All posts by Jason Rantanen

About Jason Rantanen

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

Bits & Bytes from Jonathan Hummel

Patent

RECENTLY 

#1. House Bill Would Exempt USPTO from Sequestration.

  • Tony Dutra at Bloomberg BNA reports a Bill has been
    introduced into the House that would exempt the USPTO
    from government cuts forced by sequestration. The Bill, and an
    accompanying letter signed by several Silicon Valley Congressman urgers
    Congress to exempt the USPTO because that Office is funded solely by fees
    paid with the applications it receives. The USPTO stands to lose about
    $150 million in funding.

#2. Judge's Facebook Friends not grounds for Recusal

  • Venkat
    Balasubramani     at Eric Goldman's Technology & Marketing Law Blog
    reports on two cases that seek to answer the question whether or not Facebook "friendships"
    are grounds for Judicial recusal. The two opinions are further evidence of
    the way the social networking site is affecting the law in very basic ways
    by defining or redefining relationships.

#3. Library
of Congress Logging Blawgs

#4. New Digital Rights Management
Technology (& the Fictitious Lillian Virginia Mountweazel).

  • James Bridle at The Observer reports that Germany's
    Fraunhofer Institute
    recently revealed that it is working on a new digital rights management
    system, entitled SiDiM.
    Regular DRM involves making changes to the code of the media. The proposed
    SiDiM, however, make literal changes to the content of the media. For
    example, the word "unhealthy" would automatically change to
    "not healthy" and thus distinguish a plagiarist's work from a
    licensed work. Indeed, there is precedence for this: the "Mountweazel"
    is a made-up word inserted into a dictionary to catch unwary
    plagiarists, which originates in the fictitious Lillian Virginia
    Mountweazel who first appeared in the New Columbia Encyclopedia
    of 1975.

JOBS

Patent Search Attorney – Large
Corporation – Evanston, Ill.

  • Cardinal Intellectual Property,
    an Intellectual Property Search and Services company, is seeking a Patent
    Search Attorney to work in its Evanston, Illinois office.

Patent Attorney / Agent – Law Firm –
Fairfax, Va.

  • MG-IP Law, PLLC is
    accepting resumes for a Patent Attorney or Patent Agent with an electrical
    or computer science background and at least two years of experience. MG-IP
    is a growing top 40 IP firm located in the northern Virginia area and
    offers a flexible work environment.

UPCOMING EVENTS

Related
articles

 

Commil v. Cisco: Issues of validity “may” negate intent for inducement

Patent

By Jason Rantanen (note that you can now follow me on Twitter @PatentlyO_Jason).  For the sake of disclosure: while I was in practice I represented Cisco in an unrelated patent infringement litigation involving wireless technology.

Commil USA, LLC v. Cisco Systems, Inc. (Fed. Cir. 2013) Download 12-1042.Opinion.6-21-2013.1
Panel: Newman (concurring-in-part, dissenting-in-part), Prost (author), O'Malley (concurring-in-part, dissenting-in-part)

Cisco appealed from a jury finding that it induced infringement of Commil's patent.  The primary issues addressed by the court were a pre-Global-Tech jury instruction and the appropriateness of considering validity when determining whether the accused party posessed the requisite state of mind for inducement of infringement.  All three judges on the panel agreed that the jury instruction was both erroneous and prejudicial while Judges Prost and O'Malley agreed that issues of validity may be considered in the intent inquiry. 

Jury Instruction for Inducement: During the April 2011 trial, the jury was given the following instructions relating to inducement:

If you find that a third party has directly infringed Claim 1, 4, or 6 of the '395 patent,
then Commil must prove by a preponderance of the evidence that Cisco actively and knowingly aided and abetted that direct infringement.

Furthermore, Commil must show that Cisco actually intended to cause the acts that constitute direct infringement and that Cisco knew or should have known that its actions would induce actual infringement. Inducing third-party infringement cannot occur unintentionally. This is different from direct infringement, which can occur unintentionally. Cisco also cannot be liable for inducing infringement if it was not aware of the existence of the patent.

If you find that a third party has directly infringed Claim 1, 4, or 6 of the '395 patent
and that Cisco knew or should have known that its actions would induce direct infringement, you may find that Cisco induced another to infringe Commil's patent if it provided instructions and directions to perform the infringing act through labels, advertising, or other sales methods.

(Emphasis added).  Note that the court's opinion contains only bits and pieces of these instructions.  In order to obtain them in their entirety, I pulled the April 8, 2011 trial transcript via Lex Machina.

The jury found in Commil's favor and award it $63,791,153 in damages.  Approximately two months later, the Supreme Court issued its opinion in Global-Tech v. SEB, in which it held that induced infringement "requires knowledge that the induced acts constitute patent infringement," a requirement that can be satisfied either through actual knowledge or willful blindness.  131 S.Ct. 2060, 2068, 2072 (2011).  Based on Global-Tech, Cisco argued that the "should have known" language in the above jury instruction erroneously permitted the jury to find that it liable based on a negligence standard.

On appeal, the Federal Circuit agreed with Cisco that the instruction was legally erroneous under Global-Tech and that the error was prejudicial to Cisco.  "With respect to whether the induced acts constitute patent infringement, it is clear that the jury was permitted to find induced infringement based on mere negligence where knowledge is required. This erroneous instruction certainly could have changed the result. Facts sufficient to support a negligence finding are not necessarily sufficient to support a finding of knowledge."  Slip Op. at 8.

Issues of Validity May Negate Intent: Cisco also argued, and the majority agreed, that it should have been allowed to present evidence relating to its good-faith belief that the asserted claims were invalid.  Just as a good-faith belief of non-infringement is relevant to the intent inquiry for inducement, so too is a good-faith belief about the invalidity of the claims relevant:

It is axiomatic that one cannot infringe an invalid patent. [] Accordingly, one could be aware of a patent and induce another to perform the steps of the patent claim, but have a good-faith belief that the patent is not valid. Under those circumstances, it can hardly be said that the alleged inducer intended to induce infringement. Thus, a good-faith belief of invalidity is evidence that may negate the specific intent to encourage another’s infringement, which is required for induced infringement. Several district courts have considered this question and come to the same conclusion.[]

We now hold that evidence of an accused inducer’s good-faith belief of invalidity may negate the requisite intent for induced infringement.1 This is, of course, not to say that such evidence precludes a finding of induced infringement. Rather, it is evidence that should be considered by the fact-finder in determining whether an accused party knew “that the induced acts constitute patent infringement.” Global-Tech, 131 S. Ct. at 2068.

Slip Op. at 10-11 (internal citations omitted).

Judge Newman's Dissent: Judge Newman dissented as to the validity component of the court's ruling.  In her view, the only intent issue involved in inducement the question of infringement; an infringer's belief as to the validity of the patent plays no rule in the determination of inducement: 

A defendant’s ultimate liability for induced infringement, as for direct infringement, is subject to various defenses including patent invalidity and unenforceability. However, whether there is infringement in fact does not depend on the belief of the accused infringer that it might succeed in invalidating the patent. Such a belief, even if held in good faith, does not negate infringement of a valid and enforceable patent. This rule applies, whether the infringement is direct or indirect. My colleagues err in holding that “evidence of an accused inducer’s good-faith belief of invalidity may negate the requisite intent for induced infringement.” Maj. op. at 11.

Slip Op. at 22.  One difficulty with Judge Newman's position is that she bases it on the principle that "A mistake of law, even if made in good faith, does not absolve a tortfeasor."  Slip Op. at 21.  This principle, however, would seem to apply as much to mistakes about infringement – which Judge Newman agrees are relevant to the question of inducement – as it would to mistakes about validity.  Both can involve mistakes about fundamentally legal questions or the application of law to fact. (I've also argued in the past that this tort principle does not translate well to patent law [p. 1617-1620]). 

The New Trial Issue and Judge O'Malley's Dissent: During the initial trial, according to the district court, "Cisco's trial counsel attempted to play upon religious prejudices and other ethnic stereotypes."  Slip Op. at 12.  After Commil lost on indirect infringement, the district court granted it a partial new trial on the issues of infringement and damages (that's the trial discussed above).  All three judges agreed that the district court did not abuse its discretion in granting Commil a new trial.  However, the district court also declined to include issues of validity in the new trial, a decision affirmed by Judge Prost joined by Judge Newman. 

Writing in dissent, Judge O'Malley disagreed that the district court's decision to grant Commil a new trial on the issue of infringement while not allowing Cisco a new trial on the issue of validity survived Seventh Amendment scrutiny.  Judge O'Malley also would have addressed "Cisco's potentially dispositive arguments regarding whether Commil did or ever could prove the third party direct infringement which is a necessary predicate to Commil’s induced infringement claim."  Slip Op. at 26.

Guest Post by Paul Cole: ASSOCIATION FOR MOLECULAR PATHOLOGY v MYRIAD GENETICS – an isolated decision?

Patent

Guest Commentary by Paul Cole,Professor of Intellectual Property Law, Bournemouth University, and European Patent Attorney, Lucas & Co, Warlingham, Surrey, UK.  

ASSOCIATION FOR MOLECULAR PATHOLOGY v MYRIAD GENETICS – an isolated decision?

By Paul Cole[1]

            How does the Supreme Court decision of 13 June 2013 match international opinion on the patentability of biological material? From a European and indeed from an Australian standpoint it can be said with some confidence: not so well.

            In Europe patentability in this genus of fields of endeavour was considered in the 1990’s in a debate that resulted in the passage of the European Biotechnology Directive of  6 July 1998, [1998] OJL 175/1[2]. For the relevant philosophy underlying that Directive it is only necessary to quote the relevant recitals (with emphasis added):

(16) Whereas patent law must be applied so as to respect the fundamental principles safeguarding the dignity and integrity of the person; whereas it is important to assert the principle that the human body, at any stage in its formation or development, including germ cells, and the simple discovery of one of its elements or one of its products, including the sequence or partial sequence of a human gene, cannot be patented; whereas these principles are in line with the criteria of patentability proper to patent law, whereby a mere discovery cannot be patented;

(17) Whereas significant progress in the treatment of diseases has already been made thanks to the existence of medicinal products derived from elements isolated from the human body and/or otherwise produced, such medicinal products resulting from technical processes aimed at obtaining elements similar in structure to those existing naturally in the human body and whereas, consequently, research aimed at obtaining and isolating such elements valuable to medicinal production should be encouraged by means of the patent system;

(20) Whereas, therefore, it should be made clear that an invention based on an element isolated from the human body or otherwise produced by means of a technical process, which is susceptible of industrial application, is not excluded from patentability, even where the structure of that element is identical to that of a natural element, given that the rights conferred by the patent do not extend to the human body and its elements in their natural environment;

(21) Whereas such an element isolated from the human body or otherwise produced is not excluded from patentability since it is, for example, the result of technical processes used to identify, purify and classify it and to reproduce it outside the human body, techniques which human beings alone are capable of putting into practice and which nature is incapable of accomplishing by itself;

(22) Whereas the discussion on the patentability of sequences or partial sequences of genes is controversial; whereas, according to this Directive, the granting of a patent for inventions which concern such sequences or partial sequences should be subject to the same criteria of patentability as in all other areas of technology: novelty, inventive step and industrial application; whereas the industrial application of a sequence or partial sequence must be disclosed in the patent application as filed…

The consequential legislative provision is to be found in Article 3 which was arrived at following a three-year debate involving the EU Commission and the European Parliament:

1. For the purposes of this Directive, inventions which are new, which involve an inventive step and which are susceptible of industrial application shall be patentable even if they concern a product consisting of or containing biological material or a process by means of which biological material is produced, processed or used.

