Mayo Collaborative Services v. Prometheus Laboratories, Inc., No. 10-1150 (S. Ct.)

Scheduled for oral argument on Wednesday, December 7, 2011

In Mayo Collaborative Services v. Prometheus Laboratories, Inc., the U.S. Supreme Court looks to address questions of whether and when certain types of medical methods are patentable subject matter. Prometheus specifically involves methods for optimizing patient treatment in which the level of a drug metabolite is measured and a measured level above or below a recited amount "indicates a need" to decrease or increase dosage levels. In 2005, the Court granted certiorari on related issues in Laboratory Corp. of America v. Metabolite Laboratories, Inc., but the Court later dismissed LabCorp as improvidently granted. In 2010, the Court reaffirmed the existence of meaningful limitations on patentable subject matter in Bilski v. Kappos, but the Court but did little to clarify the scope of those limitations.

Will Prometheus bring light where Bilski failed? Arguments to the Court invite it to further clarify the status of the machine-or-transformation test for process claims. Bilski indicated that this test is relevant but not necessarily decisive, and the Federal Circuit relied heavily on the test in upholding the subject-matter eligibility of Prometheus's claims. In the circuit's view, "asserted claims are in effect claims to methods of treatment, which are always transformative when one of a defined group of drugs is administered to the body to ameliorate the effects of an undesired condition." Likewise, a metabolite-level measurement step was found to "necessarily involv[e] a transformation." Although Prometheus's claims include "mental steps," the circuit emphasized that the inclusion of such steps "does not, by itself, negate the transformative nature of prior steps."

Prior posts provide additional background on the Prometheus case. The first wave of merits briefs have been filed. These include the opening brief for the petitioners, briefs in support of the petitioners, and briefs in support of neither party. The respondent-patentee's brief as well as supporting amicus briefs will be due in the upcoming weeks.

BRIEF FOR PETITIONERS (Stephen Shapiro, Mayer Brown): Prometheus's patent claims violate Supreme Court precedent forbidding claims that "preemp[t] all practical use of an abstract idea, natural phenomenon, or mathematical formula." Prometheus's claims "recite a natural phenomenon—the biological correlation between metabolite levels and health—without describing what is to be done with that phenomenon beyond considering whether a dosage adjustment may be necessary." The claims' drug-administration and metabolite-measurement steps are merely "'token' and 'conventional' data-gathering steps" that cannot establish subject-matter eligibility. Patent protection is unnecessary to promote the development of diagnostic methods like those claimed and will in fact interfere with both their development and actual medical practice.

AMICUS BRIEFS SUPPORTING PETITIONERS

AARP & PUBLIC PATENT FOUNDATION (Daniel Ravicher, Public Patent & Cardozo School of Law): "Allowing patents on pure medical correlations … threatens doctors with claims of patent infringement" and "burdens the public with excessive health care costs, and dulls incentives for real innovation." "The Federal Circuit has latched on to trivial steps beyond mental processes, such as the 'administering' step in this case, to uphold patents that effectively preempt all uses of laws of nature." Prometheus's recitation of an "administering" step stands "in stark contrast to most pharmaceutical patents that require a 'therapeutically effective amount' of a drug be administered."

ACLU (Sandra Park, ACLU): In assessing subject matter eligibility, the Supreme Court "has focused on the essence of the claim," using a "pragmatic approach [that] allows the Court to see through clever drafting." Prometheus's insertion of drug-administration and/or measurement steps into a claim "does not alter the fact that the essence of the claim is the correlation between thiopurine drugs and metabolite levels in the blood." Further, the First Amendment bars Prometheus's claims. "What Prometheus seeks to monopolize … is the right to think about the correlation between thiopurine drugs and metabolite levels, and the therapeutic consequences of that correlation."

AMERICAN COLLEGE OF MEDICAL GENETICS ET AL. (Katherine Strandburg, NYU School of Law): The patents at issue "grant exclusive rights over the mere observation of natural, statistical correlations." They "convert routine, sound medical practice into prohibited infringement" and generate burdens and conflicts for patient care and follow-on innovation. "The machine or transformation test is inapposite … to determining whether a claim preempts a natural phenomenon." It can be too trivially satisfied without shedding sufficient light on whether claims "reflect inventive activity" or "improperly preempt downstream uses of the phenomenon."

ARUP & LABCORP (Kathleen Sullivan, Quinn Emanuel): "The patents assert exclusive rights over the process of administering a drug and observing the results…. This not only blocks the mental work of doctors advising patients, but also impedes the progress of research by seeking to own a basic law of nature concerning the human body's reaction to drugs." "Patents on measurements of nature" raise constitutional concerns by removing factual information from the public domain, thereby conflicting with patents' constitutional purpose to "promote the Progress of Science and useful Arts" and threatening to chill "scientific and commercial publication."

CATO INSTITUTE ET AL. (Ilya Shapiro, Cato Institute): This case provides the Supreme Court with an opportunity to strike a blow against the "thousands of abstract process patents which have been improvidently granted since the 1990s" and that are already adversely affecting software and financial innovation. Historically, patentable "processes" "aimed to produce an effect on matter, and these patents do not." The "indicat[ing] a need" clauses in Prometheus's claims do not even form part of a process because they do "not describe an action." Patent claims such as these, "whose final step is mental," impermissibly tread on the public domain and "freedom of thought."

NINE LAW PROFESSORS (Joshua Sarnoff, DePaul College of Law): The Supreme Court "should expressly recognize" that the Constitution requires that "laws of nature, physical phenomena, and abstract ideas" be treated as prior art for purposes of determining patentability. "Allowing patents for uncreative applications would effectively provide exclusive rights in and impermissibly reward the ineligible discovery itself." Barring claims like Prometheus's under section 101, as opposed to relying on patentability requirements such as novelty and nonobviousness, promotes "efficient gate-keeping" and "sends important signals."

