Hikma Pharmaceuticals USA Inc., v. Vanda Pharmaceuticals Inc. (Supreme Court 2019)
I wrote earlier about the Federal Circuit’s decision on Vanda’s drug dosage claims that have two basic steps:
Determining whether a patient is likely a poor metabolizer of the drug iloperidone based upon DNA analysis (i.e., if the patient has has the CYP2D6 genotype)
Administering iloperidone at a lower dose to predicted poor metabolizers in order to reduce the risk of “QTc prolongation” for poor metabolizers.
In the case, iloperidone was already known as a drug treatment and that some folks were poor metabolizers in a way that created the risk. For poor metabolizers, the lower dose is still effective (since the drug stays in the body longer). A remaining problem though was how to predict who should get the low dosage. The core discovery here is that a genetic difference explains the risk, and the inventors made that discovery and then implemented it with its administration steps. The question then is whether this approach is patent eligible.
I previously explained my position in the case as follows:
(1) Vanda’s claims should be patent eligible [on policy grounds]; (2) but the claims are not patent eligible under Mayo Collaborative Services v. Prometheus Laboratories, Inc., 566 U.S. 66 (2012) and Alice Corp. Pty. v. CLS Bank Int’l, 134 S. Ct. 2347 (2014).
The Federal Circuit disagreed with my second conclusion and in a 2-1 decision held the claims eligible. Patent challenger Hikma (formerly West-Ward) has petitioned the Supreme Court review and that petition is supported by two strong amicus briefs:
Hikma Pharmaceuticals USA Inc., et al. v. Vanda Pharmaceuticals Inc.
All three briefs say basically same thing — The Federal Circuit’s Vanda decision conflicts with Mayo and Flook. “The Federal Circuit’s decision effectively overturns this court’s precedents, thwarts the proper development of patent eligibility law, and will lead to countless improperly issued patents.”
I recently posted a chart showing a short time series showing the number of inventors per patent. The basic conclusion from that post was in the headline: Average Number of Inventors per Patent Continues Steady Rise. Here, I have updated and added to those charts. The first chart below reaches back to 1976 — showing that the average number of inventors per patent has been steadily increasing over all of the past 40 years. The trend has been amazingly steady and linear, and should serve as good fodder for economic analysis. My simple linear model suggests that we’ll top the 3.0 inventors-per-patent threshold by 2021 (both the mean and median).
The second and third charts (below) provides a bit more detail and looks to answer some questions posted by James Daily of WashU regarding the underlying distributions. The basic conclusion there is that the proportion of one-inventor patents has dropped steadily — and can be linked with a steady rise in patents listing three or more inventors. During this time, the proportion of two-inventor patents has remained steady at about 25%. The charts also demonstrate that the growth in 3+ inventor patents is itself skewed: For example, the proportion of patents with 3 inventors doubled during the 43 year span while the proportion of patents with 7+ inventors saw a nine-fold increase.
Although the movement was already fully underway, recognize that the America Invents Act (AIA) helps foster this as well by (1) allowing patents to be filed by the applicant rather than the inventors; and (2) weakening the penalty for errors in listing of inventorship. That change was by design and part of what Dir. Kappos notion that major inventions these days are quite often major team projects, and that the patent law should foster and encourage those teams projects at least as much as it encourages individual innovation.
The new HUAWEI indictments make include some amount of comedy. The basic claim centers on an anthropomorphic robot named “Tappy.” Tappy is owned by T-Mobile, but HUAWEI was allowed to use Tappy to test phones it was making for T-Mobile (subject to a non-disclosure agreement). HUAWEI then started developing its own robot — with the much less friendly name of xDeviceRobot. HUAWEI tried to buy Tappy, but was refused and so figured out a way to infuse xDeviceRobot with some of Tappy’s features. That infusion of ideas is what los federales consider criminal theft of a trade secret in violation of the Federal Economic Espionage Act.
I’ll note here that Tappy the Robot is also a street performer with its (his?) own FaceBook page. I might suggest a dance-off to settle the dispute.
It turns out that HUAWEI perhaps didn’t take all the steps necessary for criminal trade secret theft. But, the criminal prosecutors were able to indict the company on conspiracy to steal trade secrets and attempted trade secret theft; as well as wire fraud and obstruction of justice.
This past fall at the Administering Patent Law symposium at Iowa Law, Professor Colleen Chien presented an argument in favor of more intentional experimentation by administrative agencies such, as the USPTO to test policy concepts and proposed several possibilities. Below, Professor Chien describes one such project, based on the Merges/Crouch proposal for deferring patentable subject matter analyses in prosecution. Read the accompanying PatentlyO Law Journal article here:
Colleen V. Chien, Piloting Applicant-Initiated 101 Deferral Through A Randomized Controlled Trial, 2019 Patently-O Patent Law Journal 1. (2019.Chien.DeferringPSM)
Guest post by Colleen V. Chien, Justin D’Atri Visiting Professor of Business Law, Columbia University School of Law; Professor, Santa Clara University Law School
“The journey of a thousand miles begins with a single step.” – Lao Tzu
Responding to frustration with the Supreme Court’s patentable subject matter (PSM) decisions, the Federal Circuit has issued clarifying decisions, the USPTO has released new guidance regarding applying Section 101 (and 112), and Senators Coons and Tillis have been holding roundtables. 101 appeals and rejections, including pre-abandonment rejections, have risen following Alice and Mayo, particularly within impacted technology areas. (Figs 1A and 1B, details here and here). To support tracking the impact of its own guidance and related developments, the USPTO should release updated versions of office action data (the last release was in 2017).
