All posts by Jason Rantanen

About Jason Rantanen

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

The America Invents Act: One Year Later (Pt. 5)

Patent, , , , , ,

By Jason Rantanen

Liveblogging the America Invents Act: One Year Later conference at the Indiana University Mauer School of Law. Warning and disclaimer: Quality may vary and these don't necessary reflect my opinions.

 

Panel 3: What did the AIA accomplish? What did it omit?

Mark Chandler (Cisco) – Not a patent lawyer; instead offers a high level perspective from tech industry. 

Issues from his perspective: Predictability is a key, but certainty means different things to different people.  Uncertainty in his industry is uncertainty about damages.  Ranges of outcome that lead to total unpredictability about valuation. The patent system is an industrial policy; it needs to be pared with a good commercial law system where the court decisions are defined by good predictability of result.  But parties aren't willing to have fruitful negotiations because of uncertainty as to damages.

Bad patents – very hard to overturn validity patents in court; estoppel provisions in inter partes reexamination made them a hard tool to use.  Also, backlog of patents. 

Effect of these issues was an increase value of litigation gamesmanship over the value of innovation. This was the context in which they came to the table.  For his industry, uncertainty as to scope of rights/quality of rights was not as important as uncertainty over damages.  But this is not something that he believes can be fixed legislatively.  From the point of view of the technology industry, the AIA accomplished very little in terms of the uncertainty they care about.

In terms of bad patents, he sees the mechanisms as positive.   On backlog, the funding provisions are excellent.

Looking forward, he is skeptical of having Congress dive into the damages issues.  Change is coming from the courts.  Judge Rader is a major mover here.  Clean up the Georgia-Pacific factors is something he sees as coming. 

Joinder provision – some judges, when confronted with the anti-joineder rule, are now consoldiating cases.  Work needs to be done here. 

Rocelle Dreyfuss (NYU) – Act focuses with laser like attention on getting a patent, but largely ignores what is being done with the patents.  Her focus is on research exemptions.  Long been two exemptions: Common law exemption and limited statutory Hatch-Waxman exemptions.  Common law exemption has largely been undermined by CAFC, especially in Madey v. Duke and Embrex v. Service Engineering; most recently, Judge Lourie's opinion in AMP v. USPTO (Myriad). 

Absence of such exception has become more worrisome over time.  Earlier studies indicated that scientists largely ignored patents.  More recent work has undermined this conclusion however.  Studies shown that less research conducted in areas where things are patented.

Every foreign country has a substantial research exception.  Japan is a good example. 

Can't you always do your research off shore?  But she'd like to see a strong research industry in the United States. 

Overall effect of a lack of research exception has been to distort other patent law doctrines – examples: Supreme Court/Federal Circuit subject matter cases.  All these cases are based on the view that patents can impact future research.  To some extent, the Supreme Court's exhaustion and injunctive reliefs are based on a concern about what's going on down stream.  A well drafted research exception is better served than twisting these doctrines around to allow downstream research.

Some believe (ex. Hal Wegner) that the common law will correct itself.  Judge Newman's language in this vein was been picked up by Chief Judge Rader in a recent opinion.  Wegner also argues that the fix would be relatively easy to accomplish with judge made law – drawing a distinction between research "on" versus research "with" a patented invention.  Other commentators would go back to the commercial/noncommercial distinction. She's doubtful these will work, however.  Rader's statement was part of a blistering dissent on an expansion of the statutory exemption; Judge Lourie's statement in Myriad was made just a month ago.  In addition, the fix isn't as simple as distinguishing between research "on" and "with"; actual research is actually far more complex – consider the use of diagnostic patents, which could be classified as either research on or research with. 

Copyright law has long had a fair use defense; it could work in patent law.  But complex, so better done as a statute than as a common law rule. 

John Duffy (UVA) – Likes: the new priority rule.  Never been a fan of first-to-file.  But this is not first to file – it's first-to-file or first-to-publicly disclose, which is a great change.  Best argument for first-to-file was administrative convenience.  Best argument for first-to-invent is that the lawyer shouldn't be part of the invention process.  New system takes the best of both: administrative ease (have to have publicly disclosed it) and you don't have to get a lawyer to do this.  Just have to get the rest of the world to follow us…

A partial accomplishment: ending asymmetric judicial review.  Historically, applicants could obtain immediate judicial review of rejections, but competitors could not obtain immediate judicial review of grants.  This was not good.  AIA helps here, with its post-grant processes.  But it still leaves significant holes in the availability of judicial review.  Proposes that the PTO be subject to standard agency review – points to Exela v. Kappos, E.D. Va. (Aug. 22, 2012).  May be a supreme court opinion.  If the country goes to symmetric judicial review, that would be a very good thing.

A partial accomplishment: curbing claim numerosity.  Patents have too many claims. Partial AIA solution: agency has power to set its own fees and thus could charge more for excessive claims. But sometimes there's a legitimate reason for large numbers of claims: legal uncertainty as to how claims will be interpreted.  Ultimate problem here: departed too far from traditional principles of claim construction.  We should instead focus on the invention – the contribution to the art – in interpreting claims.  261 U.S. 45, 63 (1923)

AIA's worst blemish: fueling bureacratic inflation. 

Gary Grisold (Senior Policy Advisory for the Coalition for 21st Century Patent Reform and former Chief IP Counsel at 3M) – AIA presented a great opportunity to improve the speed and efficiency of the patent system.  The playbook for improving the AIA was largely derived from the 2004 NAS Report.  Most of the recommendations of the 2004 report were put into play in the AIA.

Goals: effective, global patent protection efficiently obtained, maintained and enforced encouraging innovation and commercialization of innovation.  Showed us some of the charts that they used when building support for the patent law. A lot of progress from 2007-2011.

Process error – in the post-grant review, it allows the public to come in and be heard just after a patent is granted.  At some point, someone inserted "reasonably could have raised" judicial estoppel in PGR. Shouldn't be there.  Didn't realize that this happened, though.  Needs to be a technical correction to fix this.

Patent claim construction – For PGR/IPR, should patent claims should be construed the same as in validity challenges under 35 USC 282(b) rather than broadest reasonable construction?

What else might happen in the future?  Best mode – still there as an obligation; this creates a weird tension for the attorney and client.  Inequitable conduct – he believes that supplemental examination will have a lot of utility because firms will do extensive pre-litigation analysis.  Could go further with inequitable conduct, and lessen the effect even more, for the reason that it brings so much inefficiency into the process.  Experimental use exception – needs to be expanded.  Could expand prior user right.  Doctrine of equivalents is another opportunity for change.  Funding issues are always a concern – could be more secure. 

Doug Norman (Eli Lilly) – Going to talk about how in-house counsel deal with specific issues.

Move to first to file – won't preciptate a lot of change in their context, because for the past 40 years they've been living in a first-inventor-to-file world.  So their proceses have not had to change.  The change they feel is when they look at competitors' patents, they can better evaluate patent estates that they want to do a due dilligence study on. 

Grace period and international harmonization – Europeans aren't necessarily ready to accept a grace period. Have a grace period in the US that is clear, crisp and objective.  And very simple.

Fees  – important to point out that after a longrunning diversion of funds away from the PTO, the PTO has feesetting authority to move forward and build a new infrastructure.  It will cost users more, but if it leads to higher quality and faster service, it'll be worth it.

IPR/PGR considerations – A huge unknown right now.  Hopes that patent judges really will be conservative on the issue of discovery.  Is a technical amendment over the "could have raised" estoppel in PGR possible?  He hopes so; otherwise, it will greatly constrain the use of PGR. 

Inequitable conduct/supplemental examination – high point of the bill.  Thinks it will be used quite extensively, if for no other reason to have their own patents drawn into supplemental [think he means reexam] examination.  Plans on doing extensive due dilligence on patent estates they intend to acquire.  (comment – I suspect that in the pharmaceutical industry, there may be strong incentive to conduct extensive due dilligence.  I'm much less convinced this is the case in pretty much every other industry.).  He believes supplemental examination will be revolutionary, at least in the pharma/biological field.

Favors statutory research exemptions and full repeal of best mode requirement.  Related a story that OED is going to take best mode very seriously. 

John Vaughn (AAU): Universities and patent reform – University technology transfer plays an important role in technology innovation in this country.  Univerisity organizations worked together to present the view of the universities.  Two basic objectives: wanted to support those proposals that would enhance the US patent systems' ability to produce innovation, and wanted to support those proposals that would enhance the ability to licensed.  Very much shaped by 2004 NAS report. 

First to invent to first inventor to file – three conditions: (1) effective grace period; (2) continuation of provisional applications; (3) strong inventor declaration (?)  Worked with Congress on these. 

Patent certainty – university inventions inherently have uncertainty because of their early stage nature; adding other uncertainty further complicates that uncertainty.  Problem with statutory instructions on damages is that they would become a cost of doing business rather than something else. 

Strongly supported the new post-grant proceedure.  Agrees with others about the estoppel provision.  Concern that with the estoppel provision, the procedure won't be used. But very concerned about proposals for second window, additional post-grant challenge that would allow a broad capacity to challenge patents throughout their life.  This was viewed as making patents more uncertain, which would make them harder to license.  Compromise: revised and changed inter partes.

Debate over prior user rights.  Pre-AIA, only applied to business methods.  University community hated prior user rights – viewed it as a circumvention of the patent quid-pro-quo.  But at the end of patent reform, prior user rights was one of the primary obstacles at the end.  They worked out a compromise – a substantial expansion of prior user rights that sufficiently protect universities. 

Viewed as accomplishments: FtF – will be helpful to everyone.  Post-grant review – great, problem with estoppel.  Third party submisison of prior art – very helpful.  Enhanced fee setting – very helpful, wished better anti-fee diversion language.  Supplemental examination – very helpful, better to get rid of inequitable conduct altogether.  Scope of grace period – concern over how it will actually be interpreted. 