2. Biological material which is isolated from its natural environment or produced by means of a technical process may be the subject of an invention even if it previously occurred in nature.

In Australia the patentability of such materials has recently been confirmed by the Federal Court of Australia in Cancer Voices Australia v Myriad Genetics Inc [2013] FCA 65 (15 February 2013)[3], see Vaughn Barlow, CIPA, March 2013, 122-123. This very well-reasoned and detailed decision considers relevant US and UK opinions including the Kalo v Funk opinion, and explains:

105        In my opinion the patentability of the isolated nucleic acids referred to in the disputed claims does not turn upon what changes have been made to the chemical composition of such substances as a result of them having been isolated. In particular, the question of whether these substances constitute patentable subject matter does not depend upon the type of chemical bond that may have been broken in the process of isolating them. It is inevitable that some bonds will be broken in the course of isolating nucleic acids, but it is not apparent from the evidence that these will necessarily include covalent bonds. As I have already explained, the disputed claims do not require that the isolated nucleic acids they describe differ from those found in the cell in this or any other respect so far as their chemical composition is concerned.

106        Accordingly, the issue in this case turns upon whether an isolated nucleic acid, which may be assumed to have precisely the same chemical composition and structure as that found in the cells of some human beings, constitutes an artificial state of affairs in the sense those words should be understood in the present context. There are three considerations which lead me to think that it does.

107        First, in explaining the concept of manner of manufacture as one involving the creation of an artificial state of affairs, it is apparent that the High Court in NRDC was deliberate in its use of very expansive language. Not only did the High Court emphasise the “broad sweep” of the concept involved, it also made clear that metaphorical analysis may not be helpful in determining whether or not something constitutes patentable subject matter.

108        Secondly, in the absence of human intervention, naturally occurring nucleic acid does not exist outside the cell, and “isolated” nucleic acid does not exist inside the cell. Isolated nucleic acid is the product of human intervention involving the extraction and purification of the nucleic acid found in the cell. Extraction of nucleic acid requires human intervention that necessarily results in the rupture of the cell membrane and the physical destruction of the cell itself. And purification of the extracted nucleic acid requires human intervention that results in the removal of other materials which were also originally present in the cell. It is only after both these steps are performed that the extracted and purified product may be properly described as “isolated” in the sense that word is used in the disputed claims.

109        Thirdly, as Dann’s Patent demonstrates, the isolation of a particular micro-organism may require immense research and intellectual effort. In that case, it was only as a result of an intensive research effort that the isolated micro-organism in question could be made available for use in the manufacture of the new antibiotic. It was fortuitous for the patentee that it was its employees who were first to isolate the new micro-organism and first to deploy it in the manufacture of the new drug. That will not always be so. It would lead to very odd results if a person whose skill and effort culminated in the isolation of a micro-organism (a fortiori, an isolated DNA sequence) could not be independently rewarded by the grant of a patent because the isolated micro-organism, no matter how practically useful or economically significant, was held to be inherently non-patentable. In my view it would be a mistake, and inconsistent with the purposes of the Act, not to give full effect in such situations to the broad language used by the High Court in NRDC.

            The Court went on to explain that its findings were consistent inter alia with a report of the Australian Law Reform Commission of June 2004 entitled Genes and Ingenuity: Gene Patenting and Human Health (ALRC 99, 2004). That report concluded that it would be difficult, on any rational basis, to confine reform to genetic materials and technologies, and that the extension of the reform to other fields – where the patenting of pure and isolated chemicals that occur in nature was uncontroversial – could have unknown consequences.

What a shame that nobody told the Supreme Court of this body of opinion and legislation  in Europe and Australia, which is believed consistent with the opinions and legislation existing in most other countries of the industrialised world, or that if it was aware of this position elsewhere the Court decided to ignore it in favour of a judge-made exception to the express provisions of 35 USC 101!

European equivalents of the patents in issue have been considered by the EPO Appeal Board. For example, T 1213/05 UNIVERSITY OF UTAH/Breast and ovarian cancer[4] concerns the BRCA 1 gene. T 666/05 UNIVERSITY OF UTAH/Mutations[5] relates to the use of the same gene in diagnosis.

In case T 1213/05, opponents argued that the socio-economic consequences of patenting the claimed subject-matter should be considered under a.53(a) EPC because these consequences touched ethical issues. Patenting of the claimed subject-matter would not only result in increased costs for patients, but would also influence the way in which diagnosis and research would be organized in Europe, which would be clearly to the detriment of patients and doctors. The fact that a particular group of patients, i.e. patients suspected to carry a predisposition to breast cancer, would be faced with severe disadvantages and would become dependent on the patent proprietor was contrary to human dignity so that the claimed subject-matter constituted an exception to patentability under a.53(a) EPC. In rejecting this argument the Appeal Board held that the possible consequences of the exploitation of the patent were are the result of the exclusionary nature of the rights granted by a patent, i.e. the right to stop competitors from using the invention. Logically such an objection applied to the exploitation of any patent and was the same for all patents. A resolution of the European Parliament, P6_TA(2005)0407 of 26 October 2005 "Patents on biotechnological inventions" did not vest the EPO with the task of taking into account the socio-economic effects of the grant of patents in specific areas and of restricting the field of patentable subject-matter accordingly. Similar arguments were rejected by the Board, in a different composition, in Case T 666/05.

In the US litigation it was argued that patents for isolated genomic DNA inhibited more innovation than they incentivised. However, even if that proposition is accepted it appears arguable that this is also the result of the exclusionary nature of the rights granted by a patent and is the same for all patents.

It is submitted that the decision is based on a narrow and short-term view of the public interest. The drug amoxicillin was invented in 1959, became available in 1972 and was the subject of much litigation in the 1960’s and 1970’s in which this author personally participated. The relevant patents have now expired and the drug which continues in widespread use is now a generic in a competitive marketplace. In addition to the US and the UK, the drug is now made in, for example, Brazil, Canada, Italy, Mexico, New Zealand Singapore, Spain, Thailand and South Africa. The well-known Indian generic company Ranbaxy was approved a supplier for the US market by the FDA in 2003.  An invention can enrich the inventor or an employer for a limited period provided by the patent system: mankind is enriched forever.

Bosch v. Pylon: 1292(c)(2) CAFC Jurisdiction

Patent,

By Jason Rantanen

Robert Bosch, LLC v. Pylon Manufacturing Corp. (Fed. Cir. 2013) (en banc) Download Bosch v Pylon

Majority opinion written by Judge Prost, joined by judges Rader, Newman, Lourie, and Dyk.  Judges Moore and Reyna concurred and dissented-in-part in separate opinions.  Judges O'Malley and Wallach dissented.

This case deals with the question of whether the Federal Circuit has jurisdiction to entertain appeals from patent infringement liability determinations when damages and willfulness issues remain outstanding.  The court held that 28 U.S.C. § 1292(c)(2) confers jurisdiction in both situations.

Background on the case is available here.  The Federal Circuit requested that the parties brief the following issues:

  1. Does 28 U.S.C. § 1292(c)(2) confer jurisdiction on this Court to entertain appeals from patent infringement liability determinations when a trial on damages has not yet occurred?
  2. Does 28 U.S.C. § 1292(c)(2) confer jurisdiction on this Court to entertain appeals from patent infringement liability determinations when willfulness issues are outstanding and remain undecided.

Section 1292(c) states that "The United States Court of Appeals for the Federal Circuit shall have exclusive jurisdiction— (2) of an appeal from a judgment in a civil action for patent infringement which would otherwise be appealable to the United States Court of Appeals for the Federal Circuit and is final except for an accounting."  At issue was whether a trial on damages and willfulness is an "accounting" for purposes of this section.  

An "accounting" includes the determination of a patentee's damages (7-2): The majority, joined by Judge Moore (and in its conclusion by Judge Reyna), first held that an accounting includes the determination of a patentee's damages.  This approach was consistent with both the historical meaning of an "accounting" and the legislative history for the predecessor statute to § 1292.  "The statute’s interpretation through history is clear. An “accounting” in the context of § 1292(c)(2) includes the determination of damages and cannot be limited to a traditional equitable accounting of an infringer’s profits."  Slip Op. at 13. 

Nor does the a request for a jury trial to establish damages change this result: "While we agree with Bosch that an accounting was historically available in equity, we do not agree that a trial on damages falls outside the scope of the accounting described in § 1292(c)(2)."  Id.  The court's summary of its rationale:

We base our conclusion on four points. First, in 1948, Congress expanded jurisdiction over interlocutory appeals from cases in equity to “civil actions for patent infringement which are final except for accounting.” Second, the issues which were historically decided in accountings are the same as those decided during damages trials today. Third, the reasons articulated by Congress for allowing interlocutory appellate jurisdiction over patent cases that are final except for an accounting apply with equal force to a modern damages trial. Finally, stare decisis militates in favor of allowing interlocutory appeals where liability has been established and a damages trial remains.

Slip Op. at 12-13.  The last point in particular caught my eye.  The majority's argument is that the principle of stare decisis should be given weight by the court sitting en banc even when the precedent consists of panel decisions, particularly when dealing with issues of statutory interpretation.

Nonetheless, “because [our precedent] represents the established law of the circuit, a due regard for the value of stability in the law requires that we have good and sufficient reason to reject it at this late date.” Bailey, 36 F.3d at 110. [D.C. Cir sitting en banc] Indeed, panel opinions, like en banc opinions, invoke the principle of stare decisis. Panel opinions are, of course, opinions of the court and may only be changed by the court sitting en banc. It has been the law of this court for at least twenty-five years that an “accounting” under § 1292 includes a trial for the determination of damages under § 284.

Slip Op. at 20.

