The Administrative Conference of the United States (ACUS) is an independent federal agency that’s charged with recommending improvements to administrative process and procedure. The position of Chairman is currently vacant, so the Vice-Chairman, Matthew Lee Wiener, is serving as Acting Chair. A key aspect of ACUS is soliciting input from the public.
Since at least the late 1980s, concerns have been raised that the high cost of
patent litigation deters small- and medium-sized enterprises, including
those owned by traditionally underrepresented groups, from seeking
to enforce their patents. Policymakers, scholars, and organizations have studied
whether a small-claims procedure is needed for resolving patent disputes.
They have reached different conclusions and proposed different actions.
The Department of Commerce has also considered the possibility of a
small claims patent court. Most recently, in December 2012, the USPTO
issued a Federal Register notice requesting public comment on ‘‘whether
the United States should develop a small claims proceeding for patent
enforcement’’ (77 FR 74830 (Dec. 18, 2012)).
Given ongoing interest in the topic, USPTO has engaged ACUS to conduct
an independent survey and analysis of issues associated with and options to
consider in designing a small claims patent court. A report resulting from the
study will ultimately be submitted to Congress and will address, among other
topics, whether there is a need for a small claims patent court, the feasibility
and potential structure of such a court, and the relevant legal, policy, and
practical considerations in establishing a small claims patent court.
Although ACUS is seeking all comments on the topic, they’ve specifically pointed out these areas of interest:
1. Whether there is need for a small claims patent court;
2. The policy and practical considerations in establishing a small
claims patent court;
3. The institutional placement, structure, and internal organization of a
potential small claims patent court, including whether it should be
established within the Article III federal courts, as or within an Article I court,
or as an administrative tribunal;
4. The selection, appointment, management, and oversight of officials who preside over proceedings in a potential small claims patent court;
5. The subject-matter jurisdiction of a potential small claims patent court,
whether participation in such proceedings would be mandatory or
voluntary, and whether parties can remove cases to another administrative
tribunal or federal court;
6. The procedures and rules of practice for a potential small claims
patent court, including, as relevant, pleadings, discovery, and alternative
dispute resolution;
7. The remedies that a potential small claims patent court would be able to
provide;
8. The legal effect of decisions of a potential small claims patent court; and
9. Opportunities for administrative and/or judicial review of small claims
patent court decisions.
While I forsee lots of issues associated with a small claims patent court, I would imagine that the issue preclusion issues arising from an invalidity determination would be need especially carefully thought out, as well as whether patent owners could use this mechanism to bring large quantities of suits against consumers/end users who lack the resources to adequately defend themselves against a patent infringement claim.
Comments are due by July 5, 2022, and can be submitted at “info@acus.gov,” with “Small Claims Patent Court Comments” in the subject line of the message. Remember that submitted comments may be made publicly available.
Credit to Jeremy Graboyes for bringing this to my attention.
From 1793-1952, the Patent Act included a requirement that the specification “fully explain the principle” of any machine being patented. That provision was eliminated in 1952. My question, did that change reduce the disclosure requirement in any way?
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The Patent Act of 1836 included the language now found in 35 U.S.C. 112(a) and that we identify as the enablement and written description requirements. In particular, the statute required the inventor to provide “a written description of [the] invention, in such full, clear, and exact terms, as to enable any person skilled in the art or science to which it appertains, to make and construct the same.” 5 Stat. 117 (1836).
But, the 1836 statute did not stop there, it also included a further requirement for machine inventions:
and, in case of any machine, [the inventor] shall fully explain the principle, and the several modes of the application of the machine, so that it may be distinguished from other inventions.
Id. This addendum was originally part of the Patents Act of 1793 and remained in the statute until the Patent Act of 1952. It is not clear to me how the elimination of this requirement shifts the level of disclosure. What do you think?
For the chart below, I tabulated about 7,000 individual votes from the Federal Circuit Judges in patent cases decided 2014-2021. For each judge, I show the percentage of individual decisions that sided with the patent challenger; or patent owner in each case. The results here are not highly surprising. Judges Moore, Newman, O’Malley, and Stoll are all more likely to favor the patentee while Judges Lourie, Hughes, Dyk, Prost, and Reyna are relatively more likely to side with the patent challenger. Note that the differences between the judges are not huge–at most <10% difference.
