The patent battle between Masimo and Apple over pulse oximetry technology in the Apple Watch took a new turn on December 27th. Despite the recent import ban imposed by the U.S. International Trade Commission (ITC), Apple was granted a temporary stay by the U.S. Court of Appeals for the Federal Circuit. For now, this emergency ruling blocks the government from enforcing the exclusion order on certain Apple Watch models through at least mid-January. However, the legal fight is far from over. For Masimo, this short-term win for Apple weakens its bargaining position as the two companies continue their protracted patent dispute in courts and before regulatory agencies.
In a non-precedential decision, the Federal Circuit has affirmed a set of PTAB decisions canceling the claims of four patents owned by Carucel Investments L.P. (“Carucel”) — finding them invalid as obvious under 35 U.S.C. § 103. See Carucel Invs. L.P. v. Vidal, Nos. 2021-1731 (Fed. Cir. Dec. 26, 2023). The affected Carucel patents include U.S. Patent Nos. 7,221,904; 7,848,701; 7,979,023; and 8,718,543, with priority back to a 1996 application filing. All four patents relate to mobile communication systems involving base stations that can be mounted on moving vehicles. Carucel v. Vidal Opinion.
The original focus of the invention involved a closed-loop rail system running alongside a highway and that carried mobile base stations moving in the direction of the flow of traffic. That focus of the invention was quickly scrapped – likely as impractical. But, the disclosure was seen as sufficient to also cover movable base stations with no rail limitation — allowing mobile base stations that might be on the cars and other vehicles themselves.
Multiple petitioners, including Mercedes-Benz, Volkswagen, and Unified Patents filed petitions seeking inter partes review (“IPR”). Relying on KSR Int’l Co. v. Teleflex Inc., 550 U.S. 398, 406 (2007), the Patent Trial and Appeal Board (“PTAB”) instituted review and ultimately issued final written decisions concluding that the petitioners had proven by a preponderance of evidence that all challenged claims were unpatentable as obvious.
On appeal, Carucel disputed the PTAB’s claim constructions, obviousness determinations, and post-institution procedures under the Administrative Procedure Act (“APA”). The Federal Circuit rejected Carucel’s arguments on all fronts.
Claim Construction: During inter partes review proceedings, the patentee is typically seeking a narrow construction of various terms in order to distinguish itself from the prior art. This has to be a careful argument — if the patentee goes too narrow then the accused infringers can also escape liability.
Here, the patent specification suggests that the mobile base stations are connected directly via cellular-network. However, the claims themselves only use the terms “mobile device” and “mobile unit.” The court explained that neither the claim language nor the specifications justified restricting the scope to only cellular networks or requiring the mobile devices to directly register or communicate with the network. In its analysis the court concluded first that the words “mobile device” refers to the capability of movement of a physical object and does not suggest the narrow construction requested.
On the obviousness determination, the Federal Circuit made the factual determination that a person of ordinary skill in the art would have been motivated to combine the teachings of the prior art with a reasonable expectation of success. That determination quickly led to the legal conclusion that the claims were obvious. On appeal, the Federal Circuit gives deference to PTAB fact finding under the substantial evidence standard. And here, the court found more than iota to support the conclusions — especially after deferring to the PTAB’s credibility findings favoring petitioner’s expert testimony. At oral arguments, Brian Bear (Spencer Fane) argued that the Board had simply adopted the opposing expert testimony ipse dixit without providing critical analysis and, in particularly without explaining how the prior art combination overcame the “massive barrier” of incorporating the TDMA systems in some references alongside the CDMA systems in other references. As with the PTAB decision, the Federal circuit decision does not provide a direct response or analysis regarding the TDMA/CDMA incompatibility issue.
Finally, the Federal circuit rejected Carucel’s argument that the PTAB’s denials of requests for Director Review violated the APA. The denial orders themselves were unsigned, but still sufficiently identified the Commissioner Hirshfeld as the presiding officer. In addition, the Director Review does not need to separately explain reasons for denial. Although this is an agency action, the PTAB written decisions are “reviewable final decisions of the agency” despite intervening director denial.
Brian Bear of Spencer Fane argued the case for the patentee with Debra McComas of Haynes & Boone for appellees. Michael Tyler from the PTO’s solicitor’s office also defended the opinions. Judge Stark authored the unanimous opinion that was joined by Judges Dyk and Schall.
December 25th, marked the deadline for President Biden to reject the U.S. International Trade Commission’s (USITC) ruling banning imports of certain Apple Watch models. With no action from the White House, Apple now faces a federal government order to halt imports and sales of Apple Watch Series 9 and Ultra 2 devices because it incorporates light-based pulse oximetry technology covered by the claims of Masimo’s U.S. Patent Nos. 10,945,648 (claims 24 and 30) and 10,912,502 (claim 22).
By: Paul Gugliuzza is a Professor of Law at Temple University Beasley School of Law, Jordana R. Goodmanis an Assistant Professor of Law at Chicago-Kent College of Law and an innovator in residence at the Massachusetts Institute of Technology, and Rachel Rebouché is the Dean and the Peter J. Liacouras Professor of Law at Temple University Beasley School of Law.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.
The ongoing reckonings with systemic racism and sexism in the United States might seem, on first glance, to have little to do with patent law. Yet scholarship on racial and gender inequality in the patent system is growing. Recent research has, for example, shown that women and people of color are underrepresented among patent-seeking inventors and among lawyers and agents at the PTO. In addition, scholars have explored racist and sexistnorms baked into the content of patent law itself.
In a new article, we empirically examine racial and gender inequality in what is perhaps the highest-stakes area of patent law practice: appellate oral argument at the Federal Circuit.
Unlike many prior studies of inequality in the patent system, which look at race or gender in isolation, our article looks at race and gender in combination. The intersectional approach we deploy leads to several new insights that, we think, highlight the importance of getting beyond “single-axis categorizations of identity”—a point Kimberlé Crenshaw made when introducing the concept of intersectionality three decades ago.
The dataset we hand built and hand coded for our study includes information about the race and gender of over 2,500 attorneys who presented oral argument in a Federal Circuit patent case from 2010 through 2019—roughly 6,000 arguments in total. Our dataset is unique not only because it contains information about both race and gender but also because it includes information about case outcomes, which allows us to assess whether certain cohorts of attorneys win or lose more frequently at the Federal Circuit.
Perhaps unsurprisingly, we find that the bar arguing patent appeals at the Federal Circuit is overwhelmingly white, male, and white + male, as indicated on the three figures below, which break down, in a variety of ways, the gender and race of the lawyers who argued Federal Circuit patent cases during the decade covered by our study. (Note that the figures report the total number of arguments delivered by lawyers in each demographic category. Note also that the number of arguments we were able to code for the race of the arguing lawyer was slightly smaller than the number of arguments we were able to code for the gender of the arguing lawyer, so the total number of arguments reported on the figures differ slightly.)
Federal Circuit Patent Case Oral Arguments, 2010-2019
What is surprising, however, is that the racial and gender disparities illustrated above dwindle when we look only at arguments by lawyers appearing on behalf of thegovernment, as shown on the three figures below, which limit our data only to arguments by government lawyers. (About 75% of those government arguments were by lawyers from the PTO Solicitor’s Office; the others came from a variety of agencies, including the ITC and various components of the DOJ.)
Federal Circuit Patent Case Oral Arguments, 2010-2019 – Government Lawyers Only
In fact, among lawyers appearing on behalf of the government, the proportion of arguments by women, people of color, and women of color exceeded the proportion of women, people of color, and women of color in the total population of practicing lawyers—that is, all lawyers, not just patent lawyers. Among private sector patent lawyers, by contrast, the proportion of arguments by women, people of color, and women of color was much lower than the proportion of women, people of color, and women of color in the total population of lawyers, as shown on the table below.
To restate those findings in a slightly different fashion: we find that, among lawyers arguing patent cases at the Federal Circuit, a government lawyer is 2.3 times more likely than a private-sector lawyer to be a person of color, over 5 times more likely to be a woman, and over 10 times more likely to be a woman of color.
Remarkably, the racial and gender disparities we find—particularly among Federal Circuit lawyers from the private sector—bear no relation to attorney performance. As we explain at length in our article, appellants in Federal Circuit patent cases win about a quarter of the time and appellees win about three-quarters of the time—with no significant differences based on race, gender, or the intersection of the two.
There is, however, one group of lawyers who do win more frequently than all others: a small group of 65 private-sector lawyers who argue patent cases at the Federal Circuit more than anyone else—on average, at least once a year. When seeking to overturn a judgment of a district court, the PTO, or the ITC in a patent case, those frequent Federal Circuit advocates succeed 41% of the time, as compared to a 24% win rate for the other private-sector lawyers in our dataset. That finding adds a patent-law angle to a growingliterature documenting the remarkable influence a small group of specialist appellate litigators (mostly white and male, and almost all at the wealthiest, most prestigious law firms in the world) have had on the U.S. legal system.
We conclude our article with some ideas about how to make the patent system, and high-level law practice generally, more diverse and inclusive. In the main, we think our findings about the large proportion of women, people of color, and women of color arguing patent appeals for the government undercuts the oft-mentioned “pipeline” explanation for a lack of diversity in patent law—that is, the idea that women and people of color are absent because they lack scientific or technical backgrounds.
Not only is that explanation based on outmoded conceptions of what patent practice entails—especially patent litigation—our data suggest there are women, people of color, and women of color arguing patent cases at the highest level—they are just not getting many opportunities to do so in law firm practice. Indeed, though the number of government arguments in our dataset (567) is less than one-tenth the number of arguments by private-sector lawyers (5825), the government had a greater number of arguments presented by women of color (65) than the private sector did (60).
The inequalities we find among private-sector patent lawyers, and the lack of correlation between those inequalities and case outcomes, suggest that entry into the upper echelon of patent practice is about more than winning and losing in the courtroom. As a recent ABA report on “interrupting bias” suggests, to really make progress with race and gender equity, we must focus on the structural causes of disadvantage and exclusion. For instance, law firms can use concrete, objective metrics to track the effects of diversity efforts, to ensure promoting diversity is rewarded in performance reviews, and to ensure no demographic group is being treated differently in assignments, evaluation, and compensation.
