Chicken?: Test your Patent Test Taking Skills 2017

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Introduction: Although not a poultry expert, Prof Crunch recently designed and built his own back-yard chicken coop (Coop) (started and completed in August 2016).  Among its special features, the coop includes a translucent roof to allow additional winter light, a hinged trap-door in the floor for removing waste, and a vertically sliding door opening to the chicken-run.  The vertically sliding door is operated by a pulley system and can be controlled while standing next-to the nesting box door.   Thus, a user can provide access to the chicken-run at the same time as collecting eggs. The coop is also designed to be long-and-narrow in order to fit through a 40-inch wide gate while also providing at least 21 square feet of floor area.  While Crunch expects that many of these features are not unique, he believes that the combination is unique.  Crunch is an idea-man. Rather than production is looking to sell plans and instructions for making his Coop.

Crunch drafts the following two patent claims in his patent application filed December 5, 2016:

I claim:

1.     A poultry coop having a length, width, and height, said poultry coop comprising:

a roof made of a translucent material with at least 50% light transmission;

a floor having a hinged trap door and having an area of at least 21 square feet;

a first side wall that includes a nesting box with an externally hinged door; and

a second side wall that includes a vertically sliding door operated via a pulley system; wherein said pulley system is operable by a user standing near said nesting box and wherein said coop is configured with a width of less than 40-inches.

2.     A set of instructions comprising: instructions for making the poultry coop of claim 1.

Question 1. (120 words).  Crunch had considered adding an additional limitation that precisely defines the configuration of the pulley system and its components.  What are major pros and cons of adding these additional limitations to claim 1 (considering primarily the doctrines of patentability and infringement)?

Question 2. (200 words) Are these claims patent eligible subject matter?

Question 3. (60 words) Provide a concise argument that claim 1 fails for lack of definiteness.

Question 4. (80 words) Should Crunch be concerned that his back-yard prototype constitutes prior art that could be used against his own patent application?

Question 5. (240 words) Assume the following for this question: (a) the back-yard prototype is not prior art; and (b) Crunch’s expectations are correct that while many of the patented elements are known in the prior art, the combination as a whole is unique.  What can we say about the novelty/nonobviousness of the claims.

Question 6. (25 words) Assuming claim 1 is patented but not claim 2. Does Crunch have an infringement claim against a third party who begins teaching others how to make the coop?

Patentlyo Bits and Bytes by Anthony McCain

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Get a Job doing Patent Law                  

Lee v. Tam and A Basket of Deplorable People

Patent

something-slanted-this-way-comes-album-cover1Of the briefs filed in Lee v. Tam, the most entertaining is the Libertarian Cato Institute brief filed by my classmate Ilya Shapiro.  The official caption:

BRIEF OF THE CATO INSTITUTE AND A BASKET OF DEPLORABLE PEOPLE AND ORGANIZATIONS AS AMICI CURIAE SUPPORTING RESPONDENT

Cato Brief. Shapiro also rewrites the question presented: “Does the government get to decide what’s a slur?”  Cato’s core argument:

Trying to stamp out “disparaging” speech is both misguided and unconstitutional. No public official can be trusted to neutrally identify speech that “disparages.”

With that in mind, the case provides dozens of examples making its point.

In the case, the Department of Justice and USPTO are appealing the Federal Circuit’s determination that the disparagement provision of the Lanham Act, 15 U.S.C. 1052(a) is facially invalid as in conflict with the Free Speech Clause of the First Amendment of the US Constitution.  The provision at issue provides for the PTO’s refusal to register marks that consist of “matter which may disparage . . . persons, living or dead, institutions, beliefs, or national symbols, or bring them into contempt, or disrepute.”  Mr. Tam’s band name – THE SLANTS – was refused under this provision.

 

Before you read, beware that the Cato brief does include offensive and disparaging remarks. Read the: Cato Brief.

= = = = =

On ScotusBlog, Prof Tushnet expands on her recent N.D. Law Review Article and explains that “There is no neutral, non-speech-suppressing choice when it comes to trademark registration, and the Federal Circuit’s failure to recognize this fact distorted its analysis in fundamental ways.”  While the Federal Circuit aptly explained how the disparaging provision was a limitation on speech, it did not consider how granting TM rights also limit speech (government granted and enforced right to silence speech of others).   Although bold, the Cato brief lacks some amount of nuance and fails to consider this point.