VERIZON & HP (Michael Kellogg, Kellogg Huber): "It is longstanding law that a claim is non-patentable if it recites a prior art process and adds only the mental recognition of a newly discovered property of that process." See Gen. Elec. Co. v. Jewel Incandescent Lamp Co., 326 U.S. 242 (1945). "This principle is soundly based on Section 101's limitation to processes and products that are not only 'useful' but 'new.'" "[A]dding to the old process in Prometheus's patent claims nothing more than a mental step of recognizing the possible health (toxicity or efficacy) significance of the result of the process does not define a 'new and useful process.'"

AMICUS BRIEFS SUPPORTING NEITHER PARTY

UNITED STATES (Solicitor General Donald Verrilli, Jr.): The claimed methods recite "patent-eligible subject matter," and petitioners' objections to patentability are properly understood as challenges to the claimed methods' novelty and nonobviousness. By analogy with "patent law's 'printed matter' doctrine," the claims should ultimately be found invalid because, as construed by the district court, they "merely … appen[d] a purely mental step or inference to a process that is otherwise known in (or obvious in light of) the prior art." But the Supreme Court should affirm the Federal Circuit's holding on subject matter eligibility.

AIPPI (Peter Schechter, Edwards Wildman): AIPPI "encourages all member countries to allow medical personnel the freedom to provide medical treatment of patients without the authorization of any patentee." Unlike the U.S. and Australia, most countries "exclud[e] methods of medical treatment of patients from patent eligibility." When the medical-practitioner exemption of 35 U.S.C. § 287(c)(1) applies, "the courts lack subject matter jurisdiction." The exemption applies to the defendants, who "are plainly 'related health care entities.'" Thus, "the case should be dismissed for lack of federal subject matter jurisdiction."

MICROSOFT (Matthew McGill, Gibson Dunn): Subject-matter eligibility tests should not involve "pars[ing] the claimed invention into the 'underlying invention' and those aspects that are 'conventional' or 'obvious' or insignificant 'extra- or post-solution activity.'" Such parsing lacks any guiding principle that can make its application predictable. Petitioners seek an improperly "expansive application of the mental steps doctrine." "[I]f every step of a process claim can be performed in the human mind, that process is unpatentable." But the Federal Circuit has improperly "extended th[is] principle to apply to machines or manufactures that replicate mental steps."

NYIPLA (Ronald Daignault, Robins Kaplan): Innovation's "bewildering pace" argues against "rigid categorization of patent-eligible subject matter." "[T]here is no basis for excluding processes directed to analyzing the chemicals in a patient's body from patent eligibility." When satisfied, the machine-or-transformation test should decisively establish eligibility. But failure of the test should not necessarily establish ineligibility. Preemption analysis "must incorporate a critical assessment of whether the claim at issue actually claims a fundamental principle as a fundamental principle in contrast to an application of that principle."

ROCHE & ABBOTT (Seth Waxman, WilmerHale): Patents are crucial for innovation in personalized medicine and more particularly for the continued development diagnostic tests that can enable such medicine's practice. Arguments "that patents on diagnostic tests stifle innovation and basic scientific research" are "largely based on speculation, rather than sound evidence." Generally speaking, "market-driven business practices and self-enforcing market norms correct for any perceived limitations on the accessibility of patented diagnostic technologies." Congress should be trusted to provide appropriate patent-law exemptions for medical practice and research.

The Supeme Court continues to take an active interest in patent cases, with three currently pending before the Court.  Briefs are available through the American Bar Association's Supreme Court coverage site.

Patent Cases Pending Before the Supreme Court:

Mayo v. Prometheus: Subject Matter Patentability of Processes, redux. In Mayo, the Supreme Court will revisit the issue of patentable processes in a case that was the subject of a grant-vacate-remand order following Bilski.  The Court has asked the parties to answer the following question:

Whether 35 U.S.C. § 101 is satisfied by a patent claim that covers observed correlations between blood test results and patient health, so that the claim effectively preempts all uses of the naturally occurring correlations, simply because well-known methods used to administer prescription drugs and test blood may involve “transformations” of body chemistry.  

Argument is set for December 7, 2011.  This case has prompted substantial debate and numerous amici submissions.  Prior PatentlyO posts:

• Prometheus v. Mayo (January 25, 2009)
• Mayo v. Prometheus: Medical Methods and Patentable Subject Matter at the Supreme Court (October 28, 2009)
• Prometheus v. Mayo: En Banc Petition on Patentability of Medical Methods (June 26, 2010)
• Mayo v. Prometheus Labs: Bilski and Medical Methods (June 29, 2010)
• Prometheus v. Mayo: Patenting Medical Methods (September 15, 2010)
• Prometheus Laboratories v. Mayo: The Broad Scope of Statutory Subject Matter (December 22, 2010)
• Supreme Court to Revisit Patentable Subject Matter Eligibility (June 20, 2011)

Kappos v. Hyatt: Standard of Review of Patent Office Appeals to the District Court.  In Kappos v. Hyatt, the Supreme Court will address the de novo nature of a civil action brought by a patent applicant under 35 U.S.C. § 145.  The Federal Circuit, sitting en banc, previously held that in such a proceeding the applicant many present new evidence to the district court and that any factual conclusions impacted by that evidence must be determined de novo, without deference to the patent office.  The Supreme Court has not yet set oral argument.  Prior PatentlyO commentary:

• Appealing a BPAI Rejection: Can the Applicant Present New Arguments and New Evidence to the District Court? (February 17, 2010)
• The Timeliness of the En Banc Rehearing of Hyatt v. Kappos (February 18, 2010)
• Hyatt v. Kappos: Federal Circuit Opens Door to Post-BPAI Civil Actions (November 8, 2010)
• US Government Asks for Increased Deference When Patent Applicants Challenge BPAI Decisions in Court (April 11, 2011)
• Supreme Court takes Two More Patent Cases (June 27, 2011)

Caraco v. Novo: Counterclaims Relating to Brand Name Description of Claim Scope. This case relates to a generic company's ability to seek a counterclaim to correct a brand pharmaceutical company's alleged misdescription of patent claim scope submitted to the FDA. Oral argument is set for December 5, 2011.