An "accounting" includes willfulness determinations (5-4): The majority, this time without Judges Moore or Reyna, also concluded that Section 1292(c)(2) confers jurisdiction on the Federal Circuit to hear appeals from patent infringement liability determinations while willfulness issues are still outstanding.  As with damages, the court held that an "accounting" includes willful infringement determinations.  This, the majority wrote, was also consistent with the historical understanding of an "accounting."  "Long before the enactment of § 1292(c)(2)’s predecessor statute in 1927, accounting proceedings included the determination of willfulness by a special master."  Slip Op. at 23.  Post-1927 cases confirmed this view.  "Indeed, after the enactment of § 1292(c)(2)’s predecessor statute in 1927, courts continued to determine willfulness as part of an accounting, which occurred after the finding of liability." Id. at 24. 

Bifurcation is a decision within the district court's discretion: A common refrain in the court's opinion is its comment that it is deciding only the appellate jurisdictional issue; it is not issuing a broader decision on bifurcation of damages and willfulness.  For example, near the end of the opinion the court notes: 

Finally, we wish to make clear that district courts, in their discretion, may bifurcate willfulness and damages issues from liability issues in any given case. District courts have the authority to try these issues together or separately just as they have the authority to try all issues together at the liability stage. They may decide, for example, for reasons of efficiency due to the commonality of witnesses or issues in any particular case, that bifurcation is not warranted. District court judges, of course, are best positioned to make that determination on a case-by-case basis. Today, we answer only the question of whether § 1292(c)(2) grants this court jurisdiction over appeals where the district court has exercised its discretion to bifurcate the issues of damages and willfulness from those of liability.

Judge O'Malley's Dissent: Writing in dissent, and joined by Judge Reyna, Judge O'Malley disagreed with the broad interpretation of Section 1292(c)(2) adopted by the majority.  "As an exception to the final judgment rule, § 1292(c)(2) is to be interpreted narrowly…Because I believe the term “accounting” only applies to a limited class of proceedings before special masters or to those instances in which the trier of fact has decided all matters relevant to a damages determination save the application of those decisions to an undisputed set of numbers, I do not believe § 1292(c)(2) justifies the exercise of jurisdiction over this appeal."  Slip Op. at 54-55. 

In the dissent's view, the majority erred by asking the wrong historical question.  "What we should ask is not what questions may be considered during the course of an “accounting” but whether the procedure that was an “accounting” as of 1927—the one contemplated in § 1292(c)(2)—is the same as or encompasses a jury trial on any of those same questions."  Id. at 56.  This distinction matters because the historical meaning of an "accounting" was tied to the determination by a special master not by a jury. With regard to the majority's historical argument, the dissent wrote:

The majority’s only attempt at a statutory analysis to support its holding is its claim that, by substituting the phrase “civil actions” for “suit[s] in equity” in the jurisdictional grant of § 1292, Congress somehow intended to expand the concept of an accounting to include jury trials on damages. The disregard for the importance of the right to a jury trial and misunderstanding of what a jury trial entails which is evident in this proposition is stunning.

Id. at 57.  Even less defensible, in the dissent's opinion, was the majority's conclusion as to willfulness.  Indeed, even requiring infringement and willfulness determinations to take place before separate juries may be impermissible in itself.  "A bifurcation order which requires that two different juries visit the interwoven issues and overlapping facts involving infringement and validity on the one hand and willfulness on the other would violate the defendant’s Seventh Amendment right to a jury trial."  Id. at 79.

Judges Moore and Reyna: Judges Moore and Reyna wrote separate opinions expressing their views that an "accounting" does not include a willfulness determination but can include the damages enhancement step that occurs following a willfulness determination.  The result is a court in relative agreement on the question of whether Section 1292(c)(2) confers jurisdiction while damages issues remain pending but sharply decided on the question of whether it confers jurisdiction when a willful infringement determination has yet to be made. 

Myriad: The PTO’s Preliminary Guidance

Patent

By Jason Rantanen

Within hours of the Court's Association for Molecular Pathology v. Myriad Genetics, Inc. decision yesterday, the USPTO published its preliminary guidance to the Patent Examining Corps relating to nucleic acid-related technology.  From the memorandum:

As of today, naturally occurring nucleic acids are not patent eligible merely because they have been isolated. Examiners should now reject product claims drawn solely to naturally occuning nucleic acids or fragments thereof, whether isolated or not, as being ineligible subject matter under 35 U.S.C. § 101. Claims clearly limited to non-naturally-occurring nucleic acids, such as a cDNA or a nucleic acid in which the order of the naturallyoccuning nucleotides has been altered (e.g., a man-made variant sequence), remain eligible. Other claims, including method claims, that involve naturally occurring nucleic acids may give rise to eligibility issues and should be examined under the existing guidance in MPEP 2106, Patent Subject Matter Eligibility.

Read the entire memorandum (it's short) here: Download Myriad_20130613

Myriad: Justice Scalia’s Concurrence

Patent

By Jason Rantanen

Concurring in part and concurring in the judgment in Myriad, Justice Scalia wrote:

I join the judgment of the Court, and all of its opinion except Part I–A and some portions of the rest of the opinion going into fine details of molecular biology. I am unable to affirm those details on my own knowledge or even my own belief. It suffices for me to affirm, having studied the opinions below and the expert briefs presented here, that the portion of DNA isolated from its natural state sought to be patented is identical to that portion of the DNA in its natural state; and that complementary DNA (cDNA) is a synthetic creation not normally present in nature.

What are your thoughts?  Is the level of detail in the Court's opinion too great, too little, or just right? 

Myriad: Isolated DNA out, cDNA in

Patent

By Jason Rantanen

Association for Molecular Pathology v. Myriad (2013)  Download 12-398_8njq

In an unanimous opinion, this morning the Supreme Court drew a sharp line between isolated DNA (not patentable subject matter) and cDNA [synthetic versions of DNA that omit non-coding portions] (patentable). There is a curious concurrence by Justice Scalia that I'll post about separately.

The Court's basic rationale is similar to Judge Bryson's dissent in the Federal Circuit opinion. DNA is really about information, Myriad's patent claim treats it as if it's about information, and that's how the Court treats it as well.  Because the minor chemical differences between naturally occurring DNA and isolated DNA don't change the informational component of DNA relative to its naturally ocurring state, isolated DNA is not patentable.  However, the creation of cDNA in the laboratory does affect this informational component by removing the non-expressing portion of the DNA sequence, thus producing a non-naturally ocurring DNA sequence.  This change in the informational content is sufficient to render the cDNA sequence patentable.

The 101 Standard: The court applied an incentive/preemption framework for analyzing the patentable subject matter issue:

As we have recognized before, patent protection strikes a delicate balance between creating “incentives that lead to creation, invention, and discovery” and “imped[ing] the flow of information that might permit, indeed spur, invention.” (quoting Mayo v. Prometheus, at 23)

Isolated DNA: Simlar to its approach in other patentable subject matter cases, the Court first looked to the essence of what Myriad had done.  "Myriad’s principal contribution was uncovering the precise location and genetic sequence of the BRCA1 and BRCA2 genes within chromosomes 17 and 13. The question is whether this renders the genes patentable….In this case, [] Myriad did not create anything. To be sure, it found an important and useful gene, but separating that gene from its surrounding genetic material is not an act of invention."  Slip Op. at 12.

In reaching its conclusion as to the unpatentability of isolated DNA, the Court adopted an information-centric view of DNA as opposed to a chemical-structural approach: 

Nor are Myriad’s claims saved by the fact that isolating DNA from the human genome severs chemical bonds and thereby creates a nonnaturally occurring molecule. Myriad’s claims are simply not expressed in terms of chemical composition, nor do they rely in any way on the chemical changes that result from the isolation of a particular section of DNA. Instead, the claims understandably focuson the genetic information encoded in the BRCA1 and BRCA2 genes. If the patents depended upon the creation of a unique molecule, then a would-be infringer could arguably avoid at least Myriad’s patent claims on entire genes (such as claims 1 and 2 of the ’282 patent) by isolating a DNA sequence that included both the BRCA1 or BRCA2 gene and one additional nucleotide pair. Such a molecule would not be chemically identical to the molecule “invented” by Myriad. But Myriad obviously would resist that outcome because its claim is concerned primarily withthe information contained in the genetic sequence, not with the specific chemical composition of a particular molecule.

Slip Op. at 14-15.

cDNA Patentable: The Court reached a different result for cDNA:  

cDNA does not present the same obstacles to patentability as naturally occurring, isolated DNA segments. As already explained, creation of a cDNA sequence from mRNA results in an exons-only molecule that is not naturally occurring. Petitioners concede that cDNA differs from natural DNA in that “the non-coding regions have been removed.” Brief for Petitioners 49. They nevertheless argue that cDNA is not patent eligible because “[t]he nucleotide sequence of cDNA is dictated by nature, not by the lab technician.” Id., at 51. That may be so, but the lab technician unquestionably creates something new when cDNA is made. cDNA retains the naturally occurring exons of DNA, but it is distinct from the DNA from which it was derived. As a result, cDNA is not a “product of nature” and is patent eligible under §101, except insofar as very short series of DNA may have no intervening introns to remove when creating cDNA. In that situation, a short strand of cDNA may be indistinguishable from natural DNA.

Slip Op. at 16-17 (emphasis added).  Note that under the last bit, a cDNA sequence may not be patent eligible subject matter in some circumstances.

What are the consequences?  My immediate reaction is that for most practical applications, the Court's holding means that even though the broadest possible biotechnology product claims (to the isolated DNA itself) aren't going to be patentable, the key elements in making and using a biotechnology-based invention are still going to be protectable via patents (Part III of the Court's opinion makes this especially clear).  This will allow researchers and competitors a little bit of wiggle room to design around biotechnology patents because they can use the basic isolated sequence but there will still be substantial limitations on what they can do with that isolated sequence.  For this reason, I'm skeptical that the Court's opinion will have a negative effect on the incentives for creating biotechnology-based applications.  To the contrary: by affirming that cDNA can be patented, it may strengthen the incentives for investing in research in this area.

In terms of the effects on my friends here at the University, I can see at least two consequences. First, it may allow researchers more freedom to engage in whole-genome sequencing because they won't need to deal with a multitude of isolated DNA patents for individual sequences.  On the other hand, because early-stage research on newly discovered DNA sequences cannot be patented, it may encourage companies – and perhaps universities – to pursue greater secrecy over those early stage discoveries.  Social research norms may cut against this – particularly in universities – but there may be some increased pressure, particularly at the margins, towards secrecy of potentially valuable inventions.