The America Invents Act: One Year Later (Pt. 4)

Academic Studies, Patent, , , ,

By Jason Rantanen

Liveblogging the America Invents Act: One Year Later conference at the Indiana University Mauer School of Law. Warning and disclaimer: Quality may vary and these don't necessary reflect my opinions.

Keynote speaker – Director David Kappos

Director Kappos – Going to talk about what the USPTO is working on. 

Satellite offices – USPTO has been around since around 1790; always had only one location.  First satellite office: Detroit.  That office now up and running, and first class of examiners is examining applications.  Hired about 12 judges there.  On time, below budget.

Opening up three more offices.  Dallas-Fort Worth, Denver, Silicon Valley.  Denver location has been chosen already; doing site surveys for the other two locations.  Have vacancy notifications for hiring requests for judge out now; will be putting out hiring announcements for examiners soon.  Love to hire law school graduates.  In addition to hiring in Alexandria, there are going to be hiring opportunities in these areas.  Great place to start your career; but also a good place for a long term career.

IP Critical to GDP and Jobs – conducted a recent study called "Industries in Focus" that reports on the importance of innovation/IP rights for the GDP.  Also a recent study by BIO that reports on the enormous contribution of universities to GDP through Bayh-Dole.

AIA- AIA is a lot about balance between first inventors and follow-on competitors.  On Sunday, the first major piece of the AIA goes into effect.  Follow-on competitors are great – produce great products at great prices; produce innovations of their own.  The AIA isn't about advantaging anyone; it's about balancing both sides.

Major tenets of AIA: enabling the patent system to work for everyone, in every industry. 

Increase certainty of patent rights – includes backstop provisions, such as post-grant review;

Remove or prevent low quality patents- no way, consistent with any cost-effective business methodology, that you can do a perfect job.  Also, courts have consistently not chosen the easy way out in terms of flexibility rather than hard, categorical rules.  PTO promulgates a lot of guidelines – useful, but not perfect. This is why post-grant is so important – when the PTO gets it wrong in the first instance, there's a backstop.

Build a 21st century patent system – this leads to the world's first 21st century patent system.  This is not the most-cautious approach.  It's not a Swiss watch, it's innovation friendly.

More than halfway done with implementing provisions of the AIA.  After Sunday, just the 18-month rules to go into effect. 

Challenging fee-setting process is in progress.  Started this process with the academy, with IP-law economists.  They helped design a system that sets fees that are consistent with policy.  It will take several iterations, but he's serious about listening to the academy on this issue.

2012 Fall Roadshow in progress this month.  Lots of good feedback from these. Notes that new forms (not samples) that are to be used starting Monday are now available on the USPTO website.

Track One statistics – fast tracking of applications accompanied by a petition.  Now almost a year out from creation.  Average days to final disposition is 153.8 days.  About 5,500 applications so far.  Petition gets granted 96% of the time; 47 days to first office action. Of the 1716 final dispositions mailed, 867 allowances mailed.  Not a fast way to get a rejection; a fast way to get a patent if you should be getting a patent. Also, examiners want to pick up Track One first, because (1) it shows the applicant is serious; (2) probably an important innovation; and (3) applicant will be willing to engage with the examiner to get the job done.

Unexamined patent application backlog – backlog is going down.  New narrative is "optimal inventory" – want to come to the right level of backlog/inventory.  What about unintentional consequences: when they changed a lot of the incentives, it sent backlog numbers in the right direction.  However, the consequence was that doing this unintentionally sent a message to examiners to sit on RCE's; this is what they're working on now.  Soon, the RCE backlog will go like the unexamined patent application backlog. 

What is "inventory"?  The about of applications available fluctuates, but there needs to be work available to everyone to work on every day.  If the inventory gets too low, there are days when some people don't have enough work and others have too much.  So now the PTO needs to make sure that the inventor doesn't crash through the optimal inventory level.

Forward looking pendency – now down in the 16 month range.  Goal is 10 months; not that far off from that goal.  Less than two years from now they'll be at the optimal level. 

IP Awareness Assessment Tool – enables a non-lawyer to navigate a number of questions that adjusts the question to understand whether they might have possible issues in patent/trademark/trade secret areas.  Idea is to help small businesses understand when and how they need legal advice, and to navigate IP-issues before talking to a lawyer.

The H-Word: Harmonization.  Of forms of IP, patent laws are the laggard in terms of harmonization.  Working with patent systems of other countries to continue moving towards harmonization, especially grace period.  This is an area where further industry and academy support would be very welcome.  Trading partners need to change their laws to adopt the grace period. 

Social Enterprises: 2010-2011 – green tech pilot.  Totally maxed out.  This was the prototype for Track One.  Now they're working on the pro bono program.  A year into the program – have already issued patents, have inventors with products in the marketplace.  Launching in other cities.  By 2014, plan to have every region of US covered so that if you have a great idea, but not the resources to hire a patent attorney, you can get one through this system.  "No Invention Left Behind."  Looking to expand globally, with modifications.

Patents for Humanity – currently running.  Lot of applications coming in; closes in mid-October.  Involves patents that are being used for humanitarian purposes.  http://patentsforhumanity.challenge.gov.  Gives access to accelerated PTO processes, including appeals.

Education outreach – Put in place an education outreach to all kids in America.  Want to get positive, age-appropriate information out to kids of all ages so that they view themselves as innovators, they respect their innovations, they respect the innovations of others.

Software patents – came to the PTO to try and help with this.  Been working on making sure the agency doesn't issue patents that it shouldn't.  Championed stronger disclosure requirements; 112 guidelines specifically directed to software; trained examiners on using these guidelines; rise in 112 rejections on software patents.  This is a specific area where they're trying to improve patent quality. 

Question – how do you sort the good examiners from bad examiners?

Answer: USPTO has a LOT of data.  They track the data down to the individual examiner level.  Allowance rates – too high/too low.  Prosecution efficiency – have a new measure called compact prosecution that looks at whether the prosecution gets done.  Quality – check when they grant and reject cases.  Some of the best examiners are taken off the line and used as quality assurance supervisors.  What they've been finding is that even as you improve throughput and quality, there will be pockets (art units, departments, examiners) who need some help.  Data is also being given to the examiners on a monthly basis.  Also focusing on art units that exhibit significant deviations to see if there's an issue. Seeing improvement.

Bob Armitage – Thanked Director Kappos for the America invents Act.

The America Invents Act: One Year Later (Pt. 3)

Patent, , ,

By Jason Rantanen

Liveblogging the America Invents Act: One Year Later conference at the Indiana University Mauer School of Law. Warning and disclaimer: Quality may vary and these don't necessary reflect my opinions.

Panel 2: Administrative Trials

Michael Tierney (Lead judge of BPAI) – New Patent Trial and Appeal Board eFile system will go live at 12:01 am on Sunday, September 16.  They will also have folks available to answer calls starting on Sunday. 

AIA trial proceedings will be a hybrid examination/trial-like process.  Relatively straightforward, step-by-step proceedings.  Trials will be completed within one year. 

Who can practice: also a hybrid.  Lead counsel must be a practitioner registered with the PTO, but the board may recognize pro had vice counsel during a proceeding upon a showing of good cause.  A pro hac counsel is subject to the Office's Code of Professional Responsibility.  Requests should explain why there's good cause. 

Proceedings are streamlined so as to make it possible to complete proceeding in one-year.  In addition, page limits have been imposed on the petition and arguments, but not the evidence.  Claim charts can be included as single-spaced. 

Threshold standards for initiation:
IPR: "reasonably likelihood" that petitioner would prevail as to at least one claim challenged.  This means >50% chance. 
PGR/CBM: petition must demonstrate that it is "more likely than not" that at least one of the claims challenged is unpatentable.  This just means that it has to be a "close call" that one of the claims is unpatentable.  This does not mean that all non-frivolous arguments will result in a PGR/CBM proceeding.

Inter partes review: discovery- allow parties to agree to discovery between themselves.  Also, mandatory initial disclosures, routine discovery, and additional discovery. In general, discovery will function ilke infringement proceedings – i.e.: parties exchange among themselves, then choose what to provide to the board.   

Recommends starting with the practice guide if you want to understand the rules.  

Jay Kesan (University of Illinois) – Examined post-grant review in Japan and compared to US.

JPO has invalidation trial.  JPO does not have a threshold standard; grounds are very broad.  Anytimeime during the life of the patent. No estoppel under JPO proceeding.  Third parties that are not involved in the challenge can file another challenge on the same facts and evidence.  Scope in terms of the number of claims is not all that different.  Parties can file anonymously.  Takes about 8.7 months. Patent can be amended after the trial decision before the appeal – lots of opportunities to tweak the patent.  Just about anyone can request. 

Costs: Rough estimate is about $200,000 for US proceedings.  In Japan, about $25k to $125k. 

In Japan, about 7-10 times higher to litigate the case in district court.  Roughly about 2% of all patents are being challenged (300 out of 150,000 issued patents) are opposed using JPO invalidation. 

Data over a decade shows that the litigation court decisions tend to be arrived at before the JPO decision.  In a large number of cases, there's an agreement the patent is invalid.  There is some disagreement in cases, however – about 20% of the time the JPO and district court reach opposite conclusions.  This is consistent with the rate of affirmence of the JPO by the high court (around 80%).

Questions:
Joshua Larsen (Barnes & Thornburg) – what parts of the new procedures will be most challenging for the judges to deal with? 

Michael – not a whole lot of judges who had experience with inter partes, but they just hired a large number of people with significant litigation experience as judges. 

Jay K – 60-80 pages is still a lot of stuff to go through.  If 2% of all the issued patents are subject to this process, thats a lot of workload. 

Michael – there's still going to be ex parte reexamination.  There's also going to be full blown proceedings.  He wouldn't expect all 2% to go the reviews. 

Josh – how is claim construction going to be handled?

Michael – no Markman, but there's a requirement that the petitioner must explain what the claim means up front.  Tell us up front what you, as the petitioner, think the claim means and how the prior art meets the claims.  

Jay K – thinks this approach is just fine.

