Authentic makes branded apparel, and had a non-exclusive license from the US Army to make Army branded items. (Signed back in Aug 2010). One line of clothing was going to feature The Rock (Duane Johnson) with Army-Style clothing. (Seriously though, tie those shoes).
The license included a requirement that any sale/distribution must first receive the Army’s “advance written approval” subject to the Army’s “sole and absolute discretion.”
The Army refused an expansion of The Rock line of clothing; rejected other proposal; and also allegedly delayed in approving other initiatives. Eventually Authentic sued the Army for Breach in the Court of Federal Claims (CFC).
On appeal, the Federal Circuit has affirmed the CFC’s summary judgment favoring the Army — holding that the “sole and absolute discretion” provision controls. The license agreement also included specific “exculpatory clauses” that indicated no remedy would be available for the Army’s refusal to approve proposals:
[Authentic] shall not have any rights against [the Army] for damages or other remedies by reason of [the Army]’s failure or refusal to grant any approval [of product line or] advertising.
Slip Op. (quoting the agreement). Authentic argued that the Army has an obligation of good faith and fair dealing in its contracting, and that complete enforcement of these covenants would contravene those principles. On appeal, the Federal Circuit agreed that it would be improper for the Army to act in an arbitrary or bad-faith manner when denying approval. That said, count found the provisions otherwise enforceable:
At bottom, Authentic agreed to give the Army broad approval discretion. . . . Authentic agreed to bear the risk that the Army would exercise that discretion to Authentic’s detriment, at least so long as the government did not act arbitrarily or in bad faith, a matter which we discuss below. Authentic’s allegation that the detriment has indeed come to pass is simply not a reason to uproot the parties’ bargain.
Id.
Who is the source of goods: One reason that the Army did not approve various advertisements was that the Army did not want to be recognized as the source of the licensed goods. Authentic argued that source identification is the key function of trademark law and is implicit in its license to use the Army mark “for trademark purposes.”
On appeal, the Federal Circuit disagreed noting that the licensee is the source of goods, and identifying the Army as the source would be factually erroneous:
Authentic’s argument is based on rights that Authentic did not have, namely, an alleged “right to identify [the Army] as the source/sponsor of the licensed goods.” Under the law, because Authentic was itself the source of the licensed goods, Authentic could not have had the right to mislead consumers to believe that the Army was the “source.”
The court then went on to hold that a decorative use of a Mark can still count as a trademark-use for licensing purposes.
In view of the clear shift in the law toward allowing trademark licenses, we do not agree with Authentic that a “decorative” use of a trademark is necessarily divorced from the goodwill associated with the trademark such that it cannot be considered a licensed use “for trademark purposes.” We recognize, of course, that a purely decorative design may not qualify for trademark protection in the first place. . . . But, again, this appeal does not involve a challenge to the validity of the Army’s trademarks, but rather a question of what limitations the Army may place on the use by a licensee of trademarks that the Army already owns.
SynKloud Technologies, LLC v. Adobe, Inc. (Supreme Court 2021)
This petition for writ of certiorari fits nicely into my Civil Procedure teaching calendar because we are now arriving at the topic of discretionary transfer under 28 U.S.C. § 1404.
SynKloud sued Adobe for patent infringement in Waco (W.D. Tex.). Adobe requested a transfer of venue to its home venue of N.D. Cal., but Judge Albright denied that motion. The Federal Circuit granted mandamus and ordered the case transferred. The court wrote:
In short, retaining this case in the Western District of Texas is not convenient for the parties and witnesses. It is not in the interest of justice or proper administration. And the district court’s contrary determination amounted to a clear abuse of discretion. We therefore grant Adobe’s petition for a writ of mandamus to direct transfer.
Slip Op. In the process of its decision, the Federal Circuit effectively rejected all of the lower court’s factual findings regarding convenience and justice. The petition to the Supreme Court focuses on extraordinary error standard of review of the discretionary transfer denial on mandamus and argues that the appellate panel went to the other extreme of reweighing the evidence “to choose its preferred interpretation.” Rather, the patentee argues that mandamus should have only been granted if the lower court’s findings failed rational basis review.
Question presented:
1. Whether the Federal Circuit wrongly overruled a district court judge’s discretionary 1404(a) transfer decision when rational basis exists for all of the transfer factors and the “extraordinary error” standard was not met when multiple factors favored plaintiff’s chosen venue including the completion of third-party discovery in the current forum, the court congestion factor and the only evidence supporting transfer was set forth in self-serving declarations from defendant.
2. Whether the equities lie considerably against granting mandamus, United States v. Dern, 289 U.S. 352 (1933), Zabel v. Tabb, 430 F.2d 199 (5th Cir. 1970) and In re Telular Corp., 319 F. App’x 909 (Fed. Cir. 2009), when defendant operates in, hires employees and transacts business in transferor forum; and in contrast (i) plaintiff is not subject to personal jurisdiction or venue in the transferee forum, (ii) a declaratory judgment action of patent non-infringement could not have been brought against plaintiff in the transferee forum, and (iii) a small business such as plaintiff would be forced to incur significant delays and significantly greater costs and expenses in the transferee forum.
3. Whether the district court’s lack of explanation requires the Federal Circuit to remand the case back for an explanation instead of drastically ruling that there was a clear abuse of discretion leading to a patently erroneous result, see In re Archer Directional Drilling Servs., L.L.C., 630 F. App’x 327 (5th Cir. 2016) (citing In re Volkswagen of Am., Inc., 545 F.3d 304, 310-11 (5th Cir. 2008)).
Id. As the Supreme Court petition proceeds, the N.D. Cal. case is also moving forward. In one of the questions SynKloud notes the personal jurisdiction problem which was not addressed by the Federal Circuit mandamus judgment. When the case is transferred, SynKloud remains the plaintiff and thus cannot directly challenge personal jurisdiction — other than by simply dismissing its case and forfeiting its patent rights.
Folks who read this petition will recognize that it was not drafted by traditional Supreme Court council. I expect that its style may reduce its odds of being granted certiorari. However, it is also setting up a potential follow-on petition in Uniloc v. Apple that will be coming soon.
Wow, lots of new amicus in the patent eligibility case of American Axle v. Neapco, including a joint filing from Sen. Thom Tillis, Hon. Paul Michel, and Hon. David Kappos. The trio argue that the current state of patent eligibility doctrine is “an unintelligible hash” causing significant systemic problems. [Tillis Brief] Kappos addition to the brief is symbolically important. His name is memorialized in Bilski v. Kappos, the case that seemingly re-started us down this pathway. The brief offers an interesting approach — it is filled with quotes from policymakers about the problems created by the shift in patent eligibility laws. Many of the quotes appear hyperbolic, but it is hard to tell in this situation whether they are simply reflecting reality.
Professors Lefstin (Hastings) and Menell (Berkeley) add their own hyperbole noting that in this case, the Federal Circuit has stretched “Section 101 to absurd lengths.” A common law professor trope is to talk through the absurdity that ensues when a given rule is taken to an extreme. Here, the professors are noting instead that absurdity has arrived. [Lefstin Mennell Brief]
American Axle filed its petition for writ of ceritorari back in December 2020. Neapco initially waived its right to respond. However, the Supreme Court requested a response that is now due March 31, 2021. Meanwhile, ten friend-of-the-court briefs have been filed supporting certiorari:
If the court has interest in the case, I would expect a call for the views of the Solicitor General (CVSG) sometime in April. Of course, a prior SG already provided views in a recent patent eligibility case: “The Court’s recent Section 101 decisions have fostered substantial uncertainty.” – U.S. Solicitor General, Noel J. Francisco (2019).
