by Dennis Crouch

Biogen MA, Inc. v. EMD Serono, Inc. & Pfizer Inc. (Fed. Cir. 2020) [BiogenSerono]

After a five-week-trial, the jury returned a verdict that Biogen’s asserted claims were anticipated by two prior art references. In the lawsuit, Biogen had asserted infringement of its US7588755 against Serono and Pfizer based upon their sale of Rebif (IFN-β used for MS treatment).

In a post-judgment order, the District Court rejected this portion of the jury verdict–holding that no reasonable jury could have found anticipation. In addition to JMOL, the district court also conditionally granted a new trial on anticipation under R.59.  The jury had sided with Biogen on other grounds of infringement/validity and so it looked like a win for the patentee. Because the original jury had found the patent invalid, it did not award any damages.  Thus, the district court entered a “partial judgment” and scheduled a new trial on damages.

Appeal before a Damages Trial: 28 U.S.C. § 1292(c)(2), provides appellate jurisdiction once a patent case is “final except for an accounting.”  In Robert Bosch, LLC v. Pylon Mfg. Corp., 719 F.3d 1305 (Fed. Cir. 2013)(en banc) the court determined that “accounting” as used in that provision included a jury trial on damages.  Thus, appeal was appropriate at this point.

Product-by-Process Within a Method: On appeal, the Federal Circuit agreed with the jury that prior administration of native IFN-β anticipates the claims here.  The district took issue with the conclusion since the claims expressly require treatment using “recombinant” inf-β produced in a “non-human host” and that had been “transformed by a recombinant DNA molecule.”

Although the claim is a method claim, it requires use of a particular product (IFN-β) produced by a particular process (recombinant transformation in a non-human host). Of note, the claim does not appear to require the manufacturing step, only that administration of a product created in that manner.  On appeal, the Federal Circuit determined that this setup is appropriate for the product-by-process rule: an old product is not patentable even if it is made by a new process. See Gen. Elec. Co. v. Wabash Appliance Corp., 304 U.S. 364 (1938).

In applying the product-by-process rule to a method claim, the court reasoned as follows:

If the novelty of the recombinant IFN-β composition requires comparing its structure to the structure of native IFN-β, as Amgen requires, it would defy all reason to excuse that analysis for a method of administration claim using that composition. Such a rule could have the absurd result that a recombinant composition could be non-novel, the method of administration could be non-novel, but the method of administration of the composition defined by the process of its manufacture would be novel as a matter of law.

There is no logical reason why the nesting of a productby-process limitation within a method of  treatment claim should change how novelty of that limitation is evaluated. Indeed, we have previously applied product-by-process analysis to a nested limitation. . . . The nesting of the product-by-process limitation within a method of treatment claim does not change the proper construction of the product-by-process limitation itself.

Slip Op. (Citing Purdue Pharma L.P. v. Epic Pharma, LLC, 811 F.3d 1345 (Fed. Cir. 2016)).

Biogen also argued that the prior art was inadequate because there was no proof that it was had the same structure.  Although the native molecule had the same polypeptide sequence, there was no evidence that it had folded in the same manner — and thus did not necessarily meet the “therapeutically effective amount” limitation.  On appeal, the court noted that the prior art was the same polypeptide sequence as required by the claim and had also shown therapeutic activity — the claim did not require that it be the identical therapeutic activity or identical folding pattern as the patentee’s product.

After reviewing these issues, the appellate panel found the jury had a reasonable basis for its invalidity decision.

= = =

The new trial issue is a bit trickier.  The rule states that the court my grant a new trial “for any reason for which a new trial has heretofore been granted.” R. 59.  Here, the new trial was apparently justified on “the same legal errors” as the JMOL determination. “None of the additional considerations noted by the district court in support of its conditional grant of a new trial are independently sufficient to support its decision.”  Thus, the new trial is also reversed.

On remand, the defendant wins and the patent claims are invalid.

by Dennis Crouch

Network-1 Techs. v. Hewlett-Packard Co. (Fed. Cir. 2020)

In this case, the E.D. Tex. jury came back with a win for the defendant — finding that HP did not infringe Network-1’s US6218930 and that the patent was invalid.  Post-Verdict, the district court flipped on validity — holding that HP was estopped from raising its obviousness challenge because it had joined an (unsuccessful) IPR against the patent.

