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Jason is a Law Professor at the University of Iowa College of Law. View all posts by Jason Rantanen →

Guest Post: U.S. Patent Practitioner Trends of 2016 – Part I

June 29, 2016PatentJason Rantanen

By Zachary Kinnaird, Patent Attorney with International IP Law Group, PLLC

As an update to last year’s write-up on this topic, 1,210 new U.S. patent practitioners earned registration numbers in 2015, a slight rebound from the recent low in 2014 according to data gathered from the USPTO roster. These 2015 results extend a nearly 40% dip over the past six years from recent highs in 2008 and 2009 when around 2000 new practitioners were added each year. Based on Jan-April 2016 registrations, I project about 1,150 new practitioners in 2016.

Last year I projected 1,000 new patent agents and patent attorneys would earn their registration number. My prediction missed by ~17% of the final total. However, last year I used only one month’s data was to make a year-end prediction, while this year my prediction is made with four months of data as a guide. Otherwise, I used the same methodology for this finding as the previous write-up last year.

The above graph shows only initial registrations. It does not show changes in which a patent agent becomes a patent attorney, as the practitioner does not receive a new registration number. The registrations for 2015 indicate that 42.4% of the initial registrations were for patent attorneys and 57.6% were for patent agents (some of whom later became or will become patent attorneys).

Prof. Radin’s Patent Notice and the Trouble with Plain Meaning

June 29, 2016PatentAbstract Idea, AIA Trials, anticipation, Claim Construction, Enablement, obviousness, PGR, Subject Matter Eligibility, Written DescriptionJason Rantanen

By Jason Rantanen

Professor Margaret Radin, who recently retired from the University of Michigan Law School, is a leading scholar known for her work in property theory, contracts law, intellectual property, and internet commerce. She’s best known to my students for her articulation of a modern personhood theory of property in Property and Personhood, 34 Stan. L. Rev. 957 (1982).

In her essay Patent Notice and the Trouble with Plain Meaning forthcoming in the Boston University Law Review, Professor Radin offers her thoughts on a topic at the heart of contemporary debates in patent law: the extent to which the words of claims can operate as boundaries that provide the same degree of notice that we expect in the real property context. The abstract reads:

In their book, Patent Failure, James Bessen and Michael Meurer took the position that notice of the scope of a patentee’s property right is usefully analogous to notice conveyed by real property boundaries. In this essay I argue to the contrary that the idea that patent claim language could be rendered determinate enough to justify an analogy with physical fences or metes and bounds is illusory. Patent claims raise the question, in a way that fences do not, of how words “read on” objects in, or states of, or events in the world. I take a small detour through the language theory of Quine as backdrop to my argument that there is no such thing as plain meaning, at least not in situations involving innovative products and processes where there is money at stake. I draw on three landmark patent cases — Markman, Phillips, and Festo — to illustrate this basic point. In my concluding Postscript I bring the big picture into play. The costs of providing better notice, even if that were possible, might outweigh the gains. Plus, even if the analogy with physical boundaries and the commitment to plain meaning were not illusory, such rigidity in interpreting claims would undermine a significant feature of the patent system: the flexibility to reward breakthrough inventions proportionately to their importance.

Professor Radin’s discussion is worth a read for the eloquent way that she captures and synthesizes the raw strands floating around in current discussions about patent claims.

Viewed through the lens of my current projects, though, her essay raises deeper questions about the meaning of claim construction itself. Over the last two decades, patent law has experienced the emergence of the perception that claim construction is simply the process of interpreting the meaning of the words in the claims. From Markman to Cybor to Phillips, claim construction grew into a search for linguistic meaning. Even Teva reinforces this perception, with its focus on the role of evidence in determining the meaning of key claim terms.

But patent law’s dirty secret is that claim construction isn’t just about divining the linguistic sense of words and phrases in the claims. That’s a seemingly fine inquiry when analyzing questions such as infringement, or anticipation or even, perhaps, nonobviousness. Yet when it comes to other issues in patent law–enablement, written description and especially § 101–defining the meaning of words is less central to the analysis. To be sure, sometimes the formalized procedure of Phillips does matter in enablement. Liebel-Flarsheim and Automotive Technologies offer two examples. But for the most part, the formalized claim construction that we’re used to is absent from the Federal Circuit’s enablement, written description and § 101 determinations.

Nevertheless, claim construction of a sort is present. The court articulates something that it uses in its analysis. In the enablement and written description contexts, I’ve come to call this something a target that must be enabled or adequately described. What it really is, though, is claim construction–just not in the sense that we’ve become comfortable with.

The Federal Circuit’s opinion on Monday in Bascom v. AT&T Mobility [Download Opinion] illustrates this point. That case involved a motion to dismiss granted by the district court on the ground that the claims were invalid on § 101 grounds. (I’ll summarize the facts and holding in more detail in a subsequent post.) After assuming that the claims were directed to an abstract idea under Enfish‘s statement about “close calls” at step one of the Alice/Mayo framework, the court turned to step two: the search for an “inventive concept.” Here, the court concluded that the “inventive concept described and claimed in the []patent is the installation of a filtering tool at a specific location, remote from the end-users, with customizable filtering features specific to each end user,” a concept that the court concluded was not (on the record before it) conventional or generic. Slip Op. at 15-16. This determination–of identifying an “inventive concept”–is as much claim construction as the linguistic machinations of Phillips. Indeed, the court even refered to what it is doing as construing the claims: “Thus, construed in favor of the nonmovant–BASCOM–the claims are “more than a drafting effort designed to monopolize the [abstract idea].” Slip Op. at 17.

Data on Federal Circuit Appeals and Decisions

June 2, 2016PatentJason Rantanen

By Jason Rantanen

A few months ago, I wrote that the Federal Circuit is now receiving more appeals arising from the Patent and Trademark Office than the District Courts. As of the end of May, that trend is still holding strong.

This influx of appeals raises the question of how the Federal Circuit will manage its expanded docket. One possibility is that the court will make greater use of Rule 36 summary affirmances in appeals where the panel votes to affirm.

To assess whether this is already happening, my research assistants collected and coded information about all decisions in appeals arising from the PTO and district courts that were posted to the Federal Circuit’s “opinions and orders” page since 2008. (To my knowledge, this represents the full set of opinions and Rule 36 summary affirmances, but if anyone has contrary information I’d be very interested in hearing it.) Orders (not all of which are posted to the website) are not included in the below graphs.

The first graph distinguishes between Federal Circuit opinions, both precedential and nonprecedential, and Rule 36 summary affirmances. The orange bars represent numbers of opinions each year and the blue bars represent numbers of Rule 36 summary affirmances. The percentages reflect the percentage of Rule 36 summary affirmances.

I see two takeaways from this graph. One is that the use of Rule 36 summary affirmances is indeed rising, both in absolute numbers and as a percentage of dispositions. During 2015 and so far in 2016, the Federal Circuit has resolved more appeals arising from the PTO through Rule 36 summary affirmances than with an opinion.

But the court can hardly be accused of slacking: at the same time that Rule 36 summary affirmances are going up, the court is also issuing more opinions in appeals arising from the PTO than ever before. Last year, the court issued almost 60 opinions in appeals arising from the PTO and this year it is poised to exceed that by a substantial margin.

A similar trend appears from looking at precedential and nonprecedential opinions separately. The following figure depicts numbers of precedential opinions (yellow), nonprecedential opinions (red), and Rule 36 affirmances (blue). The rate at which the court is issuing both precedential and nonprecedential opinions is climbing, with the court issuing only a few less precedential opinions in the first five-and-a-half months of 2016 than all of last year. The percentages here reflect the percentage of all dispositions that took the form of a precedential opinion.

I also looked at appeals arising from the district courts and include those graphs as below. Here, too, the percentage of appeals disposed of through a Rule 36 summary affirmance has risen since 2008, as has the absolute number of Rule 36 summary affirmances. However, given the slight dip in appeals arising from the district courts, I expect to see a lower number of both appeals and summary affirmances this year.

For the sake of completeness, here’s the figure for precedential and non-precedential opinions broken out separately.

Data collection notes: For purposes of this analysis, each document was treated as an individual disposition. Approximately 10% of the data was coded by independently by two coders. Comparison of the coding results indicated near-perfect agreement.

Thanks to my research assistants Peter Kline and Andrew Stanley for their work in coding these decisions.

Judge Hughes and the New § 101 Dichotomy

May 23, 2016PatentAbstract Idea, Subject Matter EligibilityJason Rantanen

By Jason Rantanen

Enfish v. Microsoft (Fed. Cir. 2016) Download Enfish
Moore, Taranto, Hughes (author)

In re TLI Communications Patent Litigation (Fed. Cir. 2016) Download TLI
Panel: Dyk, Schall, Hughes (author)

This month’s decision in Enfish was an overnight sensation—almost literally, as mere days later the PTO issued the new examiner guidance to implement the decision that Dennis wrote about last week. That guidance emphasizes the Federal Circuit’s recognition of Mayo Step-1 as a meaningful inquiry and focuses on particular aspects of Enfish that relate to that inquiry: comparisons to prior abstract idea determinations; a caution against operating at too high a level of abstraction of the claims, and the rejection of the tissue-paper argument that use of a computer automatically dooms the claim (it doesn’t).

Although receiving only light treatment in the guidance, in my view the critical analytical move in Enfish is more than just the court’s recognition of Mayo Step 1 as meaningful—it is the analytical framework that the Federal Circuit constructs that ultimately determines the outcome. At its heart, Enfish contains a seemingly simple categorization scheme, one that offers the promise of a quick and easy way out of the § 101 maelstrom. Yet, looking deeper, my sense is that it would be a mistake to rely too heavily on the Enfish framework as a universal solution, even in the computer technology space.

On its own terms, the Enfish framework sets up a choice between “whether the focus of the claims is on the specific asserted improvement in computer capabilities…or, instead, on a process that qualifies as an “abstract idea” for which computers are invoked merely as a tool.” Enfish Slip Op. at 11. In other words, is the claimed invention something that makes a computer work better? Or are computers merely being used to do another task? If the former, the subject matter is patentable; if the latter, the claim must be subjected to Mayo Step-2. This distinction sets up the ultimate conclusion in Enfish that the claims are not directed to an abstract idea and serves as the analytical difference between Enfish and In re TLI Patent Litigation, a subsequent opinion concluding that the challenged claims are not directed to patentable subject matter.

In Enfish, Judge Hughes introduced the “improvement in computer capabilities”/”invoked merely as a tool” dichotomy after rejecting the idea that “all improvements in computer-related technology are inherently abstract and, therefore, must be considered at step two.” Id. In broad terms, the inquiry involves considering “whether the claims are directed to an improvement to computer functionality versus being directed to an abstract idea,” but the framework is made more concrete in the next sentence. That sentence contains the language quoted above, a binary categorization whose importance grows as it is repeated throughout the remainder of the discussion of patentable subject matter:

“In this case [] the plain focus of the claims is on an improvement to computer functionality itself, not on economic or other tasks for which a computer is used in its ordinary capacity.” Id. at 12.
“we find that the claims at issue in this appeal are not directed to an abstract idea within the meaning of Alice. Rather, they are directed to a specific improvement to the way computers operate.” Id.
“the claims here are directed to an improvement in the functioning of a computer. In contrast, the claims at issue in Alice and Versata can readily be understood as imply adding conventional computer components to well-known business practices.” Id. at 16.
“And unlike the claims here that are directed to a specific improvement to computer functionality, the patent ineligible claims at issue in other cases recited use of an abstract mathematical formula on any general purpose computer.” Id. at 17.
“In other words, we are not faced with a situation where general-purpose computer components are added post-hoc to a fundamental economic practice or mathematical equation. Rather, the claims are directed to a specific implementation of a solution to a problem in the software arts. Id. at 18.