In short, broadening the population of lawyers who make it to very top of appellate practice will require a more deliberate approach than “add diversity and stir”; it will require disrupting the rules and norms that exclude and undermine outsiders to the status quo.
Three main takeaways:
Racial and Gender Disparities in Patent Law Practice: The study highlights that the demographic of attorneys arguing patent appeals at the Federal Circuit is predominantly white and male. This disparity is evident when compared to the total population of practicing lawyers. However, an interesting contrast is observed in government lawyers, where the proportion of arguments by women, people of color, and women of color exceeds their proportion in the overall lawyer population.
No Difference Between Attorney Demographics and Case Outcomes: Despite the noted disparities in racial and gender representation, these factors do not correlate with the success rates in court. The data indicates that appellants in Federal Circuit patent cases win roughly a quarter of the time and appellees three-quarters of the time, irrespective of the attorney’s race, gender, or their intersection.
Need for Structural Changes to Enhance Diversity: The post concludes that the disparities in private-sector patent law practice and the absence of correlation with case outcomes point to a need for more than just increasing diversity. There is a call for addressing structural causes of disadvantage and exclusion in the legal profession. This includes implementing concrete measures in law firms to track and promote diversity, ensuring fair treatment in assignments, evaluations, and compensation, and disrupting norms that perpetuate the status quo, thereby broadening the population of lawyers in top appellate practice.
Guest post by: Davidson Heath, Assistant Professor of Finance,Nathan Seegert, Associate Professor of Finance, and Jeffrey Yang. All authors are with the University of Utah David Eccles School of Business. 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.)
Diversity in innovation is essential. Varied perspectives, experiences, and skills foster creativity and problem-solving. Diverse teams are more likely to challenge assumptions, leading to novel solutions and breakthroughs. Variety in tastes and background can help identify and serve a wide range of user needs.
Open-source software (OSS) is often praised for its ability to foster innovation. Part of the rationale is that OSS allows for open collaboration, enabling continuous improvement and adaptation by a diverse community. For example, a vast garden of open-source large language models such as Meta’s Llama 2 are flourishing and are projected to surpass closed-source AI in the near future.
Figure 1. Capabilities of Machine Learning Models: Open vs. Closed-Source
The open-source collaborative model has accelerated innovation in many fields. Yet to date, we know little about how these teams form, and how their diversity impacts productivity. How does the diversity of OSS teams compare to the overall contributor pool? And what are the productivity outcomes for OSS teams that increase their diversity compared to those that do not?
In our new paper, entitled “Team Production and the Homophily Trap: Evidence from Open-Source Software,” we examine the dynamics of diversity and productivity in the OSS setting. The key novel concept that we introduce is homophily – the tendency of individuals to associate with others who are similar. This tendency, while natural, has important implications for the diversity and productivity of OSS teams. By analyzing over 40,000 teams developing OSS projects over a ten-year period, we uncover two facts – (1) teams tend to be less diverse than the available pool of contributors, primarily due to homophily and (2) teams that add diversity have higher productivity, suggesting that other teams are “stuck” in an inefficient, low-diversity state. Strikingly, this pattern has been getting worse, not better, over time; as the coder population has expanded, average team diversity has actually fallen.
Figure 2. Trends over Time in Open-Source Coder Population and Team Diversity
This pattern, which we term the “homophily trap”, is detrimental to development and innovation. For those leaders working on software projects or within engineering, scientific and innovative teams, our study highlights the importance of the following questions: How can organizations avoid the homophily trap? What specific strategies can be employed to attract and retain diverse team members? What gains can organizations expect to see from diversifying their teams?
Our study helps to answer some of these questions. First, we show that team diversity has large positive returns to productivity. We find that teams that do escape the homophily trap by increasing their diversity are more likely to continue to be actively developed; have more development activity, conditional on continuing; and attract a larger and more diverse userbase. These effects are especially strong for teams that start at lower levels of diversity, underlining the substantial untapped potential in diversifying team composition.
Second, our study provides suggestions and strategies for enhancing team diversity and escaping the homophily trap. Importantly, initiatives to increase the diversity of the overall pool of contributors can actually backfire because a more diverse pool gives teams more similar peers to assort with. To combat this tendency, teams need policies that directly encourage diversity at the team level. Such policies can break the cycle of homophily-based selection into homogeneous groups. To attract and retain diverse team members, it is important to implement inclusive recruitment practices and establish an environment that values diverse perspectives. Finally, educate your engineers. By promoting awareness of the benefits of diversity, it may be possible to avoid the homophily trap.
For engineers, scientists, and inventors, we believe the insights from our study highlight the crucial role of team diversity in driving innovation and productivity. Teams might prefer similar peers for ease of coordination and communication and might prefer to recruit known quantities from their social networks, but these benefits are smaller than the gains to productivity from a more diverse team. And importantly, interventions targeted at increasing diversity on teams can yield improvements in both team diversity and project outcomes. This perspective is particularly relevant for organizations in settings where collaboration and innovation are paramount.
Three main takeaways:
Diversity Drives Innovation: Diversity in teams fosters creativity and problem-solving. It is a positive input into innovative breakthroughs and addressing a wide range of user needs.
The Homophily Trap: Our study uncovers a “homophily trap” in open-source software teams, where teams are less diverse due to a preference for similarity, limiting their potential. Quasi-experimental estimates suggest an increase in team diversity results in a 2.4 percentage point increase in the likelihood that a project remains active in the subsequent year. An increase in team diversity also leads to significant increases in the size and diversity of the project’s userbase.
Strategies to Enhance Diversity: To mitigate the homophily trap, our study suggests promoting diverse team formation, targeting low-diversity teams in particular, and creating supportive environments for diverse talent.
In a December 20, 2023 decision, the UK Supreme Court has agreed with American courts that an inventive machine is not deserving of patent rights. The underlying case will be familiar to many with Dr. Stephen Thaler of St. Louis seeking to patent a thermal-mug designed by an artificial intelligence machine that he created. Thaler has argued that the AI (called DABUS) conceived of the particular invention in question and also identified its practical utility. The UK Supreme court based its holding upon the text of the UK Patents Act of 1977 as it reached the same ultimate conclusion as the Federal Circuit in Thaler v. Vidal, 43 F.4th 1207 (Fed. Cir. 2022), cert. denied, 143 S. Ct. 1783 (2023).
These Thaler cases showcase that under the current patent law regime, autonomous AI systems cannot qualify as inventors entitled to patent rights, irrespective of their creativity. For AI-generated inventions to become patentable, intervention by policymakers to amend inventorship laws would likely be necessary. However, the arguably bigger questions of immediate importance surround collaborative human-AI inventions where both human and machine contribute in creation of a new invention. Thaler expressly disclaimed any human input into DABUS’s inventions, but going forward mixed human-AI inventor teams seem inevitable. Neither the UK Supreme Court’s decision nor the parallel US rulings provide direct guidance on the requisite threshold quality or quantity of human participation in such collaborative inventions to satisfy legal inventorship requirements. Thus, for instance, an open issue remains whether token perfunctory human approval of an AI-devised invention would suffice, or if substantive intellectual contribution is needed. And for primarily AI-driven inventions, are minor tweaks by a human collaborator enough? Or must the human contributor objectively supply the novel concept? (more…)
In a recent nonprecedential decision, the Federal Circuit dismissed Ontel’s appeal seeking to overturn the PTAB’s IPR decision upholding the patentability of Dafni’s hair straightening brush patents. Ontel Products Corp. v. Guy A. Shaked Invs. Ltd., No. 2022-1938 (Fed. Cir. Dec. 19, 2023). The court held that Ontel lacked standing to appeal because “the dispute between Ontel and Dafni over this patent is moot.” Under the mootness doctrine, “a case becomes moot ‘when the issues presented are no longer live or the parties lack a legally cognizable interest in the outcome.’” ABS Global, Inc. v. Cytonome/ST, LLC, 984 F.3d 1017, 1020 (Fed. Cir. 2021). At the same time, the panel refused to vacate the PTAB decision upholding the ‘562 patent claims, holding that the case “became moot through actions that are closer to joint settlement than to unilateral action” by Dafni.
In my earlier post, I noted my hope that the Federal Circuit would reach the substantive issues that focused on the role of secondary considerations in obviousness determinations and whether Dafni had established the required nexus between the evidence of industry praise and acceptance and the claimed invention. The mootness conclusion precludes that analysis.
Dafni had originally sued Ontel for infringing several different patents. Ontel successfully petitioned for Inter Partes Review (IPR) of one, US9877562, and the district court agreed to stay litigation pending outcome of the IPR. Rather than waiting for that outcome, Dafni, with cooperation from Ontel, entered a stipulated dismiss of the ‘562 infringement allegations. The basic idea was that by removing that patent out of the queue, the case asserting US9578943 could move forward. Dafni eventually won the IPR with a PTAB final written decision holding that the claims had not been proven invalid. Ontel appealed, but the Federal Circuit has now dismissed the appeal as moot.
In explaining why Ontel lacked a concrete stake in the appeal, the court emphasized that “Dafni’s prior ’562 patent-infringement claim against Ontel is no longer pending” and that Dafni’s “disclaimer of any right to challenge the district court’s order dismissing the claim of infringing that patent (including by seeking to reinstate the ’562 patent-infringement claim), precludes any new assertion of that patent against Ontel.” Further, Ontel provided no “evidence of planned or likely future conduct that could risk potential-infringement liability” and identified no “relevant contractual rights” affected by the PTAB decision.