In this post, I propose a complementary approach that aims to conserve agency and applicant resources even while policymakers work to clarify the law. It builds on the idea of deferring 101 subject matter until other issues are exhausted first proposed by Robert Merges and Dennis Crouch, but with some important modifications. Deferral would be at applicant’s option, not mandatory, and the USPTO should roll out this intervention through a controlled trial with randomization, as the agency has done previously, to determine the practice’s effectiveness.
Experimenting with Ordering
The case for deferring subject matter builds on the insight that 101 is rarely the single dispositive issue – among office actions prior to abandonment, less than 15% of TC36BM and medical diagnostic applications and 2% applications overall are “only 101.” Yet 101 is controversial – the rate of ex parte decisions addressing 101 has also shot up, from less than 10% to over 80% in 2018 in medical diagnostic and software technology areas, and to 26% overall. (Fig 1B)
Deferring 101 would borrow from the Supreme Court doctrine of avoidance, which allows the Court to “resolve cases on non-constitutional grounds whenever possible,” in order to conserve court resources and legitimacy. Other federal agencies have also used deferral, for example, in the mid to late 2000s, when the application of immigration law to same-sex couples in some cases required family separation. To avoid this harsh consequence, Department of Homeland Security prosecutors administratively closed some cases, immigration judges granted continuances for unusually long periods in hopes that the law would change, and US Customs and Immigration enforcement officials granted requests for deferred action. That is to say, they avoided the law by deferring its application.
Avoiding PSM issues would allow cases to resolve, through allowance or abandonment, on less controversial, non-101 grounds. (The USPTO’s new guidelines implement this logic to a degree, shifting focus towards 112 and away from 101). But making 101 deferral optional, at applicant’s discretion, would preserve the benefits of compact prosecution and the freedom applicants enjoy to select a fast or slow track for each application.
The Advantages of Experimentation
Trying out applicant-initiated 101 deferral through a rigorous pilot has several advantages. First, unlike changing the law or its application which requires all to adjust, only applicants dissatisfied with the status quo would see a change. 85% of office actions don’t even include a PSM rejection I’ve found previously.
Second, implementing 101 deferral as a pilot with randomization, like the USPTO did when it conducted the post-trademark registration proof-of-use pilot, will support effective policy-making through evaluation, iteration, and refinement. Design (intent-to-treat), ethical (through consent) and methodological (power, randomization, etc.) concerns and details are discussed in the accompanying piece.Rigorously tracking the impact of PSM on patent prosecution over the course of a pilot can also provide much-needed empirical support to 101 policy-making in general.
Finally, my proposal preserves the benefits of the status quo, including the little-discussed incentive prosecutors now have to add details to their patent applications and claims, a good thing. In work with students that I presented at the Federal Trade Commission’s recent hearings building on an earlier analysis in IP Watchdog by Will Gvoth, Rocky Bernsden, and Peter Glaser from Harrity & Harrity LLP, I observed that there has been a “flight to quality” among patent complaints and applications. Carrying out a differences-in-differences analysis, we found that specification length and counts of words and unique words in the first claim have grown among software applications relative to others following the Alice decision. Deferring 101 would preserve this previously unexplored impact of the “Mayo-Alice effect” on software patent drafting. If 101 were eviscerated by Congress, so too could the incentive to be more concrete in describing and claiming inventions.
If successful, the treatment would result in the diminished presence of 101 subject matter issues within ex parte appeals and pre abandonment rejections and, potentially, resolution time, e.g. closer to pre-Mayo or Alice levels. Applicant and prosecutor satisfaction with the process, changes made to what gets filed, timelines, and such factors would also be worth tracking.
Read it here: Colleen V. Chien, Piloting Applicant-Initiated 101 Deferral Through A Randomized Controlled Trial, 2019 Patently-O Patent Law Journal 1. (2019.Chien.DeferringPSM)
With thanks to Santa Clara Law University students Jiu-Ying Wu, Nicholas Halkowski, Marvin Mercado, and Saumya Sinha and to William Gvoth, Peter Glaser, and Rocky Bernsden of Harrity LLP for assistance with data, and Hans Sauer and Jonathan Probell for their comments on earlier drafts.