Patent Cases Pending Before the Federal Circuit Sitting en banc:

Akamai v. Limelight and McKesson v. Epic: Multi-Party, Multi-Step Infringement issues.  In this set of cases the Federal Circuit will address infringement liability when multiple parties collectively perform separate steps of a muti-step process claim but no single entity performs all the steps. Oral argument will take place on November 18, 2011.  Prior PatentlyO commentary:

• Akamai v. Limelight: Joint Infringement Requires an Agency Relationship or a Contractual Obligation
• Joint Infringement: When Multiple Actors Work in Concert
• Federal Circuit orders En Banc rehearing of Akamai Joint Infringement Claim
• En Banc: Federal Circuit to further Address Joint Infringement

In Costco, the Supreme Court was asked to apply the first sale doctrine of copyright law in the context of international sales. Costco had purchased legitimate Omega watches abroad and then imported them into the US.  The watches included a small copyrighted design on the back surface and Omega argued that the importation and further distribution of the watches constituted copyright infringement.  Ordinarily, the purchaser of a legitimate copy of a work can lawfully resell the copy based on the first sale doctrine (also known as copyright exhaustion). The trick, however, is that copyright is territorial in nature and the first sale abroad arguably did not “exhaust” the US copyright. The 9^th  Circuit had sided with Omega — holding that the first sale doctrine did not apply to foreign manufactured copies that were purchased abroad.

Without opinion, and in a 4–4 split, the Supreme Court has affirmed the 9^th  Circuit decision. However, because of the 4–4 split, the case will not be seen as precedent-setting. Thus, as Ryan Vacca wrote in an e-mail this morning: “Our unanswered questions . . . remain unanswered.”

On Monday, Petitioner Global-Tech filed its brief in the inducement of infringement case pending before the Supreme Court.  The complete brief can be downloaded from the American Bar Association's website.  The arguments are summarized below:

35 U.S.C. 271(b) Requires the State of Mind of "Purposeful, Culpable Expression and Conduct" to Encourage an Infringement.

Global-Tech takes the position that inducement of patent infringement under 271(b) requires "'purposeful, culpable expression and conduct' to encourage an infringement."  In other words, the accused party must possess the "purpose" of causing the infringement of a patent - even knowledge of infringement is insufficient.  In support of this position, Global-Tech relies heavily on MGM Studies, Inc. v. Grokster, Ltd., 545 U.S. 913 (2005), a copyright inducement case in which the Court discussed 271(b) and described the inducement rule as premising liability on "purposeful, culpable expression and conduct."  Global-Tech buttresses its argument by asserting that a lower standard would make 271(b) so broad as to render 271(c) (contributory infringement) insignificant and, furthermore, is supported by the legislative history.

Global-Tech also raises two policy considerations.  First, it delves into the issue of causation, suggesting that because 271(b) does not contain a causation requirement, Congress must have intended to for it to apply only to "morally culpable conduct" - which Global-Tech equates with purpose.  Second, it argues that (absent clear Congressional intent) there is a presumption that statutes are meant to only regulate conduct outside the United States to the extent necessary to further important U.S. interests, and that anything less than a "purposeful, culpable expression and conduct" standard is unnecessary to further U.S. interests. 

The "Deliberate Indifference" Standard is Wrong

In addition to advancing its "purposeful, culpable expression and conduct" approach to inducement, Global-Tech also argues that the Federal Circuit's "deliberate indifference to a known risk" standard is lower than knowledge, recklessness, and even negligence.  Global-Tech rests this assertion on the proposition that because the Federal Circuit's articulation of the "deliberate indifference" standard did not specify the degree of risk, it thus encompasses even minimal risks of infringement.  Global-Tech further argues that the risk in this case was of the minimal variety because it did not know about the patent and because of the uncertainties of both claim construction and infringement proceedings.

Global-Tech raises two additional arguments.  After asserting that aiding and abetting, a related tort doctrine, requires knowledge of the actor's participation in an underlying crime or tort, it then contends that the use of "actively," "induces," and "infringement" in 271(b) signals that the standard must be higher than that of aiding and abetting (i.e.: purpose).  From a policy standpoint, Global-Tech criticizes the "deliberate indifference" standard as being quite unclear - and thus placing a burden on competition and innovation.

Global-Tech concludes by asserting that if the Court holds that 271(b) requires not just purposeful, culpable conduct or knowledge, but also recklessness, it should reverse and remand.

In GlobalTech v. SEB, the Supreme Court is addressing the question "[w]hether the legal standard for the state of mind element of a claim for actively inducing infringement under 35 U.S.C. § 271(b) is "deliberate indifference of a known risk" that an infringement may occur...or instead "purposeful, culpable expression and conduct" to encourage an infringement.”  Yet, as I suggested last month, perhaps framing the issue as an involving an inquiry into the subjective state of mind of an accused inducer isn't the best approach.  Instead, I propose that an analysis akin to civil recklessness - asking whether a high risk of infringement of a valid patent would have been obvious to a reasonable person in the accused party's position - is the better way to view the fault component of indirect infringement.  

That's the central argument of a draft article that I've prepared, and I'm interested in any feedback readers might have.  The abstract is provided below; the complete paper is available here. 

Unlike direct patent infringement (a strict liability claim), indirect and willful infringement require the patent holder to demonstrate fault on the part of the accused infringer. The conventional approach to the fault elements of these doctrines views them as involving a subjective inquiry into the accused party’s state of mind. Inducement of infringement, for example, requires that the alleged infringer possess mental culpability for it to be found liable. The question presented by the Supreme Court’s recent grant of certiorari in Global-Tech v. SEB is the quintessential illustration of this conventional view, asking whether the “state of mind” of the accused party is one of “deliberate indifference” or “purpose.” This mens rea-based approach to fault is likely the product of indirect infringement’s origins as an adaptation of the tort theory of aiding and abetting, an intentional tort.