Central to the Enfish framework is a recognition and definition of what is not patentable subject matter. The opinion does not try to fight the idea that there is some subject matter that is not patentable. Instead, it acknowledges that there are limits on patentable subject matter and works with those limits. Judge Hughes considers the precedents in this area and identifies them as fundamentally involving the use of a computer as a general-purpose tool. By defining what is not patentable subject matter in this way, Judge Hughes is freed to identify some “other” that is outside that impermissible category: developments that improve on the operation of the computer itself. Here, although the claimed invention could conceivably be articulated as an abstract idea, placing it within the framework leads to only one outcome: it is an improvement in computer capability, and thus patentable subject matter.

But viewing Enfish as the end-all of abstract ideas analysis, while appealing, would a mistake. Judge Hughes’ next patentable subject matter opinion, issued just a few days latter, suggests that there is more to the analysis than just mechanically applying the Enfish framework. At first, In re TLI Patent Litigation starts out with the Enfish framework: that “a relevant inquiry at step one is ‘to ask whether the claims are directed to an improvement to computer functionality versus being directed to an abstract idea.'” TLI Slip Op. at 8, quoting Enfish. In Enfish, he observed,:

“We contrasted claims ‘directed to an improvement in the functioning of a computer’ with claims ‘simply adding conventional computer components to well-known business practices,’ or claims reciting ‘use of an abstract mathematical formula on any general purpose computer,” or “a purely conventional computer implementation of a mathematical formula,’ or ‘generalized steps to be performed on a computer using conventional computer activity.'”

Id., quoting Enfish. Unlike in Enfish, however, “the claims here are not directed to a specific improvement to computer functionality. Rather, they are directed to the use of conventional or generic technology in a nascent but well-known environment, without any claim that the invention reflects an inventive solution to any problem presented by combining the two.” Id.

In re TLI raises two additional points to consider, however. First, in addition to defining what is not patentable subject matter, Judge Hughes articulates some characteristics of subject matter that is patentable: “a solution to a ‘technological problem’ as was the case in Diamond v. Diehr” or an “attempt to solve a challenge particular to the Internet.” Id. at 10. Left unclear is the meaning of this discussion: does one only get to the solution to a technological problem inquiry if the claims are not directed to a specific improvement to computer functionality? Or is the analysis more flexible than Enfish implies?

More significant are concerns about the bright-line nature of the Enfish approach. While bright-line rules can be helpful, Bilski v. Kappos demonstrates the risk associated with their use in the patentable subject matter area. Judge Hughes recognizes this concern in TLI, noting “the Supreme Court’s rejection of ‘categorical rules’ to decide subject matter eligibility.'” Id. The Federal Circuit will need to be careful to avoid becoming overly reliant on the Enfish framework, especially in areas where it does not fit well. With the benefit of the last few years of experience, hopefully the Federal Circuit will be able to avoid this pitfall. Even as this issue works its way out, however, I suspect to see the Enfish framework drawn upon heavily at the PTO and in district courts in the near future.

Book Review: Patents After the AIA

May 17, 2016PatentFirst to InventJason Rantanen

By Jason Rantanen

Alan J. Kasper, Brad D. Pedersen, Ann M. Mueting, Gregory D. Allen, & Brian R. Stanton, Patents After the AIA: Evolving Law and Practice (Bloomberg BNA 2016).

Last fall, I sat next to Greg Allen at the AIPLA annual conference dinner. After we started talking about the lingering effects of pre-America Invents Act 102(g), he excitedly told me about a treatise he was working on that dealt with that and many other complexities created by the AIA. He enthusiastically described the detail into which the book went, including the dozens of timelines dealing with different chronological issues facing patent prosecutors today and the lengthy chapter on transition issues, a chapter that turned out to be surprisingly complex.

A few weeks ago, I received a copy of the book for reviewing purposes. The short version is that Patents After the AIA is massive and detailed, and aimed largely at those who practice before the Patent Office. The tome, bigger even than Harmon’s Patents and the Federal Circuit, is about three inches thick with over 1,900 tissue-paper thin pages. Packed inside is more detail on the changes and challenges posed by the AIA than anyone might imagine from just reading the (relative short) 58-page AIA itself. The dozens of timelines are there, along with chapters on legislative history, regulations, prior art and grace periods, international issues and harmonization, transition issues and much more. Paired with the discussions of the law are “Practice Tips”: practical advice for prosecuting attorneys. There is a wealth of detail about post-AIA patent practice contained in this book, and it could become the go-to treatise for patent attorneys.

That detail, though, imposes its own limitations. In trying to simultaneously be a treatise on all of patent law and a useful resource for prosecutors, its usability suffers. The substantive portion of the treatise begins with a history of patent law–starting with the Book of Genesis. The first chapter includes an abstract, conceptual overview of “The Innovation Process and Terminology Used in This Treatise,” complete with “instantiations of an invention.”[1] Many topics are covered in multiple chapters, sometimes in a redundant way. Discussions of post-AIA § 102(a), for example, are sprinkled throughout the book, with overlapping discussions in chapters 5 (Prior Art, Grace Periods, and Exceptions After the America Invents Act: Global Considerations), 6 (Prior Art, Grace Periods, and Exceptions After the America Invents Act: Practical Considerations), and 9 (America Invents Act Patentability Standards–Issues and Commentary).

The authors recognize this limitation: before even the table of contents, the reader comes to an eight-page section on “How to Use This Treatise,” begging the reader to “PLEASE…take a few minutes to read and study this introductory section of the treatise.” In chapter 1, after summarizing the AIA, the authors include another orientation section: a description of the treatise’s organization and summaries of the chapters. The authors also attempt to address the complexity of the subject matter by defining terms, with two separate lexicographies (a short one at the front and a long one at the end). In some cases, this helps the reader: for example, differentiating between “Post-AIA” and “Pre-AIA” is critical. But numerous terms that the audience for this book would likely be familiar with, such as “appeal brief,” “evidence,” “malpractice,” and even “human” (“a member of the Homo sapiens species”) are also defined.[2] While definitions can be useful in establishing precision of meaning, they lose their effectiveness with both length of the text and number of defined terms–here, 164 pages of them. The index suffers from the opposite problem: its 37 pages tend to be less detailed in key spots than desirable. For instance, there is just one index column for “Prior art under the AIA” but two columns of index entries for “Prior user rights.” Yet much of the book (and probably the practical concerns of attorneys) relate to the former rather than the latter. Readers will probably find the table of contents to be more useful than the index.

Some of these issues may be due to the multi-author nature of the text, with too many cooks in the kitchen. There’s unquestionably a lot to discuss here, but coupled with the amount of patent law covered there needs to be an emphasis on effectively communicating it. For this treatise to become the go-to volume on patent law, the authors (or maybe just one person) need to focus on taking that next step. Understandably, though, the authors were under significant time pressure in getting this project out the door, and they’re to be commended for what they accomplished.

Ultimately, Patents After the AIA is a useful treatise, with the potential to be more with some judicious editing. Consolidating redundant sections, culling unnecessary text, simplifying (and consolidating!) the definitions, and refining the index would all help improve the accessibility and long-term usefulness of this book. (Although if most readers are going to be using the online version of the text with its search-capability, improvements to the index are of lesser importance). Little errors in execution need to be addressed as well. Fortunately, just like with cooking, that’s an issue that can be remedied in subsequent versions. Given the rapidity with which patent law continues to develop, and the certainty that there will be judicial interpretations of the open questions the authors identify, those versions are likely to be needed in the near future.

The treatise defines “instantiation” as “[a] codification, manifestation, or representation of abstract subject matter or information as an actual, concrete, or real-world instance of that subject matter or information.”
As is “and/or,” a term that should be excised from all writing, defined or not.

Disclosure: As I mentioned above, I received a (gratis) copy of this text so that I could write this review. I also was a speaker at the AIPLA annual conference this past fall.

Edit: Based on a reader’s comment, here’s a direct link to the Bloomberg/BNA page for the book: http://www.bna.com/patents-aia-evolving-p57982059262/

Guest Post: 35 USC 289—Grant of Certiorari in Samsung v Apple = The Opportunity for a Better-Crafted Standard for Awarding Total profits

May 12, 2016PatentAffirmed Without Opinion, Damages, Federal Circuit En Banc, Licenses, Marking, VenueJason Rantanen

Guest post by Gary L. Griswold. Mr. Griswold is a Consultant residing in Hudson, WI and was formerly President of and Chief Intellectual Property Counsel for 3M Innovative Properties Company. The paper reflects the views of the author. He wishes to thank Bob Armitage and Mike Kirk for their excellent contributions to the essay.

In August, 2015, I published an article on Patently-O entitled “35 USC 289-After Apple v Samsung, Time for a Better-Crafted Judicial Standard for Awarding “Total Profits.” [i] The article appeared before the Supreme Court granted certiorari in this appeal.[ii] My use of the word “after” was, thus, a bit premature. The crafting of a new judicial standard may actually be accomplished over the next several months, as the Supreme Court considers the damages issue in Apple v. Samsung case later in its current term.

The statutory basis for awarding damages in this case is no “small-change.” 35 USC 289 provides the design patent holder with the infringer’s “total profits” on the “article of manufacture” to which the patented design “has been applied”[iii]. My August article referenced a Patently-O article by Professor Rantanen that included an analysis of the Federal Circuit’s Apple v Samsung decision and its ramifications, suggesting that the section 289 damages provision could induce “an explosion of design patent assertions and lawsuits.”[iv] Indeed, section 289 holds the potential for design patent procurement and assertion to become the next big “patent assertion entity” business model.

Some commentators have suggested that design patents, being sought and accumulated differently from utility patents, are not likely to stimulate much PAE interest. Whatever merit in that view, it needs to be tempered with the realization that greed is the mother of all of this type of business-model invention. One need only reflect on the fact that more than 1,000 qui tam actions for false marking were filed by opportunistic plaintiffs following the 2009 Federal Circuit decision in Forest Group, Inc. v. Bon Tool Co. before such actions were thankfully banished by the “Leahy-Smith America Invents Act.”[v] The prospects for design infringement revenue generation based on the “total profits”-recovery provision in 35 USC 289 could make successful design patent assertion a staggeringly profitable business. The potential for such an outcome as well as an example of such assertion was referenced in the briefs relating to the Apple v. Samsung certiorari petition[vi].

The possibility of a surge in design-patent PAE activity is almost certainly one of many reasons why the Supreme Court granted certiorari—and why it should not squander the opportunity presented in the Apple v. Samsung appeal to provide a reasoned and principled demarcation between those fact patterns where a “total profits” remedy is clearly warranted and those where it is not.

In deciding this appeal, the Supreme Court may focus on what constitutes an “article of manufacture” under section 289. The statute provides a design patent infringer “shall be liable to the [design patent] owner to the extent of [the infringer’s] total profit” if the infringer “applies the patented design … to any article of manufacture.” [vii](emphasis added) But, the patented design is not necessarily synonymous with the article of manufacture itself.

Indeed, for section 289 purposes, an “article of manufacture” has been held to be the entire substrate to which the patented design is applied. For example, it has been held that a boat becomes the “article of manufacture” when the patented design is for the windshield applied to the boat[viii]. Other examples of “articles of manufactures” whose total profits might be subject to a section 289 recovery include (1) a large agricultural combine, when the patented design is for a tire tread applied to a tire used on the combine; (2) an automobile, when the patented design is for the automobile’s rear taillights; and (3) an HDTV, when the patented design is for a semiconductor used in the television.

