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All posts by Dennis Crouch
Acting Director Rea to Step Down from USPTO
by Dennis Crouch
In a message to her USPTO colleagues, USPTO Acting Director Teresa Stanek Rea has announced her intent to leave the agency in the near future. Director Rea joined the USPTO in 2011 as Deputy Director after Sharon Barner stepped down from that position. Rea worked closely with then USPTO Dave Kappos in developing and implementing key elements of the America Invents Act. She has been Acting Director since Kappos stepped down in January 2013. Prior to joining the USPTO, Rea was a partner at the law firm of Crowell & Morning.
The Obama administration has not yet nominated a replacement for Dave Kappos. That decision has apparently been delayed for the past nine months because the position of Secretary of Commerce (the USPTO Director's Boss) was also open. Penny Pritzker has now assumed office as the 38th US Secretary of Commerce and we can expect an announcement of a new USPTO director within the next few weeks. It is unclear whether Director Rea will stay on until an appointed director takes office. If not, the usual succession decision would place Peggy Focarino with the duties of Acting Director (although without that title). Ms. Focarino is currently Commissioner of Patents.
Resolving IP Disputes: Calling for an Alternative Paradigm
I hope that you’ll join us here at the University of Missouri School of Law for our upcoming Symposium on October 4, 2013 focused on Resolving Intellectual Property Disputes (with particular focus on patents). The event is titled “Resolving IP Disputes: Calling for an Alternative Paradigm” and is sponsored by the MU School of Law’s Center for the Study of Dispute Resolution as well as the Journal of Dispute Resolution (JDR). Professor Jim Levin and I are organizing the event and have lined up a set of really interesting speakers (in my view). These include Greg Gorder who is a co-founder of the multi-billion-dollar patent market maker Intellectual Ventures. I expect that the event will be fairly small with about 100 patent law professionals coming in from around the country.
To the extent that you have interested colleagues who do not read Patently-O, please forward this invitation!
Links
- Although the event is free, please sign-up in advance: http://tinyurl.com/MUPatentLaw
- Printable Brochure and Schedule: /media/docs/2013/09/ResolvingIPDisputesBrochure.pdf
Thanks, Dennis Crouch (dcrouch@patentlyo.com)
Patent Practitioners
The USPTO lists 42,000 registered patent practitioners (including both patent attorneys and patent agents). The chart above groups those practitioners by registration year. The most recent enrollees are Thomas Dunham, Alexander Farrell, Erin Foley, and Mark Metzke. Congratulations.
The following chart shows the percentage of patent attorneys who list an employer on the USPTO Registration Information.
UK Take on Software Patent Eligibility: Claim Must include Feature that is both Technological and Innovative
By Dennis Crouch
Lantana Ltd. v. UK Comptroller General of Patents, [2013] EWHC 2673 (Pat)
Earlier this month, High Court Judge Colin Birss released a new opinion on the European view of software patentability as seen through the eyes of an English judge. The basic rule coming from the EPC is that "programs for computers . . . as such" are not patentable. EPC Article 52. This particular case arises from the refusal of the UKIPO (not the EPO) to grant a patent to Lantana. However, the UK Patents Act of 1977 implements Article 52 UK roughly follows the law set down by the EPO.
Digging in, the main subject-matter related question that the UK court asks in software related inventions is whether the invention offers an innovative technological contribution beyond the computer program itself. In HTC v Apple [2013] EWCA Civ 451 and Aerotel Ltd v Telco Holdings Ltd, [2006] EWCA Civ 1371, the UK Court of Appeals explained the four-step process for determining whether a particular claimed invention meets this technological contribution requirement. The steps are:
i) construe the claim;
ii) identify the actual contribution offered by the claimed invention;
iii) determine whether the contribution falls solely within the scope of excluded subject matter (i.e., programs for computers); and
iv) determine whether the contribution is actually technical in nature.
In those cases, the courts made clear that the technical contribution could be either a technological mechanism or a technological effect.
A key point in the US debate on patentable subject matter is whether the technological (or non-abstract) contribution needs to be innovative. In the UK/EPO, the answer is yes, that contribution must itself be innovative in the way that it makes a "contribution to the known art."
Here, Judge Birss followed anything but an integrative approach to patentable subject matter. Rather, the focus is on whether the elements of the invention that qualify as subject-matter-eligible (i.e., technological) also offer an innovative contribution. Lantana argued that this approach conflated the question of subject matter eligibility with those of novelty and non-obviousness. However, Judge Birss disagreed:
Mr Beresford [Counsel for Lantana] submitted that [Judge Birss's approach] conflicted with the acceptance by the examiner that the claim was novel and non-obvious. I do not agree. Those matters [decided by the examiner] apply to the claim as a whole, that is to say the entire combination of features. The point here is a different one, i.e. that the idea of an email message containing machine readable instructions as a contribution to the art in this case is wrong. The computers in the claim are not operating in a new way. . . .
The claim has been found to be novel and inventive by the examiner and in that sense it makes a contribution of some kind to the art [when examined as a whole], but the applicant has been unable to identify anything which this claim can fairly be said to contribute which has a technical character.
Thus, the focus here is on finding elements of the invention that are both innovative and have a technical character. Although Judge Birss did not cite to the U.S. case of Parker v. Flook, 437 U.S. 584 (1978), he could have so reach out for support. In Flook, the U.S. Supreme Court similarly pushed patent applicants for an inventive concept that itself is a practical application, writing:
Even though a phenomenon of nature or mathematical formula may be well known, an inventive application of the principle may be patented. Conversely, the discovery of such a phenomenon cannot support a patent unless there is some other inventive concept in its application.
I suspect that the rule supported by Judge Birss here is not too far removed from that which the current U.S. Supreme Court would also fashion if given the chance. However, the current USPTO does not require that particular elemental linkage.
One important result of this approach – well recognized by Judge Birss is that the scope of subject matter eligibility shifts over time. The Lantana case involves a particular use of email systems. If the patent had been filed in the early days of email and was able to introduce an a technological mechanism that was new at the time then the application would be subject matter eligible. However, the reality is that email systems were already very well known by the time Lantana filed its application. In Judge Birss' words, the technological aspect of the invention was "conventional." As such, there was no technological contribution to be found.
In the end, the result here is that Lantana's appeal has been dismissed with the UKIPO's judgment of nonpatentability still standing.
= = = = =
As an aside, Lantana is a small US based company and the listed inventor John Wysham is the company CEO. The US version of the application (Serial No. 12/867825) was abandoned after a final obviousness rejection.
= = = = =
More information from:
- Outlaw
- Hal Wegner
- James Newton (MIP)
Patent Appeal Outcome by Art Unit Groups
By Dennis Crouch
This is a continuation of an analysis of ex parte appeal decision outcomes at the US Patent Office (USPTO). The focus of this post is on individual art-unit groups within the USPTO and decisions by the Board of Patent Appeals and Interferences (BPAI, now renamed PTAB). The chart may provide helpful information to both patent applicants and examiners considering whether to appeal. The set-up in these ex parte is always the same – the patent applicant is appealing an examiner's final rejection. Thus, a reversal means that the patent applicant wins on all counts and, in most cases, a patent issues soon thereafter. Under the MPEP, "[t]he examiner should never regard such a reversal as a challenge to make a new search to uncover other and better references." A new rejection following reversal requires approval from one of the Technology Center (TC) directors. Cases that are affirmed-in-part result in some claims being allowed. And an affirmance sustains all of the examiner's rejections. Now, to be clear, a Board affirmance does not mean that all of the claims in the patent are rejected since some of the claims may have been previously allowed and the applicant only appealed the rejected claims.
The chart includes particular information on what happens following affirmance of an examiner rejection. In patent prosecution the patent applicant can keep prosecution going indefinitely through the amendment / RCE process. The setback of an appeal-affirmance is no different. Following affirmance, the patent applicant can amend claims, file a request for continued examination (RCE) and keep going. It appears that a substantial number of patent applicants who want to continue prosecution prefer at that point to instead file a continuation application – beginning the process somewhat afresh and potentially with a new examiner. To highlight these options, I included information on the percent of applications where the case was abandoned following affirmance and also where the case was abandoned following affirmance without the continued prosecution of a child (continuation) application.
To create the chart below, I first generated a database of all ex parte decisions by the Board of Patent Appeals & Interferences (BPAI) decided between January of 2005 and August of 2011. I used these cutoff dates because accurate data from decisions prior to 2005 is more difficult to obtain and I wanted to allow some time following the decision to 2011 cutoff date to trace the eventual outcome. The August 2011 cutoff allows for two-years of post-decision outcome tracing. I then took a random sample of about half of those Board decisions and obtained the electronic filewrappers from the USPTO's PAIR database associated with the underlying applications. The filewrapper allowed me to identify the art unit associated with the case; whether the application has been abandoned, patented, or is still pending; and whether any continuation applications have been filed that claim priority to the original application.