This paper asserts that this conventional view of fault for indirect infringement is inherently flawed, and is largely nonsensical in the modern context in which indirect infringement is assessed. In large part this is because fault in patent infringement, unlike the tort tradition in which it was developed, involves assessment of particular legal – as opposed to factual – consequences, consequences that are both rarely certain and unlikely to ever be desired.

Rather than continuing to view the fault elements of these doctrines as if they were traditional intentional torts, this paper proposes that the law should instead apply an objective test more closely tailored to the specific context in which patent infringement arises. Specifically, it suggests that a better approach is to conceive of the fault element as requiring an objective inquiry into whether a high risk of patent infringement would have been obvious to another in the accused party’s position. In addition to providing a more accurate and usable articulation of the fault element, viewing the question in terms of risk enables finer tuning of the doctrine when seeking optimal deterrence effects. Furthermore, this change would parallel recent shifts in the approach to fault in the context of willful infringement, and would be consistent with the actual normative standard being applied by courts.

Microsoft Corp. v. i4i Ltd. (Supreme Court 2010)

The Supreme Court has granted Microsoft's petition for a writ of certiorari and will consider whether patent law requires clear and convincing evidence of invalidity in order to invalidate an issued patent. Microsoft asks that the standard be lowered – at least for the situation where the evidence of invalidity was not considered by the patent office before the patent issued. The Supreme Court has not directly ruled on the issue. However, in KSR v. Teleflex, the Supreme Court did note that the "the rationale underlying the presumption — that the PTO, in its expertise, has approved the claim — seems much diminished" in cases where the patentee "fail[ed] to disclose" the key prior art to the PTO.

I expect that the court will agree that the statutory presumption of validity does not require a clear and convincing standard and that the standard should be lowered when a court is presented with evidence that is substantially different from that considered by the USPTO. Without explanation, Chief Justice Roberts has recused himself from this case – leaving eight justices to decide. At this point, I expect that all members of the court will agree that the standard should be lowered with some disagreement on the exact rule.

Clear and Convincing Evidence: Felony criminal cases require that prosecutors prove their case beyond a reasonable doubt. Most civil cases only require a preponderance of the evidence – often referred to as "more likely than not." Thus, in patent infringement cases, the patentee need only prove that it is more likely than not that the defendant infringed. However, the Federal Circuit has long required that invalidity defenses be proven with clear and convincing evidence. The clear and convincing standard is somewhere between a preponderance of the evidence and beyond a reasonable doubt and is sometimes referred to as "substantially more likely than not." Microsoft has not directly challenged the CAFC's rule of corroborative evidence that a single person's testimony is never sufficient to invalidate a patent.

i4i's case: In 2009, an Eastern District of Texas jury awarded $200 million + interest to i4i after finding that Microsoft willfully infringed the Canadian company's patent. Judge Davis subsequently added-on $40 million for willful infringement. The judge also issued an injunction ordering Microsoft to stop selling Word Products with the capability of using "custom XML." That injunction was stayed by the Federal Circuit pending appeal. On appeal, the Federal Circuit affirmed the lower court's findings of validity, willful infringement, enhanced damages, and permanent injunctive relief. In the meantime, the USPTO has concluded its reexamination of the i4i patent — confirming that the claims at issue are patentable. Microsoft filed a second reexamination request in August 2010 (shortly after it filed its petition to the Supreme Court). However, on November 24, 2010, the USPTO denied the request to begin a new reexamination – finding that the newly asserted prior art failed to raise a substantial new question of patentability (SNQ) as required by statute. Microsoft will likely appeal that denial. In addition, Microsoft apparently patched its software to prevent someone from using custom XML in Word in an effort to avoid the injunction and any further damages.

Microsoft has now moved-on to the Supreme Court — asking the high court to reject the "clear and convincing" evidence standard for proving a patent invalid. As Microsoft wrote in its petition for writ of certiorari, the question is "Whether the court of appeals erred in holding that Microsoft's invalidity defense must be proved by clear and convincing evidence" when the prior-art was not considered by the USPTO. This is essentially the same question that Microsoft raised in its 2008 petition in z4. That petition was withdrawn after the parties settled.

The Patent: i4i's asserted patent (U.S. Patent No. 5,787,449) covers a system for editing the metacodes of an HTML or XML document. The system uses a metacode map that is stored separately from the XML document and provides a menu of potential metacodes. The patent application was filed in 1994 and should remain in-force until 2015.

Microsoft's Invalidity Argument: Microsoft was not able to uncover any prior publication or patent that would invalidate the invention. However, the software giant argued at trial that i4i had sold an embodiment of the invention in the US more than one year prior to the 1994 patent application date. In particular, Microsoft argues that the invention was "embedded in a system called S4 - that the inventors of the ′449 Patent developed and sold to SEMI, a client of i4i's predecessor, over a year before applying for the ′449 Patent." That sale was not disclosed to the USPTO during the original prosecution and could not be presented during reexamination because reexaminations are limited to a review of prior art patents and publications. At the trial, the inventors (Vulpe and Owens) testified that the S4 system did not include a metacode map or separate the map from the marked-up document – two key features of their invention. Because the source-code for the 1993 custom software was no longer available, Microsoft primarily relied on testimony from a former i4i employee and upon written statements that Vulpe had made to investors and to the Canadian Government suggesting that the S4 software did separate metacode information.

The jury form asked "Did Microsoft prove by clear and convincing evidence that any of the listed claims of the '449 patent are invalid?" The jury answered "no." On appeal, the Federal Circuit held that the jury had sufficient evidence to rule that the patent was not anticipated by S4.