In my earlier articles, I described such “total profits” recovery scenarios as a problem in need of a judicial solution. I suggested eliminating access to section 289 “total profits” recoveries in situations where a consensus exists that a remedy of this type would be entirely unwarranted. My approach would interpret section 289 as authorizing a total-profits recovery only “if the patented design is substantially the basis for customer demand for the entire article”.[ix] If it is the basis for consumer demand, the section 289 total-profits recovery would apply to the article; if not, a recovery of total profits would not be available for the article.

This approach bears some similarity to the determination of utility patent damages under the entire market value rule[x]. A utility patent on a boat windshield does not allow the value of the boat to be used as the basis for determining a reasonable royalty absent a demonstration that the windshield was the basis for the customer demand for the boat.

In addition, the “customer demand” limitation is consistent with the apparent rationale for enacting section 289 in the first place. Current section 289 and its predecessors replaced a Supreme Court decision[xi] that provided limited damages to design patent owners even where the infringers had applied the patented design to an article of manufacture in order to create the customer demand for the article of manufacture. In such a situation, forcing the copyist to turn over its total profits obtained on the infringing article represents good policy.

However, even under a “customer demand” limitation, section 289 is no timid remedy. It would not involve any form of “apportionment” of the profits to be awarded to the design patent holder on the ground that some proportion of the profits might be attributable to non- design patented factors. Apportionment is not consistent with the Congressional intent when section 289 and its predecessors were enacted.

Moreover, even if the section 289 remedy is unavailable, the patent owner is not left without the right to recover damages. All the remedies otherwise available for patent infringement remain, whether or not a section 289 “total profits” recovery can be secured as long as there is no double recovery of damages[xii].

The Apple v. Samsung case is of particular importance because imposing the “customer demand” standard on section 289 recoveries does not require another act of Congress. The courts are free to interpret statutes to effectuate the purpose Congress had in enacting them. Under section 289, Congress did nothing to preclude the courts from determining what qualifies—and does not qualify—as an “article of manufacture.”

The Federal Circuit sees this judicial flexibility otherwise. It (incorrectly) saw its hands as having been tied by Congress in Apple v. Samsung, stating: “We are bound by what the statute says, irrespective of policy arguments that may be against it”[xiii]. Fortunately, the Supreme Court has the opportunity to see the situation differently.

The Supreme Court may—and should—see it differently. It can define an “article of manufacture” as being limited to objects for which the patented design is substantially the basis for customer demand. Courts have acted similarly in the past to assure that application of a statute will not result in foreseeable outcomes which are clearly inappropriate and manifestly unintended. The emergence of the “entire market value” rule is a good example of where the alleged “infringing product” cannot be reflexively used as the basis for a damages calculation where the “patented invention” is a mere component or feature of the product and not the product itself.

The Court will have, however, some competing approaches to consider in the course of deciding this appeal. Another possible approach to interpreting section 289 is the so-called “separate product” exception. This exception to a section 289 recovery limits the availability of total profits to the smallest separately sold product to which the patented design is applied. While this exception has the potential to limit the possibility of some of the ludicrous outcomes noted above, it is no panacea. For example, it fails to exclude a section 289 recovery where a design patented graphical user interface (GUI) is used in an electronic device which does not involve a separately sold product. This is a serious deficiency because of the difficulty in finding any policy rationale for awarding total profits on an electronic device simply because a design on a GUI used in it is patented.

Apple has, nonetheless, suggested in its responsive brief to “Defendant-Appellants’ Petition for Rehearing en banc” what amounts to a more generalized rendition of a “separate product” exception: “As the panel correctly recognized, this distinctive design was not severable from the inner workings of Samsung’s smartphones, see Op.27-28, in a way that a cupholder is analytically distinct from the overall look-and-feel of a car.”[xiv] (emphasis added) While “severability” appears to be a more general “exception” criterion than simply being a “separate” product, the “severability” approach does not appear to address the deficiency explained above for the “separate product” exception.

If there is a concern with the “customer demand” limitation, it would be whether the limitation is so broad that it swallows most or all of the “total profits” rule. Indeed, there are many factors which cause a purchaser to acquire a particular article of manufacture—most notably its functional aspects. However, to apply the “customer demand” approach, one begins with the customer looking for something in a product space and then making the specific decision to purchase. Everyday products with new, ornamental designs such as specially shaped paper clips are a good example.[xv] While they have a known function, they are most likely purchased for their appearance. An option would be to only consider the ornamental features of a product to determine whether they were substantially the basis for customer demand, but that may well be too narrow and could lead to a total profit remedy for minor differences from an ornamental perspective.

The Supreme Court would not have granted certiorari without a sense that its guidance was needed to properly titrate a powerful damages provision. It can best do so by allowing section 289 to remain a viable incentive to create and commercialize new designs, but then limiting the articles of manufacture qualifying for a “total profits” recovery to those where the patented design is substantially the basis for customer demand for the article of manufacture. Such a holding would secure section 289 as both a distinguishing and distinguished feature of U.S. design patent law.

[i] Griswold, Gary. “35 USC 289 – After Apple v. Samsung, Time for a Better-Crafted Judicial Standard for Awarding “Total Profits”? Patently-O. August 14, 2015. https://patentlyo.com/patent/2015/08/griswold-patent-damages.html

[ii] See U.S. Supreme Court Orders List from March 21, 2016 at 2. http://www.supremecourt.gov/orders/courtorders/032116zor_h3ci.pdf

[iii] 35 U.S.C. § 289:

“Whoever during the term of a patent for a design, without license of the owner, (1) applies the patented design, or any colorable imitation thereof, to any article of manufacture for the purpose of sale, or (2) sells or exposes for sale any article of manufacture to which such design or colorable imitation has been applied shall be liable to the owner to the extent of his total profit, but not less than $250, recoverable in any United States district court having jurisdiction of the parties.

Nothing in this section shall prevent, lessen, or impeach any other remedy which an owner of an infringed patent has under the provisions of this title, but he shall not twice recover the profit made from the infringement.”

[iv] Rantanen, Jason, “Apple v. Samsung: Design Patents Win.” Patently-O. May 18, 2015. https://patentlyo.com/patent/2015/05/samsung-design-patents.html

[v] Laurie Rose Lubiano, “The America Invents Act applies the brakes to the false marking bandwagon.” LEXOLOGY, January 3 2012. http://www.lexology.com/library/detail.aspx?g=401c9bea-d643-4521-bc7d-c63d5b4a25f5

[vi] Samsung Petition for a Writ of Cert. Case No. 15-777. at 36-38. http://www.scotusblog.com/wp-content/uploads/2016/01/15-777_PetitionForAWritOfCertiorari.pdf

[vii] 35 U.S.C. § 289

[viii] Order on Motion for Partial SJ, In re Pacific Coast Marine Windshields Ltd. v. Malibu Boats LLC, Case No. 6:12-cv-33 (M.D. Fl. August 22, 2014)

[ix] See Griswold, https://patentlyo.com/patent/2015/08/griswold-patent-damages.html; See also Griswold, Gary. “35 USC § 289 – An Important Feature of U.S. Design Patent Law: An Approach to its Application.” IPO Law Journal. April 6, 2015. http://www.ipo.org/wp-content/uploads/2015/04/griswold_an-approach.pdf

[x] See Cornell University v. Hewlett-Packard Co., 609 F.Supp. 2d 279, 288-89 (N.D.N.Y. 2009):

(1) The infringing components must be the basis for customer demand for the entire machine including the parts beyond the claimed invention, (2) the individual infringing and non-infringing components must be sold together so that they constitute a functional unit or are parts of a complete machine or single assembly of parts, and (3) the individual infringing and non-infringing components must be analogous to a single functioning unit. It is not enough that the infringing and non-infringing components are sold together for business advantage. Notably, these requirements are additive, not alternative, ways to demonstrate eligibility for application of the entire market value rule.

See also Virnetz, Inc. v. Cisco Systems, Inc., 113 F.3d 1308, 1326 (Fed. Cir. 2014) (Judge Prost: “we recently affirmed that ‘[a] patentee may assess damages on the entire market value of the accused product only where the patented feature creates the basis for customer demand or substantially creates the value of the component parts.”)

[xi] See Dobson v. Dornan, 118 U.S. 10, (1886); Dobson v. Hartford Carpet Co., 114 U.S. 439 (1885); Dobson v. Bigelow Carpet Co., 114 U.S. 439 (1885); Bigelow Carpet Co. v. Dobson/Hartford Carpet Co. v. Same, 10 F. 385,386; 1882 U.S. App. LEXIS 2295 (E.D. Pa. 1882).

[xii] 35 U.S.C. § 289, paragraph 2: “Nothing in this section shall prevent, lessen, or impeach any other remedy which an owner of an infringed patent has under the provisions of this title, but he shall not twice recover the profit made from the infringement.”

[xiii] Apple v. Samsung, Fed. Cir. Opinion at 27, fn. 1.

[xiv] See Brief in Opp’n to Rhg, Apple v. Samsung, Case No. 2014-1335; 2015-1029 at 27-28 (Fed. Cir. July 20, 2015)

[xv] See, e.g., Design Patent No. USD647,138: https://docs.google.com/viewer?url=patentimages.storage.googleapis.com/pdfs/USD647138.pdf

Guest Post: The AIA, Inter Partes Review, and Takings Law

May 3, 2016PatentAIA Trials, anticipation, Claim Construction, Federal Circuit En Banc, IPR, PGR, Trade Secrets, USPTO DirectorJason Rantanen

In a provocative new article called “Taking Patents,” 72 Wash & Lee L. Rev. (forthcoming 2016), Gregory Dolin (Baltimore) and Irina Manta (Hofstra) argue that the Federal Government effectuated a taking through its creation and implementation of the inter partes review mechanism. Below, Camilla Hrdy and Ben Picozzi summarize the main points of their recent response to Dolin and Manta, “The AIA Is Not a Taking: A Response to Dolin & Manta,” 72 Wash. & Lee L. Rev. Online 472 (2016).

Gregory Dolin and Irina Manta argue in a forthcoming article that the Leahy-Smith America Invents Act (AIA) effectuated a Fifth Amendment “taking” by enhancing the mechanisms for challenging issued patents in administrative proceedings. Initial data do indicate that patents are more likely to be found invalid in the new inter partes review (IPR) and covered business method review (CBMR) proceedings than in district court actions or through the IPR and CBMR’s administrative predecessors. Patentees’ have even complained that the filing of individual IPR petitions has affected their stock prices.

Has the AIA made it too easy to invalidate a patent? Have patentees been treated unfairly? Maybe. Maybe not. But one things is clear: Dolin and Manta’s argument that the AIA is a taking faces serious legal hurdles.

First, Dolin and Manta’s premise that patents are property rights protected by the Takings Clause is far less clear than they contend. While the Supreme Court has recently suggested that patents, like land, “cannot be appropriated or used by the government itself, without just compensation,” see Horne v. Department of Agriculture, 135 S. Ct. 2419 (2015) (quoting James v. Campbell, 104 U.S. 356, 358 (1882)), both that statement, and the statement it quotes, are dicta. More recent decisions express greater ambivalence regarding patents’ status under the Takings Clause.