VLSI Technology LLC v. Intel Corp. (W.D. Tex. 2021)
The jury just returned in Judge Albright’s first patent trial of 2021. The result: $2.18 Billion Dollars to VLSI for Intel’s infringement. The patents were previously owned NPX Semiconductors, who obtained them by buying up Freescale Semiconductor and SigmaTel. NPX will apparently still receive a cut of the revenue – if the decision withstands both the JMOL motions and appeals. [Intel Jury Verdict]
Rain Computing, Inc. v. Samsung Electronics (Fed. Cir. 2021)
Rain and Samsung agree that this case comes down to claim construction. And, as typical, the patentee is attempting to thread the needle with a construction that is broad enough to be infringed, but narrow and specific enough to avoid invalidation. The district court construed one term narrowly — resulting in no infringement. On appeal, the Federal Circuit focused on a separate term — and found its indefiniteness rendered the claim invalid.
Rain’s US Patent 9,805,349 covers a method for delivering apps via a computer network using a webstore and server authentication. The claim requires “a user identification module configured to control access of said one or more software application packages.” If you have been following patent claim construction over the past decade: You know that the focus here will be whether this “module” limitation invokes 35 U.S.C. § 112 ¶ 6 as a means-plus-function term. And, if so, is it indefinite for failing to provide sufficient structural support in the specification.
Normally, patent claims are expected to spell out the actual structure of the invention — not just its function. However, § 112 ¶ 6 (now renamed § 112(f)) allows a patentee to avoid adding those specifics in combination claims by including an element “as a means or step for performing a specified function without the recital of structure, material, or acts in support thereof.” The statute goes on to include an important caveat, the element “shall be construed to cover the corresponding structure, material, or acts described in the specification and equivalents thereof.” The statute does not spell-out what happens when the specification lacks any corresponding structure — but the courts have filled the gap. A means-plus-function claim that lacks corresponding structural disclosure in the specification is deemed invalid as indefinite.
Means-plus-function claiming is fools gold — especially for anyone with a thin disclosure. The claims appear broad, but are narrowly interpreted and regularly invalidated. For years, patentees have moved away from using the term “MEANS” and replaced it with some other generalized word such as “MODULE” as used in this case. By skirting the MPF trap, these newly styled claims were more broadly interpreted and rarely invalidated as indefinite. However, that approach was collapsed by the case of Williamson v. Citrix Online, LLC, 792 F.3d 1339 (Fed. Cir. 2015). In Williamson, the Federal Circuit held that claim terms that “fails to recite sufficiently definite structure or else recites function without reciting sufficient structure for performing that function” will also be interpreted as a means-plus-function term. Although the burden on invoking 112(f) is still on the patent-challenger, Williamson eliminated the heavy presumption that it doesn’t apply.
The further trick with Williamson: (a) If a particular term – such as “module” is structurally defined within the specification then it will typically not be interpreted as means-plus-function because it was particularly defined by the applicant. (b) On the other hand, if the term is not structurally defined in the specification, then it will invoke 112(f) and also be found indefinite for lack of structural support.
Here, the court first noted that the word “MODULE” “is a well-known nonce word that can operate as a substitute for ‘means’.” The Williamson case itself focused on the word module and found that it did not indicate any “structure.” The court drew the same conclusion in Rain Computing— finding that the claimed “user identification module” has no commonly understood structure and the specification included no structural disclosure.
Here, the specification does not impart any structural significance to the term; in fact, it does not even mention a “user identification module.”
Slip Op. So, we fall into the category (b) from above: Nonce word without structural support → therefore → Invoke 112(f) and invalidate. The court writes:
Nothing in the claim language or the written description provides an algorithm to achieve the “control access” function of the “user identification module.” When asked at oral argument to identify an algorithm in the written description, Rain could not do so. Without an algorithm to achieve the “control access” function, we hold the term “user identification module” lacks sufficient structure and renders the claims indefinite.
Slip Op. Thus, the claim is indefinite. This rendered the separate non-infringement related claim construction moot.
During prosecution the patent examiner had expressly stated that the limitation “does not invoke 112, 6th paragraph, or 112(f).” However, the examiner’s somewhat cryptic reasoning was that a 112(f) means limitation cannot exist within a method claim. On appeal, the Federal Circuit noted the examiner’s error: “Applicants are free to invoke § 112 ¶ 6 for a claim term nested in a method claim.”
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Note: In Synchronoss Techs., Inc. v. Dropbox, Inc., 2019-2196, 2021 WL 520047 (Fed. Cir. Feb. 12, 2021), the Federal Circuit encountered a claim a quite similar limitation: “user identifier module.” In that case the court also found that the term invoked 112(f) but was indefinite from lack of structural support.
(Fed Cir Clerks – note that FN 1 in Rain Computing does not accurately reflect the language of the claims in Synchronoss).
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Above, I noted the draw of means-plus-function claim language for “thin disclosures.” In this case, the disclosure was actually quite extensive, but the patentee appears to have wanted to shift the scope of coverage away from the original focus of the invention disclosure. This patent is one of nine US patent applications all within the same direct family and relying on the same original disclosure.
A jury sided with the patentee Bayer — finding the patent infringed and not proven invalid. The judge refused to allow the jury to decide willfulness, and instead found no willful infringement as a matter of law. Affirmed here on appeal.
The basic setup: Bayer’s U.S. Patent No. 9,364,520 covers a conjugate that includes a “functional Factor VIII polypeptide” having a particular amino acid sequence (“or an allelic variant thereof”). Factor VIII is normally produced by the human liver and is important to blood coagulation. Thus, Factor VIII is also a helpful treatment for hemophilia A. The conjugate also includes polyethylene glycol (PEG) that is used as a preservative and has a particular binding site on the polypeptide (“the B-domain”). The process of joining the two factors together is known as PEGylation. The B-domain binding site limitation was important because prior researchers had found that non-specific conjugation changed the Factor VIII in a way that reduced or eliminated its functionality.
First the damages: After finding infringement, the Jury was asked to determine a royalty rate (17.18%); a royalty base ($872 million); and then do the math for the damages ($155 million). The district court also added another $18 million for pre-verdict supplemental damages. The verdict here is based upon Baxalta’s distribution of Adynovate, a PEGylated FVIII hemophilia treatment.
I have included a snippet from the verdict below.
At trial, Bayer’s damages expert, Dr. Addanki, testified that the royalty rate range should be 5.1% to 42.4%. On appeal, the defendant argued that this range was simply too wide and effectively required the jury to speculate — or just pick a number, any number (within the wide range). On appeal, the Federal Circuit found no problem and that the evidence presented supported the verdict. “[W]e are aware of no precedent that requires an expert to provide a single proposed royalty rate.” I wonder if next-time Dr. Addanki will push his luck and go for a 0-100% predicted range. I’m confident that it is accurate if not precise.
RANDOM: Construing the Claim Construction. The district court construed the claimed polypeptide conjugation as “not random” based upon statements in the patent and the prosecution history. On appeal, the defendant argued that the term random – although not found in the claims – should have been construed by the district court.
On appeal, the Federal Circuit found no error — explaining that claim construction need not “purge every shred of ambiguity.” quoting Acumed LLC v. Stryker Corp., 483 F.3d 800 (Fed. Cir. 2007). Here, the defendant had asked for a particular narrow construction and the district court had refused — finding it too narrow.