The court rejected Ontel’s assertion that it had an interest in preventing Dafni from relying on the PTAB decision regarding the ’562 patent in separate litigation involving Dafni’s ’943 patent. As the court explained, issue preclusion does not apply to unappealable PTAB decisions, and “the potential for collateral consequences” of the PTAB’s conclusions is insufficient to supply standing. Quoting Best Medical International, Inc. v. Elekta Inc., 46 F.4th 1346, 1353 (Fed. Cir. 2022)
Having found the dispute over the ’562 patent moot, the court next considered the proper disposition—whether to simply dismiss the appeal or also vacate the PTAB decision under United States v. Munsingwear, Inc., 340 U.S. 36 (1950). As the Supreme Court has made clear, “[v]acatur is in order when mootness occurs through happenstance—circumstances [either] not attributable to the parties [or attributable to] the ‘unilateral action of the party who prevailed in the lower court.” Arizonans for Official English v. Arizona, 520 U.S. 43 (1997). However, “mootness by reason of settlement does not justify vacatur.” U.S. Bancorp Mortg. Co. v. Bonner Mall P’ship, 513 U.S. 18 (1994).
Here, the court found Dafni did not unilaterally cause mootness but rather the case “became moot through actions that are closer to joint settlement than to unilateral action.” The court highlighted a joint stipulation dismissing the ’562 patent claims, Ontel’s opposition to reinstating those claims, and Dafni’s ultimate disclaimer of any right to challenge that dismissal order. Exercising its “equitable discretion,” the Federal Circuit declined to also vacate the PTAB decision upholding the ’562 patent claims.
An increasing number of foreign defendants are being sued for IP infringement in US courts. These cases raise important procedural questions of district court personal jurisdiction over the foreign defendants. One ongoing debate involves proper service of process for foreign defendants under the Hague Service Convention.
Freedom Patents LLC v. TCL Electronics provides some interesting nuance. The case was filed in E.D.Tex before Judge Mazzant with Freedom Patents suing TCL companies located in the China, Hong Kong, and Vietnam for infringing its antennae patents, including US8284686.
Several defendants challenged the propriety of service of process, and moved to dismiss under Federal Rule of Civil Procedure R. 12(b)(5) (“insufficient service of process”). Judge Mazzant initially delayed any ruling on the motion, but after the TCL companies petitioned for mandamus, he eventually issued his split decision in the case — ultimately finding that the HK and Vietnamese defendants had been properly served, and providing a simple mechanism for serving the PRC China-based defendants (delivering the summons to their US attorneys). [Mazzat Order on Service of Foreign Defendants].
Texas law provides a mechanism for service of process of non-Texas-residents who engage in business in Texas, but without a regular place of business or a designated agent. This substitute service process is that the Texas Secretary of State legally serves as the designated agent for foreign defendants conducting business within the state who have not already established a registered agent. Here, the plaintiff alleged that each of the defendants were conducting business in the state of Texas without any designated agent. This allowed the plaintiff to serve the Texas Secretary, he then forwarded a copy of the summons to each defendant.
Although all of the defendants received actual notice, they still complain that they were not formally served and therefore are not subject to the Court’s jurisdiction. TCL Vietnam argued that it does not engage in business in Texas, and therefore the Texas approach is improper. The Hong Kong and PRC defendants argued that the approach did not comport with the Hague Convention.
TCL Vietnam: Texas law defines ‘doing business’ within the state to include committing a tort in the state. Here, the sale of infringing product in the state is patent infringement — a tort. Although TCL Vietnam is not necessarily the importer or seller within the US, prior Texas cases have have held that a foreign manufacturer is doing business in the US by producing products with plans for them to be sold in the US, and then putting them into the stream of commerce in a way that sends them to the US. Based upon this line of reasoning along with the patentees factual allegations, Judge Mazzant found that the patentee had shown enough to conclude TCL Vietnam was doing business in the US. And, therefore, that the service was proper.
The PRC and Hong Kong defendants raised a second issue — that the transmission of documents from the Texas Secretary of State to their offices in PRC and Hong Kong implicates the Hague Convention.
On this point, the patentee disagreed and argued that it served the defendants’ legally designated agent in the State of Texas, a domestic service. And therefore, that the Hague Convention has no applicability since it only addresses foreign service.
FRCP 4(h) governs service of process for corporations, including foreign corporations. A foreign defendant being served within the US may be served by “following state law for serving a summons” as it would be done in state court in that district. See 4(h)(1)(A) referring to 4(e)(1). The patentee argues that this is what is happening — that the foreign defendants are constructively in the state of Texas via their legally designated agent and therefore can be served in the manner permitted by Texas law. On the other hand, a foreign defendant being served outside of the US can be served “by any internationally agreed means … reasonably calculated to give notice, such as those authorized by the Hague Convention.” R.4(f)(1). The rule for international service also gives district courts latitude in determining the means of service so long as “not prohibited by international agreement” so long as reasonably calculated to notify the defendants. R.4(f)(3). The defendants point here though is that service of foreign defendants outside of the US requires consideration of international agreements, namely Hague.
After reviewing these issues, the district court sided with the defendants, concluding that “when a signatory to the Hague Convention is served through the Texas Secretary of State, the Hague Convention is implicated.” Primarily here, the court concluded that due process considerations should be incorporated into the rule — and so it makes sense to ensure that the notice is reasonably calculated to reach the defendants. Normally, a party is deemed served if their designated agent is properly served. Here, however, because we have involuntary agent created by law, due process requires an additional step – that the agent then forward the materials to the defendant in a way calculated to achieve notice. Because this international forwarding is part of the service process, the rules of international service (i.e., Hague) are implicated.
At the next inquiry, the court looked to see whether the actions — mailing from the Texas Secretary comport with Hague. Now the actual Hague process is fairly slow and cumbersome. The plaintiffs instead successfully argued that the service should be deemed to pass muster so long as it is reasonably calculated to put the defendant on notice and is not contrary to any international agreement such as Hague.
With regard to Hong Kong, the court concluded (contrary to defendants arguments) that Hong Kong continues to permit service by mail. “In their Motion, Defendants stated ‘service of process by mail is not allowed in . . . the Hong Kong SAR.’ This is false.”
With regard to PRC, the court found that China has expressly objects to service by mail.
When incorporated into the Hague analysis, these contrary results allowed the court to find that service by mail from the secretary of State was proper in Hong Kong as well as Vietnam. On the other hand, the service by mail to PRC defendants was improper.
In the case, Plaintiffs requested alternative relief — allowing service of process through an alternative means. Namely, the court noted that the PRC defendants had hired US counsel and that it would be proper to serve those defendants via their US attorneys. Although Hague does not proved for service to US Counsel, it also does not prohibit that approach that the court found would be reasonably calculated to provide notice.
The defendants have moved for reconsideration — arguing the order contains clear errors of law creating “manifest injustice”if allowed to stand.
First, the defendants contend that even if Hong Kong generally permits mail service, substituted service on the Hong Kong defendants through the Texas Secretary of State was improper because they do not engage in business in Texas as required by Texas law. (Judge Mazzant seems to have skipped that initial issue for PRC/Hong Kong defendants).
Second, the defendants argue that alternative service on the China-based defendants through their U.S. counsel would violate principles of international comity. The key Federal Circuit case on point is the non-precedential In re Oneplus Tech. Co., No. 2021-165, 2021 U.S. App. LEXIS 27282, at *9-10 (Fed. Cir. Sep. 10, 2021). In Oneplus, the court explained that “even when other methods of obtaining service of process are technically allowed, principles of comity encourage the court to insist, as a matter of discretion, that a plaintiff attempt to follow foreign law in its efforts to secure service of process upon defendant.” Id. The delay caused by proper Hague service is not sufficient justification.
In the pending appeal of In re Chestek, PLLC, No. 22-1843, a trademark applicant is opposing the USPTO requirement that all applicants must disclose their domicile address. This requirement, referred to as the “domicile address rule,” has been controversial since the USPTO adopted it in a 2019 rulemaking. For individuals, this rule requires an actual residential address. See Requirement of U.S. Licensed Attorney for Foreign Trademark Applicants and Registrants, Final Rule, 84 Fed. Reg. 31498 (July 2, 2019). The outcome could have significant implications for privacy and transparency in the trademark registration system. For a variety of reasons, many people do not publicly disclose their place of residence. In the US, the most common reasons stem from domestic violence and stalking. Although the USPTO is attempting to offer a mechanism to protect domestic residence from public view, it also recently had a major data loss of that information — and effectively all domestic residence information is available in various sources online. A decision favoring the petitioner would also be seen as bolstering the Administrative Procedure Act’s notice and comment requirements.
The best place to begin any analysis is probably with the statute. (more…)
The Federal Circuit has granted a large number of mandamus petitions in order to move cases out of Judge Alan Albright’s W.D.Tex. courtroom based upon the inconvenience felt by large multinational defendants. On December 14, 2023, the appellate court once again took the extraordinary step, this time on behalf of Samsung, of granting a petition for a writ of mandamus, ordering the infringement lawsuit to be transferred to the Northern District of California. In re Samsung Elecs. Co., Ltd., No. 2023-146 (Fed. Cir. Dec. 14, 2023).
For convenience transfer motions under 28 U.S.C. 1404(a), the Federal Circuit follows the law of the particular regional circuit court of appeals. Because most of these cases stem from Texas, this means the Fifth Circuit who recently established further precedent the copyright case In re TikTok, Inc., 85 F.4th 352 (5th Cir. 2023).
The Fifth Circuit in In re TikTok granted TikTok’s petition for a writ of mandamus, directing the Western District of Texas to transfer a copyright infringement case brought against TikTok by a Chinese company to the Northern District of California. The court applied the test for mandamus review of improper venue decisions established in In Re Volkswagen, requiring the movant to show the transferee venue is “clearly more convenient.” After analyzing each of the eight court created private and public interest factors that govern transfer, the Fifth Circuit concluded that the district court’s denial of transfer amounted to a clear abuse of discretion leading to a patently erroneous result.
