July 2019

Celgene v. Peter: application of IPRs to pre-AIA patents is not a taking

Patent,

By Jason Rantanen

Celgene Corp. v. Peter (Fed. Cir 2019)18-1167.Opinion.7-30-2019

Panel: Prost (author), Bryson, Reyna

While Oil States v. Greene’s Energy, 138 S.Ct. 1365 (2018), answered the question of whether inter partes review proceedings were unconstitutional generally, it left unanswered the question of whether application of inter partes review proceedings to patents granted prior to the America Invents Act constituted a taking under the 5th Amendment.  Here, the Federal Circuit directly addresses that question, concluding that it is not.

Constitutional challenges like this one can be challenging to raise effectively on appeal.  While usually, the issues are brought up in a footnote or single sentence, this was not one of those instances: Celgene devoted 8 pages of its principal brief to its takings argument, making a serious go at it.  Still, Celgene had not raised the argument before the Board and requests to address an argument for the first time on appeal are granted only in exceptional circumstances.  However, given the circumstances–Celgene’s raising of an issue not directly resolved by Oil States, the growing number of retroactivity challenges following Oil States, and the thoroughness of the briefing on the issue, among other considerations–the court concluded that “this is one of those exceptional circumstances in which our discretion is appropriately exercised to hear Celgene’s constitutional challenge even though it was not raised below.”  Slip Op. at 25.

Celgene’s argument on the merits rested on a regulatory takings theory.  It contended that “subjecting its pre-AIA patents to IPR, a procedure that did not exist at the time its patents issued, unfairly interferes with its reasonable investment-backed expectations without just compensations.”  Id. at 26.  In response, the PTO argued that (1) the patent owner never had a valid property right because the patent was erroneously issued in the first instance,” and (2) “patents have been subject to reconsideration and cancellation by the USPTO in administrative proceedings for nearly four decades, and Celgene’s own patent[s were] issued subject to this administrative revocation authority,” and that “the AIA did not alter patent holders’ substantive rights.”  Id. at 26, 27 (internal quotation marks omitted).

The Court’s analysis focused on the degree of the change: “specifically whether IPRs differ from the pre-AIA review mechanisms significantly enough, substantively or procedurally, to effectuate a taking.”  Id. at 27.  The court concluded that they were not, a conclusion that was also in line with its precedent rejecting “constitutional challenges to retroactive application of the pre-AIA ex parte reexamination mechanism.”  Id.  The money quote:

The validity of patents has always been subject to challenge in district court. And for the last forty years, patents have also been subject to reconsideration and possible cancellation by the PTO. As explained below, IPRs do not differ significantly enough from preexisting PTO mechanisms for reevaluating the validity of issued patents to constitute a Fifth Amendment taking.

The bulk of the court’s remaining discussion walks through the various administrative revocation procedures in place over the past few decades, comparing and contrasting them with IPRs.  While the court recognized differences between ex parte and inter partes reexaminations, on the one hand, and inter partes review proceedings on the other, it viewed the similarities as “far more significant.”  Id. at 30.  The substantive grounds for review are the same (anticipation and obviousness, based on the same categories of prior art, the same evidentiary standard applies (preponderance of the evidence), the same claim construction standard applies (broadest reasonable interpretation applied in this set of IPRs), in both cases the Director has discretion to initiate the proceeding, and serve essentially the same purpose.

In the end, “Although differences exist between IPRs and their reexamination predecessors, those differences do not outweigh the similarities of purpose and substance and, at least for that reason, do not effectuate a taking of Celgene’s patents.”  Slip. Op. at 36.

The court also affirmed the PTAB’s decisions finding the appealed claims obvious.

 

Solutran v. Evalon: Processing Paper Checks and Patent-Eligible Subject Matter

Patent

By Jason Rantanen

Solutran, Inc. v. Evalon, Inc., U.S. Bancorp (Fed. Cir. 2019) 19-1345.Opinion.7-30-2019

Panel: Chen (author), Hughes and Stoll

This opinion involves review of a district court opinion denying summary judgment that claims 1-5 of U.S. Patent NO. 8,311,945 are invalid for failure to recite patent-eligible subject matter.  (The district court also granted summary judgment that the claims were infringed.)

Claim 1 is below.  Without knowing more, can you predict how the court resolved the appeal?

1. A method for processing paper checks, comprising:

a) electronically receiving a data file containing data captured at a merchant’s point of purchase, said data including an amount of a transaction as-sociated with MICR information for each paper check, and said data file not including images of said checks;
b) after step a), crediting an account for the mer-chant;
c) after step b), receiving said paper checks and scanning said checks with a digital image scanner thereby creating digital images of said checks and, for each said check, associating said digital image with said check’s MICR information; and
d) comparing by a computer said digital images, with said data in the data file to find matches.

The answer is after the jump.

(more…)

Amgen v. Coherus: Argument-based prosecution history estoppel

Patent

By Jason Rantanen

Amgen Inc v. Coherus Biosciences Inc. (Fed. Cir. 2019)  18-1993.Opinion.7-29-2019

Judges Reyna, Hughes, Stoll (author)

The doctrine of equivalents (“DOE”) may be every patent law student’s favorite doctrine to hate.  (Edit: to clarify, I mean that it can be complicated not that it’s conceptually a “bad” doctrine.) I sometimes introduce it as “the rule against perpetuities – except more complicated and economically significant.”  Under the DOE, a patent can be infringed even when the accused product or process doesn’t literally meet all the limitations of the claim.

