March 2021

Patently-O Bits and Bytes by Juvan Bonni

Bits and Bytes, Patent

Recent Headlines in the IP World:

Commentary and Journal Articles:

New Job Postings on Patently-O:

Make Sure your Patent Application is “DIRECTED TO” a Specific Technological Solution

Patent

Enco Systems, Inc. v. DaVincia, LLC (Fed. Cir. 2021) [ENCO]

Judge Stephen Limbaugh (E.D. Mo.) sided with the accused infringer DaVincia– holding that the claims of ENCO’s U.S. Patent No. 7,047,191 are invalid under 35 U.S.C. § 101 as directed to an abstract idea.  On appeal, the Federal Circuit has affirmed.

U.S. Patent No. 7,047,191 claims a method of providing captioning in an audio-visual signal using speech-to-text processing.  Claim 1 includes a number of limitations:

  • Selecting the number of lines of caption data to be displayed (I have an image below showing how my phone does this).
  • Determining the caption encoder system being used
  • Training the system to on new words;
  • Using AV cues to time the captioning so that it displays at the appropriate time.

On motion to dismiss, the district court found the claims directed to the abstract idea of “automated stenography implemented on a computer.”  The court looked particularly to the claim limitations and found them written at a “high-level of generality” and using “broad form functional terminology.”  With regard to Alice step two, the court found the claim limitations lacked any particular or concrete configuration that could serve to ground the abstract idea.

To know whether a patent claim is improperly “directed to” an abstract idea, the court have been looking to the claims and specification in a search for objective suggestions of what the inventor thinks is the advance provided by the invention. What does the patent document assert as the “focus of the claimed advance over the prior art.” Slip Op, quoting Affinity Labs of Tex., LLC v. DIRECTV, LLC, 838 F.3d 1253 (Fed. Cir. 2016).   Here, the court looked to the claims and the specification and concluded that the focus “is simply the abstract idea of automating the AV-captioning process.”  In this process, the court is typically looking for a “technical solution to a technical problem,” although that is not always required.  Here, the court noted that, although the invention involves computers it is not directed toward “any specific improved computer techniques for performing those functions—functions intrinsic to the concept of AV captioning.”  Rather, the benefit from the invention is simply automation of work previously done by humans.

Although the abstract idea test is not a novelty test, the courts repeatedly fall back on novelty in their explanation.  Here, the court writes:

The advance is only at the abstract level of computerization because claim 1 fails to set forth specific techniques for processing the data, instead reciting known computer techniques for automation of known processes.

Slip Op.  The court also found no help for the patentee under Alice step two. “The claims do not incorporate anything more beyond conventional computing hardware and software, which do not transform the subject matter into an eligible application of the abstract idea.”

In a recent “informative” opinion, the PTAB found speech-to-text patent claims eligible under Alice.  Ex parte Hannun, No. 2018-003323, 2019 WL 7407450 (P.T.A.B. Apr. 1, 2019).  On appeal the court gave no deference to the PTAB’s interpretation of eligibility doctrine and also distinguished the case — noting that Hannun recited a particular algorithm for measuring tailored parameters.

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I love figure 1 below with the bulky video camera and boxy computer equipment. The patent claims priority back to a 2000 filing date — before Apple rounded all the corners.

What Patent reforms are on the minds of IP Owners?

Patent

The Intellectual Property Owners Association (IPO) is hoping to help push through some patent law reforms and recently published a letter to Congressional leaders on IP reform reiterates suggestions already given to the White House.

What are the proposals:

  1. Legislation on subject matter eligibility to re-expand the scope of eligibility and clarify the law.
  2. Protecting Trade Secrets abroad — the US should make a global push to raise the level of trade secret protection and enforcement.
  3. Legislation to expand venue to sue in Hatch-Waxman / BPCIA cases and also for declaratory judgment cases.
  4. Ongoing oversight from Congress to ensure that PTAB proceedings are fair to the patent holder.
  5. Ongoing efforts to ensure high quality patent examination resulting in clear patents of the proper scope.
  6. Reject movements for compulsory licensing of patent or trade secret rights, both in the US and globally.