 Even though 101 patentable subject matter issues appear in a quarter of 2018 appeals decisions, this share is still small compared to the share of decisions that mention, for example, “102” (, “103”, or “112” issues though note that these numbers are inflated because they do not include case specific limitations that can weed out false positives based on incidental mentions (such as “ 10/282102”)
 For example, if an invention is incurably anticipated, obvious or unsupported, the case will have been resolved without considering subject matter. Likewise, if the claims have been re-formulated responsive to non-101 rejections and mooted any subject matter defects in the process, PSM will not factor into the application’s outcome.
 In that pilot, the USPTO randomly selected 500 registrations to participate in the initial program to assess the accuracy and integrity of the trademark register. Though companies selected to participate in the pilot had to comply with additional regulatory requirements, randomization ensured that the pilot’s findings were representative and its burdens, fairly distributed. See, 77 FR 30197, 30198 (explaining that randomness in the pilot was necessary to “ensure that the resulting assessment is not skewed by consideration of registrations with particular criteria, and that implementation of the rules does not create an unfair burden on specific types of trademark owners”). The results of the test and related USPTO reports, outreach and deliberations were used to expand and make the program permanent.
Prior Patently-O Patent L.J. Articles:
David A. Boundy, Agency Bad Guidance Practices at the Patent and Trademark Office: a Billion Dollar Problem, 2018 Patently-O Patent Law Journal 20. (Boundy.2018.BadGuidance)
Paul M. Janicke, The Imminent Outpouring from the Eastern District of Texas, 2017 Patently-O Patent Law Journal 1 (2017) (Janicke.2017.Venue)
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)
In re Ikeda Food Research Co., Ltd. (Fed. Cir. 2019)
Ikeda is attempting to patent a glucose sensor using a particular enzyme (“a soluble flavin compound-binding glucose dehydrogenase”) that promotes glucose oxidizing. U.S. Application No. 12/851,668. One U.S. patent is already issued in the family as well as Japanese , Chinese, and European patents. In this case, however, the examiner rejected the claims as obvious and the PTAB affirmed. The Federal Circuit has now also affirmed that finding.
The case is most interesting for its inherency finding. Here, the claims at issue particularly require low-maltose activity (“enzymatic activity to maltose in the enzymatic reaction layer is 5% or less relative to the enzymatic activity to glucose.”) The prior art did not expressly teach that limitation, but the PTAB found it inherently disclosed. In particular, the cited prior art used the same enzyme preparation as the patentee, and the PTAB concluded that it would inherently exhibit the same low-level maltose activity.
Teachings that are inherent to a disclosure work as prior art — both for anticipation and obviousness. However, the court applies fairly strict requirements before it will assume the existence of unstated elements. “[T]he limitation at issue necessarily must be present or the natural result of the combination of elements explicitly disclosed by the prior art.” PAR Pharm., Inc. v. TWI Pharm., Inc., 773 F.3d 1186 (Fed. Cir. 2014).
In reviewing the evidence, the Federal Circuit found that the PTAB had reasonably concluded that when the enzyme was used in the prior art that it had the identical activity as claimed by Ikeda. In particular, the PTO properly made a prima facie case of inherency that was not sufficiently rebutted by the patent applicant.
The one good argument Ikeda made here involved a separate reference (Tsuji) that also used the identical enzyme and ended up with high-maltose activity. The courts, however, distinguished Tsuji because there was evidence of sample contamination in that case and no evidence that other non-related samples were contaminated.
The approach here follows Southwire Co. v. Cerro Wire LLC, 870 F.3d 1306 (Fed. Cir. 2017), where the court found it reasonable to assume that functional limitations were met if all of the other process limitations are met. “[T]here is no indication that
the limitation is anything other than mere quantification of the results of a known process.” Id.
In the absence of any evidence that the claimed [low activity] would have been unexpected in light of [Senior’s] disclosure, there is no indication that the limitation is anything other than mere quantification of the results of a known process.
= = = = =
One unusual aspect of this case is that the parties are not fully named. Although Ikeda is apparently title owner, there is a second unnamed party that is “the Real Party in interest.” In its certificate of interest, Ikeda explains that it “shares a confidential business relationship with this entity.” Judge O’Malley granted Ikeda’s unopposed motion to keep this info secret.
Before the PTAB, Ikeda apparently did not reveal the darkhorse real-party in interest. In its decision, the PTAB explains “According to Appellants, the real party in interest is Ikeda Food Research Co. Ltd.”
Google, LLC v. Oracle America (Supreme Court 2019)
This new petition from Google asks important questions about the role of copyright in protecting software. Questions presented:
Whether copyright protection extends to a software interface.
Whether, as the jury found, petitioner’s use of a software interface in the context of creating a new computer program constitutes fair use.
Rather than licensing Java, Google rewrote the programming language for Android App development in a way that mimics Java. No problem there so long as done without copying. However, rather than renaming all the function calls, Google decided to copy the names of all the function calls. I previously explained:
As an example, Google used the Java method header “Math.max(a,b).” . . . In Android’s API, Google copied a set of 37 different Java “packages” (such as Math) that each contain many classes and method calls (such as “max()”). Overall, Google copied the header structure for more than six-thousand methods.