The invention here relates to logic for sending a power-supply on the same twisted-pair used for data transmission (Power over Ethernet or PoE). The basic approach is that the ethernet cable will start-off with a low-level current. If a particular access-device signals that it can handle higher power, then the server will raise the power level being sent.  The patent here issued in 2001 (1999) priority and the lawsuit was originally filed in 2011.

Statutory Estoppel: The big issue in the case for the patent world is statutory estoppel. One reason why this lawsuit took so long to complete was that there were two intervening reexaminations and one inter-partes-review.  HP was time-barred from bringing its own IPR, but was able to join one filed by Avaya.  The instituted IPR challenged the patent claims for anticipation and obviousness based upon two prior art references Matsuno and De Nicolo. Although the PTAB granted the IPR, it eventually upheld the validity of the challenged claims.

One result of losing an IPR challenge is estoppel under 35 U.S.C. § 315(e)(2).

(2) Civil actions and other proceedings. The petitioner in an IPR … that results in a final written decision … may not assert … that the claim is invalid on any ground that the petitioner raised or reasonably could have raised during that inter partes review.

Id.  Following the IPR final written decision, the district court eventually determined that HP was generally estopped from raising an obviousness challenge (this ruling unfortunately came post-verdict after the obviousness challenge had already been raised).

On appeal, the Federal Circuit vacated — finding that the district court too broadly applied estoppel. In reading the statute, the appellate panel concluded that “a party is only estopped from challenging claims in the final written decision based on grounds that it ‘raised or reasonably could have raised’ during the IPR.”  Slip Op. In this case, HP was time-barred from brining new claims and was limited to simply joining the claims brought by Avaya.  “Because a joining party cannot bring with it grounds other than those already instituted, that party is not statutorily estopped from raising other invalidity grounds.” Id.

What is a “Ground.” The USPTO has a way that it treats a “ground” in inter partes review, but how should the term really be construed?  The estoppel provision applies to “any ground” raised in the IPR, but the statute does not go on to define the meaning of the term “ground.” Here, the court interpreted the term as any invalidity contention against the challenged claims in the IPR based upon the prior art that served as the basis for the IPR.  The court writes:

When the Board reached a final written decision …, HP was statutorily estopped from raising invalidity grounds based on Matsuno and De Nicolo against claims 6 and 9 in a district court action. HP, however, was not estopped from raising other invalidity challenges against those claims because, as a joining party, HP could not have raised with its joinder any additional invalidity challenges.

Slip Op. Remember, the jury found the patent invalid and that verdict was rejected by the court on JMOL (JNOV).  That JMOL decision has been vacated. On remand, the district court will now need to decide whether to (1) give effect to the verdict; or (2) hold a new trial on validity.

The Federal Circuit got this right according to the Statute — and it also serves as a signal to folks who are deciding whether to join a pending IPR that the estoppel consequences will be quite limited.

Claim Construction: On appeal, the Federal Circuit provides the patentee with potential shot at winning by shifting the claim claim construction. In particular, the court found error in construction of the term “main power source.”  In particular, the district court construed the phrase as requiring a “DC power source” and on appeal the Federal Circuit expanded the definition:

We conclude that the correct construction of “main power source” includes both AC and DC power sources. There is no dispute that the ordinary meaning of “power source” includes both AC and DC power sources. And neither the claims nor the specification of the ’930 patent require a departure from this ordinary meaning.

Slip Op.  On remand, we’ll see if a new jury changes its mind based upon this difference.

Claim Broadening: The third question on appeal involved HP’s argument that the patentee had improperly broadened claim 6 during a reexamination in a way prohibited by statute:

No proposed amended or new claim enlarging the scope of a claim of the patent will be permitted in a reexamination proceeding

35 U.S.C. § 305. A claim is “enlarg[ed]” if it covers any embodiments not covered by any original claim.

Some facts:

• Two prior district courts interpreted Claim 6’s “secondary power source” to be physically separate from the claimed “main power source.”
• In the reexamination, two dependent claims were added to to require that the two power sources be “the same physical device.”

Although claim 6 was not itself amended, the dependent claim strongly suggested that the claim should be interpreted differently. As the lawsuit progressed, Network-1 subsequently disclaimed these newly added claims and the district court gave Claim 6 its narrow interpretation.