Jay Thomas – Is there a good balance between the litigation and the IPR process?  How are the parties going to figure out what patents will be challenged through post grant review?

Michael – when he looks at the statistics, most inter partes reexaminations had ongoing litigation.  Often there are stays in these cases.  His expectation as they go forward is that they will follow the 1-year timeframe.  If this is the case, the district court judge will know that the PTO is committed to having a decision within that one-year framework.

Jay K – If things were really ideal, if invalidity can be done relatively cheaply in the post grant proceedings, then this might save the parties some money in infringement litigation.    On the nine-month window, this is something that parties are going to need to figure out, maybe using proxies.

Josh – what is the possibility of serial filings on the same evidence?

Michael – I'm going to refer to 325(d).  The office may consider previous determinations in deciding whether to go forward.  If all the party is doing is submitting the same evidence again and again, the likelihood of going forward in low.

Jay K – when he talked to practitioners in Japan, they said that this type of behavior was a waste of time.

America Invents Act: One Year Later (pt. 2)

Patent, , ,

By Jason Rantanen

Liveblogging the America Invents Act: One Year Later conference at the Indiana University Mauer School of Law. Warning: Quality may vary.

Session 2: First to File/Supplemental Examination

I spoke during this panel, so wasn't able to take down any notes during Q&A

John Schaibley – Panel is going to discuss two changes under AIA: First to invent to First to File and Supplemental Examination.  Summarized the two changes.

Jay Thomas (Georgetown) – thanks Bob for his hard work on the AIA; but he won't necessarily agree with everything Bob said. 

When we teach 102, it's "the long march" – a lot of it is now gone.  Still going to be some complexity due to the prior user defense.  Also, what does "or otherwise available to the public."  What's the role of secret uses and sales prior to the date of filing. 

Remember two cases: Egbert v. Lipman(sp?): you can have a public of one; Metallizing Engineering: a trade secret use is patent defeating.  New section 102(a) still has the term "public use" in it.  Early legislative history indicated a continuity of meaning.  But things changed.  "or otherwise available to the public" was added.  Some legislative history that says that this has to be true for all prior art. Note that "public" is still pretty broad.  Just because it's technically publicly accessible doesn't mean that it's necessarily easy to find.

Also, keep in mind that these two cases were instances where the patent holder effectively tried to extend the date of filing.  Is it sound industrial policy to allow secret uses to not defeat patentability? 

International harmonization: tried to move in that direction, but didn't completely succeed.  Example: safe harbor under new 102 is different as between US and Europe and Japan. 

Short term issues: lots of filing before March 16, 2013.  Abolition of the Hilmer doctrine; lose ability to swear behind prior art references.  Storm surge is coming.  There's going to be a sharp distinction between old and new cases.  What to train the new examiners in?  Old and new or just new?  Constitutional challenges – probably dubious.  Employment assignment agreements – these will be important to look at.  And what about the technical corrections bill?  Likely to involve some huge changes of its own – dissatisfied parties are going to push for these. 

Dana Colarulli (USPTO) – Probably agrees with Bob on most of the things he said.  But legislation only gets us a good portion of the way there.  There's more to do.  Specifically, implementing the provisions in the appropriate way through rules. The PTO is really trying to get the implementation right. Very much looking for comments and feedback on the proposed rules.

International harmonization – huge step forward in restarting international harmonization discussions.  But doesn't go all the way there.  More work to be done. 

Impact of the law overall – this is the most significant change since 1836.  A lot of these changes have been percolating for far longer than the five years up to the AIA.  First to file really goes back to 1966 with a report from Lyndon Johnson, then a 1992 report that made the same suggestion.  2004 National Academies of Science recommended as well.  First to file is both international harmonization and a best practice. 

PTO's goals in drafting the rules.  Make the guidance clear and transparent.  Address examination issues raised by AIA up front. 

On grace period – this is a critical issue.  It's a unique feature of US law, but it's not the same grace period as we had before.  There are going to be questions about how narrowly the grace period is going to be read.  USPTO has interpreted the the grace period to be very narrow.  There are many views about this issue. 

Sales issue (ed. do they have to be public?) – legislative history conflicts.  Is Metalizing Engineering overturned or not? 

Visit the USPTO's AIA implementation page – lots of good material there. 

Nathan Kelley (USPTO) – How supplemental examination is supposed to work.  Purpose of supplemental examination is to immunize patentees against claims of inequitable conduct based on information that was not disclosed, inadequately disclosed, or incorrect information. 

Supplemental examination lets just about all issues of patentability to be raised.  Talked about the mechanics of supplemental examination.  If, for example, the issue raised by the supplemental examination is a written description issue, that's what will go into reexam. 

Could apply to patents that have expired because the statute of limitations on a patent (enforceability period) is six years. 

Improper requests will not get into the PAIR system until they are granted. 

Items of information are anything, as long as they're written.  Videos/oral testimony must include a transcript.   Can't give more than twelve items of information in any one request.  But you can make more than one request.

Fees – about $5k for the request, plus upfront $16,000 for reexam that will be refunded if no ex parte reexam. 

(I spoke about inequitable conduct post-Therasense and the effect on supplemental examination)

During Q&A, question came up about PTO fraud enforcement.  PTO views supplemental examination as exactly that, not an inquiry into the intent of the parties.

The America Invents Act: One Year Later (conference)

Patent, , , ,

By Jason Rantanen

Liveblogging the America Invents Act: One Year Later conference at the Indiana University Mauer School of Law.   Warning and disclaimer: Quality may vary and these don't necessary reflect my opinions.

Session 1:

Mark Janis – opening remarks.  Hard to believe it's been a year act since AIA was signed.  Still at the beginning of understanding the AIA provisions.  Exciting times.  Lots of patent law thought leaders here today – Bob Armitage, Director K appos. 

Come back in ten days for the next conference.

Bob Armitage – wants to the the upbeat, inspirational speaker that we all need at 8:30 am. 

Some things that need to be done with the AIA in terms of legislative correction of errors.  Suggests that different constituencies in patent law work together on this goal in the immediate future – before the next election.

The AIA is the most profound change to the patent system since 1836 patent statute.  He's been involved in the process of patent reform for the last 30 years.  Shortly after he left law school, he realized that we had a law school that we had a patent system that didn't work very well.  Some of the things that we needed to do to improve the patent system was to eliminate first to invent, have a more transparent grace period, and eliminate recurring patent terms. 

Sees the AIA as major constituencies coming together to move the patent system in the direction of transparency and objectivity.  If the implementation of the AIA goes well, this is the patent system we'll have.  A more predictable patent system.  Much of this comes down to invalidity defenses – under the AIA these are much simpler. 

We were the last to the table in terms of modernizing our patent system.  Prior 1999, we really had a secret patent system. With the AIA, the patent system was opened up even further.  After AIA, there's no-fault correction of misnaming of inventors; the technical filing of an affidavit that mis-names the inventor is no longer a worry; best mode is no longer a concern for patent applicants; patent prosecutors are better off because of supplemental examination.  If they're deposed, and things arise, the patent holder can, in a pre-litigation context, go back to the patent office. (me: Query how this is viable, since depositions often arise during litigation.  Could make sense for a sequential litigant).

Other big changes: deceptive intent removed throughout the application process; patent owner can seek the patent as the applicant; no more supplemental oaths. 

Post-grant review: patents are now open to more challenges after the patent issues.  It's any issue of patentability that you can raise in court, you can raise in the PTO.  Why is this important?  This lets parties challenge patents the day patents issue, not six years down the road.  Challenging patents in court is expensive.  Post-grant review allows parties to resolve these issues in the matter of months, not years, at a fraction of the cost.

Sees the AIA as increasing transparency, objectivity, predictability, simplification of patent system.  Patent validity is reduced to just four objective legal standard: sufficient differentiation from prior public disclosures and earlier patent filings of others; sufficient disclosure to identify the claimed embodiments and enable them to be put to a specific practical, and substantial use; sufficient definiteness to differentiate subject matter; sufficient concreteness to avoid excessively conceptual or otherwise abstract subject matter.  That's all there is to the patent law.  These are objective standards that don't require you to know anything about what the inventor did, thought, etc. 

The national embarrassment of the first-to-invent system will now end. Example Gore-Tex case of why this was a problem.  Interference count practice was problematic.  It was an embarrassment and it's gone. 

The AIA is an attempt to be a codification of the way Congress wants the law, not a codification of what the law is. 102(b) was a colossal mess because of the attempt to codify existing law.  Under the AIA, there are no new AIA patent law doctrines.  Legislative history says "apply as written."  Example: 102 – only new phrase is "available to public."  Apply as written – this means that prior art is that art which is publicly accessible (comment: this issue is one of the most debated issues in the new AIA).

Who benefits from the AIA?  Those with the least resources, capital available.  It's a patent system optimized for small inventors, universities.  For those engaged in commerce of patents, supplemental examination allows for due diligence to be more effective, since it will allow the curing of inequitable conduct.

K-Tec v. Vita-Mix: Analogous Art and Willful Infringement

Patent,

By Jason Rantanen

K-Tec, Inc. v. Vita-Mix Corp. (Fed. Cir. 2012) Download 11-1244-1484-1512
Panel: Newman, Lourie (author), Prost

K-TEC and Vita-Mix are manufacturers of high-end blenders.  In the early 2000's, K-Tec developed a blender geometry that reduced the problem of cavitation (the formation of an air-pocket around the spinning blade).  Figure 11 of K-Tec's patent illustrates the concept:

Figure 11

Vita-Mix used K-TEC's five-sided commercial embodiment to design its own upgraded blending jar.  After Vita-Mix released its product, two of K-TEC's patents issue.  Upon being notified of the patents, Vita-Mix redesigned its product in an attempt to design-around the patent claims (which reference "four side walls" and "a fifth truncated wall disposed between two of the four side walls.")  The redesigned Vita-Mix product looked like this:

Vita-Mix
During the patent infringement suit, the district court granted summary judgment of infringement and summary judgment that two prior art references asserted by Vita-Mix were not analogous art.  The remaining issues were tried to a jury, which found in favor of K-TEC on the remaining issues of validity, willfulness, and damages.

