All posts by Dennis Crouch

About Dennis Crouch

Law Professor at the University of Missouri School of Law.

Supreme Court Reins In Patent Venue

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by Dennis Crouch

In TC Heartland LLC v. Kraft Foods Group Brands LLC, the Supreme Court has significantly shifted the balance away from the geographically fringe Eastern District of Texas – holding that the residence requirement of 28 U.S.C. § 1400(b) refers only to a defendant’s State of Incorporation for patent infringement venue purposes.

Read the Decision: 16-341_8n59.

The short (10-page) unanimous opinion authored by Justice Thomas reaffirms the court’s prior decision in Fourco Glass Co. v. Transmirra Products Corp., 353 U. S. 222, 226 (1957) — holding again that “for purposes of §1400(b) a domestic corporation ‘resides’ only in its State of incorporation” and rejecting the notion that a much broader definition of venue (found in §1391) applies.

Although the Supreme Court law appears continuous.  The Federal Circuit created a major blip in its 1990 decision of VE Holding Corp. v. Johnson Gas Appliance Co., 917 F. 2d 1574 (1990).  In that case, the appellate court held that patent infringement venue is proper in any court having personal jurisdiction over the defendant.  That expansive change allowed for the rise of patent-focused venues such as the Eastern District of Texas where the majority of infringement lawsuits have been filed over the two decades (heat map below). PatentLawPic984

What next:  Section 1400(b) limits patent cases to the judicial district (1) “where the defendant resides,” or (2) “where the defendant has committed acts of infringement and has a regular and established place of business.”  This means a likely large boost of lawsuits in Delaware.  National retailers will still be amenable to suit essentially everywhere, but many would-be defendants will be able to avoid E.D.Texas at least. There will also be new litigation on the implications for foreign companies with no established place of business in the US.  The decision here expressly refuses to address that question other than noting that it did previously decide that foreign corps can be an exception to 1400(b). Although possible, it is unlikely the court will adapt the “established place of business” to include the internet, although that portion of 1400(b) has not been explored since the e-tailing explosion.  With less concentrated venue, I we can also expect a rise in multi-district litigation.  For more, consider Prof Janicke’s article on the Imminent Outpouring from the Eastern District of Texas.

 

SAS Institute v. Lee: Partial Institution of Inter Partes Review

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by Dennis Crouch

The Supreme Court has agreed to hear a new AIA-trials case: SAS Institute v. Lee

The inter partes review appeal focuses on the procedural question of whether the America Invents Act permits the USPTO to partially institute IPR proceedings – as it has been doing. SAS argues instead that the statute requires a full up/down vote on a petition and, if granted, the Patent Trial and Appeal Board (PTAB) must then pass final judgment on all petitioned claims:

Whether 35 U.S.C. § 318(a) … requires [the] Board to issue a final written decision as to every claim challenged by the petitioner, or whether it allows that Board to issue a final written decision with respect to the patentability of only some of the patent claims challenged by the petitioner, as the U.S. Court of Appeals for the Federal Circuit held.

As I previously wrote,

The basic setup here is that SAS argues that the PTO cannot partially institute IPR proceedings since the statute requires that PTO “shall issue a final written decision with respect to the patentability of any patent claim challenged by the petitioner.” 35 U.S.C. § 318(a)

Although a somewhat sideline issue, it will likely have its biggest impact on estoppel resulting from AIA trials and, as a result, may also shift filing strategy.

AIA Trial Docs:

 

 

SAS Institute Inc. v. Lee: Challenging Partial Institution

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The Supreme court has relisted SAS Institute Inc. v. Lee, 16-969 – an important step in the progress toward grant of certiorari.  The inter partes review case presents the following question:

Whether 35 U.S.C. § 318(a) … requires [the] Board to issue a final written decision as to every claim challenged by the petitioner, or whether it allows that Board to issue a final written decision with respect to the patentability of only some of the patent claims challenged by the petitioner, as the U.S. Court of Appeals for the Federal Circuit held.

The basic setup here is that SAS argues that the PTO cannot partially institute IPR proceedings since the statute requires that PTO “shall issue a final written decision with respect to the patentability of any patent claim challenged by the petitioner.”

Although the Department of Justice has sided with the PTO’s approach here, in a prior filing the DOJ argued that the PTO erred in “picking and choosing some but not all of the challenged claims in its Decision.” See Department of Justice v. Discovery Patents, LLC, Case IPR2016-01041 (Patent Trial & Appeal Bd., Nov. 29, 2016).

The outcome of a rule-change here  is unclear – while the patent challenger (SAS) is petitioner here.  Patentees may prefer the all-or-nothing approach that would hopefully result in final judgments confirming patentability as well as the resulting estoppel.

 

AIPLA On Board with Statutory Reform of 101

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The AIPLA has now offered its legislative proposal for rewriting 35 U.S.C. § 101 that is quite close to that offered by the IPO:

Inventions Patentable

(a) Eligible Subject Matter.—Whoever invents or discovers any new and useful process, machine, manufacture, composition of matter, or any useful improvement thereof, may obtainshall be entitled to a patent therefor, subject only to the conditions and requirements ofset forth in this title.

(b) Sole Exceptions to Subject Matter Eligibility.—A claimed invention is ineligible under subsection (a) only if the claimed invention as a whole exists in nature independent of and prior to any human activity, or can be performed solely in the human mind.

(c) Sole Eligibility Standard.—The eligibility of a claimed invention under subsections (a) and (b) shall be determined without regard to the requirements or conditions of sections 102, 103, and 112 of this title, the manner in which the claimed invention was made or discovered, or whether the claimed invention includes an inventive concept.

AIPLA statement. The AIPLA proposal is strikingly similar to that of the IPO’s (although not acknowledged by the AIPLA statement).

[DOCX File of Table: Comparing101Proposals] Comparing101

Shore v. Lee

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In Shore v. Lee, the Federal Circuit affirmed a PTAB finding without opinion.  Shore’s petition to the Supreme Court asks whether “the Federal Circuit’s affirmance without opinion of the PTO’s rejection of Petitioner’s patent application violate 35 U.S.C. § 144?”  In its first opportunity to support the Federal Circuit’s R.36 jurisprudence, the Department of Justice has passed – instead waiving its right to offer any argument in support.  The Supreme Court will consider the petition later this month.

Wrongly Affirmed Without Opinion: At the Supreme Court

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Similarly in Broadband ITV v. Hawaiian Telecom, respondents have waived their right to respond to Broadband’s challenge to quick-look eligibility denials.

Supreme Court: Challenging Quick-Look Eligibility Denials

Moot the Dispute? Not with a conditional covenant-not-to-sue

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ArcelorMittal v. AK Steel Corp. (Fed. Cir. 2017)

In a split decision, the Federal Circuit has affirmed a district court judgment invalidating ArcelorMittal’s U.S. Patent No. RE44,153 (claim 24 and 25).  The primary disputed issue was whether the district court possessed subject matter jurisdiction when it granted summary judgment of invalidity and non-infringement.  The majority (Huges + Moore) found a sufficient case-or-controversy, while the dissent (Wallach) would have found appellant’s covenant-not-to-sue sufficient to moot the dispute.

A fundamental Constitutional limitation on the power of American courts is the requirement of a “proper case and controversy.”  US Courts only have jurisdiction over cases that involve “a substantial controversy, between [the] parties having adverse legal interests, of sufficient immediacy and reality.” MedImmune, Inc. v. Genentech, Inc., 549 U.S. 118, 127 (2007) (focusing on declaratory jurisdiction).

