All posts by Jason Rantanen

About Jason Rantanen

Jason is a Law Professor at the University of Iowa College of Law.

Is the Federal Circuit Really Worse Than the Cubs?

Patent,

By Jason Rantanen

Yesterday, following the Supreme Court’s unanimous reversal of the Federal Circuit in Nautilus and Limelight, Vera Ranieri of the Electronic Frontier Foundation observed that:

These rulings mean that the Federal Circuit has been unanimously overruled in every single patent case heard by the Supreme Court this term. Since there have been five decisions, the Federal Circuit is now an extraordinary 0-45 in supporting votes by Supreme Court justices this year. Even the Chicago Cubs have a better record than that.

Vera Ranieri, Supreme Court Overrules Federal Circuit Again. And Again. (June 2, 2014).

Ranieri has a point: the Supreme Court has not been kind to the Federal Circuit this term.  Worse than the record on these five decisions (Highmark, Octane Fitness, Medtronic, Nautilus, and Limelight), some of the Court’s comments are harshly critical of the appellate court.  As Dennis noted yesterday, in Limelight the Court wrote that “The Federal Circuit’s analysis fundamentally misunderstands what it means to infringe a method patent.”  By such measures it appears that the Federal Circuit does not currently have much credibility with the Court.

These are bleak numbers indeed, but some context is important.  First, consider that even as the Supreme Court has reversed on these five cases, it also has denied certiorari in other petitions arising from the Federal Circuit (If anyone has solid figures on these, I’d love to see them).  These petitions were vigorously pursued, often with the support of amicus.  So it’s not as if the Federal Circuit is always “losing.”

In addition, it’s important to keep in mind the broader picture: so far this term, the Supreme Court has reversed in 77% of all merits decisions except those arising from the Federal Circuit.  Last year, the Court’s final reversal rate was 72%. (source: SCOSTUSBLOG).  So that the Federal Circuit went 0 for 5 (two of which, Octane Fitness and Highmark, were a linked pair) doesn’t mean that the sky is falling.  And since 2010, the Federal Circuit has actually done fairly well: out of the 13 patent cases arising from the Federal Circuit since Bilski v. Kappos, the Supreme Court has affirmed the outcome in whole or part 7 times.

Even if these figures told the entire story on reversals, however, it’s not as if the Federal Circuit presently speaks with one voice, if it ever did.  It is full of disuniformity, with multiple viewpoints that are at odds with one another.  Given this disuniformity, it should not be surprising that two of the five cases in which the Court reversed the Federal Circuit involved a highly fractured court (Highmark and Limelight).  In these cases, the Court did not reverse a unanimous Federal Circuit, but rather settled a deep intra-circuit divide.  (Nautilus involved a concurrence by Judge Schall, but he agreed with the legal standard for indefiniteness applied by the majority).

Both Highmark and Limelight illustrate this point well: in Highmark, 5 of the 12 judges on the Federal Circuit favored a deferential standard for exceptional case determinations, an approach ultimately adopted by the Court.  Likewise, in Limelight the Supreme Court essentially agreed with the five dissenting Federal Circuit judges that indirect infringement under 271(b) requires an act of direct infringement under 271(a) (although as Tim Holbrook pointed out to me, Justice Alito left open the door for active inducement of any type of direct infringement, such as 271(f) or (g)).  And, when the Court issues its opinion in Alice, it will inevitably rule in the same direction as one or another group of judges in that highly fractured decision.  So too in Teva v. Sandoz, which will address the issue of de novo review of claim construction that split the en banc Federal Circuit 6-4.  What we are observing with the Court is, in substantial part, less outright reversals and more the resolution of intra-circuit splits, divisions that are arguably – at least in the case of subject matter eligibility – of its own making.

Thanks to former Iowa Law student and semester EFF intern Dan Garon for pointing me to Ms. Ranieri’s article.  Full disclosure: I’m not a Cubs fan.  Also, I made one substantive edit, revising the number of cases since Bilski to 13 (I had originally counted Caraco v. Novo, but on reflection it’s not really a patent case).

K/S HIMPP v. Hear-Wear Technologies: Common Sense and Claim Elements

Patent

By Jason Rantanen

K/S HIMPP v. Hear-Wear Technologies, LLC (Fed. Cir. 2014) Download Opinion
Panel: Lourie (author), Dyk (dissenting), Wallach

This nonobviousness case is significant because it illustrates an important way that some Federal Circuit judges are pushing back against KSR v. Teleflex (2007): by focusing the analysis on the presence or absence of individual limitations in the prior art and limiting what can be considered in establishing the presence of that limitation.  Here, the majority holds that while common sense or basic knowledge may provide a reason to combine elements present in the prior art, it cannot establish the presence of an element itself.

Background: Hear-Wear is the owner of Patent No. 7,016,512, which relates to hearing aid technology.  At issue in the appeal were dependent claims 3 and 9 (Hear-Wear did not appeal the BPAI’s ruling that the remaining claims of the ‘512 patent, including the claims from which 3 and 9 depended, were invalid in light of the prior art).  Claim 3 of the ‘512 patent states:

3. The at least partially in-the-canal module for a hearing aid of claim 2 wherein said insulated wiring portion is terminated by a plurality of prongs that provide a detachable mechanical and electrical connection to an audio processing module.

Claim 9 similarly depends from claims 7 and 8, adding the identical “wherein said insulated wiring portion is terminated by a plurality of prongs that provide a detachable mechanical and electrical connection” language.

Patent Office Proceedings: During prosecution of the ‘512 patent, the Examiner rejected all claims as obvious, and further stated with respect to claims 3 and 9 that “providing a plurality of prongs for the electrical connections or for the plugs is known in the art.” Slip Op. at 3, quoting office action.  In response, the applicant amended independent claims 1 and 7 to expand on the “cushion tip” element and the Examiner allowed all the claims.

HIMPP subsequently instituted an inter-partes reexamination, challenging the validity of claims 1-12 of the ‘512 patent (note that the reexamination request was filed pre-AIA).  In that proceeding, the Examiner concluded that all of the claims of the ‘512 except claims 3 and 9 were invalid in light of the prior art.  The BPAI disagreed with the Examiner’s basis for rejecting claims 1, 2, 4-8, and 10-12, but nevertheless concluded that these claims were invalid in light of prior art.  The BPAI declined, however, to reverse the Examiner’s decision not to reject claims 3 and 9 because there was no factual support in the record for the plurality of prongs element.  HIMPP appealed the BPAI’s refusal to reject claims 3 and 9; Hear-Wear did not appeal the rejection of the remaining claims.

Result: The only issue on appeal was whether the additional limitation in dependent claims 3 and 9, viz: that the “insulated wiring portion is terminated by a plurality of prongs that provide a detachable mechanical and electrical connection,” was sufficient to render the claims nonobvious.  Writing for himself and Judge Wallach, Judge Lourie affirmed the BPAI.  Writing in dissent, Judge Dyk would have reversed the BPAI and rejected claims 3 and 9 for obviousness.

What’s going on here? At the outset, it’s important to recognize what this appeal is not about.  It is not about whether or not electrical plugs were actually known in the art as of 2001, except to the extent that the court might take de novo judicial notice of that fact.  Nor is it about whether, assuming that electrical plugs were present in the prior art, common sense could provide a reason to combine plugs with the other elements of claims 1 and 2 of the ‘512 patent.

Instead, K/S HIMPP v. Hear-Wear highlights two important tensions in nonobviousness jurisprudence that are now bubbling to the surface: first, whether the standard for nonobviousness under KSR is so flexible as to allow common sense or basic knowledge to provide an element of the claimed invention, and second, the degree to which Examiners and the BPAI/PTAB may rely upon their own technical expertise.  Here, the majority embraces a strict evidentiary approach: a claim element must be present in the record and if it is not, the PTO may only consider it in narrow, peripheral circumstances.  The dissent criticizes the majority for adopting an overly rigid approach that denies examiners recourse to common sense.

Strong Evidentiary Requirements for “Core Factual Findings”: In Judge Lourie’s view, KSR does not dispense with the need to have evidence in the record disclosing each claim limitation, particularly where those limitations are “important structural limitations”:

“Here the Board refused to adopt HIMPP’s proposed rejection of claims 3 and 9 because it found that there was not a suitable basis on the record “for concluding that the particular structural features of claims 3 and 9 [were] known ‘prior art’ elements.” Board Opinion at 24. The Board’s decision was correct because an assessment of basic knowledge and common sense as a replacement for documentary evidence for core factual findings lacks substantial evidence support.”

Rather, there must be “evidence on the record, particularly where it is an important structural limitation that is not evidently and indisputably within the common knowledge of those skilled in the art.”  Slip Op. at 7 (more on the emphasized text in a moment).  KSR does not require otherwise:  “[T]he Board’s holding is not inconsistent with KSR’s caution against the overemphasis on publications and patents for combining or modifying prior art that are already on the record….In contradistinction to KSR, this case involves the lack of evidence of a specific claim limitation, whereas KSR related to the combinability of references where the claim limitations were in evidence.”  Id. (internal citations omitted).

Nor may employees of the PTO rely on their own technical knowledge.  Examiners should only do so in narrow circumstances, i.e., where the facts asserted to be well known are not capable of instant and unquestionable demonstration as being well-known), and even then must “provide an affidavit or declaration setting forth specific factual statements and explanations to support that finding,” if challenged by the applicant.  Slip Op. at 8, citing 37 C.F.R. § 1.104(d)(2) and the M.P.E.P.  And while the court recognizes that the BPAI has subject matter expertise, it “cannot accept general conclusions about what is “basic knowledge” or “common sense” as a replacement for documentary evidence for core factual findings in a determination of patentability.”  Id.

Common sense and Agency Expertise: Judge Dyk disagreed.  “In my view, the majority’s holding is inconsistent with the Supreme Court’s decision in KSR International Co. v. Teleflex Inc., 550 U.S. 398 (2007), and will have substantial
adverse effects on the examination process.”  Dissent at 2.

Here, the majority’s imposition of a rigid evidentiary standard for the presence of claim elements in the prior art goes too far.  To the extent In re Zurko, 258 F.3d 1379 (Fed. Cir. 2001) (the primary case relied upon by the majority) held otherwise, it is inconsistent with KSR:

In Zurko, we held that, as to core (as opposed to peripheral) issues, “the Board cannot simply reach conclusions based on its own understanding or experience—or on its assessment of what would be basic knowledge or common sense.” Id. That statement is contrary to the Court’s holding in KSR that “[o]ften[] it will be necessary for a court to look to . . . the background knowledge possessed by a person having ordinary skill in the art” when examining obviousness, 550 U.S. at 418 (emphasis added), and that “[r]igid preventative rules that deny factfinders recourse to common
sense . . . are neither necessary under our case law nor consistent with it.” Id. at 421. The majority’s approach here is inconsistent with KSR itself and also with our post-KSR approach. Following KSR, we recognized that the Court “expanded the sources of information for a properly flexible obviousness inquiry to include . . . the background knowledge, creativity, and common sense of the person of ordinary skill.” Perfect Web Techs., Inc. v. InfoUSA, Inc., 587 F.3d 1324, 1329 (Fed. Cir. 2009). Consequently, obviousness inquiries “include recourse to logic, judgment, and common sense available to the person of ordinary skill that do not necessarily require explication in any reference.” Id.