Central to the DOE is prosecution history estoppel: a doctrine that prevents “a patentee from using the doctrine of equivalents to recapture subject matter surrendered from the literal scope of a claim during prosecution.”  Slip Op. at 8, quoting Trading Techs. Int’l, Inc. v. Open E Cry, LLC, 728 F.3d 1309, 1322 (Fed. Cir. 2013).  Because prosecution history estoppel is a question of law, it often functions as threshold question that is resolved before moving to the fact-specific equivalents analysis.  Indeed, David Schwartz, Lee Petherbridge and others have argued that PHE is one of the key mechanisms that the Federal Circuit has used to limit the application of the doctrine of equivalents following Warner-Jenkinson.

Often when we think about prosecution-history estoppel, we think about amendment-based estoppel, which can arise when an applicant makes a narrowing amendment to a pending claim.  This case involves one of the trickier aspects of PHE: argument-based estoppel.

Background

Amgen sued Coherus for infringement of Patent No. 8,273,707, which relates to methods of purifying proteins using hydrophobic interaction chromatography (“HIC”).”  Slip Op. at 2.  This process uses a combination of a buffered salt solution containing the protein that is poured into a HIC column.  The proteins bind to column matrix and impurities are poured off.  The ‘707 patent claims a process that increases the maximum amount of protein in solution that can be loaded into the HIC column by using certain combinations of salts “chosen form one of three pairs: citrate and sulfate, citrate and acetate, or sulfate and acetate.”  Slip Op. at 4.

During prosecution (this gives rise to the PHE ruling), the examiner rejected the claims as obvious in view of a prior art patent that “disclosed several salts for improving hydrophobic interactions between a protein and the column matrix.” Slip Op. at 4.   Amgen responded by pointing out that “the pending claims recite a particular combination of salts.  No combinations of salts [are] taught nor suggested int eh Holtz et al. patent, nor [are] the particular combinations of salts recited in teh pending claims taught nor suggested in this reference.”  Id. at 4-5.  A supporting inventor declaration pointed out the three pairs above “reduced purification costs on a commercial scale as compared to using only a single salt.”  Id. at 5.  After another rejection, Amgen further pointed out that “choosing a working salt combinationw as a ‘lengthy development path’ and that ‘merely adding a second salt’ would not result in the invention” and the examiner allowed the claims.  Id. at 6.

In 2016, Coherus filed an abbreviated Biological License Application for an Amgen product.  Because Coherus’s protein purification method uses a chromatography buffer containing a salt combination, but not one of the specific combinations recited in Amgen’s claim, when Amgen sued for infringement in 2017, Amgen’s infringement theory rested on the doctrine of equivalents rather than literal infringement.  The district court subsequently granted Coherus’s motion to dismiss on the pleadings for failure to state a claim.

Federal Circuit: Argument-based prosecution history estoppel applies here

On appeal, the Federal Circuit affirmed the application of argument-based estoppel. “To invoke argument-based estoppel, ‘the prosecution history must evince a clear and unmistakable surrender of subject matter.'” Slip Op. at 9, quoting Conoco, Inc. v. Energy & Envtl. Int’l, L.C., 460 F.3d 1349, 1363 (Fed. Cir. 2006).  Here, the court held, argument-based estoppel applies “because Amgen clearly and unmistakably surrendered unclaimed salt combinations during prosecution.”  Id. at 9.  Amgen repeatedly pointed to the particular combinations of salts as important in distinguishing the prior art references.  As a result, “a competitor would reasonably believe that Amgen surrendered unclaimed salt combinations.”  Id. at 10 (internal quotation marks omitted).

Amgen’s primary argument, that it asserted other reasons for distinguishing the prior art reference, was not persuasive as “our precedent instructs that estoppel can attach to each argument.”  Id. at 11.  Nor was the court persuaded by Amgen’s argument that it’s last response before the claims were allowed did not contain the particular-salt-combination argument.  But “[t]here is no requirement that argument-based estoppel apply only to arguments made in the most recent submission before allowance.”  Id. at 11.  For those seeking to avoid this outcome, note the court’s final words on the subject: “We see nothing in Amgen’s final submission that disavows the clear and unmistakable surrender of unclaimed salt combinations made in Amgen’s January 6, 2011 response.”  (I’m curious: has any applicant ever disavowed an argument made earlier in prosecution?  This seems like a risky strategy for getting claims allowed.)

 

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Patently-O Software Law Bits & Bytes: Russian Mandatory Software by Grant Harrison

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Overview: A recent bill proposed by Russian officials would require companies whose technology devices are shipped to Russia to contain locally developed software.

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Drug Pricing and Patents – Part I

Patent

by Dennis Crouch

My law school Dean, Lyrissa Lidsky recently published a new op-ed entitled Patent reform is needed to protect patients’ access to lifesaving drugs.  Dean Lidsky is in the midst of breast cancer treatment that includes $150,000 for the biologic drug Herceptin.  Genentech (Roche) has aggressively protected this multi-billion-dollar marketplace by asserting its patent rights against potential competitors.

Dean Lidsky is receiving the treatment and insurance is paying price, but argues that the cost is simply too high:

I’m grateful that pharmaceutical companies continue to make discoveries like the one that saved my life. But Congress should pursue patent reform that puts patients first. Our lives are worth it.

The Op-Ed does not present a solution, but does cite to efforts by former Mizzou Law School professor Senator Josh Hawley (R-MO) and others.