Analogous Art: Following KSR v. Teleflex, there was some question as to the strength of the analogous arts doctrine in light of the Court's repudiation of rigid tests in analyzing nonobviousness.  Last year, however, in In re Klein, the Federal Circuit applied a robust analogous art doctrine to limit the scope of prior art that may be considered by the examiner during patent prosecution.  K-TEC v. Vita-Mix indicates that the analogous art test continues to remain alive and well in the infringement context, affirming a grant of summary judgment that the references did not constitute analogous art. 

Vita-Mix argued that the district court should have permitted the jury to consider two non-blender designs that depict five-sided containers.  Design Patent 227,535 ("Grimes") provides an example:

GrimesUnder Federal Circuit precedent, a prior art reference may not be considered in the obviousness analysis unless it is analogous art.  There are two ways to meet this requirement: (1) the reference can be from the same field of endeavor as the claimed invention; or (2) it can be reasonably pertinent to the particular problem with which the inventor is involved.  Here, Vita-Mix did not contend that the container design patents were from the same field of endeavor, and thus the CAFC focused its analysis on the second condition.

In affirming the district court's grant of summary judgment that the two design patents were not analogous art, the CAFC concluded that despite the inventor testifying that he "wanted the resulting jar to fit within K-TEC's existing quiet box, there is no dispute that creating a smaller jar was not the problem he set out to solve because K-TEC's existing jars already fit within the quiet box."  Slip Op. at 16.  (It's unclear from the opinion why needing a smaller jar would caused Grimes to have "commended itself" to an inventor's intention in considering his problem.)  A greater problem was that Vita-Mix's expert report "did not 'explain any rational underpinning for [the inventor] to have consulted non-blending containers or food mixers in order to solve the problems he encountered in designing a new blending container.'"  Slip Op. at 16, quoting the district court's opinion.

Comment: Why, especially in light of KSR v. Teleflex, should the analogous arts analysis have anything to do with what an inventor thought?  Here's how the CAFC is currently articulating the "reasonably pertinent" prong: "A reference is reasonably pertinent if it, as a result of its subject matter, 'logically would have commended itself to an inventor’s attention in considering his problem.'" Slip Op. at 15, quoting Innovention Toys, LLC v. MGA Entm’t, Inc., 637 F.3d 1314, 1321 (Fed. Cir. 2011).  Shouldn't the analysis be based on what a person having ordinary skill in the art would have thought, not an inventor (and especially not "the" inventor)? 

Willful Infringement Treated as a Question for the Jury: For those seeking to prove willful infringement, this is a good case; for those seeking some consistency with previous opinions on the subject, it may be less so.  Following the jury trial, the district court denied Vita-Mix's motion seeking to overturn the finding of willful infringement.  In affirming, the opinion makes no reference to the CAFC's recent instruction that the "objective prong" of the Seagate recklessness analysis is a separate question of law.  Instead, the opinion barely distinguishes the "objective" prong from the "subjective" prong.  Evidence for the "objective" prong:

  • Vita-Mix's noninfringement theory and most of its invalidity theories were properly disposed of on summary judgment;
  • Its remaining theories were "soundly" rejected by the jury;
  • In designing the product illustrated above, Vita-Mix started with a direct copy of K-TEC's five-sided jar (note: the "direct copy" was Vita-Mix's own pre-patent version of K-TEC's commercial embodiment); and
  • Vita-Mix considered other noninfringing designs, but opted to "produce a container that performed in the same way as the [earlier Vita-Mix product] and employ a design that its customers would not be able to distinguish from [Vita-Mix's earlier product]."

The court continued on to state that "similarly, K-TEC presented substantial evidence that Vita-Mix knew of the objectively high risk of infringing K-TEC's valid patents, but decided to proceed anyway,"  Slip Op. at 22, indicating that the preceding factors were the factors relevant to that "objectively high risk."  

Comment: One area where the K-Tec holding is particularly difficult to square with prior precedent is its reliance on copying as part of the "objective" prong of the Seagate analysis.  See DePuy Spine, Inc. v. Medtronic Sofamor Danek, Inc., 567 F.3d 1314 (Fed. Cir. 2009) ("Because we hold that DePuy failed as a matter of law to satisfy Seagate's first prong, we need not address DePuy's arguments concerning “copying” and Medtronic's rebuttal evidence concerning “designing around,” both of which are relevant only to Medtronic's mental state regarding its direct infringement under Seagate's second prong.").  

Woodrow Woods v. DeAngelo: Make a Meaningful Supplementation of Your Contention Rog Responses

Patent, , ,

By Jason Rantanen

Woodrow Woods v. DeAngelo Marine Exhaust, Inc. (Fed. Cir. 2012) Download 10-1478
Panel: Linn (author), Dyk, Reyna

Woodrow Woods, the owner of two patents relating to water jacketed marine vessel exhaust systems, and Marine Exhaust Systems, his exclusive licensee, sued DeAngelo Marine Exhaust for infringement.  During the discovery phase of the case, MES propounded an interrogatory that read "“State with specificity all prior art that anticipates such claims of one or more of the patents at issue or renders them obvious. In doing so, specify the particular claim being referred to and identify why such prior art anticipates such claims or renders them obvious.”  (emphasis added by court).  DeAngelo responded with the following statement:

“[the] interrogatory seeks attorney work-product information, and is not discoverable. DeAngelo has not yet decided which prior art references it will use to challenge the validity of the patents in suit . . . [they] shall be disclosed as required by 35 U.S.C. § 282.”

On February 8, 2010, the day before the close of discovery, DeAngelo located several old engineering drawings, which it immediately forwarded to MES, accompanied by a letter stating that "[t]hese documents arguably may anticipate the Woods invention(s), or may be relied upon as showing the state of the art in the early 1990’s," and asked whether MES would object to their use should trial begin before March 10 because otherwise DeAngelos' disclosure would violate 35 U.S.C. § 282 (requiring the disclosure of certain information relating to an accused infringer's defenses at least 30 days before trial).  MES did not immediately respond, and trial began on April 5, 2010.

During trial, MES moved under FRCP 26 and 37 to strike the drawings DeAngelo had disclosed on February 8.  The district court granted the motion, finding the disclosure and supplementation of the interrogatory response (in the form of the letter) to be untimely.  After a jury found the patents valid and infringed, the district court denied DeAngelo's renewed motions for JMOL and DeAngelo appealed.

 On appeal, the Federal Circuit rejected DeAngelo's contention that the district court had abused its discretion. While the CAFC agreed with DeAngelo that the documents in question were timely produced (they were disclosed before the close of discovery and before the thirty-day outer limit set by § 282), it disagreed that the supplementation of the interrogatory response was inadequate.  DeAngelo's communication of February 8, 2010, stated that the documents "may anticipate the Woods inventions, or may be relied upon as showing the state of the art in the early 1990’s," but this did not suffice to comply with the portion of the contention interrogatory in italics prior to the discovery deadline.  Emphasizing the important role contention interrogatories play in "helping to discover facts supporting the theories of the parties" and that they "also serve to narrow and sharpen the issues thereby confining discovery and simplifying trial preparation," Slip Op. at 11, the CAFC concluded that the district court was well within its discretion in excluding the drawings as a discovery sanction.

Additional Rulings: The Federal Circuit also rejected each of DeAngelo's other arguments (claim construction, obviousness, noninfringement, and Rule 11 sanctions).  On obviousness, the court disagreed with DeAngelo that Woods' amendment in response to an examiner rejection for anticipation qualifies as an admission that all limitations in the initial claims, existed in the prior art.  "A patent applicant is not presumed to have conceded the presence in the prior art of every claim limitation he had no reason to dispute."  Slip Op. at 25. 

The CAFC also agreed with the district court that MES and Woods had conducted an adequate pre-suit investigation, as required by FRCP 11(b).  "Here, the record is replete with evidence supporting the district court’s conclusion that MES conducted a sufficient prefiling investigation including photographing and studying photographs of DeAngelo’s accused products," slip op. at 27.  The court distinguished the inadequate investigation in Judin v. United States, 110 F.3d 780 (Fed. Cir. 1997), on the ground that MES also sought access to the products by making a direct request to DeAngelo (DeAngelo did not provide the requested information prior to the lawsuit).   

Upcoming Patent Law Conferences at Indiana-Bloomington

Patent,

By Jason Rantanen

The Center for Intellectual Property Research at Indiana University Maurer School of Law is sponsoring three conferences this fall on the state of patent law.  At the first conference, coming up in just two weeks, I'll be speaking about inequitable conduct in the wake of Therasense v. Becton Dickinson and the way the new supplemental examination rules are likely to impact patent law.  That conference features a panel discussion about what the AIA accomplished involving heavyweights in both academia (Mark Janis, John Duffy & Rochelle Dreyfuss) and industry (Mark Chandler, Gary Griswold, Doug Norman, and John Vaughn). 

Full details on each conference are available by following the links.

September 13-14:
The America Invents Act: One Year Later
Keynote Speakers:
David Kappos, Director, USPTO
Robert Armitage, General Counsel, Eli Lilly and Company
 
September 24: 
The State of Patent Litigation: A Conversation with the Federal Circuit
Keynote Speakers:
Hon. Randall Rader, Chief Judge, U.S. Court of Appeals, Federal Circuit
Hon. S. Jay Plager, Circuit Judge, U.S. Court of Appeals, Federal Circuit
(In cooperation with the Federal Circuit Bar Association)
 
November 2-3: 
The Future of Design Protection Law
Mark D. Janis, Robert A. Lucas Chair of Law, IU Maurer School of Law
Graeme Dinwoodie, Professor of Intellectual Property and
Information Technology Law, Oxford University
(Held at Oxford University)

Amkor v. ITC

Patent, , , ,

By Jason Rantanen

Amkor Technology, Inc. v. International Trade Commission (Fed. Cir. 2012) Download 10-1550
Panel: Newman, Plager, and Linn (author)

Although soon to be eliminated as prior art for new patents, 35 U.S.C. § 102(g) will continue to be a potentially important category of prior art for the near future as pre-AIA patents will remain the prevailing type of patent in infringement suits for at least the next decade.  In Amkor, the Federal Circuit answered an important question about 102(g): whether an oral disclosure of an invention to the United States is sufficient to constitute prior art.  It answered in the affirmative, with a key caveat.