Specifically, in TikTok, the Fifth Circuit found the district court erred in weighing the witness convenience and ease of access to proof factors against transfer, since the key evidence and witnesses were predominately located in China and California. It also critiqued the district court’s reliance on post-motion case progress to deny transfer as an abuse of discretion, where the court itself was responsible for delay in deciding the transfer motion. Since multiple factors favored transfer and none favored the plaintiff’s chosen venue, the Fifth Circuit granted mandamus directing the Western District of Texas to transfer the case.
In Samsung, the Federal Circuit followed-in-suit and ordered Samsung’s case to be transferred. One key factor in the case has to do with travel time from potential Korean witnesses, and the Federal Circuit concluded that the NDCA was much more convenient as a travel destination from Korea:
The Fifth Circuit recently rejected similar reasoning in In re TikTok . . . . Because most of the potential witnesses here are in Korea and NDCA, transfer would greatly reduce the time and inconvenience of travel. As in TikTok, the presence of some [party] employees in Eastern Texas . . . ‘cannot overcome the immense inconvenience that the majority of relevant witnesses would face if this case were to be tried in’ WDTX.
Samsung at 4. The court here does not provide its factual basis for explaining why traveling from Korea to NDCal is immensely more inconvenient than Korea to Texas, and has previously rejected the use of travel distance as a key factor — especially in situations like patent cases that will typically involve an extended trial.
Judge Albright had also noted that party witnesses were willing to travel to Texas — even if located in Korea or California. On Mandamus, the Federal Circuit that “[t]he Fifth Circuit recently rejected similar reasoning” in TikTok.
This decision continues a trend of the Federal Circuit relying on mandamus to repeatedly overturn Judge Albright’s refusal to transfer cases out of his WDTX courtroom. Both the outcome and the tone of In re Samsung signals that the Federal Circuit remains skeptical of plaintiff-preferred venues that lack meaningful connections to patent disputes.
It is OTDP week at Patently-O. The USPTO recently filed its response to Cellect’s en banc petition. In the case, the Federal Circuit affirmed a PTAB finding that Cellect’s patent claims are invalid for obviousness-type double patenting (OTDP). See In re Cellect, LLC, 81 F.4th 1216 (Fed. Cir. 2023). The USPTO argues that the panel’s decision properly applied precedent and OTDP principles. Cellect USPTO Response to En Banc Petition.
The primary focus of OTDP is to protect against a patentee from unduly extending its patent term by obtaining successive obvious-variant patents. Most of the time, a patentee’s obvious-variants are family members that expire on the same date based upon the 20-year-from-filing patent term. But, sometimes the expiration date of a family member can vary greatly because of Patent Term Adjustment (PTA) that has been added to account for USPTO delays in granting the patent and required by Congress in the “Patent Term Guarantee Act.”
The focus of Cellect is whether the PTAB was correct in holding that a patentee’s extra term due to PTA in one of several patents triggers an OTDP invalidation of the extended patent. In Cellect, the court affirmed that principle — even while distinguishing PTA from the parallel “patent term extension” (PTE) that can be added to patent term to account for regulatory approval delay. PTA counts for double patenting; PTE doesn’t. Cellect has challenged this ruling in its petition for en banc review.
In its brief, the USPTO highlighted that PTA differently than PTE, the USPTO contends that the panel correctly distinguished the two statutes. Specifically, the Director highlights that 35 U.S.C. §154 contains an express limitation on PTA for patents that have been terminally disclaimed, providing that “[n]o patent the term of which has been disclaimed beyond a specified date may be adjusted under this section beyond the expiration date specified in the disclaimer.” In re Cellect, 81 F.4th at 1227; 35 U.S.C. §154(b)(2)(B). As the USPTO explains, no similar limitation exists in the statute governing PTE, indicating Congressional intent to treat PTA and PTE differently for ODP purposes.
The USPTO further disputes Cellect’s assertion that the panel ignored the PTA statute’s “guarantee” of a 17-year patent term, clarifying that 35 U.S.C. §154(b)’s “patent term guarantees” are expressly “subject to” limitations, including the terminal disclaimer provision. Thus, according to the USPTO, an applicant who engages in continued examination, for example, may not receive the full 17 years of PTA.
A substantial portion of the USPTO’s brief centers on policy rationales underlying obviousness-type double patenting (ODP). Specifically, the Director rebuts Cellect’s contentions that the panel misapplied ODP principles and “eviscerated” the doctrine’s equitable purpose.
Regarding Cellect’s assertion that the panel improperly equated statutory patent term adjustment (PTA) with an unjustified term extension, the USPTO emphasizes Cellect’s admission that its claims recite obvious variants of its earlier expiring claims. Given this concession, the USPTO argues any PTA granted to Cellect beyond those claims’ expiration constitutes an improper timewise extension of its rights over admittedly indistinct subject matter. The Director contends holding otherwise would effectively grant undeserved PTA to Cellect’s reference claims.
Further, the USPTO defends the panel’s determination that Cellect’s promise not to divide ownership of its patents failed to alleviate concerns over potential harassment by multiple assignees. On this point, the Director states “promises do not substitute for sound applications of rules of law” in protecting the public against Cellect separately licensing its indistinct patents to different entities. The Director notes Cellect could have filed such a disclaimer at any time before its reference claims expired but failed to do so.
Although the petition in this case is interesting and financially important, I expect that the Federal Circuit will deny the petition and move forward with this stronger application of the OTDP rule.
Acadia Pharms v. MSN Pharms, 20-cv-00985-GBW (D.Del. December 13, 2023) [SG No OTDP]
I have been writing some about obviousness-type double patenting and thought I would continue the process with this important new decision from Judge Williams denying the generic competitor’s motion for summary judgment of invalidity based upon double patenting, and, in fact, granting the patentee’s summary judgment of no invalidity. The case involves an attempt by generics to begin marketing a generic version of Acadia’s Parkinson’s drug Nuplazid (pimavanserin). This will be an interesting appeal to watch.
At the summary judgment stage, the parties filed competing summary judgment motions focusing on whether one patent being asserted (US7601740) should be held invalid based upon obviousness-type double patenting (OTDP). This is a ‘patricide’ situation where the reference patent (US9566271) was both later filed and later issued. Because of the standard 20-year patent term calculation, both would ordinarily expire on the same day. However, the because of patent term adjustment (and PTE), the earlier ‘740 patent actually expires years later.
In its decision, the court offered two alternative justifications for siding with the patentee, which I’ll discuss in reverse order:
No Patricide: First, the court held that the ‘271 patent does not qualify as a proper OTDP reference against the earlier-filed and earlier-issued ‘740 patent. The court noted that it could not find any case that allowed a later-filed and later issued patent to invalidate an earlier one under OTDP. “The Court has been unable to identify a case where, when challenged, a later-filed, later-issued, earlier-expiring patent was used as an OTDP reference to invalidate an earlier-filed, earlier-issued, later-expiring patent. Here, the claims in the challenged patent were earlier-filed and thus are entitled to their full term, including the PTA.” The Federal Circuit just recently explained in its Cellect decision that “claims in the challenged patents are entitled to their full term, including the duly granted PTA, unless they are found to be later-filed obvious variations of earlier-filed, commonly-owned claims.” In re Cellect, No. 2022-1293, 2023 WL 5519761 , at *10 (Fed. Cir. Aug. 28, 2023).
While I identified this case as “patricide,” I see some problem with that statement because both patents claim priority back to the same original effective filing date and (I believe that) the claims in the reference patent were part of the originally filed application. Thus, the two should probably be seen as simultaneously filed rather than sequentially, even though one was formally filed prior to the other.
The district court held that because the ‘740 patent was earlier-filed, the ‘271 patent could not serve as a proper OTDP reference against it. As the court concluded, “Because a patent must be later-filed to be available as an OTDP reference, the Court finds that the ‘271 patent does not qualify as a proper reference against the ‘740 patent.” Allowing the later-filed ‘271 patent to invalidate the ‘740 patent would contradict both precedent and the purpose of preventing unjustified patent term extensions.
I will also note here that there are a number of pre-GATT cases that do apply OTDP using later-filed applications as a reference, but that was a different time when patent term was measured from the issue date. The Federal Circuit finally signaled a shift in Gilead Scis., Inc. v. Natco Pharma Ltd., 753 F.3d 1208 (Fed. Cir. 2014), cert. denied, 135 S. Ct. 1530 (2015) and distinguished the issue-date focus of the classic Supreme Court case of Miller v. Eagle Mfg. Co., 151 U.S. 186 (1894). See also, Daniel Kazhdan, Obviousness-Type Double Patenting: Why It Exists and When It Applies, 53 Akron L. Rev. 1017, 1038 (2019) (“Now, however, only the expiration date mattered.”).
Later cases have continued to compare filing dates as part of the OTDP analysis. However, this approach skips over Judge Chen’s key reasoning in Gilead that focused on the patent expiration date and whether that was being improperly extended. Chen wrote “looking to patent issue dates had previously served as a reliable stand-in for the date that really mattered—patent expiration. . . . [T]hat tool does not necessarily work properly for patents to which the URAA applies, because there are now instances, like here, in which a patent that issues first does not expire first.” Gilead. The nuance here when applied to Acadia is that Judge Williams appears to have obtusely focused on the filing date while ignoring “the date that really mattered—patent expiration.” In Gilead, the first issued patent had a longer patent term because it was later filed and thus was subject to OTDP comparison to a later-issued patent. But the key here for the court was not the filing date, but rather the expiration dates — that the patentee had two patents covering obvious variants expiring on different dates. That is the same situation the court faced in Acadia, but Judge Williams was unwilling to move beyond the formalist filing date consideration.
Its a Divisional: Judge Williams offered a second, alternative reasoning for excluding the asserted reference patent from consideration — holding that the reference patent was protected by the safe harbor of Section 121.
In some cases, the USPTO will issue what is known as a “restriction requirement” forcing the patent applicant to divide up a particular application into separate parts. A common example may involve a patent application claiming a particular chemical compound and a method of making that compound. The examiner will likely see those as two separate inventions and force them to be divided. In that situation, the patent applicant might maintain the compound claims in the original application and then file a “divisional application” to protect the methods of manufacture. Section 121 provides a safe harbor for this situation such that the two family-member patents/applications cannot serve as references against one another.