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Talk about functional claim language: The claims expressly require that the conjugate be “functional.” Still, the jury found the claims enabled. On appeal, the Federal Circuit affirmed — noting the substantial evidence presented by the patentee at trial. Further, “the specification need not include a working example of every possible embodiment to enable the full scope of the claims.”
= = = =
The patentee had cross-appealed on willfulness. The patentee presented evidence that the defendant knew about the patent and knew that its drug used the same targeted PEGylation at the B-Domain as claimed.
On appeal though the Federal Circuit agreed with the district court that this evidence was not enough to make a case of willfulness. “Knowledge of the asserted patent and evidence of infringement is necessary, but not sufficient, for a finding of willfulness. Rather, willfulness requires deliberate or intentional infringement.”
So, in the end, the verdict stands at only $100 million+.
In a recent article, Judge Hughes was quoted as saying that he does not personally look at petitions for rehearing that stem from R.36 no-opinion judgments by the Federal Circuit.
Hughes said if the panel affirmed without an opinion, he puts the petition down and waits to hear from his clerks if it’s worth considering. If the panel wrote a nonprecedential decision without a dissent, he may flip through the table of contents to make sure he’s not missing anything.
But the only en banc petitions Hughes said he reads seriously are the precedential decisions, particularly with dissents. “Those are the only ones that are going to be en-banc-worthy,” he said.
Before 1989, the Federal Circuit and its predecessor courts (going back 100+ years) wrote an opinion in each and every appeal of a patent case from the Patent Office. Now, about half of the cases are decided without opinion. Back in 2010, this represented fewer than 20 cases per year, many of which were pro se and ex parte. By 2019, more than 120 R.36 no-opinion judgments were issued in PTO cases, most of these were in hotly litigated inter partes reviews. In their article, Paul Gugliuzza and Mark Lemley looked at one area of law – patent eligibility – and concluded that the court was subtly shifting the law through its R.36 practice. Gugliuzza and Lemley, Can a Court Change the Law by Saying Nothing?, 71 Vanderbilt Law Rev. 765 (2018).
In a number of cases, parties have petitioned the Supreme Court and Federal Circuit for a hearing on the issue — arguing as I did in my 2017 article that 35 U.S.C. 144 requires the court to issue an opinion when reviewing an appeal from the Patent Office. So far, no court has agreed to even hold such a hearing.
In WaterBlasting v. Iancu, the petitioner is taking this same approach (I previously wrote about the patentee’s en banc request here.) In its new responsive briefing, the USPTO focused on general principles of appellate procedure that, by “longstanding tradition” permit the appellate courts to “establish their own procedures concerning when to issue opinions.” While I agree with this general principle, the USPTO failed to consider or work through the competing longstanding tradition in the patent context noted above or the statutory history on point.
One thing that I like about the Gov’t brief is that it lists many of the unsuccessful petitions to the Supreme Court on this issue:
See, e.g., Fote v. Iancu, 140 S. Ct. 2765 (2020); Kaneka Corp. v. Xiamen Kingdomway Grp., 140 S. Ct. 2768 (2020); Specialty Fertilizer Products, LLC v. Shell Oil Co., 138 S. Ct. 2678 (2018); Shore v. Lee, 137 S. Ct. 2197 (2017); Concaten, Inc. v. AmeriTrak Fleet Solutions, LLC, 137 S. Ct. 1604 (2017); Cloud Satchel, LLC v. Barnes & Noble, Inc., 136 S. Ct. 1723 (2016); Hyundai Motor Am. v. Clear with Computers, LLC, 134 S. Ct. 619 (2013); Kastner v. Chet’s Shoes, Inc., 565 U.S. 1201 (2012); White v. Hitachi, Ltd., 565 U.S. 825 (2011); Max Rack, Inc. v. Hoist Fitness Sys., Inc., 564 U.S. 1057 (2011); Romala Stone, Inc. v. Home Depot U.S.A., Inc., 562 U.S. 1201 (2011); Wayne-Dalton Corp. v. Amarr Co., 558 U.S. 991 (2009); Tehrani v. Polar Electro, 556 U.S. 1236 (2009).
United States v. Arthrex, Inc. (Supreme Court 2021)
Whether, for purposes of the Appointments Clause, U.S. Const. Art. II, § 2, Cl. 2, administrative patent judges of the U.S. Patent and Trademark Office are principal officers who must be appointed by the President with the Senate’s advice and consent, or “inferior Officers” whose appointment Congress has permissibly vested in a department head.
Whether, if administrative patent judges are principal officers, the court of appeals properly cured any Appointments Clause defect in the current statutory scheme prospectively by severing the application of 5 U.S.C. 7513(a) to those judges.
On Monday, March 1, 2021, the Supreme Court will hear oral arguments in this important case focusing on administrative power of the USPTO Patent Trial & Appeal Board. PTAB judges have cancelled thousands of issued patents — that judicial role (with little direct control guidance from the USPTO Director) suggests that the PTAB judges are “Officers of the United States” that must be appointed by the President. Although PTAB decisions are not directly reviewable by the USPTO Director, the director has substantial authority in controlling panel selection, rules of practice, and job performance. All those suggest that perhaps the judges are “inferior Officers” that may be appointed by a Head of Department – such as the Secretary of Commerce. If the Principal Officer theory prevails, the potential result is that a substantial number of PTAB Decisions will be rendered void.
The Federal Circuit decision in the case was a bit quirky, to be mild. The appellate court agreed with the patentee that the judges were Principal Officers that should have been appointed by the President. However, the court also purported to “save” the appointments by eliminating some of the statutory rights provided to the Judges under the APA via judicial fiat. That severing, according to the court, was sufficient to reduce the judges once again to Inferior officers.
None of the parties were satisfied with this result, and each petitioned for writ of certiorari. The Supreme Court granted the writ (as to the two questions above) and consolidated the cases.
I contacted my Mizzou Colleague and Constitutional Law Scholar Prof. Tommy Bennett for his take on the case. Bennett agrees that the parties have presented differing theories of authority and power. If you focus only on decisional authority, then Arthrex has a case that these are Officers requiring presidential appointment. However, the staffing and organizational authority lies with the PTO Director who can “appoint, assign, and re-assign any APJ for any reason [and] set the rules and procedures by which PTAB proceedings are conducted.” Prof. Bennett explained to me: “Which of these two views of authority prevails will, I think, determine how the case turns out.”
I also contacted Mark Perry for some commentary. Perry is arguing on behalf of the patent challenger Smith & Nephew and provided the following statement.
The PTO Director is charged by statute with providing policy direction and management supervision to the Office, including the Board. APJs can’t start work without his approval, they have to follow his procedural and substantive guidance while working, and he has a variety of means to review their work. Moreover, only the Director confirms or cancels patent claims at the conclusion of IPR proceedings, and thus he bears political accountability for final decisions. APJs are inferior Officers under the Appointments Clause, just as their predecessors have been since the Patent Office was created in 1836.
I’ll note here that the 1952 Patent Act required that the PTAB Judges (formerly Chief Examiners) be “appointed by the President, by and with the advice and consent of the Senate.” 35 U.S.C. 3 (1952). This does not mean that it was required, but suggests a close case. The requirement of presidential appointment ended in 1975 when the duty of appointments was pushed-down to the Secretary of Commerce. Appointments were later pushed-down further to the USPTO Director until Prof. John Duffy suggested that approach was unconstitutional.