The version of 102(g) involved in this appeal states that:

A person shall be entitled to a patent unless:

…

(g)(1) during the course of an interference conducted under section 135 or section 291, another inventor involved therein establishes . . . that before such person’s invention thereof the invention was made by such other inventor and not abandoned, suppressed, or concealed, or (2) before such person’s invention thereof, the invention was made in this country by another inventor who had not abandoned, suppressed, or concealed it. . . .

35 U.S.C. § 102(g) (2006) (emphasis added). The appeal turned on the interpretation of "made in this country": specifically, whether it encompassed an oral disclosure to a person in the United States of an invention conceived of abroad.

In concluding that an oral communication was sufficient, the CAFC issued several notable holdings.  First, it extended the holding in Scott v. Koyama, 281 F.3d 1243 (Fed. Cir. 2001), that interpreted a previous version of 102(g) to allow the inventor of an invention of foreign origin to "rely on the date that the invention was disclosed in the United States as a conception date for priority purposes" to apply to the current version of 102(g)(2).

Second, the CAFC held that an oral communication could be a sufficient disclosure for 102(g) purposes.  "While this court’s limited precedent on this issue establishes that writings can satisfy the full domestic disclosure requirement, the cases do not establish any per se requirement that such disclosure must be in writing."  Slip Op. at 12.  However, the "content of the domestic disclosure must be specific enough to encompass the "complete and operative invention…and an inventor's oral testimony to this extent is a question of proof."  Slip Op. at 13 (emphasis in original). Thus, corroboration of the testimony is necessary. 

The CAFC did not reach the issue of corroboration of the specificity of the disclosure, instead rejecting the accused infringer's argument based on the burden of persuasion and evidence necessary to invalidate an issued patent.  The accused infringer could only show a range of dates of possible U.S. disclosure that overlapped with the patent holder's possible conception dates.  "Such a showing, at best, establishes that the ASAT inventor might have conceived of the invention first. Evidence establishing that there might have been a prior conception is not sufficient to meet the clear and convincing burden needed to invalidate a patent."  Slip Op. at 16 (emphasis in original).

Obviousness: The court also affirmed the Commission's claim constructions and rejected anticipation and obviousness arguments based on another prior art reference.  In reaching this conclusion, the court pointed to a lack of any evidence of a motivation to combine or reason to modify the prior art:

Because the fused lead attached to the die pad in JP-456 prevents the lip from extending “fully around the circumference of a die pad” or “fully around the die pad” as required by the claims, Carsem was required to present evidence that one of ordinary skill in the art at the time of the invention would have been motivated or found reason to remove the fused lead from the JP-456 reference, or that common sense would have led one of skill in the art to remove the fused lead based on a known problem, design need, or market pressure. KSR Int’l v. Teleflex, 550 U.S. 398, 418-20 (2007).

Slip Op. at 21.  While this language could be interpreted as limiting "common sense" to the three specific scenarios identified in KSR v. Teleflex, a better interpretation in my view is that Carsem simply failed to provide any explanation as to why a person of ordinary skill in the art would have modified the prior art, including the three specified examples.  Anything more rigid would be inconsistent with the flexible approach to obviousness mandated by KSR.

Whitserve v. Computer Packages

Patent,

By Jason Rantanen

Whitserve, LLC v. Computer Packages, Inc. (Fed. Cir. 2012) Download 11-1206-1261
Panel: Prost, Mayer (dissenting), O'Malley (majority author)

Much of this opinion deals with relatively typical appeal issues of infringement, anticipation, and damages.  Two issues are worth highlighting, however.

Prove Every Claim Element: During the district court proceedings, CPi had focused its anticipation case on claim 10 of Patent No. 6,981,007, and the Federal Circuit agreed that claim 10 was indeed anticipated.  However, the CAFC also concluded that CPi had failed to present detailed evidence explaining how each claim element of the remaining claims was discussed in the prior art, and thus affirmed the jury verdict of no anticipation as to those claims.  The moral of this story? In the absence of a stipulation that the validity of all the claims will rise and fall on a representative claim, patent challengers should make sure to present detailed evidence on every element of every claim they are challenging when advancing one claim as a representative claim.  Here, CPi had presented cursory evidence, at best, asking its expert only "are all the elements of those claims disclosed in the Schrader patent?” to which its expert replied “Yes, they are.”

Patentable Subject Matter: Writing in dissent, Judge Mayer would have sua sponte found three of the asserted patents invalid due to lack of patentable subject matter.  "Because the WhitServe patents simply describe a basic and widely-understood concept—that it is useful to provide people with reminders of important due dates and deadlines—and then apply that concept using conventional computer technology and the Internet, they fail to meet section 101’s subject matter eligibility requirements."   Slip Op. at 51.  This issue, in Judge Mayer's view, was appropriate for the court to take up despite not having been specifically raised by the parties on appeal because there were significant changes in the law since the trial court's decision rejecting CPi's section 101 argument, namely, Mayo v. Prometheus, 132 S. Ct. 1289, 1303 (2012). 

Claim 1 of Patent No. 5,895,468, which is representative of these patent claims, is below.

A device for automatically delivering professional services to a client comprising:
a computer;
a database containing a plurality of client reminders, each of the client reminders comprising a date field having a value attributed thereto;
software executing on said computer for automatically querying said database by the values attributed to each client reminder date field to retrieve a client reminder;
software executing on said computer for automatically generating a client response form based on the retrieved client reminder;
a communication link between said computer and the Internet;
software executing on said computer for automatically transmitting the client response form to the client through said communication link; and,
software executing on said computer for automatically receiving a reply to the response form from the client through said communication link.

Edit: The post should have read "present detailed evidence," not "prevent detailed evidence."  Patent challengers certainly don't want to prevent evidence of patent invalidity! – Jason

Meyer v. Bodum: A Waste of Public and Private Resources?

Patent, , , ,

Meyer Intellectual Properties Limited v. Bodum, Inc. (Fed. Cir. 2012) Panel: Dyk (concurring), Moore, O'Malley (author) Download 11-1329

At its heart, Meyer v. Bodum is essentially an obviousness case, although for reasons having to do with the procedural posture, the court never gets to the merits of that issue, instead remanding the case for further proceedings based on numerous errors committed by the district court, which the opinion portrays as misguided and lacking an understanding of the basics of patent law.  

Judge Dyk's concurrence, reproduced in its entirety at the end of the post, goes even further, concluding that "this case is an example of what is wrong with our patent system…Such wasteful litigation does not serve the interests of the inventorship community, nor does it fulfill the purposes of the patent system."  Slip Op. at 46-47.

BodumBackground: Frank Brady was an independent sales representative for Bodum from 1986-1996, during which time he marketed and sold products including Bodum's French press coffee makers.  In the mid-1990's, Brady came up with the idea of a milk frother that used aeration instead of steam, and in 1996, he filed a patent application directed to a "Method for Frothing Liquids" that led to two issued patents, Nos. 5,780,087 and 5,939,122.  The claims essentially involve four steps: "(1) providing a container that has a height to diameter aspect ratio of 2:1; (2) pouring liquid (e.g., milk) into the container; (3) introducing a plunger that includes at least a rod and plunger body with a screen; and (4) pumping the plunger to aerate the liquid."  Slip Op. at 5. Brady also sold milk frothers through his company, BonJour, which was subsequently sold to Meyer. 

Bodum2In 1999, Bodum began selling the first generation of its accused milk frothers.  The figures  accompanying this post are the opinion's comparisons of Bodum's Version 1 frother with the '087 patent. Shortly after Meyer filed an infringement suit in 2006, Bodum changed its designs, removing the spring element holding the screen against the inside wall of the container and replacing it with an O-ring.  The O-ring was later removed to create the Version 3 frother. 

Following a jury trial in which the jury held the patents to be valid and willfully infringed, awarding $50,000 in damages, the district court trebled the damages, declared the case exceptional, and awarded Meyer its attorney fees of $756,487,56.  Bodum appealed, alleging a panopoly of errors by the district court.  The Federal Circuit agreed. 

Infringement: The CAFC vacated the district court's grant of summary judgment of infringement due to a lack of any evidence of direct infringement in the record.  Rather, the district court relied only on assumptions of direct infringement.  "We find it troubling that the district court based its direct infringement analysis on what it assumed happened, rather than on actual evidence of record. This assumption contradicts our well-established law that a patentee must prove infringement by a preponderance of the evidence."  Slip Op. at 26.

Evidentiary Rulings: Prior to and during trial, the district court made a number of evidentiary rulings that sharply limited Bodum's ability to present its case.  In an uncommon move, the Federal Circuit concluded that the district court had abused its discretion in these rulings, holding that (1) the district court erroneously limited the scope of prior art to only two references (one of which was subsequently excluded), despite sufficient disclosure of several additional references; (2) the district court  erroneously excluded Bodum's expert from testifying despite a report containing a sufficiently detailed statement of his opinions and the bases for his conclusions, especially given the non-complex nature of the technology; and (3) the district court erroneously precluded lay witnesses from testifying to authenticate one of the two allowed prior art references.  The CAFC thus remanded for a new trial on obviousness.

Inequitable Conduct: The CAFC also held that the district court erred by dismissing Bodum's inequitable conduct claims on a motion in limine.  Under Seventh Circuit law, "a motion in limine is not the appropriate vehicle for weighing the sufficiency of the evidence."  Slip Op. at 41-42.  The district court thus "erred in addressing the sufficiency of Bodum's inequitbale conduct defense on an evidentiary motion." Id. at 42. 

