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Homeland Housewares v. Whirlpool Corp. (Fed. Cir. 2017)
In a split opinion, the Federal Circuit rejected the PTAB’s IPR validity judgment favoring the patentee Whirlpool — holding instead that the challenged claims are invalid as anticipated. Patent No. 7,581,688; IPR No. IPR2014-00877. Judge Dyk penned the opinion joined by Chief Judge Prost. Judge Newman wrote in dissent.
The underlying claimed invention is an automatically pulsed blender cycle. The basic idea is to occasionally go through a “deceleration phase” that slows the cutter blade down to a reduced “predetermined settling speed” before accelerating the blade back to the normal operating speed. The claims require that the settling speed be “indicative of the items in the container having settled around the cutter assembly.”
The basic issue on appeal is whether the prior art (U.S. Patent No. 6,609,821 to Wulf) anticipates Whirlpool’s patent:
The Board determined that Wulf did not anticipate the ’688 patent because its disclosures did not meet the “settling speed” limitation. However, the Board did “not adopt any explicit construction of the term for [its] Final Written Decision,”
On appeal, the Federal Circuit first found that the PTAB should have construed the disputed language:
Just as district courts must, “[w]hen the parties raise an actual dispute regarding the proper scope of . . . claims, . . . resolve that dispute,” O2 Micro Int’l Ltd. v. Beyond Innovation Tech. Co., 521 F.3d 1351, 1360 (Fed. Cir. 2008), the Board also must resolve such disputes in the context of IPRs.
In the appeal, the appellate panel then decided to take-on the claim construction and anticipation analysis on its own. The court writes:
Given that the Board did not rely on extrinsic evidence here as to claim construction, we can determine the correct construction of “settling speed” and then determine whether the Board correctly held that Wulf does not meet the limitations of claim 1.
In my view, the court’s statement reprinted above is wrong in so many ways. Of course the the Board did not “rely on extrinsic evidence” in claim construction — since the board “declined to provide a construction.” Further, even when the claim construction considered is a question of law and reviewed de novo, the appellate court is still a reviewing court – not a court of first instance. Here, the court reviews substantial intrinsic evidence in making its claim construction determination, and it is merely a legal fiction that the resulting conclusions are not ‘factual interpretations’ that should be based upon more than a review of the appellate docket submissions. . . .
The actual claim construction issue here is somewhat odd – the claim language states that “the speed of the cutter assembly is reduced from the operating speed to a predetermined settling speed . . . indicative of the items in the container having settled around the cutter assembly.” The construction offered by the federal circuit here is that the settling speed is “slower than the operating speed and permits settling of the blender contents.” WOW – good thing that the court provided a construction here since that wasn’t apparent from the claims.
Daily Fact: According to the USPTO’s most recent Official Gazette, the slowest technology center is 3680 – Business Methods with a 41 month backlog from filing to initial office action. The fastest is 1620 – Organic Chemistry with < 18-month delay. An important caveat to these numbers is that it includes RCE reworks which substantially reduce the delay of O-Chem.
by Dennis Crouch
The chart below shows the number of utility patents issued each fiscal year going back to 1980. FY2017 has 7-weeks remaining. If issuances remain steady, then we’ll see a substantial increase in the number of patents issued over FY2016. Importantly, the increase is not due to increased new application filing but instead reflects the PTO continuing to work through its backlog of pending cases.
AIA America v. Avid Radiopharma (Fed. Cir. 2017)
In a short opinion, the Federal Circuit has ruled that the factual basis an attorney fee award need not be decided by a jury — affirming a $4 million fee award that followed a jury trial on the sole issue of whether the plaintiff (AIA) owned the asserted patents. U.S. Patent Nos. 5,455,169 and 7,538,258.
The U.S. Constitution provides
In Suits at common law, where the value in controversy shall exceed twenty dollars, the right of trial by jury shall be preserved, and no fact tried by a jury, shall be otherwise re-examined in any Court of the United States, than according to the rules of the common law.
The right to a jury of peers in civil cases is one of those fundamental principles designed to uphold the rights of property and contract but keep them in balance with community principles and values. The limitation of the amendment is that it only applies to “Suits at common law.” The “common law” limitation implicitly refers to the distinction between “legal” and “equitable” suits that do not require a jury trial. Further, the Constitution indicates that the right to jury trial shall be “preserved.” This suggests that issues which were decided by judges (rather than juries) at common law are not transformed into jury questions by the Constitution. Rather, the provision appears designed to maintain the status quo requirements
The Constitution reference to “Suits” makes historic sense when suits were either filed before a common law court or a court of equity. At the Federal level, those courts are merged and so we now look to particular issues within each lawsuit to determine whether those issues need be determined by a jury. Thus, for instance, a case involving a patentee’s request for reasonable royalty damages and injunctive relief, the damages would require a jury (if requested) as an issue traditionally decided by common law courts while injunctive relief is an equitable question that does not require a jury.