This is a very rough-cut of the data. It does not include all decisions, and I used some automated techniques to identify the winner. This process was greatly aided by Jason Rantanen’s Federal Circuit Document Dataset that he makes publicly available.
The AIA substantially altered the role of the Federal Circuit and post-AIA patent challengers are much more likely to win appeals. That is why the data here is limited to 2014+.
In a divided opinion, the Federal Circuit rejected a PTAB non-obviousness decision–holding that “generic industry skepticism” is irrelevant to the question of obviousness. Auris Health, Inc. v. Intuitive Surgical Operations, Inc., 2021-1732, — F.4th —, 2022 WL 1275241 (Fed. Cir. Apr. 29, 2022). I suggest the Auris Health majority departs from KSR by again drawing sharp lines rather than allowing for a functional, flexible analysis. KSR Int’l Co. v. Teleflex Inc., 550 U.S. 398 (2007). The opinion was penned by Judge Prost and joined by Judge Dyk. Judge Reyna wrote in dissent.
The Intuitive Surgical patent is directed to a “method for performing robotic surgery.” The improvement is a servo-pulley mechanism for swapping surgical tools (e.g., scissors to scalpel to graspers). In 2018, Intuitive Surgical sued Auris Health for patent infringement. Intuitive Surgical Operations, Inc. v. Auris Health, Inc., No. 1:18-cv-01359 (D. Del.). In response, Auris petitioned for inter partes review. The PTAB instituted the IPR, but ultimately concluded in its final written decision that the claims had not been proven obvious. On appeal, the Federal Circuit has vacated and remanded.
The IPR focused on the combination of two prior art references: Smith and Faraz (US5624398 and US5824007) that collectively teach all of the claim limitations. Smith is directed to a robotic surgical system; and Faraz is directed to stand for holding surgical instruments. In its analysis, the PTAB considered evidence presented that (1) combining the two references would create some complications and (2) conventional wisdom established substantial skepticism regarding the use of robotic systems during surgery. Based upon this evidence, the PTAB concluded that a person of skill in the art would not have been motivated to combine the references in order to arrive at the claimed invention. On appeal, the Federal Circuit altered course–holding that “generic industry skepticism cannot, standing alone, preclude a finding of motivation to combine.”
There are two areas where skepticism might come into play: (1) as part of the KSR obviousness analysis considering reasons to combine references; and (2) as a secondary consideration of non-obviousness (aka objective indicia). In the second use-case (objective indicia), the Federal Circuit has previously tightened scope of relevant evidence to only those shown to have a tight nexus with the claimed invention. Here, however, the skepticism was tied to the particular claim elements, but rather was general skepticism shown to be held by persons of skill in the art “about performing robotic surgery in the first place.”
Here, the Federal Circuit has taken the nexus requirement used for secondary indicia and brought it forward to also apply when considering motivation-to-combine.
[W]hile specific evidence of industry skepticism related to a specific combination of references might contribute to finding a lack of motivation to combine, that’s not what we have here.
Auris Health. It seems to me that this approach is unduly restrictive and in tension with KSR’s rejection of “[r]igid preventative rules that deny factfinders recourse to common sense.” Rather, in KSR, the Supreme Court held that the question of whether a person of skill would combine references is a broad and flexible inquiry. Here, it appears that the Federal Circuit is asking for evidence relating to motivation-to-combine to be tied directly to the problem being solved. But KSR rejected that approach as well.
The Court of Appeals failed to recognize that the problem motivating the patentee may be only one of many addressed by the patent’s subject matter. . . . Under the correct analysis, any need or problem known in the field of endeavor at the time of invention and addressed by the patent can provide a reason for combining the elements in the manner claimed.
KSR. One question to consider here is whether the Supreme Court intended its analysis to by symmetrical or balanced. The Supreme Court talked about “reasons for combining” involving substantial flexibility, but did not discuss whether “reasons for not combining” should receive the same treatment. It seems obvious that this should be a balanced inquiry.
In his dissent, Judge Reyna agreed that “general skepticism toward robotic surgery” should ordinarily not be enough–by itself–to negate a motivation to combine. However, he argues that it should still may be relevant to the analysis. Here, Judge Reyna found that the Board had included this reason as one among many, and that substantial evidence thus supported the Board’s conclusion of no motivation to combine. (For example, the Board noted that the combination would restrict physician movement and would reduce surgical precision).