On appeal, the Federal Circuit looked at the final result — the scope of Claim 6 has not changed. “Where the scope of claim 6 has not changed, there has not been improper claim broadening, and HP’s argument fails.”

The court went on to explain that the addition of those dependent claims would not have changed the scope of claim 6.

Thus, even were dependent claims 15 and 16 broader than unamended, independent claim 6, the remedy would not be to find claim 6 invalid as broadened, but to invalidate added claims 15 and 16 [for improper broadening].

Slip Op.  This decision sits well here, but will lead to further odd results when applied to ordinary prosecution because it allows for dependent claims that are broader than the independent version.

This post serves as a complement to Prof. Gugliuzza’s new remarks on a parallel case of In re Apple. – DC

by Dennis Crouch

In re Google (Fed. Cir. September 18, 2020) (Google III)

Google’s business pervades the lives of most Americans, including most citizens of the E.D. of Texas.  Google has millions of customers in the district; serves terabytes of data to, from, and within the district; and keeps detailed files on the activities of its citizens. Google also has lots of Texas lawyers.  Google is doing everything it can to move this case out of E.D.Texas.  The reality is though that Google doesn’t mind being in Texas, it just doesn’t want Texas style justice — where patent cases are on a direct path to a jury trial.

28 U.S.C. 1400(b) has a specific test for proper venue. An infringement lawsuit can only be filed in a district where either: (more…)

Guest Post by Prof. Paul R. Gugliuzza (Temple U.)

A rare thing happened at the Federal Circuit today. The court heard oral argument on a petition for a writ of mandamus. The petition was filed by the tech behemoth, Apple, in a patent infringement case filed against it in the Western District of Texas. In the petition, Apple seeks an order sending the case to the Northern District of California under 28 U.S.C. § 1404, which permits transfer “[f]or the convenience of parties and witnesses, in the interest of justice.”

Though transfer petitions are relatively common in patent cases, the Federal Circuit almost always decides them on the briefs alone. That the court scheduled oral argument—in a case arising out of the Western District of Texas, no less—has been interpreted as reflecting concern by the Federal Circuit about the judge shopping occurring in the Western District.

As Jonas Anderson and I showed in a recent Patently-O post and discuss in more detail in a draft article, the Western District’s case assignment rules permit plaintiffs to predict, with absolute certainty, which judge will hear their case. And plaintiffs are overwhelmingly choosing Judge Alan Albright, whose procedural rules and substantive decisions they find quite favorable.

That said, the Federal Circuit’s decision to hold oral argument on Apple’s petition could also reflect the fact that, in the midst of the COVID pandemic, it’s a pretty easy thing to do. For the past six months—and for the foreseeable future—the Federal Circuit has been conducting oral argument entirely by telephone. Indeed, that’s how I was able to listen to today’s arguments, live.

Before getting to a summary of that argument, some background about the case. The plaintiff is, like many plaintiffs in the Western District, a prolific non-practicing entity, Uniloc 2017 LLC. In September 2019, Uniloc sued Apple for infringing a patent on a system for controlling software updates.

Like more than 800 other patent cases over the past two years, Uniloc filed its case in the Waco Division of the Western District of Texas and—like 100% of cases filed in the Waco Division—it was assigned to Judge Albright. Apple sought transfer to the Northern District of California, noting that, out of 24 prior cases Uniloc had filed against it in the Eastern and Western Districts of Texas, 21 had been transferred.

But Judge Albright denied Apple’s motion in an order from the bench in May 2020. As covered here on PatentlyO, it took Judge Albright more than a month to issue an order explaining why he was doing so. When that order eventually issued, it noted, among other things, that Apple has stronger connections to the Western District of Texas than to the Eastern District and that the cases previously transferred out of the Western District (by Judge Lee Yeakel) were distinguishable because Apple’s activities in the Western District had grown significantly over the past couple years.

The Federal Circuit argument, it’s worth noting, wasn’t part of the court’s normal calendar of arguments, which typically take place during the first week of the month. Rather, it was the only case heard by a panel consisting of Chief Judge Prost, Judge Moore, and Judge Hughes.