The district originally invalidated all the claims of the ‘153 patent, but that holding was vacated in a prior appeal as to claims 24 and 25. On remand, the patentee moved to dismiss the case for lack-of-jurisdiction since all it wasn’t asserting those claims in the lawsuit and all its asserted claims had been found invalid.  At the same time, however, Defendant moved for summary judgment of non-infringement of claims 24 and 25.   Seeking to avoid such a judgment, the patentee then executed and delivered a covenant not to sue Defendants and their customers under the RE’153 patent.  Although “facially unconditional,” the delivery included a statement that the covenant was tendered on condition that its motion to amend was resolved. (That motion would amend the complaint to totally remove assertion of claims 24 and 25 from the patent).  Importantly, the delivery included a statement that the patentee would be “ready to deliver the covenant unconditionally” upon resolution of the motion and also that the point of the conditional delivery was to ensure that the district court maintained jurisdiction over the case.   Following all that posturing, the district court went ahead an held the claims invalid and denied the motion to amend as moot.

On appeal, the Federal Circuit has agreed with the district court that it still held subject matter jurisdiction over the case since the covenant-not-to-sue wasn’t fully delivered.

Although a patentee’s grant of a covenant not to sue a potential infringer can sometimes deprive a court of subject matter jurisdiction, the patentee “bears the formidable burden of showing” “that it ‘could not reasonably be expected’ to resume its enforcement efforts. . .  In this context, that requires ArcelorMittal to show that it actually granted a covenant not to sue to Defendants, and that the covenant enforceably extinguished any real controversy between the parties related to infringement of the RE’153 patent. . . .

At no time before the court entered summary judgment did ArcelorMittal unconditionally assure Defendants and their customers that it would never assert RE’153 claims 24 and 25 against them. ArcelorMittal certainly had ample opportunity to provide the unconditional assurances required to defeat jurisdiction. It did not. . . . The district court, well within its discretion in managing its docket, resolved the … summary judgment motion without having first resolved the motion to amend.

As the court notes, the outcome here was fully within the patentee’s control and for strategic reasons it chose not to actually issue the covenant-not-to-sue.

Writing in Dissent, Judge Wallach disagrees with the majority’s interpretation of the cover-letter as creating a condition precedent that must be met before the covenant takes effect.  Rather, Wallach focused on the language of the covenant that was appropriately signed and submitted and its terms extinguish “any substantial controversy of sufficient immediacy between the parties concerning the RE153 patent, the only patent at issue in the instant action.”

In discerning a covenant’s scope and effect, we rely on its terms, not evidence extrinsic to the stipulation such as terms in an accompanying cover letter. See Already v. Nike. . . . When as here a covenant’s terms are unambiguous, we may not interpret those terms using extrinsic evidence, such as a cover letter. See, e.g., Coast Fed. Bank, FSB v. United States, 323 F.3d 1035, 1040 (Fed. Cir. 2003) (en banc) (contract analogy); see also Restatement (Second) of Contracts § 285 (Am. Law Inst. 1981) (describing a covenant not to sue as a “contract”).

My take is that Judge Wallach is substantially on the right path here, but he also misses important issues by focusing on the content of the covenant rather than its mechanism of delivery.  An alternative way to see the facts is that the covenant was wrapped in a separate contract that required resolution of the motion-to-amend prior to the covenant becoming effective.  In the property context, there are differences between the states as to whether conditional-delivery is permissible (outside the escrow context).

 

 

Remarks By Director Michelle K. Lee at the George Washington University School of Law

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The following is an excerpt from PTO Director Michelle Lee’s keynote address today, at George Washington University Law School. Read the full remarks here.- DC

How do we continue to incentivize … incredible innovations? First, we must ensure that the USPTO issues the highest quality patents as quickly and efficiently as possible. This means, at a minimum, continuing to bring down our backlog and pendency so that good ideas can be patented quickly. Which is why I am proud to report that we’ve reduced our backlog of unexamined patent applications by almost 30 percent from its peak in January 2009, despite a 32 percent increase in applications over this time period. Our so-called first action pendencies – that measure the time from filing an application to the time of obtaining an initial decision from the examiner— are down by 43 percent—from 28 months in 2011 to 16 months today. Our total pendencies – the time from filing an application to the time of obtaining a final office action, such as an allowance—are down by 26 percent—from 35 months in 2010 to 26 months today. Our backlog of Ex Parte Appeals – that’s not AIA proceedings, but our internal appeal process to the Board after the examiner issues her decision – has also gone down. We have reduced our inventory of ex parte appeals by 45 percent from a high of about 26,000 in 2012 to about 15,000 today. And, we have reduced the average pendency for appeals by 30 percent from 28 months in 2016 to 19 months today. In short, our backlog and pendencies are now lower than they’ve been in more than a decade, and they will continue to go down. Simply stated, this means more inventors are obtaining more patents more quickly. . . .

We constantly welcome—in fact, we solicit—feedback and input. And we have shown that we are willing to refine and improve as many times as needed. For example, we’ve provided applicants with more access to examiner interviews more than doubling the number of interview hours in just eight years. We’ve had more RFC’s, Proposed Rules, and public roundtables than ever before – including on such topics as our Enhanced Patent Quality Initiative, our 101 guidance, and our Patent Trial and Appeal Board proceedings. We’ve also brought a broader range of services to support American innovators where and when needed, including through four regional offices across the country, and through over a dozen IP attaches across the globe. For those of you who may not know, our attaches in China, the EU, India, Brazil, and other locations help U.S. innovators obtain and enforce IP rights outside the US, and also help advocate for improved IP laws outside the U.S. . . .

Examining patents quickly and efficiently is only part of the job. The public relies on us to issue quality patents. Today, we have about a dozen programs underway that we believe will meaningfully improve patent quality. These include programs for making sure we’re getting the most relevant prior art before our examiners as early as possible by making prior art cited in our PTAB proceedings available to examiners handling related applications, and transitioning all our examiners from the decades old, antiquated U.S. Patent Classification System to the updated, increasingly global Cooperative Patent Classification System. Developing best practices such as for enhancing the clarity of the record. And developing new and better ways to measure our progress. For example, with our Master Review Form, we are now processing twice as many reviews, and capturing data not only about the correctness of our actions, but also about the clarity of our actions. This helps us identify trends, and helps us pinpoint very specific areas for training. Finally, and, importantly, for the first time in 40 years, we are doing a comprehensive review of the amount of time our examiners need to do their work in light of the many recent changes within the patent system. We are already seeing measurable and statistically significant results in our patent quality efforts even in the short amount of time since we began the Enhanced Patent Quality Initiative. And you can look forward to more improvements in the future. In sum, the USPTO is operating well, and is issuing more, higher quality patents than ever. …

What work lies ahead? Our top priority today is to make sure the Patent Trial and Appeal Board’s AIA proceedings are as effective and as fair as possible–within our Congressional mandate. Now is the right time to examine and make any needed reforms to these proceedings, because we have five years of data and experience to guide us. …

Let’s take a look at where we are with the AIA trials today. We have shared regular updates on the number of cases and the results of those cases, but we want to break down the numbers even further so that everyone has the facts, as there have been many numbers cited – some of which are accurate, some of which are not.

