by Dennis Crouch

The court issued an important short-opinion, In re Ivantis, Inc. (Fed. Cir. 2020), that should be read and considered as a case-study by in-house counsel. The case involves pre-lawsuit destruction of evidence.

The basic setup is that Ivantis has a corporate email-destruction-policy* of deleting emails that are 12-months old.  Glaukos sued Ivantis for infringement in April 2018 and served the defendant with the Summons and Complaint on April 16, 2018. On April 19, 2018 the company instituted an internal “litigation hold” that suspended the deletion-policy for emails potentially related to the lawsuit.  It turns out that Ivantis has been preparing for this litigation and considering work-arounds for Glaukos patents since at least 2013, and all those emails were deleted.

The district court found that Ivantis actually anticipated the litigation and that the email deletion constituted improper spoliation under FRCP 37(e) . As a penalty, the court found that the jury should be given an adverse inference instruction, focusing on willfulness:

Ivantis intentionally deleted and failed to preserve relevant evidence for this litigation. Ivantis anticipated patent infringement litigation from Glaukos, but nonetheless adopted and maintained a policy that deleted all company email after 12 months, resulting in the destruction of virtually all emails at Ivantis that pre-date April 2017, including emails specifically relating to the Glaukos Asserted Patents. You may presume from that destruction that the destroyed evidence was favorable to Glaukos and unfavorable to Ivantis, including on the issue of whether Ivantis willfully infringed the Asserted Patents.

Glaukos adverse inference order.  The district court also awarded “a sanction prohibiting Ivantis from referring to any pre-suit investigation of the Asserted Patents as a basis for believing that it did not infringe or that the patents were invalid.”

On mandamus, the Federal Circuit has refused to take the case – finding that the decision was not “so patently unreasonable as to warrant mandamus.” Ivantis argued that immediate appeal was important because “a massive damages judgment and an injunction against sales of Ivantis’s only product will cast a dark shadow over the company, threatening its ability to grow at this critical juncture in its development—even if Ivantis were to obtain a stay and ultimately prevails on appeal.”  The Federal Circuit noted that argument, but found it unconvincing: “we are not prepared to depart from the usual practice of waiting until after final judgment to review such orders based on such speculation.”

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I should note here that this case has more red-flags than the typical email-retention issue.

• Both companies are competing in the narrow field of FDA-approved stent-treatments for glaucoma.
• As early as 2009, Ivantis was told that it infringed Glaukos patents.
• In 2013, Ivantis hired “patent litigation counsel” to conduct diligence
  related to Glaukos’s patents.  Shortly thereafter, Ivantis instituted its email-deletion policy that resulted in deleting all the emails relating to the patents at issue here. The same attorneys represent Ivantis in this litigation.
• In 2017, Ivantis CEO distributed a report from an industry analyst wo indicated Glaukos would sue Ivantis for infringement in 2018.
• In 2018 (about a month before the lawsuit), Ivantis began preparing a petition for IPR.

In its decision, the appellate panel found these events sufficient to sustain the lower court’s determination that Ivantis “acted with the intent to deprive another party of the information’s use in the litigation.”

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* Ivantis uses the politically correct ‘retention policy’ rather than ‘destruction policy.’

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FRCP R. 37(e) Failure to Preserve Electronically Stored Information. 

If electronically stored information that should have been preserved in the anticipation or conduct of litigation is lost because a party failed to take reasonable steps to preserve it, and it cannot be restored or replaced through additional discovery, the court:

(1) upon finding prejudice to another party from loss of the information, may order measures no greater than necessary to cure the prejudice; or

(2) only upon finding that the party acted with the intent to deprive another party of the information’s use in the litigation may:

(A) presume that the lost information was unfavorable to the party;

(B) instruct the jury that it may or must presume the information was unfavorable to the party; or

(C) dismiss the action or enter a default judgment.

By: Colleen V. Chien, Professor of Law; Nicholas Halkowski, first-year associate at Wilson Sonsini and 2020 JD grad; Maria He, Masters Graduate of the Masters in Business Analytics Program at Leavey Business School, and Rodney Swartz, PhD, patent agent, Intellectual Property Associate at SRI International, and third-year JD student; all at Santa Clara University and writing in their personal capacity. This post is the third in a series about insights developed based on data released by the USPTO.