March 1 Oral arguments are set to be divided as follows:
15 minutes for US Gov’t Intervenor
15 minutes for the patent challenger Smith & Nephew
30 minutes for the patentee Arthrex
Deputy Solicitor General Malcolm Stewart will represent the U.S. at oral arguments. Stewart has been part of the case from the beginning. Although his bosses have changed, I don’t believe that the Gov’t position has substantively wavered. Mark Perry of Gibson Dunn will argue on behalf of Smith & Nephew; and Jeff Lamkin of MoloLamkin for the patentee.
At the briefing stage, the US Gov’t presented an additional waiver challenge — arguing that the patentee had not preserved its right to appeal on the appointments challenge. SCOTUS declined to hear that issue in this case. However, the issue is central to a parallel appointments challenge in Carr v. Saul. That case is looking at whether administrative law judges deciding cases under the Social Security Act should have been appointed by the President
Whether a claimant seeking disability benefits under the SSA forfeits an appointments-clause challenge to the appointment of an administrative law judge by failing to present that challenge during administrative proceedings.
Docket. Carr v. Saul is set for oral arguments on March 3, 2021. I expect opinions in the cases will be released together later this term.
Bitmanagement Software GmbH v. US, 20-1139 (Fed. Cir. 2021)
Bitmanagement distributes graphics-rendering software that the US Navy makes available to computers connected to the Navy Marine Corps Intranet. The Navy purchased these copies, but did not pay the full seat license fees for system-wide use. As part of the discussion between the parties, the Navy was supposed to (but did not) use licensing-tracking software (“Flexera”) to monitor and limit the number of simultaneous users of its system. After learning of that failure, Bitmanagement registered its copyright and then sued for copyright infringement.
Since the U.S. Gov’t is a defendant, the lawsuit was filed in the Court of Federal Claims (CFC) under 28 U.S.C. § 1498(b).
(b) [W]henever the [US] copyright in any work protected … shall be infringed by the United States … the exclusive action which may be brought for such infringement shall be an action by the copyright owner against the United States in the Court of Federal Claims [CFC] for the recovery of his reasonable and entire compensation as damages for such infringement.
Section 1498(b). The CFC agreed with Bitmanagement that it “had established a prima facie case of copyright infringement.” But, the lower court went on to excuse the Navy’s actions–finding an implied license to make/distribute copies. Bitmanagement Software GmbH v. United States, 144 Fed. Cl. 646 (2019).
Suing on Copyright vs. Contract: The Navy admitted that it did not fully live up to the implied agreement — it did not track/limit usage. On that point, the Navy suggested that potential breach should be pursued via a breach-of-contract claim, not a copyright claim. This is a convenient argument for the Navy because Bitmanagment did not allege breach of contract.
On appeal, the Federal Circuit sided with the copyright holder and found that the Navy’s failure to track/limit usage created an infringement claim. The line on this is fairly thin — the Federal Circuit makes a distinction between breaches of (a) “a condition that limits the scope” or instead is (b) “merely a covenant.” Slip Op. There is no infringement claim if the licensee breaches a mere covenant, but there will be a copyright claim that arises from breach of a condition. The court went on to explain that terms of a license “are presumed to be covenants, rather than conditions, unless it is clear that a condition precedent was intended.” Thus, “[n]ormally, a copyright owner who grants a license to his copyrighted material has waived his right to sue the licensee for copyright infringement and must instead pursue a claim for breach of contract.”
On appeal here, the court found that the use of Flexera to limit/monitor usage was a condition that induced Bitmanagment to enter the contract. The CFC did not reach the condition/covenant question, but did expressly conclude that Bitmanagment entered the contract “because Flexera would limit the number of simultaneous users … regardless of how many copies were installed on Navy computers.” On appeal, the Federal Circuit found this implied clause “critical to the basic functioning of the deal.”
Thus, the Flexera term was clearly a condition rather than merely a covenant. Unlike payment, which is typically considered a covenant, the use of Flexera at the time of copying was critical to the basic functioning of the deal. The timing of Flexera was key because the Navy’s tracking of BS Contact Geo users was intended to establish how many additional licenses the Navy would purchase. Without tracking, the Navy would have no basis to purchase more licenses and, consequently, Bitmanagement would have had no reason to enter into the implied-in-fact license. Unlike payment, which can feasibly come at any time after contract performance, Flexera was only useful if it could track, from the beginning, the number of Navy users.
Slip Op.
Bottom line here: this provision is a condition and thus its breach opens the door to a copyright infringement claim. Because the CFC already found infringement but-for the license all that remains on remand is to determine the damages owed.
Regarding damages, the court also provided some guidance to the lower court:
Because Bitmanagement’s action is against the government, it is entitled only to “reasonable and entire compensation as damages . . ., including the minimum statutory damages as set forth in section 504(c).” 28 U.S.C. § 1498(b). This amount may not include non-compensatory or punitive damages. Contrary to Bitmanagement’s argument, it is not entitled to recover the cost of a seat license for each installation. If Bitmanagement chooses not to pursue statutory damages, the proper measure of damages shall be determined by the Navy’s actual usage of BS Contact Geo in excess of the limited usage contemplated by the parties’ implied license. That analysis should take the form of a hypothetical negotiation. As the party who breached the Flexera requirement in the implied license, the Navy bears the burden of proving its actual usage of the BS Contact Geo software and the extent to which any of it fell within the bounds of any existing license. See Restatement (Second) of Contracts § 352 cmt. a (Am. L. Inst. 1981) (“Doubts [about the extent of damages] are generally resolved against the party in breach.”).
Slip op. Note 5. I’ll pause here to note the oddity with regard to proving damages. Normally, the burden is on the IP holder to prove its damages.
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I guess I don’t fully understand the law of implied contract. One reason justifying the finding of an implied contract was the fact that the parties were careful to avoid entering in an express contract. “Application of the preclusion rule was not warranted in this case for three primary reasons. First, Bitmanagement and the Navy were intentional in their decision not to enter into an express contractual relationship. As to the express agreements, the parties stipulated that “[t]here is no privity of contract between the United States and Bitmanagement.” J.A. 10057 ¶ 34. Instead, Bitmanagement and the Navy chose to use intermediary Planet 9 to conduct business.” Seems to me that both parties being careful to avoiding entering into an express contract suggests that there is also no implied contract.
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The appellate panel’s reasoning for upholding the implied contract finding was that it gave substantial deference to the lower court’s factual finding. The opinion notes that Bitmanagement’s alternative position “is certainly supported by the record.” Although Plausible, the court affirmed because the CFC’s factual findings were “plausible … and thus is not clearly erroneous.” The deference here is huge — the court also noted “grave doubts” and that it was “dubious” as to whether there was any meeting of the minds. Still, did not disturb the CFC’s ruling on that point .
The majority opinion was written by Judge O’MALLEY and joined by Judge DYK.
Judge NEWMAN wrote a concurring opinion and would have found no implied contract.
I discern no license, implied or otherwise, for the Navy to make hundreds of thousands of copies of Bitmanagement’s commercial software product “BS Contact Geo.” The Navy made the copies using Bitmanagement’s keys and installation file, and admitted that it distributed the copies throughout the Navy, although without authorization, without license, and without payment. The Navy has not justified this improper copying; it violates the terms of its purchases of Bitmanagement’s product, and violates Bitmanagement’s copyright.