Mel Bostwick, from Orrick, Herrington & Sutcliffe’s Washington, D.C., office, presented argument for Apple. In her view, the district court made two critical errors in denying transfer: First, it relied too heavily on the progress it had already made in the case as well as its already-scheduled trial date (which, under Judge Albright’s extremely speedy default schedule, is less than 18 months after the initial case management conference).

Second, according to Apple, the district court erred in applying the “cost to willing witnesses” factor in the transfer analysis. Though both Apple and Uniloc identified witnesses in California, Judge Albright, according to Apple, inappropriately discounted the relevance of those witnesses because they were willing to travel. But, Apple contended, the relevant question is the cost of their travel, not their willingness to do so.

Apple faced skeptical questioning from Judge Moore, who was, in fact, the only judge to ask a question of Apple until rebuttal. Judge Moore focused initially on the standard of review. To receive the extraordinary writ of mandamus, a party must show a “clear abuse of discretion” by the district judge. The fact that this case has some factual connection to the Western District—namely, Apple has a campus in Austin and a third party makes accused products in the district—seemed to raise doubts in Judge Moore’s mind about whether any error by the district court met that high bar.

Christian Hurt of the Davis Firm in Longview, Texas argued on behalf of Uniloc. He began by emphasizing the concerns about parties and witnesses located in the Western District that were initially raised by Judge Moore. Apple didn’t dispute, Uniloc noted, that it has an 8,000 employee campus in Austin, technical witnesses work there, and a third-party contractor makes accused products in the district.

Almost all the questions for Uniloc came from Chief Judge Prost. She asked about matters including: the exact location of the witnesses, whether it was clearly an abuse of discretion for the district court to rely on its progress and projected schedule in denying transfer, and whether Apple might have an alternative means of seeking relief, such as through a later mandamus petition or by seeking a stay pending related litigation elsewhere.

Toward the end of Uniloc’s argument, Judge Moore chimed in to ask whether, if the court found the district court had made errors in its transfer analysis, it would be appropriate for the Federal Circuit to vacate the decision and remand the case for further proceedings, rather than ordering transfer—a step the very same panel of Federal Circuit judges basically took in a  recent Western District case filed against the file storage company, Dropbox.

During Apple’s rebuttal argument, Judge Moore asked why transfer to California was warranted given the local interest in the case. Apple, Judge Moore observed, is one of the largest employers in the Western District—a far cry from the Eastern District, where Apple doesn’t even have stores anymore, for fear of aiding patent plaintiffs in establishing venue there. Judge Moore was unconvinced (to put it mildly) by Apple’s assertion that the local interest isn’t the interest of Western District of Texas and its residents, but the interest of “the people who created the accused technology,” in Cupertino.

*          *          *

So, what’s my take? The atmospherics are clearly troubling. There’s no doubt that Judge Albright is successfully courting patentees to file in his courtroom both by explicitly advertising to them and by adopting procedural rules and making substantive decisions that clearly favor them. But those larger dynamics, though they were discussed in Apple’s brief, weren’t even mentioned at oral argument. (Bostwick, Apple’s attorney, seemed to want to go there during rebuttal, but ran out of time.)

In this case, the Federal Circuit might struggle to find a legal justification for ordering transfer, particularly given high standard for mandamus. That said, the Federal Circuit rarely hesitated to transfer cases out of the Eastern District during its heyday as the nation’s patent litigation capital. In several cases, the Federal Circuit used the extraordinary writ of mandamus to engage in what seemed like pure error correction. It’s not out the question that the Federal Circuit would do something similar with the Western District, whether in this case or one of the other nearly 600 filed before Judge Albright this year alone.

Moreover, though the court competition and judge shopping that’s going on in the Western District is troubling, interlocutory appeals like the one Apple is pursuing can be costly and disruptive. That will be even more so if the Federal Circuit makes a habit of simply vacating orders denying transfer and remanding for further consideration, as Judge Moore suggested. The end result would be another round of briefing and argument—and possibly even discovery—on an issue entirely tangential to the merits of the case.

Whatever the outcome, this case between Apple and Uniloc shows how difficult it will be for the Federal Circuit, which can only hear the disputes that come before it, to change the systemic incentives that encourage judges to compete for patent cases and for plaintiffs to shop for those judges. As we suggest in our article, legislation or administrative rules mandating random case assignment and more particularly defining plaintiffs’ venue choices may be the only solution.