Section 121 is written as a fairly dense paragraph of text, but it appears to have a couple of important requirements for the safe-harbor to kick-in:
The divisional application must be “filed as a result of” the restriction
requirement on another application; and
The divisional application must be “filed before the issuance of the patent on the other application.”
Based upon the peculiar facts of this case, MSN argued that neither of these requirements had been met. Eventually, Judge Williams disagreed and found the divisional safe harbor serves as a second alternative justification for finding no double patenting.
Acadia filed its application that led to the ‘740 patent back in 2004 (this is the patent at issue in the case). Three years later, the USPTO issued a restriction requirement and Acadia elected a subset of claims that eventually issued in October 2009. Unlike the continuation applications that we’ll talk through, the ‘740 was delayed at the USPTO and so issued with about 3 years of patent term adjustment beyond the ordinary 20 year term as part of the patent term guarantee offered by Congress.
Meanwhile, one year before the restriction requirement, Acadia had already filed a continuation from the ‘740’s application (not a divisional). That continuation was pending and prosecution was moving forward with a restriction requirement. Rather taking the typical response and election in the continuation case, Acadia took a series of steps: (1) it cancelled the pending claims; (2) presented a new set of claims that corresponded to those reserved from the ‘740 restriction; and (3) told the examiner that it planned to change the case to a divisional. All this occurred in July 2009, a few months before the original application issued in October 2009. It was not until 2010 that Acadia actually amended the specification to formally identify the application as a divisional six months after the ‘740 patent had already issued. At that point, the patentee filed a series of continuations from the newly-designated divisional that eventually resulted in the ‘271 patent — the patent MSI argues properly serves as the reference for invalidating the earlier issued ‘740 patent.
With this history in mind, MSI argued that neither of the two statutory safe harbor requirements were met.
There was no application filed “as a result of a restriction requirement.” Rather, the application that became a divisional was filed prior to the restriction requirement.
The application did not become a divisional until after the original application issued — impermissibly late.
The district court rejected these arguments as misconstruing the statutory requirements. In particular, it first held that amending an application to comport with the restriction requirement constitutes “filing as a result of” for the purposes of the Section 121 safe harbor. See Union Carbide Corp . v. Dow Chem. Co., 619 F. Supp. 1036 (D. Del. 1985). Further, the court concluded the particular amendment changing the filing type to “divisional” was not the key requirement. Rather, the question is was simply whether the application ultimately complied with and reflected the restriction requirement, which the court found was satisfied here. Here, it was enough that the patentee amended the claims to align with the restricted groups of inventions and informing the examiner of the intent to have the application be a divisional in compliance with the restriction requirement.
121 safe harbor. As the district court stated, “an amended application is one ‘filed as a result of such a requirement”‘ when the claims are amended to reflect the restricted groups of inventions. Since Acadia amended the ‘271 patent application to align with the restriction requirement, the timing of the original filing date was irrelevant.
MSN also argued that the ‘271 patent application did not effectively become a divisional application until after the ‘740 patent issued, which was impermissibly late. However, the district court found this would conflict with the Federal Circuit’s guidance that Section 121 is “not concerned with . . . how any such applications are filed” but rather just requires “consonance with the restriction requirement.” The district court determined when the divisional status was effectuated was not controlling for the safe harbor analysis. The key question was simply whether the application ultimately complied with and reflected the restriction requirement, which the court found was satisfied here. With these nuances, the district court concluded that Acadia’s convoluted process satisfied the 121 requirements and thus that the safe harbor prevents the ‘271 patent from being used as a OTDP reference against the ‘740.
= = =
Of some interest in the case is that Acadia recently filed what it terms a “contingent terminal disclaimer” with the USPTO for the ‘740 patent. The terminal disclaimer is contingent on the ‘740 patent claims being found invalid for obviousness-type double patenting over the reference ‘271 patent. In other words, by its terms the disclaimer only takes effect if a final court decision holds the ‘740 claims invalid for obviousness-type double patenting over the ‘271 patent and that decision is not appealed. If that contingency were to occur, Acadia disclaims the terminal part of the ‘740 patent term that would extend beyond the expiration date of the full statutory term of the ‘271 patent (not including PTE). As a second double contingency, the filing states that in a situation where the ‘740 is found to be double-patenting and also the contingent terminal disclaimer is found impermissible/void, then the disclaimer automatically converts to a non-contingent terminal disclaimer. [51414_10759561_11-21-2023_DIST]. The USPTO generally does not permit contingent terminal disclaimers in order to overcome an OTDP rejection. Here, however, the patent has already issued and so the TD was simply put in the file wrapper. In my view it is unlikely to be effective.
This appeal was filed after CTD’s infringement case was dismissed on the pleadings with Judge Rodriguez (W.D.Tex.) finding the patentee failed to include plausible allegations of infringement of any claims from the patents-in-suit. U.S. Patent Nos. 8,327,442; 9,438,614; 9,503,470; and 11,171,974. Rather, according to the court, CTD improperly mixed and matched elements across Microsoft’s various software tools in its pleadings and failed plead that Microsoft makes, uses, or sells the required hardware components.
William P. Ramey III represented CTD in the district court and filed the notice of appeal. However, Ramey this week filed a blistering emergency motion to withdraw from the case. The motion levels a number of accusations against the funder of the litigation campaign (AiPi) and its cofounder Eric Morehouse. The central issues are that that AiPi has failed to pay legal bills and “controls” CTD to Ramey’s detriment, and in ways that have prevented him from withdrawing smoothly.
According to Ramey, Eric Morehouse originally induced AiPi as both a “patent litigation funder and law firm” and looked for Ramey to support the litigation alongside AiPi. But, Ramey asserts that AiPi have since reneged on paying for Ramey LLP’s work. “Morehouse personally guaranteed payment for all work performed,” Ramey avers, yet “no further payments have been made” despite Morehouse’s repeated assurances.
Ramey also claims he cannot continue representing CTD Networks because of an “direct conflict” with the party controlling that plaintiff – Morehouse and AiPi. Here is where the argument breaks down a bit. It seems that the direct conflict is basically (1) Non-payment of Ramey LLP’s legal fees by AiPi, Inc. (which purportedly controls the plaintiff CTD Networks LLC) and (2) Animosity between Ramey LLP and AiPi/Whitestone Law PLLC. (Whitestone is Morehouse’s separate law firm). But, at least at one level, the animosity appears to stem from the non-payment. I’m pointing this out here because non-payment of fees is not typically seen as the same level of conflict of interest as, for instance, a conflict between current clients. This is especially true where the non-payment is coming from a non-client.
The motion further alleges that Morehouse is purposefully trying to prejudice CTD’s case against Microsoft out of animosity toward Ramey LLP. For instance, no Whitestone attorney appeared for CTD Networks to facilitate Ramey’s withdrawal. And neither CTD, AiPi nor Whitestone seem willing to file an appellant brief in the Federal Circuit appeal.
In light of these purported breaches by his former collaborators, Ramey insists his firm cannot continue representing CTD Networks absent an immediate exit. Ramey seeks emergency permission to withdraw so his firm can still file its own appeal brief defending its interests, while leaving CTD to obtain replacement counsel.
A key feature of Ramey’s claim is that Morehouse and AiPi control CDT. This is important for the story so that he can show that his conflict with the former invade his lawyer-client relationship with the latter.
In a subsequent briefing also filed this week (in district court) CTD disputed Ramey’s claim that the plaintiff CDT is controlled by an adverse third party. The brief argues AiPi is not a law firm, but rather a patent prosecution and litigation support company that had engaged Ramey as lead counsel to file various patent cases on behalf of clients like CTD. “CTD Networks is not controlled by any other party.” According to the brief, AiPi “realized” in mid-2023 “that Mr. Ramey may not be able to properly represent the interests of clients sent to Mr. Ramey by AiPi.”
AiPi is not “adverse” to Mr. Ramey, AiPi is adverse to improper handling of litigation. In addition to Defendant’s pending Motion for Fees in this matter, Mr. Ramey is facing sanctions in a number of other matters in a number of other jurisdictions and has been sanctioned in a number of cases over the past few years.
The brief goes on to explain that over the summer AiPi brought in a different litigator (Joseph Zito from Morehouse’s Whitestone firm) who reviewed about 90 of Ramey’s cases and made appearances in 60 of them. The odd thing about this statement is how CDT’s brief explains that AiPi brought in Mr. Zito to do the work and make appearances in pending cases. It would have been a bit more comforting if the CDT brief had added a line stating that “CDT acting on its own accord engaged Zito.”
The CDT brief contends that by the time Zito was consulted on the CTD v. Microsoft case, the case was already at an advanced stage concerning Microsoft’s motion for fees. So no appearance was made. On December 13, Zito did file his appearance in the district court case (that is still pending on attorney fees) and indicated that it does not object to Ramey withdrawing from the case.
The appeal itself is still pending with CDT’s opening brief due shortly. Note here that Ramey filed a parallel motion in the pending appeal of CDT v. Google.
This post gets into some weeds about obviousness type double patenting stemming from the Federal Circuit’s new decision in Institut Pasteur. Although non-precedential, the decision signals that the doctrine remains strong (and strict). The decision cements that for OTDP analysis, any comparison of unexpected results or long-felt need must be made to the applicant’s own earlier patent claims, not the closest “prior art.” The court also endorsed reliance on inherency to satisfy claim limitations not found in earlier claims.
I’ll note here en banc petition briefing continues in the OTDP/PTA case of In re: Cellect, LLC. Cellect’s petition has been supported by 10 amicus briefs. The PTO responsive brief is due December 14, 2023.