Judge Reyna also commented on the seeming rigid new rule:
I am also concerned that the majority opinion may reasonably be understood to announce an inflexible and rigid rule, namely that it is “impermissible” for the Board to consider evidence of artisans’ skepticism toward robotic surgery in determining motivation to combine. I find no authority for this assertion, and indeed it appears in tension, at a minimum, with the central thrust of KSR. See KSR Int’l Co. v. Teleflex Inc., 550 U.S. 398, 415, 127 S.Ct. 1727, 167 L.Ed.2d 705 (2007) (rejecting the “rigid approach of the Court of Appeals” and articulating an “expansive and flexible approach” of determining obviousness). This is particularly true when considering art in fields of endeavor that are inherently dangerous or risky. Indeed, in past cases, this court has accounted for the attitudes of medical professionals toward certain types of procedures when determining whether a motivation to combine has been adequately demonstrated. See, e.g., Kinetic Concepts, Inc. v. Smith & Nephew, Inc., 688 F.3d 1342, 1369 (Fed. Cir. 2012) (finding no motivation to combine where “doctors were not using the disclosed devices and methods to heal wounds with negative pressure because they did not believe that these devices were capable of such healing”).
Reyna in dissent.
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What’s really happening here. In my view, the problem in this case comes down to the reality that the patentee’s evidence against combining the references is quite weak, and the majority disagreed with the PTAB’s conclusion giving it weight. However, since the court must give deference to PTAB factual findings, it would have been much harder challenge the decision on that ground, especially because the obviousness analysis depends upon so many factors. So, instead of challenging the factual findings, the majority decided to create a bright rule of law barring the evidence from even being considered as relevant to the inquiry.
On Sale Bar: The Federal Circuit’s recent decision in Sunoco Partners v. U.S. Venture (Fed. Cir. 2022) focuses on the classic patent law question of whether the inventor’s pre-filing sales activity serve to bar the patent from issuing. Was the agreement an “offer to sell” and was it excused by the “experimental use” exception.
Sunoco’s patents cover systems for blending butane into gasoline. In a bench trial, N.D. Ill. Judge Pallmeyer sided largely with the patentee–finding US Venture liable for willful infringement and awarding $6 million in damages. Both sides appealed, with the infringer wanting to escape liability and the patentee wanting more money.
The “on sale bar” prohibits patenting an invention that was placed “on sale” prior to the application being filed. The patents here are pre-AIA and so the on-sale bar included a one-year pre-filing grace period. For newer patents, the one-year grace-period is limited to pre-filing sales that can be linked-back to the inventors. “On sale” is defined by the courts as a “commercial offer for sale” of an embodiment that takes place once the invention is “ready for patenting.” Pfaff v. Wells Elecs., Inc., 525 U.S. 55 (1998). In addition, sales/offers can be excused if they qualify as “experimental use.” City of Elizabeth v. Am. Nicholson Pavement Co., 97 U.S. 126 (1877) (delay excused by “bona fide effort to bring his invention to perfection, or to ascertain whether it will answer the purpose intended”). In this analysis, the court conducts a wholistic totality-of-the-circumstances analysis in considering whether the pre-filing sales were primarily for experimentation or instead primarily for profit. Allen Eng’g Corp. v. Bartell Indus., Inc., 299 F.3d 1336 (Fed. Cir. 2002).
Application of the on sale bar is a question of law as is the underlying issue of whether the experimental use exception applies. However, underlying factual conclusions made by the lower court should be given deference on appeal.
The Facts: On February 7, 2000, the inventor’s company (MCE) offered to sell and install a butane-blending system to Equilon. In the agreement, Equilon wasn’t actually pay anything for the machine, but would agree to purchase substantial butane from MCE over the next 5 years. The Feb 7 date is important. The original patent application was filed Feb 9, 2001–one year and two days later and outside the one year grace period.
On appeal, the Federal Circuit looked to the contract and its own prior precedent to conclude that a purchase agreement is a classic offer to sell. The proposal expressly stated that “ownership and title to the Equipment” would be conveyed. The district court found effectively that the equipment was being given away since the “the contract did not require Equilon to pay MCE anything in exchange for the system in the normal course of events.” On appeal, though the Federal Circuit sided with the patent challenger–holding that the contract required transfer of title as part of the consideration for Equilon’s agreement to purchase butane. Using its de novo power, the appellate court rejected the district court’s offer’s interpretation and found that it constituted an offer for sale. The court cited a prior decision on point. Netscape Commc’ns Corp. v. Konrad, 295 F.3d 1315 (Fed. Cir. 2002) (offer to make a “remote database object . . . in exchange for four months full time employment or no more than $48,000” was a “commercial offer for sale”).