Here, the question before the courts was whether an attorney fee award under Section 215 requires a jury. For its analysis, the court first looked historically and determined that common law judges (rather than juries) decided the fee award issue. The Federal Circuit’s conclusion is that this “implies that attorney’s fees generally do not involve legal rights.” I would draw a similar but slightly distinct conclusion – that there was no right to a jury to be “preserved” regarding the issue of attorney fees. Further, the appellate panel went on to look at the remedy – and found it is properly classified as equitable because it raises “issues collateral to and separate from the decision on the merits.” (quoting Budinich v. Becton Dickinson & Co., 486 U.S. 196(1988)).
With its conclusion that attorney fees under 35 U.S.C. § 285 are “properly characterized as an equitable remedy,” there is no need for a jury determination.
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A few notes here – Yes, you heard that right, a $4 million fee award for a 12-witness jury trial. Avid had requested about $7 million. Yes, discovery and lawyering is expensive, but the discovery in the case was “targeted” toward only the ownership issue (that did admittedly involve allegation of conspiracy).
The trial issue: whether the plaintiff, the assignee of the patents in suit, has standing to prosecute this patent infringement action. Unless the plaintiff owns the patents, it has no standing. The defendants contend that the assignor of the patents was not the sole inventor of the invention; and, even if he was, ownership of the invention vested in his university-employer by operation of Florida law. If the defendants are correct, the plaintiff lacks standing.
This appears to be a super fascinating issue that would extend our knowledge of the ownership process when inventors assign their future invention rights. Unfortunately, the Jury Verdict is SEALED, and the Federal Circuit’s decision on the merits of the case was issued as a R.36 Affirmance without Opinion.
An important element of the original district court decision here (that was affirmed without opinion) points out a Florida State Regulation that “An invention which is made in the field or discipline in which the employee is employed by the University or by using University support is the property of the University…” R. 6C4–10.012(3)(c) (emphasis added). To be clear, this regulation is not a “contract” with the future inventor but instead a regulation in the Florida code that identifies ownership of the patent right — seemingly in conflict with the statement in Stanford v. Roche that “Since 1790, the patent law has operated on the premise that rights in an invention belong to the inventor.”
[UPDATE – Fixed an error – I had previously suggested that the mark at issue was a product design mark, it is not]
Romag Fasteners v. Fossil is a rare infringement case that involves allegations of both patent and trademark infringement. The important aspect of the Federal Circuit’s decision here harmonizes the attorney fee requirements for trademark and patent cases.
A jury sided with Romag – finding that Fossil’s magnetic snaps infringed both the asserted patent and trademark (product design). (U.S. Patent No. 5,722,126 and U.S. Trademark Reg. No. 2,095,367).
The jury returned a verdict for Romag, finding that Fossil had engaged in patent and trademark infringement. The district court granted fees related to the patent portion of the case but denied fees on the trademark side. On appeal, the Federal Circuit has vacated that judgment.
Lanham Act and Patent Act provide identical language for awardinging reasonable attorney fees to the prevailing party in exceptional cases: “The court in exceptional cases may award reasonable attorney fees to the prevailing party.” 35 U.S.C. 285; 15 U.S.C. 1117(a). Based upon the identical language of the statutes, the appellate court here ruled that the Supreme Court’s Octane Fitness approach to fees in patent cases also applies in Trademark cases. The Second Circuit had previously (pre-Octane Fitness) required “evidence of fraud or bad faith.” Under Octane Fitness, that requirement is unduly strict and improper. All of the other Circuit courts who have considered the issue agree with the Federal Circuit that Octane Fitness applies to TM cases under Section 1117(a). Because the court applied the incorrect standard, this TM portion of the case was remanded to determine whether fees are appropriate.
On the patent side, the appellate panel also found “several errors” by the district court – and thus vacated that grant of fees. These errors include (1) a misstatement as to the timing of the defendant’s withdrawal of its defenses and that those defenses were pursued in order to “prolong litigation;” (2) no conclusion as to the actual merit of the withdrawn defenses; (3) misstatements regarding prior court ruling on the inadequacy of the rejected indefiniteness defense as “woefully inadequate; and (4) failure to consider the totality of the circumstances, including the plaintiff’s bad-faith of waiting until just before Black Friday to file its case and request a TRO. Coming together, these issues require vacatur of the fee award on the patent side.
On remand, the district court will be asked to again reconsider an award of fees to the successful plaintiff Romag.
The Majority opinion was penned by Judge Dyk and joined by Judge Hughes. Judge Newman dissented-in-part. “I do not discern where, or how, the district court abused its discretion, for the district court reasonably observed that this case ‘stood out from the others,’ in the words of Octane Fitness, concluding that Fossil ‘aggressively pursue[d] invalidity counterclaims in an attempt to prolong litigation and exponentially increase the cost and risk of pursuing a lawsuit.'” Newman in dissent.