Daikin Indus. v. Chemours Co. (Fed. Cir. 2021) (non-precedential)
The PTAB sided with the patent challenger Chemours — finding claims 1-5 of Daikin’s U.S. Patent No. 9,574,123 unpatentable as obvious. On appeal, the Federal Circuit has affirmed.
The patent here is covers a refrigerant mixture of three compounds that I have labeled A, B, and C.
A: hydrofluorocarbons (HFCs);
B: hydrofluoroolefins (HFOs) (such as HFO-1234yf); and
C: a chlorine-containing hydrocarbon refrigerant (such as chlorofluorocarbon (CFC)).
The HFCs and HFOs apparently have lower global environmental impact, but lack the lubricant-performance of chlorine-containing CFCs. The invention balances these factors by mixing them all together. The prior art disclosed the combination of A&B and also the combination of B&C, but did not expressly disclose the full three-way combination.
Substitution: In its discussion, the court focused on the obviousness of a substitution because the prior art spoke of two forms HFO-1234yf. One form that only contains HFOs (B only); and another form that includes small amounts of CFCs (B and C). The PTAB and FedCir agreed that, in this case it would have been obvious to start with the A&B combination and then substitute the B&C version of HFO-1234yf in place of the B only version found in the primary reference.
The US Supreme Court most recently wrote about obviousness substitutions in KSR Int’l Co. v. Teleflex Inc., 550 U.S. 398, 416 (2007). There, the court explained:
[W]hen a patent claims a structure already known in the prior art that is altered by the mere substitution of one element for another known in the field, the combination must do more than yield a predictable result. . . . [W]hen a patent simply arranges old elements with each performing the same function it had been known to perform and yields no more than one would expect from such an arrangement, the combination is obvious.”
KSR. Here, there is no question that all of the elements were known in the art, the but the patentee argued unpredictability of results especially because the proposed substitution disclosed in the prior art also included other contaminants that could impact performance.
On appeal, the Federal Circuit gave deference to the PTAB’s fact finding — and concluded that it was supported by substantial evidence. In particular, the Board had relied upon expert testimony that the result was predictable and that “trivial
increase [in the contaminants] would not have prevented a [skilled artisan] from making such a substitution.”
Obviousness affirmed.
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1. A composition comprising HFC and HFO, wherein the composition comprises:
HFC-32, HFC-125, HFC-134a, and HFC-134 as the HFC;
at least one of HFO-1234yf and HFO-1234ze as the HFO; and
at least one member selected from the group consisting of HCC-40, HCFC-22, HCFC-124, CFC-115, HCFC-1122, CFC-1113, and 3,3,3-trifluoropropyne as a third component.
John Bean Techs. Corp. v. Morris & Assoc., Inc. (Fed. Cir. 2021)
John Bean’s U.S. Patent No. 6,397,622 covers a machine for rapidly chilling “slaughtered, eviscerated poultry carcasses.” Id. 🤢. The approach uses an auger that moves the carcasses in one direction against a counter-flow of chilled water. In 2014, John Bean sued its primary competitor Morris for patent infringement, and this is the second appeal in the case.
The first appeal focused on the defenses of laches and equitable estoppel. You see, back in 2002 Morris had notified John Bean that the patent was invalid (with an explanation of the prior art). John Bean took no action for the succeeding 11 years. That delay gave rise to the equitable bars. In 2013-2014 John Bean shepherded the patent through ex parte reexamination. The 2014 infringement action followed based upon amended and new claims in the patent. In its 2018 decision, the Federal Circuit explained (1) that laches no longer applies following SCA Hygiene (2017) and (2) equitable estoppel did not bar the patentee from seeking damages for the amended/new claims.
On remand, the district court again dismissed the case — finding that Morris’s conduct was permitted under a doctrine of equitable intervening rights as codified in 35 U.S.C. 252. On appeal for the second time, the Federal Circuit has affirmed.
The reissue statute, Section 252 provides for both absolute and equitableintervening rights. Although the provision applies expressly to reissue patents, Section 307(b) brings reexaminations under the fold as well. See also 35 U.S.C. 318(c) (applying intervening rights to inter partes review).
The focus here is on equitable intervening rights created where “substantial preparation was made before the grant of the [reexam].” Under the statute, a judge can allow infringing actions to continue without penalty “to the extent and under such terms as the court deems equitable for the protection of investments made or business commenced before the grant of the [reexam].” In the appeal, the patentee made two main arguments about allowing the infringer to completely avoid damages.
Equitable Relief to Protect Investments: It is undisputed that Morris has already recouped its investment in the infringing product made prior to the reexamination. Thus, according to the patentee, there is no need for equity to provide further relief “for the protection of investments.” On appeal, the Federal Circuit found no strict limits on scope of relief. “We see no indication in the statute that monetary investments made and recouped before reissue are the only investments that a court may deem sufficient to protect as an equitable remedy.”
Willful Infringement: The patentee also argued that willful infringement should be seen as a form of unclean hands that would deny equity. On appeal though, the Federal Circuit disagreed with the premise that the defendant infringed-at-all:
If there is no infringement, there cannot be willful infringement. Once the district court granted Morris’s motion for summary judgment on the affirmative defense of equitable intervening rights, it did not have to reach the question of willful infringement.
GS Cleantech Corporation, et al. v. Adkins Energy LLC, et al., No. 20-769 (Standard of review when appealing an issue decided on summary judgment that later served as the basis for an inequitable conduct finding).
adidas AG v. Nike, Inc., No. 20-728 (are PTAB judges principal officers?)
The adidas decision confused me a bit – the court has held over other cases on the same question awaiting the outcome in Arthrex that is set for Oral arguments on March 1, 2021. Nike’s patents are challenged. U.S. Patent No. 7,814,598 and No. 8,266,749. The claims appear to be broadly directed to making a shoe-upper from cloth made in a circular knitting machine.
In a split-decision, the majority has sided with the patentee and vacated a PTAB inter partes reexamination decision cancelling the claims of SynQor’s U.S. Patent No. 7,072,190. Judge Hughes wrote the majority decision that was joined by Judge Clevenger focusing on the procedural issues of collateral estoppel and mootness. Judge Dyk wrote in dissent — arguing that reexamination decisions do not create issue preclusion — they are “examination” and “inquisitorial” rather than “adjudicatory.” CitingB & B Hardware, Inc. v. Hargis Industries, Inc., 575 U.S. 138 (2015).
Issue Preclusion: Issue preclusion always involves a tribunal decision in a first case followed by a second case where the same issue is raised. When the stars align, the first decision finally settles the issue between the parties and precludes the party who lost on the issue in the first case from relitigating the same issue in the second case.
The tricky aspects of the “cases” here is that they are inter partes reexamination proceedings. Back in 2011, Vicor petitioned for pre-AIA inter partes reexamination of three closely-related SynQor patents. First Case: Two of the reexaminations reached the PTAB first — and the PTAB sided with the patentee by holding that the asserted prior art could not be combined because of “incompatibilities in the frequency.” In its decision, the PTAB noted that both sides had presented evidence regarding the issue and expressly concluded that the patentee’s evidence was more credible than that presented by the patent challenger. The Federal Circuit then affirmed that decision on appeal, although the Federal Circuit was not asked to address the particular incompatibility issue. Second Case: When the third reexamination reached the PTAB, the Board changed course — now holding that the two references were not incompatible.
On appeal, the majority found that the outcome of the first case foreclosed any relitigation of the issue by the PTAB second time around.
