March 2017

Michelle K. Lee is the Director of the United States Patent and Trademark Office

Patent,

After a long wait, the PTO has finally responded to my question of “Who is the PTO Director”:

[T]he Agency is responding that Michelle K. Lee is the Director of the United States Patent and Trademark Office and Anthony P. Scardino
is the Acting Deputy Director of the United States Patent and Trademark Office.

The letter:

uspto-foia-response

I still do not sufficiently understand  DC politics to grasp why the Dir. Lee’s position was not public for the past 50+ days, but I am glad that we may now return to some semblance of normalcy in relations between the USPTO and the public.

Origins of Patent Exhaustion in Jacksonian Politics, Patent Farming, and the Basis of the Bargain

Patent, ,

Guest Post by Sean M. O’Connor, Boeing International Professor, University of Washington School of Law

As most readers of this blog know, patent exhaustion is usually traced to Chief Justice Taney’s statement in the 1853 case of Bloomer v. McQuewan: “when the machine passes to the hands of the purchaser, it is no longer within the limits of the [patent]. It passes outside of it.”[1] Taken on its own, the quote seems straightforward to establish the modern doctrine, perhaps relying on some underlying common law rule regarding free alienability of goods. But those who read the full opinion carefully can feel less certain of this—something doesn’t seem right. As Judge Taranto correctly noted in the Federal Circuit’s Lexmark International, Inc. v. Impression Products, Inc. opinion, currently on appeal at the Supreme Court, the transactions at issue appear to be licenses or assignments and not sales of patented machines.[2] Recent scholarship has shed further light on the roots of exhaustion. John Duffy and Richard Hynes advance an account of exhaustion as judicial efforts to cabin overlapping fields of law.[3] Christopher Beauchamp revealed the details behind the first patent litigation explosion, drawing similarities to modern concerns.[4] And Adam Mossoff identified Taney’s quote as dicta, while insightfully placing it in the context of Taney’s Jacksonian Democrat politics and judicial activism.[5]

In a paper recently posted to SSRN,[6] I argue that, while this new scholarship is on the right track, it does not go far enough in unpacking the transactions and cases behind Taney’s quote. A careful reconstruction reveals that machine patentees were engaged in “patent farming:” franchising systems that relied on multilevel assignments and licenses down through wholesalers to local craftsmen who built and used patented machines in their businesses. This was because mass manufacturing and nationwide distribution of machines or other complex patented inventions was not feasible in the antebellum period.

These systems were disrupted under the patent term extensions authorized in the 1836 Patent Act, as patentees treated the extensions as new terms that allowed them to demand new deals from existing assignees/licensees. The latter believed that a proviso in the Act preserved their grants into the new term. Things came to a head in 1846’s Wilson v. Rousseau, a complicated set of consolidates cases that essentially had two holdings: 1) the extensions wiped away any existing assignments and licenses, unequivocally stating that the local franchisees could not continue using the machines they had built themselves in the first term; but 2) the proviso created a compulsory license authorizing the existing grantees to continue using the existing machines, but they could no longer make or sell machines even if they held those rights in the first term.[7] Crucially, defendants raised an exhaustion-type argument that the Court rejected.

In Bloomer, the Court was called on to decide whether the proviso also applied to Congressional private act extensions that were silent on existing grantee rights. Writing for the Court, Taney made an in pari materia argument that the private acts had to be “ingrafted” onto the general Patent Act, including the proviso, because otherwise they did not provide enough details on their own. While this fully resolved the matter, Taney engaged in extensive, unnecessary dicta—as he would do in Dred Scott and elsewhere—to explain or justify Congress’ policy decision to include the proviso in the Act. It was here that he argued that, because the local licensee franchisees received no direct benefit from the patent (they could neither sell machines, grant sublicenses, or enforce the patent), such grantees’ machines should be seen as “outside the monopoly,” with continued use rights. But the compelling spatial metaphor proved more than Taney claimed. If the machine were truly outside the patent then the franchisee should be able to resell it, which the Court clearly prohibited by expressly extending Wilson’s proviso interpretation to private act extensions. Taney’s opinion seemed driven by his Jacksonian Democrat political views to limit the reach of federal power—in the form of patents—and to protect local craftsmen from distant patent sharks and financiers.

Contrary to modern cursory histories of exhaustion, Bloomer in fact made no changes to patent law (other than applying the proviso to private act extensions). Subsequent treatises and cases cited Bloomer only for this principle. But one of Taney’s fellow Jacksonians on the Court, Justice Clifford, picked up the dicta and began oddly restating it in cases as if it were a statement of law, even though it was usually inapposite to the facts at hand and itself dicta outside the case’s holding. Incrementally, Clifford seemed to convince other Justices (and lower courts) that there was some kernel of binding law here. Slowly but steadily, Taney’s dicta edged into holdings.