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For me, an interesting aspect of the case here involves the correct level of granularity for the “prevailing party” finding. The court here divides of the portions of lawsuit between the various doctrines — patent; trademark; CT state unfair competition; etc. For each, the court determined the ‘prevailing party’ and apportioned fees accordingly – even though the losing party had won on some smaller issues. At this point, I do not believe that the Federal Circuit has strictly adopted this approach – rightly so because there is almost always overlap. Here, for instance, the TM discovery was almost certainly overlapping with the patent discovery.
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I have not examined the full history here, but the Trademark appears to cover the product design, which is also to the subject of the patent. TrafFix? The mark covers ROMAG.
Personal Audio v. Electronic Frontier Foundation (EFF) (Fed. Cir. 2017)
On appeal, the Federal Circuit has sided with the USPTO — affirming the IPR final judgment of unpatentability of Personal Audio’s US Patent No. 8,112,504. The patent claims a system for “disseminating media … episodes in a serialized sequence.”
The most interesting question addressed by the court is whether the original Inter Partes Review (IPR) Requester – EFF – has standing to to participate as a party. The problem for standing is that EFF is a public-interest organization that promotes online civil liberties. EFF was not threatened by the ‘504 patent, but instead filed the IPR petition as part of its general public interest campaign against “stupid patents.” EFF thus doesn’t appear to meet the “case or controversy” standard required by Article III of the U.S. Constitution.
The Federal Circuit decided a somewhat similar standing question in Consumer Watchdog v. Wisconsin Alumni Research Foundation, 753 F.3d 1258 (Fed. Cir. 2014). Consumer Watchdog also involved a public-interest organization challenging a patent via AIA-Trial. Standing wasn’t a problem for the trial itself since the PTAB is not an Article III court – and so the constitutional requirement didn’t apply. However, the Federal Circuit dismissed Consumer Watchdog’s appeal (it lost the case at the PTAB) on standing grounds.
EFF case has a slightly different posture since it won at the PTAB – with the patent being held invalid. The appellant Personal Audio clearly has standing since its patent has been judged unpatentable, and the question is whether EFF has standing to participate as an appellee despite its lack of a direct interest in the outcome. For the Federal Circuit, that posture makes the difference:
Here, the party invoking judicial review is Personal Audio; it is apparent that Personal Audio, on cancellation of its patent claims by the PTAB, has experienced an alteration of “tangible legal rights . . . that is sufficiently ‘distinct and palpable’ to confer standing under Article III.” Virginia v. Hicks, 539 U.S. 113, 121 (2003) (internal citations omitted). With Article III satisfied as to the appellant, EFF is not constitutionally excluded from appearing in court to defend the PTAB decision in its favor.
The court then went on to side with EFF and PTAB on the merits – confirming the claims as unpatentable.
I would suggest that the Federal Circuit’s decision on the standing issue here does not fully explore the somewhat complex precedent on the standing issue. In particular, the court wrongly focuses its standing decision on the position of the appellant. The Supreme Court has explained several times that all parties must have an ongoing case-or-controversy:
[T]he opposing party also must have an ongoing interest in the dispute, so that the case features “that concrete adverseness which sharpens the presentation of issues.”
Camreta v. Greene, 131 S. Ct. 2020, 2028 (2011) (quoting Los Angeles v. Lyons, 461 U.S. 95, 101 (1983)). I’ll note here that my reading of Camreta and Lyons is that both are addressing the Constitutional requirement – thus the AIA statutory statement allowing parties to appeal is inapplicable.
The Federal Circuit relied upon another line of Supreme Court cases – notably ASARCO Inc. v. Kadish (1989). In that case we similar situation where the petitioner was clearly harmed by a lower state-court decision but the respondent probably did not itself have sufficient case-or-controversy standing. In its decision on the case, the Supreme Court began with a recitation of standing – noting that the petitioner’s harm was sufficient: “We determine that petitioners have standing to invoke the authority of a federal court and that this dispute now presents a justiciable case or controversy for resolution here.” ASARCO. The problem with this holding is that it speaks only to the case as a whole rather than standing of the particular party.
In re i.am.symbolic, LLC (Fed. Cir. 2017)
will.i.am of the Black Eyed Peas (and solo) has a registered mark on his professional name, but is now seeking a mark of more biblical proportions: “I AM.”
Actually, his company i.am.symbolic already has registered the mark “I AM” for all sorts of clothing in class 25, but is now seeking to register the mark in other classes including cosmetics, sunglasses, and jewelry. The problem for will.i.am is not the Talmud, but instead the “I am” mark owned by beeline group that sells sunglasses, jewelry as well as registrations of the same mark owned by others.