“[T]he determination of a question directly involved in one action is conclusive as to that question in a second suit.” B & B Hardware, Inc. v. Hargis Indus., Inc., 575 U.S. 138, 147 (2015) (quoting Cromwell v. County of Sac, 94 U.S.
351, 354 (1877)).
In B&B, the Supreme Court indicated that issue preclusion applies in the administrative context, unless congress says otherwise. B&B explained more caveats: Preclusion applies “[w]hen an administrative agency is acting in a judicial capacity and resolves disputed issues of fact properly before it which the parties have had an adequate opportunity to litigate.” (TTAB context). The dissent argued on this point that reexaminations are different — it is not ‘judicial’ but rather ‘inquisitorial.’ This dispute is an interesting exercise in line drawing, but does not carry much import going forward because inter partes reexamination has been supplanted by inter partes review. The court has previously ruled that issue preclusion applies to IPR decisions (so long as the requirements of issue preclusion are met).
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One quirk of the decision is that the patentee SynQor did not raise issue preclusion to the PTAB. In its decision, the court found no forfeiture or waiver — writing that “SynQor could not have raised issue preclusion because neither [of the first two] reexaminations became final until after the Board’s decision [in the second case].” In making this determination, the Federal Circuit appears to implicitly conclude that issue preclusion does not apply until a case is affirmed on appeal or otherwise completely concluded, even if the issue-at-hand is not appealed.
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Mootness. The patentee had added some claims during the reexamination, and the PTAB found them unpatentable. Meanwhile, the patent has also expired. Thus, even if those claims emerged from the reexamination, they would have never been part of a valid patent. The patentee asked the Federal Circuit to thus vacate the invalidity finding — and it agreed. “[V]acatur is available so that “those who have been prevented from obtaining the review to which they are entitled [are] not . . . treated as if there had been a review.” Munsingwear, This “prevent[s] an unreviewable decision ‘from spawning any legal consequences.’” Camreta v. Greene, 563 U.S. 692 (2011). This effectively prevents that aspect of issue preclusion from applying against the patentee when/if this ever gets back to the infringement action in district court.
Ericsson Inc., et al. v. TCL Communication Technology Holdings Limited, et al. (Supreme Court 2021)
A jury sided with Ericsson with a $75 million verdict for the patentee. (See the verdict image above). On appeal, the Federal Circuit flipped the verdict — holding that the asserted patent was ineligible under Section 101. In a new SCT petition, Ericsson challenges the decision on procedural grounds — arguing that TCL did not properly preserve the eligibility issue for appeal. In particular, Ericsson argues for waiver because the defendant did not raise the issue in a post-verdict R.50(b) motion for Judgment as a Matter of Law.
During the litigation, TCL had argued that Ericsson’s claims were ineligible under Section 101. Before trial the district court denied TCL’s motion for summary judgment. TCL did not raise the issue again at trial or in a motion for JMOL under either R.50(a) or R.50(b).
Normally, denial of summary judgment does not preserve an issue for appeal. Rather, the moving party must follow up with a pre-verdict motion for JMOL and then a post-verdict renewed-JMOL motion. Unitherm Food Sys., Inc. v. Swift-Eckrich, Inc., 546 U.S. 394 (2006); Ortiz v. Jordan, 562 U.S. 180 (2011).
Oritz is parallel to TCL’s case but involves a Civil Rights action under Section 1983. In Oritz, a the defendants filed a summary judgment motion on qualified immunity grounds, but that motion was denied prior to trial. The plaintiff then won a jury verdict at trial and the defendant did not re-raise the qualified immunity question in a post-verdict JMOL motion. On appeal, the Sixth Circuit flipped on the issue of qualified immunity — thus excusing the defendants. In its decision, the appellate panel noted the usual rule that appellate courts “normally do not review the denial of a summary judgment motion after a trial on the merits.” However, the appellate court found qualified immunity to be a special situation and went-ahead to review the SJ decision. The Supreme Court disagreed with the Sixth Circuit — holding that the appellate panel had no power to review the summary judgment denial.
We granted review to decide a threshold question on which the Circuits are split: May a party, as the Sixth Circuit believed, appeal an order denying summary judgment after a full trial on the merits? Our answer is no. The order retains its interlocutory character as simply a step along the route to final judgment.
Ortiz v. Jordan, 562 U.S. 180, 183–84 (2011).
In TCL’s case, the Federal Circuit distinguished Ortiz by identifying a different exception for situation where the “disputed issue concerns a pure question of law.” In its analysis, the Federal Circuit purported to follow Fifth Circuit law — because this issue is procedural and the case stems from Texas. The appellate panel explained that the Fifth Circuit continues to allow appeals from S.J. denial when the issue being appealed is a pure question of law that would not have been raised at the jury trial. Note here that the Federal Circuit decision does not distinguish or even cite to the Supreme Court’s most recent statement on-point, Ortiz.
A key element of the majority decision is that – for a question of law – denial of summary judgment of ineligibility fully decides the issue and acts sub silento to effectively grant summary judgment of eligibility. “[T]he district court here did not merely deny summary judgment. Rather … it effectively granted summary judgment in favor of the non-moving party by deciding the issue and leaving nothing left for the jury to decide.” The Federal Circuit majority opinion was written by Chief Judge PROST and joined by Judge CHEN.
Judge NEWMAN wrote in dissent and argued that the majority erred in its approach to summary judgment motions — “The majority announces new law and disrupts precedent.”
All this sets up the new petition for writ of certiorari that asks two questions:
1. Whether, notwithstanding the ordinary rule that a pretrial denial of a motion for summary judgment is not reviewable on appeal, there is an exception for summary judgment decisions that turn solely on “legal issues.”
2. Whether an order denying summary judgment can be reviewed following trial, at the discretion of the court of appeals, notwithstanding a party’s failure to seek judgment as a matter of law on those grounds under Rule 50.
1. A system for controlling access to a platform, the system comprising:
a platform having a software services component and an interface component, the interface component having at least one interface for providing access to the software services component for enabling application domain software to be installed, loaded, and run in the platform;
an access controller for controlling access to the software services component by a requesting application domain software via the at least one interface, the access controller comprising:
an interception module for receiving a request from the requesting application domain software to access the software services component; and
a decision entity for determining if the request should be granted wherein the decision entity is a security access manager, the security access manager holding access and permission policies; and
wherein the requesting application domain software is granted access to the software services component via the at least one interface if the request is granted.
I wrote earlier about the Supreme Court petition in Amarin Pharma, Inc. v. Hikma Pharmaceuticals USA Inc. (Supreme Court 2021) that focuses on secondary considerations of non-obviousness such as commercial success and long-felt un-met need. There has been a small movement over the years to refer to these as “objective indicia of nonobviousness” as opposed to secondary considerations. That movement did not arise with the Supreme Court. Rather, the Supreme Court has repeatedly referred to these as “secondary factors” or “secondary considerations” of non-obviousness. It did so in both Graham (1966) and again in KSR (2007). In KSR, the court particularly suggested that they have a role in negating obviousness — effectively as rebuttal evidence. “Teleflex has shown no secondary factors to dislodge the determination that claim 4 is obvious.” In Amarin, the patentee is arguing that commercial success and the other factors should not be relegated to rebuttal evidence but rather be used on-par with the other Graham factors.
