by Dennis Crouch

In 2019, Sisvel began asserting its U.S. Patent Nos. 7,433,698 and 8,364,196 against cell phone makers, wireless chip suppliers, and cellular network operators. These patents claim methods and systems for exchanging frequency information between a mobile station and a mobile switching center to facilitate switching a mobile device’s connection point within a cellular network. Several defendants petitioned the Patent Trial and Appeal Board (PTAB) for inter partes review (IPR), arguing that the challenged claims were invalid as anticipated and/or obvious based on prior art references. The PTAB instituted IPR and ultimately issued final written decisions concluding that the claims were unpatentable. See IPR2020-01070, Paper No. 31 (PTAB Nov. 8, 2021); IPR2020-01071, Paper No. 30 (PTAB Nov. 8, 2021).

On appeal to the Federal Circuit, Sisvel challenged the PTAB’s claim construction of the term “connection rejection message” and its denial of Sisvel’s revised motion to amend the ‘698 patent claims. The Federal Circuit, in an opinion authored by Judge Stark and joined by Judges Prost and Reyna, affirmed on both issues. Sisvel International S.A. v. Sierra Wireless, Inc., No. 22-1387 (Fed. Cir. September 1, 2023).

Claim Construction

The claims at issue particularly focus on the use of a “connection rejection message” to confer certain information to a mobile device.  The term is used throughout both the patent specification and the claims.  However, it is not expressly defined. The key dispute was it should be construed broadly to mean simply “a message that rejects a connection” or narrowly limited to “a message from a GSM or UMTS telecommunications network rejecting a connection request from a mobile station.”  As is usual for IPR proceedings, the patentee was asking for the narrow construction in order to avoid the prior art.

The Board and the Federal Circuit both applied the Phillips standard. Phillips v. AWH Corp., 415 F.3d 1303 (Fed. Cir. 2005) (en banc)  Under Phillips, claims are construed according to their plain and ordinary meaning as understood by a person of ordinary skill in the art, looking at the intrinsic evidence including the claims, specification, and prosecution history. Although the specification provides guidance, limitations found within described embodiments should not be imported into the claims absent a clear intent by the patentee to limit claim scope.  Extrinsic evidence, such as dictionary definitions are less important.

On appeal, the Federal Circuit agreed with the PTAB that the plain and ordinary meaning of “connection rejection message” is “a message that rejects a connection.” It found no persuasive basis in the intrinsic evidence to restrict the term only to GSM or UMTS networks. The patentee’s argument here was that the embodiments found in the specification were all directed to UMTS or GSM networks.  But, the problem is that the specification also states that the invention is could work “in many different cellular telecommunications systems” of which UMTS and GMS are two examples. The specification goes on to state that the system work work in any system that involves sending a rejection message in the manner outlined.  Thus, although the specification only the two networks, the court found that the claims and specification were drafted broadly and did not limit the invention only to GSM/UMTS. The court  ultimately declined to confine the claims only to the disclosed embodiments and instead affirmed the broad construction.

Result — invalidity affirmed.

Motion to Amend

Sisvel also challenged the PTAB’s denial of its revised contingent motion to amend claims of the ‘698 patent. The PTAB found the proposed substitute claims impermissibly broadened the scope of the original claims, specifically by changing “based at least in part on” to merely “using” when referring to information from the connection rejection message.  The AIA explicitly prohibits broadening amendments in IPR proceedings. 35 U.S.C. § 316(d)(3) states that amended claims “may not enlarge the scope of the claims of the patent.” Similarly, 37 C.F.R. § 42.121(a)(2)(ii) provides that a motion to amend may be denied if it seeks to enlarge the scope of the claims.

Sisvel contended that when all limitations were considered together, the substitute claims were narrower overall. On appeal, the Federal Circuit explained that a claim is broadened if it is broader in any respect–even if narrowed in some other respects, if it is broadened in any respect. Here, the change from “based on” to “using” broadened the claims by removing the requirement that the frequency parameter impact the value.

Key Takeaways

In hindsight, this is a situation where the patentee could have drafted the claims in these patents in a way that would have at least avoided the arguments raised here.  Of particular note, it often makes sense to include a dependent claims that narrow aspects of the claim to the same level provided by the embodiments. Here, the court also latched-onto throwaway language in the specification stating that the system could work on any network even though the rest of the specification focused on GSM and UMTS networks.  Still, at the time the statement likely made sense as an attempt to explain why it was proper to allow claim scope that is not limited to those networks.

by Dennis Crouch

The U.S. Court of Appeals for the Federal Circuit recently declined to issue a writ of mandamus directing the U.S. District Court for the Eastern District of Texas (Judge Gilstrap) to dismiss a patent infringement lawsuit against Charter Communications based upon improper venue. In re Charter Commc’ns, Inc., No. 2023-136 (Fed. Cir. Sept. 5, 2023). Although non-precedential, the decision highlights a key difference between motions to dismiss for improper venue under 28 U.S.C. § 1406 and motions to transfer venue for convenience under 28 U.S.C. § 1404. It also shows the high bar for obtaining the “extraordinary remedy” of mandamus relief from denial of an improper venue motion.

The usual rule for appeals is that parties must wait until final judgment.  Assuming that it loses on the merits, Charter will have another opportunity to appeal venue once the case is concluded.

Background: Entropic sued Charter for infringing several of its patents, including US10135682.  The patents cover various aspects of cable network management, focusing on Cable Modem Termination Systems (CMTS) that serve multiple cable modems. The CMTS determines various Signal-to-Noise Ratio (SNR) related metrics for these modems and assigns them to different service groups based on these metrics.

Although Charter derives substantial revenue from customers located in the Eastern District of Texas, it still moved to dismiss the case for improper venue under § 1400(b), arguing it lacked a regular and established place of business in that district.  This statute limits the locations where patent infringement lawsuits can be filed.