Update: In the short term, this case may have an immediate impact on BRCA testing.  Via Brian Love at Santa Clara, Hank Greely just tweeted that: "Ambry announces its own BRCA 1/2 sequence test. $2200, a 30%+ cut from Myriad. They'll do deletes/dups for $500. Price hemorrhaging begins!" 

Dey v. Sunovion

Patent

By Jason Rantanen

Dey, L.P. v. Sunovion Pharmaceuticals, Inc. (Fed. Cir. 2013) Download 12-1428.Opinion.5-16-2013.1
Panel: Newman (dissenting), Bryson (author), O'Malley

Although decided under the "old" version of 35 U.S.C. 102, Dey v. Sunovion has broad ramifications for both current and future patents.  At issue was whether a clinical study – conducted by the accused infringer in this case – constituted an invalidating "public use."  All three judges agreed that the district court erred in granting summary judgment that the study was a public use. Judge Newman would have gone further and granted summary judgment that the study was not a public use.

A Classic Issue With a Twist: In the 1990s and 2000s, Dey and Sunovion both developed pharmaceutical products containing the compound formoterol for treating pulmonary disease.  Both filed for and obtained patents and both conducted clinical trials. 

In a twist on a classic issue, Sunovion – the accused infringer – asserted that its clinical trials were an invalidating public use against Dey's patents because they involved the accused formulation and took place well before Dey's 102(b) critical date.  During Sunovion's clinical trials, participants were given treatments to take home and self-administer twice daily.  Participants were also given some information about the study (but not the specific formulation) and signed a consent form stating that the medications must only be taken by the person for whom it was intended and that they would have to keep usage logs and return unused medications.  Test administrators signed a confidentiality agreement. The district court granted summary judgment in Sunovion's favor and Dey appealed.

The Law of Public Use: On appeal, the Federal Circuit applied the public use framework articulated in Invitrogen v. Biocrest:  "To decide whether a prior use constitutes an invalidating 'public use,' we ask 'whether the purported use: (1) was accessible to the public; or (2) was commercially exploited.'"  Slip Op. at 6, quoting 424 F.3d 1374, 1380 (Fed. Cir. 2005).  Here, the case turned on the "accessible to the public" form of public use, a fuzzy determination guided by the policies underlying the pubic use bar and a multi-factor analysis including "the nature of the activity that occurred in public; the public access to and knowledge of the public use; [and] whether there was any confidentiality obligation imposed on persons who observed the use."  Id., quoting Bernhardt v. Collezione Europa USA, 386 F.3d 1371, 1379 (Fed. Cir. 2004).  The court held that this approach applies equally to alleged third party public uses. 

Against this backdrop, the CAFC reversed the district court's grant of summary judgment of invalidity.  First, the majority viewed the issue of whether the use of Batch 3501A by study participants was "indisputably open and free" as opposed to "sufficiently controlled and restricted" as a factual determination.  "The fact that a tiny fraction of the thousands of vials were lost without penalizing the responsible test subject(s), or that the practicalities of the study required self-administration at home rather than physician administration in a closed facility, does not preclude a reasonable jury from concluding that the use of Batch 3501A was sufficiently controlled and restricted, rather than unfettered and public."  Id. at 9.  Similarly, the issue of the confidentiality obligations imposed in the study was open to dispute.  "Because a finder of fact could conclude that the study was conducted with a
reasonable expectation of confidentiality as to the nature of the formulations being tested, summary judgment on the public use issue was inappropriate."  Id. at 11.  

Public Use or Public Knowledge?: One of the main tensions in determining whether there has been an invalidating public use has long been the question of whether it is the use of the invention in public that matters or whether knowledge of the invention by the public is necessary.   In my classes, I use the classic case of Egbert v. Lippman to start the discussion: is it a public use because Samuel gave the corset springs to Frances without restriction or is it a public use because Frances wore the corset springs under her clothes in public?  Here, the court adopted the former view: what mattered in Egbert was the giving of the corset springs without restriction to the public (Frances), not the wearing of the springs in a concealed manner in public. 

In adopting this view, the majority rejected the approach of  New Railhead Mfg., L.L.C. v. Vermeer Mfg. Co., 298 F.3d 1290, 1299 (Fed. Cir.2002), which quoted another classic case, City of Elizabeth v. American Nicholson" for the proposition that "the core issue is not public knowledge of the invention, but the public use of it":

The language quoted from New Railhead derives from the seminal “experimental use” case, City of Elizabeth v. American Nicholson Pavement Co., 97 U.S. 126, 136 (1877), and it makes good sense in that setting: During experimentation, the public might have knowledge of an invention (because they see it), but may not be using the invention within the meaning of the statute (because the inventor is experimenting).4 As for Egbert, although the invalidating use in that case was not visible to the general public, the case turned on the lack of control the inventor maintained over his invention.

4 In New Railhead, the invalidating public use took place at a public commercial job site, with the knowledge of the patentee inventor. 298 F.3d at 1293, 1298. “Commercial exploitation is a clear indication of public use,” even absent separate consideration of public accessibility,
Invitrogen, 424 F.3d at 1380, and “secret commercialization” by a third party is not public use, even if it might have resulted in forfeiture were the third party the one filing the patent application, W.L. Gore, 721 F.2d at 1550.

Slip Op. at 14-15. 

Consequences for Arguing the Issue of Public Use: One major consequence of this opinion is that is makes the argument against clinical trials being public uses much easier and simpler.   Rather than attempt to deal with the complexity of arguing that a clinical trial falls into the experimental use exception to public use (a challenging task, given Federal Circuit precedent over the last decade), Dey provides an excellent grounding for the argument that many clinical trials are not public uses at all. 

Guest Post on Using the Antitrust Laws to Police Patent Privateering

Patent, , , ,

Editorial by David A. Balto.  Mr. Balto is an antitrust attorney in Washington D.C. whose representations include high technology firms.  In addition to his practice, Mr. Balto was formerly a policy director of the Federal Trade Commission, attorney-adviser to Chairman Robert Pitofsky, and an antitrust lawyer at the U.S. Department of Justice.  He has also published research and authored scholarship for Google on technology policy topics.

Using the Antitrust Laws to Police Patent Privateering

By David Balto

In the ongoing debate over patent assertion entities, increased attention is being paid to “patent privateering”: the practice of operating firms transferring patents to non-practicing entities in order to bring patent litigation against their rivals. As I explained in a recent article:

“Privateering is the practice by which established operating companies arm trolls with patents and deploy them to engage in expensive, incessant litigation against competitors. This Trojan horse approach allows companies to accrue the benefits of the egregious troll conduct without incurring any of the risks. And more often than not it is used as a competitive weapon to try to raise costs and dampen competition from rival operating companies.”

Firms like Google, BlackBerry and Red Hat recently filed comments with the Federal Trade Commission and Department of Justice, explaining the substantial concerns that patent privateering raises from a competition perspective.

This begs the question: is there an antitrust solution to the privateering problem?

A recent article by Mark Popofsky and Michael Laufert provides a thoughtful roadmap on how the antitrust laws can be used to police privateering. It’s a must-read for businesses and policymakers concerned that patents are becoming strategic tools for anticompetitive conduct.

In the current patent ecosystem, large operating companies accumulate patents in part for defensive purposes.  Those companies are unwilling to use their patents in certain strategic fashions because they fear that the same will be done to them.  These patent portfolios help assure patent peace because they assure that any strategic conduct will be met with a similar response – so-called mutually assured destruction.

Popofsky and Laufert outline three concerns around privateering transfers to PAEs that upset that balance. Privateering lets operating companies evade “[mutual assured destruction] or reputational constraints to raising rivals’ costs” and “FRAND or other licensing commitments,” and provides a method for “strategic outsourcing to PAEs to hinder rivals.”  Essentially, privateering companies are use PAEs because they have the incentive and ability to engage in strategic conduct that is prevented by current market forces.

The article gives a prime example of these concerns: the well-reported patent transfer from Nokia and Microsoft to patent troll MOSAID. After the failure of Nokia’s open source Symbian mobile operating software, Nokia joined forces with Microsoft and adopted its Windows Phone 7 platform. Nokia had originally supported open source software and made numerous FRAND commitments, but these commitments became a hindrance when Android (open source) became Nokia’s chief competitor. Microsoft and Nokia orchestrated a transfer of 2,000 of Nokia’s patents, 1,200 of which were standards essential patents (SEPs) with FRAND commitments, to MOSAID for a nominal fee. As part of the deal MOSAID has to pay Microsoft and Nokia 2/3 of the patent royalties and meet strict “royalty protection provisions and milestone payments calculated to maximize . . . revenue.”

The MOSAID transfer exhibits all three of the anticompetitive concerns. MOSAID has the incentive and ability to engage in strategic patent litigation.  Nokia could not assert these 2,000 patents without breaking patent peace and risking counter-suits for patent infringement. MOSAID can use these patents without fear because MOSAID does not practice in the industry and immune to countersuits. The transfer also allows Nokia to evade a FRAND commitment not to charge more than 2% total royalty for all the wireless SEPs in Nokia's portfolio. MOSAID did not make this promise, and even if it honored Nokia's promise and only charged 2% for the 1,200 SEPs MOSAID received the total fees could still double for competitors.

Nokia later transferred portions of its SEP portfolio to patent trolls Sisvel and Vringo. These transfers could potentially quadruple the licensing cost of these SEPs. MOSAID also can’t collect royalties from “third parties implementing certain Microsoft software in their mobile devices.” However, MOSAID must meet revenue expectations or it risks activating a default provision in the transfer contract that would allow Nokia to take those patents back for only $10,000. This creates serious strategic interests for MOSAID to aggressively target Microsoft and Nokia’s rivals.

Fortunately, Popofsky and Laufert offer several ways to challenge these troubling transfers to patent trolls under the existing antitrust laws. This outsourcing of patent litigation might “form part of a scheme to maintain or obtain monopoly power” in violation of Section 2 of the Sherman Act which prohibits monopolization. A plaintiff would have to prove that transfers to patent trolls are a part of an exclusionary strategy to obtain or maintain monopoly power by raising rivals costs. The first part of the strategy is to create patent-holdup by making FRAND commitments to get patents into a standard and then evading those FRAND commitments through transfers to patent trolls. The second part of the strategy is to raise licensing fees by arming patent trolls that have no incentive to negotiate license rates because they have no risk of patent counter-suits or injury to their reputation. If proven, a private plaintiff could receive an award of treble damages and the government can secure injunctive relief.