Furthermore, the PTO should be able to rely on its own expert knowledge when addressing issues of patentability:

Deference to the agency’s expert knowledge is particularly important with respect to obviousness. Throughout [the Supreme] Court’s engagement with the question of obviousness, [its] cases have set forth an expansive and flexible approach . . . .” KSR, 550 U.S. at 415. The Court emphasized that “[r]igid preventative rules that deny factfinders recourse to common sense . . . are neither necessary under our case law nor consistent with it.” Id. at 421. The Court specifically rejected the approach that
the majority adopts here, stating that “[t]he obviousness analysis cannot be confined by . . . overemphasis on the importance of published articles and the explicit content of issued patents.” Id. at 419. Publications and patents are not sufficient by themselves because “[i]n many fields it may be that there is little discussion of obvious techniques or combinations.” Id.

Dissent at 5.  This approach – of allowing examiners and the BPAI to rely on their own technical expertise, is consistent with the approach of the predecessor to the Federal Circuit, the Court of Customs and Patent Appeals.  It also maintains  safeguards to prevent its abuse: specifically, the requirement that Examiners “state on the record that they are relying on a fact well known in the art and provide their rationale for doing so” and the opportunity that applicants have to challenge the Examiner’s “determination that particular features were common knowledge in the art.”  Dissent at 7, 8.

No Judicial Notice: Is the presence of a plug in the prior art as of 2001 a “core factual finding” related to an “important structural limitation” that is “not evidently and indisputably within the common knowledge of those skilled in the art”?  Judge Lourie thought so, and further declined to take judicial notice of the presence of electrical plugs in the art as of 2001 for the same reason that it was reasonable for the Board and Examiner to decline to take official notice (i.e.: that these facts were “not capable of instant and unquestionable demonstration as being well-known.”).   Slip Op. at 8.  On this point, Judge Dyk jabs back: “Every purchaser of electrical devices in the United States for the past 50 years or more is familiar with multipronged electrical connections.”  Dissent at 4.

 

 

Guest Post: PTAB Partial Institution of IPR and CBM Review Violates the AIA– But There Is a Simple Fix

CBM, IPR, Patent, PGR, PTAB, , ,

Guest Post by Timothy K. Wilson, Senior IP Counsel, and John S. Sieman, Patent Counsel, SAS Institute Inc.

In the provisions of the America Invents Act (AIA) governing inter partes review (IPR), post-grant reviews (PGR), and transitional covered business method review (CBM), Congress provided the Patent Trial and Appeal Board (PTAB) with a binary choice: to either institute or not institute a review of the challenged claims, i.e., the claims identified by the petition.  Rather than pursue one of these two options, however, the PTO took a different path in its implementation of the AIA, permitting the PTAB to select only some challenged claims for review.  The excluded claims receive no further review and the final written decision does not address the patentability of those claims.  Worse, because a decision whether to institute a review is not subject to appeal, this practice (which we refer to as “partial institution”) strips petitioners of their statutory appeal right as to the excluded claims.  The PTAB has already followed the partial institution practice for dozens of IPR and CBM trials.  There is, however, a simple fix for future reviews.

The binary nature of the decision whether to institute review arises from the plain language of the statute, which includes section 314 entitled “Institution of inter partes review”:

(a) Threshold.— The Director may not authorize an inter partes review to be instituted unless the Director determines that the information presented in the petition filed under section 311 and any response filed under section 313 shows that there is a reasonable likelihood that the petitioner would prevail with respect to at least 1 of the claims challenged in the petition.

(b) Timing.— The Director shall determine whether to institute an inter partes review under this chapter pursuant to a petition filed under section 311 within 3 months after—

(1) receiving a preliminary response to the petition under section 313; or

(2) if no such preliminary response is filed, the last date on which such response may be filed.

(c) Notice.— The Director shall notify the petitioner and patent owner, in writing, of the Director’s determination under subsection (a), and shall make such notice available to the public as soon as is practicable. Such notice shall include the date on which the review shall commence.

(d) No Appeal.— The determination by the Director whether to institute an inter partes review under this section shall be final and nonappealable.

35 U.S.C. § 314 (emphasis added).

Under the AIA, petitioners choose which claims of a patent to include in a petition.  The statute refers to these as the “challenged” claims.  35 U.S.C. § 312(a)(3) (requiring an IPR  petition to “identif[y], in writing and with particularity, each claim challenged”); 35 U.S.C. § 314(a) [fn1] (referring to “claims challenged in the petition”).

The PTAB may institute an IPR if “there is a reasonable likelihood that the petitioner would prevail with respect to at least one of the claims challenged in the petition.”  35 U.S.C. § 314(a).  Because the determination “whether to institute” the IPR is a preliminary decision, the statute makes it “final and nonappealable.”  35 U.S.C. § 314(d).  Congress chose to make appeals available only at the conclusion of the IPR proceeding, after the PTAB issues a final written decision.  35 U.S.C. § 319 (permitting “[a] party dissatisfied with the final written decision [to] appeal the decision pursuant to sections 141 through 144”); 35 U.S.C. § 141 (permitting “[a] party to an inter partes review … who is dissatisfied with the final written decision … [t]o] appeal the Board’s decision only to the United States Court of Appeals for the Federal Circuit”).

The statute further requires the PTAB to issue a final written decision “with respect to the patentability of any patent claim challenged by the petitioner.”  35 U.S.C. § 318(a) (emphasis added).  The set of “claim[s] challenged by the petitioner” depends on which claims the petitioner includes in the petition, not on a later decision by the PTAB.  The statutory language leaves little doubt the final written decision—the appealable one—must address the patentability of every claim challenged in the petition.

This is not how the PTAB has implemented IPR and CBM.  For example, in the very first IPR, the PTAB reviewed a petition that challenged claims 1-20 of a patent, instituted review only on three claims, and did not address the patentability of the other 17 challenged claims in the final written decision.  Garmin Int’l Inc. v. Cuozzo Speed Techs. LLC, Case IPR2012-00001, paper 59, pp. 2, 49  (Final Written Decision of Nov. 13, 2013).   Even the PTO’s regulations that govern IPR trials contradict the statute. These regulations permit the PTAB to “authorize [inter partes] review to proceed on all or some of the challenged claims” 37 C.F.R. § 42.108(a).  Because the regulations violate the statute, the PTO exceeded its authority in promulgating them, opening up the PTO to a potential challenge under the Administrative Procedures Act.

While the PTAB’s practice of partial institution may help complete trials within the required one-year period, the practice violates the statute and strips petitioners of a statutory appeal right as to excluded claims.  In addition, the problems arising from partial institution of IPR and CBM review will spill over into litigation, as excluded claims return to district courts, presumably without estoppel.  35 U.S.C. § 318(e)(2) (limiting estoppel in civil actions to “an inter partes review of a claim in a patent under this chapter that results in a final written decision”).  Partial institution also complicates decisions on whether to stay a litigation pending the PTO proceeding.  And even if a court does stay a an infringement suit to let the PTAB resolve the petitioner’s arguments, the court may later need to review the same arguments as to the non-instituted claims, and may reach a different or even inconsistent result.

Fortunately, the PTAB can address this problem without impairing its ability to quickly resolve cases.  Even under current partial institution practice, decisions whether to institute review already address all challenged claims, identifying some claims that are likely invalid and other claims for which the petitioner has not met its burden.  If the PTAB instituted on all challenged claims as it should, that would allow the parties to decide how much of the existing page and time limits to use on each challenged claim.  These limits would still prevent trials from ballooning out of control.  PTAB judges can continue to focus their efforts on the claims identified as likely unpatentable.  And by the end of the trial, if the PTAB judges have not changed their opinions that some claims should survive, they would only need to carry the analysis about those claims forward from the institution decision into the final written decision.  By instituting review of all challenged claims and including patentability analysis of all challenged claims in the final written decision, the PTAB would restore the right to appeal the final written decision as to all challenged claims.

[fn 1] Citations provided here are for IPR proceedings; the parallel sections governing CBMs and PGRs contain similar language.

SmartGene v. Advanced Biological Laboratories

Patent, , ,

By Jason Rantanen

Earlier this month, I posed a question relating to the patent eligibility of the following claim:

  1. A method for guiding the selection of a therapeutic treatment regimen for a patient with a known disease or medical condition, said method comprising:

 (a) providing patient information to a computing device comprising:

 a first knowledge base comprising a plurality of different therapeutic treatment regimens for said disease or medical condition;

a second knowledge base comprising a plurality of expert rules for evaluating and selecting a therapeutic treatment regimen for said disease or medical condition;

 a third knowledge base comprising advisory information useful for the treatment of a patient with different constituents of said different therapeutic treatment regimens; and

 (b) generating in said computing device a ranked listing of available therapeutic treatment regimens for said patient; and

 (c) generating in said computing device advisory information for one or more therapeutic treatment regimens in said ranked listing based on said patient information and said expert rules.

This claim was a real one, from a real case.  It’s Claim 1 from U.S. Patent No. 6,081,786, and in a January 2014 nonprecedential opinion the Federal Circuit affirmed a district court’s ruling that it and claims from related patent No. 6,188,988 were ineligible for patent protection under 35 U.S.C. § 101.  Here’s the core of the court’s reasoning:

The district court correctly held that the claim 1 method falls outside the eligibility standards of section 101 as that provision has been construed. This conclusion follows from CyberSource Corp. v. Retail Decisions, Inc., where, based on earlier precedents, this court held that section 101 did not embrace a process defined simply as using a computer to perform a series of mental steps that people, aware of each step, can and regularly do perform in their heads. 654 F.3d 1366, 1373 (Fed. Cir. 2011); see also In re Grams, 888 F.2d 835, 840-41 (Fed. Cir. 1989); In re Meyer, 688 F.2d 789, 794-95 (C.C.P.A. 1982). As CyberSource explains, those precedents rest on Supreme Court decisions indicating that section 101 covers neither “mental processes”—associated with or as part of a category of “abstract ideas”—nor processes that merely invoke a computer and its basic functionality for implementing such mental processes, without specifying even arguably new physical components or specifying processes defined other than by the mentally performable steps. See Gottschalk v. Benson, 409 U.S. 63, 67-68 (1972); Parker v. Flook, 437 U.S. 584, 589 (1978).

***

The Supreme Court’s post-CyberSource decision in Mayo Collaborative Servs. v. Prometheus Labs., Inc., 132 S. Ct. 1289 (2012), reinforces the application of Cyber-Source to decide the present case. The Supreme Court in Mayo, though addressing a case involving the “law of nature” exclusion from section 101, recognized that “mental processes” and “abstract ideas” (whatever may be the precise definition and relation of those concepts) are excluded from section 101. See 132 S. Ct. at 1289, 1293, 1297-98 (quotation marks omitted). Whatever the boundaries of the “abstract ideas” category, the claim at issue here involves a mental process excluded from section 101: the mental steps of comparing new and stored information and using rules to identify medical options. Mayo demanded that, when a claim involves an abstract idea (or, in Mayo itself, a law of nature), eligibility under section 101 requires that the claim involve “enough” else—applying the idea in the realm of tangible physical objects (for product claims) or physical actions (for process claims)—that is beyond “well-understood, routine, conventional activity.” 132 S. Ct. at 1294, 1298, 1299. The claim here does not do so. It calls on a computer to do nothing that is even arguably an advance in physical implementations of routine mental information comparison and rule-application processes. In this context, the concern about preempting public use of certain kinds of knowledge, emphasized in Mayo, is a grave one. See id. at 1301-02.

