All posts by Dennis Crouch

About Dennis Crouch

Law Professor at the University of Missouri School of Law.

US Copyright Office Generative AI Inquiry: Where are the Thresholds?

Patent

by Dennis Crouch

Generative Artificial intelligence (GenAI) systems like MidJourney and ChatGPT that can generate creative works have brought a wave of new questions and complexities to copyright law. On the heels of a recent court decision denying registrability of AI created work, the U.S. Copyright Office recently issued a formal notice of inquiry seeking public comments to help analyze AI’s copyright implications and form policy recommendations for both the Office and for Congress. The notice is quite extensive and raises fundamental questions that many have been discussing for several years about copyrightability of AI outputs, use of copyrighted material to train AI systems, infringement liability, labeling AI content, and more. The Copyright Office’s inquiry is an attempt to respond to AI’s rapidly growing impact on creative industries. [Link to the Notice]

The following is a rough overview of three core inquiries that I identified in the notice.  It is also easy to just read it yourself by clicking on the notice above.

A core inquiry is whether original works that would ordinarily be copyrightable should be denied unless a human author is identified. Generative AI models produce outputs like text, art, music, and video that appear highly creative and would certainly meet copyright’s originality standard if created by natural people.  Further, if human contribution is required, the questions shift to the level of human contribution necessary and procedural requirements to claim and prove human authorship. As the notice states, “Although we believe the law is clear that copyright protection in the United States is limited to works of human authorship, questions remain about where and how to draw the line between human creation and AI-generated content.” Factors could be the relative or absolute level of human input, creative control by the human, or even a word count.  With copyright it is helpful to have some bright lines to streamline the process of registration without substantial case-by-case lawyer input for each copyrighted work, but any hard rule might skip over the nuanced. Although the notice focuses on copyrightability, ownership questions will also come into play.

A second important core inquiry focuses on training data that is fundamental to today’s generative AI models. The copyright office seeks input on the legality of training generative models on copyrighted works obtained via the open internet, but without an express license. In particular, the Office seeks information about “the collection and curation of AI datasets, how those datasets are used to train AI models, the sources of materials ingested into training, and whether permission by and/or compensation for copyright owners is or should be required when their works are included.”  Presumably different training models could have different copyright implications.  In particular, an approach that does not store or actually copy the underlying works would be less likely to be be infringing.

In building the training model, we often have copying of works without license, and so the key inquiry under current law appears to be the extent that fair use applies to protect the AI system generators.  In other areas, Congress and the Copyright Office have stepped in with compulsory licensing models, that could possibly work here — a system of providing a few pennies for each web page. Our system also supports approaches to voluntary collective licensing via joint management organizations; perhaps supported by a minimum royalty rate. An issue here is that many of the folks creating training data are doing so secretly and would like to maintain their data and how the model is using the data as trade secret information.  That lack of transparency will raise technical challenges and costs for the underlying copyright holders.

A third core area focuses on infringement liability associated with AI-outputs that result in a copy or improper derivative work.  Who is liable — the AI system developers, model creators, and/or end users? A traditional approach would allow for joint liability.  Again though, the lack of transparency makes things potentially difficult to prove copying, but perhaps availability and likelihood are enough.  On this point, notice also asks about the idea of labeling or watermarking AI content as suggested a recent White House / Industry agreement.  Although I see this issue as outside of copyright law, the inquiry suggests some penalty for failure to label.

Everyone is floundering a bit in terms of how incorporate generative AI into our world view.  I see the Copyright Office AI inquiry as a real attempt to seek creative and potentially transformative solutions. The public is invited to provide input by submitting comments by the October 18, 2023 deadline. There will also be a short response period for reply comments responding to initial submissions that closes on November 15, 2023.

USPTO Downsizes HQ; Building Owner Faces Financial Troubles

Patent

The U.S. Patent and Trademark Office (USPTO) has called their 2.4 million square foot headquarters in Alexandria, Virginia home since 2005. But the agency does not actually own the cutting-edge facility located in the Carlyle neighborhood near the Potomac riverfront. Instead, the USPTO has leased the complex from New York-based real estate owner LCOR.

Several months ago, the USPTO announced it would be downsizing and relinquishing 800,000 square feet of space. The renewed 5-year lease covers 1.6 million square feet.  Still a big footprint, but one reflective of how the USPTO’s workplace and workforce have evolved over the past two decades.

When the agency first moved in, hoteling and work-from-home examiner programs were in place, but not the expectation. Fast forward to today and the USPTO has fully embraced telework along with opening satellite offices nationwide, reducing the need for everyone to be housed at HQ. Despite major examiner corps growth during this time, the footprint no longer needs to be so large.

However, the USPTO’s landlord LCOR now faces its own challenges filling the soon-to-be vacant space. The company continues to struggle finding replacement tenants, as office vacancy rates remain high nationwide.

Most recently, credit rating agency Moody’s downgraded LCOR’s credit outlook to “high risk of default” status. The downgrade reflects Moody’s view that LCOR may have trouble refinancing debt and have insufficient cash flow to cover interest payments unless new paying tenants are found.

I remember first visiting HQ way back then and thinking of the potential benefits of having a patent law office in an adjacent building.  Today, that imagined benefit seems much less so as it is likely that your examiner is sitting at home in another state.

Venue Transfer Games Continue: Rafqa Star v. Google

Patent

by Dennis Crouch

Rafqa Star LLC v. Google LLC, No. 6:22-cv-01207-ADA, 2022 WL 3747666 (W.D. Tex. Aug. 17, 2022).

Google is one of the largest companies in the US with extensive ties not just to every state, but virtually every household in the entire country.  Still, the company regularly argues that it would be too unfair and inconvenient to litigate patent cases in states such as Texas. In a recent decision, Judge Alan Albright (W.D.Tex.) denied Google’s motion to transfer venue. In his 40-page order, Judge Albright provided an in-depth analysis of the private and public interest factors that, based upon prior precedent, govern transfer under 28 U.S.C. § 1404(a).  The relevant statute reads as follows:

For the convenience of parties and witnesses, in the interest of justice, a district court may transfer any civil action to any other district or division where it might have been brought or to any district or division to which all parties have consented.

Id.  Before analyzing this case, I want to step back and recognize that the current legal test for patent venue transfer has departed significantly from the statutory language declaring the goals of convenience and justice. The public and private factor analysis mandated by current precedent does not actually focus on real inconvenience to parties or witnesses. For instance, the location of documents and witnesses gets weight when almost everything is cloud based. And the 100-mile rule makes little sense in an age of national air travel and remote work.  This is especially true for patent cases that will have nationwide impact.

Moreover, these motions are never really about convenience in patent cases, but rather are tactics for judge shopping with the parties competing to reach a perceived more favorable forum. Like Google, the defendants are typically corporations with national reach who can – and do – litigate anywhere. But they believe certain districts or judges, like Judge Albright, are less favorable for them. Venue motions are weaponized as part of broader forum shopping, not for legitimate inconvenience reasons.

This underlying reality casts doubt on the entire enterprise of venue disputes in patent cases. The jurisprudence should be realigned to get back to the statutory standard and goals of convenience and justice. But until then, district courts and parties are stuck playing this game, as evidenced by the venue fight in Rafqa v. Google.

An interesting solution would be to require parties to certify that the public and private factors highlighted in their argument serve as the primary motivation for seeking a venue change, rather than an attempt to avoid a judge or forum perceived to be less favorable.  W.D. Texas has also largely eliminated the Judge Albright singularity with its order requiring random distribution of patent cases filed in Waco.

Back to Rafqa Star: Ultimately, the Judge Albright determined that Google failed to meet its burden to demonstrate that its proposed transferee venue (N.D.Cal.) was clearly more convenient than Waco. What makes the the order particularly significant is Judge Albright’s lack-of-credibility findings regarding Google’s venue declarant, Mr. Peter Tan.  The key arguments here really relate to the work-from-home transformation for many tech workers, including those at Google.

As Judge Albright explained, Mr. Tan’s declaration ambiguously stated that Google employees “report to” offices in NDCA but did not declare that they actually reside there. Google’s lawyers then used this ambiguous phrasing claim that the employees were located in NDCA. Judge Albright also recounted inconsistent testimony Mr. Tan gave at an evidentiary hearing when pressed about his basis of knowledge for claiming employees were in NDCA.  Mr. Tan was unable to give a persuasive basis.  Based upon his in-person credibility determination, Judge Albright found Mr. Tan’s declaration and testimony unreliable and thus struck the statements about employee locations.

The order also explores apparent attempts by Google’s counsel to mislead the Court about the location of a Google employee in Texas. Counsel relied on a LinkedIn profile rather than investigating the employee’s actual location, leading to shifting stories.

These aspects of the case offer some important tactical considerations for the parties, especially when the fact-finder is a judge rather than a jury.

This case will almost certainly receive a mandamus petition to the Federal Circuit, and it will be interesting to see whether the appellate court once again rejects Judge Albright’s approach.

Rafqa’s asserted patent US11145215 claims a method of providing user feedback (such as directions) based upon inputs from a motion detector and video device.