Slide 1 Revised

This waterfall slide is our attempt to present even more data in a more accessible and transparent format. According to waterfall slide data, which shows the status of every petition filed since beginning of AIA, of those petitions that have reached some sort of final disposition (i.e., are not pending), about one third of all petitions are denied institution and do not go to trial; about one third of all petitions settle either before or after the decision to institute; and only about one third of all petitions ever reach final written decision. It is only at that point of reaching final written decision is it relevant to talk about the patentability or unpatentability of the claims of a patent. And, at that point, it is true that 66 percent of petitions will find all instituted claims of the patent unpatentable, 17 percent of petitions will find all instituted claims of the patent patentable, and an additional 17 percent will have mixed results (some instituted claims will be found to be patentable and some will be found to be unpatentable). So statements that “all” or 95 percent or even 80 percent of patents are found unpatentable are not supported by the data and do not account for prior disposition by settlement or by denial of institution.

Slide 2 Revised

Drilling down further on the institution rate, here is some helpful data from the years the AIA trials have been in effect. As you can see, the institution rate in our proceedings has been steadily declining from a high of 87 percent in the beginning, to about two thirds today. These are the numbers, and these are the facts. Now, our stakeholders have understandably asked how the rates of unpatentability in AIA proceedings, reflect on the quality of all of the other patents we’ve issued. . . . [T]here are almost 2.8 million patents in force. Incredible. Of those 2.8 million about 4,000 patents have been challenged in AIA trials. This represents less than 0.2 percent of the patents currently in force. …

As I have said many times in the past, the USPTO is constantly looking for ways to make the AIA trials as effective and as fair as possible within our Congressional mandate.  And we welcome your suggestions and ideas, the more specific, the better. To this end, we’ve set up a mailbox where you can submit your ideas at PTABProceduralReformInitiative@uspto.gov. This is an early opportunity to provide input. Your feedback here will help form the basis for our recommendations to the administration on next steps.

In fact, we have already heard from a number of you regarding a number of issues. As discussed:

  1. Multiple petitions, and how best to curb abusive practices.
  2. Whether to provide other opportunities to amend claims later in the proceedings when patent owners may have a better sense of where their claims stand,
  3. Whether to reevaluate our claim construction standards in view of new data and experiences, and
  4. How to best incorporate the findings and legal conclusions of prior proceedings at the USPTO, including examination and other post-grant proceedings, as well as, importantly, proceedings conducted in the federal courts.
  5. What considerations should go into a decision to institute, for example, how can we better take into account considerations such as the interests of justice, economic factors, and hardship.
  6. As to decisions to institute, whether there should be additional review of institution and termination decisions—and by whom.
  7.  When and how to permit parties to join proceedings.
  8. When and under what circumstances might it be appropriate to extend the length of the proceedings beyond 12 months and what impact would extensions have on litigations before, not only the Board, but district courts. . . .

[W]e are [also] streamlining the way the Board identifies and designates opinions as precedential, with the goal of designating more opinions precedential. Why? Because doing so 1). Improves the consistency across panels of the Board, and 2). Provides greater notice to the public to help you make better informed decisions on how to manage your Board proceedings. . . .

Fees: Finally, we are also proposing increases to our AIA trial fees. . . . We believe, as many of you do, that these proceedings should be self-funded. I commend our team for making thoughtful initial cost projections and for recommending revisions to ensure that these proceedings are fully self-funded. There is much to do on AIA proceedings, patent quality, and in many other areas, and I promise you that we are working diligently, with a sense of purpose, every day.

In closing, we all want what’s best for this country’s inventors, innovators and entrepreneurs. Because it is through their efforts that our country remains at the forefront – economically and globally. Simply stated—and I think President Trump and Secretary Ross would agree—we want the United States to out-innovate and out-perform our global competitors, producing new jobs and new technologies and new industries that benefit all Americans, including individual inventors and those in our small businesses and startups. Let’s not forget that the modest businesses and unknown inventors of today may become the largest and most well-known drivers of our economy tomorrow. To make that happen, Congress, the courts, the administration (especially the USPTO), and even all of you here today, must all work together to make sure the system envisioned by our Founding Fathers lives up to its purpose to promote innovation. You have the commitment of the entire USPTO team that we will play our part to ensure that we continue to incentivize the kind of innovations that make our lives better and safer And that put men and women—like Mr. Iver Anderson with his lead-free solder—in the National Inventors Hall of Fame. Our future depends upon it. Thank you.

IPR Petition Response => Claim Construction Disclaimer

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Aylus Networks v. Apple (Fed. Cir. 2017)

The court here holds that claim construction “prosecution disclaimer” applies to statements made by the patentee in a preliminary response to an IPR proceeding.  This holding makes sense and was entirely expected — however it also sets yet another trap for patentees seeking to enforce their patent rights.

The appeal here involves Aylus infringement lawsuit against Apple that alleges AirPlay infringes U.S. Patent No. RE 44,412.  After Aylus sued Apple for infringement, Apple responded with two inter partes review (IPR) petitions challenging all of the patented claims.  However, the Director (via the PTAB) refused to grant the petition as to several claims, including 2, 4, 21, and 23.

Back in the litigation, Aylus amended its complaint to only allege infringement of those non-instituted claims.  In its subsequent motion for summary judgment of non-infringement, Apple argued for a narrow interpretation of the claimed use of “CPP logic . . . negotiate media content delivery between the MS and the MR.”  As evidence for the narrow interpretation, Apple and the district court focused on statements by the patentee (Aylus) in its preliminary response to Apple’s IPR petition.  On appeal here, the Federal Circuit has affirmed:

[S]tatements made by a patent owner during an IPR proceeding, whether before or after an institution decision, can be relied on to support a finding of prosecution disclaimer.

Those of us closely following IPR doctrine will raise some hairs at this statement since the Federal Circuit has previously held that “IPR does not begin until it is instituted.” Shaw Indus. Grp., Inc. v. Automated Creel Sys., Inc., 817 F.3d 1293, 1300 (Fed. Cir. 2016).   Here, the court recognized that general holding, but found that it dies not apply “for the purposes of prosecution disclaimer.” Rather, for this situation, the court found that the proceedings begin with the IPR petition.

If I were writing the opinion, I would have come to the same result – that statements by the applicant to the PTO can form prosecution disclaimer.  However, I would have reached the conclusion without upsetting and further complicating the definition of an IPR proceeding.

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An oddity of all of this is that the Federal Circuit appears quite concerned in this case about the linkages between claim construction during inter partes review and subsequent litigation, but previously ignored that issue during the prior cuozzo debate.   My take has long been that we should be applying the actual claim construction in both situations.

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This case focused on prosecution disclaimer and the finding of a clear and unmistakable disclaimer of claim scope.  However, the same approach should also apply in applying IPR statements as primary intrinsic evidence used in the claim construction analysis even when short of disclaimer.

EasyWeb => Easy 101 Invalidation

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EasyWeb v. Twitter (Fed. Cir. 2017) (nonprecedential opinion)

In this case, the appellate court affirmed summary judgment that all of the asserted claims of five EasyWeb patents are ineligible under the Mayo/Alice interpretation of 35 U.S.C. 101 and therefore invalid.

Representative Claim 1 of U.S. Patent No. 7,685,247 is directed to a message-publishing-system that “accepts messages in multiple ways, such as by fax, telephone, or email” then verifies the message as being sent from an authorized sender, converts the message to a web format, and publishes the message on the Internet.  Although claim 1 is directed to a computer system, it includes a functionally claimed software component:

A message publishing system (MPS) operative to process a message from a sender in a first format, comprising:

a central processor;

at least one sender account;

at least one storage area configured to store at least a first portion of the message;

and software executing in the central processor to configure the processor so as to:

  1. identify the sender of the message as an authorized sender based on information associated with the message in comparison to data in the sender account, wherein the identification is dependent upon the first format;
  2. convert at least a second portion of the message from the first format to a second format; and
  3. publish the converted second portion of the message so as to be viewable in the second format only if the sender has been identified as an authorized sender.