In contrast with trade secrets, the Supreme Court has never held that patents are property under the Takings Clause. In Florida Prepaid Postsecondary Education Expense Board v. College Savings Bank, 527 U.S. 627 (1999), the Court held that Congress can’t abrogate states’ sovereign immunity from patent infringement claims. In reaching this conclusion, the Court stated that patents are “surely included within the ‘property’ of which no person may be deprived by a State without due process of law.” Id. at 642. But the Court declined to rule on patents’ status under the Takings Clause. See id. at 642.

Most recently, in Zoltek Corp. v. United States, 442 F.3d 1345 (Fed. Cir. 2006) (per curiam), vacated on other grounds, 672 F.3d 1309, 1314–22 (Fed. Cir. 2012) (en banc), the Federal Circuit held (rightly or wrongly) that 28 U.S.C. § 1498 is the only means of recovery for patentees whose patents are infringed by the U.S. government. Patentees can’t bring claims for compensation under the Takings Clause. Although the court eventually vacated that decision, the court never repudiated the reasoning behind its constitutional holding.

Dolin and Manta try to get around Zoltek by arguing that, unlike government infringement—which is like a forced permit and leaves all the rights of a patent intact—the AIA “changed the scope of patent rights themselves” by subjecting issued patents to more stringent post-issuance review. However, courts have not endorsed that argument, and analogs are difficult to find.

Second, even if we accept the argument that government can potentially take patents by altering their scope retroactively, courts are unlikely to view post-issuance review proceedings as the kinds of government actions regulated by the Takings Clause. Courts assessing constitutional challenges under the Fifth or Fourteenth Amendment tend to distinguish actions intended to “cure” defects in government administrative systems from incursions on property rights. In Patlex Corp. v. Mossinghoff, 758 F.2d 594 (Fed. Cir. 1985), the Federal Circuit rejected a very similar challenge to IPR’s predecessor based partly on this distinction, noting that reexamination statute belonged to “the class of ‘curative’ statutes, designed to cure defects in an administrative system[,]” and that such statutes are treated more favorably for Fifth Amendment purposes even when they devalue property rights. We see little reason that a court would reach a different conclusion today.

Lastly, even if a court decides it is possible for the government to take patents by subjecting them to more stringent post-issuance review, Dolin and Manta’s argument almost certainly loses as a matter of takings doctrine. To determine whether a particular governmental action effectuates a taking, courts assess “the character of the governmental action, its economic impact, and its interference with reasonable investment-backed expectations.” See Penn. Cent. Transp. Co. v. City of New York, 438 U.S. 104, 124 (1978). Thus, even assuming we accept that the AIA significantly devalued all patents (a big “if”), whether this constitutes a taking depends on whether patentees should have anticipated that Congress would amp up administrative review, given the existing regulatory background.

Dolin and Manta argue the AIA’s enhanced IPR and CBMR proceedings interfered with patentees’ “reasonable investment-backed expectations” by increasing the likelihood that their patents would be found invalid in administrative proceedings utilizing patentee-unfriendly rules such as “preponderance of the evidence” standard for invalidation and “broadest reasonable construction” with limited opportunity to amend. But, as Dolin and Manta concede, the AIA was enacted against a background of federal statutes and regulations that authorize challenges to patent validity. IPR and CBMR review are only the latest in a series of administrative procedures authorizing parties to offensively challenge the validity of issued patents. To us, it seems highly unlikely that the question of whether the Takings Clause applies to the creation of new IPR and CBMR review could turn on such small differences as whether or not patentees have a full opportunity to amend their claims during review.

Also, it is worth noting that beyond third party challenges to patent validity, numerous federal regulatory statutes limit patentees’ ability to exploit their inventions for purposes of health and safety. For example, various regulatory review statutes, such as the Food, Drug, and Cosmetic Act (FDCA), the Federal Insecticide, Fungicide, and Rodenticide Act (FIFRA), and the Toxic Substances Control Act (TSCA), practically reduce effective patent lifetimes by prohibiting patentees from commercially marketing or using protected products prior to regulatory approval. Yet none of these statutes fully compensate patentees for their losses.

Are these actions all takings as well? This conclusion has troubling consequences. Does Congress really need to compensate patentees every time it passes a statute that significantly affects the value of issued patents? Could Congress pass regulations for the purpose of restraining bad-faith enforcement of patents that have already been granted? What about judicial actions that reduce the value of patents? Do they intend for Congress to compensate patentees in these cases or to take fewer actions limiting patent rights, simply due to the fear of effectuating a taking? This seems like a dangerous basis on which to formulate patent policy.

In any case, we think that, given this regulatory backdrop and the existence of administrative review proceedings for over thirty years, patentees could foresee—or reasonably should have foreseen—that the government would continue to actively regulate patent rights without “just compensation.”

Together, these arguments persuade us that the AIA is not a taking. Nevertheless, the authors’ article is a thought-provoking and educational analysis of the constitutional implications of Congress’s recent efforts to reform the patent system. We thank them for reopening the door on this area of scholarship.

Design Patent Claim Construction: More from the Federal Circuit

April 25, 2016PatentClaim Construction, design patentJason Rantanen

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

Sport Dimension, Inc. v. Coleman Co., Inc. (Fed. Cir. April 19, 2016) Download Opinion

Panel: Moore, Hughes, Stoll (author)

Coleman accused Sport Dimension of infringing U.S. Patent No. D623,714 (the “D’714 patent”), which claims the following design for a “Personal Flotation Device”:

The district court construed the claim as: “The ornamental design for a personal flotation device, as shown and described in Figures 1–8, except the left and right armband, and the side torso tapering, which are functional and not ornamental.” The court, like many other courts and a number of commentators, interpreted the Federal Circuit’s 2010 decision in Richardson v. Stanley Works as requiring courts to “factor out” functional parts of claimed designs. Coleman moved for entry of judgment of noninfringement and appealed the claim construction (along with another issue not relevant to this discussion).

After Coleman’s appeal was docketed, the Federal Circuit disavowed the “factoring out” rule that many had read in Richardson. As discussed previously on this blog, in Apple v. Samsung and again in Ethicon v. Covidien, the court insisted that Richardson did not, in fact, require the elimination of functional elements from design patent claims.

Following this new interpretation of Richardson, the Federal Circuit reversed the district court’s construction of Coleman’s claim. The court stated, for the third time in a year, that district courts should not eliminate portions of claimed designs during claim construction. So it seems that the Federal Circuit’s retreat from Richardson is complete—if that weren’t clear already.

And, for the first time I’m aware of, the court actually explained how it determined whether something is “functional” for the purposes of claim construction. It’s been clear for a while that the court was using a more expansive concept of “functionality” in the context of claim construction than it was using for validity. (For more on this issue, see this recent LANDSLIDE article by Chris Carani.) However, the court hasn’t seemed to acknowledge that disconnect or explain how courts should analyze functionality in the claim construction context. In this case, the court did both. The Federal Circuit stated that the Berry Sterling factors, although “introduced…to assist courts in determining whether a claimed design was dictated by function and thus invalid, may serve as a useful guide for claim construction functionality as well.” (Those factors, discussed here, are very similar to the factors used by courts to determine whether a design is invalid as functional in the trademark context. For more on the trademark test and how it differs from the current design patent test for validity, see here.) Applying the Berry Sterling factors to the facts of this case, the court affirmed the district court’s conclusion that the armbands and tapering were functional.

So in Sport Dimension, it is clear that the Federal Circuit thinks it is important to determine whether an “element” or “aspect” (the court uses those words as synonyms) of a design is functional. And it is very clear that courts are not supposed to completely remove functional “elements” or “aspects” from design patent claims as a part of claim construction. But what are courts supposed to do? Here is what the court said:

We thus look to the overall design of Coleman’s personal flotation device disclosed in the D’714 patent to determine the proper claim construction. The design includes the appearance of three interconnected rectangles, as seen in Figure 2. It is minimalist, with little ornamentation. And the design includes the shape of the armbands and side torso tapering, to the extent that they contribute to the overall ornamentation of the design. As we discussed above, however, the armbands and side torso tapering serve a functional purpose, so the fact finder should not focus on the particular designs of these elements when determining infringement, but rather focus on what these elements contribute to the design’s overall ornamentation.

It’s not at all clear what the court is trying to say here, especially in the highlighted portion (emphasis mine). It seems that perhaps the court is trying to say that, in analyzing infringement, the factfinder should focus on the overall appearance of the claimed design. But if that is what the court meant, then this “claim construction” frolic adds nothing—the infringement test already requires the factfinder to look at the actual claimed design, as opposed to the general design concept.

This portion of the decision also seems to be in some conflict with the court’s decision in Ethicon. In Ethicon, as here, the district court eliminated all the functional portions of the claimed design. Unlike this case, the district court in Ethicon said that all the elements were functional and, thus, the claim had no scope. The Federal Circuit reversed, stating:

[A]lthough the Design Patents do not protect the general design concept of an open trigger, torque knob, and activation button in a particular configuration, they nevertheless have some scope—the particular ornamental designs of those underlying elements.

So Ethicon says that factfinders must look at the “particular ornamental designs” of functional elements. Sport Dimension says they “should not focus on the particular designs of [functional] elements.” These statements could potentially be reconciled by drawing a distinction between the “particular design” of an element/feature and the “particular ornamental design.” But it’s not at all clear what that distinction might be—or whether it makes sense to draw such a distinction at all.

More importantly, it’s not clear what, exactly, the Federal Circuit hopes to gain by making district courts go through this rigmarole. In this case, the accused product looks nothing like the claimed design, as can be seen from these representative images:

Claimed Design

Accused Product

Yes, they both have armbands with somewhat similar shapes and some tapering at the torso. But the overall composition of design elements is strikingly different. You don’t need to “factor out” anything or “narrow” the claim to reach the conclusion that these designs are plainly dissimilar. (The same was true, by the way, of the facts in Richardson.) Even for designs that are not plainly dissimilar, the Egyptian Goddess test for infringement should serve to narrow claims appropriately where elements are truly functional because one would expect those elements to appear in the prior art. So once again, one is forced to ask what the Federal Circuit is trying to accomplish with these “claim construction functionality” rules—and whether the game is worth the candle.

Patent Protection for Scientific Discoveries: Sequenom, Mayo, and the Meaning of § 101

April 22, 2016Patentanticipation, Enablement, obviousnessJason Rantanen

Guest post by Jeffrey A. Lefstin, Professor, University of California, Hastings College of Law, and Peter S. Menell, Professor, University of California, at Berkeley School of Law. Professors Lefstin and Menell recently filed an amicus brief in support of Sequenom’s petition for certiorari.

The Supreme Court’s decision in Mayo Collaborative Services v. Prometheus Laboratories, Inc. (2012) triggered the most radical redefinition of patent-eligible subject matter in U.S. history by engrafting onto § 101 an ‘inventive application’ requirement for patenting practical applications of scientific discoveries. In Ariosa v. Sequenom (2015), the Federal Circuit held that under Mayo, a diagnostic process based on the discovery of cell-free fetal DNA in the maternal bloodstream was not patent-eligible under § 101, because the steps of amplifying and detecting DNA were conventional at the time the invention was made. Now that Sequenom has filed its petition for certiorari, the Supreme Court has the opportunity to revisit its holding in Mayo that discoveries are not patent-eligible unless inventively applied.

The decision in Mayo came as a shock to patent practitioners and the inventive community. How could the Supreme Court overlook the clear language running throughout the history of patent law authorizing patent protection for inventions and discoveries? Why would the Court turn away from the long tradition holding that practical application, not inventive application, suffices to render a discovery patent-eligible?

As we have discovered, highly pertinent material in the patent statutes, legislative history, and jurisprudence was never presented to the Mayo Court. The result is a deeply flawed decision that contradicts Congress’s patentability framework and misinterprets critical precedent.