The key question for rejecting a registration is whether the use of the mark would create a likelihood of confusion. Although will.i.am is a well-known music group front man, he is not widely known simply as “i.am.” According to the court, the application offers no meaningful limitation on the mark so as to more directly tie that link (such as indicating the i.am mark will always be used in conjunction with the will.i.am mark). Although the mark registration indicated that the goods would be used in ways “associated with . . . will.i.am,” the court found that the limitation was not meaningful.
will.i.am argued that the court should consider the peaceful coexistence of the mark owners. On appeal, the Federal Circuit limited that doctrine to non-identical cases and cases where a large number of products were using similar marks (such as “paw prints on clothing”). See Jack Wolfskin Ausrustung Fur Draussen GmbH & Co. KGAA v. New Millennium Sports, S.L.U., 797 F.3d 1363, 1373–74 (Fed. Cir. 2015), cert. denied, 136 S. Ct. 982 (2016);
Guest Post by Saurabh Vishnubhakat, Associate Professor of Law and Associate Professor of Engineering, Texas A&M University. This post is based on a new paper forthcoming in the Seton Hall Law Review. Read the draft at https://ssrn.com/abstract=2992807.
We tend to think of the different patentability requirements as separate hurdles to be cleared. To be patentable, an invention must reflect eligible subject matter (§ 101). It must be new (§ 102), nonobvious (§ 103), adequately disclosed (§ 112), and so on. A quick review of patent doctrine makes it clear, however, that patent law’s separate statutory requirements reflect similar, overlapping concerns.
Subject-matter eligibility, in fact, overlaps with all the other major requirements. For example, one way to understand why natural products and natural laws are ineligible for patenting is that they are not truly innovative. The concern about innovation is one that the novelty and nonobviousness doctrines also share. Similarly, one way to understand why abstract ideas are ineligible is that the patentee might preempt the full scope of an idea without disclosing all possible instantiations of the idea. The concern about preemption and proportional patent scope is one that the enablement and written description doctrines also share.
Given this overlap, subject-matter eligibility could theoretically be used in place of various other patentability requirements.
How These Overlaps Show Up in Examination
As it turns out, this is not just a theoretical possibility. Evidence for these overlaps is pronounced in actual patent examination. Because compact prosecution pushes examiners to identify all grounds for rejection together (rather than raise them piecemeal across multiple Office actions), it is possible to learn how frequently a given invention presents multiple patentability problems.
A new, fairly large dataset (800 randomly selected patents) of USPTO records reveals that subject-matter ineligibility does overlap substantially with other statutory requirements in examiner Office actions. More than six times out of seven, an invention that was rejected for ineligibility under Section 101 was also rejected on at least one other ground.
How These Overlaps Show Up in Litigation
These overlaps have also become very interesting to courts because they seem to offer a shortcut for deciding patent validity more quickly and more cheaply: by using subject-matter ineligibility at the pleading stage. Litigation data on motion practice in patent cases bears this out. Early in litigation, when decision costs have not yet accrued, motions to dismiss and motions for judgment on the pleadings are based primarily on ineligibility under Section 101. By contrast, among motions for summary judgment following discovery, subject-matter ineligibility plays a much smaller role as other, more fact-intensive patentability doctrines can now be argued.
Conversely, the points at which subject-matter ineligibility is argued are spread fairly evenly across motions to dismiss (34%), motions for judgment on the pleadings (27%), and summary judgment (39%). The five other major patentability requirements—utility, novelty, nonobviousness, enablement, and written description—come up almost exclusively at summary judgment.
Why Courts Like Section 101 As a Shortcut—and Why It’s a Problem
Using subject-matter eligibility early can be attractive to a court. Deciding a patent’s validity at all can be costly. Claim construction, discovery, jury trials—the list of decision costs goes on. Deciding validity incorrectly can be costly, too. Failing to strike down an invalid patent tends to distort the market today and enable abuses such as nuisance litigation. Meanwhile, wrongly striking down a valid patent tends to undermine incentives for future investment in research and commercialization.
A court that invests more resources in a decision is less likely to make a mistake, but this only helps to a point. If the next dollar spent on reaching a good decision saves less than a dollar of error cost, the overall expenditure is actually a waste. The lesson, then, is not to minimize decision cost alone or minimize error cost alone but to minimize the sum of decision cost and error cost. (This insight is at least as old as Judge Frank Easterbrook’s 1984 paper on decision and error in antitrust cases.)
Problems arise in the patent context when judges who want to conserve resources today cut too many corners and underestimate their likelihood of errors. The costs from those errors, after all, lie in the future and are easy to miss. Judges in patent cases have begun relying on a style of decision-making that is quite similar to antitrust law’s distinction between per se rules and the rule of reason.
An antitrust rule that says a certain economic practice is per se invalid is cheap to administer but, like many bright-line rules, can lead to errors. The rule of reason is more likely to result in a correct decision about the economic conduct in question, but will require more judicial resources. Per se rules of antitrust should only be used, therefore, for types of economic conduct that are well-understood and very reliably harmful.
Subject-matter eligibility is becoming a sort of per se shortcut for patent invalidity, in contrast to more costly inquiries like nonobviousness or enablement analogous to the rule of reason. The historical lesson of antitrust, though, has been that per se rules should be used very sparingly because a wide range of economic practices may prove to have procompetitive effects. This does not mean the conduct is definitively legal under the antitrust laws—or that a given patent is definitively valid. It simply means that more information and more careful judicial consideration are needed before an accurate decision can be reached.