1400(b) Any civil action for patent infringement may be brought in the judicial district where the defendant resides, or where the defendant has committed acts of infringement and has a regular and established place of business.

Id.  The Supreme Court has interpreted this statute to limit actions against corporations to either (1) their state of incorporation or (2) a district where the defendant “has a regular and established place of business” and also infringes the patent by making, using or selling the invention.   Charter is a Delaware company and does not operate its own retail stores in the Eastern District.  Still, the district court denied the motion to dismiss, finding venue was proper because Charter ratified retail stores operated by its subsidiaries in the district and those subsidiaries were Charter’s agents.

Improper vs. Inconvenient Venue

There is an important distinction between improper venue under § 1400(b) and inconvenient venue under § 1404(a). Section 1400 applies when venue is “wrong” or “improper” in the chosen district. If venue is improper, the district court must dismiss the case or transfer it to a proper district.  And, if a case goes to conclusion in an improper venue, a losing defendant would have an opportunity to appeal and at least get a new trial in a proper venue.

In contrast, § 1404 allows transfer “[f]or the convenience of parties and witnesses” even when venue is proper. Courts have greater discretion in deciding § 1404 transfer motions based on case-specific factors like convenience and judicial economy.  And, by the end of a trial, it is almost never “convenient” to retry the case in another venue.  Thus, post-trial section 1404 appeals are basically automatic losers.

Thus, even though “wrong venue” sounds like a bigger deal than “inconvenient venue” the Federal Circuit has historically only granted immediate mandamus actions for the latter.  The difference here is that, absent mandamus, the inconvenient venue issue cannot practically be appealed.

Mandamus Standards

The party seeking a writ of mandamus must show (1) no other adequate means to attain relief; (2) a clear and indisputable right to issuance of the writ; and (3) the writ is appropriate under the circumstances. Cheney v. U.S. Dist. Ct. for D.C., 542 U.S. 367 (2004).  In the past, the court has suggested that 1400(b) issues are unlikely to lead to mandamus relief because “post-judgment appeal is an adequate alternative means for attaining relief” if venue is found improper on appeal. In re Monolithic Power Sys., Inc., 50 F.4th 157 (Fed. Cir. 2022).

The Federal Circuit’s Decision

In a short opinion authored by Judge Cunningham, the Federal Circuit denied Charter’s petition for mandamus, finding no justification for immediate review of the district court’s order:

At most, CCI’s arguments present a record-specific dispute: whether CCI exerts control sufficient to impute its subsidiaries’ in-district operations to CCI under Fifth Circuit law. . . . CCI’s petition does not raise the type of broad, fundamental, and recurring legal question or other considerations that might warrant mandamus review.

In re Charter Commc’ns, Inc., (Fed. Cir. Sept. 5, 2023) (internal citations and quotation marks omitted). The court here emphasized that mandamus is an “extraordinary remedy” and Charter had not shown the district court’s decision was clearly wrong or raised a novel legal issue requiring prompt resolution. Rather, Charter seemed to “present[] a record-specific dispute” about imputing its subsidiaries’ activities to Charter for venue purposes. The court also explained that Charter could still challenge venue on direct appeal after final judgment, which provided an adequate alternative remedy.

Conclusions

The court has refused to take the bait and expand mandamus relief to improper venue challenges under § 1400(b). Defendants must generally wait to appeal after final judgment, even if venue may have been erroneous. Note though that mandamus may be still be justified for improper venue decisions implicating unsettled areas of law or where the party can show a major resulting injustice. But disagreements about case-specific facts and analysis are unlikely to clear the high mandamus bar.

The U.S. Patent and Trademark Office (USPTO) has called their 2.4 million square foot headquarters in Alexandria, Virginia home since 2005. But the agency does not actually own the cutting-edge facility located in the Carlyle neighborhood near the Potomac riverfront. Instead, the USPTO has leased the complex from New York-based real estate owner LCOR.

Several months ago, the USPTO announced it would be downsizing and relinquishing 800,000 square feet of space. The renewed 5-year lease covers 1.6 million square feet.  Still a big footprint, but one reflective of how the USPTO’s workplace and workforce have evolved over the past two decades.

When the agency first moved in, hoteling and work-from-home examiner programs were in place, but not the expectation. Fast forward to today and the USPTO has fully embraced telework along with opening satellite offices nationwide, reducing the need for everyone to be housed at HQ. Despite major examiner corps growth during this time, the footprint no longer needs to be so large.

However, the USPTO’s landlord LCOR now faces its own challenges filling the soon-to-be vacant space. The company continues to struggle finding replacement tenants, as office vacancy rates remain high nationwide.

Most recently, credit rating agency Moody’s downgraded LCOR’s credit outlook to “high risk of default” status. The downgrade reflects Moody’s view that LCOR may have trouble refinancing debt and have insufficient cash flow to cover interest payments unless new paying tenants are found.

I remember first visiting HQ way back then and thinking of the potential benefits of having a patent law office in an adjacent building.  Today, that imagined benefit seems much less so as it is likely that your examiner is sitting at home in another state.

by Dennis Crouch

Rafqa Star LLC v. Google LLC, No. 6:22-cv-01207-ADA, 2022 WL 3747666 (W.D. Tex. Aug. 17, 2022).

Google is one of the largest companies in the US with extensive ties not just to every state, but virtually every household in the entire country.  Still, the company regularly argues that it would be too unfair and inconvenient to litigate patent cases in states such as Texas. In a recent decision, Judge Alan Albright (W.D.Tex.) denied Google’s motion to transfer venue. In his 40-page order, Judge Albright provided an in-depth analysis of the private and public interest factors that, based upon prior precedent, govern transfer under 28 U.S.C. § 1404(a).  The relevant statute reads as follows:

For the convenience of parties and witnesses, in the interest of justice, a district court may transfer any civil action to any other district or division where it might have been brought or to any district or division to which all parties have consented.