Google’s reason for copying the naming structure was a form of free-riding. There were already many thousand Java programmers and Google was looking for a way to get them to develop Apps for Android. In its shortest form, Google explains the case as follows:
As is relevant here, software interfaces are lines of computer code that allow developers to operate prewritten libraries of code used to perform particular tasks. Since the earliest days of software development, developers have used interfaces to access essential tools for building new computer programs. Contravening that longstanding practice, the Federal Circuit in this case held both that a software interface is copyrightable and that petitioner’s use of a software interface in a new computer program cannot constitute fair use as a matter of law.
After reading the Federal Circuit decision, I wrote that the case is “likely heading to the Supreme Court.” Although I believe that the case has a very good shot – one difficulty is that it involves a decision by the Federal Circuit applying Ninth Circuit law — it effectively holds no weight and can be simply rejected by the next Ninth Circuit panel addressing the same issues.
Willis Electric (Taiwan) owns several patents on artificial Christmas trees. In 2015, Willis sued Macao-based Polygroup for infringement. Polygroup turned-around and filed several inter partes review (IPR) petitions that were granted. In its final decisions, the PTAB sided with the patentee – finding that Polygroup had not proven the claims unpatentable. On appeal, the Federal Circuit has rejected the PTAB’s claim construction. Below, I look at just one of the cases — this one involving “modular artificial tree.”
Claim Construction: The PTAB has recently begun performing “standard” claim construction during inter partes review proceedings – rather than the broadest reasonable interpretation. This case, however falls under the old regime.
The claim term at issue in the preamble phrase – “modular artificial tree”
A modular artificial tree, comprising: . . .
Even applying the broadest-reasonable-interpretation, the PTAB found the phrase limiting — and construed it to require “a tree constructed of modular portions, each modular portion being a separate tree section” with pre-attached branches. The cited prior art references all had branches that separately attached to the trunk — and thus did not provide a prior art teaching of the pre-attached branchs.
On appeal, the Federal Circuit rejected this construction — finding that it “does not represent the broadest reasonable interpretation of ‘modular artificial tree.'” None of the claims require branches, and the proffered expert testimony regarding the term’s meaning was “conclusory” and “unsupported” by corroborating evidence.
Relying on the testimony of Willis’s expert, Dr. Brown, the Board concluded that a modular tree is “a ‘distinct’ type of artificial tree with tree sections that come ‘with branches pre-attached to the trunk.’” . . .
Dr. Brown’s statement is a conclusory and unsupported assertion, and we find it to be inconsistent with the intrinsic record. So, his testimony does not provide substantial evidentiary support for the Board’s conclusion that a modular tree is one with “branches pre-attached to the trunk.”
Instead, the Federal Circuit found that a more natural broadest-reasonable construction of modular artificial tree is as “an artificial tree with elements capable of being easily joined or arranged with other parts or units.”
On remand, the Board will consider whether this change alters the non-obviousness conclusion.
In a split decision, the Federal Circuit has sided with the patentee Dr. Barry — affirming the induced infringement and $17 million damages judgments as well as several determinations regarding the public-use and on-sale statutory bars. The patents here are directed to spine surgery methods that involve large screws drilled into the spine. U.S. Patent Nos. 7,670,358 and 8,361,121.
The dissenting opinion by Chief Judge Prost offers a concise explanation of a primary issue in the case:
The facts are simple. More than one year before filing for the ’358 patent, Dr. Barry successfully performed his claimed surgical method on three different patients, charging each his normal fee. Dr. Barry’s method was thus prima facie “on sale” or in “public use” before the critical date under 35 U.S.C. § 102(b) [pre-AIA].
The majority added to these facts — that Dr. Barry was not satisfied that his method worked well enough until follow-up testing that occurred after the third surgery.
Here, the patented invention is a method — and so cannot really be “on sale.” In addition, Barry’s pre-critical-date performance of the method was within the surgical rule where HIPAA and other privacy rules ensure that the method was not publicly used. However, one conflict was the extent that Barry was commercializing the the invention — with the idea that commercialization counts as a public use. In a footnote, the Court concludes that he did not “exploit” his invention prior to the critical date since he charged the same for his new surgery has he did for the old.
Though earning his normal fees from the three surgeries [likely $$$$$], Dr. Barry did not “exploit” his invention as a means to attract the three patients for those surgeries or to charge more because he used his new technique. The jury could find that he would have gotten the same business, and earned the same fee, even if he had not planned to use or used the inventive process.
There are a number of major problems with this conclusion from the court — likely enough to fill a law review article.
In the end, for the majority, the case turned on the question of whether the invention was “ready for patenting” at the time when it was used for the surgeries. The majority found that it was not yet ready for patenting – and thus that the uses did not serve as prior art. Even though the invention had been reduced to practice used in practice, it was not ready for patenting because Dr. Barry didn’t really know if it worked to create a stable improvement in spine function. “[T]here is substantial evidence that Dr. Barry’s invention was not ready for patenting until January 2004 because the final follow-up from the October surgery was reasonably needed for the determination that the invention worked for its intended purpose.” The dissent again disagrees — arguing accurately that “Dr. Barry could have obtained a patent before the critical date.”