“Intent Engine” Claims Fail 101 for Lack of Technological Inventive Concept

Patent

by Dennis Crouch

USC IP P’ship, L.P. v. Meta Platforms (Facebook), 22-1397 (Fed. Cir. August 30, 2023)

In a non-precedential opinion authored by Judge Pauline Newman, the Federal Circuit has affirmed USC IP Partnership’s asserted patent claims are all invalid.  Back in 2020, USC IP sued Facebook for infringing its U.S. Patent No. 8,645,300.  The arguably pro-patentee Judge Alan Albright served as the district court judge.  Like Judge Newman, he had also found the claims invalid as unduly directed to an abstract idea. USC IP P’ship, L.P. v. Facebook, Inc., 576 F. Supp. 3d 446 (W.D. Tex. 2021) (granting summary judgment of ineligibility).

A difficulty with search engines, and communication generally, is that parties often fail to fully and literally state their needs.  We are often left inferring intent based upon other clues, such as situational context or our knowledge of the speaker.  USC IP’s ‘300 patent attempts to provide some solutions to this problem through its “intent engine” that uses an “intent tool” as well as a ranking tool to provide better results. The intent engine analyzes information about the user to predict their intent and displays this inferred intent in the intent field. It also recommends webpages matching the intent in the recommendation field. The user can provide ranking data on how well the webpage matches their intent via the ranking tool, and this data is stored in a database. As recited in the claims, the intent engine combines intent prediction, webpage recommendation, and user ranking to deliver a customized browsing experience. But, the claims focus on the high-level functionality of the system rather than the technical details of how intent analysis, recommendation algorithms, or data storage operate.  In some of the claims, the process is interactive — with the system prompting visitors to confirm their intent before recommending webpages matching the intent.

As per usual, the Federal Circuit analyzed patent eligibility under the two-step test set forth in Alice Corp. v. CLS Bank Int’l, 573 U.S. 208 (2014). At step one, the court looks to whether the claims are directed to an abstract idea such as a fundamental economic practice or mathematical formula. If so, the court proceeds to step two, where it considers whether the claims contain an “inventive concept” sufficient to transform the abstract idea into a patent-eligible application. This process involves looking at the claim elements individually and in combination to assess whether they amount to significantly more than the abstract idea itself.

Applying the two-step Alice framework, the Federal Circuit agreed with the district court that the claims are directed to the abstract idea of “collecting, analyzing and using intent data.” This kind of data collection and analysis is an abstract idea, even  if implemented on a computer. The court compared USC IP’s claims to those invalidated in Electric Power Group, LLC v. Alstom S.A., 830 F.3d 1350 (Fed. Cir. 2016).

At Alice step two, the court agreed that the claims lack an inventive concept to transform the abstract idea into a patent-eligible application. They merely invoke generic computer components like web browsers and databases. As Judge Albright explained, the “intent engine” is described only as a black box without accompanying technical details.

The patentee’s key argument on appeal was at step-2, arguing that the “intent engine” was not a conventional or generic computer component, but provided a technical solution rooted in computer technology like the claims in DDR Holdings. The patentee argued the intent engine played a role that went beyond well-understood, routine, and conventional computer functionality.  And, the patentee provided expert testimony at the district court level in an attempt to support this conclusion.

On appeal, the Federal Circuit rejected these arguments and again affirmed Judge Albright’s holdings. Albright had disregarded the expert testimony as merely providing legal conclusions without underlying factual support — finding it not “backed by any concrete facts from the specification or prior art.”  The appellate panel went on to agree that the ‘300 patent claims are not directed to any improvement in computer functionality itself but merely describe the use computers as a tool.

The claims here were filed and issued prior to Alice and Mayo at a time when many patents were focused more on the functional terms without the accompanying technical details.  Today, many are thinking of similar tools in the generative AI context. Like here, I expect that gen-AI tools will face high patent eligibility obsticles absent inclusion of strong technical implementation details placed at least within the specification, but more likely within the claims themselves.

 

Taylor v. Hunton Andrews Kurth LLP: A Cautionary Tale for Inventors and Startups

Patent

The Harris County Texas appellate court recently affirmed summary judgment favoring the Hunton Andrews Kurth law firm and its attorneys. Taylor v. Hunton Andrews Kurth, LLP, 14-22-00410-CV (Tex. App.–Hous. [14th Dist.] July 13, 2023).  Taylor and his companies WPEM and W2W had sued the firm for legal malpractice after first losing its infringement lawsuit and being stuck with the defendants attorney fees. The case offers a few key takeaways for entrepreneurs delving into the patent system.

Background: William Taylor and his business partner developed a software application called SafeCell and assigned the patent rights to their startup company W2W. They hired Hunton AK to handle the patent application process. Hunton filed provisional and non-provisional patent applications on behalf of W2W.  Several years later, after a patent was granted (and their legal bill still unpaid), Taylor and his partner transferred patent rights back to themselves as individuals and terminated W2W. They then formed a new company called WPEM and assigned the patent to WPEM so it could sue another company for infringement. That lawsuit failed with a complete reversal — WPEM was ordered to pay $180,000 in attorneys’ fees to the defendant.

Taylor, his partner, WPEM, and W2W then sued Hunton for legal malpractice, alleging negligence in the handling of the original patent application. The trial court dismissed all claims except Taylor’s individual claims against one Hunton attorney, which were later severed and dismissed in a separate order. The appellate court affirmed, holding (1) Taylor was not the firm’s client, and neither was WPEM; (2) although W2W as a client its had been terminated in 2017 — more than 3 years before hand.  That was a problem because Texas has a 3-year limitation on actions following dissolution of a corporation.

Key Takeaways for Inventors and Startups

1. Be careful when assigning IP rights from individuals to businesses, and back again.

The engagement letter was between W2W and Hunton, not with Taylor or his partner as individuals. And, Hunton had the individuals sign a particular statement that they were not the clients.  The court found this disclaimer made clear Hunton only represented W2W. The transfer of the patent from W2W to the individuals did not transfer W2W’s attorney-client relationship.

Key quote: “The assignment of a patent does not transfer an attorney-client relationship.” (quoting Telectronics Proprietary, Ltd. v. Medtronic, Inc., 836 F.2d 1332 (Fed. Cir. 1988)).

2. Understand the effects of terminating a business entity.

W2W lacked standing to sue because it had been terminated as an entity outside the 3-year winding up period permitted under Texas law. Its claims were extinguished.

Key quote: “Once dissolved, the corporation could neither sue nor be sued, and all legal proceedings in which it was a party abated.” (quoting Hunter v. FW, 620 S.W.2d 547 (Tex. 1981)).

3. Individual shareholders generally can’t sue for harms to the company.

The court applied the corporate injury rule, which bars owners from recovering personally for injuries to the company. Taylor owned no individual losses because he did not own the patent rights at any relevant time.

Key quote: “Under the corporate injury rule, an owner of a company cannot sue to recover damages personally for a wrong done to the company. ”

The outcome here is a classic corporate defense strategy — the defense used the complex corporate structure and ownership changes to ultimately defeated of the claims.  For inventors and startups seeking to protect IP, it makes sense to also consult with a corporate attorney along the way to ensure consistent protection.

I’ll note here that although Hunton Andrews Kurth won on technicalities, they also denied the substance of the claims.

Double Patenting and Patent Term Adjustment

Patent

by Dennis Crouch

The Federal Circuit recently issued an important decision in In re: Cellect, LLC (Fed. Cir. Aug. 28, 2023) regarding how Patent Term Adjustment (PTA) interacts with terminal disclaimers and obviousness-type double patenting (ODP). This case establishes binding precedent that a terminal disclaimer cuts off any extended patent term granted through PTA.

This holding contrasts with the court’s prior rulings regarding Patent Term Extension (PTE), where the extended term is calculated from the disclaimed expiration date, not the original expiration date. Thus, PTE extends beyond a disclaimed term, while PTA does not.

This result was expected by many patent experts, although some in the pharmaceutical industry had pushed for PTA to extend beyond disclaimed terms similarly to PTE. In the end, the statutory language expressly addressing disclaimers in the context of PTA proved decisive. This precedent will apply to all patents already in-force as well as those issued in the future.  Thus, applicants will want to carefully consider PTA and terminal disclaimer strategy for patent families.

If I were the judge, I would consider eliminating non-statutory double patenting. I expect the doctrine would have never developed under our current patent term calculation and is instead a vestige of history.

Millions of U.S. patents are tied to a family member patent via terminal disclaimer and its accompanying promise of continued common ownership.  A terminal disclaimer generally disclaims any patent term that would extend beyond the expiration date of the full statutory term of the reference patent and are generally required for the USPTO in order to overcome a rejection for obviousness-type double patenting.

Obviousness-type double patenting (ODP) is a judicially created doctrine that prevents an inventor from obtaining a second patent for claims that are not patentably distinct from claims in a first patent. The doctrine has its stated origins in 35 U.S.C. 101, which provides that an inventor may obtain “a patent” (singular) for an invention.  The obviousness question normally focuses on prior-art as required by Section 103.  ODP doctrine does not consider prior art but rather non-prior-art patents (or applications) with overlapping inventorship.