Our decisions since Mayo do not undermine Cyber-Source or its application here…..

You can read the entire opinion here: SmartGene v ABL.

ABL has since filed a petition for certiorari, as well as an amicus brief in Alice v. CLS.  Its position is that SmartGene should be GVR’d regardless of the outcome in Alice v. CLS (which might issue as soon as tomorrow).  From the introduction:

Judge Pauline Newman recently characterized the Federal Circuit as being in a state of jurisprudential “deadlock,” making patent eligibility under 35 U.S.C. § 101 a question “whose result will depend on the random selection of the panel.” CLS Bank Int’l v. Alice Corp. Pty. Ltd., 717 F.3d 1269, 1280 (Fed. Cir. 2013) (hereinafter CLS Bank) (en banc) (Newman, J., dissenting), cert granted, Alice Corp. Pty. Ltd. v. CLS Bank Int’l, 134 S.Ct. 734 (2013) (hereinafter Alice). No better case illustrates the panel-dependent crapshoot that Section 101 jurisprudence has become than this one. Although it is impossible to predict the Court’s forthcoming opinion in Alice, there is little doubt that it will significantly impact the law in this area and break the deadlock in the Federal Circuit.

The decision below is a prime example of the
current dysfunctional state of the law in the Federal Circuit.

You can read the petition here: ABL v. SmartGene petition for writ of certiorari.

More on Claiming Clones: Products of Nature and Source Limitations

Guest Post, Patentable Subject Matter, , ,

Guest post by Dr. Jeffrey A. Lefstin, Professor of Law, University of California, Hastings College of Law

Jason’s excellent post on Roslin summarized the case and raised the question of whether the Federal Circuit paid insufficient attention to the inherent differences conveyed by the ‘clone’ limitation of the claims. In this post I address two other issues in Roslin:  the Federal Circuit’s interpretation of Ckakrabarty and Funk Brothers, and Roslin’s consistency with Federal Circuit precedent holding that structural or functional differences between natural and synthetic products must be defined in the claims.

Unaltered by the hand of man: Judge Dyk’s opinion in Roslin unfortunately perpetuates the view, now found in the PTO’s Myriad guidelines, that Chakrabarty requires a claimed invention to be “markedly different” from a natural product for patent-eligibility under § 101.  Myriad itself imposed no such requirement: the Court found BRCA cDNAs patent-eligible without determining that they were “markedly different” from natural sequences. And though Myriad reiterated the “markedly different” language from Chakrabarty, Chakrabarty’s discussion of ‘products of nature’ was entirely dictum. Only the question of whether living organisms were patent-eligible was before the Court in Chakrabarty; the ‘product of nature’ rejection in the case had not been sustained by the Patent Office Board of Appeals.

The Chakrabarty Court noted the claimed bacteria differed markedly from natural bacteria by way of distinguishing the case from Funk Brothers.[1] As Paul Cole’s recent post notes, the patentee had discovered that certain strains of bacteria could be mixed together without inhibiting their nitrogen-fixing capability.  Justice Douglas regarded this compatibility as the unpatentable discovery of a natural phenomenon;  the claims were unpatentable because the patentee’s application – a mixed inoculant – was “a simple step” once the underlying discovery was assumed away.

As I discuss in a recent article, Funk  was nonetheless very much a patent eligibility case. It reflects Douglas’s view – shared by Justice Stevens in Flook, and Justice Breyer in Mayo – that obvious applications of scientific discoveries or abstract ideas are not patent-eligible “inventions” within the meaning of the statute.

Whether or not we share that view, understanding it shows us that Funk was an ‘inventive application’ case, not a ‘product of nature’ case. Douglas made no reference to the ‘product of nature’ doctrine, nor to the recent cases embodying it.[2] Instead, Douglas emphasized the lack of change in the bacteria to establish that the mixed inoculant was obvious (once the patentee’s discovery was assumed away). Under the old doctrine of ‘aggregation,’ it was not invention to combine old elements where the elements were unchanged, and no new function arose from their combination. It was therefore not inventive for the patentee in Funk to combine old bacteria without changing their structure or function.

But just as many combinations of old elements become patentable when a new function emerges, the mixed inoculants of Funk would have been patentable — even if the bacteria remained unchanged — had the mixed inoculant acquired new functions not performed by its constituent bacteria. If Funk Brothers instead stood for the proposition that a combination is unpatentable if its constituents are ‘unaltered by the hand of man,’ then a very large number of inventions become patent-ineligible.  An artificial structure like an arch, formed by piling stones atop each other, would be ineligible unless the stones themselves were altered by the hand of man.  Even as ardent a skeptic of the patent system as Justice Douglas would not have gone that far.

Source limitations and expressly claimed distinctions: The second difficulty with Roslin is its demand that the ‘marked differences’ between the natural organism and the invention must be expressly claimed. As Jason discussed, the applicant in Roslin argued that cloned animals differ from their natural counterparts at least in having mitochondrial DNA derived from the egg donor, rather than the animal which donated the somatic nucleus. The Federal Circuit rejected such arguments because neither the difference in mitochondrial DNA, nor any functional consequence of that difference, was recited in the claims.

However, the same argument, albeit in the context of § 102, was before the Federal Circuit in the extensive litigation over Amgen’s recombinant erythropoietin (EPO) patents. Much like Roslin, Amgen had claims to a ‘copy’ of natural product: in that case EPO produced by mammalian cells in culture. While Amgen’s synthetic EPO differed in glycosylation from the natural product, several of the claims in the case recited only the non-natural source of the EPO, not the structural differences. The Federal Circuit recognized that the novelty of the synthetic EPO claims depended on whether synthetic EPO differed from natural EPO.  Yet the court found novelty based on the unclaimed structural and functional differences between natural and  synthetic EPO, which were demonstrated in part by the specification and prosecution history, and in part by testimony at trial. Amgen Inc. v. F. Hoffman-LaRoche Ltd, 580 F.3d 1340, 1370 (Fed. Cir. 2009). In effect, the court held that the structural and functional differences characterizing the synthetic product were inherent in the source limitations. (The court did not inquire whether all synthetic EPO molecules falling within the scope of the claims would display similar differences in glycosylation.)

Thus under Amgen, a source limitation alone (such as ‘non-naturally occurring’ or ‘purified from mammalian cells grown in culture’) may establish novelty of a product. Assuming the ‘clone’ limitation in Roslin to require derivation from nuclear transfer, then it serves as a source limitation as well. Since Roslin cannot overrule Amgen, we seem to be in a regime where differences between natural and synthetic products may be unclaimed yet confer novelty under § 102, but must be explicitly claimed to establish ‘marked difference’ under § 101. Of course, if Roslin is correct, that doctrinal inconsistency is less significant than the consequence that Amgen-type claims – and perhaps a wider category of product-by-process claims involving natural products – are now ineligible under § 101.


[1] In Chakrabarty, the Commissioner never suggested that the claimed bacteria were unpatentable under Funk, nor even raised the case.  Rather, Chakrabarty argued that if living organisms were not patent-eligible, the Court would have said so in Funk.

[2] In particular, the General Electric and Marden cases denying patentability to purified tungsten, uranium, and vanadium. The defendant had urged General Electric upon the Funk court in its brief.

Claiming Clones

Patent

 In re Roslin Institute (Edinburgh) (Fed. Cir. 2014) In re Roslin
Panel: Dyk (author), Moore, Wallach

Dolly cloneThis case relates to Dolly, probably the most famous baby sheep ever.1  As most folks know, Dolly was the first successful mammalian clone from an adult somatic cell.  This means that her nucleic genetic material is a copy of the adult from which she was cloned.  The basic process used to create Dolly is illustrated to the right.

In addition to claims on the cloning process (which were not at issue in this appeal), the University of Edinburgh also sought product claims.  Claims 155 and 164 are representative:

155. A live-born clone of a pre-existing, nonembryonic, donor mammal, wherein the mammal is selected from cattle, sheep, pigs, and goats.
164. The clone of any of claims 155-159, wherein the donor mammal is non-foetal.

The Patent Office rejected these claims on Section 101, 102, and 103 grounds and the University appealed.

The Federal Circuit agreed that the claims were not patent eligible under Section 101.  The court began by distinguishing Funk Bros. Seed Co. v. Kalo Inoculant Co., 333 U.S. 127 (1948) (which it treated as a subject matter eligibility case) from Diamond v.
Chakrabarty, 447 U.S. 303, 309 (1980), with the latter involving a patent eligible organism because “it was ‘new’ with “markedly different characteristics from any found in nature and one having the potential for significant utility.”  Slip Op. at 6, quoting Chakrabarty at 310 (emphasis added by court).  On the other hand, “any existing organism or newly discovered plant found in the wild is not patentable.”  Id. at 6-7.  Association for Molecular Pathology v. Myriad Genetics, Inc., reinforced this distinction. 133 S. Ct. 2107 (2013)

Here, the claims covered organisms (such as Dolly) that do not “possess ‘markedly different characteristics from any [farm animals] found in nature.'”  Slip Op. at 7, quoting Chakrabarty.    The emphasis of the court’s analysis was on genetic identity: “Dolly’s genetic identity to her donor parent renders her unpatentable.”  Id. The claims thus fell into the product of nature exception to the broad scope of patent eligible subject matter.

Underlying the court’s opinion was a policy thread relating to copying generally: that the copying of unpatentable articles is permitted so long as it does not infringe a patented method of copying.  In Sears Roebuck & Co. v. Stiffel Co., for example, the Supreme Court wrote that “[a]n unpatentable article, like an article on which the patent has expired, is in the public domain and may be made and sold by whoever chooses to do so.” 376 U.S. 225, 231 (1964).  Because the claimed clones are exact genetic copies of the of patent ineligible subject matter, they, too, are not eligible for patent protection.

What about the argument that these clones may be genetic copies of the donor organism, but they aren’t exactly the same?  For example, environmental factors will produce differences between the phenotypes of the donor and clones and their mitochondrial DNA will differ, since the mitochondrial DNA comes from a different source than the nucleic DNA.  The court rejected these arguments because such differences were not claimed: the claims are written in terms of genetic identity, not phenotypic or mitochondrial differences.

What the court appears to be implicitly doing here is to interpret the claims in a manner that is least favorable to the applicant.  There is at least a plausible argument that the claims do implicate genetic identity but phenotypic diversity by their reference to a “live-born clone of a … mammal.”  To be sure, the word “clone”  contemplate genetic identity.  But at the same time the very idea of a live-born mammalian clone suggests that the product will not be an exact duplicate of the donor.  In other words, while the claims don’t contain the words “phenotypic difference,” those differences are inherent in what a clone is: a clone will necessarily exhibit phenotypic differences because it will develop in different environmental circumstances than its donor.

However, even were the claims to expressly include such limitations, the court reasoned that it would not change the outcome.  As to phenotypic differences, they “do not confer eligibility on their claimed subject matter. Any phenotypic differences between Roslin’s donor mammals and its claimed clones are the result of ‘environmental factors,’ Appellant’s Br. 21, uninfluenced by Roslin’s efforts.”  Slip Op. at 10.  (I guess the fact that the whole process was set in motion by human activity doesn’t count).  As to mitochondrial differences, “There is nothing in the claims, or even in the specification, that suggests that the clones are distinct in any relevant way from the donor animals of which they are copies.”  Id. at 11.  As a result, the claims fail the “markedly different characteristics” language of Chakrabarty.