Note here that in my original short explanation of this decision, I indicated that the invention “had been reduced to practice.” According to the majority, the invention was not reduced to practice because that requires a determination (by the inventor) “that the invention would work for its intended purpose.” In re Omeprazole Patent Litig., 536 F.3d 1361 (Fed. Cir. 2008).
The Eastern District of Texas winds its way from the gulf coast along the Louisiana and Arkansas border and up to Oklahoma. The district does not include of the largest Texas cities, but it does include the Dallas suburb of Plano (we can debate whether it is a suburb, but it is). Plano is important because it is Corporate HQ for a number of large companies and also serves as regional HQ for many others.
Plano is also supporting E.D.Tex. as an ongoing venue for patent infringement cases.
In TC Heartland (2017) the Supreme Court ruled that a patent infringement lawsuit against a US company can only be filed in a venue (1) where the defendant is registered as a corporation (i.e., “a Delaware Corporation”); or (2) a venue where the defendant “has committed acts of infringement and has a regular and established place of business.” Quoting 28 U.S.C. 1400(b). Previously, the Federal Circuit had ruled that venue was proper in any court with personal jurisdiction over the defendant.
The new narrower venue rules have shifted the field because many prior E.D.Tex. defendants are not Texas Corporations and do not satisfy the alternate “regular and established place of business” prong of the proper venue test. The resulting shift has been major. Prior to TC Heartland about half of patent infringement lawsuits were filed in E.D.Tex; Now the number has dropped to about 14%.
I wanted to look at who is still getting sued in E.D.Tex. For this mini-study, I just looked at the original complaints of the 18 patent infringement lawsuits filed in E.D.Tex during the first three weeks of 2019. Of the 18, the vast majority (two-thirds) assert venue based upon the defendant having a regular and established place of business located in Plano. The remaining lawsuits can be broken into two different categories for venue: Three (17%) involve defendants that are residents of Texas and whose HQs are located in the District; and three more (17%) are foreign defendants who can are arguably not limited by the two-prong TC Heartland test, but rather can be sued in any jurisdiction for venue purposes. 28 U.S.C. 1391(c)(3).
PlasmaCAM, Inc. v. Fourhills Designs, et al al
Hawk Technology Systems, LLC v. Whitesboro Independent School District
Ironworks Patents LLC v. AsusTek Computer Inc.
Rembrandt Wireless Technologies, LP v. Apple Inc.
ICON Health & Fitness, Inc. v. Flywheel Sports, Inc.
Proximity Sensors of Texas, LLC v. AMS-TAOS USA, Inc.
Axcess International, Inc. v. Avigilon USA Corporation
Beverage Packaging Solutions LLC v. PepsiCo, Inc. et al
The USPTO has released additional information regarding its current operations and the ongoing Federal Government funding crisis. Bottom line is that the PTO expects to continue its patent operations “until at least the second week in February.” Things on DC appear to be thawing enough to provide hope that an appropriations bill will see some light before then.
Although the USPTO is user-fee funded, it may only spend money that has been appropriated by Congress. This limit comes directly from the US Constitution, which says “No Money shall be drawn from the Treasury, but in Consequence of Appropriations made by Law.” Article I, Section 9.
The most recent USPTO appropriations authorization ended on December 22, 2018 — seemingly cutting of the agency’s ability to spend money. However, the USPTO has been setting aside previously appropriated money in an “operating reserve” fund for a rainy-day (or rainy month+). It is this operating reserve that is now being spent and set to run-out in a couple of weeks.
Many federal agencies receive budget authority for a single fiscal year, and any money appropriated but not spent by year-end will lapse and no longer be available. Thus, for instance, 31 U.S. Code § 1301 provides that an annual appropriation “may be construed to be … available continuously only if the appropriation … (2) expressly provides that it is available after the fiscal year covered by the law in which it appears.” USPTO appropriations ordinarily include the this type of additional express caveat that appropriated funds are “to remain available until expended.” That provision allows the USPTO to set-aside its rainy-day fund from prior appropriations.
The aforementioned reserve fund is part of the USPTO’s strategic plan. And the plan particularly involves setting user fees at a high enough level to grow that fund to withstand even fairly unreasonable funding lapses. One concern though is whether the USPTO fee setting authority covers such overage. In particular, the USPTO is authorized to set fees “only to recover the aggregate estimated costs to the Office for processing, activities, services, and materials relating to patents (in the case of patent fees).” Adding a strategic operating-reserve-fund in case of a shutdown does not appear to fit within this list of cost bases.
Following-up on Yesterday’s PTA post, I wanted to run some numbers on Patent Term Adjustment. The chart below shows the average patent term adjustment for patents issued issued since 2005. The bump in early 2010 is due to a change in interpretation of the law in the Wyethdecision. If the PTA had been calculated consistently during this entire period, we would now be seeing the lowest values during the entire 13 year reporting period.