Notwithstanding, it took twenty years for the dicta to be used in a Supreme Court holding for use-rights only in an actuals sale of goods,[8] and another twenty to find a right of resale as part of what was originally called “emancipation.”[9] Patent exhaustion did not arise from common law principles of free alienability of chattels,[10] nor was it solely a statutory interpretation issue, nor an intentional effort to protect consumer rights or limit anticompetitive behavior generally. Instead, the unifying principle was that the courts were trying to protect the parties’ reasonable expectations and basis of the bargain when unexpected developments, such as unforeseen legislation creating a new kind of patent term extension, appeared. To this end, with few exceptions (such as the antitrust zeal of the early twentieth century), the Supreme Court was clear that emancipation/exhaustion was a default implied license for use (and later, resale) by purchasers of patented goods, but that could be contracted around by express mutually-assented conditions. At the same time, the courts were vigilant against “gotcha” tactics of some patentees and purchasers alike, and many of the cases are best understood as courts policing these abuses.

In the end, courts of the nineteenth century were grappling with an explosion of innovative patent commercialization models similar to today’s experimentation with IP-based transactions. But the response then was not to straightjacket these new models into a single mandatory transaction type. And the Supreme Court should resist that temptation in deciding Lexmark now. To decide that exhaustion is a mandatory rule precluding the use of expressly conditional sales that are the mutually assented basis of the parties’ bargain would be historically and doctrinally inaccurate. Equally important, it would cut off many economically and socially useful IP-goods transactions, especially in the modern globalized value/supply chain production of technology-based goods such as computers, smartphones, and televisions.[11]

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[1] Bloomer v. McQuewan, 55 U.S (14 How.) 539, 549 (1853).

[2] See, e.g., Lexmark International, Inc. v. Impression Products, Inc., 2014-1617, 2014-1619 Slip Op. (Fed. Cir. 2016) (describing the transactions at the heart of Bloomer as patent licenses and not sales of goods).

[3] John Duffy and Richard Hynes, Statutory Domain and the Commercial Law of Intellectual Property, 102 Va. L. Rev. 1 (2016).

[4] Christopher Beauchamp, The First Patent Litigation Explosion, 125 Yale L.J. 848 (2015).

[5] Adam Mossoff, Commercializing Property Rights in Inventions: Lessons for Modern Patent Theory from Classic Patent Doctrine, in Competition Policy and Patent Law Under Uncertainty: Regulating Innovation (eds. Geoffrey Manne and Joshua Wright, Cambridge Univ. Press 2011); Adam Mossoff, Exclusion and Exclusive Use in Patent Law, 22 Harvard. J.L. Tech. 321 (2009); Adam Mossoff, A Simple Conveyance Rule for Complex Innovation 118 Tulsa L. Rev. 101, 107-10 (2009).

[6] Sean M. O’Connor, Origins of Patent Exhaustion in Jacksonian Politics, Patent Farming, and the Basis of the Bargain available at https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2920738.

[7] 45 U.S. 646 (1846).

[8] Adams v. Burke, 84 U.S. 453 (1873).

[9] Keeler v. Standard Folding Bed Co., 157 U.S. 659 (1895).

[10] In the paper, I expand on Judge Taranto’s and Professors Duffy and Hynes’ arguments that Justice Breyer’s citation to Lord Coke’s 1628 Institutes in Kirtsaeng v. John Wiley & Sons, Inc., 133 S.Ct. 1351 (2013), is not dispositive to show a common law basis for exhaustion.

[11] See Brief of 44 Law, Business and Economics Professors, Impression Products, Inc. v. Lexmark International, Inc., available at https://papers.ssrn.com/sol3/papers2.cfm?abstract_id=2923826; Sean M. O’Connor, IP Transactions as Facilitators of the Globalized Innovation Economy 212-27 in Rochelle Dreyfuss et al., Working Within the Boundaries of Intellectual Property: Innovation Policy for the Knowledge Society (Oxford Univ. Press 2010).

Implementing and Interpreting the Defend Trade Secrets Act (DTSA)

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undefinedI am looking forward to our event at the University of Missouri School of Law on Friday, March 10, 2017: Implementing and Interpreting the Defend Trade Secrets Act.  Sponsored by our Center for Intellectual Property and Entrepreneurship (CIPE) and the Business, Entrepreneurshisp & Tax Law Review (BETR)

Key Points for Friday:

Speakers include Mark Halligan from FisherBroyles in Chicago; Peter Menell, Professor at University of California, Berkeley School of Law; Robin Effron,
Professor at Brooklyn Law School; Yvette Joy Liebesman, Professor at
Saint Louis University School of Law; Orly Lobel, Professor at
University of San Diego School of Law; and me (Crouch).