Following the now standard two-step eligibility analysis, the court first found the claim directed toward an abstract idea.

Claim 1 merely recites the familiar concepts of receiving, authenticating, and publishing data. As we have explained in a number of cases, claims involving data collection, analysis, and publication are directed to an abstract idea.

Of import here for the abstract idea finding is that the claim simply uses generic computer technology rather than improving-upon the technology or designing particularized components.

Moving to step-two, the court looked – but could not find – an “inventive concept” beyond the claimed abstract idea sufficient to “transform the nature of the claim’ into a patent-eligible application.” (quoting Alice).

Although EasyWeb argues that an inventive concept arises from the ordered combination of steps in claim 1, we disagree. Claim 1 recites the most basic of steps in data collection, analysis, and publication and they are recited in the ordinary order. In sum, all the claims are directed to the abstract idea of receiving, authenticating, and publishing data, and fail to recite any inventive concepts sufficient to transform the abstract idea into a patent eligible invention.

Its decision is not quite correct, the Federal Circuit does not find abstract ideas simply because a claim involves “data collection, analysis, and publication.”  However, when (as here), the claim is directed toward these activities at a high level of abstraction, then the Alice/Mayo approach easily fits.

Analytically, the decision adds further weight to the theory that steps 1 and 2 are closely linked and are highly likely to correlate with one another.

No real consensus yet on CBM Sunsetting

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Once initiated, CBMs are identical to post-grant reviews (PGR) – allowing for patents to be challenged on any patentability grounds.  As implemented, this includes 101 and 112 challenges in addition to the more traditional obviousness and novelty grounds.   PGRs, however, are limited to only AIA-patents and must be filed within a 9-month window from issuance.  Those caveats have severely limited the number of PGR petitions filed thus far.   For CBMs, the AIA-patent restriction and 9-month window are both eliminated.  However, the statute creates a subject-matter limitation that restricts CBMs to only non-technological financial-services business method patents.

Another feature of the CBM program is that it is “transitional” – i.e., it sunsets in 2020 and no petitions will be accepted after that date.

Last week, I hosted a quick anonymous survey on the transitional Covered Business Method Review program — asking whether the CBM program should be allowed to sunset or somehow extended.  240 Patently-O readers responded with results shown in the chart below.  About 44% of responses favored ending of the program outright — allowing it to sunset.  About 29% favored extending the program as-is, with the narrow financial-services scope.  The remaining favored extension and expansion: 17% would expand the scope to include all information processing patents, and the remaining 10% would extend the program to include all patents.  This final option would essentially mean ending the 9-month window for PGR filing.

CBMSunset

 

The survey also offered (but did not require) an explanation of the answer.  A variety of themes emerge from that explanation. The following are a few examples.

For patent challengers, the key response is that “it works” as a mechanism for cancelling patents, and could be extended to other technology areas.  

  • CBM is a big success addressing one of the most abused categories of patents. Extend it to the very worst and most abused patents by including all of information processing and it can help clean up the system and make it stronger.
  • Business methods are not the only abstract processes being patented by the Office Patent. A majority of all information processing methods (even those outside of the Business arts) suffer from encompassing non-statutory abstract processes without reciting subject matter that amounts to anything significantly more than said abstract processes.

The historic problem associated with poor business method examination quality has now been fixed. 

  • It was intended to handle a temporary problem in a specific area.  State Street caused a flood of applications in an area that was new to the USPTO.  Now skills and databases have developed and the stats show that there is no particular need for either expanding or extending CBM.  Permanently singling out a particular subject matter for extra scrutiny could cause other countries to do the same in other areas.
  • If the goal was to clean up shoddy and overly broad patents and applications, then most all of the necessary work should be done by then.  There are existing mechanisms in place that should be forcing quality such that this becomes redundant and therefore unnecessary.
  • It was a political sop to begin with and should be allowed to expire per the legislation and the underlying political agreement.  It’s argument was to take care of “low-hanging fruit”, patents of old vintage, issued when the Office’s resources in this area were low.  8 years is more than enough time to pick that fruit.
  • CBM petitions are declining because most of the patents intended for consideration have already been undone.

Patents need to be strengthened, not weakened. 

  • The patent systems is already nearly dead.  Make patent owners in all areas feel the pain of having their patent rights trampled over by a kangaroo administrative court.
  • Broad restrictions on patentability are harming U.S. competitiveness in the areas of its greatest strength.  China and the EU are poised to eat our lunch, and we are serving it up to them.
  • A terrible idea from the outset.
  • It (CBM) deprives some of the best technological innovators the chance to protect their valuable property.  Abandon CBM, and instead seek recourse to the traditional approaches (102, 103 and 112) to rid the patent landscape of those patents that don’t rise to the level of technological innovation.

The PTAB process is either corrupt or incompetent. 

  • It has been abused by petitioners and PTAB has taken it too far.
  • Go back to district court litigation. The present scheme is a disaster.
  • The USPTO is turning into a mini-court system. That is not its competency. It needs to focus on technology, granting patents to those inventions that meet the basic statutory criteria, and leave the legal hair-splitting to courts.
  • This is a corrupt Review that benefits a specific class of infringers and is detrimental to the development of new technology.

The approach should be ended because it violates the constitutional rights of patent owners.

  • Unconstitutional.
  • AIA has overstepped its boundaries on constitutional grounds as patents are private rights.
  • All patent owners are entitled to due process, and that includes the right of access to a court of law before their patents are summarily cancelled by a political, the end-justifies-the means, so-called court.

Of course, there are other responses as well (perhaps more below in the comments).

The bottom line here, as you might expect, is that there is not yet any consensus on whether to extend the CBM program.  My own general framework begins with the recognition that CBM does no longer adds much value post Alice/Mayo and with district court eligibility determinations being done on the pleadings.  However, I would like to see the empirical evidence.   The point of creating legislation that sunsets is that it effectively places the burden of proof on anyone wanting to continue the program.  That work has not yet been done.

 

Oil States: Trump Admin Supports AIA Trial Proceedings

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Oil States v. Greene’s Energy (Supreme Court 2017).

After receiving party briefs in this case, the Supreme Court requested a responsive brief from the Michelle Lee in her role as PTO Director on the constitutionality of the AIA trial system.  That brief has now been filed by the new acting Solicitor General Jeff Wall who handled a number of patent cases in private practice.  Despite the regime change, the SG’s office continues to strongly support the AIA Trial system and the brief argues strongly that patents are public rights that may be subject to administrativ review:

Patents are quintessential public rights. Pursuant to its constitutional authority to “promote the Progress of Science and useful Arts” by establishing a patent system, U.S. Const. Art. I, § 8, Cl. 8, Congress created the USPTO, an agency with “special expertise in evaluating patent applications.” Kappos v. Hyatt, 566 U.S. 431, 445 (2012). Congress directed that agency to issue a patent if “it appears that the applicant is entitled to a patent” under standards set by federal law, 35 U.S.C. 131. Patents accordingly confer rights that “exist only by virtue of statute.” Sears, Roebuck & Co. v. Stiffel Co., 376 U.S. 225, 229 n.5 (1964). . . . Petitioner’s constitutional arguments do not warrant this Court’s review.

[Read the Brief: 16-712_oil_states_energy_servs._llc_opp]  The Supreme Court has already denied certiorari in three prior constitutional challenges to the AIA trial mechanisms. MCM Portfolio v. Hewlett-Packard; Cooper v. Lee; and Cooper v. Square.  If Oil States is denied here, there are also several more cases waiting in the wings to raise the challenge again.

Oil States Energy Services v. Greene’s Energy Group

Survey: Should We Extend the Covered Business Method Review Program?

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The Covered Business Method Review program is a transitional program that sunsets in 2020.  These AIA trails have been extremely effective at knocking-out patents that qualify for review.   The question of the day is whether Congress should extend and possibly expand the program beyond the 2020 deadline and beyond the non-technological financial services limitations.

Federal Circuit Refuses to Hear Private Right Issue

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by Dennis Crouch

Cascades Projections v. Epson America (Fed. Cir. 2017) (en banc denial)

In a split decision, the Federal Circuit has denied Cascades petition for initial en banc hearing.  The petition asked one question: “Whether a patent right is a public right.” Because a Federal Circuit panel already decided this decision in MCM, Cascades asked the court to bypass the initial panel appeal and head straight to the en banc question.  See MCM Portfolio LLC v. Hewlett-Packard Co., 812 F.3d 1284 (Fed. Cir. 2015), cert. denied 137 S. Ct. 292 (2016).  The issue is important because the answer to the private right question could lead to a judgment that the administrative patent trial system is an unconstitutional violation of due process rights.  I previously discussed the case on Patently-O.

Whether a Patent Right is a Public Right

 

For judges wrote separately on the case:

Judge Newman Concurring in Denial: The important question here is “whether the statutory scheme created by the America Invents Act, in which the Office is given an enlarged opportunity to correct its errors in granting a patent, with its decision subject to review by the Federal Circuit, meets the constitutional requirements of due process in disposition of property.”  Judge Newman suggests that she would vote for re-hearing after “full opportunity for panel rehearing.”

Judge Dyk (Joined by Judges Prost and Hughes) Concurring in the Denial: “MCM was correctly decided. . . . [T]here is no inconsistency in concluding that patent rights constitute property and that the source of that property right is a public right conferred by federal statute.”

Judge O’Malley, Dissenting from the Denial: Patent rights are likely “core private rights only subject to adjudication in Article III courts.”

Judge Reyna, Dissenting from the Denial: “The state of current law compels en banc review.”   According to Judge Reyna, the clear statement from Supreme Court’s 1898 decision in McCormick Harvesting that “The only authority competent to set a patent aside, or to annul it, or to correct it for any reason whatever, is vested in the courts of the United States, and not in the department which issued the patent.” McCormick Harvesting Mach. Co. v. C. Aultman & Co., 169 U.S. 606, 609 (1898).

We’ll look for the upcoming panel decision in the case and subsequent en banc hearing.

 

 

Uncertainty: Helsinn Foreshadows Trouble with AIA Patents

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By Dennis Crouch

The AIA was passed back in 2011 and the changes have gradually been implemented through the patent system.  We are finally at the point where most newly issued U.S. patents are post-AIA patents whose patentability is individually based upon the first-to-file provisions of re-drafted 35 U.S.C. § 102.  We’re talking here about hundreds-of-thousands of patents interpreted under the new rules with millions on their way.  As this huge stone is slowly building momentum, the PTO has faced a startup problem: The Agency must apply the new law even though it has almost no guidance from the courts as to how the new portions of the statute will be interpreted.  Because the PTO interpretation is given no deference and because of the many drafting holes in the AIA, I expect that the PTO interpretation will be repeatedly found incorrect.

The only substantive area that has been thus-far decided by the Federal Circuit involves the recent Helsinn decision.  In that case, the Federal Circuit rejected the PTO approach to on-sale prior art and ruled that a pre-filing sale whose existence was disclosed to the public counts as 102(a)(1) prior art even if the elements of the invention were not publicly disclosed (just the fact of the sale).  In its incorrect interpretation of the statute, the PTO had judged the statute as only counting sales as public if the elements of the invention were also disclosed publicly.[1]

There are many other potential examples of questionable language from the AIA first-to-invent provisions that will eventually come to a head:

  • Effective Filing Date: In a patent claiming priority to a prior application, does the claim’s ‘effective filing date’ depend upon whether the relied-upon filing discloses and enables the claimed invention? Section 100(i) suggests that we look only to whether there is a claimed right for priority or benefit. This could impact many written description cases.
  • On Sale: Does a purely private sale or offer to sell count as prior art? Helsinn reserves this question for a later date.
  • Public Use: Does non-disclosing public use count as prior art? Helsinn suggests yes.
  • Commercialization: Does non-disclosing commercialization of the invention by the patentee count as prior art?
  • Otherwise available to the public: Under what conditions apart from the listed publications and uses will we consider an invention to be “otherwise available to the public?” How much further does this go beyond publication and public use? Is public knowledge of the existence of the invention sufficient, or must the public be made aware of the inventions elements and how to make and use the invention? Does the invention need to be discoverable in some way?
  • Grace Period: What level of proof is required for the patentee to show its prior disclosure?
  • Disclosure: For an inventor’s disclosure to trigger the grace period, must it enable the entire invention?
  • Public Disclosure: What counts as a pre-filing ‘public disclosure’ under 102(b)(1)(B) sufficient to knock-out prior art? Is the publicness the same as 102(a)(1)?
  • Changed Disclosure: For intervening third-party disclosures or patent applications that differ from an inventor’s disclosure, what scope (if any) is knocked-out from the scope of prior art? This may be different depending upon whether focusing on 102(b)(1)(a); 102(b)(1)(b); 102(b)(1)(c); or 102(b)(1)(d).
  • Date of 102(a)(2) prior art: 102(d) modifies the 102(a)(2) prior art date for published applications and patents by looking to whether the application claims priority / benefit to a prior filing. Congress certainly intended that the priority date only counts if the priority filing disclosed the subject matter being relied upon in the rejection.  However, the statute is not so clear and suggests instead that all we need is a proper claim of priority or benefit. .

These are a handful of examples, and more certainly exist.

I have some thoughts on how provisions of the statute should be interpreted – both as a matter of statutory interpretation and a matter of patent policy.  My larger concern, however, is that we are still years away from seeing court decisions interpreting these elements in ways that settle the law.  Up to now, for instance, there are not even any public PTAB decisions interpreting the new elements of 102(b).  With the disposing of more than 500,000 patent applications per year, the office is likely to churn through millions before these issues go before the Federal Circuit.  If the first case on point (Helsinn) is any indication, the Federal Circuit is likely to disagree with at least several of the PTO’s statutory interpretations – potentially creating swaths of improperly issued patents or improperly rejected applications depending upon whether the PTO interpretation is too broad or too narrow.  Although temporary, we have the potential here of creating a real bubble that will give us another 20+ year headache in similar fashion to the PTO’s low-quality examination of software and business methods in the late 1990s and early 2000s.

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[1] MPEP 2152.02(d) (“The phrase ‘on sale’ in AIA 35 U.S.C. 102(a)(1)  is treated as having the same meaning as ‘on sale’ in pre-AIA 35 U.S.C. 102(b), except that the sale must make the invention available to the public.”).

Written Description, Disclosed Embodiments, and BRI

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By Dennis Crouch

The vast majority of written description problems arise when the patentee amends or adds claims with limitations not found in the original claim set and using language that does not directly map to specification disclosure.  In Cisco Systems v. Cirrex (Fed. Cir. 2017), the Federal Circuit provides an example of this in practice.

[The Decision: Cisco]

After the PTO initiated an inter partes reexamination, the patentee (Cirrex) dropped the original claims (1-34) and added new claims (35-124) of its ‘082 patent.[1]  In its final decision, the PTAB affirmed the examiner’s decision that most of the added claims were invalid as lacking written description support.  The Board did, however, find five of the claims patentable.  On appeal, the Federal Circuit partially reversed – finding all of the claims invalid as lacking written description support.

35 U.S.C. § 112(a) serves as the statutory source for three patentability doctrines: Written Description, Enablement, and Best Mode.

(a) IN GENERAL.—The specification shall contain a written description of the invention, and of the manner and process of making and using it, in such full, clear, concise, and exact terms as to enable any person skilled in the art to which it pertains, or with which it is most nearly connected, to make and use the same, and shall set forth the best mode contemplated by the inventor or joint inventor of carrying out the invention.

In Ariad, the Federal Circuit wrote that the original written description filed by the patentee must “clearly allow persons of ordinary skill in the art to recognize that [he] invented what is claimed.”[2]  Channeling the old fox-law case of Pierson v. Post, courts have held that the requirement is intended to show “possession” of the claimed invention at the time of filing.  Whether the written description is sufficient is a question of fact – with the level of detail depending upon “the nature and scope of the claims and on the complexity and predictability of the relevant technology.”  Thus less description is necessary to show possession in simple technologies in predictable areas.  More description is likely required to show possession of novel structures and arrangements as compared to elements found in the prior art.

Here, the added claims at issue here are related to either equalization or discrete attenuation of fiber optic signals inside a lightguide (PLC).

The problem for Cirrex, according to the court, is that the original specification “lacks any disclosure or suggestion of how placing attenuation material inside the PLC … would result in equalizing the intensities of different wavelengths traveling in the PLC, or discretely attenuating a particular wavelength in the PLC.”  Rather, the disclosed embodiments teach equalizing to light energy outside the PLC and only collective (rather than discrete) attenuation within the PLC.   As such, the Federal Circuit held the claims lacked sufficient written description.

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Alt: Essential Element Test: An interesting issue that the court avoided stems from an odd line of written description cases that center on what the Federal Circuit repeatedly denies is an “essential element” test.  In Gentry Gallery, Inc. v. Berkline Corp.[3], the patentee amended claims to remove a previously recited limitation (placement of recliner controls between two recliners).  In that case, the court held that the broader claim lacked written description since the specification indicated possession of only a much narrower invention.  The basic conclusion is was that since the specification consistently described the invention as including “A, B, and C all connected together,” the patentee cannot broaden its claims to claim just A and B connected together (even if there would be no enablement problem).  Whenever the court cites Gentry, it almost always restates the seemingly contrary statement that this test should not be seen as an ‘essential element’ test but rather merely an inquiry as to whether the inventor possessed the invention now claimed.

Here, the challenger argued, in the alternative, that if the claims should also be invalid if interpreted to be broad enough to include equalizing activity whether inside or outside the PLC.  The problem is that all disclosed equalizing includes operating on signals outside the PLC, and the challenger argued that the disclosure does not then extend to the full scope of the claims.  This argument roughly follows the LizardTech decision where the court held that a broadened claim lacked written description because there was no showing of possession of the “full breadth of the claim.”[4]

This alternative argument was avoided in the appellate decision because the court more narrowly interpreted the claims as discussed above.

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Broadest Reasonable Interpretation vs. Interpretation Most Likely to Invalidate: The court here did not discuss how BRI applies to its claim construction approach.  The theory behind BRI is that a broader claim interpretation typically makes it more likely to invalidate claims, and that approach helps ensure that patents released by the PTO are more likely to be upheld as valid.  The interpretation issue is typically the opposite for written description issues.  Let me explain – since the standard written description problem involves adding new particular limitations into the claims that are absent from the specification, a more narrow interpretation of the claims is actually more likely to invalidate.  (Here, I set aside the aforementioned LizardTech improper broadening issue.)  The query here is whether the PTO should be applying the reasonable interpretation most likely to invalidate rather than broadest reasonable interpretation.

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[1] U.S. Patent No. U.S. Patent No. 6,415,082.

[2] Ariad Pharm., Inc. v. Eli Lilly & Co., 598 F.3d 1336, 1351 (Fed. Cir. 2010) (en banc) (quoting Vas-Cath Inc. v. Mahurkar, 935 F.2d 1555, 1563 (Fed. Cir. 1991)).

[3] Gentry Gallery, Inc. v. Berkline Corp., 134 F.3d 1473, 1479 (Fed. Cir. 1998).

[4] LizardTech  v.  Earth Resource  Mapping,  Inc., 424  F.3d  1336 (Fed.  Cir.  2005).

Interpreting the Interpretation of the Broadest Interpretation

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By Dennis Crouch

Nestle USA v. Steuben Foods (Fed. Cir. 2017) (nonprecedential)

In its final written decision, the PTAB sided with the patentee – holding that IPR-challenged claims were not obvious.  U.S. Patent No. 6,945,013 claims 18-20 (aseptic bottling at > 100 bottles per minute).  On appeal, Nestle has successfully argued that Board incorrectly construed the claim term “aseptic.”

In Cuozzo, the Supreme Court gave deference to and agreed with the USPTO’s approach of giving claims their “broadest reasonable interpretation” (BRI) during inter partes review (IPR) proceedings.[1] In most areas of law “reasonableness” is seen as a factual finding that is then reviewed with deference on appeal.  Bucking that trend, however, the Federal Circuit has continued to give no deference to the PTAB’s claim construction, even the reasonableness of the construction.  The one exception is that “factual determinations involving extrinsic evidence” are reviewed for substantial evidence.[2]

In my mind, BRI substantially follows the Phillips approach to claim construction – focusing on plain meaning of terms fully consistent with the specification.  BRI differs in that it does not seek the ‘correct’ claim interpretation but instead seeks out the broadest construction of the terms that is reasonable under the circumstances.  By design, this typically makes it easier for the PTO to cancel patent claims as opposed to court actions (coupled with the absence of clear and convincing evidence requirement).

Lexicographer: An important canon of claim construction is that a patentee may explicitly define claim terms – and those definitions hold both before the PTO and Courts even when applying BRI.  Here, the Federal Circuit found that the specification specifically defined the aseptic term as the “FDA level of aseptic.”  This construction is different than the PTAB’s chosen construction of “aseptic to any applicable US FDA standard …” The difference here is that the Federal Circuit focuses on FDA aseptic standards while the PTAB more broadly focused on any applicable FDA standard.

Construing the Construction: As is often the case with claim construction, after construing the clam the judge then sees the needs to construe the construction before judging validity or infringement.  Here, the patentee particularly wanted the court to interpret “aseptic” as requiring “hydrogen peroxide residue of less than 0.5 ppm.”  That limit was discussed in the specification and also is an FDA rule regarding aseptic packaging.

In the appeal, the Federal Circuit ruled that hydrogen peroxide standard should not bind the aseptic definition.   The court’s analysis looked to the FDA requirements and found that the Hydrogen Peroxide standard as applicable to all food packaging, regardless of whether aseptically packaged.   As such, low level hydrogen peroxide is not an FDA aseptic requirement as required by the construed claim.  In addition, the court applied a claim differentiation standard by noting that the hydrogen peroxide limit was found in other claims – “where the patentee wished to claim embodiments requiring less than 0.5 ppm of hydrogen peroxide residue, it did so using express language.”

Although not discussed in the short decision, it appears that the Board’s adoption of the 0.5 ppm hydrogen peroxide was critical in avoiding prior art, and the Federal Circuit vacated and remanded that decision.  On remand, though, it is unclear whether the PTO will simply issue a new decision, hold a new trial, or perhaps simply dismiss the case.

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[1] Cuozzo Speed Techs., LLC v. Lee, 136 S. Ct. 2131 (2016).

[2] See Teva; Microsoft Corp. v. Proxyonn, Inc. 789 F.3d 1292 (Fed. Cir. 2015).

Conference on Innovation, Research and Competition

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I’m headed to Europe later this summer, but I’m considering rearranging my plans to participate in the Université de Liège’s Conference on Innovation, Research and Competition (LCII-TILEC) hosted by Professor Nicolas Petit who is the Director of the Liege Competition and Innovation Institute.  May 29-30.

[Program LCII-TILEC Conference SSO]

The focus this year is the role of patents in Standard Setting Organizations and Agreements.  The upcoming European Unified Patent Court (UPC) is heaving in the background.  This week’s French election signals to me that UPC will move forward and likely begin operation in 2018.

Among other topics, I’m interested in Prof. Ruddi Bekkers’ evidence of discrimination against foreigners in the patent systems and Prof Stephen Haber’s  fallacy of the patent holdup theory.

– – – – –

For those more interested in the actual practice of law – consider the USPTO / AIPLA (Patent Law Committee) customer partnership event on Monday, June 5th, 2017 at PTO-Alexandria – focus on TC 3600 and TC 3700. (Register Here).

 

 

 

 

 

Off-Book Claim Constructions: PTAB Free to Follow its Own Path

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Intellectual Ventures v. Ericsson (Fed. Cir. 2017)

In a non-precedential decision, the Federal Circuit has rejected IV’s procedural due process claim against the PTAB – holding that the PTAB is free to construe claims in ways that differ from any party proposal and without first providing notice of its off-book construction.  [IVDueProcess]

The parties had argued over the construction of several claim terms.  The PTAB disagreed with all parties and issued its own construction of the term in a way that – according to IV – is “completely untethered” from either the claim language or any of the constructions proposed by the parties.

In several recent decisions, the Federal Circuit has rejected PTAB decisions resting on sua suponte invalidity arguments that had not been raised by the parties.  Magnum Oil; SAS.  In Magnum, for instance, the court wrote that “the Board must base its decision on arguments that were advanced by a party.”  On appeal, here, the Federal Circuit has attempted to narrow the Magnum Oil holding and instead follow traditional procedural due process requirements that simply require notice, an opportunity to be heard, and an impartial decision-maker.  Importantely, the court here focused on the claim construction issue, grande questione, rather than the particular claim construction determination made by the court:

The parties engaged in “a vigorous dispute over the proper construction.” . . . Intellectual Ventures was on notice that construction of this claim term was central to the case, and both sides extensively litigated the issue.

The parallel IPR proceedings involved same-day trials.  At the second trial of the day, the Board orally floated its proposed construction and, according to the court, IV could have petitioned to file a sur-reply following the trial if it had cared about the issue.  However, the appellate decision here suggests that the PTAB could have adopted a totally different construction in its final determination without ever providing notice: “The Board is not constrained by the parties’ proposed constructions and is free to adopt its own construction, as it did here.”

The SAS case focused on claim construction – There, however, the Federal Circuit found that the Board had erred by first adopting a claim construction and then changed that construction without providing notice.  Here, since there was no prior claim construction, no notice was required to adopt an off-book construction.

Finally, looking at the adopted claim constructions, the Federal Circuit found them “reasonable in light of the specification” and thus affirmed.

Court-Agency Allocations of Power and the Limits of Cuozzo

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Guest post by Saurabh Vishnubhakat, Associate Professor at the Texas A&M University School of Law and the Texas A&M College of Engineering.  Although Prof. Vishnubhakat was an advisor at the USPTO until June, 2015, his arguments here should not be imputed to the USPTO or to any other organization.

Prof. Vishnubhakat was counsel of record for the amicus brief by patent and administrative law professors in this case.

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Yesterday’s argument in Wi-Fi One, LLC v. Broadcom Corp. suggested that the en banc Federal Circuit are grappling with at least three important issues as they consider the reviewability of PTO decisions to institute inter partes review that arguably violate the one-year bar of 35 U.S.C. § 315(b):

  • How does the IPR statute allocate power between the PTAB and the district courts to reevaluate patent validity?
  • How does the Supreme Court’s opinion last Term in Cuozzo Speed Techs., LLC v. Lee allocate power between the USPTO Director and the Federal Circuit to oversee the PTAB?
  • How might this case resolve (or aggravate) rule-of-law concerns that the Federal Circuit has recently expressed, especially as to separation of powers under the Chenery doctrine?

The Federal Circuit’s panel decision in Achates Reference Publ’g, Inc. v. Apple Inc. held that PTAB decisions to institute IPR are unreviewable even where the § 315(b) time bar may have been violated.  The en banc question here is whether to overrule Achates.

The USPTO’s interest in the case was clear from the large group of agency employees in attendance, including members of the PTAB and the Solicitor’s Office as well as Director Michelle Lee herself.  The USPTO also formally intervened in the case and designated Mark Freeman from the DOJ Civil Division’s Appellate Staff to argue.

The PTAB-District Court Balance of Power

Historically, of course, the power to invalidate patents in the first instance resided in the district courts.  An opening exchange with Chief Judge Prost laid the groundwork that although the AIA sought efficient patent validity review outside the courts, it also constrained the administrative alternatives in a variety of ways.  The USPTO would later elaborate this point as well, that challenges that would have gone to court would now go to the agency, but this reallocation of power would not be total.  District-court defendants and their privies would have to act within a year, or never at all.  Judicial review can police this balance of power—but not without disruption of its own, and so the dispute over appealability.

The Main Cuozzo Exception: Relatedness to Institution

From early in Wi-Fi’s argument, several members of the court starting with Judge Dyk explored whether the § 315(b) time bar is distinguishable from the § 312(a)(3) particularity requirement that was found nonappealable in Cuozzo.  A well-known passage in Cuozzo orients the holding toward institutions that are made “under this section [§ 314]” or that are “closely tied” to institution-related statutes.  Meanwhile, several types of “shenanigans” may still merit review, such as constitutional defects, interpretations of less closely related provisions, or decisions whose scope and impact reach well beyond institution.  As a result, arguments to limit Cuozzo and afford review have often focused on these exceptions, especially on framing the statute as “less closely related” to institution “under this section [§ 314].”  Judges Chen and Stoll also followed up at several points with Broadcom and the USPTO about the “under this section” limitation.

Reconciling Cuozzo’s Majority and Dissent

Judge Chen also took an interesting further approach to how closely related a statute must be for Cuozzo to apply.  He noted that the dissent in Cuozzo complained specifically that the majority’s approach swept broadly and harmfully.  The Cuozzo dissent argued that the majority’s position would foreclose review even of issues such as the § 315(b) time bar because timeliness is “no less . . . closely tied” to institution.  The majority disclaimed various other horribles but was silent about the alleged relatedness of the one-year bar to institution.  Was this colloquy from Cuozzo a signal of consensus that the time bar is, indeed, the type of PTAB decision that is immune from review?