In many ways, PTA levels are a good measure of USPTO timeliness and performance because they are based upon Congressional goals for patent prosecution, including (i) a first office action within 14 months of filing; (ii) responses within 4-months; and (iii) total pendency of not more than 3-years (regardless of the cause). One important measure not captured by PTA involves RCE filing because that filing cuts-off the three-year expectation.
The second chart shows the percentage of patents with 2 or more years of PTA. Note that drop has been quite dramatic. Congratulations to the PTO.
The largest PTA cases typically involve successful appeals. For instance, recently issued U.S. Patent No. 10,025,588 was given 13 years PTA. In that case, the examiner first rejected the claims as anticipated (reversed on appeal) and then came back to apply the same prior art as an obviousness rejection (again reversed on appeal).
Claim 1 of the patent owned by Teradata is written as follows:
1. A process, executed by at least one processor in a database system, of parsing a database query, comprising:
transforming, by the at least one processor, the database query containing at least one user defined data type method into a statement; and
removing, by the at least one processor, redundant invocations of the at least one user-defined data type method in transforming the database query to the statement.
Supernus is an important case that may substantially extend the patent term adjustment (PTA) for your client. You’ll need to review the case files of recently issued cases to determine whether PTA was reduced by some supplemental filing (such as a late IDS). You may get the time back with a showing that the delay was reasonable. Deadlines in this area are tight. – DC
This case involves calculation of patent term adjustment (PTA) that extends the 20-year patent term due any delays in obtaining the patent. The statute attributes most delays to the USPTO (extending PTA), but some are attributed to the patent applicant (reducing PTA). With regard to PTA reduction, the statute particularly calls-out late office action responses as “failure of an applicant to engage in reasonable efforts to conclude processing or examination of an application.” 35 U.S.C. 154(b)(2)(C). In addition, the statute particularly gives the PTO Director authority to “prescribe regulations” that spell-out the times where PTA should be reduced due to an applicant’s failure to engage in such reasonable efforts.
This case involves supplemental filings by a patent applicant that potentially delay prosecution. The dates here are important:
February 2011, Supernus (the patentee here) filed a request for continued examination (RCE) in the case;
August 2012, Sandoz filed an opposition in the the parallel European case that cited 10 new documents.
September 2012, Supernus received notice of the opposition from its European counsel.
November 2012, Supernus filed an information disclosure statement providing the cited documents.
When the patent issued, the USPTO caculated the patent-term-adjustment as 1,260 days. Although that adds years to the patent term, the patentee wanted more. In particular, the PTO had reduced the term by 646-days — the entire time from the filing of the RCE until the filing of the IDS. The PTO stood-by its calculation and cited its regulation that PTA is reduced by any “submission” by the applicant “after a reply has been filed” by the applicant. 37 C.F.R. 1.704(c)(8). Under the regulation, the PTA reduction is calculated as the number of days between the original “reply” filing (here, the RCE) and the later “submission” (here, the IDS).
Supernus has a legitimate complaint. The statute says that PTA should be reduced when the applicant has failed to engage in reasonable efforts. Here, Supernus apparently had no knowledge of the new documents for at least 18-months (Feb 2011 – Aug 2012). In fact, one of the documents (the opposition itself) had not even been created yet. The point here is that even a highly reasonable actor could not have submitted the documents during that 18-month period.
A difficulty for Supernus is that the Federal Circuit previously upheld this particular regulation ( 37 C.F.R. 1.704(c)(8)) — finding it “reasonable.” Gilead Scis., Inc. v. Lee, 778 F.3d 1341 (Fed. Cir. 2015).
On appeal here, the Federal Circuit has distinguished Gilead and sided with the patentee. In Gilead, the information found in a late-filed IDS was already known to the patentee — thus it was proper to attribute the entire delay to the applicant. The basic holding in Gilead was that the PTO does not have to prove that applicant delay actually caused a delay in issuance.
Here, the court focused on whether the PTA reduction can exceed “time during which the applicant failed to engage in reasonable efforts to conclude prosecution.” After considering the language of the statute, the court concluded that the USPTO is only permitted to reduce PTA for periods where the applicant acted in an unreasonable manner. This conclusion follows easily from the statute:
The period of adjustment of the term of a patent under paragraph (1) shall be reduced by a period equal to the period of time during which the applicant failed to engage in reasonable efforts to conclude prosecution of the application.
35 U.S.C. § 154(b)(2)(C)(i) (emphasis added by the court).
Although the PTO has authority to regulate this area, it does not have authority to contravene the statute — as such the office acted inappropriately here. “We find the USPTO’s PTA reduction to be inconsistent with the PTA statute and, as a result, we accord no deference to the USPTO’s application of the regulations at issue in these circumstances.”
The PTO will now need to think-up some new regulations. Two potential solutions.