= = =
The Federal Circuit recently affirmed a PTAB rejecting claims in a patent application filed by Institut Pasteur on the ground of obviousness-type double patenting. In re: Institut Pasteur, No. 2022-1896 (Fed. Cir. Dec. 13, 2023) (non-precedential). This case provides additional insight into the doctrine of obviousness-type double patenting and the ongoing high bar set by the Federal Circuit for overcoming such rejections. Opinion by Judge Clevenger, joined by Judges Taranto and Stoll.
Obviousness-type double patenting is a judge-made doctrine designed to prevent applicants from extending patent rights first obtaining an earlier-expiring patent and then obtaining a later-expiring patent with claims that are obvious variants of those in the earlier patent. The policy goal is to prevent unjustified timewise extension of exclusive patent rights. The doctrine was particularly relevant for patent applications filed prior to 1995 because patent term was calculated at 17 years after patent issuance. Today, patent term starts ticking as soon as the patent application — making it much more difficult to stagger patent rights in order to evergreen protection. (Note that one way to differentiate patent timing is through PTA — and that is being challenged in the Cellect case discussed above.) In addition, the doctrine is designed to protect potential defendants from unfairly facing multiple infringement lawsuits.
The Gap in 102 for Self-Harming Prior Art: Everyone knows that you cannot obtain a patent that merely claims an obvious variant of the prior art. 35 U.S.C. 103. Section 102 of the Patent Act defines prior art, and includes an important exception that is incredibly relevant to the OTDP situation. In particular, we know that the first-inventor-to-file provision found in 102(a)(2) spells out, as the name suggests, that a prior-filed patent application (once it becomes public) will serve as prior art against a later filed patent application. The important exception for OTDP purposes is that Congress limited the first-to-file provision of 102(a)(2) to applies only in cases where the two competing patent applications name different inventors and are owned by different entities. In other words, Congress carved out an exception such that your own earlier-filed patent application does not qualify as prior art that could invalidate your later-filed application under 102(a)(2), even after the earlier application publishes. Although this analysis uses post-AIA statute, the limited protection for applicants against self-harming prior art also existed in the pre-AIA statute.
What we have here is a gap in the scope of prior art within the statute associated with the patentee’s own pre-filing activities. Courts have acknowledged that these filings by patent applicants are not prior art under the statute, but recognize policy concerns that justify limiting applicants’ rights anyway. Specifically, courts want to prevent applicants from unjustly extending patent protection with repetitive filings on obvious variants of their own inventions. Additionally, courts are concerned that separated patents (especially if ownership is separated) could put defendants at risk of facing multiple lawsuits asserting what is essentially the same invention.
The judge made solution then is to act in equity to bar an applicant from obtaining or enforcing to patents that are obvious variants to one another unless the patent applicant has filed what is known as a terminal disclaimer that disclaims any potential extra patent term in the later-issuing patent and that also promises to keep the two patents under the same ownership. Applicants who fail to file such a disclaimer can find their applications refused by the PTO or found unenforceable by the courts.
Ordinarily, obviousness analysis compares a claim against prior disclosures. OTDP is different. In OTDP, the policy concern is focused on obtaining two patents whose claims are too close to one another. Thus, the OTDP analysis compares the two sets of claims and asks whether one set is an obvious variant of the other.
In Institut Pasteur, the patent applicant filed a patent application in 2015 directed to methods of treating pain by administering opiorphin. The examiner rejected the pending claims as obvious over the claims of a different Pasteur patent directed to similar methods of pain treatment using the same peptides, and that had been filed the year before, in 2014.
Before the Board, Pasteur argued that OTDP should not apply — arguing that its 2015 applicant claimed claimed methods that were significantly different from those in the 2014 patent. In particular, the 2015 applicant required administration of the peptides for seven days without inducing drug dependence or tolerance, whereas the 2014 patent did not specify any particular duration of treatment or recite the lack of dependence/tolerance. The PTAB rejected that distinction and instead affirmed the examiner’s rejection, finding that the 2014 patent embraced treatment of chronic pain, so it would have been obvious to administer the therapy for over seven days. The Board also found that avoiding dependence/tolerance would be an inherent result of carrying out the methods of Pasteur’s earlier 2014 patent.
On appeal, the Federal Circuit affirmed the Board’s decision strictly applying obviousness-type double patenting. The court reiterated that when unexpected results are used to rebut a prima facie case of obviousness, those results must be shown to be unexpected compared to the closest prior art (here, Pasteur’s 2014 patent). In re Baxter Travenol Labs., 952 F.2d 388, 392 (Fed. Cir. 1991). Pasteur failed to make that comparison. The court also endorsed the Board’s use of inherency to fill in the missing claim limitation of dependence/tolerance as part of the obviousness analysis. The trick here that the court played, is that this “closest prior art” precedent comes from ordinary obviousness cases, not OTDP cases. See Baxter. And, as you recall, Pasteur’s 2014 patent is not prior art. Here, the court made the leap that it should effectively be treated as prior art for all aspects of the OTDP obviousness analysis, including both evidence of unexpected results and secondary considerations of nonobviousness.
Regarding secondary considerations, the Federal Circuit affirmed the Board’s dismissal of Pasteur’s long-felt need evidence. Pasteur had argued there was a long-felt need for pain medication that avoids issues of drug tolerance and dependence. However, the court endorsed the Board’s finding that any such need was already satisfied by Pasteur’s 2014 patent claims. In other words, in obviousness-type double patenting, where reference claims satisfy a long-felt need, that need does not constitute objective evidence for a later patent’s claims of non-obviousness over the reference claims.
During oral arguments, Salvatore Arrigo argued on behalf of Institut Pasteur before the panel of Judges Taranto, Clevenger, and Stoll. Arrigo emphasized that unexpected results are an “integral part” of determining obviousness under Graham v. John Deere. He argued that the unexpected lack of tolerance and dependence when administering the claimed peptide for 7 days should be considered in the prima facie obviousness analysis, before reaching a conclusion on obviousness:
You have to look at the unexpected results first to figure out if it’s obvious. If you don’t, it’s always an expected results are always going to be inherent 100 percent of the time because you’ve already reached obviousness before considering. It’s part of the obvious analysis to get there.
The judges questioned whether the proper comparison should be to morphine or to the closest prior art, the claims of the ‘871 patent. Mr. Arrigo maintained morphine was the appropriate comparison “because the prior art is just this giant genus and no one within that genus ever did anything that would have shown this unexpected result.” In its decision, however, the Federal Circuit rejected this analysis — holding that for OTDP analysis, any unexpected results must be in comparison to the company’s other patent being analyzed.
Guest Post by Jordan Duenckel. Jordan is a third-year law student at the University of Missouri and a registered patent agent. He has an extensive background in chemistry, food science, and economics.
Law is a noble profession destined to be marred by the activities of attorneys behaving badly. On November 27th, Chief Judge Colm Connolly of Delaware released a blistering opinion reprimanding counsel for inexcusable and willful lapses in professional responsibility, misrepresentations to the USPTO, and potential unauthorized practice of law all associated with the patent assertion entity IP Edge LLC (IP Edge) and its affiliate Mavexar LLC (Mavexar). Disciplinary, administrative, and potential criminal referrals result for the counsels of record for plaintiffs for this conduct. For other practitioners, this is a cautionary tale about third-party litigation and candor to the Court.
Even when clients are viewed as mere “inventory”, they are still owed the renowned “punctilio of an honor the most sensitive.” Huber v. Taylor, 469 F.3d 67, 81 (3d Cir. 2006) (quoting Meinhard v. Salmon, 249 N.Y. 458, 464 (N.Y. 1928) (Cardozo, J.))
Judge Connolly’s 102-page opinion is thorough and supplies extensive examples of attorney (and non-attorney) coercive misbehavior through a pattern of activity spanning three plaintiffs that display shocking disregard for professional responsibility stemming from third party litigation funding. An in-depth look at Mellaconic IP is representative of Nimitz and Lamplight’s comparable situation. Mellaconic IP is a sole member LLC organized under the laws of Texas. That sole member is Hau Bui, a food truck and restaurant operator by day. At the hearing, Mr. Bui told how Linh Deitz, the office manager for Mavexar, formed Mellaconic in August 2020 with the limited assets of seven patents. Mr. Bui’s testimony about his ownership of the patents begins to supply insight:
Q: Okay. How much did you pay for the patents? A: I didn’t pay for the patents. Q: So how do you come to own patents if you don’t pay for them? A: I was- came up–someone pushed me with the opportunity, selling the patents. Q: Who was that? Mellaconic? A:Mellaconic-no, Mavexar. Sorry.
When asked about the actual business of Mellaconic, Bui stated:
Q: Did you have to take on any responsibilities to assume ownership of the patents? A: As far as, just like, viewing the litigations and everything that come through. Q: Oh, so you do review the litigations? A: Yeah. Q: Tell me about what you do in that regard? A: So Mavexar will send me the litigations of what’s going on or the, you know, attorney engagements. And then I, essentially, if l sign-I approve of them or disapprove of them. Q: How do you know whether to approve or disapprove of an attorney? A: I mean, I chose Mavexar and they’re-they’re-what is it? -they’re good. Like, you know, they haven’t done me wrong. Q: Well, so do you get a share, then, of lawsuits or settlements that are brought using these six patents? Is that how you make money, passive income, as you call it? A: Yeah.
Mellaconic “acquired” the patent via a patent assignment from another company, Empire, and subsequently filed an assignment at the PTO and entered a “Consulting Services” agreement with Mavexar on August 11, 2020. At the time Mellaconic filed with the PTO an assignment that stated that Mellaconic’s “right, title, and interest” in the seven assets listed in the assignment “includ[ed] all income, royalties, damages and payments now or hereafter due or payable with respect thereto,”* Mavexar was contractually entitled to 95% of the profits generated from licensing or litigating those assets. Mellaconic subsequently filed 44 different patent infringement cases nationwide asserting a single patent, 9,986,435 (the #435 patent). Maxevar located and contacted attorney Jimmy Chong to be counsel for Mellaconic in these lawsuits and filed the suits as well as voluntary dismissals with cocounsel’s firm Sand and Sebolt.
A slight issue arose when it became clear that Bui was unaware that Chong’s firm was Mellaconic’s counsel, even failing to identify Mr. Chong in person from 20 feet away, with the first direct contact via email on November 30th, weeks after the hearing. Bui replied, “Yes, you can continue to communicate to Mavexar team directly.” At the hearing, it became clear that Mr. Bui did not review any complaints before being filed or even that he was apprised of settlement offers in the litigation. Up to thirteen complaints had been filed and voluntarily dismissed before Mr. Bui even communicated with his counsel of record. Chong and Sebolt’s attorneys would often communicate with Maxevar to confirm settlement offers without asking for Bui’s consent.
Omnipresent in any attorney-client representation are the requirements of the rules of professional responsibility that are codified by the Model Rules. Rule 1.2 (allocation of authority), Rule 1.4 (Communications), Rule 1.7(Loyalty), and Rule 1.8f (Third Party Funding) were all implicated in Connolly’s opinion. Rules 1.2 and 1.4 are important but self-evident in this context. The more pernicious, and less visible, problem is the implications of third-party funding creating a conflict of interests that results in a de facto denial of independent representation. The potential for a conflict of interest is clear when profits (or a substantial portion of them) are assigned to one party and the risk is assigned to another. Third-party litigation in general carries increased risks of conflicts of interest and non-practicing patent assertion entities (PAEs) enhance the risks even more.
The structure that Mavexar created assures that the only risk Mavexar assumes when an attorney files at Mavexar’s direction an infringement case in Mellaconic’s name is the potential that Mellaconic will not follow its contractual obligation to reimburse Mavexar for the fees and costs Mavexar advances to that attorney that exceed any gross recovery. In other words, Mavexar has virtually nothing to lose and everything to gain (i.e., 95% of everything) from asserting the patent in infringement suits. Mellaconic, by contrast, receives a tiny fraction of the litigation gains but it, and potentially Mr. Bui, personally have lots to lose if the litigation results in an adverse decision, sanctions, or fees and costs that exceed the gross recovery. PAEs, like Mavexar, represent rent-seeking behavior (extraction of wealth without any reciprocal contribution of productivity), and the related Tullock Paradox, at work: increased marginal utility at a fraction of the marginal cost.
Considering these vastly different profit and risk profiles, Mavexar’s and Mellaconic’s interests were significantly different when it came to deciding to file or to settle the lawsuits Mr. Chong and co-counsel brought in Mellaconic’s name. Repeatedly, Chong and others insisted that they do not represent Mavexar as counsel but rather that Mavexar acts as a consultant to Mellaconic. However, Mavexar is the guiding force behind the entirety of the assertion of patent infringement claims despite explicitly requesting to keep their name out of any of the litigation that was filed despite being the real party in interest. Mavexar was actively involved in the creation of shell companies, finding “targets” to assert patents against, hiring attorneys to represent Mellaconic, and actively managing settlement discussions.**
Much ink can and has been spilled discussing the economic and societal merits of third-party litigation funding. Regardless of the future direction, a bedrock legal principle must remain: truly independent representation of all parties is core to informed decisions and fair dealing. Mr. Bui, and many others like him nationwide, are deprived of that fundamental principle when conflicts of interest are disguised and perpetrated by PAEs at the expense of clients. This is beyond an academic review of best practices: real clients suffered real economic and emotional distress as a result of these attorney’s disregard. The de facto client was Mavexar and the actual client, Mellaconic, was simply “inventory,” left without some of the most basic tenants of legal representation.
*This assignment either does not disclose or actively hides the real party in interest because it falsely states who is entitled to the income from the patents. This false statement forms the basis for the criminal referral under 18 U.S.C. 1001. There is also some uncertainty around whether federal law was broken concerning failing to disclose a French sovereign investment fund that was the original assignor of at least one of the patents.
**While Mavexar vigorously denies being a law firm, the work they were doing in the litigation is legal in nature and forms the basis of the unauthorized practice of law referral.
I previously wrote about the trademark case of Great Concepts v. Chutter that involves two restaurants both using the same phonetic name: DANTANNA’S and DAN TANA’S. In the underlying trademark cancellation proceeding, the TTAB found that one party had committed fraud within its declaration of incontestability; and that fraud justified cancellation of the registration. On appeal the Federal Circuit reversed — concluding that the statute was very specific that fraud in obtaining the registration can justify cancellation, but says nothing about fraud in establishing incontestability. The court distinguished with some squirrely precedent finding that renewal counted as “obtaining” for the fraud-cancellation doctrine. Torres v. Cantine Torresella S.r.l., 808 F.2d 46 (Fed. Cir. 1986).
In a recent petition for panel rehearing, the USPTO has asked for the Federal Circuit to tighten up its language. GreatConceptsRehearingPetition.
The agency particularly focuses on one sentence from the opinion that it foresees might create trouble:
Section 14 lists numerous bases on which a third party may seek Board cancellation of a registered mark, including likelihood of confusion, abandonment, dilution, deceptiveness, and if the mark is merely descriptive or has become generic or functional. See 15 U.S.C. § 1064. Notably absent from this list is fraud committed in connection with an incontestability declaration.
Opinion at 13. As you can see, the Federal Circuit opinion provides several bases for cancelling a mark, indicating that they are listed within the statute. Although these are all grounds for cancellation, they are not expressly found within Section 14 of the Lanham Act. As the PTO writes: “The sentence is incorrect as a matter of law because Section 14 of the Trademark Act does not explicitly reference ‘likelihood of confusion,’ ‘merely descriptive,’ or other bases for cancelling a registration that is less than five years old, which include any ground that would have prevented registration in the first place.” Rather, the courts have interpreted Section 14 to allow a mark <5 years old to be challenged based upon any ground that would have prevented registration in the first place qualifies.
In its brief, the Federal Circuit argues that the Federal Circuit’s incomplete list could be used in the future to limit the bases for cancellation to only those listed. “The USPTO is concerned that the opinion text quoted above will result in confusion in later cases about what grounds are available to cancel a registration.” The court has invited a response from the two parties, and I expect that neither will complain about the slight correction.
The U.S. Copyright Office published a Notice of inquiry (“NOI”) and request for comments, Artificial Intelligence and Copyright, Docket No. 2023-6 on August 30, 2023, calling for comments from interested parties addressing dozens of questions. The Office’s questions focused on a wide range of issues including the copyright implications of the use of in-copyright works as training data, on the feasibility of licensing such uses, the impact on competition and innovation in AI industries depending on how courts resolved training data copyright issues, the copyrightability of AI outputs, whether new laws regulating generative AI were needed, whether AI developers should be obliged to disclose the sources of their training data, and whether AI outputs should be labeled as such.
The Office received roughly 10,000 comments on October 30, 2023. We, who have been writing and teaching about copyright law and how it has responded to challenges posed by new technologies for decades, were among those who submitted comments, see https://www.regulations.gov/comment/COLC-2023-0006-8854.
Substance of the Samuelson, Sprigman, Sag Reply Comments:
We should begin by noting our appreciation for the FTC’s work enforcing both federal antitrust and consumer protection laws and helping to lead policy development in both areas. In our view, the FTC plays a vital role in keeping markets open and honest, and we have long been admirers of the intelligence and energy that the agency brings to that task. More specifically, we recognize the usefulness of examining intellectual property issues through the lenses of competition and consumer protection.
However, in the case of its response to the Copyright Office’s NOI on Artificial Intelligence and Copyright, the FTC has submitted Comments that are unclear and thus open to a variety of interpretations—and possibly to misinterpretations as well. The FTC’s Comments also raise questions about the scope of agency’s authority under Section 5 of the Federal Trade Commission Act, 15 U.S.C. 45, to bring enforcement actions aimed at activities, including those involving the training and use of AI, that might involve copyright infringement—although we would note that the copyright consequences of AI are, as yet, undefined.
We have three principal criticisms of the FTC’s comments:
First, the FTC’s submission is not a model of clarity: indeed, later in these Comments we will focus on a particular sentence from the FTC Comments that is worrisome both for its opacity and for the ways in which it may be interpreted (or misinterpreted) to chill innovation and restrict competition in the markets for AI technologies.
Second, the FTC Comments do not appear to be based on a balanced evidentiary record; rather, the Comments appear largely to reflect views articulated by participants in an Oct. 4, 2023, FTC Roundtable event[1] that featured testimony largely from artists and writers critical of generative AI: 11 of the 12 witnesses appeared to be or to represent individual creators, and one represented open-source software developers who objected to AI training on their code. Not a single witness provided perspectives from technologists who have developed and work with AI agents. Perhaps not surprisingly given the imbalance in the record, the FTC comments do not seem to appreciate the variety of use cases for AI technologies or the broader implications of those technologies for competition policy.
Third, and finally, certain of the FTC’s Comments could, if misunderstood, upset the careful balance that the copyright laws create between private rights to control copyrighted works and public access and use of those works. Upsetting that balance could chill development not only of useful AI technologies, but of a range of new technologies and services that augment consumers’ opportunities to access and use copyrighted works and increase the value of those works to consumers.
In the remainder of these Comments we will focus on a specific sentence from the FTC Comments that illustrates all of these problems. (more…)
Sections 271(b) and 271(c) of the Patent Act form the statutory basis for the two forms of indirect patent infringement, induced and contributory, respectively. Section 271(c) explicitly provides that sale of a material that is “suitable for substantial noninfringing use” is not contributory infringement (note that this proviso does not apply to induced infringement under 271(b)). In a recent post, Dennis pointed out that in H. Lundbeck A/S v. Lupin Ltd. the Federal Circuit “somewhat controversially” states that:
[S]ubstantial noninfringing use in section 271(c) refers to uses that do not infringe the patent in question, not other patents. The text is clear: to support liability, the accused infringer must sell a material part of an invention or an article for use in practicing a patented process “knowing the same to be especially made or especially adapted for use in an infringement of such patent.” 35 U.S.C. § 271(c) (emphasis added). “Such patent” is in the singular and refers to a specific patent—the asserted patent.