Id.  Before analyzing this case, I want to step back and recognize that the current legal test for patent venue transfer has departed significantly from the statutory language declaring the goals of convenience and justice. The public and private factor analysis mandated by current precedent does not actually focus on real inconvenience to parties or witnesses. For instance, the location of documents and witnesses gets weight when almost everything is cloud based. And the 100-mile rule makes little sense in an age of national air travel and remote work.  This is especially true for patent cases that will have nationwide impact.

Moreover, these motions are never really about convenience in patent cases, but rather are tactics for judge shopping with the parties competing to reach a perceived more favorable forum. Like Google, the defendants are typically corporations with national reach who can – and do – litigate anywhere. But they believe certain districts or judges, like Judge Albright, are less favorable for them. Venue motions are weaponized as part of broader forum shopping, not for legitimate inconvenience reasons.

This underlying reality casts doubt on the entire enterprise of venue disputes in patent cases. The jurisprudence should be realigned to get back to the statutory standard and goals of convenience and justice. But until then, district courts and parties are stuck playing this game, as evidenced by the venue fight in Rafqa v. Google.

An interesting solution would be to require parties to certify that the public and private factors highlighted in their argument serve as the primary motivation for seeking a venue change, rather than an attempt to avoid a judge or forum perceived to be less favorable.  W.D. Texas has also largely eliminated the Judge Albright singularity with its order requiring random distribution of patent cases filed in Waco.

As Judge Albright explained, Mr. Tan’s declaration ambiguously stated that Google employees “report to” offices in NDCA but did not declare that they actually reside there. Google’s lawyers then used this ambiguous phrasing claim that the employees were located in NDCA. Judge Albright also recounted inconsistent testimony Mr. Tan gave at an evidentiary hearing when pressed about his basis of knowledge for claiming employees were in NDCA.  Mr. Tan was unable to give a persuasive basis.  Based upon his in-person credibility determination, Judge Albright found Mr. Tan’s declaration and testimony unreliable and thus struck the statements about employee locations.

The order also explores apparent attempts by Google’s counsel to mislead the Court about the location of a Google employee in Texas. Counsel relied on a LinkedIn profile rather than investigating the employee’s actual location, leading to shifting stories.

These aspects of the case offer some important tactical considerations for the parties, especially when the fact-finder is a judge rather than a jury.

This case will almost certainly receive a mandamus petition to the Federal Circuit, and it will be interesting to see whether the appellate court once again rejects Judge Albright’s approach.

Rafqa’s asserted patent US11145215 claims a method of providing user feedback (such as directions) based upon inputs from a motion detector and video device.

by Dennis Crouch

USC IP P’ship, L.P. v. Meta Platforms (Facebook), 22-1397 (Fed. Cir. August 30, 2023)

In a non-precedential opinion authored by Judge Pauline Newman, the Federal Circuit has affirmed USC IP Partnership’s asserted patent claims are all invalid.  Back in 2020, USC IP sued Facebook for infringing its U.S. Patent No. 8,645,300.  The arguably pro-patentee Judge Alan Albright served as the district court judge.  Like Judge Newman, he had also found the claims invalid as unduly directed to an abstract idea. USC IP P’ship, L.P. v. Facebook, Inc., 576 F. Supp. 3d 446 (W.D. Tex. 2021) (granting summary judgment of ineligibility).

A difficulty with search engines, and communication generally, is that parties often fail to fully and literally state their needs.  We are often left inferring intent based upon other clues, such as situational context or our knowledge of the speaker.  USC IP’s ‘300 patent attempts to provide some solutions to this problem through its “intent engine” that uses an “intent tool” as well as a ranking tool to provide better results. The intent engine analyzes information about the user to predict their intent and displays this inferred intent in the intent field. It also recommends webpages matching the intent in the recommendation field. The user can provide ranking data on how well the webpage matches their intent via the ranking tool, and this data is stored in a database. As recited in the claims, the intent engine combines intent prediction, webpage recommendation, and user ranking to deliver a customized browsing experience. But, the claims focus on the high-level functionality of the system rather than the technical details of how intent analysis, recommendation algorithms, or data storage operate.  In some of the claims, the process is interactive — with the system prompting visitors to confirm their intent before recommending webpages matching the intent.

As per usual, the Federal Circuit analyzed patent eligibility under the two-step test set forth in Alice Corp. v. CLS Bank Int’l, 573 U.S. 208 (2014). At step one, the court looks to whether the claims are directed to an abstract idea such as a fundamental economic practice or mathematical formula. If so, the court proceeds to step two, where it considers whether the claims contain an “inventive concept” sufficient to transform the abstract idea into a patent-eligible application. This process involves looking at the claim elements individually and in combination to assess whether they amount to significantly more than the abstract idea itself.

Applying the two-step Alice framework, the Federal Circuit agreed with the district court that the claims are directed to the abstract idea of “collecting, analyzing and using intent data.” This kind of data collection and analysis is an abstract idea, even  if implemented on a computer. The court compared USC IP’s claims to those invalidated in Electric Power Group, LLC v. Alstom S.A., 830 F.3d 1350 (Fed. Cir. 2016).

At Alice step two, the court agreed that the claims lack an inventive concept to transform the abstract idea into a patent-eligible application. They merely invoke generic computer components like web browsers and databases. As Judge Albright explained, the “intent engine” is described only as a black box without accompanying technical details.

The patentee’s key argument on appeal was at step-2, arguing that the “intent engine” was not a conventional or generic computer component, but provided a technical solution rooted in computer technology like the claims in DDR Holdings. The patentee argued the intent engine played a role that went beyond well-understood, routine, and conventional computer functionality.  And, the patentee provided expert testimony at the district court level in an attempt to support this conclusion.

On appeal, the Federal Circuit rejected these arguments and again affirmed Judge Albright’s holdings. Albright had disregarded the expert testimony as merely providing legal conclusions without underlying factual support — finding it not “backed by any concrete facts from the specification or prior art.”  The appellate panel went on to agree that the ‘300 patent claims are not directed to any improvement in computer functionality itself but merely describe the use computers as a tool.