Until now, the use of subject-matter eligibility at the pleading stage may be conserving decision costs, but without sufficient regard for error costs in decisions on patent validity. In my paper, I discuss problems with the current approach and propose three ways to guard against this irresponsible borrowing from antitrust.
By Jason Rantanen
I’ve been taking a break from blogging for the past few months to focus on teaching, research and service at the University of Iowa. That’s allowed me to experience new aspects of technological innovation and patent law, particularly in the context of a research university. It’s also allowed me to work on a couple of projects that are finally coming to fruition.
The first is described below. It’s a concept that will likely feel familiar to most patent practitioners. I’ve just articulated the inchoate idea and given it structure to allow it to be weighed and debated more easily. Virtually every person connected with patent law that I’ve shown the paper to has had examples and stories of their own, some of which I’ve added. At the onset I want to make clear that while I think that the credentialing function of patents has merit on balance, in individual situations it can have substantial negative effects.
Here’s the abstract:
The conventional explanation for why people seek patents draws on a simple economic rationale. Patents, the usual story goes, provide a financial reward: the ability to engage in supracompetitive pricing by excluding others from practicing the claimed technology. People are drawn to file for patents because that is how these economic rewards are secured. While scholars have proposed variations on the basic exclusionary mechanism, and a few have explored alternate reasons why businesses seek patents, the question of whether individuals—human beings—seek patents for reasons other than the conventional economic incentive remains unexplored. As Jessica Silbey recently observed, human creativity is motivated by more than just the potential for immediate economic returns. But an individual’s motivation to create does not explain why that person would go through the trouble and expense of obtaining a patent absent the promise of economic gain.
We offer an explanation for why individuals may seek patents beyond the promise of supracompetitive pricing: patents serve as credentials. Simply put, some human beings want to be recognized by society as inventors. But claiming to be an inventor without evidence is unlikely to persuade the masses—or perhaps even friends. Patents serve as powerful evidence that an individual meets the societal definition of “inventor.” Just as a doctoral degree in history might indicate that one is an intellectual, obtaining a patent shows that the person named on its face is a real-life, government-certified inventor. Regardless of whether a particular patent conveys an economically valuable mechanism of exclusion, the inventorship recognition alone may motivate some individuals to seek patents.
Links to the draft article are here:
SSRN: https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3013780
SocArXiv: https://osf.io/edumf/
Ji-Yong (David) Chung and John Voisinet are patent professionals at Snyder, Clark, Lesch & Chung. David.Chung@snyderllp.
We’re now approaching the end of FY2017 (Sept 30, 2017), and the USPTO is very likely to end up spending well more than it collects in fees. The chart below is just through June 30 (Q3), but look fairly harsh with a several hundred million dollar gap between income and spending. PTO Finance Chief Tony Scardino suggest that the gap will be almost – but not quite – be eliminated by the end of the Fiscal Year. However, its not clear to me how that might happen without dramatic changes.
by Dennis Crouch
In Amdocs v. Openet Telecom, a Federal Circuit panel reversed the lower court’s ineligibility finding over a vigorous dissent. Judges Plager and Newman versus Judge Reyna. Claim 1 of the disputed business-software patent is shown below.
1. A computer program product embodied on a computer readable storage medium for processing network accounting information comprising: computer code for receiving from a first source a first network accounting record; computer code for correlating the first network accounting record with accounting information available from a second source; and computer code for using the accounting information with which the first network accounting record is correlated to enhance the first network accounting record.
U.S. Patent No. 7,631,065.
Although the Federal Circuit walked through its Alice/Mayo analysis, I expect that a more infringer-friendly panel would have almost certainly sided with the district court. Now, Openet has petitioned the Supreme Court for writ of certiorari – arguing that the Federal Circuit improperly reached beyond the clearly overbroad claims when making its decision.
Question presented:
Whether the Federal Circuit erred by looking beyond the claims to the patent specification to assess patent eligibility?
The case here is interesting. Rather than pushing back against Alice and Mayo as many patent attorney suggest, the petitioner here argues that the Federal Circuit is subverting those cases to find claims eligible when they clearly are not. It is possible that the Supreme Court could simply issue a one-line opinion: “Vacated, see Alice/Mayo.” I would look for several amicus briefs on each side of this one.
The unfortunate aspect of this case for most patentees is that it is another business method case — business method patents are unlikely to see friendly eyes from the Supreme Court.
Dennis wrote up the facts of this case on the main page, here. Boiled down, a district court held a bench trial and held that people substantively involved in prosecution of the ‘018 Patent knew of but-for material references, which were not disclosed. Although the district court had intended to hold a separate trial on intent to deceive, instead it held that the patentee’s discovery abuses (and other apparent misconduct) warranted an adverse inference of intent to deceive. The discovery abuses were related to the inequitable conduct issue. Accordingly, it held the patent unenforceable for inequitable conduct.
The panel split (Judge Newman dissenting), but affirmed 2-1, holding that the withheld art was in fact but-for material and that the district court had not abused its discretion by, under regional circuit law, imposing an adverse inference (more on that, the key and troublesome issue, below).