Although the statutory hook of Section 101 focuses on one-patent-per-invention, the policy concern is also highly focused on ensuring that a patentee cannot obtain multiple patents on a single invention in order to improperly extend the patent term.  This problem is largely historic — stemming from the time when patent term was determined based upon the date of issuance and prior to publication of applications.  These transformations have substantially limited gamesmanship potential.  However, in the patent-term-adjustment world, it is possible to extend a patent’s term by several years in situations where the patent applicant has a successful PTAB appeal.

ODP is intended to prevent an inventor from securing a second, later-expiring patent for small modifications or obvious variations of the same invention claimed in an earlier patent. The goal is to prevent an unjustified extension of the term of exclusivity for the invention beyond the original patent term. ODP is most commonly applied when two commonly owned patents share overlapping or obvious claims but have different expiration dates.  The courts have concluded that a terminal disclaimer by the patentee along with a binding promise of ongoing co-ownership serves as a solution — allowing both patents to issue.  The result is effectively a single patent with a single patent term designed to preventing potential harassment from multiple assignees asserting commonly owned patents covering the same invention.

= = =

The case at hand involves several Cellect patents related to image sensors in personal digital assistants and phones.  The patents are all part of a family and all claim priority to the same original application. The patents also received varying Patent Term Adjustment (PTA) to extend their terms due to USPTO delays during examination.

After Cellect sued Samsung for infringement, Samsung requested ex parte reexaminations of Cellect’s patents asserting they were unpatentable for obviousness-type double patenting (ODP) over earlier expiring patents in the family.  The examiner agreed the claims were unpatentable for ODP in the reexaminations. The Board affirmed the unpatentability findings.

On appeal, Cellect argued that PTA should be available beyond the disclaimed portion of the term — noting that the judge-made-law could not overcome the statutory guarantee.  On appeal, however, the Federal Circuit affirmed the Board and rejected Cellect’s arguments.  The clincher here is that Congress identified disclaimers within the PTA statute, stating: “No patent the term of  which has been disclaimed beyond a specified date may be adjusted under this section beyond the expiration date specified in the disclaimer.”  35 U.S.C. 154(b)(2)(B).   In other words, Congress appears to be stating that PTA  cannot extend a patent term beyond what was disclaimed — but this is exactly what Cellect was asking for.  The appellate panel also agreed with the PTAB that Cellect received an unjustified timewise extension and a terminal disclaimer was required to ensure common ownership since the later patents were clearly obvious variants of the original.  An otherwise result would effectively confer PTA on the earlier issued patents even though they were not entitled.

In summary, the unjustified extension stemmed from the challenged claims extending beyond the expiration of the one family member (‘036) that did not receive PTA. This could have been resolved with a terminal disclaimer, but none were filed.

The decision thus establishes how PTA granted under 35 USC 154 should be factored into the ODP analysis — and the result does not favor patent families.

Publicly Traded International Patent Firm IPH Continue Growth through Acquisition

Patent

by Dennis Crouch

The publicly traded Australian company IPH Limited continues expanding its global intellectual property services empire. IPH’s latest acquisition is the Canadian IP firm Ridout & Maybee for $65 million Canadian dollars. This comes just 10 months after IPH purchased Canada’s largest IP firm, Smart & Biggar.

Ridout & Maybee will merge into Smart & Biggar, further consolidating IPH’s presence in Canada. IPH’s strategy is to dominate secondary IP markets like Canada, New Zealand, and Singapore. It already owns leading firms in Australia, including AJ Park, Griffith Hack, Pizzeys, and Spruson & Ferguson.

Ridout’s website indicates only that the firm is joining “fellow Canadian IP firm, Smart & Biggar” and does not indicate that the firm will be owned by the publicly traded firm IPH.

As I wrote last October, IPH’s model raises conflict of interest concerns. With control of over 1/3 of Australian patent filings, competitors may find their IP work handled by business partners. The growth also tests regulations restricting non-lawyer ownership of law firms.

The expansion of publicly traded international IP conglomerates like IPH makes one wonder if similar consolidation could come to the US. For now, the USPTO prohibits their model. But with IPH now owning top firms across the Pacific, Canada, and Australia, pressure on the USPTO’s stance may build over time. The IPH model promises global reach and resources while threatening attorney independence. The coming years will tell whether it represents the future of IP law.

9th Circuit Revives False Claims Act Action for Fraud on the Patent Office

Patent

by Dennis Crouch

The U.S. Court of Appeals for the Ninth Circuit recently issued a pair of decisions in the qui tam case Silbersher v. Valeant Pharmaceuticals concerning the False Claims Act’s (FCA) public disclosure bar.  The case sets significant precedent in linking FCA claims to patent prosecution and fraud upon the patent office.  The case can be contrasted with Silbersher v. Allergan, Inc., 21-15420, — F.4th — (9th Cir. Aug. 25, 2022) [21-15420], that Silbersher lost.

Background

The False Claims Act (FCA) allows private citizens, known as “relators,” to file qui tam suits on behalf of the government against those who have submitted false or fraudulent claims to the Federal Government. A relator who successfully prosecutes an FCA action is entitled to receive a percentage of any recovery. This bounty system is meant to encourage whistleblowers to come forward with information about fraud against the government. However, the FCA also contains a “public disclosure bar” to prevent opportunistic litigation by relators who do not contribute any original information. The public disclosure bar mandates dismissal of qui tam suits where the allegations are substantially the same as information already publicly disclosed through certain channels enumerated in the statute. The public disclosure bar applies to block FCA claims when: (1) the disclosure occurred via a specified channel, (2) the disclosure was public, and (3) the relator’s allegations are substantially the same as what was disclosed.  31 U.S.C. § 3730(e)(4)(A). If the bar is triggered, courts must dismiss the FCA claim unless the relator qualifies as an “original source” of the information.

In this case, the relator, Zachary Silbersher, brought an FCA lawsuit alleging that Valeant Pharmaceuticals and Dr. Falk Pharma fraudulently obtained patents covering their Apriso drug.  According to Silbersher, Valeant intentionally withheld material prior art references showing that Apriso’s delayed-release formulation was obvious. Valeant then allegedly used the fraudulently obtained patents to charge Medicare/Medicaid inflated prices for Apriso.

Silbersher is a patent attorney and represented GeneriCo in an inter partes review (IPR) proceedings that invalidated one of Valeant’s patents related to Apriso.  In the course of that investigation, Silbersher found that Valeant (allegedly) took inconsistent positions in prosecuting related patents several years apart regarding whether Apriso’s effectiveness without food would have been obvious.

The district court dismissed the suit under the FCA’s public disclosure bar discussed above. The court held that the inter partes review (IPR) proceedings invalidating one of Valeant’s Apriso patents qualified as a public disclosure and contained substantially the same allegations as Silbersher’s complaint.  Thus, because the fraud was already subject of public disclosure, it could not serve as the basis for a False Claims Act Claim.

Ninth Circuit’s Analysis

On appeal, the Ninth Circuit reversed, holding that the IPR proceedings did not qualify as a public disclosure under § 3730(e)(4)(A).  The provision spells out the types of public disclosures that bar FCA claims:

[Barring disclosures may be found in] … (i) in a Federal criminal, civil, or administrative hearing in which the Government or its agent is a party; (ii) in a congressional, Government Accountability Office, or other Federal report, hearing, audit, or investigation; or (iii) from the news media …

Id.  The appellate panel explained that IPRs are primarily adversarial and adjudicatory rather than investigative. With the government not a party to the IPR, the proceeding did not qualify under channel (i) as a “hearing in which the Government … is a party.” Nor did it qualify under channel (ii) as an “other Federal … hearing” since IPRs are not focused on fact-finding or obtaining information, but rather serve as an adversarial proceeding.

While the patent prosecution histories qualified as public disclosures under channel (ii), the Ninth Circuit held they did not disclose substantially the same allegations or transactions as Silbersher’s complaint. Critically, neither the prosecution histories nor any other single qualifying document revealed Valeant’s allegedly inconsistent positions taken before the PTO. According to the Ninth Circuit, publicly disclosing a “fraudulent transaction” requires revealing both the alleged misrepresentation and the true facts, which was absent here.

Key Takeaways

The decisions provide a roadmap for litigators to structure FCA claims based on “fraudulent transactions” arising from allegations of inequitable conduct or inconsistent representations before the PTO. Carefully piecing together the elements of fraud from various public sources may avoid triggering the public disclosure bar. For defendants, these cases highlight the importance of the pleadings and demonstrating that the “essential elements” of alleged fraud have already been publicly disclosed.  A prosecution history that explains any inconsistencies with parallel proceedings would also avoid the potential problem.

Third Circuit Allows Deduction of Generic Hatch-Waxman Defense Costs

Patent

by Dennis Crouch

Mylan v. IRS, No. 22-1193, — F.4th — (3d Cir. July 27, 2023)

In a recent tax appeal, the Third Circuit court of appeals afformed that legal expenses incurred by generic drug makers to defend against patent infringement suits brought under the Hatch-Waxman Act are deductible as ordinary and necessary business expenses. This aligns with longstanding precedent treating patent litigation defense costs as deductible for the alleged infringer.