The Mayo Court did not discuss the statutory basis for patent-eligibility of scientific discoveries. Instead, the Court revived Parker v. Flook (1978), which had been supplanted by Diamond v. Diehr (1981), to require that scientific discoveries be inventively applied to be patent-eligible. Mayo, like Flook, relies upon a single quotation from Neilson v. Harford, an 1841 English case—“We think the case must be considered as if the principle being well known”—to conclude that courts must treat scientific discoveries as part of the prior art in assessing the eligibility of applications of such discoveries. Therefore, unless the scientific discovery is inventively applied, the claim is ineligible for patent protection under § 101.

Unfortunately, many patent litigators – and many of the amicus briefs filed in Sequenom – have shied away from directly confronting the fundamental mistakes in the Mayo decision. They understandably fear that the Supreme Court will not be willing to acknowledge error. We hope otherwise. It is critically important that the Court be apprised of the proper basis – the clear text of the statute, legislative history, and the meaning and context of key cases – for interpreting patent eligibility.

Our brief filed in support of Sequenom’s petition makes three basic arguments:

First, the patent statutes have always defined inventions and discoveries to be patent-eligible subject matter. The very first patent statute, the Act of 1790, permitted patents for an “invention or discovery,” and every subsequent statute – the Acts of 1793, 1836, 1870, and 1952 – incorporated both “inventions” and “discoveries” into its text. Legislative history, such as the House and Senate Reports accompanying the Plant Patent Act of 1930, expresses Congress’s understanding that the patent laws have always applied “both to the acts of inventing and discovery.”

Furthermore, the intent to protect conventional applications of new discoveries was incorporated directly into § 101 of the 1952 Act. The legislative history of the Plant Patent Act shows that Congress defined routine and conventional applications of new discoveries as patent-eligible subject matter under § 101’s predecessor statute, R.S. § 4886. And the legislative history of the 1952 Act shows that Congress intended to carry forward that standard of patent-eligibility in § 101.

Even more significantly for Sequenom’s claims, the 1952 Act added a new definition of “process” in § 100(b), defining “process” to include “a new use of a known process, machine, manufacture, composition of matter, or material.” P.J. Federico, one of the chief drafters of the Act, explained that § 100(b) was intended to clarify that the new use of a known material in a known process was patent-eligible subject matter under § 101:

[A] method claim is not vulnerable to attack, on the ground of not being within the field of patentable subject matter, merely because it may recite steps conventional from a a procedural standpoint and the novelty resides in the recitation of a particular substance, which is old as such, used in the process.

Section 100(b) removes any doubt that a process based on the discovery of a new property in a known substance is patent-eligible – even if the process merely recites conventional steps.

Second, Flook and Mayo’s grounding of the ‘inventive application’ requirement in Neilson v. Harford profoundly misinterprets that case. The Exchequer’s reference to treating Neilson’s discovery as “well known” was merely invoking an earlier case, Minter v. Wells (1834), to rule that Neilson had claimed a patentable application of his discovery – a machine – rather than an unpatentable abstract principle. Moreover, Mayo could not have been further from the truth when it claimed that Neilson’s patent was sustained because Neilson had applied his discovery in an inventive way. Neilson’s patent was sustained against an enablement challenge precisely because his means of application were routine, conventional, and well-known. In both English and American law, Neilson became the principal authority for the well-accepted proposition that specific and practical applications of discoveries were patentable, without any novelty or ‘invention’ in the means of application, provided that the patent supplied an enabling disclosure.

Third, a test of inventive application or undue preemption in § 101 disregards the framework established by Congress in the 1952 Act. The great advance of the 1952 Act was to differentiate the amorphous concepts of “invention” and “undue breadth” into the non-obviousness and disclosure requirements of §§ 103 and 112. Shoehorning an extra requirement for ‘inventiveness’ or lack of preemption into § 101 reverses those doctrinal innovations. The Supreme Court recognized as far back as O’Reilly v. Morse (1854) that disclosure, not subject matter, polices the patent bargain against unduly broad claims. That an inventor’s claim might practically preempt all use of a discovery will, as the Court said in The Telephone Cases (1888), “show more clearly the great importance of his discovery, but it will not invalidate his patent.”

Applying §§ 103 and 112 may require fact-intensive inquiries into the state of the prior art, the capabilities of skilled artisans, and the claim scope permissible based on the specification. But that is the structure prescribed by Congress under the 1952 Act. The judicial branch may not discard that statutory framework in favor of an “I-know-it-when-I-see- it” standard for patentability under § 101.

Section 101 – Pivotal Moment for Clarity on Patent Subject Matter Eligibility

April 21, 2016PatentAbstract Idea, AIA Trials, anticipation, Federal Circuit En Banc, PGR, Subject Matter EligibilityJason Rantanen

Guest post by Bart Eppenauer. Mr. Eppenauer is the Managing Partner of the Seattle office of Shook Hardy & Bacon and former Chief Patent Counsel at Microsoft. In the interests of disclosure, Shook represents three of the many defendants/appellees in the McRo (Planet Blue) case discussed below. Mr. Eppenauer is not involved in that case.

We have reached a pivotal moment for the courts to provide more meaningful guidance on the contours of what actually is patent eligible subject matter (rather than what is not) and a workable framework for applying such guidance. A number of important cases are before the U.S. Supreme Court and the Federal Circuit involving patent subject matter eligibility in the wake of Alice v. CLS Bank Int’l and Mayo Collaborative Services v. Prometheus Labs. Given the high invalidation rate of patents on Section 101 grounds at the Supreme Court, Federal Circuit, U.S. District Courts, and the Patent Trial and Appeal Board (PTAB), interested stakeholders have justifiable concerns on the future value of patents involving software and life sciences, and the fallout this could have on American investment in these crucial industries.

On March 21, 2016, Sequenom, Inc. filed a Petition for Writ of Certiorari seeking to overturn the Federal Circuit’s decision invalidating its pre-natal genetic testing patent as a patent ineligible natural law or phenomenon, in Sequenom, Inc. v. Ariosa Diagnostics, Inc. Ten days earlier, Versata Development Group also filed a Petition for Writ of Certiorari challenging multiple findings by the Federal Circuit involving a Covered Business Method (CBM) Patent Review by the USPTO invalidating its software based hierarchical pricing engine patent. See Versata Development Group, Inc. v. SAP America, Inc. Petitions for Writ of Certiorari on subject matter eligibility were also filed in March in Cloud Satchel v. Barnes & Noble and Vehicle Intelligence Safety v. Mercedes-Benz USA. At the Federal Circuit, several important “abstract idea” cases are soon to be decided, including McRO (Planet Blue) v. Bandai Namco Games America on patents for automated lip synchronization of 3D animated characters, Intellectual Ventures v. Symantec involving malware and spam detection and email filtering patents, and Thales Visionix v. USA relating to a helmet mounted display system patent. Several of these cases could provide an excellent opportunity for the courts to provide more clarity on application of the Mayo/Alice test under Section 101.

The Sequenom case in particular may be the right case for the Supreme Court to reexamine the boundaries of Section 101, especially given the dramatic, if not unintended, impact that Mayo and Alice have had on subject matter eligibility decisions. At the heart of Sequenom, the Court has another opportunity to determine whether a novel method is patent eligible when it involves the research and discovery of naturally occurring phenomenon. Petitioner Sequenom asserts that the Court’s Mayo decision set out uncertain and indiscernible limits on Section 101 doctrine that has eroded trust in the patent system, such that the issue is “particularly life-threatening to life-science innovators.” (Petition p. 12). Several Federal Circuit judges seem to agree with this proposition. In his concurrence in affirming the district court’s decision under Section 101, Judge Linn remarked:

I join the court’s opinion invalidating the claims of the ’540 patent only because I am bound by the sweeping language of the test set out in Mayo…. In my view, the breadth of the second part of the test was unnecessary to the decision reached in Mayo. This case represents the consequence—perhaps unintended—of that broad language in excluding a meritorious invention from the patent protection it deserves and should have been entitled to retain.

In their concurrence on denial of rehearing en banc, Judges Lourie and Moore also strongly asserted that the Sequenom claims at issue were neither solely directed to a natural phenomenon, nor abstract, and “it is unsound to have a rule that takes inventions of this nature out of the realm of patent-eligibility on grounds that they only claim a natural phenomenon plus conventional steps, or that they claim abstract concepts.” But these judges agreed that the Federal Circuit panel “did not err in its conclusion that under Supreme Court precedent it had no option other than to affirm the district court.” And in his separate concurrence of denial of rehearing en banc, Judge Dyk noted:

Yet I share the concerns of some of my colleagues that a too restrictive test for patent eligibility under 35 U.S.C. § 101 with respect to laws of nature (reflected in some of the language in Mayo) may discourage development and disclosure of new diagnostic and therapeutic methods in the life sciences, which are often driven by discovery of new natural laws and phenomena. This leads me to think that some further illumination as to the scope of Mayo would be beneficial in one limited aspect. At the same time I think that we are bound by the language of Mayo, and any further guidance must come from the Supreme Court, not this court.

Without question, Section 101 is no longer a “coarse filter” for subject matter eligibility, as many jurists and practitioners believe it should be. That is evident from the recent landscape of Section 101 decisions since Alice. Of the more than 250 federal court decisions invoking Section 101 since Alice, 70% of those cases have found the patent invalid. And at the Federal Circuit, DDR Holdings v. Hotels.com stands alone as the sole decision upholding the patent under Section 101 among 31 decisions since Alice. My optimistic view that DDR Holdings would forge a sensible path on software patents and that more decisions would follow this path has simply not proven true to date. Nonetheless, given that so many of the patents before the Federal Circuit involved simple financial or business practices or other non-technical practices implemented on generic computers, there still may be hope that DDR Holdings will provide the underpinnings for further decisions clarifying the eligibility of software technology inventions.

Perhaps the nearest opportunity for such a clarification lies in the McRO/Planet Blue case, where we can expect a decision at any time. The case has been noted as a case to watch on software patentability in that the patents at issue arguably utilize complex and specific computer-implemented techniques for automated lip synchronization of 3D animated characters. Based on questions and comments from the judges during oral argument, the Federal Circuit may view this case as involving a technology-based patent that will dictate a different outcome under the Mayo/Alice test than so many of the negative decisions on business method or ecommerce patents with token computer implementation.

It will most likely be several months for a decision in Intellectual Ventures v. Symantec as the Federal Circuit heard oral argument on April 6, 2016. Intellectual Ventures (IV) argues that its patents are designed to improve computer network security through novel approaches to malware and spam detection and email screening. As such, IV believes that their patents solve problems “specifically arising in the realm of computer technology” and DDR Holdings demonstrates that the patents are patent eligible. Symantec counters that the IV patents use generic computing technology to apply basic concepts such as using the Dewey decimal system on digital files or applying standard mail routing practices to email instead of postal mail. IV likely has a better argument that DDR Holdings should apply than many of the recent Federal Circuit decisions where that argument has failed, but I could see this case going either way.