The transfer can also be challenged under Section 7 of the Clayton Act which prevents mergers and acquisitions if they are likely to substantially lessen competition or tend to create a monopoly. Patent acquisitions can be challenged under Section 7.  The article notes that the Department of Justice has already used this power in 2011 to prevent Microsoft from acquiring Novell’s patents to which Microsoft already had a license. This agency action was made to prevent a transfer whose only logical purpose was to attack open source software. The government can continue to use its Section 7 power to block transfers to patent trolls and it can challenge these transfers before they inflict harm.

The Section 7 power should be fully explored.  The National Restaurant Association and Food Marketing Institute have suggested that the agencies need to increase their scrutiny of patent transfers to PAEs and they offer an important tool.  They suggest that the FTC and DOJ adopt regulations to make more of these transfers reportable under the Hart Scott Rodino Act. This would give the agencies far stronger tools to fully investigate and challenge these transfers.

The transfers could also be challenged as a restraint of trade under Section 1 of the Sherman Act. Michael Carrier has commented that the MOSAID transfer “could present a Section 1 concern similar to a pooling arrangement the Supreme Court declared per se illegal in Singer Manufacturing Co.” Transfers running afoul of Section 7 can also "be recast as violations of Sherman Act Section 1."

Finally, the FTC can also challenge transfers that seek to dodge FRAND and other commitments through Section 5 of the FTC Act. The FTC has already done this in a consent order with N-Data Solutions. The FTC Act gives the Federal Trade Commission the power to prevent "unfair methods of competition in or affecting commerce and unfair or deceptive acts or practices in or affecting commerce."

The Popofsky/Laufert paper should be required reading for the regulators at the FTC and DOJ. Well conceived enforcement actions against transfers to trolls would be one of the most effective ways to deal with the growing privateering problem.

Congratulations to 2013 Mark T. Banner Award Recipients!

Patent

By Jason Rantanen

I'm very happy to announce that my Iowa Law colleague, Christina Bohannan, has been selected to receive the ABA Intellectual Property Law Section's 2013 Mark T. Banner Award for her contributions to intellectual property law.  Professor Bohannan will be receiving the award alongside the Hon. Pauline Newman at the Banner Award Luncheon during the ABA's Annual Meeting in San Francisco in August.  She is both the youngest person and first academic to receive the award.

You can read more about the Mark T. Banner award, and about Mark Banner himself, on the ABA's website. Past recipients of Banner award are the Hon. Richard Linn, Marybeth Peters, former Registrar of Copyrights and director of the Copyright Office, and the Hon. James F. Holderman. 

Recent Scholarship: Investing in America’s Future by David Kappos

Patent

Last fall, then-PTO Director David J. Kappos delivered a speech on software patents, the PTO, and innovation, in which he strongly defended software patents.  Below, Director Kappos, now with Cravath, Swaine & Moore, summarizes an article that he recently published in the Stanford Technology Law Review that expands on that theme.  – Jason

"Investing in America’s Future Through Innovation" appearing in the Stanford Technology Law Review

By: David J. Kappos

While the smart phone patent wars have ignited debate about the patent system, the discussions are about far more than smart phones and software patents.  These disputes, and the accompanying critiques, raise a more fundamental question about the willingness of the United States to invest in our future.  We Americans need to make up our collective mind about whether we are satisfied with short-term gratification to get the newest technology at the absolute lowest price or whether we are willing to invest in the long-term. At their core, patents, and intellectual property in general, represent that investment.

Drawing on recent patent quality metrics, my article appearing in the Stanford Technology Law Review brings balance to the heated rhetoric surrounding the smart phone patent wars, explaining why the best evidence available shows that these disputes are not about low quality software patents or an ineffective patent system.  In fact, and in contrast to the many critiques that offer no empirical evidence, the data shows that low quality patents are not the problem. Instead, the real issue is the historical tension between the necessary long-term incentives that form the basis for the patent system, versus the desire of consumers to have products and services today at the lowest prices possible. To move beyond the rhetoric of the current debate, we must continue to have faith in allowing our national innovation system to grow and develop as it has over 200+ years so that we and our children will have even more, and better, innovations to enjoy in the future.

The article is available on the Stanford Technology Law Review's website at: http://stlr.stanford.edu/2013/05/investing-in-americas-future-through-innovation/

Best Mode: Only Mostly Dead

Patent

By Jason Rantanen

Ateliers de la Haute-Garonne v. Broetje Automation USA Inc. (Fed. Cir. 2013) Download 12-1038.Opinion.5-17-2013.1
Panel: Newman (author), Prost (dissenting), Reyna

While the America Invents Act eliminated the failure to disclose best mode as a defense in patent infringement suits commenced on or after September 16, 2011, it remained available as a defense for litigation that had already commenced.  In AHG v. Broetje, the Federal Circuit divides over the issue of whether intentional concealment is required for a best mode violation in a split that will likely remain forever unresolved.

AHG is the owner of two patents relating "to the dispensing of objects such as rivets through a pressurized tube with grooves along its inner surface, to provide a rapid and smooth supply of properly positioned rivets for such uses as the assembly of metal parts of aircraft."  Slip Op. at 2. Prior to the enactment of the AIA, AHG filed an infringement suit against Brotje. 

The crux of Brotje's best mode argument turned on whether the inventors' best mode involved three-grooves or an odd number of grooves. At the time of the application, the inventors were mostly using three-groove embodiments.  The patents disclosed a three-groove embodiment (among other examples including a fifty-five groove and two two-groove embodiments).  Brotje argued, however, that at the time of the application the inventors considered an odd number of grooves to be the best mode of carrying out the invention.  Based on Broje's theory, the district court granted summary judgment of invaliditydue to a failure to disclose the best mode of carrying out the invention.  AHG appealed.

Best mode and the issue of intent: In granting summary judgment, the district court stated that "the clear weight of Federal Circuit authority holds that intentional concealment is not required for best mode violations . . . ." and that the "patents-in-suit are 'so objectively inadequate as to effectively conceal the best mode from the public,' such that a reasonable jury could not find in AHG’s favor with respect to Broetje’s ‘odd number’ theory."  Slip Op. at 9, quoting district court (emphasis in original). 

On appeal, the majority disagreed with the district court that this was the correct correct legal standard.  "Violation requires intentional concealment; innocent or inadvertent failure of disclosure does not of itself invalidate the patent."  Slip Op. at 10.  Thus, under the majority's view, a best mode violation requires both that the inventor knew of a better mode and intentionally concealed it.

Judge Prost disagreed that this is the law of best mode.  "The majority holds that a '[v]iolation [of the best mode requirement] requires intentional concealment.'…"  Dissent at 2 (emphasis in quotation).  This decision "is itself based on an error of law.  It is not in accord with our precedent regarding intent in a best mode analysis."  Id. at 1. Rather, "this court has repeatedly acknowledged the error in the Brooktree dicta and recognized that we are bound to follow our earlier precedent that intent is not an element of a best mode violation."  Id. at 3.

In support of their positions, both the majority and dissent cite an array of recent precedents and engage in a series of dueling footnotes.  This disagreement might seem somewhat minor; after all, best mode is being phased out as a defense in patent litigation.  What is interesting here is the way in which the judges express their disagreement: both opinions suggest that not only is the other side wrong, but that its opinion is invalid.  This is particularly apparent in the treatment of recent precedent by the majority and dissent.  Both cite substantial amounts of recent and older opinions that arguably support their positions and conclude that the opposing sets of precedents are invalid; they then cite back to older precedent in a complex dance in which older precedent is better, unless it is too old, unless it is cited in a more recent old opinion (compare majority footnote 3 with dissent footnote 1).

This opinion itself seems likely to fall into that morass when it is cited in the future: some judges may take the view that it is binding for what it says while others take the opposite view.  I'm curious as to whether this reflects an emerging trend in Federal Circuit jurisprudence or whether it no different than other doctrinal disagreements within the court.  My observational sense is that dissents and disagreement within Federal Circuit opinions are have been on a substantial rise but haven't yet put together the data to test that intuition.

Articulating the best mode:  Majority and dissent also disagreed over what needed to be disclosed.  The majority interpreted the best mode requirement as requiring that the best embodiment must be disclosed.  "The general statement that an odd number is better than an even number is not a statement of a better mode than the preferred embodiment shown in the specification. There was no evidence of intentional concealment of a better mode than was disclosed. The preferred embodiment's disclosure of a three-groove tube is adequate to enable a person skilled in this art to practice the best mode." Slip Op. at 14.

The dissent disagreed.  In addition to concluding that it was a disputed question of fact as to whether the three-groove embodiment or the odd-number of grooves was the preferred embodiment, the dissent would have found even the three-groove embodiment to not be adequately disclosed.  "[T]he inventors did not simply reveal their best mode and disclose others; they buried the best mode among other embodiments, also falling under the preferred embodiment heading, that did not include the
'essential' feature that the inventors discovered and knew was necessary to successfully implement their invention. Such disclosure is not the “quid pro quo” demanded by the best mode requirement."  Dissent at 6.

Motiva v. ITC and Nintendo

Patent

By Jason Rantanen

Motiva, LLC v. International Trade Commission and Nintendo Co., Ltd. (Fed. Cir. 2013) Download 12-1252.Opinion.5-9-2013.1
Panel: Newman, Prost (author), O'Malley

In order to bring a section 337 action in the International Trade Commission to prevent the importation of a product that infringes a patent, the plaintiff must establish that a domestic industry exists or is in the process of being established for the articles protected by the patent. Earlier this year, a Federal Circuit panel consisting of Judges Bryson and Mayer held that:

section 337 makes relief available to a party that has a substantial investment in exploitation of a patent through either engineering, resale and development, or licensing.  It is not necessary that the party manufacture the product that is protected by the patent, and it is not necessary that any other domestic party manufacture the protected article. As long as the patent covers the article that is the subject of the exclusion proceeding, and as long as the party seeking relief can show that it has a sufficiently substantial investment in the exploitation of the intellectual property to satisfy the domestic industry requirement of the statute, that party is entitled to seek relief under section 337.

InterDigital v. USITC and Nokia, 707 F.3d 1295, 1303-4 (Fed. Cir. 2013) (emphasis added). You can read more about Interdigital here. Based on this holding, the InterDigital majority sided with the ITC plaintiff. Writing in dissent, Judge Newman viewed the domestic industry requirement as necessitating domestic manufacture.

In Motiva v. ITC and Nintendo, a panel consisting of Judges Newman, Prost and O'Malley have limited InterDigital to some extent. In Motiva, the panel concluded that the domestic industry requirement is not satisfied by a plaintiff whose only activities at the time of filing its complaint consisted of its litigation against the ITC defendant when those activities were "not an investment in commercializing Motiva's patented technologies that would develop a licensing program to encourage adoption and development of articles that incorporated Motiva's patented technology." Slip Op. at 10.