Mylan had deducted over $100 million in litigation expenses for the periods of 2012-2014 it occurred in defending patent infringement lawsuits brought against the generic manufacturer after it submitted abbreviated new drug applications (ANDAs) with paragraph IV certifications challenging the respective patents.  The IRS disallowed the deductions and issued notices of deficiency to the company — concluding that instead the litigation costs should be capitalized under I.R.C. § 263 (and associated regulations) as costs to acquire intangible assets (the FDA drug approvals).   The capitalization process requires amortization over 15 years rather than permitting immediate tax relief offsetting current income.

Mylan petitioned the U.S. Tax Court for redetermination and won a holding that litigation costs were deductible business expenses, rejecting the IRS’s position that they should be capitalized.  The IRS Commissioner then appealed to the 3rd Circuit who affirmed.

In the appeal, the IRS argued that litigation costs should be capitalized under Treas. Reg. §1.263(a)-4(b)(1)(v) as amounts paid to facilitate the acquisition of the FDA drug approvals, which are intangible assets.  The 3rd Circuit rejected that argument, holding that lawsuits by the branded manufacturers do not facilitate FDA approval.  The court noted that the FDA can approve an ANDA regardless of the litigation outcome and also that not every ANDA results in litigation so it is not a required step in the process.  Although litigation is a contemplated aspect of the Hatch-Waxman process, that does not convert the litigation into an approval requirement.  The court also noted that disparate tax treatment between generics and brands would undermine Hatch-Waxman.

The Third Circuit had previously held that litigation expenses a patentee incurs in enforcing its patents are ordinary and necessary business expenses because they are “peculiarly normal to the business in which … [patentee] taxpayers [a]re engaged.” Urquhart v. Commissioner, 215 F.2d 17, 19 (3d Cir. 1954). The court in Mylan reasoned that generic manufacturers defending infringement suits are engaged in functionally the same activity as patentees enforcing patents. Thus, the court concluded that deductibility should not differ based on whether litigation expenses are incurred by the patentee or alleged infringer. In the court’s view, “[i]t makes no difference in deciding the question of deductibility whether the patent litigation expenses are incurred by the patentee or the alleged infringer. Nor does it matter that the deductibility question arises in the context of an ANDA suit.”

Generic manufacturers relying on deductibility of these litigation costs will benefit from the ruling. If the fees had to be capitalized, it would substantially increase costs and undermine their incentives to challenge weak patents under Hatch-Waxman.

PTAB Captains Take Notice: Carefully Weigh Secondary Considerations

Patent

By Dennis Crouch

The nexus requirement serves as a threshold that must be met before secondary indicia will be even considered as relevant to the obviousness inquiry.  In its recent Volva Penta decision, the Federal Circuit found that the PTAB had  (1) created too high of a burden to prove nexus and (2) been unduly dismissive of the patentee’s evidence of commercial success and copying.  The case reinforces the notion that patentees should attempt to include some claims that are largely coexistive with its product line, especially in today’s world of likely copying. The case also serves as a reminder that product copying still caries significant weight in the obviousness analysis. Volvo Penta of the Americas, LLC v. Brunswick Corp., 22-1765, — F.4th — (Fed. Cir. August 24, 2022).

For several years, Volvo Penta has been selling a boat engine drive where the propellers are forward facing and thus tucked under the boat. The setup, known as a tractor-type stern drive, pulls the boat forward rather than traditional rear-facing propellers that push.  The drive has been a commercial success, especially for boats with nearby swimmers because the forward facing propellers offer potential safety advantage.

In 2020, Brunswick launched a competing product under its Mercury brand and, on the same day as its product launch also filed an IPR petition challenging Volvo’s US Patent 9,630,692.  The PTAB granted the petition and ultimately sided with the petitioner by holding that the claims would have been obvious based upon a combination of the prior art references.   On appeal, however, the Federal Circuit has vacated and remanded–ordering the PTAB to take a fresh look at the secondary indicia of nonobviousness such as commercial success and copying.

Obviousness analysis primarily focuses on comparing the claimed invention against the prior art and using that consideration to guess whether the gap would have been obvious to fill at the time of the invention.  But, the

Obviousness analysis primarily focuses on comparing the claimed invention against the prior art and using that consideration to guess whether the gap would have been obvious to fill at the time of the invention. But, the analysis should not end there. Secondary indicia of nonobviousness, also referred to as objective evidence, provide real-world, albeit indirect insights into the obviousness determination. Evidence of commercial success, long-felt but unsolved need, failure of others, industry praise, and copying can indicate that an invention was not obvious to those skilled in the art at the time, even if it appears so in hindsight. While secondary considerations do not control the obviousness conclusion, they must be considered as part of the totality of the evidence when presented by the patentee.  At times, the objective evidence is considered the most probative and cogent evidence of nonobviousness.

In recent years, the courts and patent office have been restricting the use of objective evidence of nonobviousness by applying a tight nexus requirement.  Before the evidence is given any consideration, the patentee must show a nexus between the invention as claimed and the objective evidence of nonobviousness.  This nexus requirement is designed to ensure, for instance, that commercial success is due to qualities of the invention being patented rather than some other advance or perhaps simply marketing.  Nexus can be established via a presumption when the evidence is tied to a product that embodies and is coextensive with the claims. Brown & Williamson Tobacco Corp. v. Philip Morris, Inc., 229 F.3d 1120 (Fed. Cir. 2000). Even without a presumption, nexus can be shown by tying the evidence to the “unique characteristics of the claimed invention.” Fox Factory, Inc. v. SRAM, LLC, 944 F.3d 1366 (Fed. Cir. 2019). The patent owner bears the burden of establishing nexus. WMS Gaming Inc. v. Int’l Game Tech., 184 F.3d 1339 (Fed. Cir. 1999). Nexus is not limited to only novel features, but considers the invention as a whole. Chemours Co. FC, LLC v. Daikin Indus., Ltd., 4 F.4th 1370 (Fed. Cir. 2021).

Here, the PTAB found that Volvo Penta was not entitled to a presumption of nexus between the claims and the objective evidence. It held that even though the Forward Drive and Bravo Four S embodied the claims, Volvo Penta did not provide sufficient arguments regarding coextensiveness. The PTAB also found that Volvo Penta did not otherwise demonstrate nexus by identifying the unique characteristics or merits of the claimed invention tied to the objective evidence presented.

On appeal, the Federal Circuit vacated.  The court noted that Volvo Penta expressly argued the commercial success of the Forward Drive was tied to the “steerable tractor-type drive” recited in the claims. Volvo Penta cited internal Brunswick documents discussing the need to match the capabilities of the Forward Drive in developing the Bravo Four S. This demonstrated a nexus between the Pulling-type stern drive in the claims and the objective evidence.  While Volvo Penta’s arguments on coextensiveness may have been fairly minimal, the court found them sufficient to show nexus by tying the evidence to the specific claimed feature of a tractor-type stern drive. The undisputed evidence showed boat manufacturers strongly desired this feature in Volvo Penta’s product. Thus, the Federal Circuit found Volvo Penta established the required nexus between the claims and objective evidence.

The Federal Circuit also determined the PTAB’s analysis and weighing of the objective evidence was deficient in several ways.

First, the court found the PTAB’s assignment of “some weight” or “very little weight” to the various secondary considerations was overly vague. This was problematic even if the individual weights were supported, because the PTAB provided no insight into its summation finding that collectively the evidence only “weighed somewhat” in favor of nonobviousness. As the court noted, it is unclear whether “some weight” has the same meaning across different factors.

Second, for certain factors like copying, the PTAB’s assignment of weight contradicted its own factual findings. The PTAB found evidence showing Brunswick copied the Forward Drive in developing its competing Bravo Four S product. However, despite noting that copying is usually considered “strong evidence” of nonobviousness, the PTAB only gave copying “some weight.” This  seeming inconsistency was not explained by the PTAB in its final written decision.

Third, the PTAB dismissed or overlooked aspects of the evidence related to long-felt need, praising comments, and commercial success, and the appellate panel found that those potential gaps might have altered the weight designation.  On these points, the court cited cases focusing on the PTAB’s duty to explain and support its factual and legal conclusions. See, e.g., Pers. Web Techs., LLC v. Apple, Inc., 848 F.3d 987 (Fed. Cir. 2017) (remanding in view of the Board’s failure to “sufficiently explain and support [its] conclusions”); In re Nuvasive, Inc., 842 F.3d 1376 (Fed. Cir. 2016)(same).

The Federal Circuit’s decision in Volvo Penta provides important guidance for patent applicants and owners seeking to overcome obviousness challenges. It reemphasizes potentially important role that objective evidence plays in the obviousness determination, and shows that the nexus requirement should not be applied overly restrictively. While patentees must establish nexus, a limited amount of support tying the objective evidence to the claimed invention as a whole can be sufficient.  The court also makes clear that the PTAB must fully and fairly consider all relevant objective evidence, avoid ambiguous weighing, and sufficiently explain any dismissal or discounting of probative evidence. Vague labels like “some weight” are unhelpful. Findings that contradict the evidence, like affording copying only minimal weight, will draw enhanced scrutiny.