Hawley and Sen. Rick Scott (R-FL) proposed the Transparent Drug Pricing Act of 2019 (S.977) includes a fairly weak transparency proposal requiring each state to adopt policies requiring pharmacists to disclose the price of prescription drugs.

The Bill would also limit the “retail list price” of U.S. drugs to “the lowest retail list price for the drug among Canada, France, the United Kingdom, Japan, or Germany.” Sen. Hawley explains in his press release: “There is no reason why U.S. pharmaceutical companies sell drugs to people in foreign countries far cheaper than what they charge Americans.”  As it stands, the Bill this provision could be easily skirted by manufacturers and retailers.  Notably, the Bill does not (1) define “retail list price;” (2) offer any enforcement mechanism; or (3) indicate if any agency would have authority to enforce the pricing provision.  Unless those elements are tightened-up, the provision will be mere lip service.

Prior to becoming Senator, Josh Hawley helped lead the charge against the Affordable Care Act (Obamacare) both as Missouri AG and privately in the Hobby Lobby case.

Proving Written Description with Experimental Data

Patent,

by Dennis Crouch

Nuvo Pharmaceuticals v. Dr. Reddy’s Laboratories Inc., Docket No. 17-02473 (Fed. Cir. 2019) [Decision][En Banc Petition][Opposition by Dr. Reddy’s]

The asserted patents in this case cover a combination dosing of (1) a pain-relief drug (NSAID) with an enteric coating (released in acidic environment) and (2) an uncoated PPI.  U.S. Patent Nos. 6,926,907 and 8,557,285.

1. A pharmaceutical composition in unit dosage form comprising therapeutically effective amounts of:

(a) esomeprazole, wherein at least a portion of said esomeprazole is not surrounded by an enteric coating; and

(b) naproxen surrounded by a coating that inhibits its release from said unit dosage form unless said dosage form is in a medium with a pH of 3.5 or higher;

wherein said unit dosage form provides for release of said esomeprazole such that upon introduction of said unit dosage form into a medium, at least a portion of said esomeprazole is released regardless of the pH of the medium.

Claim 1 of the ‘285.

The defense raised a written description issue – arguing that the original patent filings did not support the “therapeutically effective” limitation.  The district court sided with the patentee, but the Federal Circuit reversed on appeal and held the claims invalid. In particular, the Federal Circuit found that PHOSITA could not tell from the patent document that the compound was “therapeutically effective” as claimed.

Obviousness – Written Description Interplay: The amount of written description needed varies from patent to patent depending upon a number of factors — including the level of skill in the art.  An invention that far-exceeds the state-of-the-art will need more description in order to show possession of the invention.

In this case, the patentee won its obviousness argument by showing PHOSITA would not have reasonably expected the combination to work.  As such, that means that the claim elements must be fully described in the specification.

The Court also explained that the written description requirement does not always require proof that a claimed drug treatment is effective.  The difficulty for the patentee here, is that the treatment’s effectiveness is particularly claimed.

The Patentee has now petitioned the Federal Circuit for rehearing en banc and explained the holding as follows:

The panel accepted Defendants’ argument that, if the prior art would have led a skilled artisan to be skeptical that uncoated PPI would work, the patents must lack written description because they allegedly lack experimental data or a detailed theory to overcome this teaching away and persuade the skilled artisan the uncoated PPI in the claimed invention would be effective. The panel stated, for example, that the inventor failed to show possession of the claimed invention because a skilled artisan “would not have expected uncoated PPI to raise gastric pH.”

The petition argues that this approach is improper:

The panel improperly enacted a new written description standard requiring either experimental data or a detailed theory of why the invention will work, at least for inventions that overcome obviousness based on skepticism in the field or a lack of reasonable expectation of success. In doing so, the panel’s opinion contradicts the very cases it cites, which hold that written description does not require experimental data, working examples, a detailed theory of why the invention will work, or an actual reduction to practice. . . .

This opinion creates a heightened written description standard that contradicts this Court’s precedents stating that a patent specification must only show that the inventor had possession of the claimed invention and does not need to disclose data

Citing Allergan, Inc. v. Sandoz Inc., 796 F.3d 1293 (Fed. Cir. 2015) and Alcon Research Ltd. v. Barr Labs., Inc., 745 F.3d 1180 (Fed. Cir. 2014).

Following the en banc petition, the Federal Circuit requested a response from Dr. Reddy’s who filed a short brief arguing primarily that Nuvo created a false “parade of horribles” that mischaracterize the Federal Circuit’s opinion.

  • Alan Pollack (Windels Marx) is handing the appeal for Dr. Reddy’s
  • Stephen Hash (Baker Botts) is representing Nuvo Pharma.

 

Cert Petition: Respecting a Jury Verdict

Patent

Imperium IP Holdings (Cayman), Ltd.., v.  Samsung Electronics Co., Ltd., et al. (Supreme Court 2019)

QUESTION PRESENTED

This case implicates fundamental questions about the proper roles of the jury and the court. After a six-day trial, a jury found that Respondent Samsung willfully infringed Petitioner Imperium’s patent rights. In reaching that verdict, the jury found that Samsung had failed to carry its burden of proving by clear and convincing evidence that the relevant patent claims were invalid. Following post-trial proceedings, including an award of treble damages plus attorney’s fees in light of Samsung’s willful infringement and litigation misconduct, the district court entered judgment for over $22 million on the patent claims at issue.