Willful Infringement and Enhanced Damages: Because the CAFC remanded the case for a new trial on infringement and invalidity, it vacated the wilfulness verdict and enhanced damages award.  In doing so, it suggested that the district court use Bard Peripheral Vascular, Inc. v. W.L. Gore & Associates, Inc., 682 F.3d 1003 (Fed. Cir. 2012) (in which the Federal Circuit held that threshold "objective prong" of the willfulness inquiry is a question of law) as a starting point.

Judge Dyk's Concurrence: Writing in concurrence, Judge Dyk questioned why this patent issued in the first place and why it was not found obvious on summary judgment: 

While I agree with and join the thorough majority opinion, in looking at this case from a broader perspective, one cannot help but conclude that this case is an example of what is wrong with our patent system. The patents essentially claim the use of a prior art French press coffee maker to froth milk. Instead of making coffee by using the plunger to separate coffee from coffee grounds, the plunger is depressed to froth milk. The idea of frothing cold milk by the use of aeration rather than steam is not new as reflected in the prior art Ghidini patent.  Under the Supreme Court’s decision in KSR International Co. v. Teleflex, Inc., 550 U.S. 398, 420 (2007), and its predecessors, it would be reasonable to expect that the claims would have been rejected as obvious by the examiner, and, if not, that they would have been found obvious on summary judgment by the district court. But no such thing. The parties have spent hundreds of thousand of dollars and several years litigating this issue, and are invited by us to have another go of it in a second trial. Such wasteful litigation does not serve the interests of the inventorship community, nor does it fulfill the purposes of the patent system.

Judge Dyk specifically refers to the private costs of this litigation – the hundreds of thousands (at least a million, if both parties' costs are taken into account) of dollars spent by the parties on legal fees.  The public, too, has spent a substantial amount of resources on this case: the district court's time and resources, the jury's time (and perhaps a future second jury), and the Federal Circuit's own time spent correcting the errors – as evidenced by its thorough 44-page opinion.  Beyond these monetary costs, Judge Dyk's concurrence hints at an even greater public cost: the undermining of public confidence in the ability of the patent office and the courts to get patentability decisions on even relatively technologically simple inventions right.

Recent Federal Circuit Nonobviousness Opinions: Kinetic Concepts

Obviousness, Patent, ,

By Jason Rantanen

Kinetic Concepts, Inc. v. Smith & Nephew, Inc. (Fed. Cir. 2012)  Panel: Bryson, Dyk (concurring in the result), O'Malley (author) Download 11-1105

Dennis will be writing about the advisory jury issue in Kinetic Concepts in more detail, so I'll provide only a brief summary here.  Wake Forest, the patent holder, appealed a district court grant of JMOL of invalidity for obviousness of a claimed invention for treating difficult-to-heal wounds by applying suction (negative pressure).  The CAFC reversed, holding that (1) the jury's "advisory" opinion on the ultimate issue obviousness gave rise to implied findings of facts that the district court was required to accept provided that they were supported by substantial evidence, despite the presence of special interrogatories on the verdict form; (2) the jury's implied findings of facts on the Graham factors were supported by substantial evidence; and (3) the ultimate conclusion of obviousness was that the claims were not obvious. 

In arriving at the ultimate (legal) conclusion of nonobvious, the Federal Circuit focused its discussion on the lack of a reason to combine the prior art references (itself a factual finding), referencing concerns about hindsight reconstruction.  In a statement suggesting a technology-based limitation on the use of common sense, the court held that "although expert testimony regarding motivation to combine is not always required, the technology at issue here is not the type of technology where common sense would provide the motivation to combine these references."  Slip Op. at 45.

Recent Federal Circuit Nonobviousness Opinions: Alcon v. Apotex

Obviousness, Patent,

By Jason Rantanen

I'm catching up with recent Federal Circuit opinions this week.  First up, a trio of precedential opinions involving nonobviousness, a surprisingly hot topic.

Alcon Research, Ltd. v. Apotex Inc. (Fed. Cir. 2012).  Panel: Prost, Moore (author), O'Malley Download 11-1455

Apotex submitted an Abbreviated New Drug Application to the FDA seeking approval to market a generic version of the anti-allergy eye drop PATANOL; in response, Alcon sued Apotex for patent infringement under 271(e)(2)(A).  In a bench trial, the district court held that eight of the asserted claims of the patent were nonobvious, and Apotex appealed.

The Federal Circuit reversed on six of the claims.  Focusing on the primary issue, whether there was a motivation to adapt the formulation disclosed in the prior art (which was tested in guinea pigs) for use in in treating humans, the CAFC concluded that the district court had applied an overly strict reason to modify requirement to the six claims involving a range that overlapped with the prior art.   Given the district court's factual finding that "animal tests, including guinea pig models, are predictive of a compound's antihistaminic activity and its topical ocular activity in humans," the "district court clearly erred when it concluded that a person of skill in the art would not have been motivated to use the olopatadine concentration disclosed in Kamei in human eyes."  Slip Op. at 12.  It did not help Alcon's argument that its patent was based only on in vitro tests of the compound in human cells. 

The CAFC reached a different conclusion on two claims that did not cover a range of the active compound that overlapped with the prior art, finding no clear error in the district court's conclusion that "a person of ordinary skill in the art would not have a reasonable expectation of success for increasing the highest dosage used in [the prior art] by an order of magnitude."  Slip Op. at 17. 

While the CAFC considered the objective evidence, it played a relatively secondary role.  On the six claims that the panel concluded were obvious, despite agreeing with the district court that the objective considerations fell in Alcon's favor, the CAFC nevertheless concluded that after balancing the objective evidence against the strong case of obviousness presented by Apotex the claims were obvious.  No explanation of why this was so was offered.  Similarly, on the two claims in which there was no reasonable expectation of success, the court commented that the objective evidence "further supports" the nonobvious holding, citing particularly evidence of commercial success.

Comment:  The opinion avoids labeling the first part of the analysis as a "prima facie" case of obviousness, perhaps in response to recent concerns about the confusing use of that term in infringement suits.  See In Re Cyclobenzaprine Hydrochloride Extended-Release Capsule Patent Litigation, 676 F.3d 1063 (Fed. Cir. 2012).  The court refers to it only as the "evidence of obviousness discussed above" when contrasting it with the objective indicia of nonobviousness.  But this is somewhat cumbersome, and sparks the question of how should we refer to this stage of the obviousness analysis if not as the "prima facie case of obviousness?"  Possible suggestions, all of which have their problems: the first three Graham factors; the 'paper case' of obviousness; the 'theoretical' case of obviousness. Other suggestions? 

 

Supplemental Examination Final Rules

Patent

By Jason Rantanen

As Dennis writes below, tomorrow the USPTO will publish five final rules packages for implementing the America Invents Act.  This post focuses on the Supplemental Examination Rules, available here.  In large part, the Final Supplemental Examination Rules mirror the proposed rules, which I discussed in a previous post. 

The biggest change from the proposed rules relates to the elimination of some of the specific content requirements. Originally, the rules articulated several very specific categories of information that the requestor was required to provide.  The final rules are more streamlined, paralleling the content requirements for submitting an ex parte reexamination. They do, however, retain the requirement of a "A separate, detailed explanation of the relevance and manner of applying each item of information to each claim of the patent for which supplemental examination is requested." 37 C.F.R. § 1.610. (This requirement parallels the ex parte reexamination requirement of 37 C.F.R. § 1.510(b)(2).)

The PTO considered other potential changes, but in each case decided either to retain the original rule or concluded the change was mooted by its change to the content requirements.  It slightly bumped up the limit on the number of items of information that could be submitted from 10 to 12.

The cost for filing a supplemental examination request remains steep: $5,140 for the initial request plus $16,120 for the ex parte re-examination fee. Both must be paid at the time of initial request, and the $16,120 will be refunded if no re-examination is ordered.  The rules also finalize the substantial increase in the fee for filing a request for ex parte reexamination: $17,750.  Initially the small- and micro-entity reductions will not apply to these fees, although the PTO's proposed fee structure under Section 10 of the AIA do allow for such reductions. (USPTO fee website).

Given these costs, together with the realities of how patent litigation actually works and how inequitable conduct claims are generally developed, I remain highly skeptical of the PTO's projection that it will receive about 1,430 requests for supplemental examination annually.  Indeed, I suspect this number will actually be much, much smaller.  Most information that might be submitted in a supplemental disclosure request will be discovered too late for supplemental examination to matter.    For similar reasons, I am dubious of the PTO's prediction that supplemental examination will reduce the number of district court patent infringement cases in which inequitable conduct is plead as a defense. 

Guest Post by Christal Sheppard: Solving a Knotty Problem: An Outrageous Call for Patent Reform Part Deux

Patent, ,

Dr. Sheppard is an Assistant Professor of Law at the University of Nebraska Lincoln College of Law.  Prior to joining the University of Nebraska, Dr. Sheppard was Chief Counsel on Patents and Trademarks and Courts and Competition policy for the United States House of Representatives Commmittee on the Judiciary. – Jason

By A. Christal Sheppard

Just over a week ago, Dennis Crouch stated on Patently-O that “[i]t is simply ridiculous that after 40 years of debate, we still do not have an answer to the simple question of whether (or when) software is patentable.”  The confusion on what is and what is not patentable is not a new debate but has come to a head in the last few years with the Supreme Court taking on certiorari multiple cases on the matter of patentable subject matter and the Court of Appeals for the Federal Circuit, arguably, disregarding Supreme Court precedent.

We all understand the problem[1], but what is the solution?  The question of what should be patentable is fundamentally a public policy decision.  This public policy decision is one that the framers of the Constitution contemplated and specifically tasked one specific entity with balancing the equities.  The Constitution states “The Congress shall have Power…[t]o promote the Progress of Science and useful Arts, by securing for limited Times to Authors and Inventors the exclusive Right to their respective Writings and Discoveries.”  Congress not the Courts was tasked to determine what should be eligible for the “embarrassment of a patent.”  However, the Courts, led by the Court of Appeals for the Federal Circuit, not the Congress, have driven the expansion of Patentable Subject Matter to “anything under the sun made by man.” 