Aseptic Patent Law: Which Side of Literal do you Favor?

Patent

by Dennis Crouch

Steuben Food recently lost its infringement case against Shibuya Hoppmann with the district court holding (1) the doctrine of equivalents (DOE) cannot extend to cover the accused aseptic bottle filling technique and further (2) the reverse doctrine of equivalents shields the defendant against charges of literal infringement.  Steuben Foods, Inc. v. Shibuya Hoppmann Corp., No. 1:19-cv-02181-CFC, 2023 WL 2498810 (D. Del. Mar. 14, 2023) (U.S. Patent Nos. 6,209,591; 6,536,188; and 6,702,985) (Chief Judge Connolly). The case is now pending on appeal at the Federal Circuit with the successful defendant’s responsive brief due in mid-September.

There is fierce competition in the bottling industry, and Shibuya sold bottling lines to a major Steuben customer.  Steuben sued Shibuya on three patents and initially won with a jury awarding $38 million in infringement damages.  However, Chief Judge Connolly rejected the jury verdict by issuing a Judgement Notwithstanding the Verdict, holding that no reasonable jury could have found infringement.  The rules of civil procedure now identify JNOV as the perhaps more politically correct name of Judgment as a Matter of Law (JMOL).  The new name avoids the inconvenient truth that the process involves the rejection of a constitutionally protected jury decision.

Based upon what I’ve read — that admittedly does not yet include the appellee’s brief — I would side with Steuben Foods in this one.  Judge Connolly was too aggressive at rejecting the jury verdict of infringement; too aggressive at applying the vitiation doctrine to a single word within the claim; and too aggressive at applying the long dormant reverse doctrine of equivalents.

= = =

Judge Connolly’s JMOL decision turns on two controversial patent law doctrines – the doctrine of equivalents and its inverse, the reverse doctrine of equivalents.

Doctrine of Equivalents

The doctrine of equivalents allows a patentee to establish infringement, even when an accused product or process does not literally fall within the claims of the patent, if the accused product or process contains only insubstantial differences from the patent claims. The Supreme Court recognized the doctrine of equivalents in Graver Tank & Mfg. Co. v. Linde Air Products Co., 339 U.S. 605 (1950), explaining that it operates to prevent copying that makes only minor, insubstantial changes to avoid the literal scope of the claims. The doctrine is justified on the basis that language has inherent limitations in capturing the true scope of an invention, so equivalents help protect the inventor and promote innovation. However, the doctrine is controversial because it expands patent scope beyond literal claim terms, reducing public notice and potentially ensnaring later-developed technologies in infringement. The Supreme Court placed key limitations on the doctrine in Warner-Jenkinson Co. v. Hilton Davis Chemical Co., 520 U.S. 17 (1997), requiring equivalence to be assessed on an element-by-element basis and prohibiting vitiation of claim limitations.

Steuben’s ‘985 patent covers a sterilization machine and includes the following element: “wherein said atomized sterilant is intermittently added to said conduit.”  Claim 1 (emphasis added).   The problem though is that the accused device was shown to add the sterilant continuously. Although the jury found infringement by equivalents, the district court reasoned that the doctrine of equivalents could not apply in this type of binary situation.  That lead to the court’s conclusion that allowing equivalents for continuous operation would vitiate the intermittent operation limitation.   On appeal, Steuben contends the court ignored precedent against using a ‘binary choice’ approach to vitiation. See, Deere & Co. v. Bush Hog, LLC, 703 F.3d 1349, 1356–57 (Fed. Cir. 2012) (“Courts should be cautious not to shortcut this inquiry by identifying a ‘binary’ choice in which an element is either present or ‘not present.'”).   The patentee also argues that substantial evidence supported the jury’s equivalents verdict based on applying the proper function-way-result test.

This aspect of the dispute thus raises important questions about how narrowly the doctrine of equivalents should be applied. And, in addition, it challenges the power distribution between judge and jury in finding infringement.

Reverse Doctrine of Equivalents

A more surprising aspect of Judge Connolly’s decision is his application of the reverse doctrine of equivalents.  Reverse DOE allows an accused infringer to escape liability, even if its product or process literally satisfies every element of the patent claim, if the accused product or process is so substantially changed in principle that it performs the same or a similar function in a substantially different way. The doctrine originated in Supreme Court precedent such as Graver Tank and was designed to prevent unwarranted extension of patent scope over later-developed technologies functioning in new ways. However, the doctrine is controversial because it negates what would otherwise constitute infringement under the statute, conflicts with literal claim interpretation, and is seldom applied by courts today.

For the ‘591 patent, the lower court rejected the jury verdict of infringement based upon the reverse DOE — holding that the accused product operated “in a substantially different way” from Steuben’s invention as described in its specification.  Here, the claims required a “second sterile location.” Steuben accomplished this with a redesign of filling valves to avoid attracting contaminants and use of sterilant.  On the other hand, the accused product used a bellows surrounding the valve stem to prevent contamination.

The district court found the accused product’s approach to fit within the literal claim scope, but still non infringing because the approach was radically different from that described in Steuben’s specification.

In the case, Shibuya provided expert testimony of the key differences of operation by comparing the accused product against the disclosed embodiments.  During the trial, the patentee focused on the claim language and did not attempt to rebut the argument that the underlying approaches to create the sterile region was quite different.  (Steuben also apparently mischaracterized the patents disclosure). In its JMOL decision, the court concluded that the unrebutted evidence of significant difference was enough to entitle Shibuya to JMOL of noninfringement under the reverse doctrine of equivalents.  The court emphasized here that the critical issue is whether the accused device is so far changed in principle that it operates substantially differently from the claim, even if it literally infringes.

On appeal, Steuben argues the court fundamentally misapplied Reverse DOE analysis by comparing Shibuya’s device to patent specifications rather than the actual claims. It also contends the Reverse DOE improperly negates infringement, conflicting with the Patent Act.

The Federal Circuit now has the opportunity (and duty) to shape the law on these two important equivalents doctrines. On the doctrine of equivalents, the court can provide guidance on applying a legal test of vitiation versus the factually intensive function-way-result test.  In the lead up to the recent Amgen decision, many of us have had ongoing discussions about the relationship between disclosure doctrines (enablement/WD) and the doctrine of equivalents.  As one doctrine is locked-down, there is more pressure to expand the other.  With so much focus on the disclosure side, it may be time to ease up on the DOE limitations.

For the reverse doctrine of equivalents, the court can clarify if this much maligned doctrine still remains viable in today’s statutory framework.  And if so, the court should delineate the proper role of the reverse doctrine versus literal claim interpretation. As with DOE, I would argue that reverse DOE should be given to the jury to decide rather than JMOL.

The appeal was filed by Cook Alciati (Steuben’s former Chief IP Counsel, now in private practice at Gardella Grace). A team from Sterne Kessler, apparently led by appellate specialist JC Rozendaal represents the defendant-appellee.

Looking Back: Graver Tank after 70 years

Patent

by Dennis Crouch

The Supreme Court’s landmark 1950 decision in Graver Tank & Mfg. Co. v. Linde Air Products Co., 339 U.S. 605 (1950) is one of the court’s most cited patent cases.  The decision established important guideposts for applying the doctrine of equivalents (“DOE”), including consideration of the prior art and a focus on the substantiality of differences. While courts today emphasize evaluating equivalence on an element-by-element basis, Graver Tank‘s substantive analysis remains highly influential.

Linde Air Products held a patent on welding fluxes using alkaline earth metal silicates. US Patent No. 2,043,960. Graver Tank’s flux substituted manganese silicate, which was not an alkaline earth metal. Though Graver Tank’s flux did not literally infringe, the Court found it performed “the same work in substantially the same way [to] accomplish substantially the same result.”  This has become known as the function-way-result or tripartite test.

The decision thus reestablished that products need not infringe literally to infringe a patent. Even if the language of a claim isn’t met exactly, the doctrine of equivalents provides protection from knock-offs that are only trivially different.  An important aspect of this outcome is that its factual intensity meant allowed patentees to avoid summary judgment and instead frequently reach jury.

Over the past 70 years, Graver Tank’s doctrine of equivalents analysis has been instrumental in assessing infringement and remains a key tool for patentees to enforce their rights against insubstantial changes. At the same time, the doctrine has been further shaped and limited. Courts today emphasize an element-by-element approach rather than looking at the product as a whole. Warner-Jenkinson Co. v. Hilton Davis Chemical Co., 520 U.S. 17 (1997). Prosecution history estoppel limits the doctrine for claims amended or argued during patent prosecution. Id, See also, Festo Corp. v. Shoketsu Kinzoku Kogyo Kabushiki Co., 535 U.S. 722 (2002).  And, the doctrine of vitiation precludes a finding of equivalence when it would effectively eliminate or “vitiate” a claim limitation. See, Freedman Seating Co. v. American Seating Co., 420 F.3d 1350 (Fed. Cir. 2005) and Depuy Spine, Inc. v. Medtronic Sofamor Danek, Inc., 469 F.3d 1005 (Fed. Cir. 2006).