Motiva’s investment in the litigation against Nintendo could indeed satisfy the economic prong of the domestic industry requirement if it was substantial and directed toward a licensing program that would encourage adoption and development of articles that incorporated Motiva’s patented technology. See InterDigital Commc’ns, LLC v. Int’l Trade Comm’n, 707 F.3d 1295, 1299 (Fed. Cir. 2013) (clarifying that efforts directed toward licensing a patent can satisfy the domestic industry requirement where they would result in the production of “goods practicing the patents”)….

However, the ALJ found that Motiva’s litigation against Nintendo was not directed at developing such a licensing program. Relying on extensive documentary evidence and witness testimony, the ALJ concluded that the presence of the Wii in the market had no impact on Motiva’s commercialization efforts or ability to encourage partners to invest in and adopt its patented technology. And Motiva was never close to launching a product incorporating the patented technology—nor did any partners show any interest in doing so, for years before or any time after the launch of the Wii. Motiva’s only remaining prototype was a product far from completion, and a multitude of development and testing steps remained prior to finalizing a product for production. Moreover, the evidence demonstrated that Motiva’s litigation was targeted at financial gains, not at encouraging adoption of Motiva’s patented technology. The inventors looked forward to financial gains through Motiva’s litigation, not hopes of stimulating investment or partnerships with manufacturers.

Slip Op. at 10 (emphasis added).

Timing of the domestic industry analysis: The Federal Circuit also held that the date of the filing of Motiva's ITC complaint is the "relevant date at which to determine if the domestic industry requirement of Section 337 was satisfied." Slip Op. at 11. Thus, irrespective of Motiva's earlier attempts to develop a domestic industry for its technology before 2007, there was "no evidence in the record relating that development activity to Motiva’s efforts to establish a domestic industry at the time Motiva chose to file its complaint three years later." Id.

Forrester v. Wheelabrator: No Federal Subject Matter Jurisdiction Over Tortious Interference Claims Involving Prospect of Claim Construction

Patent,

By Jason Rantanen

This case is significant because even as it applies the Supreme Court's recent ruling in Gunn v. Minton to find a lack of subject matter jurisdiction over state law tortious interference claims involving patent issues it also expressly suggests that there are limits to the effects of the Court's ruling.  This issue is particularly important to be cognizant of because, as here, a lack of subject matter jurisdiction can instantly reset a lawsuit regardless of how far along it has proceeded. 

Forrester Envtl. Servs., Inc. v. Wheelabrator Techs., Inc. (Fed. Cir. 2013) Download Forrester v Wheelabrator (2013)
Panel: Newman, Bryson, Dyk (author)

Forrester, a player in the market for industrial and municipal waste treatment systems, sued competitor Wheelabrator in New Hampshire state court for a violation of the New Hampshire Consumer Protection Act, tortious interference with a contractual relationship, tortious interference with Forrester's prospective advantage, and trade secret misappropriation.  Forrester's claims were based on the allegation that in 2007, Wheelabrator met with Kobrin, a Taiwanese company that Forrester had a business arrangement with, telling Korbin that Wheelabrator's US patents covered the technology provided to Kobin by Forrester.  Forrester contended that this statement was false and that as a result of the false statement Korbin ended its arrangement with Forrester.

After Forrester filed its suit in state court, Wheelabrator removed the action to federal district court.  The district court summarily denied Forrester's remand motion and subesequently ruled in Wheelabrator's favor on all of Forrester's substantive claims.  Forrester appealed.

Recap of Section 1338 Requirements: Under 28 U.S.C. § 1338, federal district courts have original jurisdiction over "any civil action arising under any Act of Congress relating to patents."  While this applies on its face to standard patent infringement suits, "a cause of action created by state law may 'aris[e] under' federal patent law within the meaning of 28 U.S.C. § 1338 if it involves a patent law issue that is '(1) necessarily raised, (2) actually disputed, (3) substantial, and (4) capable of resolution in federal court without disrupting the federal-state balance approved by Congress.' Gunn v. Minton, 568 U.S. ___, ___, 133 S. Ct. 1059, 1065 (2013)."  Slip Op. at 6-7.

Patent law issue here not "substantial": The central issue on appeal was whether Forrester's state law claims necessarily raise a substantive issue of patent law because Forrester's allegations "necessarily require the trial court to construe the claims of the patent in order to determine whether the alleged statements were [] false."  Slip Op. at 8, quoting Wheelabrator's brief.  The Federal Circuit held that this did not raise a substantial issue of patent law here because, as in Gunn, there is "no prospect of future conflict between inconsistent judgments in state and federal courts."  Id. at 10.  Due to the  circumstances of this case, "there is no prospect of a future U.S. infringement suit arising out of Kobin's [operations in Taiwan]" and because the patents have all expired, there is "no prospect that future conduct in the U.S. could lead to an infringement suit regarding those patents."  Id.

The Federal Circuit also rejected Wheelabrator's specific argument that resolution of the claim construction issues necessarily would have potential preclusive effects in future litigation involving the patents.  "[T]he Supreme Court rejected a related argument in Gunn, concluding that any such collateral estoppel effect “would be limited to the parties and patents that had been before the state court,” and that '[s]uch ‘fact-bound and situation-specific’ effects are not sufficient to establish federal arising under jurisdiction.'"  Id., quoting Gunn. 

Limits on Gunn: Even while concluding that here the district court did not have jurisdiction, Forrester recognizes some potential limits when applying Gunn to state law claims:

In the past, we have concluded that similar state law claims premised on allegedly false statements about patents raised a substantial question of federal patent law. For example, in Additive Controls & Measurement Systems, Inc. v. Flowdata, Inc., we concluded that the plaintiff’s state law business disparagement claims arose under patent law for the purposes of 28 U.S.C. § 1338. [] We noted that under state law, “a business disparagement claim requires [the] plaintiff to prove . . . the falsity of [the] defendant’s allegedly disparaging statements.” []  There, the allegedly disparaging statement was an accusation of patent infringement; thus, we concluded that in order to prove the falsity of that statement, the plaintiff would have to “show that its product does not infringe the . . . patent.” [] Reasoning that the infringement issue presented a substantial question of patent law, we concluded that the claims arose under federal patent law for the purposes of § 1338. [CAFC also discusses Hunter Douglas]

Those cases may well have survived the Supreme Court’s decision in Gunn. Unlike the purely “backward looking” legal malpractice claim in Gunn, [], permitting state courts to adjudicate disparagement cases (involving alleged false statements about U.S. patent rights) could result in inconsistent judgments between state and federal courts. For example, a federal court could conclude that certain conduct constituted infringement of a patent while a state court addressing the same infringement question could conclude that the accusation of infringement was false and the patentee could be enjoined from making future public claims about the full scope of its patent as construed in federal court. 

Slip Op. at 8-9 (internal citations omitted and emphasis added).

Allergan v. Sandoz: The Thin Line of Nonobviousness

Obviousness, Patent, , , ,

By Jason Rantanen

Allergan, Inc. v. Sandoz Inc. (Fed. Cir. 2013) Download Allergan v Sandoz
Panel: Dyk (dissenting-in-part), Prost (author), O'Malley

Allergan illustrates how thin the line between obvious and nonobvious can sometimes be.  Allergan owns several patents relating to its COMBIGAN combination ophthalmic drug treatment: Patent Nos. 7,323,463, 7,642,258, 7,320,976, and 7,030,149.  Representative claim 1 of the '463 patent states:

1. A composition comprising about 0.2% timolol by weight and about 0.5% brimonidine by weight as the sole active agents, in a single composition.

Sandoz sought to market a generic version of COMBIGAN, triggering Allergan to file suit under 35 U.S.C. § 271(e)(2)(A) alleging infringement of its four patents.  Sandoz stipulated to infringement of most of the asserted claims following claim construction and the district court subsequently found that all of the remaining asserted claims were not invalid after a bench trial.  Sandoz's appeal focused primarily on the district court's nonobviousness ruling. For purposes of the appeal, the asserted claims of the '463, 258, and '976 patents were treated as a single group (I'll refer to these collectively as the '463 claims, since that's how the court refers to them) with claim 4 of the '149 patent treated separately.

The '463 claims – obvious: On appeal, the court unanimously reversed the district court's determination that the claims of the '463 patent were nonobvious.  Both timolol (a beta blocker) and brimodine (an alpha2-agonist) were commercially available in their claimed concentrations at the time of the invention and were used to treat opthalmic conditions.  The primary prior art reference, DeSantis, expressly taught serially administering both a beta blocker, such as timolol, with a brimodine in a fixed combination.  It also provided "an express motivation to combine alpha2-agonists and beta blockers in order to increase patient compliance."  Slip Op. at 8.

So where did the district court go wrong?  First, the Federal Circuit held that it committed clear error by finding that "“while patient compliance may have created a need for fixed combination products, it did not motivate a person of skill in the art to develop fixed combinations with a reasonable expectation of success, because the FDA did not consider improving patient compliance as a factor in its approval decision.” Id. at 9, quoting district court.  While FDA approval may be relevant to the motivation inquiry:

There is no requirement in patent law that the person of ordinary skill be motivated to develop the claimed invention based on a rationale that forms the basis for FDA approval. Motivation to combine may be found in many different places and forms; it cannot be limited to those reasons the FDA sees fit to consider in approving drug applications.

The CAFC also concluded that the district court erred by over-relying on the recognized unpredictability in the formulation carts.  While unpredictablity is also relevant to the obviousness inquiry, it can be overcome simply by establishing that there was a reasonable probability of success.  Furthermore, Allergan's challenges in developing its commercial COMBIGAN product were not particularly probative of the obviousness inquiry because the relevant inquiry is whether a person of ordinary skill in the art would have a reasonable expectation of success in developing the claimed invention, not COMBIGAN (which contains many elements in addition to those embodied in the claims). 

In addition, the Federal Circuit concluded that the district court's factual findings on teaching away were insufficient to overcome the motivation provided by DeSantis and that the secondary considerations of nonobviousness did not weigh heavily in this analysis. 

Claim 4 of the '149 patent – nonobvious: While the full panel agreed on the obviousness of the '463 claims, it split over claim 4 of the '149 patent. Claim 4 states:

4. A method of reducing the number of daily topical ophthalmic doses of brimondine administered topically to an eye of a person in need thereof for the treatment of glaucoma or ocular hypertension from 3 to 2 times a day without loss of efficacy, wherein the concentration of brimonidine is 0.2% by weight, said method comprising administering said 0.2% brimonidine by weight and 0.5% timolol by weight in a single composition.