The Thales Visionix case involves a patent for helmet-mounted display systems (HMDS) for use in defense and aerospace applications such as the F-35 Joint Strike Fighter. Unlike traditional heads-up display systems which require a pilot to look straight ahead at a display to read tactical information, a HMDS projects tactical information onto the interior visor of a pilot’s helmet. This frees the pilot from looking straight ahead at a fixed point to receive the displayed information. The claims at issue are not as specific as their intended application, yet recite a motion tracking system that includes inertial sensors and an element for receiving signals from the inertial sensors to determine orientation of a tracked object. The Court of Federal Claims judge applied Alice in a sweeping fashion and found claim 1 amounted to nothing more than a system of generic inertial sensors and a receiving element, and claim 22 as nothing more than an instruction to solve a navigation equation. In concluding that the ultimate concern under Section 101 is one of “preemption,” the judge found that the scope of the patent’s claims is insufficiently limited under Mayo and Diamond v. Diehr, and granted the motion for judgment on the pleadings. Frankly, I was quite surprised to see this decision, and believe that it is an unfortunate example of the Mayo/Alice framework taken to its extreme. Briefing is ongoing in the case, so a decision is months away.

We are at a critical juncture on defining the proper scope and application of Section 101. Unless the judiciary delineates a clearer framework for enabling meaningful patent protection in areas like biotech and software where America has been a technology leader, the U.S. could rapidly lose its competitive edge in these vital industries. Without this guidance, the U.S. will cement its recent reputation as even more restrictive and less open to patenting important new and potentially life-saving technologies than other jurisdictions such as China and Europe, which was unthinkable just a few years ago. It is critical that the Federal Circuit take the opportunity in one of these pending cases to provide meaningful guidance on the proper scope and contours of patent subject matter eligibility applied to software related technology. Even more importantly, the Supreme Court should agree to hear the Sequenom case and clarify (or revise) its Mayo/Alice test to ensure that meritorious inventions in life sciences and software remain patentable. While I don’t believe it is yet time to take legislative action, recent calls for the abolition of Section 101 entirely and dissatisfaction with application of the Mayo/Alice test is reaching a critical level. These key cases offer a significant opportunity to establish much-needed clarifications. Should this opportunity be missed, it is hard to see how Congressional action can be avoided.

Patent Applications and Grants Holding Steady for FY 2016

April 21, 2016PatentJason Rantanen

By Jason Rantanen

We’re now halfway through financial year 2016, and so far patent application and grant numbers are looking similar to the past few years. The below graph shows the number of UPR patent applications filed over the past several fiscal years (which run from October 1 to September 30), along with a simple projection of the applications for FY 2016. The vast majority of these are utility patent applications.

On a month-over-month basis, this fiscal year is following the same trajectory as 2013, 2014 and 2015.

Patent grants also look similar to the past few fiscal years. If current trends continue, we may see a slight increase over FY 2015. (Note that the numbers in the below chart are for the fiscal year; Dennis’s post from the other day is on a calendar year basis.)

Judge Dyk’s Concurrence in the Denial of Rehearing En Banc in Sequenom

April 13, 2016PatentAbstract Idea, Federal Circuit En Banc, Subject Matter EligibilityJason Rantanen

By Jason Rantanen

In preparing for a talk on recent developments in patent law that I’m giving in a few days at the Salishan Patent Conference, I went back and reread Judge Dyk’s opinion concurring in the Federal Circuit’s denial of rehearing en banc in Sequenom v. Ariosa (available here: 14-1139.Order.11-30-2015.1). In my view, he hits the nail on the head with this one, framing the patent eligible subject matter issue as an issue of claim breadth. I find his discussion particularly appealing because unlike many conventional critiques of the Supreme Court’s Mayo/Alice framework, Judge Dyk acknowledges that patent law is not limitless, and that patentable subject matter should not be completely unbounded, subject only to the constraints of §§ 102, 103 & 112. Accepting this proposition frees Judge Dyk to articulate a conceptually coherent approach to patentable subject matter in the context of discoveries of natural laws, one that allows for valid claims in this space but which still imposes limits on what can be claimed. When discovery of a natural law supplies the innovative aspect of the invention, Judge Dyk writes, claims should be limited to what the inventor has actually done:

“In my view, the breadth of the claim should be critical. Even when a patent applicant has demonstrated some particular utility for a newly discovered law of nature and reduced it to practice, the claim should be invalid unless narrowly tailored to the particular application of the law that has been developed. Claims that extend far beyond the utility demonstrated by the patent applicant and reduced to practice should be invalid, as they “too broadly preempt the use” of the underlying idea by others. Mayo, 132 S.Ct. at 1294; see also Diamond v. Diehr, 450 U.S. 175, 191–92, 101 S.Ct. 1048, 67 L.Ed.2d 155 (1981). But, so long as a claim is narrowly tailored to what the patent applicant has actually invented and reduced to practice, there is limited risk of undue preemption of the underlying idea. In Myriad the Court noted, 133 S.Ct. at 2120, that an example of a meritorious claim might be claim 21 of Myriad’s U.S. Patent No. 5,753,441 (“the ′441 patent”), which was not at issue in the case and which Judge Bryson discussed in his concurring opinion on our court’s decision below, Ass’n for Molecular Pathology, 689 F.3d at 1348 (Bryson, J., concurring). Claim 21 of the ′441 patent covers a method of detecting any of several specific mutations in the BRCA1 gene, newly discovered by the patent applicant and shown to increase a person’s risk of developing particular cancers, using conventional methods. See In re BRCA1 & BRCA2, 774 F.3d at 765.

This approach appears also to be supported by Morse. The Supreme Court established in Morse that the extent to which a patentee can claim is the extent to which he has actually made some concrete use of the discovery and reduced it to practice. “The specification of this patentee describes his invention or discovery, and the manner and process of constructing and using it; and his patent … covers nothing more.” Morse, 56 U.S. at 119. Limiting patentees to narrow applications they have actually developed and reduced to practice would be in keeping with Mayo ‘s commandment that “simply appending *1292 conventional steps, specified at a high level of generality, to laws of nature, natural phenomena, and abstract ideas cannot make those laws, phenomena, and ideas patentable.” Mayo, 132 S.Ct. at 1300 (emphasis added).

This proposed approach, limiting the scope of patents based on new discoveries to narrow claims covering applications actually reduced to practice, would allow the inventor to enjoy an exclusive right to what he himself has invented and put into practice, but not to prevent new applications of the natural law by others.⁵ This would ensure that the scope of the patent claims would not “foreclose[ ] more future invention than the underlying discovery could reasonably justify.” Id. at 1301. Limiting the scope of the patent also would avoid the problem that “the more abstractly [a process patent’s] claims are stated, the more difficult it is to determine precisely what they cover.” Mayo, 132 S.Ct. at 1302 (quoting Christina Bohannan & Herbert Hovenkamp, Creation without Restraint: Promoting Liberty and Rivalry in Innovation 112 (2012)).”

Ariosa Diagnostics, Inc. v. Sequenom, Inc., 809 F.3d 1282, 1291 (Fed. Cir. 2015). Of course, I may be biased to agree with Judge Dyk here: I’ve long thought that Section 112(a) doesn’t do an adequate job, by itself, of limiting claim breadth. (And §112(b) only relates to claim clarity, a different issue than claim breadth.) (c.f. fn 5 of Judge Dyk’s concurrence).

Mag Aerospace v. B/E Aerospace: Assignor Estoppel

March 23, 2016PatentJason Rantanen

By Jason Rantanen

Mag Aerospace Industries, Inc. v. B/E Aerospace, Inc. (Fed. Cir. 2016) Download Opinion
Panel: Prost (author), Mayer, Reyna

This case involves an advanced patent–but ancient property–law concept: assignor estoppel. The basic idea is that when an inventor or patent owner assigns a patent to another party, the original owner cannot challenge the validity of that patent. In Diamond Scientific Co. v. Ambico, Inc., 848 F.2d 1220, 1224 (Fed. Cir. 1988), the Federal Circuit explained the rationale for the doctrine: “Courts that have expressed the estoppel doctrine in terms of unfairness and injustice have reasoned that an assignor should not be permitted to sell something and later to assert that what was sold is worthless, all to the detriment of the assignee.”

Here, the accused infringer (B/E) was not itself a former owner of the patents-in-suit, but had hired the original inventor after that inventor had assigned the patents to a third party (who subsequently assigned them to plaintiff Mag Aerospace). Thus, the question for determining whether assignor estoppel applied to bar B/E from challenging the validity of the patents was whether B/E should be placed in the same shoes as the inventor–a question that boils down to the issue of privity. “Privity, like the doctrine of assignor estoppel itself, is determined upon a balance of the equities.” Slip Op. at 10, quoting Shamrock Techs., Inc. v. Med. Sterilization, Inc., 903 F.2d 789, 793 (Fed. Cir. 1990). In determining whether B/E was in privity with the inventor, the district court considered an array of factors from Shamrock:

the assignor’s leadership role at the new employer;
the assignor’s ownership stake in the defendant company;
whether the defendant company changed course from manufacturing
non-infringing goods to infringing activity after the inventor was hired;
the assignor’s role in the infringing activities;
whether the inventor was hired to start the infringing operations;
whether the decision to manufacture the infringing product was made partly by the inventor;
whether the defendant company began manufacturing the accused product shortly after hiring the assignor; and
whether the inventor was in charge of the infringing operation.

On review, the Federal Circuit concluded that the district court did not abuse its discretion in concluding that assign estoppel applied. In reaching this conclusion, the court rejected B/E’s argument that it hired the employee specifically to avoid infringement. Instead, the court focused on the fact that B/E used his knowledge “to conduct the activities that are now alleged to be infringing.” The court thus focused the inquiry on the initiation the acts themselves as opposed to some sort of intent to infringe the patent.

Although it lost on the issue of assignor estoppel, and thus could not challenge the validity of the patents-in-suit, B/E nonetheless prevailed as the Federal Circuit also affirmed the district court’s grant of summary judgment of noninfringement.

Supreme Court Grants Cert on Design Patent Damages

March 21, 2016PatentDamages, design patent, Supreme CourtJason Rantanen

By Jason Rantanen

This morning, the Supreme Court granted certiorari on the design patent remedies question in Samsung Electronics Co. v. Apple Inc. It did not grant certiorari on the functionality/ornamentality question raised in Samsung’s petition.

The question presented is:

2. Where a design patent is applied to only a component of a product, should an award of infringer’s profits be limited to those profits attributable to the component?

Prior PatentlyO discussion available here. Tom Cotter also has an extensive discussion of this case on his Comparative Patent Remedies blog.

This case is particularly interesting to me, as this afternoon I’m giving a talk at the Washington & Lee School of Law on a current work in progress on the Takings Clause and changes to substantive patent law. I’ll be touching on the design patent remedies issue as an area of potential tension–regardless of how this decision turns out, it will be an imporant subject to keep an eye on!

Guest Post: What Would Happen to Patent Cases if They Couldn’t all be Filed in Texas?

March 11, 2016PatentVenueJason Rantanen

Colleen Chien, Santa Clara University Law School and Michael Risch, Villanova University Charles Widger School of Law^[1]

Today, the Federal Circuit heard oral argument in the mandamus petition brought in the TC Heartland case. At stake is where patentees can properly bring their cases, a question that has received an inordinate amount of attention–even from comedic TV shows–in light of the high concentration of patent filings in just a handful of venues.

We have followed this case with interest because, as we have written before, we believe that revising venue may be a reform that the patent system’s diverse stakeholders can agree upon. Although the reasons that plaintiffs flock to Eastern Texas and a few other districts are contested, we believe that a system that incentivizes skating rinks outside of courthouses to curry favor with local juries is far less defensible.

How did we get here? For nearly 90 years, it was settled law that special rules limiting venue governed patent lawsuits. Congress changed the general venue law in 1988, and the Federal Circuit interpreted this as removing the special rule (28 U.S.C § 1400)’s restrictions, enabling plaintiffs to choose, essentially freely, among district courts where to file their patent suits.