Experimental use: Even if thought it is an offer for sale, it could be excused based upon a conclusion of experimental use. Here, the court’s test is whether the offer was “primarily [for] experimental purposes.” The offer included a sections for both “pre-installation testing” and “post-installation testing.” On appeal, the Federal Circuit found that those contract provisions do not necessarily indicate any intent to experiment with the system design or to ensure that the invention works. Rather, those testing provisions could instead simply be for ensuring that the particular embodiment was tuned correctly. Further, the Federal Circuit found that there was no reason why the sale was needed to further any design experimentation.
Sunoco’s analogy to the Supreme Court’s seminal City of Elizabeth case falls flat. While “the nature of a street pavement,” the invention in that case, “is such that it cannot be experimented upon satisfactorily except on a highway, which is always public,” Sunoco does not dispute that MCE’s pre-installation testing was conducted at [a different contractor’s site], and could have been performed before offering to sell the system.
Slip Op. The district court had excused the prior offer as experimental use, but on appeal, the Federal Circuit reversed that as well. “These tests are not experiments, but are acceptance tests to confirm that the equipment is properly blending butane—that is, that it is working as promised.” Id.
Here, the testing described in the Equilon agreement occurred to effectuate the sale, rather than the sale occurring to occasion the testing. Therefore, we conclude that the Equilon agreement was an offer for sale made to commercially exploit the invention rather than primarily for experimental purposes. On that basis, we reverse the district court’s experimental-use determination and vacate its infringement determination.
At trial, the district court did not decide whether the invention was “ready for patenting” at the time of the offer. That second prong of Pfaff could still excuse the prior offer on remand. The defense will need to show either (1) reduction to practice or (2) a sufficient and enabling written description of the invention — one of which must have occurred prior to the offer date.
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This case is one where savvy patent attorneys would have helped: (1) filing the patent application earlier; or (2) drafting the contract so that it is not a “sale.”
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Software License: One question I have in this case involves the onboard software. The patent claims here include software elements: a “process control unit [that] generates a ratio input signal …” The sales contract though was quite clear that the equipment was being sold, but the software was only subject to “a license.” An offer to license is distinct from an offer to sell. However, the Federal Circuit has several times suggested that licensing of software code can constitute a “sale.”
[A] commercial transaction arranged as a “license” or a “lease” of a product or a device … may be tantamount to a sale (e.g., a standard computer software license), whereupon the bar of § 102(b) would be triggered because “[t]he product is … just as immediately transferred to the ‘buyer’ as if it were sold.”
In re Kollar, 286 F.3d 1326, 1331 n. 3 (Fed. Cir. 2002) quoting Group One, Ltd. v. Hallmark Cards, Inc., 254 F.3d 1041, 1053 (Fed.Cir.2001) (Judge Lourie Concurring). In Minton v. National Association of Securities Dealers, Inc., 336 F.3d 1373 (Fed. Cir. 2003), Judge Lourie wrote for the majority and concluded that a “lease” of software constituted an invalidating offer for sale. These cases (and others from the Federal Circuit) appear in tension with the consistant refrain that the on sale bar is guided tightly by Article 2 of the UCC and its focus on “sale” rather than licenses or leases.
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Enhanced Damages: On appeal, the Federal Circuit vacated the district court’s award of enhanced damages — finding an abuse of discretion. In particular, the district court had excluded testimony and opinion evidence from the defendant’s attorney John Manion because of his confusion during testimony. On appeal, the Federal Circuit concluded that the confusion was created by the cross-examining attorney who had created a new term on the spot. “The record shows that Manion was merely confused by an unfamiliar term—’online rack tank’—that Sunoco’s attorney was using.” Id. On remand, the court will need to reassess if the infringement remains sufficiently egregious to allow for enhanced damages.
Judge Prost wrote the opinion here, joined by Judges Reyna and Stoll.
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Thanks to the comment from kotodama. I have updated the post to correct a date error.