1. Except for possibly Mary’s little lamb.

Microsoft v. DataTern: Judge Rader’s Dissent Withdrawn

Patent

Last month I wrote about Microsoft Corporation v. DataTern, Inc., in which the Federal Circuit addressed the issue of subject matter jurisdiction over a declaratory judgment action brought by manufacturers where the patent holder had filed infringement suits only against the manufacturers’ customers, and had not directly threatened the manufacturers themselves.  (I.e.: the reverse of a typical contributory infringement or inducement claim).

In that opinion, the Federal Circuit affirmed the district judge’s ruling that there was jurisdiction in three out of four scenarios on the basis that these sets of facts raised the issue of inducement of infringement and contributory infringement by Microsoft and SAP.  However, the majority (Judges Moore and Prost) reversed as to the fourth scenario, in which DataTern’s infringement charts referenced only third-party documentation for key claim limitations.   Judge Rader dissented as to this final category, expressing concern that the majority’s holding provides “a roadmap to allow DataTern and its successors to keep Microsoft on the sidelines while running up wins against customers, who are often smaller and less-equipped to defend themselves.”

Yesterday, the Federal Circuit vacated the original opinion in Microsoft v. DataTern and issued a new opinion that contains only the majority’s opinion.  Judge Rader is now recused.  The order vacating the original opinion is here: Microsoft Order and the new opinion is here: New Opinion.  A comparison of the two opinions reveals that there are no other substantive differences.  No reason for the recusal is given, and neither party appears to have requested that Judge Rader be recused.  While recusals are not unheard of, this one is unusual because it occurred after the opinion issued and involved the vacation of a dissent.

One issue that this raises is whether there is a violation of Federal Circuit Rule 47.2, which states that “(a) Panels. Cases and controversies will be heard and determined by a panel consisting of an odd number of at least three judges, two of whom may be senior judges of the court.”  Prof. Tim Holbrook thinks not, pointing to Fed. Cir. Rule 47.11, which contemplates recusals after argument:

A quorum is a simple majority of a panel of the court or of the court en banc. In determining whether a quorum exists for en banc purposes, more than half of all circuit judges in regular active service, including recused or disqualified judges, must be eligible to participate in the en banc process. If a judge of a panel that has heard oral argument or taken under sub-mission any appeal, petition, or motion is unable to continue with consideration of the matter because of death, illness, resignation, incapacity, or recusal, the remaining judges will determine the matter if they are in agreement and no remaining judge requests the designation of another judge.

Note: Thanks to Dennis and Tim for contributions to this post.

PSM

Patent

I’ll return to actual blogging once I’m finished grading exams, but for now, here’s a fun one:

Question 10: [Limit: 150 words]

Explain why the following claim from a patent entitled “Systems, Methods and Computer Program Products for Guiding the Selection of Therapeutic Treatment Regimens” does NOT constitute patent eligible subject matter:

  1. A method for guiding the selection of a therapeutic treatment regimen for a patient with a known disease or medical condition, said method comprising:

 (a) providing patient information to a computing device comprising:

 a first knowledge base comprising a plurality of different therapeutic treatment regimens for said disease or medical condition;

a second knowledge base comprising a plurality of expert rules for evaluating and selecting a therapeutic treatment regimen for said disease or medical condition;

 a third knowledge base comprising advisory information useful for the treatment of a patient with different constituents of said different therapeutic treatment regimens; and

 (b) generating in said computing device a ranked listing of available therapeutic treatment regimens for said patient; and

 (c) generating in said computing device advisory information for one or more therapeutic treatment regimens in said ranked listing based on said patient information and said expert rules.

Discussion Fodder

Patent

Note that the below question is a hypothetical.  As far as I know, Congress isn’t currently thinking of adopting something like this.  Nor would I ever advocate for this language as its currently drafted.  It was deliberately written so as to produce problematic results. 

Question 8: [Limit: 150 words]

Congress is considering the following statute:

(1)   IN GENERAL.—Chapter 11 of title 35, United States Code, is amended by adding at the end of Section 112(f) the following:

An element expressed as a function that does not comply with this subsection shall be in considered to be in violation of subsection (b).

Argue that this proposed statute is consistent with the policy considerations underlying patent law.

Question 9: [Limit: 150 words]

Argue that this proposed statute is inconsistent with the policy considerations underlying patent law.

 

Edit: Here would be the text of Section 112(b) and (f) as (hypothetically) amended:

(b) Conclusion.— The specification shall conclude with one or more claims particularly pointing out and distinctly claiming the subject matter which the inventor or a joint inventor regards as the invention.

(f) Element in Claim for a Combination.— An element in a claim for a combination may be expressed as a means or step for performing a specified function without the recital of structure, material, or acts in support thereof, and such claim shall be construed to cover the corresponding structure, material, or acts described in the specification and equivalents thereof. An element expressed as a function that does not comply with this subsection shall be in considered to be in violation of subsection (b).

 

District Courts and Patent Cases, Part I

District Court, Patent, Rantanen

By Jason Rantanen and Joshua Haugo*

During the oral argument in Octane Fitness, Justice Alito asked an interesting question about the frequency at which district court judges hear patent cases.  In response to a comment from Mr. Telscher that “I do think district court judges see a lot of patent litigation,” Justice Alito asked:

Is that really true? There’s nearly 700 district judges in the country.  If we had a statistic about the average number of patent cases that a district judge hears and receives on, let’s say, a 5 ­year period, what would it be?

Oral Argument Transcript at 14 (full transcript available here).

The question was posed in such a way as to imply that patent cases were a rare occurrence for most district court judges, and since neither counsel nor research into secondary sources provided a ready answer, we pulled data from Lex Machina to seek some insight into this issue.

Since we were interested in frequency, we looked at the number of patent cases filed between 2010 and 2013 on a per judge basis.  Our analysis shows that while patent cases are relatively common generally, their distribution is indeed highly skewed.  Nevertheless, most active judges heard at least one patent case during the time and the median number of patent cases received per judge was higher than one might expect (it’s eight).  The below chart illustrates the number of patents cases received by each judge who was active during the 4-year time period, sorted by the number of patent cases received (i.e.: the judges who heard no patent cases are to the left and the judges who heard the most patent cases are to the right, with Judge Gilstrap being judge #760).  The chart cuts off at 100 cases received, but the line continues up with seven judges receiving more than 600 patent cases each (Judges Robinson, Sleet, Andrews, Schneider, Stark, Davis, and Gilstrap).

Figure 1Methodology: To obtain the data set, we ran a search on Lex Machina for all patent cases filed between 2010 and 2013.  We then copied the judge data from Lex Machina’s dynamic filter, giving us the number of patent cases per judge.  We obtained data on all district court judges (not just those that appeared in the Lex Machina search results) from the Federal Judicial Center.  This allowed us to filter the results to include only judges that met our criteria of “active” judges for the time period (i.e.: judges that were confirmed to a district court prior to 12/31/2013 and had not retired or been terminated until after 1/1/2010).  There were a total of 760 active district court judges between 2010 and 2013, although some were active for only a short time during the window we analyzed.  We were also able to limit our data set to only judges who were active for the entire time period (i.e.: who were confirmed to a district court prior to 1/1/2010 and who did not retire or take senior status prior to 12/31/2013); a chart using this data is below.

Background Statistics: In total there were 19,325 patent cases filed before 865 judges over the four year period.  The judge with the most patent cases was Judge Gilstrap of the Eastern District of Texas, who received 1,636 patent cases. Although several judges received an extraordinary number of cases, many judges that heard patent cases had only 1 patent case filed before them during the 4 year window we examined.  

Of the 19,325 total cases heard in District Courts, 18,061 cases were heard by 760 active judges.  The remaining 1264 cases were heard by 165 judges that were primarily senior status, although there were several appellate judges sitting by designation.  For this analysis, we did not include any cases filed before judges that were not active during at least some portion of the period.

There is one important caveat to this data: it reflects patent cases received by the judges.  As a result, it does not directly report on the number of patent cases actually heard by district judges (since sometimes case settle soon after filing), nor does it directly report perhaps an even more important statistic relating to Justice Alito’s questioning, that of judges’ experience rendering substantive decisions in patent cases.  This data does, however, provide some insight into these issues because we know that both figures cannot be greater than the number of patent cases received and (unless there is a particular selection bias operating in certain districts that affects settlement rates), it seems likely that the distribution of both patent cases heard and decided would follow a similar pattern.

Analysis: The average number of cases received by active judges was 23.8 cases over the span of four years, or almost 6 cases per year, while the median was 8 cases over the four-year span.  While the highest districts in terms of filings did affect the mean, removing the three highest (the Eastern District of Texas, Central District of California, and District of Delaware) still resulted in an average of 13.3 cases per judge.  Of the active judges, there were 71 that did not receive any patent cases within the window.  Thus over 90% of active judges received at least 1 patent case filed during the window.

Additionally, we looked at the numbers for judges that were active throughout the 4 year time period, in order to get a sense of what an average “active” judge might see.  These judges were commissioned prior to 1/1/2010 and had not been terminated or retired prior to 12/31/2013 (thus excluding both judges who were on the bench for only a part of the period and judges who took senior status during a portion of the period).  For this set, there were a total of 11,096 patent cases received by 434 judges.  The average number of cases received was 25.6 with a median of 11 cases over the four-year period.  Removing the top three districts from this data set still produced an average of 20 cases and a median of 10 cases received over the four-year period.  In total, only 28 of the 434 active judges did not receive a patent case during this time; over 93% of judges received at least 1 patent case.  The graph below shows a frequency chart of only judges that were active during all 4 years (the bar on the far right reflects the fifteen judges who received over 100 patent cases during the four-year period).

Figure 2 While the numbers suggest that patent cases are not unicorns, even outside of the top three districts, there also may be some merit to Justice Alito’s concern that at least a substantial number of District Court judges do not hear more than an occasional patent case, and thus may find it difficult to determine which cases are “exceptional” based on their past experience with other patent cases.  Of course the ultimate issue may not be one of determining whether a patent case is exceptional, but in simply determining whether a complex litigation suit is exceptional.  And as to that, as Mr. Telscher observed in response to Justice Alito’s questioning about numbers of patent suits received by district court judges, “I don’t know what that number is, Your Honor. But I know that district court judges carry a widely varying docket of different areas of law and are called upon to learn the law and assess the reasonableness of those positions.”

*Joshua Haugo is a second-year law student at the University of Iowa College of Law.

Edit: Michael Risch pointed out that there may be an effect depending on how Lex Machina counts transferred cases, which he estimates at 15-20% of cases.  I’m looking into the way that Lex Machina counts these types of cases: its database certainly includes both the transferor and transferee dockets, but it does not appear to count the transferor judge as being the “judge” of the case.  Instead, it appears to only count the transferee judge.  I’ll update the post once I have a better sense of this effect.

Edit2: Based on further investigations (and subject to confirmation from the folks at Lex Machina), Lex Machina counts both the transferring court and the transferee court; in other words, its not deduplicating.  The effect of this is to artificially inflate, perhaps by as much as 15-20%, the case counts below.  This causes me to echo the caution I noted originally: just because a judge “received” a case does not mean that he or she “heard” it, let alone on the substantive merits.