Paul Gugliuzza is Professor of Law at Temple University Beasley School of Law

USPTO Fees are changing at the end of the month. PCT Fees are changing on October 1, 2020; US National fees are changing on October 2, 2020. In general, the fees are going up, not down.  Beat the fees – file by September 30, 2020.

Bozeman Financial LLC v. Federal Reserve Bank of Atlanta, et al. (Supreme Court 2020)

The question in this case is whether the Federal Reserve Banks are people.  The Patent Act allows any “person” to file a petition for covered-business-method review (or IPR/PGR). Return Mail, Inc. v. United States Postal Serv., 139 S. Ct. 1853 (2019) held (1) the U.S. Gov’t is not a person under the statute and (2) consequently the USPS (a branch of the US gov’t) is not permitted to petition the USPTO for review of a patent.  The question before the Supreme Court is whether these banks are part of the government.

Whether the regional Federal Reserve Banks—the “operating arms” of the Federal Reserve System, which is the central bank of the United States—are “distinct” from the Federal Government, and qualify as “persons” permitted to seek post-issuance patent review under the America Invents Act, when the Federal Government may not under the Court’s holding in Return Mail, Inc. v. United States Postal Serv., 139 S. Ct. 1853 (2019).

Question presented.

Alexander Hamilton was instrumental in the creation of the First Bank of the United States.  That Bank’s charter ended in 1811, but the foundation served for future national banks and eventually for creation of the Federal Reserve in 1913. The Federal Reserve system includes twelve regional Federal Reserve Banks that are largely controlled by private banking interests. The twelve are self-described “instrumentalities of the United States that, collectively, make up the operating arm of the Federal Reserve System, the central bank of the United States.” (Bank Complaint).  The system as a whole is controlled by the Board of Governors of the Federal Reserve System. The Board members are presidential appointees.

Bill Bozeman’s patents cover what he calls “Universal Positive Pay” for fraud detection and check clearing. Back in 2017, the 12 Federal Reserve Banks (but not the Board) sued Bozeman seeking a declaratory judgment of non-infringement.  The banks then also filed for Covered Business Method (CBM) review of the patents at the USPTO.  The PTO instituted review and concluded that the claims were ineligible under Alice Corp. Pty. Ltd. v. CLS Bank Int’l, 573 U.S. 208 (2014).  In its decision, the Federal Circuit affirmed and also held that the banks are “persons” under the statute because they “are distinct from the government for purposes of the AIA.”

In other contexts, courts have found a very close link between the Banks and the Gov’t.

• Fed. Reserve Bank of Bos. v. Comm’r of Corps. & Taxation of Com. of Mass., 499 F.2d 60, 62 (1st Cir. 1974) (Bank is a “public governmental body” whose “interests seem indistinguishable from those of the sovereign”)
• Jet Courier Servs., Inc. v. Fed. Reserve Bank of Atlanta, 713 F.2d 1221 (6th Cir. 1983) (Banks are not “persons” under the Sherman Act because they are part of the Federal Reserve System, “an agency of the federal government.”)
• Schroder v. Volcker, 864 F.2d 97, 99 (10th Cir. 1988) (no antitrust action against defendants “affiliated with the Federal Reserve System”, including individual banks)
• United States v. Hollingshead, 672 F.2d 751 (9th Cir. 1982) (Fed Reserve Bank employees are public officials for purposes of anti-bribery statute).
• Berini v. Fed. Reserve Bank of St. Louis, 420 F. Supp. 2d 1021, 1028 (E.D. Mo. 2005) (“[C]ontrol and supervision of the federal reserve banks is vested in a Board of Governors appointed by the President with the advice and consent of the Senate”)

This case is not huge for the patent system — although there are hundreds of federally-created entities that might be “people.”  In addition, the CBM program has sunset and is unlikely to be revived.

The case is still a big deal as our country discusses the role of socialist governmental policies providing a safety net for Americans. The US system is already ripe with “private” entities designed to serve a public good: Federal Reserve banking system; Fannie Mae; Freddie Mac; Highly regulated utilities (that are given the power of eminent domain); etc.  For over 100 years, this approach has been a form of back-door socialism that becomes palatable because of paperwork showing a separation from government. This case would shine some interesting light on the field with the simple question — Are the Federal Reserve Banks part of the U.S. Government?