Before getting into the repercussions too much, one thing jumped out at me: a few days before receiving a notice of allowance for the ‘018 Patent, a third-party submitted the later-withheld references in the parent application of the ‘018 Patent. Rather than submit those references to the examiner (either by way of an RCE or otherwise), the patentee let the ‘018 Patent go to allowance, but then submitted those references in related applications that remained pending. That fact jumped out at me because this is a recurring problem — learning of art at the last minute. I know there are ways to at least submit the art, but it won’t be considered (not sure if that procedure was available when the ‘018 was prosecuted). Anyhow, the fact that the art was later disclosed in related cases obviously makes it harder to argue it was cumulative of art in the ‘018 prosecution, but also obviously, not disclosing the art later, in the other cases, would have created its own difficulties.
Let’s be clear what was decided: the panel majority held that the district court had not abused its discretion under regional circuit law by imposing an adverse inference of specific intent to deceive because of litigation misconduct during efforts to enforce the ‘018 patent. That inference is what allowed the district court to hold the ‘018 Patent unenforceable.
This case creates some complexities and lessons for trial counsel.
First off, according to the panel-majority, mere negligence by litigation counsel is enough to justify an adverse inference under the law of this regional circuit. Here, much of the discovery fight seems to have been over the scope of what is the “same subject” when privilege has been waived by disclosure of some documents on a subject. Determining the breadth of waiver — what is the “same subject — is not always a simple issue, and reasonable people can disagree about scope of waiver. From the panel-majority’s opinion, the patentee’s positions did not seem tenable, but the lesson for trial counsel is to be very careful because aggressively arguing for narrow scope can be found to be “negligent” and that can result in loss of a patent right.
Second, it seems to me odd that the Federal Circuit would rely on regional circuit law where, as here, the adverse inference goes to an issue of patent law — intent to deceive under Therasense, which interprets “unenforceability” as a defense listed specifically in the Patent Act.
Third, and related to that, an adverse inference instruction where the issue is intent to deceive is, effectively, even more draconian than terminating sanctions (e.g., striking a complaint or an answer). The impact of the adverse inference here went far beyond making one party the winner in a specific case: it took away a presumptively valid property right, and, of course, will result potentially at least in fee-shifting under Section 285.
Finally, two broader points.
First, the approach of the panel-majority of relying upon an inference is going to lead to satellite litigation and erosion of Therasense. Why bother trying to show clear and convincing evidence that the single most reasonable inference is is deceptive intent when you can try the trial lawyers?
Second, when the OED becomes aware of a judicial finding of inequitable conduct by an practitioner, it investigates. I’m not sure the OED would here — where the adverse inference instruction is what led to the holding of inequitable conduct — but if the OED does do so, will prosecution counsel have a claim against litigation counsel for “negligently” litigating so that this inference arose? What about the patentee suing the litigators?
Don’t misunderstand me: I have no idea if the lawyers “deserved” this adverse inference instruction. The panel-majority’s conclusion that the district court did not abuse its discretion is not a holding that they did deserve it. But this one, well, she’s a doozy.
A third petition for writ of certiorari to the United States Supreme Court has now been filed stemming from the Federal Circuit’s Rule 36 Debacle. Despite the need for clear guidance on the implementation of AIA Trials, most such appeals are being decided by the Federal Circuit without any opinion. I have argued that the process violates a provision of the Patent Act that requires an the court to issue an opinion in cases on appeal from the Patent & Trademark Office.
In Leak Surveys, Inc. v. FLIR Systems, Inc. (Supreme Court 2017), the petitioner explains the problem:
The Federal Circuit is the only avenue for appealing a PTAB decision that extinguishes a patent property right. But as the record of this case demonstrates like few others, the Federal Circuit’s excessive invocation of Rule 36 in PTAB appeals serves to undermine the public’s confidence that the Federal Circuit is providing meaningful and even-handed judicial review of the PTAB, but within the confines of the Federal Circuit’s limited appellate jurisdiction to review
patent validity decisions that the PTAB is authorized by statute to make in the first instance.
The petitioner asks three questions:
1. Does the Federal Circuit … exceed the scope of its limited appellate jurisdiction when it affirms a PTAB … decision that rests upon a plain and egregious error…?
2. On appeal of an IPR decision by the PTAB to invalidate a patent or patent claim, when is the Federal Circuit required to provide a statement of its reasons for affirming – in order to safeguard constitutional limits on the Federal Circuit’s administrative appellate jurisdiction (S.E.C. v. Chenery Corp., 318 U.S. 80 (1943)), and/or to comply with statutory requirements such as 35 U.S.C. §144 and 5 U.S.C. §§ 702, 704, and 706.
3. On appeal of an IPR decision by the PTAB to invalidate a patent or patent claim, when does the Federal Circuit violate a patent owner’s constitutional due process rights by considering and affirming based on arguments that were not previously considered by the PTAB, and/or for reasons apart from those stated by the PTAB itself in its written decision?
Briefing will continue over the next couple of months.