The Federal Circuit reversed, however, holding that Samsung was entitled to judgment as a matter of law on invalidity because the jury was required to accept the purportedly credible, “unrebutted,” and “uncontradicted” testimony of Samsung’s paid expert. The court of appeals reached that holding only after performing its own assessment of Samsung’s expert’s credibility and ignoring numerous other facts that could have led a reasonable jury to discount the value of this witness’s testimony.

The question presented is

whether an appellate court may reverse a jury verdict based on its own view that expert testimony was credible, “unrebutted,” and “uncontradicted,” or instead whether the Seventh Amendment requires the jury to make determinations about credibility and the weight of the evidence in determining whether a party has properly carried its burden of proof.

Docs:

Manufacturers Locking-In Consumers with Design Patents

Patent,

by Dennis Crouch

Automotive Body Parts Ass’n v. Ford Global Techs. (Fed. Cir. 2019)

Car manufacturers regularly use design patents to control the repair marketplace.  In this case, Ford accused members of the ABPA of infringing its U.S. Patent No. D489,299 (F150 truck hood) and U.S. Patent No. D501,685 (F150 headlamp) and APBA responded with a declaratory judgment lawsuit — arguing that the patented designs are functional rather than ornamental and therefore invalid.

A design patent must be directed to an “ornamental design for an article of
manufacture” and not one “dictated by function.”  High Point Design LLC v.
Buyers Direct, Inc., 730 F.3d 1301, 1315 (Fed. Cir. 2013) (interpreting 35 U.S.C. § 171(a)).   Although the article of manufacture itself is typically functional, the design itself may not be “primarily functional.”

The Federal Circuit has applied a multi-factor approach that basically asks whether the claimed design is “essential to the use of the article.” Factors:

[W]hether the protected design represents the best design; whether alternative designs would adversely affect the utility of the specified article; whether there are any concomitant utility patents; whether the advertising touts particular features of the design as having specific utility; and whether there are any elements in the design or an overall appearance clearly not dictated by function.

Berry Sterling Corp. v. Pescor Plastics, Inc., 122 F.3d 1452 (Fed. Cir. 1997).

ABPA’s argument here is that anyone repairing a damaged F150 truck will want replacement parts that match the original design.  In particular, APBA “argues
that Ford’s hood and headlamp designs are functional because they aesthetically match the F-150 truck.”  On appeal, the Federal Circuit rejected this theory of functionality: “the aesthetic appeal of a design to consumers is inadequate to render that design functional” —  “even in this context of a consumer preference for a particular design to match other parts of a whole.”  According to the court, market advantage via aesthetic appeal is the exact type of market advantage that design patents are supposed to provide.

The holding here gives a powerful nod of approval to the already rampant use of design patents to lock-in consumers for repair parts and for manufacturers to use design patents to prohibit unauthorized interconnections.  In this form, the case sits closely alongside the Federal Circuit’s decision on Google v. Oracle that is pending certiorari before the Supreme Court.  The case also reaffirms the tradition that the functional limit in design patents is a very weak test — even weaker than that of copyright and trademark law. 

Auto insurance companies have long lobbied congress to weaken design patent coverage on repair parts. This case may trigger a resurgence in that activity.  The case also suggests a potential marketplace for after-market parts that are slightly different from OEM but still functional.  I’d probably prefer an F150 that doesn’t look like the original.  

Reopening Prosecution – Rather than Allowing Appeal

Patent

In his petition for writ of certiorari, Gilbert Hyatt asks:

Whether MPEP § 1207.04 violates patent applicants’ statutory right of appeal following a second rejection.

This section of the MPEP allows a patent examiner to “reopen prosecution to enter a new ground of rejection” in response to a patentee filing an appellate brief.  Hyatt argues that this approach violates the right to appeal under 35 U.S.C. § 134 and § 6(b).  When I previously wrote about the case, I noted a “remarkably parallel” case from 1904 where the Supreme Court authorized mandamus action where the examiner refused to forward cases to the Board. U.S. ex rel. Steinmetz v. Allen, 192 U.S. 543 (1904).  The Supreme Court in that case also wryly spells-out the justification for restriction practice — “to obtain more revenue” for the Patent Office.

In its newly filed responsive brief, the USPTO agrees that after having its claims “twice rejected . . . the applicant is entitled to appeal that rejection. . . [However], contrary to petitioners’ assertion, that procedure does not deprive any patent applicant of his right to review by the Board.”

[Supreme Court Docket Page]

The PTO draws a distinction with Steinmetz because it was related to a refusal to allow an appeal with regard to restriction practice — rather than repeated reopening of prosecution.

= = = =

My take here is that the PTO should be able to reopen prosecution when it acts reasonably.  A mandamus action or APA lawsuit should be available if the agency acts otherwise.

Whether Enhanced Damage Judgment is Required for a “Final Decision”

Patent

by Dennis Crouch

Brigham and Women’s Hospital v. Perrigo Co. (Supreme Court 2019).

I wrote about this case in February 2019 under the Headline: Pepcid Complete Generic Does not Provide “Immediate Relief” and Therefore Does not Infringe.  The jury sided with the patentee and awarded $10 million in damages.  That verdict was overturned by the district court who concluded that no reasonable jury could find infringement based upon the evidence presented. And, as my headline suggests, the Federal Circuit affirmed the non-infringement holding.

My original post focused on the patent law merits and avoided some of the appellate procedure issues that are the focus of a push by the patentee to the Supreme Court.

Here’s what happened in the case. A few days after the jury verdict siding with the patentee, the court clerk entered judgment for the patentee using the court’s standard judgment form.