In Warner-Jenkinson, the Supreme Court reaffirmed the viability of the doctrine of equivalents, but placed some limitations on its application. Specifically, the Court held that the doctrine must be applied to individual elements of a claim, not to the invention as a whole. The Court also held that prosecution history estoppel can bar the doctrine of equivalents when an amendment or argument during patent prosecution surrenders subject matter that would otherwise fall under equivalents.  In Festo, the Supreme Court provided more detail on prosecution history estoppel (PHE)–establishing a a presumption against application of the doctrine of equivalents for claim limitations that were amended during patent prosecution for reasons related to patentability.

In Graver Tank, the Court had applied the doctrine to find infringement based on the substantial similarity of the overall compositions at issue. Under the standard set forth in Warner-Jenkinson, the Graver Tank analysis would likely have compared the “alkaline earth metal silicate” and “manganese silicate” elements specifically to determine their equivalence. Additionally, prosecution history estoppel may have precluded equivalence, if the reason alkaline earth metals were claimed was to overcome a rejection during patent prosecution.

The rise of these legal limitations has given judges tools to more frequently dismiss DOE claims on summary judgment or JMOL.

As the chart shows above, courts continue to cite and rely upon Graver Tank. The following are typical reasons:

  • To support application of the doctrine of equivalents generally and reference the “function-way-result.”
  • To emphasize that minor or insubstantial differences do not avoid infringement.
  • To note that equivalents is a question of fact for the jury to decide rather than a question of law.  Typically, expert testimony will provide the key underlying evidence.

On the fact/law issue, the majority opinion explains that a question is more likely to be factual in nature when it requires specific scientific knowledge. “Particularly is this so in a field where so much depends upon familiarity with specific scientific problems and principles not usually contained in the general storehouse of knowledge and experience.” Id. This quote has been cited by a number of courts in other fields when attempting to determine whether a particular issue is legal or factual.

One important note is that this post focuses on the majority opinion penned by Justice Robert Jackson.  Justices Hugo Black and William Douglas jointly wrote a dissent concluding that patents should be limited to their literal scope based upon the claim language.  The dissent argued that the DOE undermined the statutory requirement for clear patent claims.  See 35 U.S.C. 112(b) (“claims particularly pointing out and distinctly claiming”).

Size Matters: Element-by-Element Analysis in Obviousness

Patent,

by Dennis Crouch

In re Universal Electronics, Inc., No. 2022-1716 (Fed. Cir. Aug. 15, 2023) (non-precedential)

This was a consolidated appeal from two Patent Trial and Appeal Board (PTAB) decisions affirming the rejection of claims from Universal Electronics, Inc.’s (UEI) U.S. Patent Application Nos. 12/645,037 and 16/279,095 as obvious under 35 U.S.C. § 103.  On appeal, the Federal Circuit has affirmed.

The typical approach to obviousness determination is for the examiner to mentally divide the claimed invention into a number of individual elements, and then search for the individual elements within the prior art.  If the examiner finds all of the limitations, then the only key question that remains is whether the combination would have been obvious. Under KSR, that outcome does not necessarily require further evidence, but typically focuses on questions of whether PHOSITA would have been motivated to combine the references to create the invention, and have a reasonable expectation of success of that endeavor.  On the other hand, based upon my experience, examiners are much more uncomfortable finding claims obvious where particular elements are not found in the prior art. This difference is reflected in KSR and other older cases where the Supreme Court has been most critical of patents merely claiming a combination of known elements.

As a prosecution strategy, patentees have some control over the “size” of each element through their organization of claim language.  Here though, the patentee attempted to do this via argument, but ultimately failed. Lets look at the rejection and the arguments here:

The claims at issue relate to a system and method for providing improved user input functionality on a controlling device, such as a universal remote control. Representative claim 1 of the ‘037 application recites determining and then using a particular “touch location” on a touch sensitive surface to retrieve command data from a library stored in the controlling device’s memory. The Examiner rejected the claims as obvious over two prior published patent applications, Fisher and Dresti. Fisher discloses determining a touch location and using it to control an appliance. Dresti discloses retrieving command data from a library in the remote control’s memory.

The patentee argued that a key component of the invention was not found in the prior art. In particular, UEI argued that neither reference individually taught the limitation of a “controlling device that uses a determined touch location to retrieve command data from a library of command data stored in a memory of the controlling device.”  Admittedly, each individual bit of this limitation was found in one of the prior art references, but the patentee argued that this feature should be treated as an entire limitation.

On appeal, the Federal Circuit found the argument unpersuasive, concluding that the rejection properly relied upon a combination of prior art to teach all of the claim limitations.  As the patentee here attempted, attorneys can argue against dividing the claims into smaller pieces. However, it is an uphill battle once the examiner and PTAB have defined the elements narrowly and found them in separate references.

The takeaway may be that attorneys should advocate for the broader, unified view of the invention during early prosecution to avoid being boxed into a narrow element-by-element approach. Carefully crafted claims and thorough responses emphasizing the integrated advance can help shape the analysis in the desired direction. But as this case shows, it can be difficult to overcome once piecemeal elements are embedded in the record.

Unfortunately, the non-precedential opinion does not provide any detail analysis for when a tribunal be satisfied with micro vs macro elements. But, I can imagine that we’ll look to the claim language, specification disclosure, and PHOSITA knowledge.

This is the same issue that arises during infringement analysis with application of the doctrine of equivalents.

Thus, the PTAB’s conclusions that the claims would have been obvious over the cited references.

Judges: Circuit Judges Reyna, Taranto, and Stoll

DC District Court: AI-Created Works Ineligible for Copyright 

Patent

By Dennis Crouch

Thaler v. Perlmutter, No. 22-1564 (D.D.C. Aug. 18, 2023). 

A federal court has dealt a blow to the prospect of granting copyright protections to works created entirely by artificial intelligence systems. In their recent decision, Judge Howell ruled that because AI systems lack human authorship, their output is ineligible for copyright.

The case centers around an image generated by an AI system called the Creativity Machine, which the system’s owner Stephen Thaler attempted to register with the U.S. Copyright Office. Dr. Thaler is the same individual who unsuccessfully attempted to protect and invention created by a separate machine that he had titled DABUS.

In this case, Thaler listed the Creativity Machine as the author and designated the work as created autonomously by the AI, with ownership transferring to himself as the owner and creator of the machine. The Copyright Office denied the registration application on the grounds that copyright law requires human authorship. Thaler challenged the rejection in court, but Judge Howell upheld the Copyright Office’s decision.

In her ruling, Howell emphasized that human authorship has underpinned copyright law since its Constitutional inception, which enables Congress to grant exclusive rights to “authors.” While copyright has adapted over time to cover new technologies like photography and film, Howell wrote, it has never extended so far as to protect works created without any human involvement. The court does not discuss in any detail the work made for hire doctrine that does permit non-human authorship. However, even in that situation a human underlies the creation.

Judge Howell also noted that machine learning systems like the Creativity Machine do not require copyright incentives, since they operate algorithmically rather than responding to legal rights and protections. The opinion concludes unambiguously that “in the absence of any human involvement in the creation of the work, the clear and straightforward answer is the one given by the [Copyright Office]: No.”

While this ruling provides clarity for now, the accelerating development of AI systems means the issue is unlikely to disappear. As AI grows more advanced and autonomous in generating creative works, questions around copyright protections will likely resurface. Lawmakers may eventually need to reconsider whether AI-created works should be eligible for copyright, especially if human direction becomes minimal or nonexistent. With the current copyright regime requiring human authorship, however, true machine-created art remains in the public domain.

While this case dealt with a work claimed to be created entirely autonomously by an AI system, a more common scenario today sees individuals using AI tools in tandem with their own creativity and direction. In these situations where both human and machine contribute, questions arise around how much and what kind of human input is necessary to meet the originality and authorship requirements for copyright protection. If an artist uses a generative AI tool to create a work but provides extensive creative guidance and selection, there would seem to be a strong argument for human authorship. However, as AI grows more advanced and autonomous, that human contribution may become limited to little more than prompting the system. In these cases, courts will need to draw difficult lines around what amounts to human authorship. If AI progress continues apace, the fundamental question of whether true machine-created works should be eligible for copyright will require legislative attention.

What are your thoughts?

Three issues: Law/Fact Distinction in Obviousness; Envisaging the Invention; and Newman in Dissent

Patent

by Dennis Crouch

Incept LLC v. Palette Life Sciences, Inc., No. 21-2063 (Fed. Cir. Aug. 16, 2023) (Majority by Judges Schall and Taranto; Dissent-in-part by Judge Newman)

The most interesting line in the case for appellate attorneys (and legal scholars) is probably the court’s law/fact distinction in the context of obviousness analysis.  The majority wrote: “We see no reversible error … whether viewed as a factual one about the level of [commercial] success or a legal one about the weight of any such success in the overall obviousness analysis.”  The law/fact divide is important because of the evidentiary requirements in the first instance and the standard for review on appeal. Here, the court makes clear that the weight given to any objective indicia of non-obviousness is a question of law rather than a question of fact.  The result then is that its analysis can generally be based upon reason rather than evidence, and that issue is one that will be heard de novo on appeal.