The claims here were filed and issued prior to Alice and Mayo at a time when many patents were focused more on the functional terms without the accompanying technical details.  Today, many are thinking of similar tools in the generative AI context. Like here, I expect that gen-AI tools will face high patent eligibility obsticles absent inclusion of strong technical implementation details placed at least within the specification, but more likely within the claims themselves.

The Harris County Texas appellate court recently affirmed summary judgment favoring the Hunton Andrews Kurth law firm and its attorneys. Taylor v. Hunton Andrews Kurth, LLP, 14-22-00410-CV (Tex. App.–Hous. [14th Dist.] July 13, 2023).  Taylor and his companies WPEM and W2W had sued the firm for legal malpractice after first losing its infringement lawsuit and being stuck with the defendants attorney fees. The case offers a few key takeaways for entrepreneurs delving into the patent system.

Background: William Taylor and his business partner developed a software application called SafeCell and assigned the patent rights to their startup company W2W. They hired Hunton AK to handle the patent application process. Hunton filed provisional and non-provisional patent applications on behalf of W2W.  Several years later, after a patent was granted (and their legal bill still unpaid), Taylor and his partner transferred patent rights back to themselves as individuals and terminated W2W. They then formed a new company called WPEM and assigned the patent to WPEM so it could sue another company for infringement. That lawsuit failed with a complete reversal — WPEM was ordered to pay $180,000 in attorneys’ fees to the defendant.

Taylor, his partner, WPEM, and W2W then sued Hunton for legal malpractice, alleging negligence in the handling of the original patent application. The trial court dismissed all claims except Taylor’s individual claims against one Hunton attorney, which were later severed and dismissed in a separate order. The appellate court affirmed, holding (1) Taylor was not the firm’s client, and neither was WPEM; (2) although W2W as a client its had been terminated in 2017 — more than 3 years before hand.  That was a problem because Texas has a 3-year limitation on actions following dissolution of a corporation.

Key Takeaways for Inventors and Startups

1. Be careful when assigning IP rights from individuals to businesses, and back again.

The engagement letter was between W2W and Hunton, not with Taylor or his partner as individuals. And, Hunton had the individuals sign a particular statement that they were not the clients.  The court found this disclaimer made clear Hunton only represented W2W. The transfer of the patent from W2W to the individuals did not transfer W2W’s attorney-client relationship.

Key quote: “The assignment of a patent does not transfer an attorney-client relationship.” (quoting Telectronics Proprietary, Ltd. v. Medtronic, Inc., 836 F.2d 1332 (Fed. Cir. 1988)).

2. Understand the effects of terminating a business entity.

W2W lacked standing to sue because it had been terminated as an entity outside the 3-year winding up period permitted under Texas law. Its claims were extinguished.

Key quote: “Once dissolved, the corporation could neither sue nor be sued, and all legal proceedings in which it was a party abated.” (quoting Hunter v. FW, 620 S.W.2d 547 (Tex. 1981)).

3. Individual shareholders generally can’t sue for harms to the company.

The court applied the corporate injury rule, which bars owners from recovering personally for injuries to the company. Taylor owned no individual losses because he did not own the patent rights at any relevant time.

Key quote: “Under the corporate injury rule, an owner of a company cannot sue to recover damages personally for a wrong done to the company. ”

The outcome here is a classic corporate defense strategy — the defense used the complex corporate structure and ownership changes to ultimately defeated of the claims.  For inventors and startups seeking to protect IP, it makes sense to also consult with a corporate attorney along the way to ensure consistent protection.

I’ll note here that although Hunton Andrews Kurth won on technicalities, they also denied the substance of the claims.

by Dennis Crouch

The publicly traded Australian company IPH Limited continues expanding its global intellectual property services empire. IPH’s latest acquisition is the Canadian IP firm Ridout & Maybee for $65 million Canadian dollars. This comes just 10 months after IPH purchased Canada’s largest IP firm, Smart & Biggar.

Ridout & Maybee will merge into Smart & Biggar, further consolidating IPH’s presence in Canada. IPH’s strategy is to dominate secondary IP markets like Canada, New Zealand, and Singapore. It already owns leading firms in Australia, including AJ Park, Griffith Hack, Pizzeys, and Spruson & Ferguson.

Ridout’s website indicates only that the firm is joining “fellow Canadian IP firm, Smart & Biggar” and does not indicate that the firm will be owned by the publicly traded firm IPH.

As I wrote last October, IPH’s model raises conflict of interest concerns. With control of over 1/3 of Australian patent filings, competitors may find their IP work handled by business partners. The growth also tests regulations restricting non-lawyer ownership of law firms.

The expansion of publicly traded international IP conglomerates like IPH makes one wonder if similar consolidation could come to the US. For now, the USPTO prohibits their model. But with IPH now owning top firms across the Pacific, Canada, and Australia, pressure on the USPTO’s stance may build over time. The IPH model promises global reach and resources while threatening attorney independence. The coming years will tell whether it represents the future of IP law.

by Dennis Crouch

The U.S. Court of Appeals for the Ninth Circuit recently issued a pair of decisions in the qui tam case Silbersher v. Valeant Pharmaceuticals concerning the False Claims Act’s (FCA) public disclosure bar.  The case sets significant precedent in linking FCA claims to patent prosecution and fraud upon the patent office.  The case can be contrasted with Silbersher v. Allergan, Inc., 21-15420, — F.4th — (9th Cir. Aug. 25, 2022) [21-15420], that Silbersher lost.

Background

The False Claims Act (FCA) allows private citizens, known as “relators,” to file qui tam suits on behalf of the government against those who have submitted false or fraudulent claims to the Federal Government. A relator who successfully prosecutes an FCA action is entitled to receive a percentage of any recovery. This bounty system is meant to encourage whistleblowers to come forward with information about fraud against the government. However, the FCA also contains a “public disclosure bar” to prevent opportunistic litigation by relators who do not contribute any original information. The public disclosure bar mandates dismissal of qui tam suits where the allegations are substantially the same as information already publicly disclosed through certain channels enumerated in the statute. The public disclosure bar applies to block FCA claims when: (1) the disclosure occurred via a specified channel, (2) the disclosure was public, and (3) the relator’s allegations are substantially the same as what was disclosed.  31 U.S.C. § 3730(e)(4)(A). If the bar is triggered, courts must dismiss the FCA claim unless the relator qualifies as an “original source” of the information.

In this case, the relator, Zachary Silbersher, brought an FCA lawsuit alleging that Valeant Pharmaceuticals and Dr. Falk Pharma fraudulently obtained patents covering their Apriso drug.  According to Silbersher, Valeant intentionally withheld material prior art references showing that Apriso’s delayed-release formulation was obvious. Valeant then allegedly used the fraudulently obtained patents to charge Medicare/Medicaid inflated prices for Apriso.

Silbersher is a patent attorney and represented GeneriCo in an inter partes review (IPR) proceedings that invalidated one of Valeant’s patents related to Apriso.  In the course of that investigation, Silbersher found that Valeant (allegedly) took inconsistent positions in prosecuting related patents several years apart regarding whether Apriso’s effectiveness without food would have been obvious.

The district court dismissed the suit under the FCA’s public disclosure bar discussed above. The court held that the inter partes review (IPR) proceedings invalidating one of Valeant’s Apriso patents qualified as a public disclosure and contained substantially the same allegations as Silbersher’s complaint.  Thus, because the fraud was already subject of public disclosure, it could not serve as the basis for a False Claims Act Claim.

Ninth Circuit’s Analysis

On appeal, the Ninth Circuit reversed, holding that the IPR proceedings did not qualify as a public disclosure under § 3730(e)(4)(A).  The provision spells out the types of public disclosures that bar FCA claims:

[Barring disclosures may be found in] … (i) in a Federal criminal, civil, or administrative hearing in which the Government or its agent is a party; (ii) in a congressional, Government Accountability Office, or other Federal report, hearing, audit, or investigation; or (iii) from the news media …

Id.  The appellate panel explained that IPRs are primarily adversarial and adjudicatory rather than investigative. With the government not a party to the IPR, the proceeding did not qualify under channel (i) as a “hearing in which the Government … is a party.” Nor did it qualify under channel (ii) as an “other Federal … hearing” since IPRs are not focused on fact-finding or obtaining information, but rather serve as an adversarial proceeding.

While the patent prosecution histories qualified as public disclosures under channel (ii), the Ninth Circuit held they did not disclose substantially the same allegations or transactions as Silbersher’s complaint. Critically, neither the prosecution histories nor any other single qualifying document revealed Valeant’s allegedly inconsistent positions taken before the PTO. According to the Ninth Circuit, publicly disclosing a “fraudulent transaction” requires revealing both the alleged misrepresentation and the true facts, which was absent here.

Key Takeaways

The decisions provide a roadmap for litigators to structure FCA claims based on “fraudulent transactions” arising from allegations of inequitable conduct or inconsistent representations before the PTO. Carefully piecing together the elements of fraud from various public sources may avoid triggering the public disclosure bar. For defendants, these cases highlight the importance of the pleadings and demonstrating that the “essential elements” of alleged fraud have already been publicly disclosed.  A prosecution history that explains any inconsistencies with parallel proceedings would also avoid the potential problem.

by Dennis Crouch

Mylan v. IRS, No. 22-1193, — F.4th — (3d Cir. July 27, 2023)

In a recent tax appeal, the Third Circuit court of appeals afformed that legal expenses incurred by generic drug makers to defend against patent infringement suits brought under the Hatch-Waxman Act are deductible as ordinary and necessary business expenses. This aligns with longstanding precedent treating patent litigation defense costs as deductible for the alleged infringer.

Mylan had deducted over $100 million in litigation expenses for the periods of 2012-2014 it occurred in defending patent infringement lawsuits brought against the generic manufacturer after it submitted abbreviated new drug applications (ANDAs) with paragraph IV certifications challenging the respective patents.  The IRS disallowed the deductions and issued notices of deficiency to the company — concluding that instead the litigation costs should be capitalized under I.R.C. § 263 (and associated regulations) as costs to acquire intangible assets (the FDA drug approvals).   The capitalization process requires amortization over 15 years rather than permitting immediate tax relief offsetting current income.

Mylan petitioned the U.S. Tax Court for redetermination and won a holding that litigation costs were deductible business expenses, rejecting the IRS’s position that they should be capitalized.  The IRS Commissioner then appealed to the 3rd Circuit who affirmed.

In the appeal, the IRS argued that litigation costs should be capitalized under Treas. Reg. §1.263(a)-4(b)(1)(v) as amounts paid to facilitate the acquisition of the FDA drug approvals, which are intangible assets.  The 3rd Circuit rejected that argument, holding that lawsuits by the branded manufacturers do not facilitate FDA approval.  The court noted that the FDA can approve an ANDA regardless of the litigation outcome and also that not every ANDA results in litigation so it is not a required step in the process.  Although litigation is a contemplated aspect of the Hatch-Waxman process, that does not convert the litigation into an approval requirement.  The court also noted that disparate tax treatment between generics and brands would undermine Hatch-Waxman.

The Third Circuit had previously held that litigation expenses a patentee incurs in enforcing its patents are ordinary and necessary business expenses because they are “peculiarly normal to the business in which … [patentee] taxpayers [a]re engaged.” Urquhart v. Commissioner, 215 F.2d 17, 19 (3d Cir. 1954). The court in Mylan reasoned that generic manufacturers defending infringement suits are engaged in functionally the same activity as patentees enforcing patents. Thus, the court concluded that deductibility should not differ based on whether litigation expenses are incurred by the patentee or alleged infringer. In the court’s view, “[i]t makes no difference in deciding the question of deductibility whether the patent litigation expenses are incurred by the patentee or the alleged infringer. Nor does it matter that the deductibility question arises in the context of an ANDA suit.”

Generic manufacturers relying on deductibility of these litigation costs will benefit from the ruling. If the fees had to be capitalized, it would substantially increase costs and undermine their incentives to challenge weak patents under Hatch-Waxman.

By: Abhay Aneja, Assistant Professor of Law, University of California, Berkeley, Diversity Pilots Initiative Researcher, Gauri Subramani, Assistant Professor in the Department of Management, College of Business, Lehigh University and Diversity Pilots Initiative Researcher, and Oren Reshef, Assistant Professor of Strategy, Washington University in St. Louis.  This post is part of a series by the Diversity Pilots Initiative, which advances inclusive innovation through rigorous research. The first blog in the series is here, and resources from the first conference of the initiative are available here.

About 86% of all patent applications are submitted by men or all-male teams. This underrepresentation of women gets worse as the patent approval process runs its course. In other words, patent applications from women and teams with higher female representation are less likely to convert into granted patents. Why is this happening?

An essential feature of the patent process is that it is highly iterative, so rejection occurs often, as the figure below of the evaluative trajectory of patent applications shows.  While over 80% of applications face rejection, it is crucial to note that rejection does not necessarily indicate the impossibility of moving forward with that invention. Applicants can respond to rejections and continue in the patent process. However, research indicates that female patent applicants are less likely to follow up after rejection, contributing significantly to the lower conversion rate of applications to granted patents.

A potential approach for overcoming female tendencies not to push forward or fight in response to rejection relates to whether the patent applications are affiliated with attorneys or firms. When applications are affiliated with firms, the process is typically managed by patent committees comprised of specialized experts, such as patent attorneys, who have lots of experience determining whether proposed ideas can be patented. Not only can these experts craft applications strategically, but they can also manage communications with patent examiners. For instance, they may help with responding to a rejection.

Although it is no surprise that both men and women benefit from the support of patent professionals, interestingly, female applicants derive much more significant gains than men from firm and attorney affiliations. This suggests that access to information and financial resources provided by firms and attorneys is particularly valuable for female patent applicants, potentially compensating for lower response rates to rejection and the other barriers women commonly face before applying for a patent (e.g., limited professional networks). However, the proportion of male inventors affiliated with firms or attorneys is higher than that of female inventors.

The underrepresentation of women in the field of innovation has far-reaching implications for our society. We are losing the opportunity to benefit from valuable contributions and perspectives just as much as the underrepresented population in innovative activities. From a macroeconomic perspective, this is a significant loss of potential economic growth. However, while the underrepresentation of women hurts society overall, it hurts women the most.

Research demonstrates that women are more likely to develop innovations that serve the needs of other women. For instance, the first disposable diaper was created by a mother, who herself was exposed to the issue many other women also face. Therefore, if female inventors are underrepresented, women more broadly are underserved because the innovations that may serve women’s specific needs are less likely to exist. Also, participation in innovation leads to individual-level benefits. Patents enable inventors to commercialize their inventions, benefit from increased wages, and enhance their employability. Women are obstructed from the opportunity to have access to these tangible pecuniary benefits.

The underrepresentation of women in the patent process is a critical issue that needs our attention. It is easy to think that women who apply for patents are probably more resistant to negative feedback because they’re already a highly self-selected group who have persisted in their endeavors against many obstacles. However, this is not necessarily true. A robust body of research illustrates that demographics are important in career choices and trajectories. Children born into the wealthiest 1% of society are ten times more likely to be inventors than those born into the bottom 50%. Female college graduates are much less likely to transition to STEM jobs. Even if female students eventually enter those fields, female academics and scientists are less likely to patent than male academics and scientists, partially due to their limited professional networks.

Also, the small proportion of women who do end up participating in innovation are often disadvantaged by biased evaluations of their accomplishments and capabilities as compared to similarly qualified men. These hurdles throughout the process inhibit women from becoming scientists or participating in innovation. It is crucial to address these challenges at each stage of the pipeline with interventions such as providing better access to information and free legal representation. By recognizing and tackling these obstacles, we can foster a more inclusive and supportive environment for women in innovation.

Measures such as improving access to information, providing free legal representation, and dismantling gender biases in evaluations can advance diversity in innovation. More representation of women in the field will not only foster economic growth but also lead to innovations that cater to the diverse needs of our world. I urge you to join our efforts to support women and bridge the gender gap in innovation.

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by Dennis Crouch

Steuben Food recently lost its infringement case against Shibuya Hoppmann with the district court holding (1) the doctrine of equivalents (DOE) cannot extend to cover the accused aseptic bottle filling technique and further (2) the reverse doctrine of equivalents shields the defendant against charges of literal infringement.  Steuben Foods, Inc. v. Shibuya Hoppmann Corp., No. 1:19-cv-02181-CFC, 2023 WL 2498810 (D. Del. Mar. 14, 2023) (U.S. Patent Nos. 6,209,591; 6,536,188; and 6,702,985) (Chief Judge Connolly). The case is now pending on appeal at the Federal Circuit with the successful defendant’s responsive brief due in mid-September.

• SteubenFoods Appeal Brief
• District Court Decision

There is fierce competition in the bottling industry, and Shibuya sold bottling lines to a major Steuben customer.  Steuben sued Shibuya on three patents and initially won with a jury awarding $38 million in infringement damages.  However, Chief Judge Connolly rejected the jury verdict by issuing a Judgement Notwithstanding the Verdict, holding that no reasonable jury could have found infringement.  The rules of civil procedure now identify JNOV as the perhaps more politically correct name of Judgment as a Matter of Law (JMOL).  The new name avoids the inconvenient truth that the process involves the rejection of a constitutionally protected jury decision.

Based upon what I’ve read — that admittedly does not yet include the appellee’s brief — I would side with Steuben Foods in this one.  Judge Connolly was too aggressive at rejecting the jury verdict of infringement; too aggressive at applying the vitiation doctrine to a single word within the claim; and too aggressive at applying the long dormant reverse doctrine of equivalents.

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Judge Connolly’s JMOL decision turns on two controversial patent law doctrines – the doctrine of equivalents and its inverse, the reverse doctrine of equivalents.

Doctrine of Equivalents

The doctrine of equivalents allows a patentee to establish infringement, even when an accused product or process does not literally fall within the claims of the patent, if the accused product or process contains only insubstantial differences from the patent claims. The Supreme Court recognized the doctrine of equivalents in Graver Tank & Mfg. Co. v. Linde Air Products Co., 339 U.S. 605 (1950), explaining that it operates to prevent copying that makes only minor, insubstantial changes to avoid the literal scope of the claims. The doctrine is justified on the basis that language has inherent limitations in capturing the true scope of an invention, so equivalents help protect the inventor and promote innovation. However, the doctrine is controversial because it expands patent scope beyond literal claim terms, reducing public notice and potentially ensnaring later-developed technologies in infringement. The Supreme Court placed key limitations on the doctrine in Warner-Jenkinson Co. v. Hilton Davis Chemical Co., 520 U.S. 17 (1997), requiring equivalence to be assessed on an element-by-element basis and prohibiting vitiation of claim limitations.

Steuben’s ‘985 patent covers a sterilization machine and includes the following element: “wherein said atomized sterilant is intermittently added to said conduit.”  Claim 1 (emphasis added).   The problem though is that the accused device was shown to add the sterilant continuously. Although the jury found infringement by equivalents, the district court reasoned that the doctrine of equivalents could not apply in this type of binary situation.  That lead to the court’s conclusion that allowing equivalents for continuous operation would vitiate the intermittent operation limitation.   On appeal, Steuben contends the court ignored precedent against using a ‘binary choice’ approach to vitiation. See, Deere & Co. v. Bush Hog, LLC, 703 F.3d 1349, 1356–57 (Fed. Cir. 2012) (“Courts should be cautious not to shortcut this inquiry by identifying a ‘binary’ choice in which an element is either present or ‘not present.'”).   The patentee also argues that substantial evidence supported the jury’s equivalents verdict based on applying the proper function-way-result test.

This aspect of the dispute thus raises important questions about how narrowly the doctrine of equivalents should be applied. And, in addition, it challenges the power distribution between judge and jury in finding infringement.

Reverse Doctrine of Equivalents

A more surprising aspect of Judge Connolly’s decision is his application of the reverse doctrine of equivalents.  Reverse DOE allows an accused infringer to escape liability, even if its product or process literally satisfies every element of the patent claim, if the accused product or process is so substantially changed in principle that it performs the same or a similar function in a substantially different way. The doctrine originated in Supreme Court precedent such as Graver Tank and was designed to prevent unwarranted extension of patent scope over later-developed technologies functioning in new ways. However, the doctrine is controversial because it negates what would otherwise constitute infringement under the statute, conflicts with literal claim interpretation, and is seldom applied by courts today.

For the ‘591 patent, the lower court rejected the jury verdict of infringement based upon the reverse DOE — holding that the accused product operated “in a substantially different way” from Steuben’s invention as described in its specification.  Here, the claims required a “second sterile location.” Steuben accomplished this with a redesign of filling valves to avoid attracting contaminants and use of sterilant.  On the other hand, the accused product used a bellows surrounding the valve stem to prevent contamination.

The district court found the accused product’s approach to fit within the literal claim scope, but still non infringing because the approach was radically different from that described in Steuben’s specification.

In the case, Shibuya provided expert testimony of the key differences of operation by comparing the accused product against the disclosed embodiments.  During the trial, the patentee focused on the claim language and did not attempt to rebut the argument that the underlying approaches to create the sterile region was quite different.  (Steuben also apparently mischaracterized the patents disclosure). In its JMOL decision, the court concluded that the unrebutted evidence of significant difference was enough to entitle Shibuya to JMOL of noninfringement under the reverse doctrine of equivalents.  The court emphasized here that the critical issue is whether the accused device is so far changed in principle that it operates substantially differently from the claim, even if it literally infringes.

On appeal, Steuben argues the court fundamentally misapplied Reverse DOE analysis by comparing Shibuya’s device to patent specifications rather than the actual claims. It also contends the Reverse DOE improperly negates infringement, conflicting with the Patent Act.

The Federal Circuit now has the opportunity (and duty) to shape the law on these two important equivalents doctrines. On the doctrine of equivalents, the court can provide guidance on applying a legal test of vitiation versus the factually intensive function-way-result test.  In the lead up to the recent Amgen decision, many of us have had ongoing discussions about the relationship between disclosure doctrines (enablement/WD) and the doctrine of equivalents.  As one doctrine is locked-down, there is more pressure to expand the other.  With so much focus on the disclosure side, it may be time to ease up on the DOE limitations.

For the reverse doctrine of equivalents, the court can clarify if this much maligned doctrine still remains viable in today’s statutory framework.  And if so, the court should delineate the proper role of the reverse doctrine versus literal claim interpretation. As with DOE, I would argue that reverse DOE should be given to the jury to decide rather than JMOL.

The appeal was filed by Cook Alciati (Steuben’s former Chief IP Counsel, now in private practice at Gardella Grace). A team from Sterne Kessler, apparently led by appellate specialist JC Rozendaal represents the defendant-appellee.

by Dennis Crouch

The Supreme Court’s landmark 1950 decision in Graver Tank & Mfg. Co. v. Linde Air Products Co., 339 U.S. 605 (1950) is one of the court’s most cited patent cases.  The decision established important guideposts for applying the doctrine of equivalents (“DOE”), including consideration of the prior art and a focus on the substantiality of differences. While courts today emphasize evaluating equivalence on an element-by-element basis, Graver Tank‘s substantive analysis remains highly influential.

Linde Air Products held a patent on welding fluxes using alkaline earth metal silicates. US Patent No. 2,043,960. Graver Tank’s flux substituted manganese silicate, which was not an alkaline earth metal. Though Graver Tank’s flux did not literally infringe, the Court found it performed “the same work in substantially the same way [to] accomplish substantially the same result.”  This has become known as the function-way-result or tripartite test.

Over the past 70 years, Graver Tank’s doctrine of equivalents analysis has been instrumental in assessing infringement and remains a key tool for patentees to enforce their rights against insubstantial changes. At the same time, the doctrine has been further shaped and limited. Courts today emphasize an element-by-element approach rather than looking at the product as a whole. Warner-Jenkinson Co. v. Hilton Davis Chemical Co., 520 U.S. 17 (1997). Prosecution history estoppel limits the doctrine for claims amended or argued during patent prosecution. Id, See also, Festo Corp. v. Shoketsu Kinzoku Kogyo Kabushiki Co., 535 U.S. 722 (2002).  And, the doctrine of vitiation precludes a finding of equivalence when it would effectively eliminate or “vitiate” a claim limitation. See, Freedman Seating Co. v. American Seating Co., 420 F.3d 1350 (Fed. Cir. 2005) and Depuy Spine, Inc. v. Medtronic Sofamor Danek, Inc., 469 F.3d 1005 (Fed. Cir. 2006).

In Warner-Jenkinson, the Supreme Court reaffirmed the viability of the doctrine of equivalents, but placed some limitations on its application. Specifically, the Court held that the doctrine must be applied to individual elements of a claim, not to the invention as a whole. The Court also held that prosecution history estoppel can bar the doctrine of equivalents when an amendment or argument during patent prosecution surrenders subject matter that would otherwise fall under equivalents.  In Festo, the Supreme Court provided more detail on prosecution history estoppel (PHE)–establishing a a presumption against application of the doctrine of equivalents for claim limitations that were amended during patent prosecution for reasons related to patentability.

In Graver Tank, the Court had applied the doctrine to find infringement based on the substantial similarity of the overall compositions at issue. Under the standard set forth in Warner-Jenkinson, the Graver Tank analysis would likely have compared the “alkaline earth metal silicate” and “manganese silicate” elements specifically to determine their equivalence. Additionally, prosecution history estoppel may have precluded equivalence, if the reason alkaline earth metals were claimed was to overcome a rejection during patent prosecution.

The rise of these legal limitations has given judges tools to more frequently dismiss DOE claims on summary judgment or JMOL.

As the chart shows above, courts continue to cite and rely upon Graver Tank. The following are typical reasons:

• To support application of the doctrine of equivalents generally and reference the “function-way-result.”
• To emphasize that minor or insubstantial differences do not avoid infringement.
• To note that equivalents is a question of fact for the jury to decide rather than a question of law.  Typically, expert testimony will provide the key underlying evidence.

On the fact/law issue, the majority opinion explains that a question is more likely to be factual in nature when it requires specific scientific knowledge. “Particularly is this so in a field where so much depends upon familiarity with specific scientific problems and principles not usually contained in the general storehouse of knowledge and experience.” Id. This quote has been cited by a number of courts in other fields when attempting to determine whether a particular issue is legal or factual.

One important note is that this post focuses on the majority opinion penned by Justice Robert Jackson.  Justices Hugo Black and William Douglas jointly wrote a dissent concluding that patents should be limited to their literal scope based upon the claim language.  The dissent argued that the DOE undermined the statutory requirement for clear patent claims.  See 35 U.S.C. 112(b) (“claims particularly pointing out and distinctly claiming”).

By Jason Rantanen

I’m getting ready to teach my Fall 2023 Patent Law class, and that means updating the granted utility patents graph that I do every few years.  This year’s version shows U.S. utility patents granted per year from 1840-2022:

Data for 2023 isn’t included in the table, but as of July 25, 2023, the authority file contains just 171,556 patents.  If the pace remains the same, that would work out to about 294,000 patents granted this calendar year–around 10% fewer than 2022 (327,482 granted patents) and around 18% lower than 2020 (356,640 granted patents). (In contrast, at the end of July 2022 there were 186,500 patents listed on the Authority file.) But my sense is that the drop from 2022 may be due to a delay in actually publishing the granted patents rather than reflecting a decline.

In fact, looking at the USPTO’s reported statistics, I’d actually expect more issued patents in 2023 than in 2022.  Filings are continuing to trend slightly upwards (there were 457k non-RCE UPR filings in FY 2022, as compared with 450k in FY 2020 and 427k in FY 2018). Allowances are up slightly as well: 253k allowances so far in 2023, as compared with 247k at the same point in 2022. So the decrease in granted patents relative to last year may be the result of a delay between allowance and publication. If you have any insights into this, I’d love to hear them.

One thing that does appear to be real is a drop in allowances relative to 202o, which had 278k allowances by the end of June. This doesn’t appear to be the result of fewer applications or a lower allowance rate–instead, there’s been a large growth in the unexamined application inventory from 570k (June 2020) to 735k (June 2023).

Methodology:

I imported the 2023-07-25 Patent Grant Authority file into STATA and tabulated the number of A1, B1 and B2 kind code records by year.  (For those who might be confused by the use of A1, the authority file uses A1 to indicate pre-2001 utility patent grants).  I included patents that are marked as Withdrawn.  The above graph uses calendar years (Jan. 1 – Dec. 31) instead of FY (fiscal years: Oct 1 to Sept. 30).  To predict 2023, I divided the grants as of the 7/25 by 7, then multiplied by 12; the number is similar if weeks are used. Data on filings and allowances comes from the detailed spreadsheet at the bottom of https://www.uspto.gov/dashboard/patents/.