Edit3: Lex Machina confirmed that “each separately assigned civil action number is a case except, if it is an intradistrict transfer, we detag it so it does not count as a patent case.  In the event of a inter-district transfer, we will have one case with the outcome “procedural: interdistrict transfer” and the other case with whatever its outcome was.”  So what I observed above holds.

 

Congratulations to the Winners of the Giles S. Rich Patent Moot Court Competition

Patent

Congratulations to our team from the Iowa College of Law, Joshua Galgano and Michelle Wallace, and their coaches, Prof. Christina Bohannan and Damon Andrews, for winning the national finals of the 41st Annual Giles S. Rich Patent Moot Court Competition.  Dr. Galgano is a 3L who holds a PhD in chemical and biochemical engineering; he will begin his career at Sterne Kessler Goldstein & Fox this fall.  Ms. Wallace is a 2L with a chemical engineering background; she will be working at Reinhart, Boerner, & Van Deuren this summer.  Congratulations to both!

Congratulations also to Suffolk Law School’s team of Christina Mott and Scott Chappell, coached by Even Brown, who finished in second place.  Other teams competing in the finals included Columbia, the University of Washington, the University of Utah, the University of Houston, and Michigan State.

Earlier this afternoon, the two teams argued before Judges Lourie, Tarranto, and Chen.  This year’s problem involved issues of subject matter eligibility of claims relating to DNA and of subject matter jurisdiction over a licensing dispute.  If you’re curious about the problem, it can be found here.

(Also, this morning the Federal Circuit issued its opinion in Apple v. Motorola, affirming-in-part and reversing-in-part Judge Posner.  While the three judges agreed on most issues, they disagreed on issues of injunctive relief (Judge Rader would have allowed Motorola’s request for injunctive relief to proceed and Judge Prost would not have vacated the district court’s summary denial of Apple’s request for injunctive relief) and means-plus-function claim interpretation.)  More on this opinion later.

Guest Post by Prof. Sichelman: Stop Bashing Academics: Why Mark Lemley, Peter Menell, and Rob Merges are Highly Qualified to Teach and Write about Patent Law

Patent, , , , , , ,

Guest Post by Prof. Ted Sichelman, University of San Diego, School of Law

Recently, Hal Wegner has been circulating and commenting upon the qualifications of patent law professors. For example, he lists whether patent law professors at the Top Ten IP programs as ranked by US News & World Report are licensed to practice at the USPTO, have an “understanding” of international/comparative patent law, or clerked at the Federal Circuit (see below). According to Wegner, these “credentials” are “particularly” and “uniquely” valuable (in some cases, “essential”) for professors to make “optimum” patent policy reform proposals, especially those concerning PTO practice and international harmonization.

(To provide some background, I provided Wegner a list of names of all professors in the U.S. who currently teach and write about patent law at US News ranked and unranked IP programs, with the understanding that he would circulate the list to his readers. After I sent Wegner my list, without my input, he annotated it (along with other names) with various credentials and provided commentary and alternative lists, such as the one reproduced below. Because I believe Wegner’s analysis is flawed—and given my initial participation—I feel personally obligated to respond.)

NaplesNotably absent on Wegner’s list above are any professors from Stanford, Berkeley, and George Washington (GW), the top ranked IP programs in the nation. (The same holds true for many other schools, both in and outside of the top 10. I focus on the top three schools to underscore the problems with Wegner’s approach.) Rather than effectively denigrate these programs, Wegner should have recognized the transformative role that these schools have played historically (for GW) and more recently (for all three schools) in elevating patent law to a prominent place in the academy and developing unparalleled educational opportunities for future patent professionals and scholars.

Importantly, an unintended implication of Wegner’s discussion is that patent law professors without the stated qualifications—particularly, a patent bar registration number—are unfit to teach and write about patent law more generally. For instance, on his e-mail blog, Greg Aharonian recently circulated the comments of an anonymous patent lawyer who referred to Stanford’s Mark Lemley as “one of a small army of law school academics that have built very successful . . . careers studying intellectual property law, especially patent law, albeit without ever actually having practiced before a patent office, done research, or even studied science or engineering.”

These sorts of criticisms are misguided. First, many patent law professors have extensive patent litigation experience, including on-going experience as “of counsel” lawyers, experts, and consultants. Although having patent prosecution experience is clearly beneficial for teaching and writing about patent law, patent litigation is as well and should not have been disregarded. For instance, Wegner and Aharonian presumably know well that Mark Lemley is a partner at a top-tier IP litigation boutique, Durie Tangri, and spends numerous hours on real-world matters. In fact, he has argued or is scheduled to argue three Federal Circuit patent cases so far this year, has argued before the Federal Circuit eleven times (in addition to four arguments in the regional circuits), and has represented another ten parties on briefs in the court. Additionally, he has been counsel for a party in the Supreme Court twice in patent cases (both patentees, incidentally). Lemley has been the lead author or co-author on 40 amicus briefs in the Supreme Court and the courts of appeals. And if that were not enough, his articles have been cited nine times in Supreme Court opinions and 145 times by courts overall. Finally, he’s conducted extensive empirical analyses of USPTO and judicial practice in many academic papers. (Ah, I forgot to mention that he’s represented parties in 85 cases in the district courts, too.)

So Lemley clearly is highly qualified (in fact, uniquely qualified) to write about and teach patent law. Nonetheless, Lemley often is maligned by practitioners because of a proposal he made (along with now Federal Circuit Judge Kimberly Moore) about a decade ago to restrict continuation practice. Yet, regardless of whether you agree with his views—and I often disagree with him—he’s clearly well-situated to write about and suggest reforms concerning PTO practice, the Federal Circuit, the Supreme Court, and the Patent Act more generally. In this regard, Lemley has written over 125 articles, many of them offering outstanding suggestions to reform the patent system, such as his idea for “gold-plated” patents. Lemley should not be unfairly singled out for one unpopular proposal or simplistic mischaracterizations of his views.

In a response to e-mails Wegner received asking why patent litigation was not listed in his chart, including one of my own, he responded that while patent litigation “may well be the best practice background for a patent academic . . . . no patent faculty seeking to make an optimum contribution to patent policy or harmonization can do so without  someone on the faculty having expertise in international/comparative and Agency practice.” Wegner’s position is too sweeping. Although it is certainly useful to have faculty members who have prosecution experience—and Wegner’s criterion of simply having a patent bar number is in any event not too indicative of such experience—it isn’t necessary to have such experience to make outstanding policy proposals, even when it comes to PTO practice. Indeed, only a few judges at the Federal Circuit itself would meet such criteria. It seems hard to fathom that Wegner believes that the Federal Circuit cannot make an “optimum” contribution to patent policy, including practices at the PTO, given their lack of such credentials. The same should hold true for academics. And to go one step further—as does the anonymous lawyer’s blanket assertion on Aharonian’s e-mail blog that a professor cannot sucessfully “study,” write about, or presumably teach patent law without having worked as a patent prosecutor or an engineer—is simply preposterous.

Second, many patent law professors, such as UC Berkeley’s Peter Menell and Rob Merges (also absent on Wegner’s chart)—in addition to having extensive prior and on-going experience as experts and consultants in patent litigation matters—have spent numerous hours writing casebooks and patent law practice guides. Rob Merges and John Duffy’s Patent Law and Policy is the leading patent law casebook, and contains extensive commentary from its authors. Merges is also co-founder and Senior Policy Advisor of Ovidian LLC, a Berkeley-based consulting and informatics company specializing in assessing and valuing patent portfolios. That experience is invaluable for the next generation of patent law professionals working in the emerging patent “marketplace.” Finally, because Berkeley—like GW and Stanford—offers separate courses in patent prosecution and patent litigation taught by prominent practitioners, it is hard to see how its students are not getting broad, deep, and practical exposure to patent law.

After co-founding the Berkeley Center for Law & Technology (BCLT) in 1995, Peter Menell soon began working with a team of top patent and other IP litigators to provide an annual four-day intensive training program on IP law and case management for federal judges, as well as numerous other national and regional events. That work led to the development of the Patent Case Management Judicial Guide, a comprehensive treatise that has been referred to as “the bible” for judges and litigators. Menell has also worked with district courts on the development and revision of patent local rules and filed amicus briefs in important IP cases. He also served as one of the PTO’s inaugural Edison scholars. His empirical research on patent claim construction with Jonas Anderson, a former BCLT Fellow—in which they reviewed every claim construction order issued by the Federal Circuit since 2000—was cited numerous times in the Federal Circuit’s recent en banc Lighting Ballast decision. Any comprehensive evaluation of patent law programs would value these qualifications.

The same holds true for professors who write about specific topics in patent law, but do not teach it. For instance, Berkeley’s Pam Samuelson is a world-renowned copyright expert and a winner of the “genius” grant from the John D. & Catherine T. MacArthur Foundation. She occasionally writes about software patents, including for her column in the Communications for the Association for Computing Machinery (ACM) journal, which is mainly read by software and computer science professionals. As Professor Samuelson’s work shows, one need not be an expert on every nuance of the patent system, especially the nitty-gritty of prosecution, to make sound reform proposals.

Other academics are permanent and full-time but not on the “tenure-track.” For example, BCLT Executive Director Robert Barr—who directs the Berkeley IP program and organizes numerous IP events there—is former chief patent counsel at Cisco, is licensed to practice before the PTO, and has long been a leader in the Silicon Valley and national patent law community. Along with John Whealan—former Solicitor at the PTO and another highly-regarded national leader in patent law who directs GW’s IP program—Wegner left Barr off the list.

Finally, many patent law professors have significant industry experience. For example, blog commenters on a recent Patently-O post of mine referred to me as “ivory tower” and as having “a lack of ‘real world’ experience.” In fact, before becoming a law professor, in addition to practicing patent litigation for four years, I founded three tech companies, raising nearly $5 million in financing, including being CEO of Unified Dispatch, a software company that makes innovative speech recognition systems for ground transportation companies. At Unified Dispatch, I designed and oversaw most of the company’s software products, which included writing detailed specifications and managing programmers and other engineers, and was the lead inventor on several patent applications and one patent. As part of that process, I also managed our outside patent counsel for several years during prosecution. Before attending law school, I earned an M.S. in Physics. Since becoming a patent law professor, I’ve consulted and served as an expert on an-going basis in patent litigation matters and related projects. So not only is the “ivory tower” label is inaccurate, it also misapprehends the often close ties between academia and practice.

The same sorts of backgrounds and relevant experience hold true for many other academics who teach and write about patent law. For example, Donald Chisum—yes, the author of the leading patent law treatise—is not registered to practice before the USPTO (he majored in philosophy). Granted, practicing before the PTO is helpful to writing about PTO practice, but would anyone doubt that Chisum is sufficiently knowledgeable to do as much?

I commend Hal Wegner’s efforts in calling attention to the patent law programs and scholars (which is why I assisted him in the process). There are clearly limitations to the US News ranking system, and I agree it’s valuable to see the credentials of those teaching at patent law programs across the country. However, it was irresponsible for him to omit the founders and leaders of many of the most important IP programs on his list of academics with “practical experience” in “key areas” merely because they don’t have a patent bar reg #, don’t have a deep understanding of comparative patent law, didn’t clerk for the Federal Circuit, or aren’t technically “tenure-track.” Patent litigation, industry experience, and other credentials are just as relevant.