Read more here: IPO-to-IP-Subcmte-Leaders_Key-IP-Issues

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Federal Circuit on TM Licensing: We’re going to Enforce the Terms

Patent

Authentic Apparel v. US (Fed. Cir. 2021)

Authentic makes branded apparel, and had a non-exclusive license from the US Army to make Army branded items. (Signed back in Aug 2010).  One line of clothing was going to feature The Rock (Duane Johnson) with Army-Style clothing. (Seriously though, tie those shoes).

The license included a requirement that any sale/distribution must first receive the Army’s “advance written approval” subject to the Army’s “sole and absolute discretion.”

The Army refused an expansion of The Rock line of clothing; rejected other proposal; and also allegedly delayed in approving other initiatives. Eventually Authentic sued the Army for Breach in the Court of Federal Claims (CFC).

On appeal, the Federal Circuit has affirmed the CFC’s summary judgment favoring the Army — holding that the “sole and absolute discretion” provision controls.  The license agreement also included specific “exculpatory clauses” that indicated no remedy would be available for the Army’s refusal to approve proposals:

[Authentic] shall not have any rights against [the Army] for damages or other remedies by reason of [the Army]’s failure or refusal to grant any approval [of product line or] advertising.

Slip Op. (quoting the agreement).  Authentic argued that the Army has an obligation of good faith and fair dealing in its contracting, and that complete enforcement of these covenants would contravene those principles.  On appeal, the Federal Circuit agreed that it would be improper for the Army to act in an arbitrary or bad-faith manner when denying approval. That said, count found the provisions otherwise enforceable:

At bottom, Authentic agreed to give the Army broad approval discretion. . . . Authentic agreed to bear the risk that the Army would exercise that discretion to Authentic’s detriment, at least so long as the government did not act arbitrarily or in bad faith, a matter which we discuss below. Authentic’s allegation that the detriment has indeed come to pass is simply not a reason to uproot the parties’ bargain.

Id.

Who is the source of goods: One reason that the Army did not approve various advertisements was that the Army did not want to be recognized as the source of the licensed goods. Authentic argued that source identification is the key function of trademark law and is implicit in its license to use the Army mark “for trademark purposes.”

On appeal, the Federal Circuit disagreed noting that the licensee is the source of goods, and identifying the Army as the source would be factually erroneous:

Authentic’s argument is based on rights that Authentic did not have, namely, an alleged “right to identify [the Army] as the source/sponsor of the licensed goods.” Under the law, because Authentic was itself the source of the licensed goods, Authentic could not have had the right to mislead consumers to believe that the Army was the “source.”

The court then went on to hold that a decorative use of a Mark can still count as a trademark-use for licensing purposes.

In view of the clear shift in the law toward allowing trademark licenses, we do not agree with Authentic that a “decorative” use of a trademark is necessarily divorced from the goodwill associated with the trademark such that it cannot be considered a licensed use “for trademark purposes.” We recognize, of course, that a purely decorative design may not qualify for trademark protection in the first place. . . . But, again, this appeal does not involve a challenge to the validity of the Army’s trademarks, but rather a question of what limitations the Army may place on the use by a licensee of trademarks that the Army already owns.

Id.

Discretionary Transfer out of Waco

Patent

SynKloud Technologies, LLC v. Adobe, Inc. (Supreme Court 2021)

This petition for writ of certiorari fits nicely into my Civil Procedure teaching calendar because we are now arriving at the topic of discretionary transfer under 28 U.S.C. § 1404.

SynKloud sued Adobe for patent infringement in Waco (W.D. Tex.).  Adobe requested a transfer of venue to its home venue of N.D. Cal., but Judge Albright denied that motion.  The Federal Circuit granted mandamus and ordered the case transferred.  The court wrote:

In short, retaining this case in the Western District of Texas is not convenient for the parties and witnesses. It is not in the interest of justice or proper administration. And the district court’s contrary determination amounted to a clear abuse of discretion. We therefore grant Adobe’s petition for a writ of mandamus to direct transfer.