Where might we be headed? Petitioners now argue under a variety of theories that the restrictions in 28 U.S.C. § 1400(b) in effect be reinstated, and given greater effect. Other than our concerns about the end result, we take no position at this time on the legal merits of any particular argument. In any event, it’s not our opinion that matters. If the Federal Circuit agrees, patent venue would revert to either (1) defendant’s residency (place of incorporation) or (2) a combination of infringing acts plus a regular-place-of-business. Congressional proposals are expected to both broaden and narrow this definition, though we caution against the development of proposals that make it difficult for the plaintiff to determine appropriate venue without undertaking substantial discovery in the first place or that makes the determination of “real” places of business uncertain.

But the Federal Circuit will not wait for Congress. How significant would a reversion to § 1400 be? Although impossible to predict with certainty, we think it is worthwhile to consider, so we performed an analysis that attempts to model that venue rule. We considered what would have happened in 2015, had the proposed interpretation been in effect then. Last year patent plaintiffs filed 44% of their cases in the Eastern District of Texas. Where would they have filed (assuming that they would have filed at all) had the previous interpretation of Section 1400 rule been in place? That is to say, where would patent plaintiffs file if they couldn’t all go to Texas?

To carry out our analysis, we chose 500 cases at random, corresponding to 665 defendants, filed in 2015. We then carried out three steps, as described in greater depth here. First, we approximated where each named defendant could be sued according to the more restricted reading of the statute, using place of business and incorporation data provided by complaints and facility/location information provided by Reference USA, a widely-used database of business data. Second, we identified, based on where the case was actually filed, and also where the plaintiff had sued in the past, the likely venue of suit. That is, if a plaintiff sued all over the country, then we assumed it would continue to do so. But if a plaintiff sued only in one district, we assumed they would sue again in that district if it could legally do so. Third, we compared the results of the first two steps and determined the percentage of 665 plaintiff-defendant pairs (“cases” for short) that reflected the following “matches”:

An exact match – P could have filed the case as is;
A plausible match – P could have filed in “Ps preferred venue” – any venue P filed in in 2014-2015;
No match – but P could have filed in the P class’ preferred venue – one of the top 5 venues of OpCos or NPEs; or
No match – none of the above.

The resulting analysis suffers from a few limitations. First, our data sources are likely to contain a modest number of errors and only roughly approximate permissible defendant venues. Second, though we assume that infringement took place in each district where the defendant has a location, this assumption may not hold in every jurisdiction. Third, outside of “exact” matches, it’s hard to tell with certainty where plaintiffs would choose to file – though we assume that plaintiffs plausibly would file where they have before, due to greater familiarity with the court, and that certain matches were “preferred” because we assume that P would prefer to file where others in the P’s class have filed in the past, other factors may trump. Finally, our dataset is small – only 500 cases – though we are in the process of extending the analysis. Still, we believe that the results from this initial analysis are instructive, and share them below.

As shown in Figure 1, we find that though approximately 30% of “cases” would have been able to be filed as they were, 70% of them would not have able to be filed as is. While 8% could have been filed where the plaintiff had filed before, in 62% of cases, plaintiffs would have to file in a jurisdiction they had never filed before, though 41% of the time, a jurisdiction preferred by other plaintiffs of the same time was available.

Figure 1

Applying codings for entity type provided by Unified Patents in Figure 2, we find that the rule change would have a greater impact on NPE plaintiffs (26% would have been able to file in the same district vs. 40% of OpCos) than OpCo plaintiffs, but that many OpCos – about 50% – would also have had to file outside of their past venues. This makes intuitive sense as plaintiffs often prefer to file in their home court, that, even if not generically plaintiff friendly, nonetheless are more convenient and represent areas where the plaintiff’s witnesses, as well as employees, are located.

Figure 2

Where would the cases go? We used the steps described above to determine likely venues for all but the “no match” cases, with the results shown in Figure 3. For the reasons described above – principally that we cannot be sure where plaintiffs would sue, particularly outside of their own past patterns – the data presented here are suggestive, rather than definitive, of projected patterns. With these caveats in mind, it appears that the Delaware would be the top venue, capturing 33% of the cases, followed by the Northern District of California with 21% of cases, and the ED Tex, with 11% of the cases.

Figure 3

CONCLUSION

So, where does this leave us? Many cases would have to move, and not just those filed by NPEs. Even so, a decent number of cases could have stayed in the same location. That Delaware and Northern California would be the most popular is unsurprising given how many defendants are incorporated in Delaware or headquartered in Silicon Valley. Perhaps more surprising is that Eastern Texas remains third on the list, albeit with a much smaller percent of cases. These cases would likely be filed against retailers selling patented goods from stores located in that district, though there were some defendants in our sample that were headquartered there.

In conclusion, changes to venue rules would likely cause real changes to venue locations. Not all the cases would move to Delaware (as some might have expected), but a decent number likely would. Though some plaintiffs would be inconvenienced, there would be much more diversity in patent venues, with many districts seeing more cases than they have in some time, and a few districts seeing many fewer. While we leave analysis of the legal merits to others, we are literally and figuratively of two minds with respect to this outcome. On the one hand, ending the Eastern District of Texas hegemony would be a good thing. On the other hand, one of us has litigated patent cases in unpopular districts and warns that defendants should be careful what they wish for; there is a reason why so many “specialist” district court proposals have been made.

To the extent that some percentage of patent cases have been made possible solely because of favorable venue, we would expect to see dynamic effects as well, should the Federal Circuit recalibrate patent venue to its nearly century old equilibrium. If Congress doesn’t like the result, it can always act.

^[1] We thank Lex Machina for providing us with case data, Unified Patents for providing us with entity codings, and research assistants Reuben Bauer, Emma Stone, Campbell Yore, Max Looper, Amanda Garger, Christie Larochelle, for help with coding.

Federal Circuit Now Receiving More Appeals Arising from the PTO than the District Courts

March 2, 2016PatentAIA Trials, IPRJason Rantanen

By Jason Rantanen

Appeals arising from district court patent infringement cases have historically made up about a third of the court’s docket. In 2011, for example, appeals from the district courts constituted 33% of appeals filed, while appeals from the PTO were about 9%.

(Graph from http://www.cafc.uscourts.gov/the-court/statistics)

That distribution no longer holds. During Fiscal Year 2015 (which ended on September 30, 2015), appeals from the PTO exploded, to about a quarter of all appeals filed. Appeals from the district courts also rose, but at a slower pace.

(Graph from http://www.cafc.uscourts.gov/the-court/statistics)

That trend has continued, with appeals from the PTO now overtaking appeals from the district courts. The below chart shows the annual number of appeals filed from 1997 to the end of January 2016. As of January 29, the court had docketed more appeals arising from the PTO than the district courts. If this filing rate holds true for the rest of the year, we can expect almost as many appeals from the PTO to be filed as there were appeals from the district court last year.

(Data source: http://www.cafc.uscourts.gov/the-court/statistics)

My primary hypothesis for this dramatic rise is relatively simple. Since the implementation of the America Invents Act, there has been an explosion of inter partes review proceedings at the PTO. In inter partes review proceedings, there is inevitably a winner—and a loser. Given the relatively small cost of filing an appeal, and the current uncertainty as to outcomes on appeal, parties that are losing on IPR are filing those appeals. There are other things going on, particularly the increased thoroughput of the PTAB, but I suspect that many of the appeals from the PTO are of IPR proceedings.

Whatever the cause, the ramifications of this increase in appeals from the PTO are quite significant. If I’m right that most of these appeals from IPR proceedings, they’re likely to be hotly contested by both parties. In addition, each of these cases involves its own invention and technology. So I see this as a substantial workload increase for the Federal Circuit judges and their clerks. One thing to take a look at going forward is how the Federal Circuit is going to be handling these appeals.

(I don’t have an explanation for the drop in appeals from the district courts, other than possibly the decline in patent cases filed and pending that occurred in late 2014 and early 2015. It could also be due to more cases being resolved through the IPR proceedings—although as others have observed, only a fraction of patents involved in infringement litigation are also involved in IPR proceedings)..

En banc Federal Circuit affirms Mallinkrodt, notwithstanding Quanta

February 12, 2016PatentFederal Circuit En Banc, LicensesJason Rantanen

By Jason Rantanen

Lexmark International, Inc. v. Impression Products (Fed. Cir. 2016) (en banc) Download Opinion
Majority opinion authored by Judge Taranto, with Judge Dyk dissenting (joined by Judge Hughes)

This morning the Federal Circuit issued its en banc opinion in the closely watched Lexmark case. In a behemoth 92 page opinion by Judge Taranto, the court held that the limitations on the exhaustion doctrine set out in its 1992 Mallinkrodt and 2001 Jazz Photo opinions remain good law, notwithstanding the Supreme Court’s intervening decisions in Quanta Computer, Inc. v. LG Electronics, Inc., 553 U.S. 617 (2008) and Kirtsaeng v. John Wiley & Sons, Inc., 133 S.Ct. 1351 (2013).

From the majority opinion:

First, we adhere to the holding of Mallinckrodt, Inc. v. Medipart, Inc., 976 F.2d 700 (Fed. Cir. 1992), that a patentee, when selling a patented article subject to a
single-use/no-resale restriction that is lawful and clearly communicated to the purchaser, does not by that sale give the buyer, or downstream buyers, the resale/reuse authority that has been expressly denied. Such resale or reuse, when contrary to the known, lawful limits on the authority conferred at the time of the original sale, remains unauthorized and therefore remains infringing conduct under the terms of § 271. Under Supreme Court precedent, a patentee may preserve its § 271 rights through such restrictions when licensing others to make and sell patented articles; Mallinckrodt held that there is no sound legal basis for denying the same ability to the patentee that makes and sells the articles itself. We find Mallinckrodt’s principle to remain sound after the Supreme Court’s decision in Quanta Computer, Inc. v. LG Electronics, Inc., 553 U.S. 617 (2008), in which the Court did not have before it or address a patentee sale at all, let alone one made subject to a restriction, but a sale made by a separate manufacturer under a patentee-granted license conferring unrestricted authority to sell.

Second, we adhere to the holding of Jazz Photo Corp. v. International Trade Comm’n, 264 F.3d 1094 (Fed. Cir. 2001), that a U.S. patentee, merely by selling or authorizing the sale of a U.S.-patented article abroad, does not authorize the buyer to import the article and sell and use it in the United States, which are infringing acts in the absence of patentee-conferred authority. Jazz Photo’s no-exhaustion ruling recognizes that foreign markets under foreign sovereign control are not equivalent to the U.S. markets under U.S. control in which a U.S. patentee’s sale presumptively exhausts its rights in the article sold. A buyer may still rely on a foreign sale as a defense to infringement, but only by establishing an express or implied license—a defense separate from exhaustion, as Quanta holds—based on patentee communications or other circumstances of the sale. We conclude that Jazz Photo’s no-exhaustion principle remains sound after the Supreme Court’s decision in Kirtsaeng v. John Wiley & Sons, Inc., 133 S. Ct. 1351 (2013), in which the Court did not address patent law or whether a foreign sale should be viewed as conferring authority to engage in otherwise-infringing domestic acts. Kirtsaeng is a copyright case holding that 17 U.S.C. § 109(a) entitles owners of copyrighted articles to take certain acts “without the authority” of the copyright holder. There is no counterpart to that provision in the Patent Act, under which a foreign sale is properly treated as neither conclusively nor even presumptively exhausting the U.S. patentee’s rights in the United States.