Almost two years have passed since the USPTO issued its January 2019 Patent Eligibility Guidance (PEG). As the prospect of near-term Supreme Court or Congressional action on Section 101 remains murky, it is worth taking stock of patent prosecution and application trends following the PEG, and also, the Office’s accompanying Guidance on Section 112. In this post, we report on quarterly trends in office actions and filings before and after the PEG. We build on earlier analyses reported in PatentlyO and the USPTO Office of Chief Economist’s own report from earlier this year, Adjusting to Alice, which found that the PEG was followed by decreases in both the likelihood of receiving a rejection and the uncertainty in patent examination.

It is thanks to the exciting continued releases of patent data from the Patent Office, collectively as part of the Open Data Portal (in beta), that we can follow these trends in an attempt to understand the impact of policy. We encourage the USPTO to continue providing data and improving its coverage and quality, providing the only source of data that the courts and policymakers can turn to on the prosecution impacts of their work, as well as research and patent data startups. As to the office action and appeals data, discontinuities and quality issues in currently available datasets presented challenges to our analysis, which we overcame by developing a number of computational approaches. The accompanying PatentlyO Bar Journal Article, Parsing the Impact of Alice and the PEG, (hereinafter referred to as “Article”), has the details and code we used, as well as a summary of the supporting analyses described below.

We find, following the PEG:

1. Decline in 101 Subject Matter Rejections and Stabilization of Appeals: The prevalence of 101 subject matter rejections declined by 37% after the PEG with absolute declines most dramatic among “software” applications as previously defined. (Fig. 1) Ex parte appeal decisions addressing 101 subject matter appeared to stem their rise. (Article 1A)

2. No Discernable Increase in 112 Rejections: The 112 Guidance issued by the Patent Office in January 2019 described the use of 112(a), (b), and (f) to address functional claims in computer-implemented inventions. Following the 112 Guidance, we did not discern an increase in the examiner’s application of 112 rejections, in general (Fig. 2) or at the subsection level, except in the case of 112(f) rejections as applied to “software” applications which have increased steadily since the USPTO’s February 2014 Executive Action on Claim Clarity and Federal Circuit’s June 2015 Williamson decision, both directed to functional claiming, from 2.7% in 1Q14 to 7.6% in 4Q19. (See Article 2A)

3. Leaving Small Entities Behind Through Forum Shopping?: Some applicants have responded to elevated 101 rejection rates by using analytic tools to draft their claims in order to “forum shop” out of Alice-impacted art units. Though the use of these tools is not observable, it is plausible that their cost puts them out of reach of small and micro entities, and might, as a result, lead to a greater concentration of discounted applications in these art units. However, when we looked at the data, we found that the share of applications by discounted entities over time had not increased but rather, has stayed relatively steady among applications filed from 2010 to 2018. (See Article Fig. 3)

4. No Noticeable Decline in “Medical Diagnostic” or “Software” Applications following Alice or Mayo: One limitation of focusing solely on rejection rates is that they do not capture applications “never filed” due to the changes in law or policy. To gauge whether or not there was an “Alice” or “Mayo” “effect” on the number of applications, we looked for declines, in absolute and relative terms, among medical diagnostic and software technology applications, as previously defined, but found no such declines. (See Article Fig.4) Although the PEG came out more than 18 months ago, we do not yet have a complete picture of application trends following the PEG, so cannot rule out that it was followed by increases in filings.

5. More Unique Words in Issued Patent Claims post Alice: Another limitation of focusing on examiner behavior is that it does not take into account changes in applicant behavior and the dynamic there between. With the help of Rocky Berndsen, Peter Glaser, and William Gvoth of Harrity and Harrity, we looked at the number of words included in patents filed after Alice. Applying a “differences in differences” approach, we found that the number of unique words in “software” patents relative to a baseline doubled from 10 additional to 20 additional words, consistent with the hypothesis that the Alice decision led to the addition of claim details. (See Article Fig. 5) As patents filed after the PEG are granted, it will be worth seeing whether or not outcomes along this metric have changed.

Conclusion

The data indicate that, following the PEG, the prevalence of 101 subject matter rejections, and likely frustration associated with same, declined. At the same time, we did not find that 112 rejections increased noticeably to take their place, or that caselaw or the PEG resulted in sustained diminished filings. While we are not able to report on the impact of the PEG on filings and application “quality” (words and details), due to time effects, fortunately, the USPTO’s data releases should seed continued study and analysis of the impact of it and future guidance and court decisions.