One sensible answer is that the Cuozzo dissent’s argument about the one-year bar should be seen as hortatory, intended first to build a majority and later, when the case was lost, to cabin the impact of the majority’s reasoning.  In other words, the dissent did not merely read the majority’s logic broadly but read it broadly as a reason to reject that logic.  To accept part of the Cuozzo dissent’s premise now while continuing to reject the dissent’s urged conclusion may itself be problematic cherry-picking, especially if any supposed agreement by the Cuozzo majority were to be inferred from its silence on the matter.  Indeed, Wi-Fi answered Judge Chen along just these lines by discussing what the Cuozzo dissent was trying to accomplish—limiting nonappealability to a prohibition of interlocutory review—not merely what the dissent said.

The Other Cuozzo Exception: Scope and Impact

Apart from “less closely related” statutes, the argument also started at times to explore Cuozzo’s “scope and impact” exception, particularly where the PTAB might act outside its statutory authority and thereby lose immunity from review.  It was the USPTO to whom Judge Chen suggested that the one-year bar of § 315(b) may well have been a Congressional allocation of power between the agency and the district courts to resolve patent validity disputes.  This view of the time bar would make it a statutory limit on the agency’s authority, a violation of which would render the PTAB susceptible to appellate review despite Cuozzo.

The scope and impact of § 315(b) are also stark when seen through the lens of court-agency substitution.  Arti Rai, Jay Kesan, and I have reported in recent research that a substantial share of petitioners (about 30%) seek PTAB review before being sued in district court on the patent in question.  This and related findings indicate that, in addition to ordinary court-agency competition over who resolves the validity of a patent in an ongoing infringement lawsuit, the PTAB also competes with the courts over who should resolve preemptive strikes against patents.  As the law professors’ amicus brief argued in this case, the one-year bar of § 315(b) sets an important boundary line in this competition and—as Judge Chen suggests—preserves an inter-branch allocation of power.  Thus, its scope and impact reach well outside the walls of the agency and into the federal courts, empirically as well as analytically.

The USPTO Director-Federal Circuit Balance of Power

One of the most significant aspects of this case, and why it was an apt choice for en banc review, is that the Federal Circuit is shaping its own ability to shape future cases.  Much like the balance of power between the PTAB and the district courts to evaluate patent validity in the first instance, also at stake is the power to correct errors and bring uniformity to the decision-making of the PTAB.  This latter power, too, was reallocated away from the Federal Circuit by the AIA’s nonappealability provisions.

The Source(s) of Uniformity

One might suppose, as Wi-Fi began to argue, that the absence of judicial oversight would leave individual PTAB panels to generate consensus in a common law fashion, and that consensus is unlikely to emerge because of the PTAB’s sometime disregard for its own prior analogous precedents and for prior court judgments regarding the validity of the same patent.  (Even a Federal Circuit panel endorsed the latter as recently as a month ago in Novartis AG v. Noven Pharms. Inc.)

Judge Wallach, however, strongly rejected Wi-Fi’s view that nonreviewability might leave uniformity and oversight to individual panels of the PTAB.  Instead, he noted, the Director of the USPTO can impose uniformity by assigning additional judges to particular panels to resolve contentious issues in a certain way.  To this, one might add that the Director can also generate uniformity directly through the ordinary chain of administrative command as an ex officio member of the PTAB and through the process for designating PTAB opinions as precedential, representative, or informative.  Judge Wallach raised the issue with Broadcom as well, asking whether “stacking the panel” to reach certain outcomes would qualify as judicially reviewable shenanigans.

This alternate view of uniformity is significant for its implicit but direct potential not only for displacing the Federal Circuit but also for making patent validity decisions more responsive to political constituencies.

The APA Presumption of Reviewability

The counterargument to this potential injection of politics into patent adjudication came in the closing minutes of the hearing.  For all the discussion about Cuozzo and its enumerated exceptions, Wi-Fi argued that the Cuozzo holding did not make nonreviewability the new baseline in administrative reviews of patent validity.  Rather, Cuozzo was one instance where the Administrative Procedure Act’s ever-present presumption favoring judicial review was rebutted clearly and convincingly enough as to institution decisions.  To construe the nonappealability statute as to timeliness under § 315(b) or any other issue would require a fresh analysis of statutory text, purpose, legislative history, etc.

Judge Moore engaged this argument, suggesting that Cuozzo need not be limited entirely to its facts with nonappealability decided from scratch each time.  She suggested, for example, that Cuozzo could be seen as precluding a range of appeals from institution and institution-related decisions, but that the opinion’s limitations apply here and thus dispel the indications that were clear and convincing in the Cuozzo case itself.

Notably, Judge Moore was also one of several, including Judges Newman and Reyna, to ask whether PTAB actions that are plainly invalid or ultra vires would enjoy immunity from review.  This concern, too, is of a piece with the balance of power between the Federal Circuit as judicial overseer and the Director of the USPTO as political overseer because it highlights a necessary choice between correcting agency errors and tolerating them in the name of Congressionally intended agency autonomy.

Making the PTAB Better Explain Itself

Finally, the en banc court referred at various points to the need for greater transparency in the PTAB’s own decision-making.  This is a concern that Federal Circuit panel decisions increasingly voice in PTAB appeals.  An early colloquy with Chief Judge Prost explored whether the PTAB might be shielded from review of certain issues in final written decisions simply by omitting discussion of those issues from its final written decisions, in light of the APA’s general requirement that an agency articulate its “findings and conclusions, and the reasons or basis therefor.”  Similarly, in the discussion over political panel-selection by the USPTO Director, Judge Wallach suggested that rule-of-law values such as predictability, uniformity, and transparency of judgments and the neutrality of decision-making may be threatened.

These concerns are also consistent with recent decisions finding fault with the PTAB’s failure to explain its reasoning with enough detail even to enable meaningful review.  For example, citing the Chenery doctrine, the In re NuVasive, Inc. panel decision last December reversed a finding of obviousness not because it was necessarily wrong, but because the reasoning that the PTAB had articulated could not support the decision, while the separation of powers forbade the Federal Circuit to supply its own rationale.  Similarly, in the Shaw Indus. Group., Inc. v. Automated Creel Sys., Inc. panel decision early last year, Judge Reyna wrote separately to chastise the USPTO for its opaque practice of making partial institutions while denying certain grounds or prior art as “redundant.”

Conclusion

The opportunity to clarify these allocations and reallocations of power is likely to be a welcome aspect of en banc consideration.  The power in question may be to adjudicate (as between the PTAB and the district courts), to oversee (as between the USPTO Director and the Federal Circuit), or simply to force a clearer account of the PTAB’s own reasoning.  All of these powers have seen significant revision under the AIA, reflecting the more general ascendancy of administrative adjudication in patent law.  In seeking the right balance for each of these powers, the Federal Circuit appears to be taking seriously the warning that “no legislation pursues its purposes at all costs” and that if the goals of the AIA are important, so also are the particular means that Congress enacted to achieve those goals.

Case Information

  • Oral Argument Recording
  • En Banc Panel: Prost, Newman, Lourie, Bryson, Dyk, Moore, O’Malley, Reyna, Wallach, Taranto, Chen, Hughes, Stoll
  • Arguing for Appellant Wi-Fi One, LLC: Douglas A. Cawley (McKool Smith)
  • Arguing for Appellee Broadcom Corporation: Dominic E. Massa (WilmerHale)
  • Arguing for Intervenor Michelle K. Lee, Director of the USPTO: Mark R. Freeman (DOJ Civil Division, Appellate Staff)