By Jason Rantanen

Last week we released version 1.16 of the Compendium of Federal Circuit Decisions, which is a publicly-available dataset containing information about all documents published by the Federal Circuit on its website since 2004 (which includes all opinions and, since 2007, all Rule 36 summary affirmances).  The Compendium was designed from the ground-up to be used for empirical research rather than as a conventional legal research tool.

Generally, there haven’t been any striking changes in the statistics for the court’s opinions and Rule 36 summary affirmances so far in 2020.  The below two graphs are the basic ones that I usually show: opinions and Rule 36 affirmances by the Federal Circuit in appeals arising from the PTO and district courts.

The Federal Circuit’s decision output for appeals arising from the USPTO and District Courts for the first eight months of 2020 looks similar to the last few years.  Currently, the court is on track to write few more opinions in cases arising from the district courts and a few less in cases arising from the PTO, but both numbers are similar to last year (so far).  It’s worth noting that COVID-19 hasn’t really affected the court’s decision output.

One noteworthy shift is the relative drop in Rule 36’s.  So far in 2020, the court has decided more appeals via the mechanism of nonprecedential opinion and fewer through summary affirmance–especially in appeals arising from the PTO.

Affirmance rates continue to be in line with the past: the vast majority of decisions result in the affirmance of the lower tribunal.*  Over the last few years, the court has consistently affirmed the PTO outright about 80% of the time, and affirmed-in-part another 7% of the time.  The district courts have been affirmed a bit less often: about 70% of the time the court is affirmed entirely, and another 13% of the time it has been affirmed-in-part.  The court’s decisions in 2020 have been consistent with these metrics.

Who’s written the most majority opinions in patent case so far this year?  For appeals arising from the PTAB, it’s been Chief Judge Prost at 14, followed by “Per Curiam” at 12.  This isn’t a new development: panels have been issuing opinions Per Curiam at a rate of about 8-16 per year for the past five years.  For appeals arising from the district courts, Judge Lourie has written the most at 16 opinions so far this year; Judge Moore has written the second-most at 11 (also joined by the panel writing Per Curiam.)

You’re welcome to play around with the data on your own here: https://empirical.law.uiowa.edu/compendium-federal-circuit-decisions.  Keep in mind that with any empirical data project, it’s important to be mindful of what the data means, as well as its limitations (many of which I discuss here and here).

*For those wondering how this data relates to the statistics on the Federal Circuit’s webpage, the Federal Circuit reports reversal rates based on Financial Year (10/1 – 9/30) rather than Calendar Year, only considers complete reversals as reversals (i.e.: an affirmance-in-part is not a reversal), and calculates its reversal rate as a function of appeal docket numbers rather than decisions (for example, a single decision can, in rare instances, involve 10 or more appeal docket numbers).  See id. at 260, 263, 278.

Thanks to Meddie Demmings IV, Dan Kieffer, Lindsay Kriz, Ryan Meger, and Madison Murhammer Colon for assistance in collecting this data.

Guest post by Paul R. Gugliuzza & J. Jonas Anderson.  Paul Gugliuzza is Professor of Law at Temple University Beasley School of Law. Jonas Anderson is Associate Dean for Scholarship and Professor of Law at American University Washington College of Law.

Move over Marshall. The new capital of American patent litigation is Waco, Texas. Waco’s sole federal judge, Alan Albright—who took the bench less than two years ago—now hears more patent cases than any other judge in the country.

It’s all happened quickly. As recently as 2018, the Western District of Texas, which spans from Waco, Austin, and San Antonio in the central part of the state to El Paso in its far western reaches, received only 90 patent cases, a mere 2.5% of patent cases filed nationwide. Two years later, the Western District is on pace to receive 850 patent cases by year’s end, roughly 22% of patent cases filed nationwide and more than any other district in the country.

Practically all of those cases are on Judge Albright’s docket. As the figure below shows, the Waco Division received a mere 28 patent cases in 2018, the year he took the bench. If current trends hold, Judge Albright alone will receive 779 patent cases in 2020, an increase of 2682%!