The second issue of importance is as another data point in the forest-trees  anticipation analysis in situations where the prior art discloses thousands of potential embodiments.  The court has repeatedly held that such a reference is only anticipatory if a person of skill would have immediately envisaged the invention now being claimed.  In this case, the court took a relatively broad view of what constitutes anticipation — focusing on the level of specificity in the claims and guideposts such as the purpose of various elements in the claim.  In the end, the patentee lost and the claims were found invalid.

Finally, the case includes another dissent from Judge Newman.

= = =

Incept’s patents cover a method for treating cancer that involves injecting a biodegradable filler gel prior to radiation treatment in order to increase space between the the tissue being treated and the closest body organs.  Afterwards, the gel biodegrades and so does not need to be removed. U.S. Patent Nos. 8,257,723 and 7,744,913.  Palette Life Sciences initiated IPR proceedings and the PTAB eventually found the challenged claims unpatentable as anticipated/obvious.  On appeal, the Federal Circuit has affirmed with Judge Newman offering a partial dissent. The dependent claims include various forms of the filler, such as thixotropic polymer, collagen, a polysaccharide, or hyaluronic acid.

Wallace discloses millions of possible compositions, and the patentee argued that the Board engaged in improper retrospective construction of the invention by picking and choosing various elements from the disclosure.  The idea then is that one skilled in the art could not have “at once envisaged” the various species claimed by Incept.  On appeal, the majority sided with the Board, holding that “Wallace expressly describes compositions that have the claimed characteristics of, and are used for the same displacement purpose as, the compositions referred to in the ’723 patent claims challenged as anticipated.”

Incept cannot use the fact that Wallace describes multiple compositions to evade an anticipation finding where Wallace provides “as complete detail as is contained in the patent claim,” such that a skilled artisan would have understood that Wallace’s compositions had the same generic properties as those in the ’723 patent claims.

In her opinion, Judge Newman took the majority to task for ignoring limitations in narrower dependent claims.

The majority appears to hold that, when the broader claim is anticipated, the dependent claims are automatically anticipated. That is not the law. Each claim must be considered as a whole, including all its limitations. . . . A generic prior disclosure does not anticipate all of its embodiments, including novel specific embodiments, whether or not the facts are such that the generic disclosure may render the embodiment obvious.

The problem with Judge Newman’s arguments here is that the patentee only barely argued the dependent claims, and the majority recognizes this at least to most of the dependent claims – noting that Incept had failed to provide specific arguments directed to those claims.

Other claims were found obvious by the PTAB and the majority again affirmed that holding. The patentee had provided evidence of commercial success — showing that most prostate cancer treatments in the US used an injectable  known as “SpaceOar” exclusively licensed from the patentee.  The Board refused to give any weight to the commercial success because the sales numbers provided included free and replacement versions, without accounting for those numbers.   In addition, the Board found the patentee’s expert testimony not credible and not supported by evidence.

Judge Newman’s dissent noted that “It is undisputed that the Incept product
experienced regular increases in annual commercial sales, and at the time of trial Incept had obtained 55% of the market for comparable products. Palette’s only criticism of Incept’s commercial information was that Incept also gave free samples. The majority now holds that Incept’s commercial sales cannot be considered as a measure of commercial success because some product was provided free of charge.”

= = =

Independent claim 1 of the ’723 patent recites:

1. A method of delivering a therapeutic dose of radiation to a patient comprising

introducing a biocompatible, biodegradable filler between an organ and a nearby tissue to increase a distance between the organ and the tissue, and

treating the tissue with the therapeutic dose of radiation so that the presence of the filler causes the organ to receive less of the dose of radiation compared to the amount of the dose of radiation the organ would receive in the absence of the filler,

wherein the filler is introduced as an injectable material and is a gel in the patient, and

wherein the filler is removable by biodegradation in the patient.

 

New Amendment to FRCP Could Help Streamline Privilege Management in Patent Cases

Patent

by Dennis Crouch

On August 15, 2023, the Judicial Conference Advisory Committee on Civil Rules published proposed amendments to Rules 16 and 26 of the Federal Rules of Civil Procedure. One of the goals of these amendments is to encourage parties to address issues relating to claims of privilege and work product protection early in litigation. This could be particularly impactful for patent cases, which frequently involve extensive disputes over these very issues.  The proposal would also retitle Rule 16(b) to include both scheduling and case management (the current version just focuses on scheduling).

Rule 26(b)(5)(A) focuses on the the procedure for “claiming privilege” as an reason for refusing to comply with an otherwise valid discovery request or disclosure requirement.  A party generally has to:

(i) expressly make a claim of privilege; and

(ii) create a privilege log that describes the nature of the thing withheld.

The privilege log will be disclosed to the other side and it is something of an art to describe the items without putting the other side on the trail of the protected information. Note – I use privilege here as an overarching term. The rule applies to items/information protected by both privilege and work product rules.

The proposed amendment to Rule 26 requires parties to discuss and include in their discovery plan the method they will use to comply with Rule 26(b)(5)(A).  This will likely include some information about the contents of the privilege log; manner and timing of the exchange; etc.  Similarly, the change to Rule 16 make discussion of this plan an optional aspect of the Judge’s 16(b) scheduling order.

Patent cases often involve the assertion of attorney-client privilege and work product protection over large volumes of technical, financial, and legal documents. At times, litigation between competitors centers on highly confidential corporate information that parties often seek to protect as privileged.  Producing privilege logs describing all of these documents can be extremely burdensome and costly.  The amendment encourages parties to agree upfront on efficient ways to approach this task, such as through categorical designations or date ranges rather than document-by-document listings.

The proposed amendment to Rule 16 allows the court to include provisions about privilege issues in its scheduling and case management orders. With an early understanding of the volume and type of potentially privileged materials involved, the judge can build in procedures for timely resolution of any disputes. For example, the order could provide for rolling productions of privilege logs on a regular schedule.

Getting ahead of privilege disputes will be especially useful in patent cases, where objections often arise late in discovery — and key documents are often hidden behind that privilege wall. Last-minute disagreements can derail case schedules. An orderly process set forth in the case management order will allow privilege issues to be dealt with efficiently as they arise, without disrupting the rest of the litigation.  To be clear though, the new rule is quite incremental and is subject to substantial abuse by parties who seek to hide documents using weak privilege arguments.

While application will depend on the specifics of each case, these amendments represent a step in the right direction. Patent litigators should be prepared to have detailed discussions about privilege during the Rule 26(f) conference and seek early guidance from the court.

The Rule 16/26 proposals begin on page 120 of the following PDF document released by the Judicial Center: https://www.uscourts.gov/sites/default/files/2023_preliminary_draft_final_0.pdf.

Meta Claim Construction: Finding Meaning in the Meaning

Patent

by Dennis Crouch

One-E-Way, Inc. v. Apple Inc., 22-2020 (Fed. Cir. Aug. 14, 2023) (nonprecedential) (Opinion by Chief Judge Moore, joined by Judges Lourie and Stoll).

The district court sided with Apple on summary judgment, finding no infringement. On appeal, the Federal Circuit has affirmed, holding that Apple’s accused Bluetooth products do not infringe One-E-Way’s patents.  Although the parties had agreed to the construction of the “unique user code” term, they disagreed over the construction-of-the-construction.  On appeal, the court treated this meta-construction effectively as a form of claim construction — looking for the ordinary meaning rather than a contract-like interpretation that would have looked more toward discerning the intent of the parties.

One-E-Way sued Apple for infringing the claims of two patents related to a wireless digital audio system that allows private listening without interference. The system uses a transmitter connected to an audio source and a receiver connected to headphones. The transmitter contains a code generator that generates a “unique user code” associated with a specific user to allow pairing between the transmitter and receiver.

During the infringement litigation, the parties agreed to construe “unique user code” as a “fixed code (bit sequence) specifically associated with one user of a device(s).” Although Apple’s Bluetooth products do transmit a unique code to establish the connection, the code is not unique to the user, but rather it is unique to the Bluetooth device.  The district court agreed with Apple’s assessment and granted summary judgment of non-infringement.

On appeal, One-E-Way argued that the “unique user code” limitation is still met by Apple’s accused Bluetooth products. Specifically, One-E-Way contended that even though the Bluetooth address codes are associated with devices, the codes are still associated with individual users through operation of the device. In other words, One-E-Way argued that Bluetooth pairing to a particular device is equivalent to pairing with a specific user.  This argument makes the assumption that each device is limited to just “one user.” Although that assumption is not strictly true, I expect that it holds true in 99% of cases.  For a while, I shared Bluetooth headphones with one of my daughters–it did not work well at all.

The Federal Circuit rejected this argument, finding that it was inconsistent the claim construction which clearly states the code is associated with “one user.” rather than the device itself.  Even if the Bluetooth address code is associated with a user through use of the device, the code remains fundamentally associated with the device. The Federal Circuit found no evidence that the code itself becomes directly linked to the user, rather than the device, through pairing and use.