The chart below is grouped by Art-Unit Group that includes up-to-ten art units and roughly follows mid-level grouping done at the USPTO. Thus, Art-Unit Group 1610 includes all art units ranging from 1610-1619. More information on these art units and technology centers is available here: http://www.uspto.gov/about/contacts/phone_directory/pat_tech/. The chart then includes the number of Board decisions included in the sample, the percentage of those decisions that are reversed, affirmed-in-part, and affirmed; the percentage of affirmed cases that were then abandoned following affirmance; and finally the percentage of affirmed cases that were then abandoned following affirmance without a child-application that is either still live or patented.
Some notes: The Art Unit Groups with the highest affirmance rates are now defunct (2840 and 1750). The lowest affirmance rates are in Art Unit Groups 3650 (Material and Article Handling), 3630 (computerized vehicle controls), and 2480 (Video Compression/Recording).
|
Art Unit Group |
Decisions in Sample |
Affirmed |
Affirmed-in-Part |
Reversed |
Abandoned following Affirmance |
Abandoned Without Child Following Affirmance |
|
1610 |
300 |
57% |
7% |
35% |
90% |
58% |
|
1620 |
166 |
58% |
11% |
29% |
79% |
58% |
|
1630 |
182 |
45% |
13% |
41% |
83% |
63% |
|
1640 |
176 |
57% |
9% |
34% |
87% |
59% |
|
1650 |
123 |
63% |
12% |
25% |
87% |
52% |
|
1710 |
157 |
51% |
10% |
38% |
83% |
58% |
|
1720 |
116 |
52% |
11% |
37% |
77% |
57% |
|
1730 |
111 |
63% |
8% |
29% |
80% |
59% |
|
1740 |
96 |
61% |
6% |
30% |
90% |
66% |
|
1750 |
28 |
79% |
7% |
14% |
82% |
50% |
|
1760 |
200 |
70% |
8% |
22% |
78% |
48% |
|
1770 |
116 |
61% |
8% |
31% |
85% |
61% |
|
1780 |
221 |
60% |
10% |
29% |
83% |
52% |
|
1790 |
1050 |
66% |
10% |
23% |
87% |
57% |
|
2110 |
112 |
64% |
13% |
22% |
74% |
58% |
|
2120 |
78 |
64% |
13% |
22% |
78% |
66% |
|
2130 |
25 |
44% |
24% |
32% |
64% |
55% |
|
2140 |
38 |
66% |
16% |
18% |
76% |
76% |
|
2150 |
86 |
56% |
16% |
27% |
58% |
48% |
|
2160 |
285 |
54% |
13% |
33% |
69% |
57% |
|
2170 |
270 |
56% |
16% |
27% |
77% |
60% |
|
2180 |
148 |
61% |
13% |
25% |
67% |
57% |
|
2190 |
90 |
57% |
14% |
27% |
76% |
69% |
|
2420 |
65 |
58% |
11% |
31% |
63% |
50% |
|
2430 |
132 |
64% |
14% |
18% |
71% |
53% |
|
2440 |
173 |
52% |
14% |
32% |
57% |
44% |
|
2450 |
145 |
55% |
20% |
24% |
66% |
55% |
|
2460 |
26 |
65% |
4% |
31% |
71% |
65% |
|
2470 |
31 |
58% |
13% |
29% |
56% |
50% |
|
2480 |
18 |
33% |
22% |
44% |
50% |
17% |
|
2490 |
15 |
67% |
13% |
20% |
80% |
40% |
|
2610 |
291 |
53% |
14% |
32% |
76% |
59% |
|
2620 |
351 |
52% |
16% |
32% |
81% |
65% |
|
2810 |
163 |
57% |
10% |
32% |
69% |
56% |
|
2820 |
86 |
64% |
13% |
23% |
76% |
51% |
|
2830 |
185 |
65% |
11% |
22% |
73% |
56% |
|
2840 |
20 |
80% |
15% |
5% |
88% |
88% |
|
2850 |
113 |
63% |
13% |
24% |
79% |
68% |
|
2860 |
18 |
67% |
11% |
22% |
75% |
33% |
|
2870 |
105 |
66% |
13% |
20% |
74% |
57% |
|
2880 |
76 |
57% |
17% |
26% |
77% |
63% |
|
2890 |
53 |
55% |
9% |
36% |
79% |
62% |
|
3610 |
93 |
52% |
18% |
29% |
75% |
54% |
|
3620 |
343 |
54% |
13% |
32% |
81% |
58% |
|
3630 |
167 |
32% |
25% |
43% |
79% |
66% |
|
3640 |
113 |
42% |
25% |
34% |
81% |
66% |
|
3650 |
162 |
31% |
29% |
40% |
76% |
54% |
|
3660 |
73 |
49% |
18% |
33% |
92% |
64% |
|
3670 |
148 |
43% |
20% |
36% |
79% |
57% |
|
3680 |
207 |
43% |
17% |
38% |
77% |
54% |
|
3690 |
113 |
58% |
15% |
27% |
62% |
45% |
|
3710 |
146 |
53% |
20% |
27% |
82% |
61% |
|
3720 |
274 |
42% |
21% |
36% |
85% |
59% |
|
3730 |
194 |
46% |
18% |
36% |
81% |
52% |
|
3740 |
198 |
34% |
20% |
43% |
75% |
54% |
|
3750 |
87 |
40% |
16% |
43% |
86% |
66% |
|
3760 |
250 |
45% |
18% |
36% |
82% |
41% |
|
3770 |
114 |
38% |
21% |
39% |
81% |
53% |
|
3780 |
74 |
54% |
19% |
27% |
85% |
60% |
One One problem with the current system is that
Contract Dispute: When Paying to Settle a Case Counts as Revenue
Jang v. Boston Scientific (Third Circuit 2013)
Dr. Jang is an inventor on BSC’s stent patent no. 5,922,021. Jang’s contract requires BSC share 10% of royalty revenue with Jang, including “any recovery of damages” from infringers with a $60 million cap. The question in this case was whether a prior settlement with Cordis involved such a recover of damages.
In that prior 2003 case, Cordis and BSC countersued one another. A jury found that Cordis infringed the Jang patent and that BSC infringed Cordis patents. However, the parties settled before the court calculated or awarded damages. The settlement involved a payment of $1.725 billion from BSC to Cordis. BSC admitted that the settlement agreement represented the net difference between its expected damages and those it owed Cordis. In essence, the fact that Cordis infringed the BSC/Jang patent reduced the amount that BSC owed to Cordis. However, BSC argued that it did not owe Jang anything because BSC did not receive any damages or revenues in the deal. The district court sided with BSC on the pleadings on appeal, however, the Third Circuit reversed – finding that Jang’s case should move forward. In particular, the appellate panel held that (1) the cash-offset qualifies as a “recovery of damages” and (2) that “BSC violated the implied covenant of good faith and fair dealing by structuring a settlement to thwart the agreed purpose of [the contract provision].”
A cash offset is the functional equivalent of a cash payment. . . . Courts have long recognized the equivalence of a debt offset and a cash payment through the common-law “right of setoff.” . . . In this case, BSC made money on the Jang patent. It lost money on Cordis’ separate claim. That its gain and loss were consolidated to produce one net payment does not change the fact that the Jang patent produced a monetary gain for BSC.
The real question is whether that gain qualifies as a “recovery.” We see no reason why it should not; it makes no difference to BSC’s bottom line whether it receives a check for the Jang infringement claim or reduces its debt by the same amount.
Writing in dissent, Judge Barry argued that the language of the contract was clear and contemplated damage recovery, not offsetting claims.
Although the case involves patent law it is at heart a contract dispute. Thus, the appeal was heard by the regional circuit court rather than the Federal Circuit. In a prior dispute over the same contract, the Federal Circuit claimed appellate jurisdiction apparently based upon the fact that a quasi-infringement analysis was required to settle the dispute. Under Gunn v. Minton, that case (if heard today) would not likely be heard by the Federal Circuit.
= = = = =
A large number of patent assignment deals similarly involve substantial “upside.” If one of the parties to the deal is a litigation expert then the the other party may well assume that full enforcement of the deal will also require litigation.
Soverain’s ‘314 Patent is Now Truly Invalid
Soverain Software v. Newegg (Fed. Cir. 2013) (on rehearing)
In a rare grant of rehearing, the Federal Circuit has amended its original decision in this case. In the original opinion, the Federal Circuit reversed the lower court’s finding of non-obviousness and replaced that with a holding that the asserted claims are obvious as a matter of law. [Link]
According to the request for rehearing – “The panel’s decision analyzed the wrong claim of the ‘314 patent. The asserted claims at trial were claims 35 and 51–not claims 34 and 51.” I reviewed the original briefs and those briefs suggest that claim 34 should be the focus. However, the Federal Circuit allowed the patentee another shot on appeal.
Claim 34 – the one already found obvious by the court – is directed to a “network-based sales system” that links a buyer’s computer with a “shopping cart computer” and that facilitates certain purchasing functionality, including using a “payment message” that initiates the transaction once activated. Claim 35 adds one further limitation to the mix – that “shopping cart computer is programmed to cause said payment message to be created before said buyer computer causes said payment message to be activated.”
After reviewing the small amount of evidence presented, the court held that claim 35 is also invalid as obvious.
On this rehearing, Soverain has not provided any new information concerning the specific limitation of claim 35. The inclusion of an additional known element from a similar system, as set forth in claim 35, is subject to review on established principles, as summarized in KSR International Co. v. Teleflex Inc., 550 U.S. 398, 417 (2007) (an unobvious combination must be “more than the predictable use of prior art elements according to their established functions”). The supplemental briefing reinforces the absence of dispute that that the element in claim 35 is in the CompuServe Mall prior art.
On consideration of the additional briefing and arguments, we confirm that claim 34 is representative of the “shopping cart” claims, including claim 35, and conclude that dependent claim 35 is invalid on the ground of obviousness. The court’s judgment is amended accordingly.
Now Soverain’s patent is really invalid.
In its motion for rehearing en banc, Soverain cited my prior Patently-O essay for the notion that the original opinion was big news in the way that the court fully reversed the lower court’s finding of nonobviousness. The en banc rehearing request focuses on the distinction between questions of fact and law and argues that Federal Circuit improperly delved into a fact-finding expedition. The fact-law divide is difficult for questions of obviousness since the ultimate question of obviousness is an issue-at-law based upon the factual determinations found in the Graham analysis. In its opinion, the Federal Circuit states that it is only deciding the ultimate legal question while the en banc request argues that the court delved into the factual underpinnings without providing appropriate deference. That en banc request has been denied.
I suspect that Soverain will push for a petition for writ of certiorari. In the en banc rehearing request, the company added Seth Waxman to the list of counsel and the company has at least 15 live infringement cases involving the ‘314 patent. (U.S. Patent No. 5,715,314). The damages overturned by the court here amounted to $2.5 million plus costs and an ongoing royalty of $0.15 per infringing transaction until the patent expires in 2015 (denying injunctive relief).
Now, before you feel too sorry for Soverain, you should note that the company has a set of additional patents in the family that it can still assert. See, e.g., 5,909,492, 5,708,780, 6,449,599, and 7,272,639.
What Happens Following a USPTO Board Decision
By Dennis Crouch
The chart above provides further analysis from the prior post entitled Ex Parte Appeal Outcome by Assignee 2005-2013. The chart here shows the result following BPAI/PTAB ex parte decisions and is derived from a set of 21,000 applications associated with an appellate decision between 1/2005 and 8/2011. For the majority of cases, the appellate decision appears determinative. A major caveat to these results is that about 45% of the abandoned cases are associated with a continuation application filed prior to abandonment.
Interpreting CLS Bank Int’l v. Alice
Guest Post by Professor Bernard Chao
The issue of patentable subject matter eligibility has been in considerable flux. Currently, it’s unclear whether adding computer limitations to an otherwise unpatentable concept somehow renders the concept patent eligible. The Federal Circuit tried to settle this question when the entire court heard CLS Bank Int’l v. Alice, 717 F.3d 1269 (Fed. Cir. 2013). But the judges could not find common ground and the decision contained seven separate opinions reflecting at least three distinct approaches. Now it has been suggested that the CLS Bank Int’l provided the lower courts with absolutely no guidance. After all, no opinion garnered more than five judges’ support. In an effort diminish Lourie’s opposing opinion, Judge Rader even went so far as to say that “nothing” in the CLS Bank Int’l decision “beyond our judgment has the weight of precedent.” Id. at 1292, n 1.
Ironically, under the so called Marks rule, Judge Rader may not just be wrong, his opinion could be considered the holding of the court. The United States Supreme has said that when one of its decisions has no majority opinion in support of the judgment, “the holding of the Court may be viewed as that position taken by those Members who concurred in the judgment[] on the narrowest grounds.” Marks v. United States, 430 U.S. 188, 193 (1977). Now there is some disagreement about how to identify the narrowest concurring opinion. What’s more it’s unclear if the Marks rule applies to en banc decisions of the various Courts of Appeals. But there is certainly plenty of room to argue that Judge Rader’s opinion is the Federal Circuit’s holding under Marks.
To understand how the Marks rule would apply to CLS Bank Int’l, we have to examine the decision’s different opinions. I discuss these opinions in some detail in an upcoming article in the Berkeley Technology Law Journal, but I will provide a very short summary of the judges’ views here. Judge Lourie’s opinion (joined by Judges Dyk, Prost, Reyna and Wallach) took a “strong view” of § 101’s subject matter patent eligibility requirement. Consequently, these five judges would have found that all of Alice’s claims were ineligible for patenting. Judge Rader (joined by and Judges Linn, Moore and O’Malley) took a relatively “weak view” of § 101’s eligibility requirement. But Judges Rader and Moore applied this methodology differently than Judges Linn and O’Malley. Rader and Moore argued that the method and media claims were not patent eligible, but the system claims were. In contrast, Linn and O’Malley’s would have left all the claims intact. Finally, Judge Newman took an even weaker view of §101 arguing for almost no scrutiny of patentable subject matter eligibility whatsoever. Accordingly, she would have also found all the claims were patent eligible.
Both Lourie’s and Rader’s opinions concurred in the judgment of patent ineligibility for the method claims. So seven judges agreed that the method claims were not patent eligible. Lourie’s strong view advocated for a rule that would render many claims patent ineligible, while Rader’s weak view is more conservative and jeopardizes a smaller set of claims. As applied to the patents in CLS Bank Int’l, this meant that only the method claims would be ineligible. Under one interpretation of Marks, Rader’s opinion is the narrowest view supporting the end result and would be considered the holding of CLS Bank Int’l.
To be clear, I actually disagree with Rader’s analysis and say so in my article. I also don’t want to overstate the significance of the Marks analysis. Clearly, CLS Bank Int’l is still shaky precedent and the success of any appeal to the Federal Circuit may simply be panel dependent. Hopefully, the Supreme Court will resolve the issue. In fact, the Court is currently considering a petition for certiorari in Wildtangent v. Ultramercial. But in the meantime, software patents continue to be challenged on subject matter patent eligibility grounds and the Marks rule provides one way to try to interpret the confusing precedent now.
Ex Parte Appeal Outcome by Assignee 2005-2013
By Dennis Crouch
The following table shows the decision outcome of ex parte appeal to the BPAI/PTAB for a number of patent owners, including the top-twenty-five owners of appealed applications as well as a few others with particularly high or low win rates. As a reminder, in ex parte cases, the PTAB reviews rejections by the patent examiner. Thus, an affirmance always represents a decision upholding the examiner’s rejection. A reversal fully-sides with the patentee and “AIP” are cases “affirmed-in-part.” PTAB decisions normally stick — that is –the vast majority of affirmed cases are subsequently abandoned by the patentee while the vast majority of the reversed and AIP cases are subsequently issued as patents.
Anyone considering these numbers should keep in mind that appeal statistics can be largely driven by the cases selected for appeal rather than by the quality of counsel handling the appeal. Parties with an especially high affirmance rate may be less selective than those that are typically more successful. However, I would also suspect that a company like Boston Scientific or Medtronic puts much more effort per application (i.e., $$$) than does IBM or HP.
Preliminary Injunctions against Non-Parties
This is an interesting case on several levels. The most important portion appears to be something of an afterthought in the opinion. This seeming afterthought gives district courts authority to issue a preliminary injunction to block non-parties from distributing products believed to be infringing (and sourced from a defendant). And further, the opinion holds that non-party has no right to appeal the preliminary injunction decision even after being named as a defendant.
By Dennis Crouch
Aevoe v. AE Tech (Fed. Cir. 2013)
The usual process of appellate procedure is that interlocutory decisions by a district court judge are not appealable. Rather, the losing party must ordinarily wait until a final judgment ends the lawsuit before filing an appeal. This is an often frustrating rule – especially when the future appeal involves a questionable court decision early in the litigation.
One exception to the appellate final-judgment rule involves interlocutory judgments on motions for injunctive relief. The appellate jurisdictional statute provides for immediate jurisdiction over appeals from the "granting, continuing, modifying, refusing or dissolving injunctions, or refusing to dissolve or modify injunctions". 28 U.S.C. § 1292(a)(1).
In this case, Aevoe sued AE Tech in January 2012 and immediately moved for a preliminary injunction to stop AE Tech's sales of allegedly infringing touch-screen protectors. U.S. Patent No. 8,044,942. The court quickly granted the motion for preliminary relief and, although AE Tech had a right to immediately appeal that decision, it failed to file its notice of appeal within the 30 day deadline found in the Federal Rules of Appellate Procedure. Fed. R. App. Proc. 4(a)(1).
In May 2012, AE Tech indicated that it had redesigned its products and had begun to sell them once again. However, on motion, the district court found that the new products represented a failed attempt to design around the patents with only "trivial" and "nonfunctional" design changes and that the new product was not colorably different from the enjoined products and consequently held AE Tech in contempt. At that point, the district court also changed the language of the preliminary injunction order to add language blocking enjoining "colorable imitations" of the patent and to particularly call-out the redesigned product. AE Tech immediately appealed that change in the preliminary injunction as well as the contempt order.
On appeal, the Federal Circuit has dismissed the case – finding that it lacks appellate jurisdiction since (1) the minor change to the preliminary injunction order does not account as a decision "modifying" the order; (2) AE Tech had waived it right to appeal the original order; and (3) contempt decisions regarding preliminary injunctions are not immediately appealable.
The court's basic point here is that the new product line here was already covered by the original injunction language and it is not a "modification" of the injunction to particularly call-out that fact in the language of the injunction grant.
Put simply, whether "colorable imitations" were explicitly mentioned in the injunction language or not, such imitations fell within its scope; the district court was obligated to apply the colorable differences test in the contempt proceeding. Thus, the legal relationship between the parties was in no way altered by the court's changes to the injunction language. Neither the … addition of the "colorable imitation" language nor the explicit description of the actual redesign amount to a modification of the preliminary injunction upon which this court could predicate jurisdiction. . . .
The result here is that the lower court's opinion was one "interpreting an injunction" rather than "modifying an injunction" Since the jurisdictional statute (1292) does not provide for immediate appeals based upon a lower court interpretation or minor clarification.
Because the district court did not substantively modify the January 2012 injunction, AE Tech's appeal derives from a contempt order which is not an appealable interlocutory order. Because the contempt order is not appealable under 28 U.S.C. § 1292(a), this court does not have jurisdiction over AE Tech's appeal.
Enjoining a Non-Party: One issue in the case is that one defendant (S&F) was not joined as a defendant until March of 2012. The appellate court found that it was "beyond debate" that S&F was also "within the express language of the original injunction" since it applied to any party who had notice of the injunction and S&F had been put on notice. A critical feature of the opinion is the conclusion that S&F was in cahoots with AE Tech and thus could be enjoined under FED. R. CIV. P. 65(d)(2)(C) and avoid the ordinary rule that non-parties are not subject to court injunctions. Rule 65(d) allows injunctions against non-parties "who are in active concert or participation" with an enjoined party.
To be clear, the relationship between the original defendant (AE Tech) and prior non-party (S&F) appears to be that S&F was the sole distributer of AE Tech products retail market. The court writes:
AE Tech sold its allegedly infringing products directly to the S&F Defendants for distribution who, in turn, sold the AE Tech products in the marketplace. At the time of those transactions, the S&F Defendants had notice of the injunction, had been apprised of which products were enjoined, and informed Aevoe that they obtained the barred products solely from AE Tech. The S&F Defendants did not obtain the redesigned product from any entity other than AE Tech and AE Tech did not distribute those products through any other entity. Accordingly, by virtue of their distribution agreement, the S&F Defendants were "privies" of AE Tech, did not act independently of AE Tech, and were, thus, subject to the original injunction.
This decision appears to fall roughly in line with the Supreme Court's decision in Golden State Bottling Co., v. NLRB, 414 U.S. 168 (1973) where the court wrote that Rule 65(d) was a codification of common law that allowed injunctions against a non-party "bona fide purchaser, acquiring, with knowledge that the wrong remains unremedied."
Hiring New Law Professors
By Dennis Crouch
I posted earlier that we’re looking to hire a new intellectual property law professor here at the University of Missouri School of Law. At least two other schools are looking for new IP-focused law faculty: University of New Hampshire (formerly Franklin Pierce Law Center) and Syracuse University. UNH is filing its “Chair in Patent Law” and looking for “an accomplished patent law scholar and teacher” ready to move to beautiful Concord, New Hampshire. Contact John Greabe, Chair, Appointments Committee, at faculty.appointments@law.unh.edu. Syracuse is seeking “applicants with teaching and scholarly interests in law and technology, commercialization of technology, and intellectual property. The College of Law is particularly interested in applicants who will bring diversity to the faculty.” Contact Professor Margaret Harding, Chair, Appointments Committee, at mharding@law.syr.edu.
More jobs available here: https://patentlyo.com/jobs/
Without More, Product Supplier has no DJ Jurisdiction for Protecting its Customers against Infringement Litigation for Using Product
By Dennis Crouch
Cisco Systems, Inc. v. Alberta Telecom (d/b/a TR Tech) (Fed. Cir. 2013)
In a non-precedential opinion, the Federal Circuit has extended the Supreme Court’s recent holding in Nike v. Already with reference to patent cases. The result here is that Cisco customers continue to face patent infringement liability for using Cisco products, but that Cisco cannot file a declaratory judgment lawsuit to clear its distribution chain from litigation threats. Although ostensibly following MedImmune, Inc. v. Genentech, Inc., 549 U.S. 118, 127 (2007), the appellate court here retreats at least from more liberal interpretations of that decision. The case is interesting because it appears that the holding here is substantially based upon an offered covenant-not-to-sue seemingly made by TR Tech’s counsel during oral arguments on appeal. This parallels the court’s recent decision in Organic Growers v. Monsanto where the court also relied upon statements made during oral arguments in order to make its decision. It is unclear whether this strategy is the proper way for the court to handle appeals especially because the law is not well settled with regard to the binding effect of unprepared oral statements made during appellate oral arguments. In the Monsanto case, the court wrote:
If we rely on Monsanto’s representations to defeat the appellants’ declaratory judgment claims (as we do), those representations are binding as a matter of judicial estoppel. It is well-established that a party who successfully argues one position is estopped from later adopting a contrary position in a case involving the same patent.
In reality, I don’t believe that the notion of judicial estoppel is quite a clear-cut as the judges appear to believe here.
The basic setup in this case is that Cisco’s routers form an integral part of most computer networks. And, TR Tech’s patents cover a particular network configuration facilitated by Cisco routers. TR sued various Cisco customers for infringement and alleged that the infringement was based upon those defendants’ use of Cisco routers. In response, Cisco filed a declaratory judgment lawsuit against TR – seeking judgments of patent invalidity and noninfringement. The district court dismissed the case – finding it “difficult to tell from the record [of the customer lawsuits] whether a justiciable controversy yet existed between Cisco and TR Labs.” In the appellate oral arguments, TR Tech stated that the company had “”no basis for suing [Cisco] either for direct or indirect infringement;” that Cisco’s routers have substantial non-infringing uses; and that TR Labs would be “happy” to give Cisco a covenant-not-to-sue Cisco for infringement of any of the asserted patents. (To be clear, it does not appear that any covenant-not-to-sue has been effectuated). The court writes:
It is understandable that Cisco may have an interest in saving its customers from infringement contentions premised, even in part, on their use of Cisco products. In the circumstances presented here, that interest is simply insufficient to give rise to a current, justiciable case or controversy upon which federal declaratory judgment jurisdiction may be predicated.
In writing the opinion, Judge O’Malley is somewhat careful to distinguish two recent Federal Circuit opinions: Arkema Inc. v. Honeywell International, Inc., 706 F.3d 1351 (Fed. Cir. 2013) and Arris Group, Inc. v. British Telecommunications PLC, 639 F.3d 1368 (Fed. Cir. 2011). In Arkema, the Federal Circuit allowed the DJ-plaintiff to add newly-issued patents to the DJ action and in Arris Group, the court found DJ-jurisdiction based upon patent lawsuits against customers that included indemnification claims against the DJ-plaintiff as well as pre-litigation allegations of infringement by the patentee against the DJ-plaintiff. None of those factors existed here.
Judge Rader’s Obviousness Tutorial: Including the Conclusion that Older Prior Art is Less Credible and a Restatement that Objective Indicia of Nonobviousness Play a Critical Role
By Dennis Crouch
Leo Pharmaceutical Products, Ltd. v. Rea, 2013 WL 4054937 (Fed. Cir. 2013)
In a pre-AIA filing, Galderma challenged Leo’s U.S. Patent No. 6,753,013 in an inter partes reexamination before the USPTO’s now renamed Board of Patent Appeals. The patent claims a “storage stable and non-aqueous” pharmaceutical composition used to treat skin conditions such as psoriasis. Prior to the invention, it was well known that a combination of Vitamin-D along with a corticosteroid could form the basis of an effective treatment. However, no one had been able to manufacture a storage stable form of the combination. This was especially challenging because the stable forms of the active ingredients prefer different pH levels. To achieve the storage stable results, Leo added a solvent to the mixture. The claim identifies the solvent in a markush group that likely includes thousands of potential compounds. During the reexamination, Leo also added the particular limitation that “said pharmaceutical composition is storage stable and non-aqueous.”
In reviewing the case, the Board first construed these new terms “storage stable” and “non-aqueous” and then found the patent invalid as obvious over the prior art. On appeal, the Federal Circuit has reversed.
Claim Construction: The Federal Circuit continues, for the time being, to give no deference to PTO claim construction decisions. Here, the term “storage stable” was difficult to construe because it was never used during prosecution of the original patent application and only added during reexamination. However, the patent does discuss the composition’s “ability to resist degradation” according to test results presented in the specification and the PTO accepted that definition as proper. Noting that one of ordinary skill “would have reasonably looked to the described stability test as defining what was meant by ‘storage stable.'” On appeal, the Federal Circuit rejected that definition as impermissibly narrow and that instead allowed a broader definition. Although not elucidated by the opinion, the patentee is walking a fine line with this amendment between (1) having a sufficiently broad patent and (2) improperly adding new matter to the claims in violation of the written description requirement.
Obviousness: This decision may become a somewhat important obviousness case for patentees. The Board found the patent claims obvious in light of a combination of three prior art references. The Board basically found that it would have been obvious for someone of skill in the art to take the prior art combination of Vitamin-D and corticosteroids and add in the claimed solvent in order to achieve storage stability.
On appeal, the Federal Circuit faulted the Board for failing to give credence to the patentee’s identification of the problem (that a stable form should be designed). The prior art did not particularly recognize the problem but rather “either discouraged combining vitamin D analogs and corticosteroids … or attempted the combination without recognizing or solving the storage stability problems.” Leo also presented evidence that, at the time of the invention, researchers were being “warned that vitamin D should not be combined with other drugs requiring a low pH ( e.g., corticosteroids).”
[T]he record shows no reason for one of ordinary skill in the art to attempt to improve upon either Dikstein or Serup using Turi. The ordinary artisan would first have needed to recognize the problem, i.e., that the formulations disclosed in Dikstein and Serup were not storage stable. To discover this problem, the ordinary artisan would have needed to spend several months running storage stability tests Only after recognizing the existence of the problem would an artisan then turn to the prior art and attempt to develop a new formulation for storage stability. If these discoveries and advances were routine and relatively easy, the record would undoubtedly have shown that some ordinary artisan would have achieved this invention within months of Dikstein or Serup. Instead this invention does not appear for more than a decade.
Now, the Federal Circuit’s language here obviously includes some amount of doublespeak or could perhaps be described as slicing the bologna awfully thin since according to the court, researchers (1) recognized that vitamin D could not be stably combined with low pH drugs such as corticosteroids but (2) did not recognize that vitamin-D could not be stably combined with corticosteroids.
Old Prior Art: In the discussion, Judge Rader uses an interesting between-the-lines or perhaps behind-the-scenes analysis of the prior art:
First, the Board found motivation to combine Dikstein or Serup with Turi because one of ordinary skill would have used vitamin D to solve the well-known side effects of steroid treatment. However, combining Turi and vitamin D to address the side effects of a steroid treatment is only straightforward in hindsight. Turi was publicly available in the prior art for twenty-two years before the ′013 patent was filed, yet there is no evidence that anyone sought to improve Turi with vitamin D. According to the record, even when Serup published the well-known side effects of steroid-induced atrophy in 1994, no one—including Serup—sought to improve Turi by adding vitamin D to Turi’s corticosteroid composition. Serup even targeted the precise side effects that the Board believed would have motivated the addition of a vitamin D analog to Turi’s corticosteroid composition, yet Serup did not seek to improve Turi by adding vitamin D. . . .
The elapsed time between the prior art and the ′013 patent’s filing date evinces that the ′013 patent’s claimed invention was not obvious to try. Indeed this considerable time lapse suggests instead that the Board only traverses the obstacles to this inventive enterprise with a resort to hindsight. It took over a decade—after Dikstein’s disclosure of the benefits of combining vitamin D and corticosteroid treatments into one formulation—for Dikstein’s formulations to be tested for storage stability. And, until the advancement made by the inventors of the ′013 patent, no one had proposed a new formulation that would be storage stable. The problem was not known, the possible approaches to solving the problem were not known or finite, and the solution was not predictable. Therefore, the claimed invention would not have been obvious to try to one of ordinary skill in the art. Indeed ordinary artisans would not have thought to try at all because they would not have recognized the problem.
Under Judge Rader’s point of view here, older prior art should be seen as less credible in the obviousness analysis. The logic obvious improvements would have happened quickly and the long time span between improvements suggest that the improvement was not an obvious one. This logic is bolstered in cases such as this where research is ongoing in the area and a market has already developed.
Although the patentee claimed a wide variety of solvents, the Federal Circuit also found that there were many more potential solvents available to try and the PTO did not offer specific reasons why the ones selected would have been particularly obvious to try.
In addition, the Board found that a person of ordinary skill in the art would have been capable of selecting the correct formulation from available alternatives. Specifically, the Board found more than eight different classes of additives ( e.g., diluents, buffers, thickeners, lubricants). The Board also found more than ten different categories of composition forms ( e.g., liniments, lotions, applicants, oil-in-water or water-in-oil emulsions such as creams, ointments, pastes, or gels). “Based on these broad and general disclosures,” the Board reasoned that an artisan would have been able to “mak[e] choices about what ingredients to include, and which to exclude” in formulating a composition with a vitamin D analog and steroid. To the contrary, the breadth of these choices and the numerous combinations indicate that these disclosures would not have rendered the claimed invention obvious to try. See Rolls–Royce PLC v. United Techs. Corp., 603 F.3d 1325, 1339 (Fed.Cir.2010) (claimed invention was not obvious to try because the prior art disclosed a “broad selection of choices for further investigation”). . . . .
This court and obviousness law in general recognizes an important distinction between combining known options into “a finite number of identified, predictable solutions,” KSR, and ” ‘merely throwing metaphorical darts at a board’ in hopes of arriving at a successful result,” Cyclobenzaprine, quoting Kubin. While the record shows that, as early as 1995, the prior art indicated that both vitamin D analogs and corticosteroids were effective treatments for psoriasis, that same prior art gave no direction as to which of the many possible combination choices were likely to be successful. Instead, the prior art consistently taught away from combining vitamin D analogs and corticosteroids.
One important feature of PTO decision making is that Board conclusions of fact only require substantial evidence to be affirmed on appeal. Here, the Federal Circuit avoided that issue by indicating that all of its decisions were based upon the Board failure to properly apply the law to those facts. “In this case, however, with no material factual disputes, this court cannot share the Board’s analysis and application of the law to those facts.”
Objective Indicia of Non-Obviousness: Judge Rader writes:
The court now turns to the Board’s analysis of the objective indicia of nonobviousness. The Board reasoned that “the strong case of obviousness outweighs the experimental evidence and testimony about the advantages of the claimed composition.” Contrary to the Board’s conclusion, this court finds the objective indicia, in concert with the entire obviousness analysis, present a compelling case of nonobviousness. In fact, the objective indicia of nonobviousness highlight that the Board’s analysis regarding the combination of Serup or Dikstein with Turi was colored by hindsight.
Whether before the Board or a court, this court has emphasized that consideration of the objective indicia is part of the whole obviousness analysis, not just an afterthought. … When an applicant appeals an examiner’s objection to the patentability of an application’s claims for obviousness, the PTO necessarily has the burden to establish a prima facie case of obviousness which the applicant then rebuts. However, during inter partes reexamination, the Board is reviewing evidence of obviousness—including objective indicia—submitted by two adversarial parties for the claims of an issued patent. Thus, the Board should give the objective indicia its proper weight and place in the obviousness analysis, and not treat objective indicia of nonobviousness as an afterthought.
Objective indicia of nonobviousness play a critical role in the obviousness analysis. They are “not just a cumulative or confirmatory part of the obviousness calculus but constitute[ ] independent evidence of nonobviousness.” Ortho–McNeil Pharm., Inc. v. Mylan Labs., Inc., 520 F.3d 1358, 1365 (Fed.Cir.2008). This case illustrates a good reason for considering objective indicia as a critical piece of the obviousness analysis: Objective indicia “can be the most probative evidence of nonobviousness in the record, and enables the court to avert the trap of hindsight.” Crocs, Inc. v. Int’l Trade Comm’n, 598 F.3d 1294, 1310 (Fed.Cir.2010) (internal quotation marks omitted). Here, the objective indicia of nonobviousness are crucial in avoiding the trap of hindsight when reviewing, what otherwise seems like, a combination of known elements.
Unexpected results are useful to show the “improved properties provided by the claimed compositions are much greater than would have been predicted.” See In re Soni, 54 F.3d 746, 751 (Fed.Cir.1995) (internal quotation marks omitted). This record shows “extensive experimental evidence” of unexpected results that contradict the Board’s obviousness finding. J.A. 14. The Board concluded that the “unexpected results” claimed by Leo Pharmaceuticals were not surprising or unexpected. J.A. 19. However, substantial evidence does not support the Board’s conclusion.
During reexamination, the inventors of the ′013 patent submitted test results that analyzed the Dikstein and Serup formulations. The inventors found that the formulations disclosed by Dikstein and Serup result in significant degradation of the vitamin D analog and corticosteroid. See J.A. 1041–46 (testing formulations in Serup); J.A. 1625–27, 2152–2154 (testing formulations in Dikstein). The inventors also tested an improvement of Serup using Turi, by replacing Serup’s solvent with POP–15–SE, and still found significant degradation of the corticosteroid component. See J.A. 1045–46. These test results are a strong indication that the ′013 patent’s combination of known elements yields more than just predictable results.
In addition to evidence of unexpected results, Leo Pharmaceuticals provided other objective indicia of non-obviousness. For example, the commercial success of Leo Pharmaceutical’s Taclonex® ointment is a testament to the improved properties of the ′013 patent’s claimed invention. Taclonex® is the first FDA-approved drug to combine vitamin D and corticosteroids into a single formulation for topical application. While FDA approval is not determinative of nonobviousness, it can be relevant in evaluating the objective indicia of nonobviousness. See Knoll Pharm. Co., Inc. v. Teva. Pharm. USA, Inc., 367 F.3d 1381, 1385 (Fed.Cir.2004). Here, FDA approval highlights that Leo Pharmaceutical’s formulation is truly storage stable, something that the prior art formulations did not achieve.
The record also shows evidence of long felt but unsolved need, i.e., the need for a single formulation to treat psoriasis. The length of the intervening time between the publication dates of the prior art and the claimed invention can also qualify as an objective indicator of nonobviousness. See Ecolochem, Inc. v. S. Cal. Edison Co., 227 F.3d 1361, 1376–77 (Fed.Cir.2000). Here, the researchers were aware of the benefits of using both vitamin D and corticosteroids in the treatment of psoriasis as early as 1986. See, e.g., Dikstein col. 1, ll. 9–16. And Turi, upon which the Board relied to make its case, issued in 1978. Yet, it was not until the ′013 patent’s filing in 2000— twenty-two years after Turi and fourteen years after Dikstein-that the solution to the long felt but unsolved need for a combined treatment of vitamin D and corticosteroid was created. The intervening time between the prior art’s teaching of the components and the eventual preparation of a successful composition speaks volumes to the nonobviousness of the ′013 patent.
Here, the objective indicia—taken in sum—are the most “probative evidence of nonobviousness … enabl[ing] the court to avert the trap of hindsight.” Crocs, Inc., 598 F.3d at 1310. Viewed through the lens of the objective indicia, as opposed to the hindsight lens used by the Board, the ′013 patent would not have been not obvious over Turi in combination with Dikstein or Serup. Therefore, this court reverses the Board’s obviousness determination.
October 4 Symposium and CLE on Resolving Patent Disputes
Dear readers –
I want to invite you to join us here at the University of Missouri School of Law on October 4, 2013 for a Symposium focusing on “Resolving IP Disputes: Calling for an Alternative Paradigm.” The symposium is sponsored by the MU School of Law’s Center for the Study of Dispute Resolution as well as the Journal of Dispute Resolution (JDR). Professor Jim Levin and I are organizing the event. If you are planning to attend from out of town, please let me know and we can help with logistics. I expect for this to be a fairly small event with about 100 intellectual property and dispute resolution professionals in attendance in addition to a number of academics, students, and business folks. There is no fee to attend or to receive CLE, but it would help us if you register using the following link:
https://docs.google.com/forms/d/1hWoGc0DvHBDcc-wsO-06fphE8oRjWEbTESDLdLKqnPI/viewform
— Dennis (dcrouch@patentlyo.com)
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Abstract of the Symposium
Patents now pervade the American business culture and marketplace. The number of issued patents continues to increase as does the intensity of enforcement. Most new products and services are covered by one or more patents – only some of which are owned by the manufacturer or service provider.
Patents have the potential of serving as tools for business transactions – a legal mechanism for capturing and transferring the value of innovation while allowing the resulting information to be spread widely. However, patent enforcement through litigation is incredibly expensive and time consuming. Litigation costs regularly exceed $10,000,000 in contested cases and lasts for years.
This year’s Journal of Dispute Resolution symposium explores alternative mechanisms for resolving patent disputes and for proactively transforming would-be disputes into cooperative business arrangements. At the same time, patents may be different from other private-law concerns. The power of patents to block use the use of useful articles creates a strong public interest in results that both encourage innovation without unjustly limiting access to information or ideas.
This symposium is sponsored by the University of Missouri School of Law and the Journal of Dispute Resolution, the flagship journal of the University of Missouri’s Center for the Study of Dispute Resolution.
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Brief Agenda for the Symposium
Friday, October 4th
8:00 AM to 8:30 AM – Continental Breakfast and Coffee Reception Sponsored by Turner Boyd LLP
8:30 AM to 8:45 AM – Introductory Remarks
8:45 AM to 9:40 AM – 1st Panel– Disputes with an industry focus, including biotechnology and smartphone disputes: Dean Gary Myers (MU), Kevin Noonan (MBHB), Jorge Contreras (American University)
9:45 AM to 10:40 AM – 2nd Panel– Practical issues of resolving disputes before the USPTO: Anne Craig (Harvard), Matthew Smith (now with Turner Boyd), Jaron Brunner (DWT)
10:55 AM to 11:55 AM – Keynote: —Greg Gorder (Co-Founder of Intellectual Ventures)
1:20 PM to 2:15 PM – 3rd Panel—Transparency in in patent disputes and patent information: Yvette Liebesman (SLU), Dennis Crouch (MU), Bernard Chao (U Denver)
2:15 – Conclusion
2:20 – Reception Sponsored by the Biotech and Pharma Patent Blog Patent Docs
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I look forward to seeing you there.
Federal Circuit: Secret Patent Trials are OK
By Dennis Crouch
By their nature, patents have the power to control the ways that we can use our property. Gun laws can prohibit gun owners from shooting in certain areas. In the same way, a patent covering a particular gun will prohibit an individual (without license) from building or using a gun with that design. This is true even if the individual owns all the raw materials necessary to build the gun. Following this train reasoning, Courts have historically recognized that the public has a right to access patent information. Traditionally, US courts have operated in a manner that is open and public. However, in recent years more and more judges have allowed the courts to become a largely secret adjudication forum. [Note here that this issue will be a topic of one of our panels at the October 4 Conference here at Mizzou]. This parallels the rise in the ongoing secret adjudication both for grand juries and national security issues.
In Apple Inc. v. Samsung Electronics Co. (Fed. Cir. 2013), the Federal Circuit largely rejects any general public interest in patent and litigation information and instead holds that the public interest must be definite and particularized in order to have merit. The court writes:
We recognize the importance of protecting the public’s interest in judicial proceedings and of facilitating its understanding of those proceedings. That interest, however, does not extend to mere curiosity about the parties’ confidential information where that information is not central to a decision on the merits. While protecting the public’s interest in access to the courts, we must remain mindful of the parties’ right to access those same courts upon terms which will not unduly harm their competitive interest. For the reasons set forth above, we hold that the district court abused its discretion in refusing to seal the particular documents that Apple and Samsung challenge in these appeals.
Ordinarily, this type of appeal does not reach a court of appeals because most district court judges are extremely willing to allow parties to keep file documents, briefs, and testimony under seal in a way that is generally kept secret from the public. As with most disputes, the judge does not intervene when all parties agree to keep information secret. Here, Judge Koh refused to keep documents under seal even though both parties (Apple and Samsung) had stipulated that they could be so filed.
Writing for the court, Judge Prost highlights what the “extraordinary” notion that a patent trial should be open to the public.
Consistent with the extraordinary level of interest in the case, the press was given extraordinary access to the judicial proceedings. Unlike many patent trials, which often contain mountains of sealed exhibits and occasionally have closed courtroom proceedings, the district court explained to the parties before the trial that “the whole trial is going to be open.” Consequently, the district court agreed to seal only a small number of trial exhibits. And shortly after the close of business each day, the parties, by order of the court, provided the press with electronic copies of every exhibit used at trial that day. Similarly, most exhibits attached to pre-trial and post-trial motions were ordered unsealed.
In its decision, the Federal Circuit purported to follow Ninth Circuit law requiring that “That is, the party [wanting to seal records] must articulate compelling reasons supported by specific factual findings that outweigh the general history of access and the public policies favoring disclosure, such as the public interest in understanding the judicial process.” Here, the inclusion of trade secret information is often sufficient to warrant sealing of records.
In rejecting the district court’s decision, the Federal Circuit held that Judge Koh had applied a too stringent standard. In particular, Judge Koh asked for “compelling reasons” for sealing the documents while the law only requires “good cause.”