I wanted to see what language courts have been using and so pulled up the 2,500+ Federal Court decisions since 1966 that talk about either objective indicia or secondary considerations (or both). [Search strings below]. The results. Most cases — about 2/3 — follow Graham and speak of “secondary considerations.” Another 13% are what I call “overlapping” and use forms of characterizing the analysis. Finally, 20% speak in terms of “objective indicia.” The charts below shows these results along with the time series.
* To find the cases, I used Westlaw and limited the search to only patent-cases. For “objective indicia” cases, I looked within the opinin (OP) for (“objective indicia” or “objective factors”) /s (obvious! or nonobvious!). For “secondary considerations” cases, my search string was (“secondary factors” or “secondary conditions”) /s (obvious! or nonobvious!). Note – there are some problems with attempting longitudinal studies with Westlaw for several reasons, including changes in how cases are recorded and coded within the service.
In this non-precedential opinion, the Federal Circuit has sided with the patentee CROCS — upholding the design patent for its really amazing footwear. D517,789.
The setup here is an inter partes reexamination filed by Dawgs back in 2012 (now Mojave Desert). During the reexam, the examiner searched the Wayback Engine (Internet Archive) and found images on the crocs website that predate the patent application filing. The examiner relied upon those pre-filing disclosures (images below) to reject the patent claims as anticipated. However, the PTAB rejected that analysis and instead upheld the validity of the issued patent.
Here is the problem — the patent includes claim features on the bottom-side of the shoe, and Fig 11 does not show the bottom of the shoe. On appeal, the Federal Circuit affirmed with only cursory analysis: “Having reviewed the Board’s decision and the record, we discern no reversible error.”
Mojave’s basic argument is that nothing on the bottom of the shoe was really claimed. Mojave’s briefing included the figure below, where it argued that the red lines were the only claimed portion — and those were adequately shown in the Fig 11 prior art. (Sorry color blind friends).
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An aspect of the case also involved whether Mojave could stand-in for the original IPR petitioner Dawgs. Dawgs went bankrupt back in 2018 and stopped participating in the IPR. Mojave bought up various aspects of Dawgs rights. However, the PTAB refused to allow Mojave to participate in the reexam. On appeal here, the Federal Circuit found that Mojave was an appropriate substitute.
In contrast to Agilent, the sale … clearly transferred all of U.S.A. Dawgs’s assets and claims and did so using broad language. U.S.A. Dawgs did not need to enumerate each of its assets individually to effectuate the broad transfer. U.S.A. Dawgs dissolved and did not continue to participate before the Board. Under the circumstances, the transfer of all assets on its face included the rights in the Board proceeding.
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The briefing involved substantial discussion about who should count as the “ordinary observer” for both infringement and validity consideration. In a prior case involving the patent, Crocs had argued that the ordinary observer was an “Impulse Buy Purchaser.” That low-standard made it easier to argue infringement since – at a quick glance the accused product looked so similar. In this case, however, the patentee changed its tune and focused on detailed and small differences that would not have been observed at a quick glance. The court did not reach this issue, which might have applied judicial estoppel.
Amarin Pharma, Inc., v. Hikma Pharmaceuticals USA Inc. (Supreme Court 2021)
Obviousness is the key, the core, and the central doctrine of our US utility patent system. The Supreme Court’s doctrine in Graham v. John Deere (1966) and KSR v. Teleflex (2007) serve as the pillars along with the statutory language from the 1952 Patent Act.
A patent for a claimed invention may not be obtained … if the differences between the claimed invention and the prior art are such that the claimed invention as a whole would have been obvious before the effective filing date of the claimed invention to a person having ordinary skill in the art to which the claimed invention pertains. Patentability shall not be negated by the manner in which the invention was made.
35 U.S.C. § 103. Of course, in deciding Graham, the Supreme Court wrote that the new Section 103 ““was intended to codify judicial precedents” such as ” Hotchkiss v. Greenwood, 52 U.S. (11 How.) 248 (1851) and its progeny.
Objective indicia of Nonobviousness — do you call them "secondary factors?"
In a bench trial, the district court invalidated Amarin’s patent covering a drug treatment for hypertriglyceridemia — finding the claims obvious over a combination of prior art references that had been previously considered by the USPTO. On appeal, the Federal Circuit affirmed without opinion (R.36). Now, the patentee has filed a petition with the US Supreme Court asking for clarification of the Graham analysis. In particular, what is the role of the objective indicia of non-obviousness. We sometimes call these “secondary factors” — and that is the focus of the particular dispute. Does the Federal Circuit err when it (sometimes) relegates the objective indicia to a secondary status.
This Court has made clear that objective indicia must be considered along with the other factors before concluding that any invention is obvious, so that real world indicators—which are often the strongest evidence of nonobviousness—may guard against the risk that patents will incorrectly appear obvious in hindsight.
The Federal Circuit has improperly relegated objective indicia of nonobviousness to a secondary role. Under the Federal Circuit’s framework, a court first considers only the three technical Graham factors and reaches a conclusion of “prima facie” obviousness. Only then does the court consider objective indicia, merely as a basis for rebutting a conclusion already reached. The result is over-invalidation of patents through hindsight bias and the suppression of innovation.
The question presented is: Whether a court must consider objective indicia of nonobviousness together with the other factors bearing on an obviousness challenge before making any obviousness determination.
The key case in point is likely Goodyear Tire & Rubber Co. v. Ray-O-Vac Co., 321 U.S. 275 (1944). In its decision, the Supreme Court explained that the patented “leakproof dry cell for a flash light battery” was within a crowded art which suggested that invention was obvious — especially when “viewed after the event.” But, the court looked also to the long-felt unmet need before negating patentability:
During a period of half a century, in which the use of flash light batteries increased enormously, and the manufacturers of flash light cells were conscious of the defects in them, no one devised a method of curing such defects. Once the method was discovered it commended itself to the public as evidenced by marked commercial success. These factors were entitled to weight in determining whether the improvement amounted to invention and should, in a close case, tip the scales in favor of patentability. Accepting, as we do, the findings below, we hold the patent valid and infringed.
Id. Goodyear was a 5-4 decision written by Justice Owen Roberts. Justice Hugo Black dissented with a quote from a 19th Century Court decision: “a shadow of a shade of an idea.” A. Works v. Brady, 107 U.S. 192 (1883) (“It was never the object of [the patent] laws to grant a monopoly for every trifling device, every shadow of a shade of an idea, which would naturally and spontaneously occur to any skilled mechanic or operator in the ordinary progress of manufactures.”). Black wrote:
If the patentee here has ‘discovered’ anything, it is that the creamy substance in a dry cell will not leak through a steel jacket which covers and is securely fastened to the ends of the cell. For that alleged discovery this patent is today upheld. I do not deny that someone, somewhere, sometime, made the discovery that liquids would not leak through leak-proof solids. My trouble is that, despite findings to the contrary, I cannot agree that this patentee is that discoverer. My disagreement is not based solely on the narrow ground that the record shows previous patents have been issued to others who put jackets of metal and other substances around dry cells. Antiquarians tell us that the use of solid containers to hold liquids predated the dawn of written history. That the problem of the quality and strength of the walls of such containers was one to which ancient people turned their attention appears from the widespread currency at an early age of the maxim that ‘new wine should not be put in old bottles.’ It is impossible for me to believe that Congress intended to grant monopoly privileges to persons who do no more than apply knowledge which has for centuries been the universal possession of all the earth’s people—even those of the most primitive civilizations.