Some Background Reading:

  • Menell, Peter S., Misconstruing Whistleblower Immunity Under the Defend Trade Secrets Act (January 3, 2017). UC Berkeley Public Law Research Paper No. 2893181. Available at SSRN: https://ssrn.com/abstract=2893181
  • Effron, Robin, Trade Secrets, Extraterritoriality, and Jurisdiction (December 1, 2016). Wake Forest Law Review, Vol. 51, No. 6, 2016; Brooklyn Law School, Legal Studies Paper No. 475. Available at SSRN: https://ssrn.com/abstract=2896137
  • Lobel, Orly, Enforceability TBD: From Status to Contract in Intellectual Property Law (June 2, 2016). Boston University Law Review, Vol. 96, 2016; San Diego Legal Studies Paper No. 16-217. Available at SSRN: https://ssrn.com/abstract=2788857
  • Goldman, Eric, Ex Parte Seizures and the Defend Trade Secrets Act (November 30, 2015). Washington and Lee Law Review, Vol. 72, No. 284, 2015. Available at SSRN: https://ssrn.com/abstract=2697361
  • Cannan, John, A (Mostly) Legislative History of the Defend Trade Secrets Act of 2016 (May 4, 2016). Available at SSRN: https://ssrn.com/abstract=2775390

 

Failed Assignment Documents → NO STANDING TO SUE

Patent

erieinsuranceIntellectual Ventures v. Erie Indemnity (Fed. Cir. 2017)

In yet another Intellectual Ventures loss, the the Federal Circuit has affirmed the W.D. Pennsylvania district court ruling that the asserted patents are invalid as ineligible under 35 U.S.C. § 101.[1] This decision was issued in parallel with IV v. Capital One discussed previously. I’m going to put-off the Section 101 discussion for another post, however, and write here about the assignment debacle.

Intellectual Ventures: XML Patent Invalid

Assignment of Patent Rights: In before reaching the Section 101 eligibility issues, the district court dismissed IV’s infringement case related to the ‘581 patent for lack of standing – finding that IV didn’t actually own the patent.

The ‘581 patent (while still an application) was assigned to AllAdvantage.com.  Several months later, AllAdvantage.com expressly assigned the parent patent of the ‘581 patent to Alset (along with several other patents and pending applications), but did not expressly list the ‘581 patent (still then pending as an application).  Believing it owned the ‘581 patent, Alset recorded its assignment rights back in 2002 and later assigned the patent to an  IV-owned-entity that later recorded the assignment with the PTO.  Meanwhile, IV has defended four IPR petitions against the patent and asserted the patent in two other cases. 

Based upon the assignment documents as interpreted under California law, the district court found that Alset never obtained title to the ‘581 patent, and that under the rules of derivative title, IV likewise could not own the patent.  Thus, the ‘581 infringement claims were properly dismissed on appeal.

Looking through the actual assignment agreement, it does indeed appear to be very specific in terms of what patents and applications are included: assignment-of-patent. The assignment document does not include any broad statements regarding “technology grant” or “all of the assignor’s patents” or even “including family member patents and patent applications.”  Further, the assignment does not express any warranties that might require the assignor to fix the problem.  In those counter-factual situations, the court may well have flipped its decision and gone with the usual industry practice that patent family member ownership is kept together.

Bottom line here is (1) the assignment document was not well written and (2) the due diligence completely failed. And, the result is that the patentee holds no patent rights.

Although not raised by the parties, the case reminds me of redecoration statute issues. Section 261 of the patent act states that

[A]n assignment . . . shall be void as against any subsequent purchaser … without notice, unless [the assignment] is recorded in the Patent and Trademark Office within three months from its date or prior to the date of such subsequent purchase or mortgage.

35 U.S.C.  § 261.  Of course, the statute does not directly apply to this case since the fight is not between competing chains of title as we had in Stanford v. Roche, but rather is simply the question of whether the Intellectual Ventures was assigned rights rights in the first place.

The notion of adverse possession and other potential estoppel doctrines also come to mind.  Here, IV at least has ‘color of title’, based upon its assignment rights, has been paying its taxes (maintenance fees), and protecting the rights against challengers. Perhaps California Law may allow a title-by-estoppel in this situation.

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[1] All claims of U.S. Patent Nos. 6,510,434; 6,519,581; and 6,546,002 ineligible under 35 U.S.C. § 101 (eligibility).

Intellectual Ventures: XML Patent Invalid

Patent, ,

by Dennis Crouch

Intellectual Ventures v. Capital One (Fed. Cir. 2017)

In parallel decisions, the Federal Circuit has affirmed two lower court judgments that Intellectual Ventures patents are ineligible under 35 U.S.C. § 101. This post discusses the Capital One decision and leaves Erie for later.[1]

Collateral Estoppel Following Partial Summary Judgment: An initial issue is that of collateral estoppel.  In a parallel still-pending case, a SDNY district court found IV’s Patent No. 6,715,084 ineligible under Section 101.[2]  That decision was a partial summary judgment – not yet final judgment – since other patents are still at issue.  Still, the MD district court in Capital One found that the prior invalidity decision collaterally estopped IV from arguing validity in this case. On appeal, the Federal Circuit affirmed the preclusion – finding that, under 4th Circuit law, a sufficiently complete partial-summary-judgment of invalidity is sufficient to preclude a patentee from asserting a patent in a parallel case.  This outcome contradicts the Federal Circuit’s prior decision in Vardon Golf (issue preclusion does not flow from partial summary judgment prior to final judgment).[3] However, the Federal Circuit distinguished that case by noting that Vardon Golf was based on 7th Circuit law rather than 4th Circuit law at issue here.