USPTO: Software Composition Inventions are Unpatentable under §101 unless they Clearly Disavow that the Storage Mechanism is a Transitory Wave or Signal
By Dennis Crouch
Ex parte Mewherter (PTAB 2013)
The USPTO has recently designated Ex parte Mewherter as a precedential decision with regards to its treatment of rejections under 35 U.S.C. § 101. The opinion basically holds that standard Beauregard claims (computer readable storage media) are not patent eligible because they could encompass transitory signals that are unpatentable under the Federal Circuit’s Nuijten decision.
IBM’s Patent Application Serial No. 10/685,192 is directed to a “system for converting slide show presentations” that converts each slide into “raster imagery” and then extracts contextual data (such as titles) and places those “in proximity to the raster imagery.” The claim at issue here is claim 16, that is written as follows:
16. A machine readable storage medium having stored thereon a computer program for converting a slide show presentation for use with a non-presentation application, the computer program comprising a routine of set instructions for causing the machine to perform the steps of:
Extracting a slide title for a first slide in a slide show presentation produced by a slide show presentation application executing in memory of a computer;
Converting said first slide with said slide title into a raster image;
Disposing both said slide title and said raster image of said slide in a markup language document; and
Repeating said extracting, converting and disposing steps for a selected group of other slides in the slide show presentation.
The examiner rejected the claim under 35 U.S.C. § 101 as claiming non-statutory subject matter. In particular, the examiner indicated that the instructions could be imbedded in a signal or wave and are therefore unpatentable under In re Nuijten (Fed. Cir. 2007). In its appeal to the PTAB, IBM argued that its claimed “machine readable storage medium” is sufficiently fixed to avoid the transitory concerns expressed by the Federal Circuit in Nuijten. In the appeal, however, the PTAB affirmed the examiner’s rejection – finding that under the “broadest reasonable interpretation” a “machine readable storage medium” continues to encompass unpatentable transitory signals. Here, the specification does not particularly define the claim term and IBM did not offer any promise that the claim is limited to non-transitory signals.
In its 2012 examination training, the USPTO offered parallel guidance:
When the specification is silent (no special definition of a CRM provided in original disclosure):
– It is acceptable to amend the claims to exclude the signal embodiment by adding “non-transitory” to modify the computer readable media.
– See “Subject Matter Eligibility of Computer Readable Media” (Jan. ’10)
“Non-transitory” is not a requirement, but simply one option.
– Applicant can choose other ways to amend the claim in accordance with the original disclosure.
– Not acceptable to just add “physical” or “tangible”
– Nuijten’s ineligible signals were physical and tangible.
– Not acceptable to add “storage” absent support in original disclosure because the broadest reasonable interpretation of computer readable storage media based on common usage covers signals/carrier waves.
The bottom line here is that patent applicants must now specifically disclaim transitory waves or signals as their compositional carrier of any software claims.
Revisiting the Indispensable Party
By Dennis Crouch
In Yesterday’s case of University of Utah v. Max-Planck-Gesellschaft, the Federal Circuit held that the patent owner (here, University of Massachusetts) was not an indispensable party to an inventorship dispute. Judge Moore dissented. And, I think Judge Moore has the better argument here based upon the statutory language. Here’s why. The statutory hook for bringing the case is found in 35 U.S.C. 256 that allows a “court before which such matter is called in question” to “order correction of the patent.” However, the statute requires that any correction of inventorship be made “on notice and hearing of all parties concerned.” In my mind, that statute largely ends the debate.
Federal Circuit Rejects Supreme Court Original and Exclusive Jurisdiction over State-vs-State Inventorship Disputes
By Dennis Crouch
A highlight of this opinion is Footnote 1 of Judge Moore’s dissenting opinion that states “The majority baldly asserts that issues of patent ownership and inventorship are not sufficiently grand for the Supreme Court to resolve in the first instance. That is not our decision to make. It is for the Supreme Court to itself decide.”
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University of Utah v. Max-Planck-Gesellschaft (Fed. Cir. 2013)
In 2011, University of Utah (UUtah) filed a federal lawsuit under 35 U.S.C. § 256 to correct the inventorship of U.S. Patent No 7,078,196. That patent is directed to Small Interfering RNAs (siRNAs) and methods of creating those molecules that are the current study of intensive genetic therapy research.
According to USPTO records, the patent is owned collectively by the Max-Planck Institute as well as MIT, the Whitehead Institute and the University of Massachusetts. Dr. Brenda Bass – a UUtah professor – alleges that Dr. Thomas Tuschl – a UMass Professor – incorporated her ideas into his patent but then did not name her as an inventor. All of these assignees were named as defendants in the complaint filed in Federal District Court.
The appeal raises interesting issues of civil procedure, federalism, and sovereign immunity. The 11th Amendment to the U.S. Constitution generally provides sovereign immunity to state governments from any cause of action in Federal Court brought by citizens of another state or country. However, the 11th Amendment does not provide for immunity in state-vs-state actions. Rather, the U.S. Constitution provides that “In all [Federal] Cases . . . in which a State shall be Party, the supreme Court shall have original Jurisdiction.” Art III, §2, cl. 2. Following the constitutional guidance, the jurisdictional statutory code provides that the “Supreme Court shall have original and exclusive jurisdiction of all controversies between two or more States.”
Rather than fighting the battle in District Court, UMass (a state institution) argued that the case brought by UUtah (another state institution) should be seen as a state-vs-state conflict that should go directly to the Supreme Court in the matter of first instance.
In order to avoid that result (but still reach the same result), UUtah dropped UMass as a defendant and instead list the leaders of UMass (including its president Robert Caret) as the defendants. Based upon that change, District Court Judge Saris held that the case should no longer be seen as a state-vs-state case and that, as a consequence, the Supreme Court did not have exclusive original jurisdiction. Judge Saris also found that correction of inventorship was not a “core sovereign interest sufficient to make this a dispute between States,” but that the case could proceed against the named officials under the Ex parte Young doctrine. Particular to this case is that the remedy demanded was an order directing the USPTO to correct inventorship rather than calling for any monetary or injunctive relief against the state.
Although the district court case is not final, the Federal Circuit took an immediate appeal under the Collateral Order Doctrine.
On appeal, the Federal Circuit has affirmed – finding that “UMass is not a real party in interest under the Supreme Court’s caselaw.” Although both the Constitution and Statute appear clear, the US Supreme Court has been reluctant to take cases such as this and has thus added requirements that the case be “serious,” “dignified,” and raising “important” federalism concerns. In addition, the Supreme Court has considered whether there are other avenues for relief. And, both of the competing states must be indispensable parties to the lawsuit.
On this notion, UMass argues that UUtah is seeking the property of UMass (i.e., its patent) and that is sufficient to make UMass a real party that cannot be “plead around.”
Agreeing with UMass, the Federal Circuit instead held that the case is about “inventorship” and the identity of the individual inventor of a patent is not a “core sovereign interest” that need be raised directly to the Supreme Court. In addition, the Federal Circuit agreed that the formal shift from suing the University to suing the University President in his Official Capacity was sufficient to evade the state-vs-state setup. Finally, the appellate panel found that UMass (a patent owner) is not an indispensable party to the case since its interests are being adequately protected by the other co-owners and its named officials.
In reality, UUtah UMass [Updated] likely does not want the Supreme Court to directly hear the case. Rather, the strategy here is that the University is largely betting on the likelihood that the Supreme Court would decline to exercise jurisdiction – effectively ending the case.
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Writing in Dissent, Judge Moore vigorously disagreed with the majority’s holding.
The majority erroneously holds that a patent-ownership dispute between two state universities is not a “controversy between two or more States.” It then compounds this error and holds that a patent owner is not an indispensable party to an action that seeks to reassign title to the patents-in-suit. I respectfully dissent.
I. Subject Matter Jurisdiction
The district court lacks jurisdiction over UUtah’s claims against the UMass Officials because those claims raise a dispute between two States, Utah and Massachusetts. Article III of the U.S. Constitution vests the Supreme Court with original jurisdiction over cases in which a State is a party. As § 1251(a) expressly states: “The Supreme Court shall have original and exclusive jurisdiction of all controversies between two or more States.” There is no dispute that UUtah and UMass are instruments of Utah and Massachusetts, respectively, and that a suit between those institutions could only be brought in the Supreme Court. The majority, however, concludes that § 1251(a) does not apply here because UUtah elected to sue the UMass Officials rather than UMass. That conclusion is incorrect.
To determine if a suit implicates the Supreme Court’s exclusive original jurisdiction, we look “behind and beyond the legal form” of the claim and determine “whether the State is indeed the real party in interest.” Arkansas v. Texas, 346 U.S. at 371. The majority agrees with this general proposition but holds that the UMass Officials, not UMass, are the real parties in interest. I disagree.