Slip Op. In the process of its decision, the Federal Circuit effectively rejected all of the lower court’s factual findings regarding convenience and justice.  The petition to the Supreme Court focuses on extraordinary error standard of review of the discretionary transfer denial on mandamus and argues that the appellate panel went to the other extreme of reweighing the evidence “to choose its preferred interpretation.” Rather, the patentee argues that mandamus should have only been granted if the lower court’s findings failed rational basis review.

Question presented:

1. Whether the Federal Circuit wrongly overruled a district court judge’s discretionary 1404(a) transfer decision when rational basis exists for all of the transfer factors and the “extraordinary error” standard was not met when multiple factors favored plaintiff’s chosen venue including the completion of third-party discovery in the current forum, the court congestion factor and the only evidence supporting transfer was set forth in self-serving declarations from defendant.

SynKloud Petition for Certiorari. The petition presents two additional questions:

2. Whether the equities lie considerably against granting mandamus, United States v. Dern, 289 U.S. 352 (1933), Zabel v. Tabb, 430 F.2d 199 (5th Cir. 1970) and In re Telular Corp., 319 F. App’x 909 (Fed. Cir. 2009), when defendant operates in, hires employees and transacts business in transferor forum; and in contrast (i) plaintiff is not subject to personal jurisdiction or venue in the transferee forum, (ii) a declaratory judgment action of patent non-infringement could not have been brought against plaintiff in the transferee forum, and (iii) a small business such as plaintiff would be forced to incur significant delays and significantly greater costs and expenses in the transferee forum.

3. Whether the district court’s lack of explanation requires the Federal Circuit to remand the case back for an explanation instead of drastically ruling that there was a clear abuse of discretion leading to a patently erroneous result, see In re Archer Directional Drilling Servs., L.L.C., 630 F. App’x 327 (5th Cir. 2016) (citing In re Volkswagen of Am., Inc., 545 F.3d 304, 310-11 (5th Cir. 2008)).

Id.  As the Supreme Court petition proceeds, the N.D. Cal. case is also moving forward. In one of the questions SynKloud notes the personal jurisdiction problem which was not addressed by the Federal Circuit mandamus judgment.  When the case is transferred, SynKloud remains the plaintiff and thus cannot directly challenge personal jurisdiction — other than by simply dismissing its case and forfeiting its patent rights.

Folks who read this petition will recognize that it was not drafted by traditional Supreme Court council.  I expect that its style may reduce its odds of being granted certiorari.  However, it is also setting up a potential follow-on petition in Uniloc v. Apple that will be coming soon.

Is it Hyperbole if it Accurately Describes an Absurd Reality

Patent

Wow, lots of new amicus in the patent eligibility case of American Axle v. Neapco, including a joint filing from Sen. Thom Tillis, Hon. Paul Michel, and Hon. David Kappos. The trio argue that the current state of patent eligibility doctrine is “an unintelligible hash” causing significant systemic problems. [Tillis Brief]  Kappos addition to the brief is symbolically important. His name is memorialized in Bilski v. Kappos, the case that seemingly re-started us down this pathway.  The brief offers an interesting approach — it is filled with quotes from policymakers about the problems created by the shift in patent eligibility laws.  Many of the quotes appear hyperbolic, but it is hard to tell in this situation whether they are simply reflecting reality.

Professors Lefstin (Hastings) and Menell (Berkeley) add their own hyperbole noting that in this case, the Federal Circuit has stretched “Section 101 to absurd lengths.”  A common law professor trope is to talk through the absurdity that ensues when a given rule is taken to an extreme.  Here, the professors are noting instead that absurdity has arrived. [Lefstin Mennell Brief]

American Axle filed its petition for writ of ceritorari back in December 2020.  Neapco initially waived its right to respond. However, the Supreme Court requested a response that is now due March 31, 2021.  Meanwhile, ten friend-of-the-court briefs have been filed supporting certiorari:

If the court has interest in the case, I would expect a call for the views of the Solicitor General (CVSG) sometime in April. Of course, a prior SG already provided views in a recent patent eligibility case: “The Court’s recent Section 101 decisions have fostered substantial uncertainty.” – U.S. Solicitor General, Noel J. Francisco (2019).