Even more troubling is Wegner’s assertion that having someone on the faculty with one of his criteria is “essential” for making “optimum” policy proposals. And most troubling is that Wegner provides fodder for commenters such as those on Aharonian’s e-mail blog that professors without such credentials cannot successfully write about or apparently teach patent law more generally, not to mention commenters on this blog calling professors like me “ivory tower,” when it is simply not the case. Wegner and the commenters should do their homework. Otherwise, their “analysis” remains at best misguided and at worst scapegoating.

Berkeley and Stanford serve—and, historically, GW has served (and soon again will serve)—as model programs for training patent practitioners, scholars, and judges. The same holds true for many law schools I have omitted in this short blog post. Rather than denigrate these schools, Wegner would have done better to highlight the tremendous value offered to students and the patent law community more generally from this talented and highly qualified group of scholars.

Microsoft v. DataTern: Declaratory Judgment Jurisdiction and End User Lawsuits

Patent

By Jason Rantanen

Microsoft Corporation v. Datatern, Inc. (Fed. Cir. 2014) 13-1184.Opinion.4-1-2014.1
Panel: Rader (dissenting-in-part), Prost, Moore (author)

This case relates to one of the most common criticisms of the patent system raised today: infringement suits and threats of enforcement made against end users. If yesterday’s order in In re Toyota represented the Federal Circuit’s first venture in this area, Microsoft v. DataTern is the followup expedition.

DataTern sued several Microsoft and SAP customers, alleging that they infringed Patents No. 5,937,402 and 6,101,502 based on the customers’ use of Microsoft and SAP products.  DataTern’s claim charts extensively referred to the functionality of the Microsoft and SAP products and in most cases cited to Microsoft and SAP documentation for each claim limitation.  The exception was the ‘402 patent claim charts: they cited to non-Microsoft documentation for some claim limitations.

Based on this activity, Microsoft and SAP filed declaratory judgment actions against DataTern.  The district court rejected DataTern’s motion to dismiss for lack of subject matter jurisdiction and granted summary judgment of noninfringement to Microsoft and SAP.  DataTern appealed.

On appeal, the Federal Circuit agreed that the district court possessed subject matter jurisdiction over Microsoft and SAP’s declaratory judgment action in three of the four scenarios in play.  On the fourth scenario (Microsoft and the ‘402 patent), the majority concluded that the district court lacked jurisdiction while Judge Rader would have found jurisdiction across the board.  (As a reminder, subject matter jurisdiction in declaratory judgment actions asks “whether the facts alleged, under all the circumstances, show that there is a substantial controversy, between parties having adverse legal interests, of sufficient immediacy and reality to warrant the issuance of a declaratory judgment.” MedImmune, Inc. v. Genentech, Inc., 549 U.S. 118, 127 (2007).)

In reaching this conclusion, the majority rejected two important arguments raised by Microsoft/SAP: (1) that suing customers can provide a basis for subject matter jurisdiction by supplier for direct infringement and (2) that suing customers necessarily creates jurisdiction for induced or contributory infringement:

To the extent that Appellees argue that they have a right to bring the declaratory judgment action solely because their customers have been sued for direct infringement, they are incorrect. DataTern has accused customers using Appellees’ software packages of infringing the asserted method claims, but there are no arguments that there is a case or controversy between DataTern and Appellees on direct infringement.

…

To the extent that Appellees argue that DataTern’s suits against its customers automatically give rise to a case or controversy regarding induced infringement, we do not agree. To prove inducement of infringement, unlike direct infringement, the patentee must show that the accused inducer took an affirmative act to encourage infringement with the knowledge that the induced acts constitute patent infringement. Global–Tech Appliances, Inc. v. SEB S.A., 131 S. Ct. 2060, 2068 (2011). Absent the knowledge and affirmative act of encouragement, no party could be charged with inducement.

Slip Op. at 7-8.  However, the court did hold that declaratory judgment jurisdiction could be based on an inducement of infringement or contributory infringement claim.  Here, DataTern’s charts were sufficient to raise this issue for Microsoft and the ‘502 patent and SAP and both patents.

The claim charts provided to the SAP customers allege direct infringement of the ’402 and ’502 patents based on SAP’s customers’ use of BusinessObjects. Moreover, these claim charts cite to SAP-provided user guides and documentation for each claim element. In other words, DataTern’s claim charts show that SAP provides its customers with the necessary components to infringe the ’402 and ’502 patents as well as the instruction manuals for using the components in an infringing manner. Providing instructions to use a product in an infringing manner is evidence of the required mental state for inducing infringement.

Id. at 9 (comment: of course, knowledge (or at least willful blindness) that the acts infringe is also required under Global-Tech v. SEB, but there doesn’t seem to be a dispute about that here).

But, the claim charts were insufficient for Microsoft and the ‘402 patent:

The ’402 patent claim charts as they relate to Microsoft’s customers, however, are substantively different. They cite exclusively to third-party—not Microsoft provided— documentation for several key claim limitations. While these claim charts allege the customers’ direct infringement of the ’402 patent based on its use of Microsoft’s ADO.NET, they do not impliedly assert that Microsoft induced that infringement. Nothing in the record suggests that Microsoft encouraged the acts accused of direct infringement, and simply selling a product capable of being used in an infringing manner is not sufficient to create a substantial controversy regarding inducement.

Slip Op. at 10.

Judge Rader dissented, expressing concern that the majority’s opinion gave patent holders whose enforcement strategy involved suing end users who could not afford to litigate a roadmap for avoiding triggering declaratory judgment jurisdiction for manufacturers.  This, Judge Rader contends, is a problem:

Of course, DataTern and other potential patent litigants would like to find a way to keep Microsoft or other major corporations on the sidelines while seeking numerous settlements with their customers who cannot afford the cost of a major lawsuit. Thus, this decision takes on special importance because it shows DataTern and its successors a way to achieve that lucrative objective.

The roadmap comes about because all a patent holder needs to do to avoid triggering declaratory judgment jurisdiction is to make sure to cite to non-manufacturer documentation for several “key” claim limitations.

The court determines in this case that jurisdiction is not available over Microsoft’s action on the ’402 patent because DataTern “cite[d] exclusively to third party—not Microsoft-provided—documentation for several key claim limitations” in its charts. Majority Op. at 10. For this reason alone, the court denies Microsoft declaratory judgment jurisdiction to resolve these issues in a single focused lawsuit. This lone detail, within the control of the patent owner, should not defeat an otherwise valid declaratory judgment action. The practical effect of this holding creates a roadmap to allow DataTern and its successors to keep Microsoft on the sidelines while running up wins against customers, who are often smaller and less-equipped to defend themselves.

Slip Op. at 25.

Comment: One way that this opinion may be limited by future courts is to focus on the “several key claim limitations.”  It may be that transparent attempts to avoid creating jurisdiction by token references to non-manufacturer documentation will not suffice.

PatCon 4: The Patent Troll Debate

Patent, ,

Below is my account of the Patent Troll debate at PatCon 4.  As those who were in attendance know, it was a dynamic, insightful, and interesting discussion about a very complex issue.

Resolved: That hostility to patent trolls is not well justified theoretically or empirically and will likely result in bad law.

Pro: David Schwartz, John Duffy

Con: Michael Meurer, Mark Lemley

***

John: Hostility to patent trolls unfounded as a theoretical matter.  Patent trolls rely on two fundamental features of the patent system, and that defines their business model.

1) Alienability of patent rights: this should not be changed.  This is something that should be kept, not just because of property rights theory generally, but also because of patent rights in particular.  This is because inventors are generally not people who are good at business.   So you need to allow these people to transfer their patent rights to others.

Consider AT&T research labs: better to have everything integrated into a massive corporation or to have rights spread out among lots of people.

2) Litigation costs are high.  We should generally not be happy about this generally.  We can all agree that this is a problem.  But patent trolls are more efficient at dealing with this type of litigation.  They’re more capable of asserting of asserting these rights.  Also, keep in mind that if you have relatively narrow patent rights, you’re going to need an efficient market for those narrow rights.  This is the role that patent trolls offer.  This allows for the valuation of patents.

Mike – Three observations:

1) Relatively little troll activity at the start of the 20th century

2) Small businesses have motivated Congress and the White House to pursue a variety of reforms

3) Peter Detkin thinks that there is a lot of evidence that some folks are gaming the system.

Empirical research shows that patent trolls impose a tax on innovation.  This hazard increases with R&D investment.  Other research supports this conclusion.  Patent defense imposes a cost on companies’ Research and Development.  Patent defense has a negative effect on small firm R&D persisting for up to three years.  This harm was present even if the defendant won the lawsuit.  This is particularly concerning since there’s evidence indicating that patent trolls frequently lose their lawsuits.

This produces a chilling effect, that is strongest among small, high-tech firms.  New research by Catherine Tucker showing patent troll litigation “was associated with a loss of roughly $21.8 billion of VC investment over the course of five years.”

Dave: Theory that NPEs can be good for the system because they’re specialist.  Prof. Meuer system seems to be arguing that the whole patent system doesn’t work.  Dave can’t address all that; the debate here is just over whether the specific entity that holds the patent matters.  And he’s not convinced.

Dave might be persuaded if the suits were mainly frivolous, then there might be a big problem.  But there’s not clear evidence of this.  Going to lay out some guideposts about what he thinks are the right way to think about this issue:

1) Critical issue of what a PAE is.  This definitional problem needs to be overcome first.  Anyone that doesn’t practice the patent?  Too broad; encompasses universities, individual inventors, aggregators.

2) Need to have a baseline to compare to.  If the type of entity is the problem, then it can’t just be problems endemic to the patent system that matters.

3) Need to fundamentally we as academics approach research into patent litigation.  Can’t keep all this research private.  Data needs to be publicly available, for many reasons.  For example, the definitional issue: does this change the outcome?  Very hard to have a meaningful discussion about all this when the data is proprietary and held by corporations with skin in the game.

Mark: His position is that trolls aren’t necessarily the problem with the patent system.  But while trolls themselves are not the problem, trolls are a symptom of real problems with the patent system.  They’re a symptom of long tendency times, unclear claims, incentives to write broad functional claims.  As a result of these things, anyone can easily and cheaply stand up and make a plausible claim that I’m entitle to a portion of your company’s profits.  The result is a development of the ‘bottom feeder’ model, where at least some entities are pursuing a strategy of extorting nuisance value settlements.  Trolls can make use of high discovery costs and asymmetries.

Is hostility to trolls making bad law?  Let’s look at developments:

1) eBay: you get an injunction when you’re entitled to one.

2) We got more sophisticated with our damages arguments

3) Eliminated the willfulness infringement letter game

4) Reduced the cost of addressing patent validity by inter partes review

5) Started to eliminate forum shopping

What is Congress/Courts doing?

1) Give district courts discretion to punish frivolous suit

2) Forcing patent holders to be more clear in their claims in Biosig v. Nautilus

3) Considering reducing the cost of discovery by addressing e-Discovery

4) Considering making patent holders sue the manufacturer, rather than the downstream users or mom and pop merely as a way of increasing the royalty base.

Mike: Rebuttal to Dave and John –  There are many instances of small entities – such as biotech or pharma startups – that were able to enforce their patents without the need of intermediaries.  Doesn’t see a major role for tech transfer via intermediaries in the pharma and biotech areas because there is a lot of tacit information. So very skeptical were going to facilitate much transfer of technology by facilitating PAE practices.

John:
Rebuttal to Mike’s invocation of the precautionary principle: we should welcome innovation.  The rise of patent trolls is a rise of innovation in law.  We should not be afraid of this; we should embrace it.  Also, in every other field where there are property rights, there is a robust secondary market.  Consider used car markets.  It’s an oddity that we don’t have one in patent law.

Rebuttal to Mark’s point on taking advantage of asymmetries.  But this is something that defendants do as well – defendants are perfectly willing to take advantage of independent inventors.

Rebuttal to Mike’s event studies data. [Had to talk real fast because he was running out of time so I didn’t get it, but the button line was that Mike’s studies have flaws[

Mark: John says we have to welcome innovation.  But the kind of innovation that John wants to encourage are different from the innovation that Mark wants to encourage.  The type of innovation that John wants to encourage is innovation in extracting value from the patent system; innovation in the legal models.  And this imposes a tax on the innovation in the technical areas.  John says that this is a property system, and any property system has a robust secondary market.  But this is actually an instance that shows why patent rights are not property.  Patent trolls are taking rights that are lying fallow and bringing them into the marketplace.  But is this possibility really providing the primary incentive for folks to engage in technological innovation.

Also, let’s think about the change.  We’ve moved from a world where 2% of all patents are being enforce to perhaps a world where we’re in 50-60-70% of all patents are being enforced.  That doesn’t seem like technological transfer but something else.

Dave: Going to focus just on the bottom feeder point.  He’s against suits that are frivolous.  But this is where the data is weakest.  And this is the linchpin of the argument.  Mark suggests that there are a lot of these “bottom feeder” cases.   But the main study here (Lemley, Allison & Walker, http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1677785) isn’t really enough.

That study looks at the most litigated patents of all time.  And it finds that 90% of the patents that go to final judgment by NPEs do not win.  But the problem with this study is that is relatively limited, so it may just be outliers. Also, this study appears to involve independent inventor patents, which should be kept in mind.  Third, we’re equating unsuccessful with frivolous suits.  But that may not be the case.  Finally, there’s the problem of selection effects.  Only about 10% of cases reach final judgment.  There are many reasons to think that the 90% are not like the 10%.  Consider two possibilities:

1) The possibility of an injunction affects settlement negotiations.  Since post-eBay, it’s extremely likely that a non-practicing entity will be able to get an injunction (unlike practicing entities)

2) Practicing entities have other things that they can offer in settlement other than just money – such as business relations, etc.

David McGowan – moderator:

For Mark & Mike: Isn’t John right to say that whatever else you do, you don’t want patent law to have effects on efficient firm size?

For John & Dave: Hypothetically, let’s suppose that the choice that a sophisticated NPE is a patent portfolio, where the transaction isn’t really about whether a patent is infringed, but the aggregate possibility that there’s something in the portfolio that is infringed.

Mark: The right way to think about nondiscrimination is to think about whether we treat like situated people differently.  In other words, should we single you out for no other reason than you’re a NPE? No.  But that leaves a lot of room to apply rules in other ways that depend on particular characteristics or attributes of the entity.

John: Since they sort of largely agreed with me, I’m going to declare victory on a theoretical level.  No one is defending that we should treat inventors in these transactions differently depending on whether they are integrated into a large firm or not.

Dave: On the portfolio point.  Serially asserting patents against companies.  This is not unique to PAEs.  This is a general problem having to do with aggregation. In Mark’s Forest for the Trolls argument, he can see some benefits from aggregation in solving the royalty stacking problem.  There’s still potential for mischief with these portfolio structures, although there may be solutions.

John: Tremendous incentive for parties to come to an agreement on these portfolios unless all the patents are junk. And if all the patents are junk, then we have a bigger problem with the patent system.  Both plaintiffs and defendants lose value when suits are filed; so both parties have a strong incentive to settle. I’m going to continue to file suit against you and lose.  That’s not a very strong negotiating strategy.

Mike: One thing you should have told them, John, is that when a pharma company loses value when it files a lawsuit is because the shareholders realize that the patents are not as incontestable as they thought.

Basic economics of assertion by PAEs is, if we listen to John and Dave, is that they’re more efficient in enforcing patents.  The effect of this is to shift the borderline patents that are being assert to lower quality patents.  The result is that we’re going to have a marginal shift to lower quality patents.

In addition, the problem with the PAEs is that they aggravate the harms from notice failure.  Greater bargaining power of PAEs makes innovation tax bigger.  The size of problems with the patent system is exacerbated by PAEs.

David McGowan – moderator:

For John/Dave: Why did we see a spike in NPE suits from 2001-2009?

John: Innovation in patent monetization taking place.  This is good.  When people game the system, they show us new things to do.  Some we might want to adjust in response to.  But throw the entire innovation out?  No.

David: Also, a growing view that patents can be a valuable asset, combined with a larger number of firms that were willing to take patent cases on contingency fees.  But the real question is whether these are frivolous cases or cases that really are meritorious

For Mike/Mark: How are we going to get information that we can be confident in?

Mark: Going back to the study that Dave talked about.  Fair to say that for various structural reasons it’s hard to know much about the confidential settlements.  So what can we know?

We can look at cases that go to summary judgment and trial.  Invokes weak version of Priest-Klein here to respond to the selection effect point. Also, these are a substantial chunk of the cases in the system as a whole.  So when we tell you that 90% of those cases are losers for PAEs, that tells us something.  Also, consider Colleen Chien survey on payouts, which indicates that most of these case are settling for the cost of litigation. Ultimately, though, we really need to have more transparent settlement data, not just for studying it, but also for creating a thick secondary patent market.

Finally, if the way that things work is that the more innovative a firm is, the more it gets sued: there’s a real problem with our patent system and a fundamental disconnect be the way that incentives are aligned.

Oskar:  Consider this problem: let’s imagine two inventors who come up with a process patent that they’re never going to patent.  So what we hope they’re going to do is ex ante licensing.  You go around to the industry and try to get everyone to adopt it.  Another road that could be adopted is to get the patent and put it in a drawer and wait until someone else comes up with the process and then go out an sue them (i.e.: engage in ex post licensing.)

In between this distinction, we can say that the inventor who actually pushes the invention out is socially better than the inventor who engages in ex post licensing.

John: Patents don’t get put in drawers these days.  They get put on the internet.  So not really as big a concern about ex post licensing.  Also, see my recent article on the Paper Patent Doctrine in Cornell Law Review.

Mark: Oskar makes a really important point.  We want technology transfer.  Used to be a time when we got tech transfer through the patent system because diffusion was slow and patents made it faster.  But diffusion of tech as sped up and the patent system has slowed down.  The key here is a distinction between patent rights transfer and technology transfer.  But in a world in which most patent lawsuits are filed against independent inventors not against copiers.

For another take, see Prof. Tom Cotter’s summary of the debate: http://comparativepatentremedies.blogspot.com/2014/04/patcon-4-patent-troll-debate.html

 

Design patent nonobviousness jurisprudence — going to the dogs?

Obviousness, Patent, , ,

Guest post by Sarah Burstein, Associate Professor of Law at the University of Oklahoma College of Law

MRC Innovations, Inc. v. Hunter Mfg., LLP (Fed. Cir. April 2, 2014) 13-1433.Opinion.3-31-2014.1

Panel:  Prost (author), Rader, Chen

MRC owns U.S. Patent Nos. D634,488 S (“the D’488 patent”) and D634,487 S (“the D’487 patent”). Both patents claim designs for sports jerseys for dogs—specifically, the D’488 patent claims a design for a football jersey (below left) and the D’487 patent claims a design for a baseball jersey (below right):

Design Patents

Mark Cohen is the principal shareholder of MRC and the named inventor on both patents. Hunter is a retailer of licensed sports products, including pet jerseys. In the past, Hunter purchased pet jerseys from companies affiliated with Cohen. The relationship broke down in 2010. Hunter subsequently contracted with another supplier (also a defendant-appellee in this case) to make jerseys similar to those designed by Cohen.

MRC sued Hunter and its new supplier for patent infringement. The district court granted summary judgment to the defendants, concluding that the patents-in-suit were invalid as obvious in light of the following pieces of prior art:

Prior Art ChartThe Federal Circuit uses a two-step test to determine whether a design is obvious. First, the court must identify a proper primary reference—i.e., a “something in existence” that has “basically the same” appearance as the claimed design. Second, other references can be used to modify the primary reference “to create a design that has the same overall visual appearance of the claimed design.” Any such secondary references must be “so related [to the primary reference] that the appearance of certain ornamental features in one would suggest the application of those features to the other.”

Step One – Primary References

On appeal, MRC argued that the district court erred in identifying the Eagles jersey as a primary reference for the D’488 patent. The Federal Circuit disagreed, stating that either the Eagles Jersey or the V2 jersey could serve as a proper primary reference for the D’488 patent.

MRC also argued that the Sporty K9 jersey could not serve as a proper primary reference for the D’487 patent. Again, the Federal Circuit disagreed, stating that the Sporty K9 jersey had “basically the same” appearance as the patented design.

Step Two – Secondary References

In its analysis, the district court used the V2 jersey and Sporty K9 jersey as secondary references for the D’488 patent and the Eagles jersey and V2 jersey as secondary references for the D’487 patent. On appeal, “MRC argue[d] that the district court erred by failing to explain why a skilled artisan would have chosen to incorporate” features found in the secondary references with those found in the primary references. The Federal Circuit did not agree, stating that:

It is true that “[i]n order for secondary references to be considered, . . . there must be some suggestion in the prior art to modify the basic design with features from the secondary references.” In re Borden, 90 F.3d at 1574. However, we have explained this requirement to mean that “the teachings of prior art designs may be combined only when the designs are ‘so related that the appearance of certain ornamental features in one would suggest the application of those features to the other.’” Id. at 1575 (quoting In re Glavas, 230 F.2d 447, 450 (CCPA 1956)). In other words, it is the mere similarity in appearance that itself provides the suggestion that one should apply certain features to another design.

The Federal Circuit noted that in Borden, it found that designs for dual-chambered containers could be proper secondary references where the claimed design was also directed to a dual-chambered container. And in this case, “the secondary references that the district court relied on were not furniture, or drapes, or dresses, or even human football jerseys; they were football jerseys designed to be worn by dogs.” Accordingly, the Federal Circuit concluded that they were proper secondary references.

Secondary Considerations

MRC also argued that the district court failed to properly consider its evidence of commercial success, copying and acceptance by others. The Federal Circuit disagreed, concluding that MRC had failed to meet its burden of proving a nexus between those secondary considerations and the claimed designs.

Comments

The Federal Circuit hasn’t actually reached the second step of this test in a while. That’s because it has been requiring a very high degree of similarity for primary references (see High Point & Apple I). For a while there, it looked like it was becoming practically impossible to invalidate any design patents under § 103. Now we at least know that it’s still possible.

But we don’t have much guidance as to when it’s possible. In particular, it’s difficult to reconcile the Federal Circuit’s decision on the primary reference issue with its decision in High Point. The Woolrich slipper designs that were used as primary references by the district court in High Point were, at least arguably, as similar to the patented slipper design as the Eagles and Sporty K9 jerseys are to MRC’s designs. But in High Point, the Federal Circuit suggested that there were genuine issues of fact as to whether the slippers were proper primary references.