The underlined language is essentially the same as claim 1 of the '463 patent.  Central to the majority's conclusions was thus its treatment of the italicised language as a claim limitation: even though the creation of a single composition of 0.2% brimonidine by weight and 0.5% timolol by weight was obvious, administering it twice a day instead of three times a day without loss of efficacy was not.

The majority reached this because it was understood at the time of the invention that when brimonidine is dosed twice per day as opposed three times per day there is a loss of efficacy in the afternoon (the "afternoon trough") and Sandoz did not identify any "evidence in the prior art that would allow us to conclude that the addition of timolol to brimonidine dosed twice per day would eliminate the afternoon trough issue."   Slip Op. at 13.  Furthermore, even though it was "true that the prior art shows concomitant administration of brimonidine and timolol was dosed twice per day," that was insufficient to establish the obviousness of claim 4 because "this art does not show that there was no loss of efficacy associated with that treatment, let alone an elimination of the afternoon trough."  Id. at 14.

Judge Dyk's dissent:   Writing in dissent, Judge Dyk would have found Claim 4 invalid.  Judge Dyk's disagreement highlights the issue of whether a claim can nonobvious if it is drawn to an unknown – but inherent – property of an obvious invention.  "While a new and nonobvious method of using an existing (or obvious) composition may itself be patentable, [] a newly-discovered result or property of an existing (or obvious) method of use is not patentable."  Slip Op. at 18 (internal citations omitted).

In Judge Dyk's view, claim 4 includes only a single limitation (in this case, a step): "applying a fixed combination of 0.2% brimonidine and 0.5% timolol twice a day."  Given the prior art, [t]he method of applying a fixed combination of 0.2% brimonidine and 0.5% timolol twice a day would therefore have been obvious over the prior art." Id. at 19. 

This did not end the nonobviousness inquiry for the majority, however.  "The majority’s outcome appears to rest, therefore, on the notion that claim 4 was not obvious because it claims the result of twice-a-day dosing—avoiding “a loss of efficacy in the afternoon.”  Id., quoting Maj. Op. 13.  This is not a limitation: "[a]voiding a “loss of efficacy” is not a separate step, but rather a result of the claimed method. []. We should recognize in this case, as we did in Bristol-Myers Squibb, that '[n]ewly discovered results of known processes directed to the same purpose are not patentable.' Bristol-Myers Squibb, 246 F.3d at 1376."  Slip Op. at 19 (internal citations omitted).  

Consequences: It's worth noting that even though it prevailed in establishing the obviousness of the asserted claims of the '463 patent, Sandoz still cannot market its generic version of COMBIGAN: "The ’258, ’976, and ’149 patents each expire on April 19, 2022. Because we concludd that claim 4 of the ’149 patent is not invalid, the Appellants will be unable to enter the market until that date. Accordingly, we find it unnecessary to address the claims of the ’258 and ’976 patents."  Slip Op. at 15.

Lazare Kaplan v. Photoscribe: Make Sure to Always File a Cross-Appeal (Except When You Shouldn’t)

Patent

By Jason Rantanen

Lazare Kaplan Int'l. v. Photoscribe Technologies, Inc. (Fed. Cir. 2013) Download Lazare Kaplan v Photoscribe
Panel: Lourie (author), Dyk (dissent), Reyna

Deciding which issues to appeal can sometimes be a challenging process.  One quirky rule of appealing patent judgments is that when a district court has entered a judgment of invalidity on all asserted claims, it is improper to file a cross-appeal based on either (1) additional claims for invalidity or (2) claims of noninfringement, and doing so can potentially subject the cross-appellant to sanctions.  As Lazare Kaplan illustrates, however, when a district court has entered a judgment that the claims are not infringed and not invalid and the patent holder appeals noninfringement, the patent challenger must file a cross-appeal challenging the no invalidity judgment.  Failing to do so in this situation terminates the patent challenger's ability to raise invalidity arguments, even on remand following a broadening claim construction by the Federal Circuit. 

Background: Lazare Kaplan is the owner of Patent No. 6,476,351.  In 2006, Lazare Kaplan sued Photoscribe for infringement of the '351 patent; Photoscribe responded by filing invalidity counterclaims.  After the district court construed a key claim term, Photoscribe obtained summary judgment of no literal infringement and prevailed at jury trial on the doctrine of equivalents.  The jury also found that the claims were not invalid under the court's construction. The district court entered judgment that the claims were not infringed and not invalid. Lazare Kaplan appealed the judgment of noninfringement but Photoscribe did not appeal the judgment that the claims were not invalid.  On appeal, the Federal Circuit broadened the district court's construction and remanded for further proceedings on infringement.

Following remand, the district court agreed with Photoscribe that both infringement and validity should be retried "because the validity decision of the jury in the first trial was on the basis for a claim construction which the Court of Appeals has reversed."  Slip Op. at 4 (quoting district court).  The district court granted Photoscribe's motion for relief from the prior judgment under Rule 60(b) and its motion for summary judgment of invalidity. Lazare Kaplan appealed. 

Rule 60(b) relief:  While the majority's analysis technically involves determining whether the district court abused its discretion in granting Photoscribe's Rule 60(b) motion, because the majority concludes that the issue before it is unique to patent law, it reviews that decision without deference to either the district court or the law of the regional circuit in which the district court sits (although it does find Second Circuit decisions to be persuasive).  To the majority, the issue is simply "whether, on remand, a district court may reopen a prior final judgment as to patent validity, not appealed by either party, based on a claim construction modified by" the Federal Circuit, a pure question of patent law.  Slip Op. at 6. Framed in those terms, the majority concludes that the answer is no.

Judgment of Validity Must Be Appealed: "It is well-settled that a party must file a cross-appeal if, although successful in the overall outcome in the district court, the party seeks, on appeal, to lessen the rights of its adversary or to enlarge its own rights."  Slip Op. at 6.  An offshoot of this requirement is that "“[A] party will not be permitted to argue before us an issue on which it has lost and on which it has not appealed, where the result of acceptance of its argument would be reversal or modification of the judgment rather than affirmance.”  Id., quoting Radio Steel & Manufacturing Co. v. MTD Products, Inc., 731 F.2d 840, 844 (Fed. Cir. 1984).  In  Odetics, Inc. v. Storage Technology Corp., 185 F.3d 1259 (Fed. Cir. 1999), the Federal Circuit drew on this foundation to affirm a district court's decision that the challenger's invalidity arguments were barred in procedural circumstances similar to here.

Lazare Kaplan goes a step further, holding that a district court cannot address validity on remand where the challenger failed to appeal the judgment that the claims were not invalid, irrespective of the modified claim construction.  In reaching this conclusion, the majority expressly rejects the argument that separate appeal of validity and infringement was not necessary because the issues of validity and infringement were closely interrelated.  "Whether or not the concepts of invalidity and infringement are “closely interrelated” is irrelevant; the relevant issue is whether a ruling reversing the validity holding would expand Photoscribe’s rights or lessen Lazare Kaplan’s rights."  Slip Op. at 9.  Ultimately, regardless of the district court's view that it "makes no sense" not to entertain validity challenge on remand following a new claim construction that potentially raises new validity issues, "rules are rules, and the cross-appeal rule is firmly established in our law."  Id. at 14. 

Judge Dyk: Judge Dyk's dissent criticizes the majority for failing to adhere to the fundamental principle of patent law that “claims must be interpreted and given the same meaning for purposes of both validity and infringement analyses.”  Slip Op. at 17, quoting Amazon.com, Inc. v. Barnesandnoble.com, Inc., 239 F.3d 1343, 1351 (Fed. Cir. 2001).  Here, the district court attempted to eliminate the inconsistency of allowing the patent holder "to assert infringement on a broad claim construction while permitting it to defend against invalidity using a different and far narrower claim construction" by applying Rule 60(b)(5).  Slip Op. at 17-18. 

Judge Dyk's argument focuses on the majority's lack of any support for its conclusion that "failure to file a contingent cross-appeal bars Rule 60(b) relief." Id. at 20.  This is "not a situation governed by the traditional “cross-appeal rule”—that is, the rule that “a party must file a cross-appeal if . . . [it] seeks, on appeal, to lessen the rights of its adversary or to enlarge its own rights.” Maj. Op. 6 (citing El Paso Natural Gas Co. v. Neztsosie, 526 U.S. 473, 479 (1999)) (emphasis added). Here, Photoscribe sought on appeal not to modify the rights established by the district court judgment but to preserve them."  Id.

Biogen v. Glaxosmithkline: Prosecution History Disclaimer and Claim Construction

Patent,

By Jason Rantanen

Biogen Idec, Inc. v. Glxosmithkline (Fed. Cir. 2013) Download Biogen v GSK
Panel: Dyk, Plager (dissenting), Reyna (author)

By the mid-1990's, it was well known that rituximab, an anti-CD20 antibody, could be used to treat certain cancers of the lymph nodes such as non-Hodgkins lymphoma.  The anti-CD20 antibody binds to a portion of the CD20 antigen protein exposed on the cell surface and destroys the cell.  Scientists from Biogen discovered that patients with another type of cancer, Chronic Lymphocytic Leukemia (CLL), could also be treated using anti-CD20 antibodies.  Based on this discovery, Biogen obtained Patent No. 7,682,612.  Claim 1 of the '612 patent reads:

1. A method of treating chronic lymphocytic leukemia in a human patient, comprising administering an anti-CD20 antibody to the patient in an amount effective to treat the chronic lymphocytic leukemia, wherein the method does not include treatment with a radiolabeled anti-CD20 antibody.

Biogen filed the application leading to the '612 patent in the late 1990s.  At the time, scientists believed that only one large loop, or epitope, of the CD20 antigen was exposed on the cancerous cell's surface and that this was the only site that for an anti-CD20 antigen to bind to.  Rituximab binds to this epitope. After Biogen filed its application, other scientists discovered that the CD20 antigen had a second small loop (originally thought to be hidden inside the cell) to which other, different anti-CD20 antibodies could bind.  In 2002, Glaxosmithkline (GSK) developed a new anti-CD20 antigen that binds to the small loop.  Because it binds to a different epitope, GSK's anti-CD20 antibody has different specificity and affinity characteristics than rituximab. 

Biogen sued GSK for infringement of the '612 patent in 2010.  The district court construed anti-CD20 antibody to mean "rituximab and antibodies that bind to the same epitope of the CD20 antigen with similar affinity and specificity as rituximab."  Based on this construction, Biogen stiplated to noninfringement and appealed. 

Prosecution History Disclaimer: The issue on appeal involved the the doctrine of prosecution history disclaimer.  Prosecution history disclaimer applies when a "patentee unequivocally and unambiguously disavows a certain meaning to obtain a patent."  Slip Op. at 8.  In this circumstance, the doctrine "narrows the meaning of the claim consistent with the scope of the claim being surrendered," id. overcoming even the term's ordinary and customary meaning.  Application of the doctrine helps serve a public notice function by allowing the public and competitors rely on definitive statements made during prosecution when launching a new product or designing-around a patented invention.