$2 billion verdict in Judge Albright’s Courtroom

Patent

VLSI Technology LLC v. Intel Corp. (W.D. Tex. 2021)

The jury just returned in Judge Albright’s first patent trial of 2021. The result: $2.18 Billion Dollars to VLSI for Intel’s infringement.  The patents were previously owned NPX Semiconductors, who obtained them by buying up Freescale Semiconductor and SigmaTel.  NPX will apparently still receive a cut of the revenue – if the decision withstands both the JMOL motions and appeals. [Intel Jury Verdict]

U.S. Patent Nos. 7,523,373 and 7,725,759.

In Claim Construction: Module Means Means

Patent

by Dennis Crouch

Rain Computing, Inc. v. Samsung Electronics (Fed. Cir. 2021)

Rain and Samsung agree that this case comes down to claim construction.  And, as typical, the patentee is attempting to thread the needle with a construction that is broad enough to be infringed, but narrow and specific enough to avoid invalidation.  The district court construed one term narrowly — resulting in no infringement.  On appeal, the Federal Circuit focused on a separate term — and found its indefiniteness rendered the claim invalid.

Rain’s US Patent 9,805,349 covers a method for delivering apps via a computer network using a webstore and server authentication. The claim requires “a user identification module configured to control access of said one or more software application packages.”  If you have been following patent claim construction over the past decade: You know that the focus here will be whether this “module” limitation invokes 35 U.S.C. § 112 ¶ 6 as a means-plus-function term. And, if so, is it indefinite for failing to provide sufficient structural support in the specification.

Normally, patent claims are expected to spell out the actual structure of the invention — not just its function. However, § 112 ¶ 6 (now renamed § 112(f)) allows a patentee to avoid adding those specifics in combination claims by including an element “as a means or step for performing a specified function without the recital of structure, material, or acts in support thereof.”  The statute goes on to include an important caveat, the element “shall be construed to cover the corresponding structure, material, or acts described in the specification and equivalents thereof.”  The statute does not spell-out what happens when the specification lacks any corresponding structure — but the courts have filled the gap. A means-plus-function claim that lacks corresponding structural disclosure in the specification is deemed invalid as indefinite.

Means-plus-function claiming is fools gold — especially for anyone with a thin disclosure.  The claims appear broad, but are narrowly interpreted and regularly invalidated.  For years, patentees have moved away from using the term “MEANS” and replaced it with some other generalized word such as “MODULE” as used in this case.  By skirting the MPF trap, these newly styled claims were more broadly interpreted and rarely invalidated as indefinite.  However, that approach was collapsed by the case of Williamson v. Citrix Online, LLC, 792 F.3d 1339 (Fed. Cir. 2015).  In Williamson, the Federal Circuit held that claim terms that “fails to recite sufficiently definite structure or else recites function without reciting sufficient structure for performing that function” will also be interpreted as a means-plus-function term.  Although the burden on invoking 112(f) is still on the patent-challenger, Williamson eliminated the heavy presumption that it doesn’t apply.

The further trick with Williamson: (a) If a particular term – such as “module” is structurally defined within the specification then it will typically not be interpreted as means-plus-function because it was particularly defined by the applicant.  (b) On the other hand, if the term is not structurally defined in the specification, then it will invoke 112(f) and also be found indefinite for lack of structural support.

Here, the court first noted that the word “MODULE” “is a well-known nonce word that can operate as a substitute for ‘means’.”  The Williamson case itself focused on the word module and found that it did not indicate any “structure.”  The court drew the same conclusion in Rain Computing— finding that the claimed “user identification module” has no commonly understood structure and the specification included no structural disclosure.

Here, the specification does not impart any structural significance to the term; in fact, it does not even mention a “user identification module.”

Slip Op.  So, we fall into the category (b) from above: Nonce word without structural support → therefore → Invoke 112(f) and invalidate. The court writes:

Nothing in the claim language or the written description provides an algorithm to achieve the “control access” function of the “user identification module.” When asked at oral argument to identify an algorithm in the written description, Rain could not do so. Without an algorithm to achieve the “control access” function, we hold the term “user identification module” lacks sufficient structure and renders the claims indefinite.

Slip Op. Thus, the claim is indefinite.  This rendered the separate non-infringement related claim construction moot.

During prosecution the patent examiner had expressly stated that the limitation “does not invoke 112, 6th paragraph, or 112(f).”  However, the examiner’s somewhat cryptic reasoning was that a 112(f) means limitation cannot exist within a method claim.  On appeal, the Federal Circuit noted the examiner’s error: “Applicants are free to invoke § 112 ¶ 6 for a claim term nested in a method claim.”

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Note: In Synchronoss Techs., Inc. v. Dropbox, Inc., 2019-2196, 2021 WL 520047 (Fed. Cir. Feb. 12, 2021), the Federal Circuit encountered a claim a quite similar limitation: “user identifier module.” In that case the court also found that the term invoked 112(f) but was indefinite from lack of structural support.

(Fed Cir Clerks – note that FN 1 in Rain Computing does not accurately reflect the language of the claims in Synchronoss).

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Above, I noted the draw of means-plus-function claim language for “thin disclosures.” In this case, the disclosure was actually quite extensive, but the patentee appears to have wanted to shift the scope of coverage away from the original focus of the invention disclosure.  This patent is one of nine US patent applications all within the same direct family and relying on the same original disclosure.

Court Affirms Damages on Very Wide Royalty Range Testimony

Patent

Bayer Healthcare LLC v. Baxalta Inc. (Fed. Cir. 2021)

A jury sided with the patentee Bayer — finding the patent infringed and not proven invalid.  The judge refused to allow the jury to decide willfulness, and instead found no willful infringement as a matter of law. Affirmed here on appeal.

The basic setup: Bayer’s U.S. Patent No. 9,364,520 covers a conjugate that includes a “functional Factor VIII polypeptide” having a particular amino acid sequence (“or an allelic variant thereof”).  Factor VIII is normally produced by the human liver and is important to blood coagulation.  Thus, Factor VIII is also a helpful treatment for hemophilia A.  The conjugate also includes polyethylene glycol (PEG) that is used as a preservative and has a particular binding site on the polypeptide (“the B-domain”).  The process of joining the two factors together is known as PEGylation.  The B-domain binding site limitation was important because prior researchers had found that non-specific conjugation changed the Factor VIII in a way that reduced or eliminated its functionality.

First the damages: After finding infringement, the Jury was asked to determine a royalty rate (17.18%); a royalty base ($872 million); and then do the math for the damages ($155 million).  The district court also added another $18 million for pre-verdict supplemental damages.  The verdict here is based upon Baxalta’s distribution of Adynovate, a PEGylated FVIII hemophilia treatment.

I have included a snippet from the verdict below.

At trial, Bayer’s damages expert, Dr. Addanki, testified that the royalty rate range should be 5.1% to 42.4%. On appeal, the defendant argued that this range was simply too wide and effectively required the jury to speculate — or just pick a number, any number (within the wide range).   On appeal, the Federal Circuit found no problem and that the evidence presented supported the verdict. “[W]e are aware of no precedent that requires an expert to provide a single proposed royalty rate.”  I wonder if next-time Dr. Addanki will push his luck and go for a 0-100% predicted range. I’m confident that it is accurate if not precise.

RANDOM: Construing the Claim Construction.  The district court construed the claimed polypeptide conjugation as “not random” based upon statements in the patent and the prosecution history.  On appeal, the defendant argued that the term random – although not found in the claims – should have been construed by the district court.

On appeal, the Federal Circuit found no error — explaining that claim construction need not “purge every shred of ambiguity.” quoting Acumed LLC v. Stryker Corp., 483 F.3d 800 (Fed. Cir. 2007).  Here, the defendant had asked for a particular narrow construction and the district court had refused — finding it too narrow.

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Talk about functional claim language: The claims expressly require that the conjugate be “functional.”  Still, the jury found the claims enabled. On appeal, the Federal Circuit affirmed — noting the substantial evidence presented by the patentee at trial.  Further, “the specification need not include a working example of every possible embodiment to enable the full scope of the claims.”

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The patentee had cross-appealed on willfulness. The patentee presented evidence that the defendant knew about the patent and knew that its drug used the same targeted PEGylation at the B-Domain as claimed.