Note here, that the judgment is lacking somewhat because it is subject to an accounting and also consideration of enhanced damages for willful infringement. But, this is pretty standard — there is usually some amount of clean-up following judgment on the merits.

The basic appellate procedure question is whether this judgment is a “final decision” that must be appealed within 30 days. The question is important because Perrigo didn’t file an appeal within the 30 day requirement.  Here is the guidance:

  • 28 U.S.C. 1295(a)(1): Federal Circuit has jurisdiction of “an appeal from a final decision” in a patent case.
  • Fed. R. Appellate Proc. 4(a): “the notice of appeal . . . must be filed . . . within 30 days of entry of the judgment or order appealed from.”

In its unpublished order, the Federal Circuit worked through the details of what counts as a ‘final decision’ under section 1295. In general, a final decision is one that “ends the litigation on the merits and leaves nothing for the court to do but execute judgment.” Catlin v. United States, 324 U.S. 229 (1945) (citation omitted).  The law though has some amount of nuance. While compensatory damages are seen as a core element of the ‘merits’ litigation, attorney fee awards are not.

If you remember, the district court’s December 2016 judgment did not decide enhanced damages for willful infringement.  On appeal in this case, the Federal Circuit decided that enhanced damages are more like regular compensatory damages than attorney fees — and thus the lack of an enhanced damage award/denial meant that the district court’s Dec. 2016 decision was not a final decision and thus didn’t need to be appealed immediately.

In papers recently filed with the Supreme Court, Brigham & Women’s has indicated its intent to petition for writ of certiorari on the final decision question — arguing that the Federal Circuit’s decision lacks authority and is contrary to several Supreme Court decisions, including Budinich v. Becton Dickinson & Co., 108 S. Ct. 1717 (1988) (a decision is final even without considering attorney fee motions — “A question remaining to be decided after an order ending litigation on the merits does not prevent finality if its resolution will not alter the order or moot or revise decisions embodied in the order.”); and Ray Haluch Gravel Co. v. Central Pension Fund, 134 S. Ct. 2205 (2014) (The fact that attorney fees are authorized by contract does not change the usual rule that attorney’s fees “do not remedy the injury giving rise to the action” and therefore not part of a merits decision.)

One key way that the Federal Circuit distinguished enhanced damages from attorney fees was by looking at the statutory structure and recognizing that enhanced damages are part of the regular damages statute 35 U.S.C. § 284 while attorney fees are separately codified in 35 U.S.C. § 285.  “The source of authority to award damages is the same source of authority that authorizes enhanced damages.”  I’ll note that this exact type of reasoning was rejected by the Supreme Court in Budinich and Ray Haluch Gravel.

Some fee-shifting provisions treat the fees as part of the merits; some do not. Some are bilateral, authorizing fees either to plaintiffs or defendants; some are unilateral. Some depend on prevailing party status; some do not. Some may be unclear on these points. The rule adopted in Budinich ignores these distinctions in favor of an approach that looks solely to the character of the issue that remains open after the court has otherwise ruled on the merits of the case.

Ray Haluch Gravel.  Bottom line here is that this statutory-linkage portion of the Federal Circuit’s decision is junky and has already been effectively preempted by two prior Supreme Court decisions. In its decision, the Federal Circuit does not offer any other reason for tying enhanced damages to the final decision other than that it has done obliquely so in the past.

Documents: Supreme Court Docket.  Jim Bollinger (Troutman Sanders) is handling the petition and was also trial and appellate counsel. Jeff Gargano (Morgan Lewis) represented Perrigo at trial and in the appeal.

 

Unlawful Use of Flavor

Patent,

ScentSational Tech v. PepsiCo (Fed. Cir. 2019)

The legal claims in this case are interesting and could form a Mountain Dew commercial — unlawful use of flavor.  To be clear, the case is not about actual flavors, but instead enhancing the “perceived taste” of orange juice and other beverages by adding an aroma in scratch-n-sniff form to a bottle-lid closure. A “fresh aroma that replicates or evokes memory of the expected flavor” is released by the abrasive force of twisting off the bottle-cap.

ScentSational and PepsiCo had a 10-year business relationship.  As that partnership was winding down, ScentSational ramped-up talks with Coca-Cola.  However, those talks also broke down — and ScentSational blames PepsiCo.  In particular, the allegation is that PepsiCo misappropriated and attempted to patent ScentSational technology; and Coca-Cola dropped the project when it found PepsiCo’s pending patent applications.  ScentSational then sued for trade secret theft, breach of contract, and inventorship correction — arguing that damages should be based upon the lost Coca-Cola contract.  However, the district court dismissed the case in PepsiCo’s favor.

The primary issue on appeal had to do with damages and expert testimony.  The district court had barred most of ScentSational’s expert testimony for failing Daubert. On appeal, the Federal Circuit affirmed — holding that the district court “did not abuse the broad discretion it is accorded in determining whether, and to what extent, to admit particular expert testimony at trial.”  The Federal Circuit also affirmed the lower court’s summary judgment finding that ScentSational had failed to produce inventorship evidence.

A controversial aspect of the decision was the notion that ScentSational’s failure to prove particular damages should result in dismissal of the entire case (since damages are not an element of the trade secret or breach claims).  The appellate panel held that ScentSational’s claim to nominal damages had been waived and “In any event, we have held that we will ordinarily not remand a case merely to determine whether nominal damages would have been appropriate.”