Judge Dyk, joined by Judge Hughes, disagreed:

I agree with the government that Mallinckrodt was wrong when decided, and in any event cannot be reconciled with the Supreme Court’s recent decision in Quanta Computer, Inc. v. LG Electronics, Inc., 553 U.S. 617 (2008). We exceed our role as a subordinate court by declining to follow the explicit domestic exhaustion rule announced by the Supreme Court.

They also would take a presumption-based approach to international exhaustion that would treat exhaustion as a default rule:

Second, I would retain Jazz Photo insofar as it holds that a foreign sale does not in all circumstances lead to exhaustion of United States patent rights. But, in my view, a foreign sale does result in exhaustion if an authorized seller has not explicitly reserved the United States patent rights.

My sense is that Supreme Court review is likely given the tensions between Quanta and the Mallinkrodt rule that Judge Dyk and others have identified. In my view, Judges Dyk and Hughes have the better reading of the pre-Mallinkrodt Supreme Court decisions and the effect of Quanta. And given the Supreme Court’s tendency to look to patent law statutes when deciding non-statutory issues in copyright law (such as in MGM v. Grokster), I’m not convinced that, should it grant cert, the Supreme Court is going to feel as strongly that patent law’s exhaustion doctrine is different because it is non-statutory while copyright law’s is statutory.

Strategic Decision Making in Dual PTAB and District Court Proceedings

February 11, 2016PatentAIA Trials, anticipation, Claim Construction, obviousness, PGRJason Rantanen

By Jason Rantanen

Saurabh Vishnubhakat (Texas A&M), Arti Rai (Duke) and Jay Kesan (Illinois) recently released a draft of their empirical study of Patent Trial and Appeal Board proceedings, Strategic Decision Making in Dual PTAB and District Court Proceedings. Their study takes a close look at the relationship between IPR and CBM proceedings and district court proceedings to assess the “substitution hypothesis”: the claim that post-grant review is “an efficient, accessible and accurate substitute for Article III litigation over patent validity.”

In addition to an array of descriptive statistics on post-grant proceedings at the PTO, the authors find that:

“Although IPR petitions may challenge patent claims as to either novelty or nonobviousness, nonobviousness challenges predominate across all major technology areas.” (p. 18)
During the period studied (September 16, 2011 to June 30, 2015), “a total of 14,218 patents were either challenged in an IPR or CBM petition, asserted in litigation, or both. A subset of 11,787 patents were involved in litigation alone; 324 patents were involved in a USPTO proceeding alone; and 2,107 patents were involved in both. Accordingly, about 15.2% of litigated patents are also being challenged in the PTAB, and about 86.7% of IPR- or CBM-challenged patents are also being litigated in the federal courts.” (p. 20) [edited on Feb. 12, 2016]
Overall, most CBM and IPR petitions are filed by those with a direct self-interest flowing from infringement litigation. 78% of CBM petitioners, and 70% of IPR petitioners, “have previously been defendants in district court litigations involving the patents they later challenge in CBM [or IPR] review.” (p. 23) By this the authors simply mean that the petitioners showed up as defendants in an infringement proceeding on a given patent before filing for IPR or CBM review on that patent. They likely continued to be infringement defendants during the pendency of the IPR or CBM (the authors did not track that).

Vishnubhakat et. al’s third finding has two implications. First, a substantial number of CBM and IPR petitions are filed by parties who are not concurrently defendants in litigation involving those patents. The existence of this group merits further study. The authors suggest a range of motivations driving these petitions.

Second, notwithstanding that group, the vast majority of CBM and IPR petitions are filed by parties that are in all likelihood simultaneously litigating the patents in district court. Given the substantial amount of overlap, and the potential for strategic behavior by accused infringers, the authors suggest that the same claim construction standard should be applied by both forums–a point with implications for Cuozzo Speed Technologies v. Lee.

Read the article here: http://ssrn.com/abstract=2731002

Wi-Lan v. Apple: “Clarification” or “reconstruction”?

January 8, 2016Patentanticipation, Claim Construction, obviousnessJason Rantanen

By Jason Rantanen

Wi-Lan, Inc v. Apple Inc. (Fed. Cir. 2016) Download Opinion
Panel: Reyna (author), Wallach, Hughes

Although precedential, this case doesn’t really break new patent-law ground. Instead, it offers a data point in the tricky issue of whether a post-verdict modification to the construction of a claim constitutes a permissible “clarification” or an impermissible “reconstruction.” The opinion also provides an example of how claim construction can operate at multiple levels, in this case by applying to both the meaning of a given term and the meaning of that term in the broader context of the claim.

Wi-Lan, the owner of RE37,802, a patent relating to wireless data communication, sued Apple and others for infringement based on their manufacture and sale of standards-compliant products. Claim 1 of the ‘802 patent reads:

1. A transceiver for transmitting a first stream of data symbols, the transceiver comprising:

a converter for converting the first stream of data symbols into plural sets of N data symbols each;

first computing means for operating on the plural sets of N data symbols to produce modulated data symbols corresponding to an invertible randomized spreading of the first stream of data symbols; and

means to combine the modulated data symbols for transmission.

(emphasis added). The critical claim constructions related to “modulated data symbols,” which the district court construed to mean “data symbols that have been spread apart by spreading code” and “first computing means,” which the district court construed to be a means-plus-function element linked to particular structure disclosed in the specification. Applying these constructions, a jury found that Apple did not infringe and that the ‘802 patent was invalid as anticipated. Following trial, the district judge denied Wi-Lan’s request for judgment as a matter of law (JMOL) on infringement but granted its request for JMOL of no invalidity based on a modified construction of the structure to which “first computing means” corresponded.

The Interdependent Text and Claim Construction

On appeal, Wi-Lan challenged the district court’s denial of JMOL on infringement (effectively challenging the jury verdict of no infringement). This issue largely turned on an issue of claim construction: whether the district court’s constructions precluded Apple’s noninfringement defense, a defense premised on the argument that the claims required that data symbols be randomized before combining them, while Apple’s products combined the symbols before randomizing them.

On appeal, the Federal Circuit agreed with Apple. The text of the claim indicated that the modulated data symbols had to be randomized before combining them. The “first computing means” produces “modulated data symbols corresponding to an invertible randomized spreading of the first stream of data symbols.'” The second means then combines “the modulated data symbols for transmission.” Since “[s]ubsequent uses of the definite articles ‘the’ or ‘said’ in a claim refers back to the same term recited earlier in the claim,” slip op. at 10, quoting Baldwin Graphic Sys., Inc. v. Siebert, Inc., 512 F.3d 1338, 1342 (Fed. Cir. 2008), the term “the modulated symbols” in the second means element referred back to the randomized modulated symbols produced by the first means element, thus requiring randomization-before-combination. This construction was consistent with the specification.

Wi-Lan’s principal contention was that during its pre-trial construction of “modulated data symbols,” the district court rejected Apple’s argument that the term requires randomization. But, the Federal Circuit held, the district court’s construction only involved the unmodified, generic term “modulated data symbols.” Apple’s argument involved the intersection of the full language in the first means element with the use of “modulated data symbols” in the second means element: “Even though generic ‘modulated data symbols’ do not have to be randomized, the recited ‘modulated data symbols corresponding to an invertible randomized spreading‘ do have to be randomized.” Slip Op. at 11. Through its use of “the,” the second means element referred back to those randomized data symbols. Since Apple’s products combined then randomized, there was no direct infringement. (The Federal Circuit also disposed of Wi-Lan’s argument of infringement under the doctrine of equivalents.)

Post-verdict claim construction

Prior to trial, the district court construed the means-plus-function element “first computing means” as “element 12 of Figures 1 and 4, columns 2:6–10, 2:36–40, 2:58–62, 4:2–12, and 4:35–44, and equivalents thereof.” Using this construction, the jury found the claims to be anticipated by a prior art reference that used real multipliers to randomize the “modulated data symbols” rather than complex multipliers. In granting Wi-Lan’s motion for JMOL of no invalidity, however, the district court “determined that, although its construction of computing means ‘does
not specifically provide for a complex multiplier,’ a complex multiplier was nevertheless necessary because ‘expert witnesses from both sides agreed that complex multipliers are part of the structure of the ‘first computing means’ as taught by the ’802 patent.'” Slip Op. at 8.

On appeal, the Federal Circuit concluded that this was an instance of impermissible post-verdict reconstruction. “‘[I]t is too late at the JMOL stage to argue for or
adopt a new and more detailed interpretation of the claim language and test the jury verdict by that new and more detailed interpretation.’ Hewlett-Packard Co. v. Mustek Sys., Inc., 340 F.3d 1314, 1321 (Fed. Cir. 2003).” Slip Op. at 16. None of the corresponding structure in the court’s pre-trial construction mentioned complex multipliers or referred to the patent figure involving complex multipliers.

While a district judge may “adjust constructions post-trial if the court merely elaborates on a meaning inherent in the previous construction,” Mformation
Techs., Inc. v. Research in Motion Ltd., 764 F.3d 1392, 1397 (Fed. Cir. 2014), this was not such a case. Such “clarification” is allowed because it only makes “plain . . . what should have been obvious to the jury.” Slip Op. at 17, quoting Cordis Corp. v. Boston Scientific, 658 F.3d 1347, 1355–57 (Fed. Cir. 2011). Here, the implicit requirement of a complex randomizers was not obvious to the jury, particularly given conflicting testimony over whether the claims actually did require the use of a complex randomizer. The result was that the district court did not simply elaborate on the meaning of its prior claim construction in the post-verdict opinion, but altered that construction, something that it could not do.

University of Iowa Hiring an In-House IP Attorney

December 24, 2015PatentUSPTO DirectorJason Rantanen

By Jason Rantanen

I’m excited to report that my academic institution, the University of Iowa, is hiring an in-house intellectual property attorney. The University of Iowa is a major public research university that conducts, among many other activities, an extensive biomedical research program. Situated at the heart of Iowa City, a beautiful midwestern college town, the university consists of 13 Colleges with over 32,000 students. Among these is the University of Iowa College of Law, a top public law school founded in 1865.

The position is particularly exciting because we’ve designed it from the ground-up to support both the research and development mission of the university as well as the teaching mission of the College of Law. The person hired for this role will primarily work with the University of Iowa Research Foundation (UIRF) in connection with the patenting process. In addition, he or she will supervise law students working at the UIRF, support the innovative Iowa Medical Innovation Group course, and teach one advanced intellectual property course at the College of Law each year. The summary from the job positing is below, and the posting itself is available at: https://jobs.uiowa.edu/pands/view/68075.

The University of Iowa (UI) seeks an In-House Intellectual Property Counsel (Patent Attorney) to support licensing activities and intellectual property management for technologies being commercialized by the University of Iowa Research Foundation (UIRF). This individual will advise on transactional issues including licensing, sponsored research and related agreements. The individual may draft and file some provisional patent applications. The Patent Attorney will coordinate with the UI’s Office of the General Counsel (OGC) on the UIRF’s role in any intellectual property litigation. In addition, this individual will support the Iowa College of Law by teaching and mentoring law students. In this role, this individual will teach one or more courses each year on an advanced intellectual property law topic such as intellectual property licensing, supervise law students working as externs in the UIRF, and support the College of Law component of the Iowa Medical Innovation Group (IMIG) course. This position will have solid-line reporting to the Executive Director of the UIRF, with dotted-line reporting to the UI Assistant Vice President for Economic Development.

The current advertisement runs until January 5, and if you’re interested in the position I would encourage you to apply by early January. Inquiries about this position should not be sent to me. They should be sent to the designated contact person on the job posting.