[Read the petition here: Petition for Writ_Leak Surveys v. Flir Systems].
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Note: Celgard’s parallel petition remains pending with PTO’s response due August 21, 2017 (being handled by USDOJ Solicitor’s Office). Of course, these cases will be moot if the Supreme Court favors the patentee in Oil States. Finally, folks interested in Oil States might want to attend Duke Law’s upcoming symposium (in Washington DC) focusing on the question: Is Administrative Review of Granted Patents Constitutional? (Funded through Corporate Sponsors).
Any votes on guest posts from patent law academics – The Intellectual Property Scholars Conference (IPSC) shows some ideas of what IP law professors are working on. https://www.ipsc2017.org/schedule/
Enzo Biochem v. Applera (Federal Circuit 2017) (nonprecedential)
The Federal Circuit’s decision in this case begins with a statement that “this court now has considered this infringement action on three separate occasions over the course of thirteen years of litigation between these parties. We assume the parties are familiar with the background facts, and we therefore recite only those facts relevant to our decision in this appeal.” Enzo/Yale’s asserted patent claims a marked-nucleotide used in genetic research and testing. The claimed marker is chemically stable and thus an important replacement for the prior art use of radioactive markers. U.S. Patent No. 5,449,767. The claims are directed to a particular chemical structure and include the following disputed language: “wherein [Structure] A comprises at least three carbon atoms and represents at least one component of a signaling moiety capable of producing a detectable signal . . . .” (See structure image above).
In its prior decision, the Federal Circuit ruled that the claims only extend to producing an indirectly detectable signal (by binding a secondary directly detectable chemical agent to the marker) rather than being directly detectable (by detecting the marker itself). Enzo admits that Applera uses a directly detectable marker that doesn’t infringe (under that claim construction), but argues instead for infringement under the doctrine of equivalents (DOE).
On appeal, the Federal Circuit has rejected Enzo’s Doctrine of Equivalents claim (affirming summary judgment of no equivalents) based upon distinguishing statements in the specification. In particular, the specification explains that indirect detection is superior to direct detection. That distinction led to the prior claim construction ruling that the claims only cover indirect detection and here. Following that line of thought, the court here writes:
In Dolly, we concluded that “the concept of equivalency cannot embrace a structure that is specifically excluded from the scope of the claims.” . . . The same principle applies in this case; the concept of equivalency cannot embrace direct detection because it is “specifically excluded from the scope of the claims,” id., as we found in Enzo II. Including direct detection as an equivalent of indirect detection would render meaningless the claim language on which we based our decision in Enzo II; direct detection cannot be an equivalent of indirect detection in relation to these patent claims.
The problem with the analysis here is that the claims do not – on their face – specifically exclude “direct detection” but instead require that infringing structure “represent at least one component of a signaling moiety capable of producing a detectable signal.” The exclusion of indirect detection came in Enzo II only after “using the specification to more fully understand what the patentee claimed” and considering expert testimony. (Reminder here that the district court considered the same evidence and determined that direct detection was covered by the claims).
The Problems: In general, this case highlights the difficulties with DOE Doctrine. By definition, DOE only comes into play when the claim terms literally (expressly?) exclude the accused activity. At that point, a court is asked to focus in on the function-way-result similarities between the claimed invention and the accused activity — a question that usually goes to a jury. However, the courts are empowered to short-circuit the process and rule-out DOE if the claims expressly exclude the accused infringing mechanism – seemingly making DOE impossible to ever prove. Sad.
I teach civil procedure, patent law, and ethics, and so this opinion granting a motion to modify a scheduling order, and to allow an amended pleading, to plead inequitable conduct jumped out at me because someone successfully navigated the pleading issues created by a combination of case law and the amended rules limiting discovery to claims or defenses plead.
The problem that lawyers face is this: the combination of Exergen and Therasense require (generally) pleading that a person substantively involved in prosecution knew of but-for material information, knew the information was material, but withheld it with an intent to deceive (or engaged in “affirmative egregious misconduct) and — according to Exergen (which I think was wrongly decided, in an article I wrote before it was decided, and available here) — do so under the rigorous pleading standards of Rule 9(b). Before pleading fraud with particularity, the lawyer of course has to have a Rule 11 basis to make the allegations.
Therein comes the limitation on discovery in the 2015 amendments to the rules of civil procedure: even with good cause, there can be no discovery into issues that are not relevant to a claim or defense. So, how do you get discovery needed to plead inequitable conduct when you can’t plead it without discovery (usually)?
I know some courts have dealt with this problem by local rule or order, allowing discovery into knowledge of prior art, for example, even when it ordinarily isn’t relevant to validity that an inventor knew, or didn’t know, of particularly prior art (derivation being an obvious exception). Even, however, if you can get the discovery, you then face the problem that, ordinarily, the cut-off to amend pleadings in most scheduling orders occurs long before fact discovery closes.