Following the May 2019 decision, ScentSational petitioned for rehearing arguing that the court misunderstood a number of facts in dispute and also “that while a plaintiff must prove the existence of damages with certainty in order to recover, plaintiff need not prove the amount of loss with certainty.”  In a recent order, however, the Federal Circuit has denied rehearing — effectively ending ScentSational’s case.

= = = = =

 

 

Inventorship Challenges vs Invalidity Challenge — and Certifying Questions for Appeal

Patent,

Heat Technologies, Inc. v. Papierfabrik August Koehler SE (Fed. Cir. 2019)

This case involves an unusual bit of appellate procedure regarding certifying questions for appeal under 28 U.S.C. 1292(b). 

Back in 2018, Heat Tech sued Koehler Paper in N.D. Georgia federal court requesting correction of inventorship under 35 U.S.C. § 256 as well as damages for unjust enrichment and conversion under Georgia state law. U.S. Patent No. 9,851,146.  The basic background of the lawsuit was that Heat Tech’s president (Plavnik) invented the paper-drying mechanism that was then disclosed to Koehler as part of a collaboration evaluation.  In addition, Heat Tech argued that almost all of the information disclosed in Koehler’s patent was included in a prior Heat Tech patent application.

At the district court, Koehler filed a motion to dismiss the case — arguing that Heat Tech’s actual claim is for invalidity and that an inventorship-correction lawsuit is not appropriate when the same alleged facts would invalidate the patent for lack of novelty or obviousness.  The district court denied the motion to dismiss, but agreed to certify the question for appeal to the Federal Circuit — noting some disagreement among the courts on the state of the law.

Question certified by the district court:

Can a claimant obtain relief under 35 U.S.C. § 256 when its inventorship allegations, if taken or proven as true, would necessarily invalidate the subject patent under other provisions of the Patent Act?

= = =

The usual rule is that appellate jurisdiction follows final judgment by a district court. In a motion-to-dismiss situation, the case can be appealed if dismissal is granted — but not if dismissal is denied (because the case will still be pending at the district court).  There are several exceptions, including mandamus actions and appeals of preliminary injunction decisions another exception involves certification of an appeal under Section 1292:

(b) When a district judge, in making in a civil action an order not otherwise appealable under this section, shall be of the opinion that such order involves a controlling question of law as to which there is substantial ground for difference of opinion and that an immediate appeal from the order may materially advance the ultimate termination of the litigation, he shall so state in writing in such order.

The Court of Appeals which would have jurisdiction of an appeal of such action may thereupon, in its discretion, permit an appeal to be taken from such order, if application is made to it within ten days after the entry of the order.

In reviewing the statute, the Federal Circuit identifies three key requirements for hearing an interlocutory appeal under 1292(b):

  1. The appeal must involve “a controlling question of law.”
  2. There must be “substantial ground for difference of opinion.”
  3. An immediate appeal “may materially advance the ultimate termination of the litigation.”

Further, even when all three elements are met, the appellate court still has discretion to decide whether to permit the appeal.

On appeal now, the Federal Circuit HeatTechDecisionhas denied the 1292(b) petition and effectively indicated that the district court’s decision was correct.  In particular, the appellate panel found no “substantial ground for disagreement” because Section 256 jurisdiction “does not depend on whether the patent may be shown to be invalid.”  Slip op.  The appellate panel noted its lack of prior precedent directly and expressly on-point, but concluded that prior cases compel the answer. For example, in Frank’s Casing Crew & Rental Tools, Inc. v. PMR Techs., Ltd., 292 F.3d 1363, 1377 (Fed. Cir. 2002), the court wrote that an inventorship action could be maintained for an unenforceable patent.

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Prosecution Disclaimer: Should patent law have a Parole Evidence Rule for Claim Construction?

Patent,

by Dennis Crouch

Technology Properties Limited LLC, v.  Huawei Technologies Co., Ltd. (Supreme Court. 2019)

Back in February, the Federal Circuit issued a R.36 affirmance — affirming the lower court’s claim construction and non-infringement finding.  Tech. Properties has now filed a statement of intent to petition for writ of certiorari, now with Ken Starr at the helm and focusing on prosecution disclaimer precedent from the 1880’s along with a constitutional argument.  The patentee writes:

This case presents important questions of constitutional and patent law. The law of prosecution disclaimer, as applied in this case and in other cases, has morphed in a manner inconsistent with the Patent Act. The Federal Circuit’s increasingly anti-textualist methodology also conflicts with this Court’s long-established precedent. The improper expansion of this judicially-created doctrine upsets the balance between the role of the Patent Office and the role of the judiciary, as established by Congress, and injects great uncertainty into the publicnotice function of patents. Congress delegated the examination and issuance of patents to the Patent Office and requires deference to the agency’s decision-making.

The expanded disclaimer doctrine calls into question the Patent Office’s authority to examine and issue patents, and the limited role of the judiciary in reviewing the Patent Office’s determinations. Encouraging litigants and courts to wade through the back-and-forth between the Patent Office and a patent applicant to rewrite the issued claims through imposition of additional limitations under the guise of “claim construction” runs afoul of Congress’s delegation.

The basic argument that the patentee is making here is that patent claims should be adjudged by their terms and buried statements within the prosecution history should not be allowed to enlarge or reduce the patent scope.  You might call this the patent law parole evidence rule:

A patent is a public franchise.  The public and the patentee are entitled to clarity on the boundaries of a patentee’s rights; the claims, which define the metes and bounds of the inventor’s rights, provide that clarity. Gratuitous statements in the file history do not; they are inherently less predictable—illustrated by this case and other recent cases.