Importance of the Rule: A recent study conducted by Etan Chatlynne and published on Patently-O looked at all 119 Federal Circuit decisions on patent validity for the past several years. The study found that lowering the burden of proof would not have made any difference for 74% of those cases but might have made a difference in 26% of the cases. None of the decisions expressly stated that the result would be different if the standard had been reduced.

The clear and convincing standard probably has an important psychological impact in jury (and judicial) deliberations where the defendant's high burden for proving invalidity is contrasted with the plaintiff's lower burden for proving infringement.

The Supreme Court has granted writ of certiorari in the case of Global-Tech v. SEB to decide the level of intent required for inducing infringement. The question raised is: Whether the legal standard for the "state of mind" element of a claim for actively inducing infringement under 35 U.S.C. § 271(b) is "deliberate indifference of a known risk" that an infringement may occur or instead "purposeful, culpable expression and conduct" to encourage an infringement.

Section 271(b) of the patent act creates a cause of action against inducing infringement. The statute reads "Whoever actively induces infringement of a patent shall be liable as an infringer." Courts have struggled for years to define the level of intent that is sufficient to satisfy the rough statutory guidelines.

In DSU Medical Corp. v. JMS Co., Ltd., 471 F.3d 1293 (Fed. Cir. 2006) (en banc), the Federal Circuit held that inducement charges could only be sustained if the accused inducer "knew of the patent." In SEB (T-Fal) v. Montgomery Ward & Co., 594 F.3d 1360 (Fed. Cir. 2010), the Federal Circuit eased-back on that requirement by holding that "deliberate indifference" to potential patent rights could be sufficient to satisfy the knowledge requirement of inducement charges. Thus, Judge Rader wrote in SEB that "a claim for inducement is viable even where the patentee has not produced direct evidence that the accused infringer actually knew of the patent-in-suit."

In the case, Judge Rader distinguished between the subjective determination of "deliberate indifference" and an objective "should-have-known" standard. An interesting aspect of the Federal Circuit decision is the court's use of non-patent and non-Federal Circuit cases to aid its interpretation of the law. Specifically, the decision relies on three cases that are decidedly non-patent: Farmer v. Brennan, 511 U.S. 825 (1994); United States v. Carani, 492 F.3d 867, 873 (7th Cir. 2007); and Woodman v. WWOR-TV, Inc., 411 F.3d 69 (2d Cir. 2005).

Farmer v. Brennan involved the question of whether an incarcerated pre-operative transsexual who projects female characteristics could be held in a men-only prison. The Supreme Court there held that a prison official could be liable for "deliberate indifference" to inmate safety. US v. Carani involved an appeal of a child pornography conviction and the Seventh Circuit ruled that the defendant's knowledge of the child-status of the pornography was satisfied by the defendant's deliberate avoidance of or indifference to the truth. Woodman v. WWOR-TV involved an age discrimination charge against FOX and noted that knowledge of a fact may be proven through evidence that the party "consciously avoided knowledge of what would otherwise have been obvious him."

The cases cited above are not found in the appellate briefs. Rather, the SEB court's concept of "deliberate indifference" was raised sua sponte by the Federal Circuit.

The petition for certiorari was aided by a short but compelling brief by the legal academics led by Professor Lemley (Stanford) and Holbrook (Emory) and also signed by conservatives such as Richard Epstein (Chicago). The brief basically argued that the Federal Circuit has been unable to clarify its own law on the state of mind requirement for inducement liability. The brief also suggest that the Federal Circuit SEB decision conflicts with the Supreme Court's precedent in MGM Studios, Inc. v. Grokster, Ltd., 545 U.S. 913, 936 (2005).

Notes:

• Patently-O Discussion of Original Federal Circuit Opinion.
• Broadening Federal Circuit Jurisprudence: Moving Beyond Federal Circuit Patent Cases, 2010 Patently-O Patent Law Journal 19 (2010).

In 2009, an Eastern District of Texas jury awarded $200 million + interest to i4i after finding that Microsoft willfully infringed the Canadian company’s patent. Judge Davis subsequently added-on $40 million for willful infringement.  The judge also issued an injunction ordering Microsoft to stop selling Word Products with the capability of using “custom XML.” That injunction was stayed by the Federal Circuit pending appeal.  On appeal, the Federal Circuit affirmed the lower court’s findings of validity, willful infringement, enhanced damages, and permanent injunctive relief. In the meantime, the USPTO has concluded its reexamination of the i4i patent — confirming that the claims at issue are patentable. In addition, Microsoft apparently patched its software to prevent someone from using custom XML in Word.

Microsoft has now moved-on to the Supreme Court — asking the high court to reject the “clear and convincing” evidence standard for proving a patent invalid. As Microsoft writes in its petition for writ of certiorari, the question is “Whether the court of appeals erred in holding that Microsoft’s invalidity defense must be proved by clear and convincing evidence” even when the prior-art was not considered by the USPTO. This is essentially the same question that Microsoft raised in its 2008 petition in z4. That petition was withdrawn after the parties settled.

The patent statute (35 U.S.C. § 282) indicates that an issued patent is “presumed valid” and that the “burden of establishing invalidity” rests with the party asserting invalidity. The Federal Circuit has held that the presumption of validity is properly realized by a clear and convincing standard.  The Supreme Court has not directly ruled on the issue. However, in KSR v. Teleflex, the Supreme Court did note that the “the rationale underlying the presumption — that the PTO, in its expertise, has approved the claim — seems much diminished” in cases where the patentee “fail[ed] to disclose” the key prior art to the PTO.

By Dennis Crouch

File Attachment: Microsoft.I4I.CertPetition.pdf (172 KB)

In many respects, Justice Kennedy’s statement from eBay seems odd. The issue of permanent injunctive relief only arises after trial — after the patents are deemed valid and infringed. The trial is intended to remove any question regarding potential invalidity of the patent rights. However, in a recent amicus brief to the Federal Circuit, Verizon attempts to provide some explanation and some teeth to Kennedy’s proposal. (Justice Kennedy’s statement has been quoted and discussed in over 80 law review articles over the past four years.)

The Verizon brief was filed in the pending en banc case of TiVo v. EchoStar. That case focuses on whether the infringement of new products introduced by an adjudged infringer should be analyzed through contempt proceedings or through a new trial.

Verizon’s brief does not focus on the questions at issue in TiVo, but rather addresses the broader question of whether injunctive relief should be issued in-the-first-place. Expanding on Justice Kennedy’s statements, Verizon argues that — even after a patent is determined valid at trial — the court must consider the possibility that the patent is invalid as part of the injunction analysis:

The need to ensure that equity “mould[s] each decree to the necessities of the particular case,” Hecht, 321 U.S. at 329, requires that a district court take into account the possibility that a patent – issued and adjudged to be valid in the context of an infringement trial – is, in fact, invalid.

To explain its position, Verizon points to a specific (and common) situation — where the infringed patent is pending reexamination at the USPTO. The brief states boldly that “the pendency of a PTO reexamination proceeding weighs strongly against imposition or continuation of an injunction.”

Notes:

• Verizon filed its brief early, the first round of briefs are not due until July 26, 2010.
• Read Verizon’s brief here [File Attachment: TiVo.Amicus.Verizon.pdf (150 KB)]
• Edited to correct an error (I had said that Chief Justice Roberts wrote the eBay majority).

One of the first cases that may address the Supreme Court's ruling in Bilski v. Kappos involves RCT's claimed method of halftoning color images. The district court held the asserted claims invalid for failing to satisfy Section 101 of the patent act. The following two claims are representative:

1. A method for the halftoning of gray scale images by utilizing a pixel-by-pixel comparison of the image against a blue noise mask in which the blue noise mask is comprised of a random non-deterministic, non-white noise single valued function which is designed to produce visually pleasing dot profiles when thresholded at any level of said gray scale images.

11. A method for the halftoning of color images, comprising the steps of utilizing, in turn, a pixel-by-pixel comparison of each of the plurality of color planes of said color image against a blue noise mask in which the blue noise mask is comprised of a random non-deterministic, non-white noise single valued function which is designed to provide visually pleasing dot profiles when thresholded at any level of said color images, wherein a plurality of blue noise masks are separately utilized to perform said pixel-by-pixel comparison and in which at least one of said blue noise masks is independent and uncorrected with the other blue noise masks.

Microsoft argues that the inventive portion of the claims are directed to the unpatentable mathematical operation of halftoning and the remaining portions use well known technology to preempt use of the mathematical operation.

* * * * *

IN RE BONNSTETTER (Fed. Cir. 2010)

A second pending Section 101 case involves Bonstetter's claimed "method of benchmarking a job." The specification reports that the invention can be implemented "using pencil and paper" and the claim involves a simple four step process:

Claim 1. A method of benchmarking a job comprising:
identifying subject matter experts (SMEs) for the job;
facilitating discussion with the SMEs to identify and prioritize key accountabilities of the job;
giving a survey to SMEs to determine soft skills necessary for superior performance in the job, the survey incorporating the key accountabilities;
combining responses to the survey from multiple subject matter experts into a composite report identifying and prioritizing skills for superior performance for the job; and
interviewing a job candidate relative to said prioritized skills.

Neither the examiner nor the BPAI suggested that the claim would fail under Section 101. However, in its brief to the Federal Circuit, the USPTO indicated that the claim certainly failed the machine or transformation test (as well as being obvious). The USPTO explained the delayed Section 101 analysis based on internal USPTO delay -- the examiner's rejection was entered in July 2007, before the Federal Circuit's Bilski decision. The USPTO brief only mentions the patentable subject matter issue in a footnote (FN7). However, the issue will likely arise -- especially if the obviousness rejection is reversed.

* * * * *

Accenture Global Servs. GmbH v. Guidewire Software, 2010 U.S. Dist. LEXIS 65193 (D. Del. 2010)

In the Accenture case, district court Judge Sue Robinson has requested briefing on whether Accenture's asserted patents are invalid based on Bilski v. Kappos. The court had previously delayed its ruling on Section 101 pending outcome of that case.

Accenture's claim 1 reads as follows:

Claim 1. A method for generating a file note for an insurance claim, comprising the steps of, executed in a data processing system, of:
prefilling a first set of fields with information identifying a file note, said information comprising at least one suffix indicating a type of insurance coverage for a participant in a claim and identification of the participant, wherein the at least one suffix is preselected from one or more types of insurance coverage applicable to the claim;
obtaining a selection of fields of a first set of fields from a user, the selection identifying information for a second set of fields;
displaying in the second set of fields, the information identified by selection of field of the first set of fields;
permitting the user to add data to a predefined text area related to each field of the second set of fields based on the selected fields;
generating a file note that contains the first set of fields, the second set of fields, and the data in the predefined text area;
identifying a level of significance of the file note; and
storing the file note with the identified level of significance in a claim database including file notes associated with the claim.

A year and a half ago, the Federal Circuit threw down a gauntlet in its Bilski opinion, extensively citing Supreme Court precedent to come up with the “machine or transformation test” to determine when a process constitutes patentable subject matter. Now the Supreme Court has rejected the Federal Circuit’s conclusion that “machine or transformation” is the only test to use and provided an additional basis for why Bilski’s patent for a method of hedging risk is not patentable. In doing so, the Supreme Court has thrown back the gauntlet, leaving scholars and the Patent Bar to speculate on where the USPTO and the Federal Circuit might go with using patentable subject matter as a limit on patentability. When the smoke clears, the Bilski opinion will appear a lot like the KSR decision from 2007 and that should not be surprising since Justice Kennedy authored both.

Here are the highlights of Bilski v. Kappos.Justice Kennedy‘s opinion of the court unanimously affirmed the Federal Circuit’s ruling that Bilski’s patent should be rejected. Where the nine justices agree is that the Federal Circuit erred in distilling from precedents the “machine or transformation” test as the sole one to determine when a process is patentable subject matter. The Court based this ruling on the definition of process in Section 100 of the Patent Act and its own precedents (from the 1970’s and 1981) in Gottschalk v Benson, Parker v Flook, and Diamond v Diehr. There also was agreement that patentable subject matter is broad with limits that are finite and discernible, rather than open ended.   One of these limits is no patents for abstract ideas, and there is unanimity that Bilski’s claims for methods of hedging were too abstract, describing a general process well established in the field. In short, there was unanimity in rejecting the “machine or transformation” test as the sole test for identifying a patentable process and affirming the well known exceptions from patentable subject matter: laws of nature, physical phenomenon, and abstract ideas.

In terms of method, Bilski v. Kappos reminds me of the Canadian Supreme Court’s 2002 decision in Harvard College v. Canada (Commissioner of Patents), which rejected a patent on a multicellular living organism.   Both decisions relied heavily on a strict reading of the statute with the Canadian Supreme Court ruling that the word “invention” in the Canadian patent statute did not include living organisms. The Canadian Supreme Court decision, however, seemed to be sending a clear message to the Canadian Parliament to amend the statute if necessary. By contrast, it is not clear what the U.S. Supreme Court’s message is in Bilski. The opinion was a response to the Federal Circuit’s mischaracterization of Supreme Court precedent as a “machine or transformation” test. But at a deeper level, one is left wondering what guidance the Supreme Court is providing for practitioners, scholars, and policymakers. The Court throws the gauntlet back to the Federal Circuit, and presumably they will now take the new precedent and use it to mold patent practice.

The lack of clarity is reflected in part in the Justice Breyer concurrence, joined by Justice Scalia, providing four guiding principles for how to determine whether a process is patentable subject matter. The four principles are: (i) there are limits on patentable subject matter; (ii) transformation is an important “clue” to when a process is patentable subject matter: (iii) machine or transformation is not the sole test for determining when a process is patentable subject matter; and (iv) the “useful, concrete, tangible” test does not describe the full scope of what constitutes patentable subject matter.   These four distill down to the principle that limits on patentable subject matter have something to do with transformation to a physical state, but that usefulness, concreteness, and tangibility do not describe the extent of patentable subject matter. Justice Breyer’s principles imply that there are limitations on “dubious” patents, such as those for “exercising a cat with a laser pointer” that have nothing to do with machine or transformation. The problem is we have no sense of what those additional limitations are.

Undoubtedly, more litigation is on the way, and perhaps the Court will hear another case involving either a medical diagnostic patent or a “dubious” patent. But the Bilski case will have immediate impact on how patents are prosecuted.   After the Supreme Court’s 2007 KSR decision, patent examiners latched onto the Supreme Court’s language about “common sense” to issue obviousness rejections because a claimed combination was deemed “common sensical.” We can predict similar responses post-Bilski. The Court did not kill machine or transformation; it is now just one test. Patent examiners can still use the test as a basis for rejection. In addition, the Court’s emphasis on abstract ideas creates another basis for rejecting patents for lack of patentable subject matter.

Specifically, the Court has now revived the Gottschalk-Parker-Diehr line of cases, which were established before the creation of the Federal Circuit and which the Federal Circuit had distilled over time into the expansive “useful-concrete-tangible” approach to patentable subject matter and then into the “machine or transformation test.” In effect, the Supreme Court by reviving its precedent has negated over twenty-five years of the Federal Circuit’s attempts at doctrine. This revival opens up possibilities for examiners to rethink the relationships among process, machine, and the physical world. “Dubious” patents may be rejected because the physical phenomenon is trivial or too preemptive of the field. Patent claims might require closer connection to a machine embodiment as opposed to an abstracted, disembodied form.   An interesting question to ask is whether the patent at issue in State Street would survive the analysis proposed by Bilski.   On the one hand, the asset allocation method at issue is arguably as abstract as the hedging method. On the other hand, the method seems closely tied to a machine to give the process some specific limits.  

Ultimately, Bilski v Kappos says more about how patent law is made in the United States than about patentable subject matter. By setting the clock back to 1982, the Supreme Court is telling the Federal Circuit to try again in devising workable rules for patent law. The Federal Circuit wrote an opinion that was goading the Supreme Court to address the issue of patentable subject matter after nearly three decades. The resulting opinion raises some fundamental and unsettled questions and, unfortunately, gives us the same, old answers.

UPDATE: No decision today. The court will release opinions on Thursday (June 24) and again next Monday.

The Supreme Court has granted certiorari in an important case challenging the scope of patentable subject matter. [Order]

Questions Presented:

Whether the Federal Circuit erred by holding that a “process” must be tied to a particular machine or apparatus, or transform a particular article into a different state or thing (“machine-or-transformation” test), to be eligible for patenting under 35 U.S.C. § 101, despite this Court’s precedent declining to limit the broad statutory grant of patent eligibility for “any” new and useful process beyond excluding patents for “laws of nature, physical phenomena, and abstract ideas.”

Whether the Federal Circuit’s “machine-or-transformation” test for patent eligibility, which effectively forecloses meaningful patent protection to many business methods, contradicts the clear Congressional intent that patents protect “method[s] of doing or conducting business.” 35 U.S.C. § 273.