The arguments in this case are somewhat meta. The parties are not arguing about claim construction per se, but rather construction of the construction.  In the appeal, the Federal Circuit considered the “plain and ordinary meaning of the agreed-upon construction” and concluded that it required required a more direct link to a user.   As it would with ordinary claim construction, the court looked to the specification for support.  In particular, the court noted that the patent specifications “distinguish between users and devices when describing the purpose of the invention” and recognized the problem of conflict that I had with sharing Bluetooth accessories. “The patents’ consistent reference to ‘user’ and ‘device’ as distinct entities and association of the unique user code with ‘user’ supports the district court’s conclusion that ‘one user of a device’ does not mean the device itself.” Slip Op.

Non-infringement affirmed.

= = =

The patents at issue are:

– U.S. Patent No. 10,129,627
– U.S. Patent No. 10,468,047

The ‘627 and ‘047 patents share the same specification. The court treated Claim 1 of the ‘627 patent as representative.

ApoA1-Fc Fusion Proteins: Federal Circuit keeps Patent Hopes Alive, Holding that the USPTO Must Explain its Decisions

Patent

In re Theripion, Inc., 2022-1346 (Fed. Cir. Aug. 10, 2023) (nonprecedential) (Opinion by Judge Stark, joined by Judges Hughes and Cunningham).

ApoA1 is a key component of HDL, also known as “good cholesterol.” The founders of Therapin created a synthetic “fusion protean” of ApoA1 linked to the Fc portion of an antibody (the stem).  That fusion extends the half-life of injected HDL and allows it to be a better potential drug treatment. The claims require a specific linker protein of 10-40 amino acids between the ApoA1 and Fc portions. Theripion discovered that this longer linker improved cholesterol efflux activity compared to fusion proteins having shorter 2 amino acid linkers or no linker.  So the essence of the invention as claimed is an ApoA1-Fc fusion protein with an optimized 10-40 amino acid linker that enhances the fusion protein’s ability to remove cholesterol from cells as compared to a much shorter or absent amino acid linker.  To be clear, the prior art (including some work by the inventors here) had created ApoA1-Fc fusions, but with a short linkage. And, various types of connectors of the claimed length were also known.

The crux of the obviousness case then is whether a person of skill in the art would expect that the use of a longer peptide linker in this situation would increase cholesterol efflux activity. The patent examiner rejected the claims as obvious and the PTAB affirmed despite evidence of unexpected results presented by Theripion.

On appeal, the Federal Circuit has vacated and remanded — holding that the PTAB did not sufficiently explain its decision.

It appears the Board was not persuaded by Theripion’s evidence of unexpected results. However, we cannot discern from its opinion the reasons for such a conclusion. Nor can we determine whether the Board adequately considered the totality of Theripion’s evidence.

Slip Op.

When making an obviousness determination, the Board must first articulate all necessary underlying findings, including establishing “an adequate evidentiary basis”  and “a rational connection between the facts found and the [legal determination] made.”  A written explanation is required, although the permits brief explanations in cases that are “simple and familiar” and where “the prior art is clear in its language and easily understood.”  In re Nuvasive, Inc., 842 F.3d 1376, 1382 (Fed. Cir.
2016).  Here, the PTAB failed to walk through its justification for finding no unexpected results — and for rejecting Theripion’s evidence. The court also found the Board’s explanation for motivation to combine references to be conclusory and lacking articulation of why a skilled artisan would have been motivated to combine the teachings.

PTAB Decision: 10780_1590931411-12-2021APDA
CAFC Decision: 22-1346.OPINION.8-10-2023_2171709

I should note the irony of this decision with the Federal Circuit requiring a clear explanation from the PTAB even though the Federal Circuit does not require the same of itself, despite statutory guidance to the contrary.

= = =

In this case, the Board first found the invention prima facie obvious before addressing any objective indicia of non-obviousness. On appeal, the Federal Circuit gave that approach a pass “So long as the Board considers all evidence before reaching an ultimate conclusion as to obviousness, there is nothing inherently wrong with proceeding in the order the Board did here.” See Adapt Pharma Ops. Ltd. v. Teva Pharms. USA, Inc., 25 F.4th 1354 (Fed. Cir. 2022).

Shifting Arguments at the PTAB

Patent

by Dennis Crouch

The Federal Circuit’s new decision in Rembrandt Diagnostics, LP v. Alere, Inc., 2021-1796 (Fed. Cir. Aug 11, 2023) complements the court’s recent decision in Axonics, Inc. v. Medtronic, Inc., 2022-1532 (Fed. Cir. Aug. 7, 2023). Ordinarily, an IPR petitioner must stick to the arguments and reasoning that it sets forth in the original petition.  These two cases take a contrary position and permit the petitioner to shift as late as the  final reply brief. The court permits these changes only if responsive to new arguments by the patentee and sufficiently linked to previously raised arguments.

This post focuses on Rembrandt.  A prior post looked at Axonics.

Rembrandt was previously before the Federal Circuit on the full-institution issue that the Supreme Court addressed in SAS Institute.  The PTAB had originally instituted Alere’s IPR petition on some but not all grounds presented.  In its 2019 decision, the Federal Circuit affirmed the PTAB’s claim construction but remanded for the PTAB to consider non-instituted grounds.   On remand, the PTAB instituted on all grounds and eventually concluded that additional claims were also unpatentable as obvious. On appeal this time, the Federal Circuit has affirmed — finding that the PTAB had properly found the claims obvious.

Rembrandt owns U.S. Patent No. 6,548,019 related to assay test strip devices for testing biological fluids.  As the figure shows, the setup is quite simple and allows for multiple strips to be tested at once.

One of the key issues raised on appeal was the presentation of new theories mid-stream by the petitioner Alere.  In particular, Rembrandt pointed to Alere’s reply brief as offering new theories.

Rembrandt argued Alere raised new theories about cost/time savings as a motivation to modify the MacKay reference to hold multiple test strips. However, the Federal Circuit found this was responsive to Rembrandt’s argument that there was no motivation to modify MacKay. Further, the cost/time savings was viewed as properly expanding on Alere’s previous “efficiency” argument.

Alere’s reply argument discussing cost and time savings has a nexus to Rembrandt’s prior argument and is responsive. It refutes Rembrandt’s assertions that there is no motivation to add multiple test strips or an expectation of success. And by discussing time and cost savings as a form of efficiency, it also properly expands on and is a fair extension of its previously raised efficiency argument.

Slip Op.

The Federal Circuit found an alternative reason to affirm — holding that forfeited its argument.  Before the PTAB, Rembrandt had generally objected to new theories presented by Alere.  However, the Federal Circuit concluded that generic objection was insufficient to timely assert its right. The Federal Circuit’s position was bolstered by the fact that Rembrandt had made a very specific objection regarding another new-theory issue that is not on appeal. “We hold that Rembrandt’s generic objection is insufficient to constitute a proper objection—especially because Rembrandt expressly objected to other allegedly new theories without doing so here.”

In addition to these procedural issue, the court also concluded that the Board’s conclusions were supported by substantial evidence. A key here is that Rembrandt did not provide expert testimony to rebut Alere’s expert. The prior art and expert testimony provide substantial evidence to support the PTAB’s findings on the teachings of the prior art and motivation to combine.

Shamoon v. Resideo: Obviousness affirmed

Patent

by Dennis Crouch

Shamoon v. Resideo Technologies, Inc., No. 2021-1813 (Fed. Cir. Aug. 8, 2023) (opinion by Judge Newman; joined by Judges Reyna, and Cunningham) (non-precedential)

Charles Shamoon is the inventor and owner of U.S. Patent No. 8,064,935. The patent relates to a remote access system that allows users to monitor and control “environmental devices” like alarm and HVAC systems in their home using a base control unit and a remote unit.  Resideo challenged the patent in a pair of IPR petitions, and the PTAB eventually found the challenged  claims unpatentable as obvious over a combination of two/three prior art references.

On appeal, the Federal Circuit affirmed and rejected Shamoon’s three challenges.

The claims require a microcontroller, and Shamoon argued that the term should be construed as requiring a particular type of microcontroller that included certain memory elements. That narrowed definition might have helped Shamoon avoid the prior art.  But, the Federal Circuit upheld the PTAB’s broad claim construction of “microcontroller” — finding that it was broadly used both in the claims and the specification.

Some of the claims required a confirmation message be sent once an instruction had been executed, and Shamoon argued that the prior art failed to teach a confirmation message related to an environmental device command.  On appeal though, the court found that it was proper to combine the teaching of a confirmation message from a reference not related to environmental devices.  “Because Oinonen and Whitley disclose the environmental devices and  commands, it does not avail Mr. Shamoon to complain that Menard does not.” Slip Opinion.  Shamoon’s argument here

Finally, Shamoon argued that applying AIA proceedings to his pre-AIA patent was impermissible taking by the United States without just compensation, in violation of the Fifth Amendment.  The court quickly rejected this argument based upon its prior precedent in Celgene Corp. v. Peter, 931 F.3d 1342 (Fed. Cir. 2019) (“retroactive application of IPR proceedings to pre-AIA patents is not an unconstitutional taking under the Fifth Amendment.”).