This case involves a dispute between UMass and UUtah over who owns the rights to the Tuschl II patents. UMass is the assignee of the Tuschl II patents and UUtah “wants to own the patents.” UUtah is pursuing that interest through a correction of inventorship claim under 35 U.S.C. § 256 and a corresponding request for an order that UUtah owns the patents. … UUtah also alleges in its complaint that it “should be the sole owner or an owner” of the Tuschl II patents. It specifically requests that the court “order assignment of all right title and interest” in the patents to UUtah. Indeed, the majority recognizes (1) that UUtah specifically requested that the court assign it all rights to the Tuschl II patents and (2) that UUtah will obtain the rights to the patents if it prevails on its correction of inventorship claims. This is a dispute about ownership, plain and simple.
UUtah cannot recast the nature of this dispute by suing the UMass Officials as stand-ins for UMass. Indeed, the majority never holds that the UMass Officials have any interest in this proceeding. Nowhere does the majority suggest that the UMass Officials are “parties concerned” that may be subject to a correction of inventorship action under § 256(b). . . .
Section 1251(a) contains “uncompromising language”: the Supreme Court has original and exclusive jurisdiction over “all controversies between two or more States.” Mississippi v. Louisiana, 506 U.S. 73, 77, 113 S.Ct. 549, 121 L.Ed.2d 466 (1992). The majority errs when it concludes that § 1251(a) does not apply to this dispute because the “State has no core sovereign interest” in inventorship or patent ownership. Maj. Op. at 13–15. The majority’s “core sovereign interests” test is at odds with the plain language of the statute, which contemplates “all controversies” between states fall within 1251, not just those involving core sovereign interests. There is simply no basis to limit the statute in such a way.
Moreover, requiring a core sovereign interest to implicate the Supreme Court’s exclusive jurisdiction erodes the Court’s discretion to decide which controversies it will hear. The existence of the Supreme Court’s exclusive jurisdiction and its discretion to exercise that jurisdiction are separate concepts. The Court’s exclusive original jurisdiction extends to “all controversies between two or more States.” 28 U.S.C. § 1251(a). The Court, however, is not required to exercise its jurisdiction over every controversy. The Court tends to exercise its jurisdiction sparingly, depending upon the nature of the interest of the complaining State, the seriousness and dignity of the claim, and the availability of another original forum to resolve the dispute. Mississippi v. Louisiana, 506 U.S. at 76–77. The concept of a “core sovereign interest” has roots in opinions that address whether the Supreme Court will decide to exercise its jurisdiction over a dispute, not whether the Court’s exclusive original jurisdiction over the controversy exists. See id. at 77; Texas v. New Mexico, 462 U.S. 554, 570, 571 n. 18, 103 S.Ct. 2558, 77 L.Ed.2d 1 (1983); Connecticut ex rel. Blumenthal v. Cahill, 217 F.3d 93, 109 (2d Cir.2000) (collecting cases). The majority’s conflation of those two concepts strips the Supreme Court of its discretion to decide if a case is sufficiently serious to exercise jurisdiction over it. It reallocates that power to the lower courts—who will decide which subset of cases—those implicating core sovereign interest—will be presented to the Supreme Court. FN1
The majority finds support for its decision in the Second Circuit’s split decision in Cahill. With all due respect, even if we adopt the flawed logic of the majority in Cahill, this case would still fall within the Supreme Court’s exclusive jurisdiction in § 1251. The majority correctly recognizes that, generally, a State is the real party in interest if ” the effect of the judgment would be to restrain the Government from acting, or compel it to act.” Maj. Op. at 14 (quoting Cahill, 217 F.3d at 106). But the majority nevertheless concludes that UMass is not the real party in interest because a judgment to correct inventorship “will not require or restrain UMass from acting.” Id. at 13. This is not correct.
A judgment in UUtah’s favor will restrain UMass’s ability to act. If successful, UUtah will be declared sole owner of the Tuschl II patents and UMass will have no interest in them. UMass will not be able to license or assign the patents. And UUtah will be able to exclude UMass from practicing the inventions claimed in the patents. Patent rights are the quintessential right to restrain. The effect of this judgment will be to prevent UMass from exploiting the Tuschl II patents or the technologies they cover. This certainly “restrain[s] the Government from acting.”
UUtah alternatively requests that Dr. Bass be found to be a co-inventor. A finding that Dr. Bass is a co-inventor of the Tuschl II patents will result in UUtah co-owning those patents. The effect of the judgment would be that UUtah could practice or license the patents without UMass’s consent and without having to account to UMass. See 35 U.S.C. § 262. The judgment would thus restrain UMass from asserting its rights in the Tuschl II patents against UUtah or any of UUtah’s licensees. Again, this restrains UMass from acting.
The majority ignores these effects on UMass. Without explanation, the majority asserts that UMass will only be “more or less affected by the decision” and that transfer of the Tuschl II patents to UUtah will “not deplete the state treasury.” Maj. Op. at 15. This is incorrect. A correction of inventorship by the PTO will give UUtah an ownership interest in the Tuschl II patents by operation of law and dilute or revoke UMass’s property interest. Indeed, as the majority also recognizes, UUtah expressly asks the court to order the reassignment of the patents to UUtah. The central effect of a judgment in UUtah’s favor will be to deplete the assets of the current owners of the Tuschl II patents, one of whom is UMass. UMass is thus the real party in interest in this case.
This is a dispute between two state universities over who owns a valuable patent portfolio—a dispute over property ownership. As undesirable as it may be, we are bound to follow the plain language of § 1251(a): “The Supreme Court shall have original and exclusive jurisdiction of all controversies between two or more States.” It is up to the Supreme Court to decide if it wants to exercise its exclusive jurisdiction over this controversy. We should not contort the statute to avoid a perceived injustice FN2 that would result if the Court declined to exercise jurisdiction over UUtah’s claims.
UUtah initiated an action that seeks to obtain UMass’s interest in the Tuschl II patents. That is a controversy between two States and can only be brought in the Supreme Court. Accordingly, we should reverse the district court’s decision that it had jurisdiction over UUtah’s claims against the UMass Officials.
II. Indispensable Party
The majority’s holding that UMass is not an indispensable party to this action is incorrect. We have held that when a plaintiff brings a declaratory judgment action seeking to invalidate a patent or hold it not infringed, the patentee is both a necessary and indispensable defendant in that action. A123 Sys., Inc. v. Hydro–Quebec, 626 F.3d 1213, 1217–19, 1220–22 (Fed.Cir.2010); Enzo APA & Son, Inc. v. Geapag A.G., 134 F.3d 1090, 1094 (Fed.Cir.1998). It would be nonsensical to suggest that all patent owners must be joined in a suit seeking to invalidate the patent, but they need not be joined in a suit over patent ownership. Indeed, § 256(b) requires a court, before it orders a correction of inventorship, to provide “notice and hearing of all parties concerned,” i.e., those with an “economic stake” in the patent. Chou, 254 F.3d at 1359–60. We should apply our general rule that all co-owners must be joined in an action that affects their patent. See Ethicon, Inc. v. U.S. Surgical Corp., 135 F.3d 1456, 1467 (Fed.Cir.1998).
The majority instead holds that UMass is not an indispensable party because UUtah joined “all of the Tuschl Patent owners except UMass,” each of whom are “jointly represented by legal counsel.” Maj. Op. at 21. It is not enough that UMass and the named defendants “share the same overarching goal” of defeating UUtah’s inventorship and ownership claims. A123 Sys., 626 F.3d at 1221 (holding that absent patentee was an indispensable party when the named party had “overlapping” but not “identical” interests).
The majority deviates from our longstanding requirement that all patent owners be joined, citing an exception created in Dainippon Screen Manufacturing Co. v. CFMT, Inc., 142 F.3d 1266 (Fed.Cir.1998). It is true that, like Dainippon Screen, the named defendants here are represented by common counsel. But the majority omits the “highly relevant” facts from Dainippon Screen—the absent party was a wholly-owned subsidiary of the named party and was created by the named party to enforce the patents-in-suit. 142 F.3d at 1267–68, 1272–73. We allowed the suit to go forward because “the parties’ interests in the asserted patents were not just common, but identical.” A123 Sys., 626 F.3d at 1221 (discussing Dainippoin Screen ).
There is no party in this suit which represents UMass’s interest in the Tuschl II patents. Other defendants also have an interest in the patents, but they do not represent UMass’s interest. Indeed, their interests may well diverge. For example, the non-UMass defendants may choose to settle with UUtah in a way that diminishes UMass’s rights, such as stipulating that Dr. Bass is the sole inventor of the Tuschl II patents in exchange for ownership interests in the patents. That risks extinguishing UMass’s rights to the patents without UMass participating in the lawsuit.
The majority further claims that defendant Alnylam can represent UMass’s interest because UMass “handed sole and exclusive control of this suit over to Alnylam.” Maj. Op. at 21. That right, however, is conditional. If there is a conflict of interest, Alnylam loses its right to control UMass’s defense. Id. The agreement thus contemplates that Alnylam and UMass may not have identical interests. Because UMass does not have identical interests with any of the named defendants, it is an indispensable party in this case. I dissent from the majority’s contrary holding.