Taken on its face, the statement seems overbroad and potentially problematic for the reason set forth by another Federal Circuit panel in Lucent Techs., Inc. v. Gateway, Inc., 580 F.3d 1301, 1320 (Fed. Cir. 2009):
One example illustrates the problem with Microsoft’s approach. Consider a software program comprising five—and only five—features. Each of the five features is separately and distinctly patented using a method claim. That is, the first feature infringes a method claim in a first patent, the second feature infringes a method claim in a second patent, and so forth. Assume also that the company selling the software doesn’t provide specific instructions on how to use the five features, thus taking potential liability outside the realm of § 271(b). In this scenario, under Microsoft’s position, the software seller can never be liable for contributory infringement of any one of the method patents because the entire software program is capable of substantial noninfringing use. This seems both untenable as a practical outcome and inconsistent with both the statute and governing precedent.
The dicta from Lucent seems to support the proposition that in determining whether there has been contributory infringement with respect to a first patent, a use of the product should not be deemed a “substantial noninfringing use” negating a finding of contributory infringement if that use would infringe a second patent, at least under some circumstances. But under what circumstances should this be permitted. For example, would it be proper for a court to assume that the second patent would be infringed by an alleged “substantial noninfringing use” without allowing the alleged infringer an opportunity to challenge the validity of the second patent and participate in a formal construction of the relevant claims?
This issue arose in the context of calculating lost profit damages in a 1995 decision of the en banc Federal Circuit, Rite-Hite Corp. v. Kelley Co., 56 F.3d 1538 (Fed. Cir. 1995). In that case, the district court identified essentially the same concern expressed by the Federal Circuit in Intel, stating that its decision to award lost profit damages for lost sales of a product not covered by the infringed patent “avoid[ed] the ‘whip-saw’ problem, whereby an infringer could avoid paying lost profits damages altogether by developing a device using a first patented technology to compete with a device that uses a second patented technology and developing a device using the second patented technology to compete with a device that uses the first patented technology.” In a split decision, the Federal Circuit affirmed, explaining that:
the only Panduit factor that arguably was not met in the present fact situation is the second one, absence of acceptable non-infringing substitutes. Establishment of this factor tends to prove that the patentee would not have lost the sales to a non-infringing third party rather than to the infringer[.] Here, the only substitute for the patented device was the ADL–100, another of the patentee’s devices. Such a substitute was not an “acceptable, non-infringing substitute” within the meaning of Panduit because, being patented by Rite–Hite, it was not available to customers except from Rite–Hite. Rite–Hite therefore would not have lost the sales to a third party. The second Panduit factor thus has been met. If, on the other hand, the ADL–100 had not been patented and was found to be an acceptable substitute, that would have been a different story, and Rite–Hite would have had to prove that its customers would not have obtained the ADL–100 from a third party in order to prove the second factor of Panduit.
Writing in dissent, Judge Nies pointed out the potential problem with the majority’s approach:
[T]he one or more patents on technology used in the ADL–100 were never asserted against Kelley, and the validity of those patents is untested. If those patents are invalid, the majority’s analysis collapses.… Given that Kelley has had no legal basis for bringing a declaratory judgment action challenging the unlitigated patents (never having been charged with their infringement), the majority imposes liability and overlooks the unfairness in its theory. If the unlitigated patents are significant to damages, Kelley deserves an opportunity to defend against them. A clearer denial of due process is rarely seen.
On a related note, in Eli Lilly & Co. v. Actavis Elizabeth LLC, 435 F. App’x 917 (Fed. Cir. 2011), the Federal Circuit held that the use of a drug that has not been approved by the FDA does not constitute a “substantial noninfringing use” for purposes of 271(c). The accused infringer in this Hatch-Waxman case argued that up to 29% of the total use of the drug in question was off-label and noninfringing, and the patent owner conceded that this noninfringing off-label use was possibly as high as 8%. But the Federal Circuit found this used to be irrelevant for purposes of 271(c), holding that “unauthorized activity does not avoid infringement by a product that is authorized to be sold solely for the infringing use.” See also Grunenthal GMBH v. Alkem Lab’ys Ltd., 919 F.3d 1333, 1340 (Fed. Cir. 2019)(“In a pharmaceutical case, the noninfringing use must be in accordance with the use for which the product is indicated.” citing Eli Lilly and Co. v. Actavis Elizabeth LLC).
Based on my review of reported decisions, contributory infringement has not played a significant role in pharmaceutical patent litigation, and is redundant in view of the availability of an action for induced infringement. There are many decisions in which an alleged infringer is found liable for both induced infringement and contributory infringement, and also a significant number of decisions in which the alleged infringer has been found liable for inducing infringement but not contributory infringement. See, e.g., Vanda Pharms. Inc. v. W.-Ward Pharms. Int’l Ltd., 887 F.3d 1117 (Fed. Cir. 2018) and In re Depomed Pat. Litig., 2016 WL 7163647 (D.N.J. Sept. 0, 2016). However, I have searched of case law and failed to find a reported decision involving and FDA-authorized pharmaceutical in which the court found contributory infringement but held that there was not induced infringement. I found a single district court decision in which the court found that contributory infringement had been proven and did not make a finding with respect to induced infringement, declaring the issue moot in view of its finding of contributory infringement. Alcon Rsch., Ltd. v. Apotex Inc., 790 F. Supp. 2d 868 (S.D. Ind. 2011).
Western Digital Techs., Inc. v. Viasat, Inc., No. 22-CV-04376-HSG, 2023 WL 7739816 (N.D. Cal. Nov. 15, 2023) Docket No. 4_22-cv-04376
Western Digital sued Viasat for infringing claims from several patents, including US8,504,834, which covers “media streaming systems and software.” In a recent decision, Judge Haywood (N.D.Cal.) granted a motion to dismiss — finding the claims of the ‘834 patent directed to ineligible subject matter. The background section of the patent explains explains that prior art systems decrypted locally stored content using a decryption key obtained from a digital rights management (DRM) server. This had drawbacks related to efficiency and cost. The patent describes an improved system where the decryption key is derived from a stream of data received over a network, rather than needing to contact a DRM server.
Claim 14, treated by the court as representative, recites:
A method for activation of local content, the method comprising:
performing the following in a host device in communication with a storage device storing encrypted content:
receiving a stream of data from a network;
deriving a key from the received stream of data; and
decrypting the encrypted content using the key derived from the received stream of data.
The claim covers a method for decrypting locally stored encrypted content. A host device receives a stream of data over a network, derives an encryption key from that stream, and uses that derived key to decrypt encrypted content stored on a connected storage device.
Alice Step One – Is the Claim Directed to an Abstract Idea?
At Alice step one, the court asks whether the claim is “directed to” a patent ineligible abstract idea. Here, the court found claim 14 is directed to the abstract idea of “delivering and deriving a decryption key from a stream of data.” The court provided several bases for deriving this idea as gist of the claim and for concluding that it constitutes an abstract idea.
First, the court analyzed the focus of the claimed advance over prior art systems as described in the patent background and specification. The court found the focus was on using a stream of data to deliver and derive a decryption key, rather than contacting a DRM server.
The court then noted that the claims are functional in nature — claiming the result itself. On this point, the court found that claim 14 does not recite any practical method of implementation, but rather uses only generic computer components like a “host device” and “network” along with conventional processes like “receiving,” “deriving,” and “decrypting” to achieve the result. This demonstrated the claim was drafted in a result-oriented or functional manner focused on the principle itself.
The court also found that the key steps of claim 14 could be performed by a human mind or with pen and paper by deriving a decryption key from a received communication and using it to decrypt content. This indicated abstraction under Federal Circuit precedent.
Finally, the court analogized the claim to those found abstract in several other cases, where claims merely collected, organized, transmitted data without a specific new process for doing so, including Electric Power Group, LLC v. Alstom S.A., 830 F.3d 1350 (Fed. Cir. 2016) (collection, analysis, and display of data are abstract), and Two-Way Media Ltd. v. Comcast Cable Commc’ns, LLC, 874 F.3d 1329 (Fed. Cir. 2017) (broad functional steps that lacked technical details were abstract).
Alice Step Two – Does the Claim Recite an Inventive Concept beyond the Abstract Idea itself?
At step two of Alice, the court searches for an inventive concept to ensure the claim amounts to significantly more than the abstract idea. Here, the court found no inventive concept in claim 14, when considered either element-by-element or as an ordered combination.
The court found that the claim elements recite only generic computer components like a “host device” performing conventional computer functions like “receiving” and “deriving.” Plaintiffs apparently did not dispute this.
For the ordered combination, Plaintiffs argued that using streaming data to provide decryption keys in the claimed manner was unconventional and advantageous over prior systems. But the court rejected this, finding that any such unconventional use or improvement described in the specification was untethered from the broad claim language. The court held that even assuming the specification discloses specific steps rendering use of streams unconventional, those details are missing from claim 14.
Conclusion
Because this was at the motion to dismiss stage, the Court permitted Plaintiffs leave to amend their infringement allegations related — perhaps to include factual allegations that show eligibility. However, the patentee subsequently provided the court with notice that it will not be filing an amended complaint.
While Plaintiffs respectfully disagree with the Court’s determination under 35 U.S.C. § 101 for all of the reasons set forth in its briefing on the issue (see, e.g., Dkt. No. 53), Plaintiffs are not filing an amended complaint and instead reserve the right to appeal the Court’s decision when final judgment is entered in this case.
P’s Response to the Court’s Order. The case is ongoing with two additional Western Digital patents — each which contain claims with more technological detail imbedded into the claims. The outcome here recognizes that patentees are finding ways to overcome the eligibility issues, both at the PTO and in court, but there are still lots of traps. Though workarounds now often exist, Alice/Mayo still present ample opportunities to find claims abstract – particularly for computer-implemented inventions. The path forward for Plaintiffs remains challenging despite their arguments on appealability.