Case law dictates that the intent of Congress was 1) that patentable subject matter is a requirement separate from that of the other requirements of the patent laws and 2) that Congress intended for anything under the sun made by man to be potentially patentable with the exception of laws of nature, natural phenomena and abstract ideas. Thus, the Courts have, by a stepwise expansion of patentable subject matter to software and business methods, created a situation whereby the high tech industry has been legally encouraged to tie itself into a Gordian knot.  A knot that, without overruling prior precedent, or creative interpretation of precedent, the Courts cannot resolve.

This blog post is to propose that the United States Congress immediately take an active role in the creation of the parameters for patentable subject matter.[2] Congress is the only entity that has the ability and the resources to resolve this conflict in a reasonable and responsible manner. It is also the entity charged by the Constitution with doing so.

I’m not unaware that using the terms “reasonable” and “responsible” in the same sentence with the United States Congress during an election year will globally elicit sound effects from chortles to foul language questioning my mental facilities.  However, below are a few points that are worth considering regarding who is best positioned to advance a solution to what most of the intellectual property community would consider a mess. 

  1. The Constitution does not require patents to be granted and while our international agreements do require minimum patent rights, software and business methods are not among them.[3]  Currently we have a Court created expansion of the definition of what is eligible for patent.  Congress has yet to wade into this morass of what should be eligible for a patent except to provide for exceptions to the Court-created expansion. Congress has created exceptions in piecemeal “fixes”, specific individual carve-outs, instead of addressing the broader issue head-on.[4]
  2. History shows that Congress once before stepped in when the Supreme Court and the predecessor to the Court of Appeals for the Federal Circuit were in discordance.  In the 1940s, the country was then also wrestling to establish a standard of invention.  The Administration appointed a Commission and the patent bar was up in arms.  As a result, section 103 – nonobviousness – was added to the statute by Congress in 1952 to inject a stabilizing effect that the Courts and general practice had not been able to accomplish over decades.  What is needed in the current situation is stabilization.  Today, the Courts are destabilizing the law of patentable subject matter rather than stabilizing it.
  3. Businesses need certainty to operate and to plan effectively. Only Congress can be prospective in its resolution.  For instance, if Congress decides that software and business methods are not patentable subject matter ONLY the Congress can make this prospective to not conflict with settled expectations.  If the Supreme Court narrows patentable subject matter, or patentability more generally, trillions of dollars of company valuation evaporate from the balance sheets with one Supreme Court decision.[5]  However, Congress can decide that starting on a date certain in the future that all patents granted or applications filed before that date are under the “old” common law rules and all patents post-implementation are under the new law.  Congress can provide finality on this issue without gutting company value.[6]  
  4. Only Congress can create an alternative method of protection, apart from patent, for items that they determine do not meet the test for “promoting the process of science.”  For example, concurrent with the delayed implementation of a narrower definition of patentable subject matter, Congress can provide sui generis protection for those fields they decide to carve-out.  Many such ideas have been proposed, such as shorter exclusivity duration and limited remedies.
  5. A Congress, unlike the Courts whose precedent binds future judges, cannot bind a future Congress.  Should the law of patentability need to expand for unknown advancements, Congress can do that in a way that is much less disingenuous than the Courts.   The framers of the Constitution contemplated this in their directive to Congress.  The language in the Constitutional defining  what should be eligible for the monopoly is malleable so that patent law can adjust as technology and the need for promotion for the advance of science changes over time. 

There are a multitude of very good reasons why calling on Congress is not a perfect solution.  But with Myriad and the patentability of gene sequences and genetic testing on the horizon, does the intellectual property community want the Courts or Congress to decide this public policy issue?  Businesses need certainty and only Congress can now provide that stabilizing influence without destabilizing entire industries.  Whether Congress will or not, ought not prevent the assertion that they should. 

Food for thought…

[1] The Supreme Court decisions have done nothing to clarify what is and what is not patentable.  At this juncture, not only is the Federal Circuit in rebellion against the Supreme Court; an influential judge from another circuit dismissed an entire high-tech case with prejudice and promptly penned an article entitled “Why There Are Too Many Patents in America”; the International Trade Commission is under siege from an explosion of technology cases and recently sought comment from the public as to whether certain patents should have limited remedies; the Administration (United States Patent and Trademark Office and the Department of Justice) have differing opinions regarding the patentability of genes and genetic tests; thermonuclear patent warfare between high tech companies is overloading our courts; market based solutions are spawning Fortune 500 companies as the new patent troll; and a patent valuation bubble reminiscent of the real estate market before the crash is driven ever forward as companies amass patents as a shield of paper armor not as an instrument of innovation. 

[2] One thing is certain, there will not be unanimous agreement on what should be patentable subject matter; however, someone should decide and should decide now.  Moreover, that decision should not negatively affect those who have relied upon the law as the Court defined and expanded it over the last 40 years only to now sound the horns of retreat. 

[3] I am not here advocating for any particular resolution, I am merely pointing out a fact.

[4] Prior user rights for business method patents in the 1999 American Inventors Protection Act; Human organisms, tax patents and creating a business method patent post-grant opposition procedure in the 2011 America Invents Act.  The Congress did not address the latter three as patentable subject matter issues, but in carving them out the Congress is showing that there are additional areas that they have determined should not be entitled to patents where the Courts have determined otherwise. 

[5] Of course patents are subject to case-by-case challenges but the Supreme Court seems to be signaling that whole categories of patents, while still technically eligible, would not meet the Courts inventiveness test as a practical matter.

[6] Congress can also provide some finality on the issue of whether patentable subject matter is a separate requirement from 102, 103 and 112.

More on the Death of the Best Mode Requirement

Patent

By Jason Rantanen

Despite (or more likely because of) the effective demise of the requirement that patent applicants disclose the invention's best mode at the time of filing the application, several academic commentaries on the subject have appeared recently, including two that I co-authored.  Below I summarize our most recent work along with two other notable recent articles on best mode.

  • In The Pseudo-Elimination of Best Mode: Worst Possible Choice?, a short essay recently published in the UCLA Law Review Discourse, we argue that by equivocating on the best mode requirement – eliminating it as an argument against validity during an infringement action while technically retaining it in section 112 – Congress may have not only failed to achieve the goal of leveling the playing field between U.S. and foreign applicants, but may have tilted it from uneven in one direct, if it ever was uneven, to uneven in the other.  The article can be downloaded here: http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2103278.  Our previous article, In Memoriam Best Mode is discussed here.
  • In Patent Reform and Best Mode: A Signal to the Patent Office or a Step Toward Elimination?,  Ryan Vacca provides a detailed history of the best mode requirement up through the America Invents Act, before examining whether the Patent and Trademark office has the ability to enforce the requirement itself.  Professor Vacca concludes that the PTO's methods are unlikely to be effective, and recommends that "if Congress believes it made the right decision in the AIA concerning best mode, then Congress should simply bite the bullet and formally eliminate best mode as a requirement for patentability."  The article can be downloaded here: http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1957768
  • In Best Mode Trade Secrets, Brian Love and Christopher Seaman conclude that it may become routine post-AIA for patentees to concurrently assert both patent rights and trade secret rights in certain types of cases.  The authors identify undesirable consequences of this change, and suggest an approach courts could consider in order to limit dual claims of trade secret and patent protection.  The article can be downloaded here: http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2056115

Loughlin v. Ling

Patent

By Jason Rantanen

Loughlin v. Ling (Fed. Cir. 2012) Download 11-1432
Panel: Lourie (author), Rader, Moore

This opinion concerns the relationship between 35 U.S.C. § 135(b)(2), which limits the circumstances under which an interference may be provoked, and 35 U.S.C. § 120, which provides the benefit of an earlier filing date based on a prior application.  Section 135(b)(2) states:

A claim which is the same as, or for the same or substantially the same subject matter as, a claim of an application published under section 122(b) of this title may be made in an application filed after the application is published only if the claim is made before 1 year after the date on which the application is published.

(emphasis added).  Ling et al. filed their original application on January 16, 2004.  Four months later, Loughlin et al. filed their application, which was published on November 18, 2004, and which subsequently issued as a patent.  On February 5, 2007, Ling filed a second application that was granted priority to the original application under section 120.  Seeking to provoke an interference, on February 21, 2007, Ling copied into this second application claims from Loughlin's pending application. 

Loughlin contended that Ling's was barred from provoking an interference by § 135(b)(2), as the claims were made more than a year after Loughlin's application was published and Ling's second application was filed in 2007, well after Loughlin's application was published (in 2004).

The Federal Circuit disagreed, affirming the Board of Patent Appeals and Interference's ruling that the priority benefit of § 120 applies to § 135(b)(2) – in essence, treating Ling's second application as if it had been filed as of the filing date of the first, thus taking it outside the scope of the "application filed after" language.  "We agree with Ling that the Board correctly interpreted § 135(b)(2) in view of the plain language of that statute and the benefit provision of § 120. The first sentence of § 120 permits an application to claim the benefit of an earlier filing date, such that the application is treated as having been effectively filed on the earlier date."  Slip Op. at 8.  In reaching this conclusion, the court noted the broad applicability of section 120, such as in the context of § 102(b), (d), and (e), and that the Board has consistently interpreted § 135(b)(2) as including the priority benefit of § 120.

CLS Bank v. Alice: The “Nothing More Than” Limitation on Abstract Ideas

Patent, , ,

By Jason Rantanen

CLS Bank International v. Alice Corporation Pty. Ltd. (Fed. Cir. 2012) Download 11-1301
Panel: Linn (author), O'Malley, Prost (dissenting)

Despite two recent opinions by the Supreme Court, the issue of patent eligible subject matter continues to sharply divide the Federal Circuit.  CLS Bank v. Alice Corporation illustrates this point neatly, even going a step further.   Unlike other recent opinions involving questions of patent eligible subject matter that have approached the issue in a relatively narrow, case-specific manner, here the majority implements a sweeping rule with significant implications for future cases – a rule that the dissenting judge criticizes as being irreconcilable with Supreme Court's precedent.