And unfortunately, the Federal Circuit seems to have revived the ill-advised Borden standard. As I’ve argued before, the second step of the § 103 test has never made much sense. Even the judges of the C.C.P.A., the court that created the test, had trouble agreeing about how it should be applied. But the Borden gloss—that there is an “implicit suggestion to combine” where the two design features that were missing from the primary reference could be found in similar products—is particularly nonsensical. At best, this Borden-type evidence suggests that it would be possible to incorporate a given feature into a new design, from a mechanical perspective—not that it would be obvious to do so, from an aesthetic perspective.

All in all, this case provides an excellent illustration of the problems with the Federal Circuit’s current test for design patent nonobviousness. Perhaps now that litigants can see that § 103 challenges are not futile, the Federal Circuit will have opportunities to reconsider its approach.

Guest Post by Prof. La Belle: Demand Letters, DJ Actions, and Personal Jurisdiction

Patent

Demand Letters, DJ Actions, and Personal Jurisdiction

Guest Post by Megan La Belle, Associate Professor, Catholic University of America, Columbus School of Law

For more than fifteen years now, accused infringers have faced substantial personal jurisdiction obstacles in patent declaratory judgment (DJ) actions.  In Red Wing Shoe Co. v. Hockerson-Halberstadt, Inc., 148 F.3d 1355 (Fed. Cir. 1998), the Federal Circuit held that patent owners are not subject to personal jurisdiction in DJ actions based exclusively on the sending of demand letters to accused infringers in the forum state.  Red Wing Shoe was a purely policy-driven decision: if demand letters could create jurisdiction, patent owners would hesitate to send them and fewer patent disputes would settle out of court.  Because the policy favoring settlement is “manifest,” the Federal Circuit reasoned,  personal jurisdiction doctrine should facilitate—not discourage—the use of demand letters to settle patent disputes.  Since Red Wing Shoe, the Federal Circuit has reaffirmed this holding repeatedly, and other courts have extended it to the copyright and trademark contexts.  See, e.g., Integrity Mgmt. of Fla., LLC. v. Dental Websmith, Inc., 2008 WL 4372878, *5 (D. Neb. Sept. 19, 2008); Lab. Corp. of Am. Holdings, Inc. v. Schumann, 474 F.Supp.2d 758, 762 (M.D.N.C. 2006).  Indeed, the Federal Circuit’s rule has gone virtually unchallenged, as I’ve discussed in other writings.

Recently, however, the use of demand letters by patent owners has come under attack.  Both federal and state lawmakers have criticized patent owners who send demand letters to multiple alleged infringers looking for quick settlements.  Some states have already passed laws aimed at curbing this practice, and the Senate is currently considering various bills that would make the sending of certain types of demand letters an unfair or deceptive act or practice under the Federal Trade Commission Act.  The Executive, likewise, is taking a stand against patent demand letters.  In February, the White House launched a website at http://www.uspto.gov/patents/litigation/index.jsp  “to empower those who have received a demand letter or may be threatened with a patent lawsuit with information about their options.”  The website provides, among other things, that a DJ action may be an option for an accused infringer.

Yet, these legislative and executive efforts to curtail patent demand letters are undermined by the Federal Circuit’s rule in Red Wing Shoe.  Not only does the rule encourage the use of demand letters, but it often insulates patent owners from a DJ suit in the accused infringer’s home state.  Arguably, this special jurisdictional rule for patent DJ actions never made much sense.  As I suggest in this recent article, however, the current debate surrounding demand letters signifies that the time has come for Congress—or perhaps the Federal Circuit itself—to take a hard look at this jurisdictional rule.

Ed.: You can read the full text of Prof. La Belle’s article at http://www.vanderbiltlawreview.org/2014/03/against-settlement-of-some-patent-cases/  

Supreme Court to Address Standard of Review for Claim Construction

Patent, Supreme Court,

This morning the Supreme Court granted Teva’s petition for certiorari in Teva Pharmaceuticals USA, Inc. v. Sandoz, Inc.  Teva’s petition presents the following issue:

Whether a district court’s factual finding in support of its construction of a patent claim term may be reviewed de novo, as the Federal Circuit requires (and as the panel explicitly did in this case), or only for clear error, as Federal Rule of Civil Procedure 52(a) requires.

This case will be heard next term.  You can find the briefs on Scotusblog: http://www.scotusblog.com/case-files/cases/teva-pharmaceuticals-usa-inc-v-sandoz-inc/

Edit: See above for Dennis’s more thorough discussion of the parties’ positions!

 

The meaning of “intellectual property”

Patent

Energy Recovery, Inc. v. Hauge (Fed. Cir. 2014) 13-1515.Opinion.3-18-2014.1
Panel: Rader, Reyna, and Wallach (author)

At the heart of this case lies the question of “what is intellectual property?”  Here, the answer has more than philosophical implications: a finding of contempt hinges on it.

Leif Hauge was a former president of Energy Recovery, Inc. (“ERI”), a company specializing in “pressure exchangers,” which are used in reverse osmosis.  Mr. Hague and ERI apparently had a falling out, and in 2001 they entered into a settlement agreement, adopted by the district court, that included a section entitled “ABSOLUTE TRANSFER OF ALL RIGHTS IN PATENTS, PATENT APPLICATIONS AND ALL RELATED INTELLECTUAL PROPERTY, TO ENERGY RECOVERY.”  That paragraph specified that Mr. Hauge:

“irrevocably and absolutely assign[s]” to ERI “all right, title and interest along with any and all patent rights,” [], which Mr. Hauge had in “(i) the patents and patent applications . . . ; (ii) any and all patent rights . . . , intellectual property rights, property rights . . . ; and (iv) all other intellectual property and other rights relating to pressure exchanger technology predating this Order.”

Slip Op. at 8 (citations to Joint Appendix omitted).  He also agreed to a non-compete clause that prohibited him from making or selling energy recovery devices for use in RO salt water desalination for two years.  Id. at 3.

After the non-compete clause expired, Mr. Hauge obtained a new patent on pressure exchanger technology and formed a company, Isobarix, that began selling its own pressure exchanger.  In 2013, the District Court (acting on ERI’s Motion for Order to Show Cause) entered an order finding that allowing Mr. Hauge “to . . . develop new products using the very technology he assigned to ERI solely because those new inventions post-date the Agreement would render the Settlement Agreement and its assignment of ownership rights useless,” finding him in contempt of the 2001 Order, and enjoining him and Isobarix “from manufacturing and selling pressure exchangers and replacement parts for ERI’s pressure exchangers.”  Slip Op. at 4.

On appeal, the analysis focused on whether Mr. Hauge had violated clause (iv) of the agreement, which required him to “irrevocably and absolutely assign”…”all right,
title and interest along with any and all patent rights,” which he had in “(iv) all other intellectual property and other rights relating to pressure exchanger technology predating this Order.”

Here is where the split over the meaning of “intellectual property” comes into play.  ERI argued that Mr. Hauge was not, under the settlement agreement, able “to appropriate the very pressure exchanger technology” that he explicitly transferred to ERI in 2001.  This was a view that the district court apparently agreed with when it concluded that Mr. Hauge should not be allowed to “develop new products using the very technology he assigned to ERI.”  Id. at 4.  Both approaches treat “intellectual property” as meaning “technology.”  In other words, what mattered was that Mr. Hauge was allegedly using ERI’s own technology, including technical knowledge that he acquired while its president.

The Federal Circuit, on the other hand, agreed with Mr. Hauge’s view: that he had complied with the settlement agreement by “transfer[ring] ownership of the pre-Agreement pressure exchanger intellectual property.”  Slip Op. at 8.  He was “not claiming ownership of ERI’s intellectual property,” id. at 9, and “[n]othing in the 2001 Order expressly precludes Mr. Hauge from using any manufacturing process.”  Id. at 8.  Under the Federal Circuit’s approach, “intellectual property” is not treated as the technology itself, but the rights over that technology, rights that Mr. Hauge properly assigned to ERI.  (To spark yet another debate: This is, in my view, the only correct way to view the term.  Using “intellectual property” to refer to the underlying technology, as opposed to the legal regimes surrounding that technology, leads to chaos, confusion, and erroneous views about the law).

What about the argument that Mr. Hauge maintained ownership of ERI’s trade secrets, which operate a much grayer area of intellectual property law?  The Federal Circuit declined to treat these as “intellectual property and other rights,” at least for purposes of a civil contempt finding.  “Civil contempt is an appropriate sanction only if the district court can point to an order of the court which ‘sets forth in specific detail an unequivocal command which a party has violated.'”  Id.  Here, there was no such command.

Bose v. SDI: Post-verdict intent

Patent

Bose Corporation v. SDI Technologies, Inc. (Fed. Cir. 2014) (nonprecedential) 13-1347.Opinion.3-12-2014.1
Panel: Chen, Clevenger (author), Hughes

Despite being nonprecedential, this opinion is interesting because it’s the first time to my knowledge that the Federal Circuit has endorsed a “points in time” approach to an intent-based patent infringement doctrine such as inducement.

Background: Bose alleged that SDI indirectly infringes Patent No. 7,277,765, relying on both inducement and contributory infringement theories.  The district court granted summary judgment of noninfringement in SDI’s favor based a failure to meet the claim limitations as construed (for 144 of the accused products) and on a lack of intent to infringe (for the remaining product).

Intent to infringe: On appeal, the Federal Circuit reversed the district court’s grant of summary judgment as to the inducement issue. (It affirmed, however, the court’s ruling of noninfringement with respect to the other 144 products on claim construction grounds).

On the issue of intent, the Federal Circuit agreed that there were periods of time during which SDI might have possessed the requisite level of intent, and thus summary judgment as to those periods was inappropriate.  First, between the time when SDI learned of the patent and May 22, 2009, when it received an opinion of counsel, SDI may have possessed the requisite intent – that was an issue for the jury to decide:

Where the record reveals no basis for a good-faith belief sufficient to thwart liability, summary judgment of no liability cannot stand. Whether SDI had such a good-faith
belief prior to receiving the opinion of counsel is a triable issue for the jury to consider. Therefore the summary judgment incorrectly absolves SDI of liability from December 10, 2008 until May 22, 2009, when SDI received the opinion of counsel.

Slip Op. at 18.  The CAFC did conclude that for the period after SDI received the letter, it could not be liable for inducement, particularly since Bose never challenged the competency of the counsel who drafted the letter or even entered it into evidence despite possessing a copy.

But, the CAFC declined to extend that conclusion into the future – specifically, to the period after judgment would be rendered in this case:

Bose further argues that the District Court improperly allowed the opinion of counsel to absolve SDI of potential post-verdict liability. The District Court found that the patent’s validity and the iW1 device’s infringement were both triable issues for the jury. A jury could, at trial, find the patent not invalid and infringed. In this scenario, SDI’s opinion of counsel would not shield it from postverdict liability because SDI could not credibly argue that it maintained its good-faith belief of invalidity following a verdict to the contrary. The summary judgment improperly absolved SDI of potential post-verdict liability.

Slip Op. at 18.  This move is significant because it’s the first time that I’m aware of that the Federal Circuit has considered the state of mind of the accused infringer at various time periods when evaluating intent (rather than adopting some sort of “omniscient being” standpoint) or adopted a post-verdict theory that intent must follow (which both I and Tim Holbrook have argued is the right way to think about intent in inducement cases).  Here, I think the court gets the reasoning exactly right.