That 1880’s case: Goodyear Dental Vulcanite Co. v. Davis, 102 U.S. 222 (1880).

Distribution of Working Draft to 250-Member Standard Setting Working Group – NOT a PUBLICATION

Patent

Samsung v. InfoBridge (Fed. Cir. 2019)

In the inter partes review (IPR), the Patent Trial & Appeal Board (PTAB) sided with the patentee Infobridge — concluding that the purported prior art was not sufficiently publicly accessible prior to the patent’s November 7, 2011 filing date (and therefore not prior art).  On appeal, the Federal Circuit has rejected that decision — holding that the PTAB “applied the wrong legal standard in assessing public accessibility.”

The reference at issue is “Working Draft 4 of the H.265 standard” (WD4) which was developed by an MPEG group known as the Joint Collaborative Team on Video Coding (“JCT-VC”).  The information included int he reference was discussed at a July 2011 meeting in Torino that included about 250 participants including both academics and corporate representatives. WD4 then written and uploaded to the JCT-VC website on October 4, 2011 as one of hundreds of documents listed on the Torino meeting sub-page. The documents are in no apparent order and when printed run 48 pages long. (The relevant page is listed below, can you find our reference of interest?).

 WD4 was also uploaded to an MPEG website on October 4, 2011, but required a password to access.  Also, the same day the WD4 lead author posted a link to the document to a listserve that included JCT-VC members and other interested individuals.

A publication must be either actually distributed or else made publicly accessible.  Courts ask “whether a person of ordinary skill in the art could, after exercising reasonable diligence, access a reference.”  If so, then it is a publication.

Level of Access: In its decision, the Board found no evidence to show that “WD4 was accessible to anyone other than members of JCT-VC” because the websites were too complicated and unorganized. Regarding the listserve, the Board found that the “other interested individuals” testimony to lack credibility and found it  “nothing more than conjecture and speculation.”  The board – in essence – found no evidence that the WD4 document “was generally disseminated to persons interested and ordinarily skilled in the art.” As such, the Board held that the reference should not be considered prior art as of its 2011 date.

Distribution within the Group: Samsung argued that the JCT-VC group should be considered analogous to an academic conference and that distribution within the group should count as publication.  “JCT-VC was composed of more than 250 members who were skilled artisans” in the relevant video coding art.  On appeal though the Federal Circuit rejected this argument — holding that publication requires distribution beyond the creators of the document.  ” [A] work is not publicly accessible if the only people who know how to find it are the ones who created it” — even if those people are a loose standard setting organization of 250 global experts.

Email Listserv Distribution: The patent challenger was able to gain traction with its listserv argument by showing public accessibility.

The Board departed from this well-established principle by repeatedly faulting Samsung for not proving that the WD4 reference was “generally” or “widely” disseminated. …[A] limited distribution can make a work publicly accessible under certain circumstances.  But the Board’s analysis stopped short of considering whether those circumstances were present here. The Board also faulted Samsung for failing to show that the email recipients “represented a significant portion of those interested and skilled in the art.” That was not Samsung’s burden. The Board’s decision to reject Samsung’s evidence because it did not establish that enough interested and ordinarily skilled artisans actually obtained the WD4 reference was therefore erroneous.

Rather than requiring Samsung to prove that persons of ordinary skill actually received the listserv email, the Board should have considered whether Samsung’s evidence established that an ordinarily skilled artisan could have accessed the WD4 reference, after exercising reasonable diligence, based on the listserv email. This might include examining whether a person of ordinary skill, exercising reasonable diligence, would have joined the listserv. It also might include considering the circumstances of the email itself, for example why the email was sent and whether it was covered by an expectation of confidentiality. Because the record is not clear on these factual questions, we decline to resolve them in the first instance on appeal. In particular, we are reluctant to assume that an email among potential collaborators should be treated the same as a public disclosure without clear findings by the Board. Accordingly, we vacate the Board’s finding that Mr. Bross’s email did not make the WD4 reference publicly accessible and remand so that the Board can consider this issue after applying the correct legal standard.

On remand, the PTAB will reconsider these issues — and likely find again that the listserv distribution was not sufficiently public.

Apportionment of Willfulness and Discretion to Reconsider Attorney Fees

Patent

by Dennis Crouch

SRI International, Inc. v. Cisco Systems, Inc. (Fed. Cir 2019)  (modified opinion on rehearing)

When the Federal Circuit released its eligibility decision in March 2019, I panned the opinion as a “results-oriented decision [that] unfortunately shades-facts and provides no clarity in its legal analysis of eligibility.”  On petition, the panel has modified its original opinion. Unfortunately, the court did not modify its eligibility analysis, but rather modified a portion of the remand on attorney fees.

The jury awarded SRI a 3.5% reasonable royalty for a total of $23,660,000 in compensatory damages.  The jury also found by clear and convincing evidence that Cisco’s infringement was willful.  The judge then doubled the compensatory award as a punitive damages for willful infringement and also awarded $8 million attorney fees as well as an ongoing compulsory license for any future infringement. (I believe the patents have now expired).

Willful Infringement: The patent act does not expressly identify willfulness as relevant to an infringement lawsuit. However, courts have ruled that willfulness is an underlying requirement for enhanced damages under 35 U.S.C. 284. “Enhanced damages under § 284 are predicated on a finding of willful infringement.”