The explosion of patent cases in Waco—the vast majority of which are filed by non-practicing entities—is fueled by Judge Albright’s concerted efforts to attract patent plaintiffs. He has been explicitly advertising his district—through presentations to patent lawyers, comments to the media, procedures in his courtroom, and decisions in patent cases—as the place to file your patent infringement lawsuit.

In a draft article, now available on SSRN, we identify five reasons why the Western District is attractive to patentees and explain why they are problematic:

1. The Western District’s case assignment practice enables plaintiffs to predict—with absolute certainty—that Judge Albright, not any of the 16 other judges sitting in the district, will hear their case. All they have to do is select “Waco” from the drop-down menu on the court’s electronic filing system and the case is automatically assigned to Judge Albright.

2. Judge Albright has adopted a fast-track scheduling order that sets deadlines useful to patentees seeking to elicit quick settlements and avoid PTAB review.

3. Venue transfer decisions: Judge Albright rarely transfers cases out of the Western District of Texas (only 3 of 14 inter-district transfer motions have succeeded to date), a practice also used by judges in the Eastern District of Texas during its heyday as the go-to district for patent litigation. More remarkably, Judge Albright regularly transfers cases filed in the Western District’s Waco Division to its Austin Division while retaining the case on his own docket (50 cases and counting so far).

It’s worth pausing to emphasize what this means: patentees are filing in Waco to guarantee Judge Albright is assigned to the case. But they do not actually have to litigate in Waco to keep the case in front of Judge Albright. Rather, they can ask him to transfer the case to the more desirable locale of Austin and he will do it as a matter of course—even though, if the case had been filed in Austin originally, there is zero chance Judge Albright would have been assigned to it.

4. Judge Albright seems reluctant to stay litigation pending related disputes in other forums, such as the PTAB, not just because of the aggressive schedule he sets but also because of a normative belief that patentees have a constitutional right to have a jury decide patent validity.

5. Judge Albright has never invalidated a patent on eligibility grounds (10 motions, 10 denials), even though many of the patents being asserted are the “do it on a computer” patents at which the Supreme Court’s Alice decision was most directly targeted.

Though many reforms could help solve these problems, we focus on two.

First, there’s surprisingly no law that requires cases to be randomly assigned among judges of a particular district. Mandating random assignment would curb the judge shopping that incentivizes judges to distort procedures and the law for the specific purpose of attracting litigation.

Second, venue in patent cases should be tied to geographic divisions within a judicial district, not just the district as a whole. As applied to the Western District of Texas, that reform would thwart the tactic of using a defendant’s activities in Austin to establish venue in Waco for the sole purpose of shopping for the Waco division’s only judge.

Read the full article at https://ssrn.com/abstract=3668514.

 Edit: updated with a more recent graph.

by Dennis Crouch

Once a patent issues, it is presumed valid. “A patent shall be presumed valid.” 35 U.S.C. 282(a). In patent litigation, this has traditionally meant that a complaint for infringement need not re-establish the patent’s validity. Rather, validity challenges arise as affirmative defenses as part of the answer.

That traditional approach is no longer followed by the courts in the Post-Alice patent eligibility era.  Courts now regularly dismiss patent cases upon finding that the patentee failed to state a claim because the patent is invalid under Section 101.  In response to that potential, patentees are have begun preemptively bulking-up their complaints with factual allegations to support the patent’s validity.

A new petition for writ of certiorari in Whitserve LLC v. Donuts Inc. (2020) highlights this issue.  Back in 2018, Whitserve sued Donuts for infringing the claims of its two patents covering a method for managing due-date reminders for clients of professional-services.  U.S. Patent Nos. 5,895,468 and 6,182,078.  On a R. 12(b)(6) motion, the district court dismissed the complaint – finding that the patent was invalid as a matter of law and that – therefore – the complaint failed to state a legally cognizable claim for relief. On appeal, the Federal Circuit affirmed – explaining again that “patent eligibility can be determined at the Rule 12(b)(6) stage if there are no plausible factual allegations to impede such a resolution.” (Quoting Aatrix).  The suggestion here is that plaintiffs really do need to be making their validity case within the pleadings.