On appeal though the Federal Circuit agreed with the district court that this evidence was not enough to make a case of willfulness. “Knowledge of the asserted patent and evidence of infringement is necessary, but not sufficient, for a finding of willfulness. Rather, willfulness requires deliberate or intentional infringement.”

So, in the end, the verdict stands at only $100 million+.

 

 

Parties Again Ask the Federal Circuit to Follow the Law and Issue an Opinion in PTO Appeals

Patent

In a recent article, Judge Hughes was quoted as saying that he does not personally look at petitions for rehearing that stem from R.36 no-opinion judgments by the Federal Circuit.

Hughes said if the panel affirmed without an opinion, he puts the petition down and waits to hear from his clerks if it’s worth considering. If the panel wrote a nonprecedential decision without a dissent, he may flip through the table of contents to make sure he’s not missing anything.

But the only en banc petitions Hughes said he reads seriously are the precedential decisions, particularly with dissents. “Those are the only ones that are going to be en-banc-worthy,” he said.

Perry Cooper, Full Court Patent Review Bids Often ‘Waste of Time,’ Judge Says.  In many ways, these no-opinion judgments are the shadow docket of the Federal Circuit without the usual full-court or expositive guardrails of ordinary appellate practice.

Before 1989, the Federal Circuit and its predecessor courts (going back 100+ years) wrote an opinion in each and every appeal of a patent case from the Patent Office.  Now, about half of the cases are decided without opinion.  Back in 2010, this represented fewer than 20 cases per year, many of which were pro se and ex parte.  By 2019, more than 120 R.36 no-opinion judgments were issued in PTO cases, most of these were in hotly litigated inter partes reviews. In their article, Paul Gugliuzza and Mark Lemley looked at one area of law – patent eligibility – and concluded that the court was subtly shifting the law through its R.36 practice. Gugliuzza and Lemley, Can a Court Change the Law by Saying Nothing?, 71 Vanderbilt Law Rev. 765 (2018).

In a number of cases, parties have petitioned the Supreme Court and Federal Circuit for a hearing on the issue — arguing as I did in my 2017 article that 35 U.S.C. 144 requires the court to issue an opinion when reviewing an appeal from the Patent Office. So far, no court has agreed to even hold such a hearing.

In WaterBlasting v. Iancu, the petitioner is taking this same approach (I previously wrote about the patentee’s en banc request here.)   In its new responsive briefing, the USPTO focused on general principles of appellate procedure that, by “longstanding tradition” permit the appellate courts to “establish their own procedures concerning when to issue opinions.”  While I agree with this general principle, the USPTO failed to consider or work through the competing longstanding tradition in the patent context noted above or the statutory history on point.

One thing that I like about the Gov’t brief is that it lists many of the unsuccessful petitions to the Supreme Court on this issue:

See, e.g., Fote v. Iancu, 140 S. Ct. 2765 (2020); Kaneka Corp. v. Xiamen Kingdomway Grp., 140 S. Ct. 2768 (2020); Specialty Fertilizer Products, LLC v. Shell Oil Co., 138 S. Ct. 2678 (2018); Shore v. Lee, 137 S. Ct. 2197 (2017); Concaten, Inc. v. AmeriTrak Fleet Solutions, LLC, 137 S. Ct. 1604 (2017); Cloud Satchel, LLC v. Barnes & Noble, Inc., 136 S. Ct. 1723 (2016); Hyundai Motor Am. v. Clear with Computers, LLC, 134 S. Ct. 619 (2013); Kastner v. Chet’s Shoes, Inc., 565 U.S. 1201 (2012); White v. Hitachi, Ltd., 565 U.S. 825 (2011); Max Rack, Inc. v. Hoist Fitness Sys., Inc., 564 U.S. 1057 (2011); Romala Stone, Inc. v. Home Depot U.S.A., Inc., 562 U.S. 1201 (2011); Wayne-Dalton Corp. v. Amarr Co., 558 U.S. 991 (2009); Tehrani v. Polar Electro, 556 U.S. 1236 (2009).

WaterBlasting PTO Brief.

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Federal Circuit Continues to Remain Silent about its R.36 Opinions