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The patent at issue – U.S. Patent No. 8,747,897 – is somewhat interesting in the way that it claims the use of polyvinyl pyrrolidone (PVP) as a “complexing agent” in its pills.
The Supreme Court has affirmed the Federal Circuit’s interpretation of the “on sale bar” — holding that “Congress did not alter the meaning of ‘on sale’ when it enacted the AIA.” The particular focus here was whether “secret” sales continue to qualify as prior art under the revised Section 102. Here, the court says yes — “an inventor’s sale of an invention to a third party who is obligated to keep the invention confidential can qualify as prior art under §102(a).”
In light of this settled pre-AIA precedent on the meaning of “on sale,” we presume that when Congress reenacted the same language in the AIA, it adopted the earlier judicial construction of that phrase. . . . Given that the phrase “on sale” had acquired a well-settled meaning when the AIA was enacted, we decline to read the addition of a broad catchall phrase [otherwise available to the public] to upset that body of precedent.
After deciding that the AIA did not change the law, the Supreme Court also took some time to address the question of what is the law. An interesting aspect of the decision here is that the Supreme Court has never expressly addressed the question of whether or the extent that an offer or sale must be public. However, the court noted its prior implicit precedent that secret sales count as prior art:
Although this Court has never addressed the precise question presented in this case, our precedents suggest that a sale or offer of sale need not make an invention available to the public. . . . The Federal Circuit … has made explicit what was implicit in our precedents. It has long held that “secret sales” can invalidate a patent. E.g., Special Devices, Inc. v. OEA, Inc., 270 F. 3d 1353 (2001) (invalidating patent claims based on “sales for the purpose of the commercial stockpiling of an invention” that “took place in secret”); Woodland Trust v. Flowertree Nursery, Inc., 148 F. 3d 1368 (1998) (“Thus an inventor’s own prior commercial use, albeit kept secret, may constitute a public use or sale under §102(b), barring him from obtaining a patent”). . . .
Given that the phrase “on sale” had acquired a well-settled meaning when the AIA was enacted, we decline to read the addition of a broad catchall phrase to upset that body of precedent.
The Supreme Court decision is short – nine pages of text – and unanimous – authored by Justice Thomas.
Guest post by Howard Skaist, founder of Berkeley Law & Technology Group, LLC.
In 2014, two months after Alice was decided by the Supreme Court, a post that I wrote appeared on Patently-O proposing an approach to claim drafting in light of the Alice decision using a “thought experiment” as an illustration. A hypothetical in that post suggested trying to claim the original computer spreadsheet VisiCalc before the Alice decision and then after the Alice decision. The conclusion of the post as to Section 101 was summarized at the time, as follows:
“…from a formal perspective, it is necessary that innovative aspects of the invention, as implemented or intended to be implemented, be on the face of the claim …” (emphasis supplied)
One problem, however, as illustrated starkly by the hypothetical is that claims drafted in light of the Alice decision are generally narrower than they would have been otherwise. Today, perhaps, one could write better (e.g., broader) claims to pass muster under the Mayo–Alice Framework than the example claims provided in that 2014 post. However, the point of this post is not to attempt to do that, but rather to consider the pre-Alice claim provided as an illustration and ask the following two questions.
A method comprising: implementing a spreadsheet on a computer.
The primary change under the new subject matter guidance is to so-called step 2A (using the terminology of the US Patent Office) — whether the claim is directed toward a judicial exception such as an abstract idea. The new subject matter guidance adds a first prong and a second prong to Step 2A. Following the first prong, an examiner is to determine whether the claim recites a judicial exception, in this case an abstract idea, by referring to subject matter groupings. The subject matter groupings are specified as: mathematical concepts, certain methods of organizing human behavior, and mental processes.
I note that the guidance is quite specific in saying that the claim must “recite” matter that falls within the enumerated groupings. Thus, here, I would say it does not. Nonetheless, I have to question if an examiner would take that view. While the claim clearly does not recite a mathematical concept, I could imagine an examiner asserting that the claim recites a mental process. While I would not agree with this latter conclusion, I could imagine that an examiner might say, for example, that a spreadsheet can be a mental process and that the language “implementing … on a computer” is nothing more than clever patent drafting.
How, then, might the claim be re-drafted to overcome such a rejection, but still retain some measure of breadth? To challenge ourselves, and perhaps, recite slightly more than necessary, how about this claim?
A method comprising: implementing a spreadsheet via a computer, including determining contents of one or more cells thereof, based at least in part on one or more user-specified operations to be applied to signals and/or states to be provided as operands for the one or more user-specified operations.
This re-drafted claim at least arguably does not recite a mental process. Rather, the claim language is pretty specific to make it clear that physical processes are taking place. Thus, at least two out of three groupings have been drafted around.
Still, an examiner might say that a spreadsheet is a long-standing, fundamental economic practice or one that is a method of organizing human activities, demonstrating one danger with this particular grouping. It is, by its very nature, a bit vague. Without making any admissions, thus, it would not be not entirely unreasonable for an examiner to suggest that a spreadsheet might fall into this grouping.