Now, the case is up before the Supreme Court on Whitserve’s recently filed petition. Question presented:

If a patentee makes factual assertions that its claimed invention is directed to patent eligible subject matter under 35 U.S.C. § 101, including assertions that the claimed invention does not consist of well understood, routine, or  conventional activity and that the claimed invention is supported by evidence of commercial success, is a district court permitted to overlook the patentee’s assertions, find that the claimed invention is directed to patent ineligible subject matter, and dismiss the patentee’s complaint under Rule 12(b)(6) given the requirements of Rule 12(b)(6) analyses and the statutory presumption of § 282(a)?

[Petition].

When I read the question presented, I instantly wanted to make some amendments — in particular, I wanted to focus not on bar “factual assertions that” but rather on “non-conclusory factual assertions showing that patent is plausibly eligible.”  My transformation focuses on the plausibility standard from Iqbal and Twombly.  In those cases, the Supreme Court raised the standard for “showing that the pleader is entitled to relief” under R.8(a).  On my second time through, however, I began to really question this approach.

We are talking here about a pleading that attempts to preempt a potential affirmative defense — normally the plaintiff does not even need to plead a response to an affirmative defense.

[E]ven after the defendant has pleaded an affirmative defense, the federal rules impose on the plaintiff no obligation to file a responsive pleading.

Fernandez v. Clean House LLC, 883 F.3d 1296 (10th Cir. 2018).  And, when a Reply to an affirmative defense is ordered, it is sufficient to simply deny the allegations of the defense rather than explain or offer competing factual allegations.  In that situation, the non-conclusory / plausibility standard of Iqbal does not apply.

All this leads me to say that – for 12(b)(6) purposes, even conclusory factual allegations regarding eligibility may be sufficient to overcome a motion to dismiss. Of course, at that point, the court can jump quickly to a R.56 Summary Judgment question — allowing special early discovery on the eligibility issue to see whether there is any evidence to support the allegations.

* Note, the image above comes from a design patent owned by Krispy Kreme parent company HDN Development.

Is anyone working hard on a Covered-Business-Method (CBM) Review petition?  The program is ending soon. I believe the last day to file your petition is September 15, 2020.

by Dennis Crouch

I previously wrote about the case of Bank v. Al Johnson’s Swedish Rest., Docket No. 19-01880 (Fed. Cir. 2019).  The dispute is over whether the USPTO should cancel Al Johnson’s registered trademark for goats on a green roof. To be clear – the mark is not the image of goats on a roof, but instead is an actual building with live goats walking around on the roof. [Goat Cam]

Bank challenged the registration on several grounds, including improper functionality and disparaging (toward the goats and their human friends).  The problem in the case for Bank is that he is not a competitor or customer. Banks is not injured by the mark in any concrete way other than being offended by its existence.

The TTAB dismissed the opposition for lack of standing. That decision was then affirmed on appeal since Bank provided neither a real interest nor a reasonable basis for his belief of damage.  The court noted that the “offense” injury was substantially undermined by Tam.

• Discussion of the Federal Circuit Decision;
• Discussion of the Supreme Court Petition, subsequently denied.

In its original decision, the Federal Circuit also awarded attorney fees to Swedish Restaurant under Fed. R. App. P. 38:

If a court of appeals determines that an appeal is frivolous, it may, after a separately filed motion or notice from the court and reasonable opportunity to respond, award just damages and single or double costs to the appellee.

Id. The court found that the Banks appeal was frivolous. Banks is an attorney and represented himself in the appeal. Usually pro se parties are given more leeway because of their lack of training and experience in the system. However, an attorney representing himself is not given such leeway:

Even though Mr. Bank appears pro se before us, he is an attorney and bears the commensurate obligations. Accordingly, we grant Swedish Restaurant’s motion for costs and attorney fees, including the costs and fees incurred in relation to the parties’ sanctions motions, and
deny Mr. Bank’s motion for sanctions.

Costs and attorney fees to Swedish Restaurant.

Federal Circuit Original Opinion.

Following the court’s decision, there was some debate on attorney fees. In particular, Swedish Restaurant requested that the court clerk enter the attorney fee award. Banks protested — arguing that attorney fee awards must be calculated and awarded by the court, not the clerk.  The Federal Circuit agreed on that point and today awarded all of Swedish Restaurant’s requested fees of $28,523.00.  (The Clerk separately taxed the costs at $241.54.)