Background: Alice sued CLS for infringement of four patents covering, in the majority's words, "a computerized trading platform for exchanging obligations in which a trusted third party settles obligations between a first and second party so as to eliminate 'settlement risk'.  Settlement risk is the risk that only one party's obligation will be paid, leaving the other party without its principal."  Slip Op. at 2.  The patents included method, system, and computer program product claims. Claim 1 of Patent No. 7,149,720 is representative of the system claims:

1. A data processing system to enable the exchange of an obligation between parties, the system comprising:
a data storage unit having stored therein information about a shadow credit record and shadow debit record for a party, independent from a credit record and debit record maintained by an exchange institution; and

a computer, coupled to said data storage unit, that is configured to (a) receive a transaction; (b) electronically adjust said shadow credit record and/or said shadow debit record in order to effect an exchange obligation arising from said transaction, allowing only those transactions that do not result in a value of said shadow debit record being less than a value of said shadow credit record; and (c) generate an instruction to said exchange institution at the end of a period of time to adjust said credit record and/or said debit record in accordance with the adjustment of said shadow credit record and/or said shadow debit record, wherein said instruction being an irrevocable, time invariant obligation placed on said exchange institution.

The district court granted summary judgment of invalidity based on a failure to claim patent eligible subject matter.  Alice appealed.

The majority's "nothing more than" limitation: In reversing the district court, the majority focused on the "abstract ideas" exception to patent eligible subject matter.  Examing the concept of "abstract ideas," the majority concluded that despite substantial precedent and commentary, its meaning remains unclear and its boundary elusive.  There is, of course, some guidance in the precedent, notably the machine or transformation test and concerns about preempting an entire field of innovation.  There are also computer-specific opinions, which the majority distilled down into the rule that "a claim that is drawn to a specific way of doing something with a computer is likely to be patent eligible whereas a claim to nothing more than the idea of doing that thing on a computer may not."  Slip Op. at 18 (emphasis in original). But even this rule allows for "great uncertainty" as to the meaning of "abstract ideas."

Against this backdrop, the majority did not attempt to define the concept of "abstract ideas."  Instead, it implemented a new rule that minimizes the need to make such a determination and strongly favors a conclusion of patentable subject matter when claims involve anything that might be characterized as an abstract idea.  The majority's rule:

"this court holds that when—after taking all of the claim recitations into consideration—it is not manifestly evident that a claim is directed to a patent ineligible abstract idea, that claim must not be deemed for that reason to be inadequate under § 101…Unless the single most reasonable understanding is that a claim is directed to nothing more than a fundamental truth or disembodied concept, with no limitations in the claim attaching that idea to a specific application, it is inappropriate to hold that the claim is directed to a patent ineligible “abstract idea” under 35 U.S.C. § 101."

Slip Op. at 20-21 (emphasis added).  Applying this rule, the majority concluded that Alice's claims were directed to patent eligible subject matter.  In reaching this conclusion, it emphasized the need to look at the claim as a whole rather than to generalize the invention as the district court did.  Applying this approach, the majority concluded that the computer limitations "play a significant part in the performance of the invention" and that the claims are "limited to a very specific application of the concept of using an intermediary to help consummate exchanges between parties." Id. at 26. 

The majority also emphasized a theme previously discussed on PatentlyO: that district courts have the discretion to determine the order in which to assess questions of validity, and may execise that discretion in the interests of judicial efficiency: "Although § 101 has been characterized as a “threshold test,” Bilski II, 130 S. Ct. at 3225, and certainly can be addressed before other matters touching the validity of patents, it need not always be addressed first, particularly when other sections might be discerned by the trial judge as having the promise to resolve a dispute more expeditiously or with more clarity and predictability."  Slip Op. at 13 (emphasis added).

Judge Prost's Dissent: Writing in dissent, Judge Prost sharply criticized the majority for "responding to a unanimous Supreme Court decision against patentability with even a stricter subject matter standard."  Dissent at 8.    "The majority resists the Supreme Court’s unanimous directive to apply the patentable subject matter test with more vigor. Worse yet, it creates an entirely new framework that in effect allows courts to avoid evaluating patent eligibility under § 101 whenever they so desire."  Id. at 1.  Judge Prost was equally critical of the majority's departure from the Supreme Court's case-specific approach to questions of patent eligible subject matter.  "The majority has failed to follow the Supreme Court’s instructions—not just in its holding, but more importantly in its approach."  Id. at 3.

Central to Judge Prost's dissent is the view that the Supreme Court in Prometheus required that to be patent eligible the subject matter must contain an "inventive concept."  "Now there is no doubt that to be patent eligible under § 101, the claims must include an “inventive concept.”  Dissent at 3. Finding nothing inventive in the claims – they consist of the abstract and ancient idea together with its implementation via a computer – the dissent concludes that they cannot constitute patent eligible subject matter.

The Heart of the Dispute: One interpretation of the divide between majority and dissent is that it flows from fundamentally different approaches to the question of what the "invention" is for purposes of § 101.  The majority sees the "invention" as rigidly defined by the claims: "ignoring claim limitations in order to abstract a process down to a fundamental truth is legally impermissible," and accuses the dissent of doing just that.  Slip Op. at 23.  In contrast, the dissent, while recognizing the importance of the claims, strips them of jargon in order to ask "So where is the invention"?  Dissent at 5.  The majority's approach resembles the standard patent law approach to dealing with the concept of the invention; the dissent's is much more similar to how the Supreme Court analyzes questions of patentable subject matter. 

In any event, given the fundamental disagreement between the majority and dissent, this will be a case to keep a close eye on.

Correction to original post: Judge Lourie was joined by Judge O'Malley, not Judge Moore.

Sciele v. Lupin: The Presumption of Validity Does Not Change

Patent,

By Jason Rantanen

Sciele Pharma Inc. v. Andrx Corporation (Fed. Cir. 2012) Download 12-1228
Panel: Moore (author), Lourie, Prost

Lupin sought permission to market a generic version of Fortamet, an extended-release tablet of metaformin hydrochloride.  In response, Shionogi filed a lawsuit asserting infringement of Patent No. 6,866,866, thus triggering a 30-month stay of FDA approval.  The stay expired while the litigation was still ongoing and Lupin attempted an at risk launch of its generic product.  Shionogi obtained a preliminary injunction to prevent Lupin from selling its product that Lupin appealed.

This opinion is noteworthy largely for its discussion of the presumption of validity.  Lupin argued that the presumption of validity should not apply because of errors committed by the patent office during prosecution: the patent office erroneously issued the patent with claims that had been both rejected by the examiner and cancelled by the applicant.  Shionogi argued that there should be a heightened presumption of validity because the prior art references relied on by Lupin were before the PTO during prosecution. 

The Federal Circuit rejected both arguments, although it acknowledged that the specific circumstances could carry some weight in the overall determination.  "Whether a reference was previously considered by the PTO, the burden of proof is the same: clear and convincing evidence of invalidity…The burden does not suddenly change to some-thing higher–“extremely clear and convincing evidence” or “crystal clear and convincing evidence”–simply because the prior art references were considered by the PTO."  Slip Op. at 10-11.  However, the fact that references were previously before the PTO could impact the weight the court or jury assigns to the evidence: "For example, it could be reasonable to give more weight to new arguments or references that were not explicitly considered by the PTO when determining whether a defendant met its burden of providing clear and convincing evidence of invalidity."  Id.

Likewise, while the court rejected the argument that the presumption of validity did not apply because of the PTO's errors during prosecution, it allowed those errors to be considered: "We can take it all into account, including both the fact that the Cheng and Timmins references were before the Patent Office and the bizarre circumstances surrounding the issuance of the claims in this patent."  Id. at 12.

Against this backdrop, the CAFC concluded that the district court's obviousness analysis was flawed because it overstated the fact that the references were not before the PTO in KSR and incorrectly rejected Lupin's substantive arguments on disclosure and motivation to combine.

Although the standard for determining whether the patentholder has demonstrated a likelihood of success on the merits is a significant issue in some preliminary injunction appeals, this does not appear to be one where the outcome would have turned out differently if the CAFC had applied a standard other than whether the applicant raised a substantial question as to validity.'  The Federal Circuit judges were clearly persuaded that there was a strong obviousness challenge to the patent. 

Supreme Court Grants Cert in Already v. Nike

Patent

By Jason Rantanen

This morning the Supreme Court granted certiorari in Already, LLC dba Yums v. Nike, Inc., No. 11-982, an appeal carrying the potential for profound implications for patent law.  The question presented asks:

Whether a federal district court is divested of Article III jurisdiction over a party’s challenge to the validity of a federally registered trademark if the registrant promises not to assert its mark against the party’s then-existing commercial activities.

The Petition focused on a split between the Second and Ninth Circuit, but similar disagreements have simmered in the Federal Circuit.  Under controlling Federal Circuit precedent, it has long been the law that a patent holder can divest a federal court of Article III jurisdiction over the defendant's counterclaim for a declaratory judgment of patent invalidity by promising not to sue.  See Super Sack Mfg. Corp. v. Chase Packaging Corp., 57 F.3d 1054, 1059-60 (Fed. Cir. 1995).  A subsequent dissent by Judge Dyk, however, urged the abandonment of the Super Sack rule.  See Benitec Australia, Ltd. v. Nucleonics, Inc., 497 F.3d 1340, 1350-55 (Fed. Cir. 2007) (Dyk, J., dissenting). 

Should the Court agree with Petitioners, it thus would very likely spell the end of the so-called Super Sack covenant, making it harder for patent holders to withdraw their patents once placed into litigation. 

Notes: