A group of pro-patent senators and members of Congress have published what they are calling “a bipartisan, bicameral framework on Section 101 patent reform.”

Basics of the framework are to create a defined, closed list of subject matter category exclusions: Fundamental scientific principles; Products that exist solely and exclusively in nature; Pure mathematical formulas; Economic or commercial principles; Mental activities.  Under the framework, a patent would not be eligible based upon “simply reciting generic technical language or generic functional language.”  At the same time, the framework suggests that “practical applications” should be patent eligible.   Finally, the framework calls for a divide-and-conquer approach — making clear “that eligibility is determined by considering each and every element of the claim as a whole and without regard to considerations properly addressed by 102, 103 and 112.”

Sen Tillis Press Release.

by Dennis Crouch

A key point of argument and policy over the past decades has been the level of authority given to the USPTO as the government’s expert patent law agency.  When the USPTO makes a decision — is that decision respected by other tribunals?  At times the agency is given substantial deference (factual conclusions made by the PTAB), but other agency decisions are also regularly reviewed de novo without deference.  With regard to interpretation of substantive patent law, PTO determinations are often simply ignored.

Cleveland Clinic Found. v. True Health Diagnostics LLC (Fed. Cir 2019) (nonprecedential) offers a case-in-point with the following key statement from the Federal Circuit:

While we greatly respect the PTO’s expertise on all matters relating to patentability, including patent eligibility, we are not bound by its guidance. And, especially regarding the issue of patent eligibility and the efforts of the courts to determine the distinction between claims directed to natural laws and those directed to patent-eligible applications of those laws, we are mindful of the need for consistent application of our case law.

In the case at hand, the Federal Circuit refused to follow or give any deference to PTO guidelines and instead affirmed a lower court determination that the claims at issue were ineligible as effectively claiming a law of nature.

Over the years, the PTO has shifted policy.  In the old eligibility cases like Diehr and Chakrabarty, the agency was refusing to issue patents that it saw as crossing-the-eligibility-line.  However, the new statements by Dir. Iancu go the other-way, with the USPTO creating a policy of issuing patents that the courts would find invalid (if given the opportunity).

The statement from the court here is important although buried in a non-precedential opinion.  One reason for its importance is its clear tension with the Federal Circuit’s recent decision in Natural Alternatives that called for Skidmore deference to be given to the PTO statement on eligibility.

The U.S. Patent and Trademark Office has adopted guidance on how examiners [and the agency as a whole] should determine whether a claim is eligible under § 101 and provided examples of eligible and ineligible claims. Under these guidelines, a claim to a practical application of a natural product to treat a particular disease is patent eligible. The parties dispute the persuasiveness of this document and the weight we should afford it under Skidmore v. Swift & Co., 323 U.S. 134, 65 S.Ct. 161, 89 L.Ed. 124 (1944).

Nat. Alternatives Intl., Inc. v. Creative Compounds, LLC, 2018-1295, 2019 WL 1216226, at *5 n.2 (Fed. Cir. Mar. 15, 2019).  Although Natural Alternatives was precedential, its statement regarding Skidmore deference was admittedly dicta by Judge Moore.  Judge Moore was also on the Cleveland Clinic panel, and I suspect that she would not have signed the opinion if it had been issued as precedential. Of course, that begs the question of why sign it as a non-precedential opinion?

Guest Post by Professor Paul M. Janicke, University of Houston Law Center.   In 2017, Prof. Janicke was awarded the Tom Arnold Lifetime Achievement Award by the State Bar of Texas. – DC

I have now been a registered patent attorney for 50 years, spending 21 of them in private patent litigation practice before joining the law faculty at the University of Houston. Looking back on it all, and on the posture of patent litigation in the past few years, I feel it is time to consider some major surgery on the patent statute, re-envisioning what we are trying to accomplish. Lawyers presently active in the field have told me enforcing a United States patent is nigh unto impossible today. You usually have to fight off multiple IPRs in the Patent & Trademark Office, during which time any infringement suits you have filed are likely stayed. If your client’s patents survive the PTO proceedings, you then have to battle against the much wider field of prior art established by the America Invents Act. For example, foreign patents used to be effective as prior art as of their grant or publication dates; now they are secret prior art as of their foreign filing dates. Time bars of public use and on sale, formerly limited to U.S. activities, are now expanded to world-wide events. And some kinds of prior art were removable by showing an earlier invention date, but that option is now gone. Meanwhile the remedies section, §271, has not changed in any meaningful way. No wonder patent infringement suits filings have dropped 30% as of June 30 of this year, compared to two years earlier.

I do not contend that fewer patent suit filings are necessarily a bad thing. A plausible argument can be made that any well-functioning law system should generate a smaller number of court fights. In the patent law world, that could signify better quality patents with everyone respecting them, resolving any minor disagreements by ADR, and filing zero infringement cases. However, the present situation suggests something else is afoot. A new look at what we are trying to accomplish by way of promoting progress in the useful arts may be in order. Many of the provisions in the current law are borrowed from the patent statutes of more than a century ago. Some may have been well-intentioned in their time and may even have some measure of residual benefit today, but experience shows that many of them are causing more trouble than they are worth. Maybe it is time to jettison these provisions. In these pages over the coming weeks I will present my proposals for streamlining the patent system in that way. I will try to balance them between those favoring accused infringers and those helping patent owners. To readers steeped in patent property philosophy, all of them will likely be labeled heretical.

The proposals are intended to be compromises, some favoring patent owners and some favoring infringers, whom we will no longer consider criminals. The two most central items are these:

(1) Continue to allow prosecution of as many claims as desired, but after allowance require the applicant to choose no more than three for issuance. During the first three years from grant, attacks on these claims can be made in the PTO or the courts, to the same extent as now. After three years from the issue date, validity of the claims becomes incontestable.

(2)  In exchange for (1), the remedy of permanent injunction disappears, except in ANDA cases. It will be replaced by a revised financial remedy: equitable sharing in the infringer’s revenues from the infringing activity, as set by the judge.

Proposal (1) is admittedly borrowed from the trademark law of incontestability, and may strike some as unfair to late entrants into a market. Those companies will find the validity questions foreclosed. However, my sense is that we need to cut down on the seemingly endless attacks on patent validity, and a fair sharing system seems to me a sensible way of going about it. (I do not expect hurrahs! from the patent litigation bar.)

I recognize that prong (2) can be said to make a patent no longer intellectual “property,” since there will usually be no explicit power to exclude others. This may be a heresy, but for progress of the useful arts maybe this is better. To start with, in real life patent cases we seldom see permanent injunctions going into effect any more. Government contractors are immune from them, and after the Supreme Court’s eBay decision, when they are granted by a court they are usually bought out by a financial payment arrangement instead. So maybe an equitable sharing remedy will work better for practically promoting the progress of the useful arts. The originator gets rewarded, and the benefits of the invention flow more widely and sooner. (I do not expect hurrahs! from the patent licensing bar.)

I have several other heresies in mind, which I intend to present a few at a time in the coming weeks.

by Dennis Crouch

In July 2018, Amgen filed its petition for certiorari asking the Supreme Court to reject the Federal Circuit’s imposition of separate “written description” and “enablement” requirements along with their various requirements and standards.  Amgen argues that the Court should simply follow the statute — requiring “a written description of the invention . . . in such full, clear, concise, and exact terms as to enable any person skilled in the art to which it pertains . . . to make and use the same.”  Amgen Inc. v. Sanofi, Aventisub LLC, SCT Docket No. 18-127 (Petition filed July 23, 2018) (Cert Petition).

The basic push here is against the “possession” standard that serves as the core of the Federal Circuit’s written description requirement.  Apart from any policy arguments — Amgen argues that the statute spells out the test — and it is enablement, not possession.  Rather than focusing on what the inventor possesses, the Act requires the specification simple teach others — “as to enable an person skilled in the art . . . to make and use” the invention.

The brief provides a statutory linguistic argument that makes sense — the “grammatical structure [is] inescapable” and shows that statute provides one standard for judging the written description — the enablement standard.

This statutory argument goes a long way, but in my view will lack compelling force to the Supreme Court (as it did for the Federal Circuit in Ariad).  Rather, for 112(a), historical cases are the key since the language of 112(a) all stems directly from the Patent Act of 1793.  A grammar diagram (seemingly based upon modern language usage) is a rather weak argument for interpreting this olde language.  Rather, a successful argument here should seen in light of the history of the statute and how it has been directly addressed by the Supreme Court over the past 225 years.  In Ariad, the Supreme Court looked particularly to the Supreme Court decision in Schriber-Schroth Co. v. Cleveland Trust Co., 305 U.S. 47 (1938) as recognizing a separate written description (possession) requirement that goes beyond mere enablement.  Although the cert petition repeatedly cites Schriber-Schroth it doesn’t actually address the portion relied upon by the Federal Circuit that served as the crux of its decision.

by Dennis Crouch

This is an important decision here – applying the equitable defense of unclean hands in a unique way to overturn a $200 million jury verdict.  Although the opinion rests on shaky ground (my view), it is now the law of the land. 

Gilead Sciences v. Merck (Fed. Cir. 2018)

The district court rejected a $200 million jury verdict against Gilead’s infringing Hep-C sofosbufir drugs.  Rather than enforcing the jury verdict, the district court held instead that the patents are unenforceable due to Merck’s “unclean hands” involving both business and litigation misconduct. The district court explained:

The record … reflects a pervasive pattern of misconduct by Merck and its agents constituting unclean hands, which renders Merck’s ‘499 and ‘712 Patents unenforceable against Gilead. . . .

Candor and honesty define the contours of the legal system. When a company allows and supports its own attorney to violate these principles, it shares the consequences of those actions. Here, Merck’s patent attorney, responsible for prosecuting the patents-in-suit, was dishonest and duplicitous in his actions with Pharmasset, with Gilead and with this Court, thus crossing the line to egregious misconduct. Merck is guilty of unclear hands and forfeits its right to prosecute this action against Gilead.

On appeal, the Federal Circuit has affirmed – seemingly rendering the two asserted U.S. Patent Nos. 7,105,499 and 8,481,712 effectively moot.

As I discuss below, the decision has a few substantial problems — most notably is the fact that the unclean-hands traditionally only applies to block a party from seeking equitable relief (as opposed to legal relief).  In the end, it appears that Merck was only seeking compensatory money damages — something purely legal.  I know that Merck originally requested declaratory judgment of infringement (prior to Giliad’s market release), but the actual claim before the jury was for infringement and compensatory damages.  Further, declaratory judgment is now seen as a statutory right rather than an equitable doctrine.  We should draw here a strong parallel with SCA Hygiene Prods. V. First Quality Baby Prods. (Supreme Court. 2017) (Equitable defense of laches cannot bar legal damages in patent cases).  Further, it appears to me that Merck did not request injunctive relief in this case (based upon my reading of their counterclaim).

The facts as decided found by the district court:

• 2001: Merck filed patent applications that eventually led to the patents-in-suit here. Merck Chemist/Patent-Attorney Phillipe Durette helped with the prosecution.
• 2002: Jeremy Clark working for a predecessor to Gilead (Pharmasset) was begin reviewing Merck’s early published patent applications “looking for loopholes.”  Clark hit upon a proposed compound that led to sofosbuvir – the active drug at issue in this case.
• 2003, Pharmasset (Clark) filed a patent application the sofosbuvir creation.
• 2004 Merck and Pharmasset began to collaborate on development, but setup (1) a non-disclosure agreement and (2) a FIREWALL blocking Merck patent prosecutors from seeing details of Pharmasset.  However, in a PHONE CALL, Patent Attorney Durette was told about the secret Clark patent application.  After the phone call, Durette stopped his participation in the collaboration, but continued to prosecute the Merck patents.
• 2005 the Pharmasset (Clark) patent application became public, and Durette then amended the claims in the Merck applications to specifically target on the same compound.
• Durette worked the first application until it issued in 2006.
• A separate attorney (Jeffrey Bergman) took over prosecution for Merck in 2010 and narrowed so that the claims targeted metabolites of the same sofosbuvir compound.
• Later at trial, Durette served as the corporate (R. 30(b)(6)) witness for Merck and the district court found that he gave false testimony in his deposition — denying that he had been part of the PHONE CALL.

Here, the real problem for Merck is that its agent Durette (1) joined the call against the FIREWALL; then (2) continued to prosecute the applications after improperly learning of the information; and (3) lied about it at trial.  Collectively, those were enough for an unclean hands finding.  Note here that unclean hands sits in the background of several legal defenses: (a) the defendant alleged failure of written description, but the jury found that the amended claims were fully supported by the original specification; (b) the defendant alleged an implied license; but the court found otherwise; (c) there might have been a violation of the non-disclosure agreement, but that defense did not apply since Merck’s application was filed after the Pharmasset (Clark) application became public; (d) the defendant could have sued for breach of contract or unfair competition, but it did not.

The doctrine of unclean hands has long been part of the U.S. law operating under the maxim: “those seeking equity must do equity.” In other words, a party asking for equitable relief must come with clean hands.   In the 1933 case of Keystone Driller Co. v. General Excavator Co., the Supreme Court Court spelled out how the doctrine operates in patent cases. The court began with the traditional maxim that a “[c]omplainant, to be entitled to equitable relief, must not only show that he has good cause of action, but that he comes into court with clean hands.”

He must be frank and fair with the court, nothing about the case under consideration should be guarded, but everything that tends to a full and fair determination of the matters in controversy should be placed before the court.’ Story’s Equity Jurisprudence (14th Ed.) s 98. . . . This court has declared: ‘It is a principle in chancery, that he who asks relief must have acted in good faith. The equitable powers of this court can never be exerted in behalf of one who has acted fraudulently, or who by deceit or any unfair means has gained an advantage. To aid a party in such a case would make this court the abetter of iniquity.’ Bein v. Heath, 6 How. 228, 247, 12 L.Ed. 416.

Of course, the “clean hands” must be tied to the matter in litigation — courts look to see whether the bad-acts are connected to the cause of action at issue.  In Therasense, the Federal Circuit reviewed Keystone:

Keystone involved the manufacture and suppression of evidence. The patentee knew of “a possible prior use” by a third party prior to filing a patent application but did not inform the PTO. After the issuance of the patent, the patentee paid the prior user to sign a false affidavit stating that his use was an abandoned experiment and bought his agreement to keep secret the details of the prior use and to suppress evidence. With these preparations in place, the patentee then asserted this patent, along with two other patents, against Byers Machine Co. (“Byers”).  Unaware of the prior use and of the cover-up, the court held the patents valid and infringed and granted an injunction. The patentee then asserted the same patents against General Excavator Co. and sought a temporary injunction based on the decree in the previous Byers case. The district court denied the injunctions but made the defendants post bonds. The defendants discovered and introduced evidence of the corrupt transaction between the patentee and the prior user. The district court declined to dismiss these cases for unclean hands. On appeal, the Sixth Circuit reversed and remanded with instructions to dismiss the complaints. The Supreme Court affirmed.
The Supreme Court explained that if the corrupt transaction between the patentee and the prior user had been discovered in the previous Byers case, “the court undoubtedly would have been warranted in holding it sufficient to require dismissal of the cause of action.” Id. at 246, 54 S.Ct. 146. Because the patentee used the Byers decree to seek an injunction in the cases against General Excavator Co. and Osgood Co., it did not come to the court with clean hands, and dismissal of these cases was appropriate.

One thing that the Therasense court missed here in its discussion of Keystone is that the equitable defense was applied to the equitable remedies sought by the patentee. It was not a direct defense to the associated legal remedies.

In this case Merck ultimately asked the court for a purely legal remedy (compensatory damages) for Gilead’s admitted infringement — I am hard-pressed to understand how unclean hands now fits into the picture as a defense.

= = = = =

I’ll note here that the thrust of Merck’s argument is that the bad-acts were not material since Merck did not take any advantage of the knowledge until after the Gilead patent published.  And, at that point, it was standard patent practice to amend claims to parallel a competitor’s patent application.  Thus, the bad acts (at least pre-litigation) might not be considered the but-for cause (materiality standard for inequitable conduct).  Here, however, the court refused to extend the strict Therasense materiality standard to the unclean hands doctrine.

The charts below provide a pendency snapshot for utility patents issued in the past month. Each chart provides two curves – one counting pendency from filing date (or 371 Date for Nat’l Stage) to issuance and the other counting pendency from the earliest priority filing date to issuance.  (Each dot represents a three-month period). Median pendency is now down to about 25 months from filing and only about 10% of these newly issued patents were pending for > 4 years.