So, now you know why I found this case, Marical Inc. v. Cooke Aquaculture Inc. (D. Maine, July 31 2017) interesting. On the last day of fact discovery, the accused infringer took the 30(b)(6) deposition of the inventor, who testified (basically) that he knew information that was but-for material but wasn’t disclosed to the USPTO during prosecution. The patentee opposed the motion to amend the accused infringer’s pleading to assert inequitable conduct, arguing (a) there was no good cause to modify the cut-off date for amending pleadings, long past and (b) even if there were, the amendment was futile because it could not meet the Exergen/Therasense standard.
The magistrate held there was good cause (it said that the accused infringes was justified in waiting to assert inequitable conduct until after it deposed the inventor), and that the amendment was not futile because it met the Exergen/Therasense standard.
There’s a lot here to think on. One is to make sure that, if you have a local rule or case management order, that you follow it to make sure you plead inequitable conduct timely. Another is, if there is no such order or rule, to be diligent and to perhaps put the other side on notice, early and before depositions, that you’re going to seek information relating to inequitable conduct even though you haven’t pled it, because you can’t plead it until you have discovery.
by Dennis Crouch
In-court secrecy continues to thrive – at least in regards to protecting business interests. Almost all patent infringement lawsuits include secrecy orders negotiated by the parties without much court participation. Courts often view themselves as arbiters of disputes between the parties – and if the parties agree on a particular issue then there is no dispute.
The right to secrecy in federal courts was upped a bit further with the Defend Trade Secrets Act of 2016 in situations where the parties don’t agree. The DTSA includes a requirement that a court “may not authorize or direct the disclosure of any information the owner asserts to be a trade secret” without first allowing an under-seal submission of a description of the confidential interest. 18 U.S.C. 1835. Although not stated, the implication is that the court must then review the submission before requiring disclosure.
The Federal Circuit allows submission of confidential appellate briefs, but requires non-confidential versions to also be submitted with the filings – basically blacking-out the particular confidential information. Further, Federal Circuit Rule 28(d)(1)(A) requires that a party seeking to mark confidential more than 15 words in its brief must petition the court. That petition was filed and granted in the case of Georgetown Rail Equipment v. Holland L.P. In granting the motion, the court wrote that:
Georgetown Rail Equipment is seeking additional words to mark portions of its response brief describing confidential pricing information, confidential internal financial information, contractual terms relating to confidential agreements with customers, and confidential information of two non-parties. Those details were designated as confidential in the underlying proceedings. In light of the limited and focused nature of the proposed markings, the court will grant the motion.
[OrderGrantingMotionForExpandedConfidentialBrief] The
When it comes to issuing an actual opinion, an important question is whether the Federal Circuit (or lower court) is bound by the confidentiality of a submission under seal containing trade secret information. I.e., may the court publicly disclose a trade secret – and thus destroy the property right; if disclosing a trade secret submitted under seal, must the court first weigh the public interest in open courts against the harm of disclosure; and would an improper disclosure by the court be seen as a taking?
I have talked through some of these issues with Federal Circuit judges who indicated their usual pathway is to attempt to avoid disclosing the secret information in the opinion – if possible. In Georgetown Rail Equipment v. Holland L.P., however, the court apparently found that approach untenable and instead issued decision on August 1 under seal: Sealed Judgement and Opinion. At the same time, the court issued an Order to Show Cause as to “why the opinion should not be unsealed.” The court writes:
Because the record in this case contains extensive material marked as confidential, the court has issued its opinion dated August 1, 2017 under seal. The court does not believe, however, that the opinion contains confidential material. The parties are hereby ordered to show cause, by means of a single joint response coordinated among the parties, why the opinion should not be unsealed. The response to this order must specify which words, if any, are proposed to be redacted, and must specifically state the cause for each such requested redaction. If the parties propose redactions, the response to this order must also propose specific words to replace each of the proposed redactions in an unsealed opinion. The joint response shall be filed no later than August 15, 2017.
[Order to Show Cause] [Aside: It will be interesting to see the redacted version of the submission.]
The court is on the right track with this order. However, it is also problematic because it focuses parties on the question of whether “the opinion contains confidential material” as if that is the sole question. The parties are hereby ordered to show cause, by means of a single joint response coordinated among the parties, why the opinion should not be unsealed. A proper analysis of the issues will take the next step of explaining why the parties’ private interest in confidentiality in the court proceeding outweighs the storied tradition of open and public courts.
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Redaction with Replacement: The court here also provides an innovative suggestion that could transform the redaction process. Rather than simply blacking-out information from its opinion, the court here asks the parties to “propose specific words to replace each of the proposed redactions in an unsealed opinion.” Redaction with replacement is likely the gold-standard approach for judicial opinions and appellate briefs, but we’ll see how it works in this case.
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The patent at issue here is U.S. Patent No. 7,616,329 covering a method for inspecting railroad. Most of the redactions in the briefs fit in the following pattern:
He testified that, but for Holland’s infringement, Georgetown would have inspected XXXXX miles of track for UP over a XXXXXXX period at a rate of $XXXXX, thereby realizing $XXXXX in revenues.