Goodyear, dissent by Justice Black. Justice Robert Jackson also wrote a short dissent in Goodyear arguing that the patentee had not proven sufficient nexus between the invention’s merits and the product’s commercial success. Rather, at the time there was a war going on that also drove business.
In its December 2020 decision, the Federal Circuit sided with the PTO — upholding the PTAB conclusion that Mr. Earley’s claims were obvious based upon Earley’s own prior invention. The court has now also denied Early’s petition for rehearing. Earley represented himself pro se. His filings at the Federal Circuit were not pretty, and I expect that sealed his loss — even if he had a good underlying argument on the merits. Still his innovations are pretty interesting.
Earley’s pending application, APN No. 12/925,235, claims priority back to a 2009 filing date. His prior patent, PAT No. 6,949,842 reaches back to a 2001 provisional and issued as a patent in 2005 — so it was 102(b) prior art.
In looking at the history in the case, I suspect that Earley could have won by submitting his factual arguments to the Examiner / PTAB in the form of an affidavit (i.e., as evidence) rather than merely as arguments in the briefing. The PTAB had noted that Earley’s arguments regarding problems with the prior art carried no weight because they were based upon conclusory statements rather than “objective evidence (e.g., declaration evidence) providing detailed specifics.”
The decision here provides another anti-functional-limitation decision — this time rendering Amgen’s monoclonal antibody claims invalid. Although enablement decisions traditionally differed greatly between biotech and computer innovations, the decision here relies heavily on the Federal Circuit’s recent software decision in McRO, Inc. v. Bandai Namco Games Am. Inc., 959 F.3d 1091 (Fed. Cir. 2020).
The first jury sided with Amgen, the patentee, finding that Regeneron had failed to prove that the asserted patents lacked enablement or written description. On appeal, the Federal Circuit vacated the resulting final judgment and ordered a new trial based upon errors in evidentiary rulings and jury instructions. On remand, the second jury again sided with Amgen. The district court though favored the defendant and awarded Judgment as a Matter of Law (JMOL) for lack of enablement. On appeal, the Federal Circuit has affirmed.
[Image of second verdict above]
The patents at issue claim monoclonal antibodies used to help reduce LDL-C levels. US8829165 and US8859741. Amgen’s product is evolocumab (Repatha) and Regeneron’s product is alirocumab (Praluent). Both drugs have been shown to be effective and each sell for around $14,000 per year. In the lawsuit, Regeneron admitted to infringement, but challenged the patent’s enablement — arguing that the claims extend well beyond what was taught in the specification.
Anyone reading the claims will quickly notice that the claims are claimed functionally — the claims are basically directed to all monoclonal antibodies that bind to a particular portion of the protein PCSK9 and consequently block PCSK9 from binding with the LDL-C.
An isolated monoclonal antibody [that] binds to [one of the residues of PCSK9] and … blocks binding of PCSK9 to LDRL
‘165 patent. Sanofi argued to the jury that the claims encompass millions of potential antibody candidates and that the specifications lack sufficient guidance to allow a person of skill in the art to practice the full scope of the claims without undue experimentation in the form of substantial trial and error. Amgen provided contrary testimony: “The jury heard evidence from which it could conclude that the number of distinct antibodies within the claims was around 400.” After hearing both sides, the jury found the claims enabled. But, Judge Andrews rejected the jury verdict and sided with the patentee — holding that no reasonable jury could have found otherwise.
Enablement: The patent act requires that the patent specification “enable any person skilled in the [relevant] art . . . to make and use” the claimed invention. 35 U.S.C. 112(b). Like obviousness, enablement is a question of law based upon a collection of factual findings. The Federal Circuit generally considers the Wands factors in enablement cases — particularly when asking whether the gaps in disclosure require undue experimentation. The Wands factors:
Quantity of experimentation necessary: When more experimentation is needed, it is more likely undue experimentation;
Amount of direction or guidance presented in the specification: When less guidance is provided, it is more likely that practicing the invention requires undue experimentation
Presence or absence of working examples: Their absence suggests undue experimentation;
Nature of the invention: This one is basically meaningless, but it generally is seen in comparison to the level of prior art;
State of the prior art: If the invention is a major step beyond the prior art, then it more likely requires undue experimentation;
Relative skill of those in the art: If PHOSITA is relatively low skill then it is more likely that undue experimentation is needed to practice the invention;
Predictability or unpredictability of the art: Unpredictable arts are more likely to require undue experimentation in order to practice the invention;
Breadth of the claims: Broad claims are more likely to require undue experimentation to practice the full scope of the claims.
In re Wands, 858 F.2d 731 (Fed. Cir. 1988).
The functional claim language and resulting potential for so many compounds fitting within the claim scope focus attention on the final factor — claim breadth. Although Amgen appears to have provided guidance and framework for creating and testing the efficacy of each of its claimed compounds, the problem is that there are many thousands of potential compounds — only some of which will actually work effectively as claimed.
While functional claim limitations are not necessarily precluded in claims that meet the enablement requirement, such limitations pose high hurdles in fulfilling the enablement requirement for claims with broad functional language. . . .
[T]he scope of the claims is broad. While in and of itself this does not close the analysis, the district court properly considered that these claims were indisputably broad. . . . If the genus is analogized to a plot of land, the disclosed species and guidance “only abide in a corner of the genus.” AbbVie (Fed. Cir. 2014). Further, the use of broad functional claim limitations raises the bar for enablement, a bar that the district court found
was not met.
Slip Op.
Although the court identifies the limitations in the claim as “functional” rather than structural. These particular functional limitations are important because they direct researchers in how to go about identifying compounds covered by the claims. In other words, its not surprising that researchers would say that their invention is compounds that bind to PCSK9 — because that is exactly how they have been screening for the compound. Amgen suggested a randomization-and-screening roadmap as a pathway for figuring out which antibodies would bind with PCSK9. On appeal though the Federal Circuit held that that the the amount of experimentation was too much.
The functional limitations here are broad, the disclosed examples and guidance are narrow, and no reasonable jury could conclude under these facts that anything but “substantial time and effort” would be required to reach the full scope of claimed embodiments.
We therefore conclude that, after weighing the Wands factors, the court did not err in concluding that undue experimentation would be required to practice the full scope of these claims.
Slip Op. Note, the court took care to suggest that it may be possible to enable an entire genus, but only perhaps. “We do not hold that the effort required to exhaust a genus is dispositive. It is appropriate, however, to look at the amount of effort needed to obtain embodiments outside the scope of the disclosed examples and guidance.”
In this case the burdens are important. The jury found that the defendants had not met their burden of clear-and-convincing evidence of invalidity. The district and appellate courts considered the same evidence and flipped — holding that the only reasonable outcome that a jury could reach is that the claims were proven invalid with clear and convincing evidence.
Amgen argued that that the potential breadth of the claims was “artificially inflated” by Sanofi; that the “millions” number was contested on the facts; and “A reasonable juror could easily have rejected Sanofi-Regeneron’s argument [as not] clear and convincing.” On appeal, the Federal Circuit notes that they are “not concerned simply with the number of embodiments but also with their functional breadth,” although the court later appears to side with the defendant in concluding that “the evidence showed that the scope of the claims encompasses millions of candidates.”
This is a big case for enablement and I expect to see a petition for rehearing — likely with substantial focus on the standards for reviewing and rejecting a jury’s factual findings.
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Consider – Greg R. Vetter, Patent Law’s Unpredictability Doctrine and the Software Arts, 76 Mo. L. Rev. 763 (2011) (arguing against the categorical lines on enablement).