Prior Coverage of the Case:

• Supreme Court Docket
• Mar 5, 2009: Bilski v. Doll: Round I of Amicus Briefs  
• Mar 1, 2009: Patentable Subject Matter Redux: Bilski 2009
• Jan 30, 2009: BPAI Again Rejects System Claims under Bilski  
• Jan 28, 2009: Bilski Petitions Supreme Court to Decide Issues of Patentable Subject Matter
• Jan 27, 2009: Should Patent Attorneys Support Bilski?
• Nov 18, 2008: Software Method Claims: Bilski in light of Benson  
• Nov 13, 2008: Post-Bilski BPAI Approves of Beauregard Claims
• Nov 10, 2008: Applying Bilski to Metabolite’s Diagnosis Claim   
• Nov 4, 2008: Holman: Applying Bilski to Biotechnology and the Life Sciences
• Nov 2, 2008: Collins: In re Bilski: Tangibility Gone “Meta”
• Oct 30, 2008: In re Bilski: Patentable Process Must Either (1) be Tied to a particular machine or (2) Transform a Particular Article
• May 8, 2008: CAFC Hears En Banc Bilski Case (oral arguments)
• Apr 10, 2008: Ex Parte Bilski: On the Briefs
• Mar 28, 2008: Ex Parte Bilski: Once Again Rethinking the Scope of Patentable Subject Matter   
• Feb 15, 2008: Bilski: Full CAFC to Reexamine the Scope of Subject Matter Patentability

Documents:

• Supreme Court: Bilski Petition for Certiorari
• Supreme Court: Government Opposition to Certiorari, Bilski Government Opposition to Certiorari
• Supreme Court: Bilski Reply in Support of Certiorari, Bilski.reply.pdf
• Supreme Court: Nine Amicus Briefs In Support of Certiorari.
• Federal Circuit: En Banc Decision: 07-1130.pdf
• Federal Circuit: Dozens of Amicus Briefs
• PTO Board of Patent Appeals & Interferences Bilski Decision: BPAI.Bilski.pdf

Amicus Support:

• According to the Supreme Court rule, the petitioner (here Bilski) now has 45 days to file its opening brief on the merits. The respondent's brief is ordinarily due within thirty days of that date. Any amicus brief would be due 7 days after the filing of the brief for the party being supported. This pushes the deadline for the first round of amicus briefs to the week of July 20.

In a 2008 en banc decision, the Federal Circuit affirmed a Patent Office ruling that Bernard Bilski’s claimed method of hedging the risk of bad weather through commodities trading was not patent eligible under Section 101 of the patent act. The Court applied a “machine-or-transformation test” as the only test to be used in determining whether a claimed process is eligible for patenting under § 101. The decision holds that a claimed process either (1) be tied to a particular machine or apparatus or (2) transform a particular article into a different state or thing. Although the Court identified the Bilski test as the only test, it added two corollaries: (1) the addition of a mere field-of-use limitation without other meaningful limits on claim scope will not render a method claim patent eligible; and (2) insignificant extra-solution limitations will not render a method claim patent eligible.

Bilski has petitioned the Supreme Court to hear its appeal and look at the question of patentable subject matter for the first time in a generation. Diamond v. Chakrabarty and Diamond v. Diehr together opened the door for broader patent eligible subject matter. Notably, Justice Stevens – author of the Diehr dissent – is the only justice still on the bench. Bilski’s petition asks two questions:

1.       Whether the Federal Circuit erred by holding that a “process” must be tied to a particular machine or apparatus, or transform a particular article into a different state or thing … despite this Court’s precedent declining to limit the broad statutory grant of patent eligibility for “any” new and useful process beyond excluding patents for “laws of nature, physical phenomena, and abstract ideas.”

2.       Whether the Federal Circuit’s “machine-or-transformation” test for patent eligibility, which effectively forecloses meaningful patent protection to many business methods, contradicts the clear Congressional intent that patents protect “method[s] of doing or conducting business.” 35 U.S.C. § 273.

The first round of Amicus briefs – those supporting the petition – have now been filed. The PTO’s briefs and briefs in opposition to the petition are due in early April.

Amicus Briefs Supporting the Petition (I have not reviewed all of these, but wanted to post them for public consumption):

• AIPLA: “There is no support in this Court’s precedent for the Federal Circuit majority’s conclusion that this Court enunciated a definitive ‘machine or transformation’ test for determining the patent eligibility of a claimed process under § 101.” The statute should be interpreted to promote new areas of technology.   File Attachment: aiplaamicus.pdf (148 KB)

• Boston IPLA: The “machine-or-transformation test” conflicts with Supreme Court precedent. File Attachment: bostonamicus.pdf (142 KB)

• Borland Software: File Attachment: borlandamicus.pdf (158 KB)

• Koninklijke Philips Electronics: File Attachment: philipsamicus.pdf (162 KB)

• Anne Barschall: The Supreme Court appears to have some “prejudice against electronic devices [as evidenced by] both Benson and Morse.” Its not magic, it is engineering. You can’t see electricity or quantum particles but that does not make them abstract ideas. File Attachment: barschallamicus.pdf (217 KB)

• Medistem: Bilski has considerable bleed-through to non-business method patents. File Attachment: medistemamicus.pdf (109 KB)

• Accenture and Pitney Bowes: The Federal Circuit's "only one test" rule is too rigid and goes against the Supreme Court's precedent that demonstrated flexibility in the Section 101 inquiry. [DDC Comment: The flexibility theme is strongly present in the past several years of Supreme Court patent cases. In eBay, MedImmune, and KSR, the Supreme Court saw a rigid Federal Circuit rule and made it more flexible.] File Attachment: accentureamicus.pdf (122 KB)

• Franklin Pierce Law Center: File Attachment: fplcamicus.pdf (128 KB)

• John Sutton: File Attachment: suttonamicus.pdf (120 KB)

The Supreme Court held oral arguments in this case on February 24. In its opinion, the Federal Circuit held that it lacked appellate jurisdiction to review a district court order to remand a case back to state court. The Federal Circuit's decision goes against precedent set by the Third, Fourth, Fifth, Sixth, Seventh, Eighth, Ninth, Tenth and Eleventh Circuits. And, the case appears in conflict with the Supreme court's Powerex v. Reliant (2007) decision.

During oral arguments the Justice Roberts was considering when lower courts follow Supreme Court holdings when he made the following statement:

CHIEF JUSTICE ROBERTS: Well, they don't have a choice, right? They can't say, I don't like the Supreme Court rule so I'm not going to apply it, other than the Federal Circuit.

(Laughter).