The two additional patents at issue in Capital One (U.S. Patent Nos. 7,984,081; and 6,546,002) cover the editing of XML data.  A representative claim (claim 21) of the ‘081 patent is directed to an “apparatus for manipulating XML documents” and includes a processor along with operational elements (software?).  The patent claims use of a hierarchy of data structures for creating a dynamic document. At the top of the hierarchy is a “management record type” made-up of “primary record types” that are, in turn made up of “data objects” designated by “data components” of an XML document.  A user interface allows modification and modifies (in an undefined way) the underlying XML document.[4]

Alice Step 1: Reviewing these elements, the Federal Circuit found that “the patent claims are, at their core, directed to the abstract idea of collecting, displaying, and manipulating data.”  IV had argued that the claims offered “a concrete solution” to the problem of dynamically managing multiple sets of XML documents.   That view, according to the court, limits the patent to the XML technological environment but does not make it any less abstract since XML documents were already well known and used in routine business transactions.

Further, the inventor’s naming of the data structures with unique names does not overcome the fact that the limitations are directed to generic data types and “merely encompass the abstract idea itself of organizing, displaying, and manipulating data of particular documents.”

Alice Step 2: In applying step two of Alice, the court looked for whether the claims included something “significantly more” than merely describing the abstract idea and applying well-understood, routine, conventional activity.”  In considering the claims at issue, the court found “no inventive concept” beyond the aforementioned abstract idea.

[T]he Claims recite both a generic computer element—a processor—and a series of generic computer “components” that merely restate their individual functions—i.e., organizing, mapping, identifying, defining, detecting, and modifying. That is to say, they merely describe the functions of the abstract idea itself, without particularity. This is simply not enough under step two.

Repeating its prior statement regarding the inventor’s coined-terms, the court wrote: “The mere fact that the inventor applied coined labels to conventional structures does not make the underlying concept inventive.”

Invalid.

 

= = = = =

[1] Intellectual Ventures v. Erie Indemnity (Fed. Cir. 2017) affirming invalidity of U.S. Patent Nos. 6,510,434; 6,519,581; and 6,546,002 under 35 U.S.C. § 101 (eligibility).

[2] See Intellectual Ventures II, LLC v. JP Morgan Chase & Co., No. 13-cv-3777-AKH, 2015 WL 1941331, at *17 (S.D.N.Y. Apr. 28, 2015) (“JPMC”).

[3] Vardon Golf Co. v. Karsten Manufacturing Corp., 294 F.3d 1330 (Fed. Cir. 2002).

[4] Claim 21.

An apparatus for manipulating XML documents, comprising:

a processor;

a component that organizes data components of one or more XML documents into data objects;

a component that identifies a plurality of primary record types for the XML documents;

a component that maps the data components of each data object to one of the plurality of primary record types;

a component that organizes the instances of the plurality of primary record types into a hierarchy to form a management record type;

a component that defines a dynamic document for display of an instance of a management record type through a user interface; and

a component that detects modification of the data in the dynamic document via the user interface, and in response thereto modifies a data component in an XML document.

= = = = =

As an aside, folks might be interested in looking back at the i4i XML Patent No. 5,787,449 that resulted in the $200 million verdict against Microsoft.

The Imminent Outpouring from the Eastern District of Texas

Articles and Publications, Journal, Patent, , , , , , , ,

The following guest post by Professor Paul Janicke ties-in with his new article published at: Paul M. Janicke, The Imminent Outpouring from the Eastern District of Texas, 2017 Patently-O Patent Law Journal 1. – DC

by Paul M. Janicke┼

When the Supreme Court reverses the Federal Circuit’s venue ruling in the TC Heartland case, a reversal widely expected, it will return patent venue to the time prior to 1988, when the residence of a corporation for patent venue purpose was limited to (i) a district within the state of incorporation, or (ii) a district where the corporation has a regular and established place of business and has allegedly committed an act of infringement. Presently pending in the Eastern District of Texas are 1,000+ patent cases. The number may go up or down a little before the Court’s ruling, but it’s not likely to change much in that short time.[1] My inquiry is: What will happen to those cases?  My analysis on this subject can be found at Paul M. Janicke, The Imminent Outpouring from the Eastern District of Texas, 2017 Patently-O Patent Law Journal 1..

The new venue statute upon which the Court will base its ruling became effective in January 2012. That means it applies to nearly all the cases now on the Eastern District’s docket, and the venue for hundreds of those cases was likely improper. Those defendants who are not Texas corporations and who lacked any regular and established place of business in Eastern Texas when suit was filed will be entitled to dismissal or transfer to a district that would have been proper under the new law, unless they have waived the improper venue defense. Let’s take a look at the groups of possibly affected defendants.

Local Merchants

Some defendants are local merchants in the Eastern District, accused of infringement only because they sell products made by others. Venue as to these merchants will be proper under either the old or new venue rules, so they are entitled to neither dismissal nor transfer. If the case against a merchant’s vendor is transferred, the merchant’s best bet is to seek a stay of the case against it. While stays are not particularly favored in the Eastern District, a situation like the present one has not likely been encountered before. It may work.

Active Players As Defendants

These are typically manufacturers of high-tech products or vendors of software. Computer-related technology is said to be the subject of over 90% of patent case filings in the district. Most of them lack any regular place of business in Eastern Texas, although we have found some 70 companies who employ 100 or more persons in the district and are defendants in pending patent cases there. Most of these businesses are in Plano, with a few in Beaumont. They too will have to stay put. It isn’t required that the place of business be related to the accused infringing activity.

The Many Other Defendants, And the Problem of Waiver

Those companies lacking a regular business location in the Eastern District will, for the most part, want to exit that district. Some may choose to stay there in order to effect a quick settlement or to show support for their beleaguered customers who have been sued in the district, but I estimate at least 800 will consider seeking a transfer. These break down into two roughly equal groups, those who have waived improper venue and those who have not. Waiver of this defense most typically occurs by failure to plead it in the answer or in an early motion under Rule 12. A sampling of pleadings in pending Eastern District patent cases reveals that in roughly 400 cases the main defendant did not plead improper venue or make a Rule 12 motion. (Note that this is a different subject from inconvenient venue, which is handled under a different statutory section and was sometimes pleaded in the answers.) It is understandable why the improper venue pleading was missing in so many cases: No one knew or even suspected until very recently that the venue rules had been changed by Congress in 2011, effective for all cases filed after January 2012. Good ethical lawyers know they shouldn’t plead a matter for which they have no legal or factual basis, and so they didn’t, and therein lies the waiver. Unfortunately, they cannot undo it by arguing “change in the law.” The change occurred in 2012.

The other group of defendants may have been insightful, but more likely were just following a form-book shotgun answer, and so they did plead improper venue in their answers. Answering this way is usually enough to preserve this defense, but not always. It has been held that taking discovery does not trigger a waiver, nor does proceeding to trial. It is thought that the corporate defendant who has pleaded the defense unsuccessfully has been forced to remain in the improper forum, so these litigation activities are not held against it. However, some courts have held that moving for summary judgment (unsuccessfully of course) is a different matter and does cause a waiver. You are not obliged to seek summary judgment, and you are invoking the court’s power. So some in the second group may find they too have waived.

For Those Exiting, Where Will They Be Sent?

This leaves about 400 non-waived cases. The case law on improper venue cases shows a distinct judicial preference for transfers rather than dismissals. To what districts will these non-waived defendants be transferred? Whatever districts are chosen, we should bear in mind that some of the NPE plaintiffs may not wish to follow, due to the expense involved, so those cases may effectively end. For more serious plaintiffs, we do not know where the cases will go. It depends on subjective factors applicable to each case, but here are some possible options: (1) Choose a district that one or both parties ask for. (2) Select a proper district that has a number of patent pilot judges, the three largest being Northern Illinois, Southern New York, and Central California. (3)  Use history as a guide: In 1997, one year before the large influx to Eastern Texas began, the busiest patent districts were Northern California (172 filings), Central California (162 filings), and Northern Illinois (116 filings). In that year the number of patent cases filed in the Eastern District of Texas was: 10. We shall soon see.

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┼ Professor of Law, University of Houston Law Center

[1] The case is set for argument March 27, with a decision very likely before the end of the Court’s term in June.

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Read the Article: Janicke.2017.Venue

Prior Patently-O Patent L.J. Articles:

  • Mark A. Lemley, Erik Oliver, Kent Richardson, James Yoon, & Michael Costa, Patent Purchases and Litigation Outcomes, 2016 Patently-O Patent Law Journal 15 (Lemley.2016.PatentMarket)
  • Bernard Chao and Amy Mapes, An Early Look at Mayo’s Impact on Personalized Medicine, 2016 Patently-O Patent Law Journal 10 (Chao.2016.PersonalizedMedicine)
  • James E. Daily, An Empirical Analysis of Some Proponents and Opponents of Patent Reform, 2016 Patently-O Patent Law Journal 1. (Daily.2016.Professors)
  • Tristan Gray–Le Coz and Charles Duan, Apply It to the USPTO: Review of the Implementation of Alice v. CLS Bank in Patent Examination, 2014 Patently-O Patent Law Journal 1. (GrayLeCozDuan)
  • Robert L. Stoll, Maintaining Post-Grant Review Estoppel in the America Invents Act: A Call for Legislative Restraint, 2012 Patently-O Patent Law Journal 1 (Stoll.2012.estoppel.pdf)
  • Paul Morgan, The Ambiguity in Section 102(a)(1) of the Leahy-Smith America Invents Act, 2011 Patently-O Patent Law Journal 29.  (Morgan.2011.AIAAmbiguities)
  • Joshua D. Sarnoff, Derivation and Prior Art Problems with the New Patent Act, 2011 Patently-O Patent Law Journal 12 (sarnoff.2011.derivation.pdf)
  • Bernard Chao, Not So Confidential: A Call for Restraint in Sealing Court Records, 2011 Patently-O Patent Patent Law Journal 6 (chao.sealedrecords.pdf)
  • Benjamin Levi and Rodney R. Sweetland, The Federal Trade Commission’s (FTC) Recommendations to the International Trade Commission (ITC):  Unsound, Unmeasured, and Unauthoritative, 2011 Patently-O Patent Law Journal 1 (levi.ftcunsound.pdf)
  • Kevin Emerson Collins, An Initial Comment on King Pharmaceuticals: The Printed Matter Doctrine as a Structural Doctrine and Its Implications for Prometheus Laboratories, 2010 Patently-O Patent Law Journal 111 (Collins.KingPharma.pdf)
  • Robert A. Matthews, Jr., When Multiple Plaintiffs/Relators Sue for the Same Act of Patent False Marking, 2010 Patently-O Patent Law Journal 95 (matthews.falsemarking.pdf)
  • Kristen Osenga, The Patent Office’s Fast Track Will Not Take Us in the Right Direction, 2010 Patently-O Patent L.J. 89 (Osenga.pdf)
  • Peter S. Menell,  The International Trade Commission’s Section 337 Authority, 2010 Patently-O Patent L.J. 79
  • Donald S. Chisum, Written Description of the Invention: Ariad (2010) and the Overlooked Invention Priority Principle, 2010 Patently‐O Patent L.J. 72
  • Kevin Collins, An Initial Comment on Ariad: Written Description and the Baseline of Patent Protection for After-Arising Technology, 2010 Patently-O Patent L.J. 24
  • Etan Chatlynne, Investigating Patent Law’s Presumption of Validity—An Empirical Analysis, 2010 Patently-O Patent L.J. 37
  • Michael Kasdan and Joseph Casino, Federal Courts Closely Scrutinizing and Slashing Patent Damage Awards, 2010 Patently-O Patent L.J. 24 (Kasdan.Casino.Damages)
  • Dennis Crouch, Broadening Federal Circuit Jurisprudence: Moving Beyond Federal Circuit Patent Cases, 2010 Patently-O Patent L.J. 19 (2010)
  • Edward Reines and Nathan Greenblatt, Interlocutory Appeals of Claim Construction in the Patent Reform Act of 2009, Part II, 2010 Patently‐O Patent L.J. 7  (2010) (Reines.2010)
  • Gregory P. Landis & Loria B. Yeadon, Selecting the Next Nominee for the Federal Circuit: Patently Obvious to Consider Diversity, 2010 Patently-O Patent L.J. 1 (2010) (Nominee Diversity)
  • Paul Cole, Patentability of Computer Software As Such, 2008 Patently-O Patent L.J. 1. (Cole.pdf)
  • John F. Duffy, The Death of Google’s Patents, 2008 Patently O-Pat. L.J. ___ (googlepatents101.pdf)
  • Mark R. Patterson, Reestablishing the Doctrine of Patent Exhaustion, 2007 Patently-O Patent L.J. 38
  • Arti K. Rai, The GSK Case: An Administrative Perspective, 2007 Patently-O Patent L.J. 36
  • Joshua D. Sarnoff, BIO v. DC and the New Need to Eliminate Federal Patent Law Preemption of State and Local Price and Product Regulation, 2007 Patently-O Patent L.J. 30 (Download Sarnoff.BIO.pdf)
  • John F. Duffy, Are Administrative Patent Judges Unconstitutional?, 2007 Patently-O Patent L.J. 21. (Duffy.BPAI.pdf)
  • Joseph Casino and Michael Kasdan, In re Seagate Technology: Willfulness and Waiver, a Summary and a Proposal, 2007 Patently-O Patent L.J. 1 (Casino-Seagate)

Patentlyo Bits and Bytes by Anthony McCain

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Get a Job doing Patent Law                  

Prior Settlement Agreement Helps the Jury find Liability and Damages

Patent, , ,

by Dennis Crouch

Prism Tech v. Sprint Spectrum (Fed. Cir. 2017) [prismtech]

The Nebraska jury found Sprint liable for infringing Prism’s patents and awarded $30 million in reasonable-royalty damages. U.S. Patent Nos. 8,127,345 and 8,387,155. [verdict]prismverdict

AT&T was also sued under the patents but ended up settling the case for [REDACTED LARGE SUM OF MONEY].  On appeal, Sprint argued (unsuccessfully) that the settlement should not have been shown to the jury under Federal Rule of Evidence 403.