During an early stage of the prosecution of the '612 patent, the examiner rejected the presented claims on enablement grounds:

Claims 1 and 12 are broadly drawn to ‘. . . an anti-CD20 antibody or fragment thereof’. This is
broadly interpreted for examination purposes to be any and all anti-CD20 antibodies, no matter
the specificity or affinity for the specific epitope on the circulating tumor cells. While the specification is enabling for the application of RITUXAN®, RITUXIMAB® and 2B8-MX-DTPA in the treatment of hematologic malignancies, the specification is not enabling in the application of all other anti-CD20 antibodies, which may have different structural and functional properties.

In response, the applicant wrote:

Applicants respectfully submit that even though antibodies directed to the same antigen might have different affinities and functional characteristics, one of skill in the art could readily identify an antibody that binds to CD20 with similar affinity and specificity as does RITUXAN® using techniques that are well known in the art. . . . With that knowledge in hand, the skilled artisan could readily produce anti-CD20 antibodies using similar techniques, and screen such antibodies for those having an affinity and functional activity similar to Rituxan®

Based on this exchange in the context of the prosecution history read as a whole, the majority agreed with the district court that prosecution disclaimer applied to limit the scope of "anti-CD20 antibody."  "[R]ather than challenging the examiner’s understanding of the crucial terms, the applicants argued that the specification was enabling for anti-CD20 antibodies with similar affinity and specificity as Rituxan®."  Slip Op. at 10.  Nor was exact recitation of the examiner's own words necessary: "While disavowing statements must be “so clear as to show reasonable clarity and deliberateness,” Omega, 334 F.3d at 1325, this requirement does not require the applicant to parrot back language used by the examiner when clearly and deliberately responding to a particular grounds for rejection. If an applicant chooses, she can challenge an examiner’s characterization in order to avoid any chance for disclaimer, but the applicants in this case did not directly challenge the examiner’s characterization."  Slip Op. at 11. 

Hierarchy of canons of claim construction: In the hierarchy of canons of claim construction, prosecution history disclaimer trumps the presumption of claim differentiation: "Our cases make clear [] that where found, prosecution history disclaimer can overcome the presumption of claim differentiation."  Id. at 12 (note that the court said "can overcome," leaving open a door for cirucumstances in which it might not). 

Dissent: Writing in dissent, Judge Plager disagreed that this was an instance of prosecution history disclaimer.  "[T]he give-and-take that is often part of the process of negotiation between an examiner and an applicant may result in less-than-clear understandings, as happened here. Making too much of such ambiguous statements 'does not advance the patent’s notice function or justify public reliance.'"  Slip Op. at 16.  For Judge Plager, the question is thus "whether the prosecution history makes it clear that using RITUXAN® [Biogen's branded version of rituximab]-like antibodies is the only way to practice the claimed invention, and that no other antibodies can be used."  Id.  In his view, the above quoted statements fail to meet the "clear and unmistakable" standard required for prosecution history estoppel.  

The avoided question: By affirming the district court's claim construction, the CAFC avoided a battle over an extremely challenging issue: enablement in the context of after arising technologies and knowledge.  Biogen's proposed construction was "an antibody that binds to a cell surface CD20 antigen."  This construction would presumably encompass methods using antibodies that bind to the larger epitope (which Biogen discovered) as well as antibodies that bind to the smaller epitope (which Biogen did not).  Since enablement is determined as of the filing date, this presents the classic patent law hypothetical: Inventor X invents one way of curing a type of cancer and then claims simply "a cure for cancer."  Should inventor X be entitled to the claim?  She's cured cancer, after all.    

FCBA and Santa Clara Program on Advanced Complex Litigation

Patent

By Jason Rantanen

This year, the Federal Circuit Bar Asociation is sponsoring a series of programs on Advanced Complex Litigation. Next Friday, May 3, the FCBA and Santa Clara Law School's High Tech Law Institute will co-host the next segment of the series. Speakers and panelists include: Chief Judge Rader, Judges Whyte and Koh, Magistrate Judge Grewal, Erich Spangenberg (IP Nav), Alan Schoenbaum (Rackspace), Mary Coyne (Verizon), Courtland Reichmann (McKool) and others. In addition, professor Colleen Chien will present the
interim results of an on-going survey of in-house counsel.

Topics include:

• Discovery
• Case Management
• Focusing Disputes
• Multiple Party Litigation

Further details are available here: http://law.scu.edu/hightech/2013-advanced-complex-litigation-series.cfm . The last program of the series will take place in Newark on May 30. Details on the entire series are available here: http://www.fedcirbar.org/olc/pub/LVFC/cpages/misc/acl_series.jsp .

Guest Post by Prof. Michael Risch: The Securitization of Patents

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Guest post by Michael Risch, Associate Professor of Law, Villanova University School of Law.

My forthcoming article in Duke Law Journal, The Securitization of Patents, argues that the best way to create patent markets might be to start treating portfolios as securities. A full draft is accessible at this SSRN page. The article makes four basic points:

  1. Aggregation and trading is not limited to non-practicing entities – everyone is doing it.
  2. Companies are trading aggregated patent portfolios as they do other patent instruments, either through sale or licensing.
  3. Aggregation is beneficial, even critical, for efficiency; this is directly contrary to the conventional wisdom.
  4. Based on the above, markets might be improved by applying securities treatment to patent portfolios.

[NB: I focus on portfolios, not individual patents. I also focus on sale and licensing of patents, not the initial patent grant. The paper explains why in more space than I have here.]

When I first wrote Patent Troll Myths, there was very little empirical data about NPEs. Since then, such research has exploded, with new data every week seemingly counting the number of NPEs and their cases. This data, though helpful, leaves a lot to be desired, I think. First, there is a rarely a real apples-to-apples comparison with the activity of product companies (and when there is, the comparison is not very granular). To that end, I’ve been developing a matched data set for my Patent Troll Myths data so we can test what real differences in quality and quantity, if any, exist. Second, the data largely ignores licensing practices, which can be quite similar. To be fair, licensing data is difficult to come by, but without it, normative determinations are difficult. Third, studies like mine, which look at the provenance of NPE patents, are rare.

These issues lead to my first point: aggregation is not just for trolls anymore, if it ever was. The public is becoming a bit more aware of this with new focus on privateering, the outsourcing of patent enforcement by product companies to licensing and assertion specialists. The idea that aggregation is just fine when a product company does it, but suddenly evil when those same patents transferred to a third party has never sat well with me. And regardless of moral considerations, the fact of the matter is that patent aggregation is everywhere.

My second point follows from the first: aggregated portfolios are being used as assets, and traded as such by all sorts of companies. This is nothing new; people have been writing about patents as a new asset classes for a while now. Transactions are getting bigger, however, and they are hitting the news. Perhaps no transaction better illustrates my point than the recent Kodak patent auction. First, Kodak offered its patents for sale as a financing strategy in bankruptcy. Second, the eventual buyer was a consortium including, among others, Microsoft (a product company); Intellectual Ventures (a licensing company, but also one that litigates, but also one that aggregates defensively; and RPX (a defensive aggregator). This one transaction is my argument in a nutshell: everyone is aggregating, and they are doing so in buy/sell type transactions for financial purposes.

My third point is that such aggregation is not always (or necessarily often) a bad thing. This is decidedly against the conventional wisdom. Companies with large portfolios surely have the ability to cause “royalty stacking,” but in practice this is less likely than if many separate parties enforced those same patents. Litigation looks much the same; regardless of the size of the portfolio, courts are just not going to hear a case asserting 1000 patents. Only a few (at most 5 or 10) patents will be at issue, and then the aggregator looks like anyone else. Similarly, in negotiations, the parties usually haggle over a few “lead” patents. This is little different than negotiation with the owner of few patents – with one big exception. When you come to terms with the aggregator, you can settle and license hundreds or maybe thousands of patents at once. Not so with single-patent owners. These folks line up one after another, asserting a few patents at a time. The biggest NPEs will often assert patents obtained by individual inventors; would product makers really rather that the inventors assert their own patents separately? Maybe, before a time when people figured out a viable mechanism for funding patent assertion, but now that individuals might seek funding for enforcing their own patents, a single aggregator must surely be a better option than many inventor plaintiffs.

There is one difference with aggregated portfolios, of course. When the parties are done haggling over the lead patents, the portfolio owner always has more to discuss while the small patent holder has none. But rather than being the greatest cost of the portfolio, a seemingly bottomless portfolio is its greatest benefit.

And that is my fourth point: when parties are trading portfolios, the haggling should be over price instead of quality and infringement. In a large enough portfolio holding patents directly related to a particular product, there will surely be some number of patents that are both valid and infringed. The question is how many, and how much it will cost to find them.  A central thesis of my article is that treating portfolios as securities will help lower transactions costs in a variety of ways by limiting the litigation costs of finding those infringing patents and instead better pricing patents in the market.  For you legal sticklers, I didn’t just make this up: the paper looks at portfolios under the Supreme Court’s famous Howey test and concludes that such treatment is at least plausible under the law.

How might securities laws benefit markets? Not in the traditional “public offering” way. I suspect that most transactions would be excluded from the registration requirements. However, such transactions might be regulated as dark pools, and require clearinghouse treatment that makes such transactions public. Further, stock fraud laws might require the disclosure of information that might affect portfolio value. For example, patent holders who know of anticipatory prior art might be required to disclose it rather than keep it secret. Perhaps most important, accepting that portfolios are simply financial transactions might drive efforts to develop objective portfolio pricing. The goal of such pricing schemes is to determine a portfolio’s price even though the parties cannot agree on the price of any of the particular patent in the portfolio.  I examine several pricing strategies that might work (and several destined to fail) in the paper.

There is obviously much more in this paper than I can write here. I detail my arguments in the full paper.

PatCon 3: Posner/Epstein Debate on the Patent System

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Continuing to liveblog from PatCon 3.  I'll continue updating this post throughout the debate. 

A Debate About the Patent System

The Honorable Judge Richard Posner of the United States Court of Appeals for the Seventh Circuit
Professor Richard Epstein, Laurence A. Tisch Professor of Law, New York University School of Law, and James Parker Hall Distinguished Service Professor Emeritus of Law and Senior Lecturer, University of Chicago Law School

Moderated by Olivia Luk of Niro, Haller & Niro

For another perspective on this debate, check out Lisa Larrimore Ouellette's post over at Written Description.

(more…)