On appeal here, the Federal Circuit ruled that enhanced damages willfulness should be further apportioned by time.  I.e., enhanced damages cannot be awarded for infringement that occurred prior to the infringer’s willful infringement. Here, the patentee proved infringement going back to 2000, but did not show that Cisco knew of the patent before May 2012 – thus no willfulness. On remand, the district court will need to reconsider the willfulness award to match the court’s temporal apportionment approach.

The court’s approach here is interesting — the jury found the infringement to be willful.  Rather than rejecting the jury verdict, the appellate panel “interpreted” the verdict as finding willfulness as of May 2012 (and finding no willfulness prior to 2012).  Then, the appellate court found error by the district court in enhancing damages for the entire term of infringement.

Attorney Fees: Ordinarily, each party must pay its own trial costs, including attorney fees. However, in patent cases the district court has discretion to award fees to the prevailing party in “exceptional cases.” Here, the district court found that Cisco’s litigation tactics were unduly aggressive:

Cisco pursued litigation about as aggressively as the court has seen in its judicial experience.  While defending a client aggressively is understandable, if not laudable, in the case at bar, Cisco crossed the line in several regards.

One example – was that Cisco maintained 19 invalidity theories until the eve of trial — then only presented two of them at trial along with defenses that were contrary to both the evidence and prior court rulings. The district court also noted that the willfulness finding by the jury contributed to the decision to award attorney fees.  Because the now-modified willful infringement judgment served as one basis for the enhanced damages, the appellate panel also vacated the enhanced damages for reconsideration on remand.

In its original opinion, the appellate panel had explained that there was sufficient evidence of bad behavior to justify a fee award even without willfulness — and thus had affirmed an award.  In the modified opinion, the court instead vacated the finding of exceptional case — likely because that decision is supposed to be within the discretion of the district court.

[Modified Opinion]

In its petition for rehearing, Cisco had also asked for reconsideration of the eligibility decision.  That portion of the petition was denied.  EFF had filed a petition in support of rehearing, arguing that “the claims here fall squarely within a category of abstract ideas that is now well-established: claims that involve collecting, analyzing, and displaying information without more.”

Network Monitoring and . . .

Relevant claim:

1. A computer-automated method of hierarchical event monitoring and analysis within an enterprise network comprising:

deploying a plurality of network monitors in the enterprise network;

detecting, by the network monitors, suspicious network activity based on analysis of network traffic data selected from the following categories:

  • network packet data transfer commands,
  • network packet data transfer errors,
  • network packet data volume,
  • network connection requests,
  • network connection denials,
  • error codes included in a network packet;

generating, by the monitors, reports of said suspicious activity; and

automatically receiving and integrating the reports of suspicious activity, by one or more hierarchical monitors.

Patently-O Software Law Bits & Bytes: Scholarly Papers by Grant Harrison

Patent

Overview: This post lists a variety of scholarly papers that have been written about the world of Software Law.

Papers: 

Send your Software Law updates to grant@patentlyo.com

US Utility Patents Granted per Year

Patent

by Dennis Crouch

We are about 3/4 of the way through fiscal year 2019 (ends September 30, 2019) and the USPTO is on-track to issue the most patents ever in a single year period — I’m forecasting 330,000 issued utility patents, which is up about 5% from the prior 1-year high in 2017.  This rise is consistent with more patentee-friendly attitude of Andrei Iancu who began his role as Trump’s USPTO director in 2018.

 

How Things Snowball: The Consequences of Violating a Rule

Ethics

By David Hricik, Mercer Law School

Being disciplined by the USPTO, a state bar, or being sanctioned by a court is, of course, not a good thing for a lawyer and in some instances it can end a career or sharply limit one.  Over the past 30 or so years, I’ve seen a lot of somewhat unpredictable consequences flow from discipline or a finding of misconduct by a court.

For example, the USPTO requires practitioners to update their addresses and, from time to time, it has sent letters to the current address and if the recipient doesn’t respond within (I think it is) a month, the practitioner is “administratively suspended.”  If that happens, not a huge deal to correct, but some state bars require reporting administrative suspensions, and if a practitioner fails to do that, then the practitioner has two problems. And, if practitioner later “covers up” either thing, well, then three problems.  (I wrote an article a while back called “how things snowball” and it came to mind just now).

This post is inspired by a recent filing, a typically mundane request to be admitted pro hac vice.  In it, the lawyer stated he hadn’t been subject to discipline but in fact, he had. Four times, over about 40 years.  According to a corrected request, the original request had been made by his office mistakenly over his signature, and that is why the four had been left off.  The order from the court asking opposing counsel if, now, they wished to oppose the motion to admit is here.  Different courts have different approaches to signing by permission and non-lawyers can’t do certain things, so will the explanation as to the original mistake now snowball into something else?  Will the judge find the “four priors” matters? The omission? I have no idea and it sounds as if a mistake was made and promptly corrected, but, things can snowball.

And, as the final example, if you haven’t read the California Supreme Court case vacating a $3m fee awarded to a firm because it had an undisclosed conflict of interest (and, as a consequence of not disclosing the conflict, (a) its arbitration agreement with the client was unenforceable and (b) it also might have had to disgorge more than the $3m award), it’s blogged below.

There are lots of ways that a violation — even at times a technical one — can snowball into something much worse — privilege waiver for unauthorized practice of law, in-house counsel failing to follow “in-house registration” statutes leading to discipline or loss of privilege, and more.

I think it is from Hill Street Blues:  “Be careful out there.”