FRE 403 permits exclusion of “relevant evidence” when its “probative value is substantially outweighed by a danger of one … unfair prejudice, confusing the issues, misleading the jury, undue delay, wasting time, or needlessly presenting cumulative evidence.”

Prior settlement agreements are obviously probative since they help to establish value of the patented technology in the industry.   Traditionally, the settlement value is modeled as less than the value of the patent once its validity and infringement are established.  However, the mixture of risk aversion and litigation costs lead to some settlements that appear greater than the expected value of patent rights.

Here, the Federal Circuit found found “adequate basis for admitting the AT&T Settlement Agreement.” The agreement covered the same patents and – at trial – Prism’s expert explained differences between usage of AT&T and Sprint to help the jury use the prior agreement as comparable.

That Agreement covered the patents at issue here, though not only the patents at issue here. In that common situation, evidence was needed that reasonably addressed what bearing the amounts in that Agreement had on the value of the particular patents at issue here.

For me, the larger potential issue is that the jury is more likely to find the patent valid and infringed if it know that AT&T already paid a [REDACTED LARGE SUM OF MONEY] to settle the case.  This would suggest at least a bifurcated trial.  However, Sprint did not appear to make that argument on appeal.

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A very interesting argument raised by Sprint on appeal was based upon Rude v. Wescott, 130 U.S. 152 (1889).  In particular, Sprint argued that prior licenses can be used to prove an “established royalty” but not to prove a “reasonable royalty.”  Of course, a single license would not be sufficient to prove the established royalty. See also Cornely v. Marckwald, 131 U.S. 159 (1889).

 

The Court held in Rude that there was insufficient evidence to prove what has been called an “established royalty” as a measure of damages at law for patent infringement—i.e., “such a number of sales by a patentee of licenses to make, use and sell his patents, as to establish a regular price for a license.”  On appeal, the Federal Circuit rejected the argument as too-old: “The Court in Rude used both the language of patent damages law and the language of evidence law, and both have changed significantly since Rude.”  In addition, the court likely cut-short certiorari on the issue by finding that Sprint had failed to properly preserve the arguments for appeal.

Limits on Disclaimer in Claim Construction

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by Dennis Crouch

Technology Properties Ltd. v. Huawei Tech, et al. (Fed. Cir. 2017)

This decision by Judge Moore recalls the Federal Circuit’s long history of rejecting district court claim constructions and also highlights Judge Moore’s formalistic approach to claim construction.

Here, the claim term on appeal is “entire oscillator disposed upon [an] integrated circuit substrate” as used in Tech Properties’ U.S. Patent No. 5,809,336.  The patent is directed to a microprocessor system that has two independent clocks: A variable frequency CPU ring oscillator clock and a fixed frequency quartz crystal I/O clock.  The improvement here is in linking the variable frequency clock to the CPU so that the performance of both vary according to external stress (such as temperature) while not impacting the I/O clock speed.

cpuclock

Following a Markman hearing, the district construed the oscillator term as being the variable-speed clock and requiring “an oscillator located entirely on the same semiconductor substrate as the central processing unit that does not require a control signal and whose frequency is not fixed by any external crystal.”  Although the claims do not expressly include the negative limitation of no-control-signal and no-external-crystal for the CPU, the district court found that the prosecution history showed that the patentee disclaimed scope of its claims when attempting to overcome prior art rejections.

Claim construction: The general process of claim construction is to interpret the claims according how a person of skill in the art (PHOSITA) would understand the claims in the context of the intrinsic record (patent and prosecution history).  This standard process uses the intrinsic record to help give meaning to the claim terms.  Phillips v. AWH.

Disclaimer: Unlike the soft and seemingly flexible approach of Phillips, any disclaimer of scope must be “clear and unmistakable.” to one of ordinary skill in the art.  Statements by the patentee that are either “ambiguous or amenable to multiple reasonable interpretations” do not create a disclaimer.  Disclaimer is big because it allows the court to permissible add limitations from the specification and prosecution into the claims.

PTO ERROR: Let me note here that – in my view – every time we have a strong prosecution disclaimer argument, we know that the PTO erred.  When the patentee made the argument that the claimed oscillator was variable-speed, the examiner should have replied: “Please amend the claims to actually include that limitation.”

No fixed-crystal-clock: During prosecution, the patentee distinguished the prior art by noting that unlike the “variable speed clock as claimed”, the prior art “is at a fixed, not a variable frequency” and “relies on an external crystal.”  For Judge Moore, these statements were sufficient to find that the patentee had disclaimed fixed-speed clocks from its entire oscillator claim scope.

The patentee noted that the disclaimer was not necessary to overcome the prior art. On appeal, however, the court rejected that factor non-determinative.  Rather, the question for disclaimer is whether the statements were “clear and unmistakable.”

[T]he scope of surrender is not limited to what is absolutely necessary to avoid a prior art reference; patentees may surrender more than necessary. . . [W]e hold patentees to the actual arguments made, not the arguments that could have been made.