Fortunately, all is not lost. Even if one fails to pass muster under the first prong, an opportunity to satisfy section 101 under the second prong remains. Here, the new guidance says that if the recited exception is integrated into a practical application, then the claim is still patent-eligible.
Specifically, the guidance says that to meet the second prong the claim is to integrate the judicial exception into a practical application that imposes a meaningful limit on the judicial exception, such that the claim is more than a drafting effort to monopolize the judicial exception. Being an advocate, my position would be that we have met this already with the claim above.
However, again, to be especially hard on ourselves, perhaps we need to make it clear that some sort of result is generated, so that, as a whole, the claim comprises an improvement over a spreadsheet generated by hand, perhaps, as follows:
A method comprising: implementing a spreadsheet via a computer, including: determining contents of one or more cells thereof, based at least in part on one or more user-specified operations to be applied to signals and/or states to be provided as operands for the one or more user-specified operations; and generating output signals and/or states based at least in part on the determining, wherein the generating includes generating a report that comprises at least a table portion or a sub-portion of the spreadsheet.
Now, it seems that it would be challenging to assert that a practical application with meaningful limits has not been claimed. Furthermore, if needed, more dependent claims could be used to flush out more application specific features. Thus, it would seem, we have successfully written or could successfully write a claim that is patent-eligible under the new guidance.
Given the length limitations of a post such as this, it is important that I now quickly move to the point of my prior musings. So, I have three general observations to make in light of my “thought experiment” above.
First, that my re-drafted claim would pass the Mayo–Alice Framework under the close scrutiny of a court at best is unclear. Thus, as one conclusion, even if you are able to draft a claim to pass the new subject matter guidance, it seems prudent to include, as dependent claims, features that you believe more clearly pass the patent eligibility test being applied by courts.
As a second conclusion, in an attempt to provide greater certainty, it appears that the new guidance permits one to present broader patent-eligible claims to the US Patent Office than previously. To rephrase this latter point, the Patent Office has provided guidance intended to ferret out the more egregious cases of patent-ineligibility, thereby leaving it to courts to sort out closer question situations, as this example might illustrate.
As a third conclusion, with respect to the new guidance, the “money,” so to speak, resides in meeting the second prong. More specifically, while a patent drafter should certainly attempt to draft claims to comply with the first prong and the second prong; still, given the vagueness at the edges of the first prong groupings, efforts by a patent claim drafter to comply with the second prong appear to me to be more likely to succeed.
We are only 21 days into 2019, but trajectories in patent infringement lawsuits appear to be following the same patterns as 2018 — with the top-four venues staying in the same almost identical rank-order:
For 2018, N.D. Cal. slightly outranked C.D.Cal. That result is flipped thus far in 2019. For 2018 and 2019, these five venues represented 55% and 57% of total case filings respectively. (Data compiled from LexMachina Dockets)
The New Judge in town is Alan Albright. Albright was a long-time patent litigator and is now the lone federal judge in the Waco division of the W.D. Texas. If you file your patent case in Waco, it will be heard by an experienced patent litigator. Congratulations Judge Albright.
The Federal Circuit is not off to an auspicious start in 2019 in terms of its opinions and decisions in patent cases. Of the 20 patent decisions issued thus far, only 4 (20%) are precedential. The majority (65%) are actually no-opinion judgments known as R.36 judgments with three more (15%) short non-precedential decisions added to the mix. Hopefully this trend will not continue.
For the whole of 2018, the stats are approximately as follows:
30(b)(6) depositions are part of the toolkit of any competent patent litigator. The proposed change would, I think, help with some questions about the rule, but leave others unresolved. The proposed amendment to Rule 30(b)(6) is below, with the proposed new language not in italics:
In its notice or subpoena, a party may name as the deponent a public or private corporation, a partnership, an association, a governmental agency, or other entity and must describe with reasonable particularity the matters for examination. The named organization must [proposal deletes the present word “then”] designate one or more officers, directors, or managing agents, or designate other persons who consent to testify on its behalf; and it may set out the matters on which each person designated will testify. Before or promptly after the notice or subpoena is served, and continuing as necessary, the serving party and the organization must confer in good faith about the number and description of the matters for examination and the identity of each person the organization will designate to testify. A subpoena must advise a nonparty organization of its duty to make this designation and to confer with the serving party. The persons designated must testify about information known or reasonably available to the organization. This paragraph (6) does not preclude a deposition by any other procedure allowed by these rules.
While I appreciate the idea behind the change — to foster cooperation by requiring conferring about the topics and so on — the case law about the use of Rule 30(b)(6) demonstrate to me that a lot more could be done to eliminate problems. (E.g., can you instruct a witness not to answer if the question is outside the scope of the notice.) If they’re going to amend it, I would hope for more is one way of stating it.
You can find more about the proposals, which include changes related to petitions at the appellate level for panel rehearing and rehearing en banc, here (to save you time, 30(b)(6) starts on page 31).