Scope of Disclaimer: The district court also found that the patentee had disclaimed any use of a control-signal in its “entire oscillator.” On appeal, the Federal Circuit modified the disclaimer to an oscillator “that does not require a command input to change the clock frequency” since the patentee had disclaimed only a “particular use of a command signal” when it characterized the prior art as different sinc it included “a command input . . . to change the clock speed.”

The principle associated with this second point goes to the scope of disclaimer which follows the general principle that a patentee’s disclaimer only extends to the scope of what is actually disclaimed.

On remand, the district court will need to decide whether this change impacts the prior non-infringement decision.

 

Affirming Arbitration Award

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Bayer Cropscience v. Dow Agrosciences (Fed. Cir. 2017) (non-precedential).

The case here involves a set of genetically modified crops containing the pat gene, which confers resistance to the herbicide glufosinate.  Some of the crops include additional genetically modified resistance n a “molecular stack” with additional herbicide resistant genes such as aad-12 ( 2,4-D herbicide tolerance) and dmmg.

The parties here have a long history of licenses and cross-licenses. However, after an accusation of IP theft,  in 2012 Bayer sued Dow for infringing its U.S. Patent Nos. 5,561,236, 5,646,024, 5,648,477, 7,112,665, and RE44,962.  In response, Dow filed a set of for inter partes reexam requests (still pending)

That litigation was dismissed because of an arbitration agreement – that resulted in a $455 million arbitration award for Bayer for lost profits and reasonable royalty and also an arbitration judgment that the patents were not invalid.

In a non-precedential opinion, the Federal Circuit has affirmed the district court’s confirmation of the arbitration award with the minor exception of interest calculation.  Here, the arbitrator awards are powerful becaues they can only be overturned based upon quite “demanding standards” involving “manifestly disregard the law.”  A portion of the award included what appears to be post-expiration royalties. However, the Federal Circuit held that the manifest-disregard standard is so high that even those damages cannot be vacated (one of the five patents has not yet expired).

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This case is actually the first time that I have seen the arbitration award submitted to the USPTO as required by 35 U.S.C. § 294(d).

(a) A contract involving a patent or any right under a patent may contain a provision requiring arbitration of any dispute relating to patent validity or infringement arising under the contract. . . .

(d) When an award is made by an arbitrator, the patentee, his assignee or licensee shall give notice thereof in writing to the Director. . . . The Director shall, upon receipt of either notice, enter the same in the record of the prosecution of such patent. If the required notice is not filed with the Director, any party to the proceeding may provide such notice to the Director.

(e) The award shall be unenforceable until the notice required by subsection (d) is received by the Director.

However, anyone inspecting the award will notice substantial redacted portions (including portions relating directly to the validity and infringement issues).  I would suggest that submission does not fully comply with the requirements of Section 294.

Chan v. Yang: Can the Federal Circuit Continue to Affirm Without Opinion?

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by Dennis Crouch

Another new petition for rehearing has been filed with the Federal Circuit asking the court to reconsider its Rule 36 Jurisprudence in light of the statutory requirements  that the court issue an opinion in cases appealed from the Patent & Trademark Office.

In Chan v. Yang, App. No. 16-1214, involves an appeal from an interference case and the merits issue involves the requirement that claims subject to interference must be patentable but for the interference.  After losing before the PTAB, the petitioner appealed and the Federal Circuit issued a R.36 “Affirmance without Opinion.”  Chan’s attorney Robert Bauer writes:

The Rule 36 Judgment of the panel gives the parties and the USPTO no guidance on the key issues that were left unresolved in the PTAB decision. In particular, there is no indication whether the decision is based upon Appellees’ claims having the “white raphide” limitation or not.  There is no indication whether the claims as considered by the panel are concluded to be directed to patentable subject matter under 35 U.S.C. 101 or not. …

The statute requires that the Federal Circuit “issue to the Director its mandate and opinion, which shall . . . govern further proceedings” in the case. 35 U.S.C. 144.  I previously argued that the Federal Circuit’s practice of Affirmances without Opinion violates this requirement for issuing an opinion.

combined-petition-for-panel-rehearing-and-rehearing-en-banc

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Meanwhile, the Federal Circuit appears to be taking some limited notice of the issue. In two pending petitions for en-banc consideration of the R.36 Issue, the court has requested responsive briefing:

  • Leak Surveys, Inc. v. FLIR Systems, Inc., Appeal No. 16-1299: responsive briefing requested by March 14, 2017
  • Cascades Projection LLC v. Epson America, Inc., Appeal No. 17-1517: responsive briefing requested by March 14, 2017

The request for responsive briefing is important since in most cases the court rejects en banc petitions without even requesting responsive briefing:

At least two pending Supreme Court petitions are also based upon R.36 judgments by the Federal Circuit:

  • Oil States Energy Services, v. Greene’s Energy Group and Michelle K. Lee
  • Enplas v. Seoul Semiconductor

In both cases, the Supreme Court could properly vacate and remand with a one-line statement requiring the court to comply with 35 U.S.C. 144.