 

Idenix v. Gilead: $2.5 Billion for Patent Infringement

Patent

Merck’s sub Idenix was just awarded $2.54 billion for Gilead’s infringement of its Hep-C treatment patents.  Asserted patents include Nos. 6,914,054, 7,105,499, 7,608,597, and 8,481,712..  D.Del. Case No.14-cv-00846-LPS.  Merck announced that a patent right “guarantees a period of return on investment [and as such] patent protection provides the research-based pharmaceutical and biotechnology industries with an incentive to invest in research and development.”

Verdict copied below:

VerdictRoyalty

Verdict Form

 

 

Default Judgment for Major Discovery Failures

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TileTechPatentby Dennis Crouch

United Construction was won on default judgment and was awarded a permanent injunction to bar Tile Tech from ongoing infringement of its U.S. Patent No. 8,302,356.  Although Tile Tech had participated in the case, it had missed many discovery deadlines and had produced only two document – both of which were nonresponsive.  The district court issued an order to comply with a warning that failure to comply would result in default judgment.  Tile Tech did not respond to the order and the court then entered default judgment. (Tile Tech had also destroyed evidence …)

The patent at issue is covers a support pedestal used to secure tiles elevated above a flooring base.  Some folks use these to support a roof-top deck, for instance. (Tile Tech’s Website showing use).

On appeal here the Federal Circuit has affirmed – finding that the district court did not abuse its discretion in issuing the default judgment (following 9th Circuit law)

Here, the District Court gave ample warning to Tile Tech in its Order to Compel that it would enter default judgment if discovery responses were not forthcoming. . . . The District Court’s opinion demonstrates its thorough consideration of the Malone factors leading to the ultimate decision not to impose lesser sanctions in this case, a decision which we find was not an abuse of discretion. As the District Court explained, “[w]here a party so damages the integrity of the discovery process that there can never be assurance of proceeding on the true facts, a case dispositive [remedy] may be appropriate.”

Quoting Conn. Gen. Life Ins. Co. v. New Images of Beverly Hills, 482 F.3d 1091, 1097 (9th Cir. 2007).

The Federal Circuit’s one interpretative change involved a portion of the injunction that barred Tile Tech from using using images of the patentee’s products in “any marketing material.”  This portion of the injunction was not based upon the infringement claim but instead upon the parallel unfair competition claim.  Still, Tile Tech argued that the injunction was over-broad because it would bar legal activities such as competitive advertising where there is no likelihood of confusion. On appeal, the Federal Circuit agreed with Tile Tech that such a prohibition would be over broad.  However, instead of amending or vacating the injunction, the Federal Circuit determined that the injunction should simply be narrowly interpreted: “To the extent that in the future Tile Tech’s advertising clearly distinguishes its product from that of United’s in a comparative advertisement, in a way that is not ‘an act of unfair competition,’ we read the injunction to not prohibit such uses.”  With that limitation, the injunction fit within the proper bounds.

 

Goodbye E.D.Texas as a Major Patent Venue

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by Dennis Crouch

In a case with the potential to truly shake-up the current state of patent litigation, the Supreme Court has granted certiorari in the patent venue case TC Heartland v. Kraft Food (SCT Docket No. 16-341).  An 8-0 reversal of the Federal Circuit is quite likely, although my headline is likely premature.

The case centers on the patent litigation venue statute which states rather simply that patent infringement actions “may be brought” either (1) in “the judicial district where the defendant resides”; or (2) “where the defendant has committed acts of infringement and has a regular and established place of business.” 28 U.S.C. § 1400(b).  Under any normal interpretation of the provision, very few cases would be amenable to proper venue in the Eastern District of Texas because almost none of the accused infringers “reside” in that district or even have a place of business in that district.  However, the “normal” interpreation was seemingly thrown under the bus by a congressional provision that expands the definition of a corporation’s residence to all districts where the company has minimum contacts.  See 28 U.S.C. § 1391.  For its part, the Federal Circuit found that Section 1391 applies to expand the scope of 1400(b) to all for, inter alia, the filing of infringement lawsuits in the Eastern District of Texas.

It turns out that the Supreme Court has already decided almost this exact case in Fourco Glass Co. v. Transmirra Products Corp., 353 U.S. 222 (1957). In Fourco, the Court held that “§ 1400(b) is not to be supplemented by § 1391(c), and that as applied to corporate entities, the phrase “where the defendant resides” in § 1400(b) “mean[s] the state of incorporation only.” (quoting from the certiorari petition). Although the provisions have been amended since 1957, non of the amendments appear to warrant such a dramatic change in the Supreme Court’s analysis of the statutes.

In its 1990 VE Holdings decision, the Federal Circuit rejected Fourco based upon some reasoning, but without any good reasons.  There are two reasons to stick with the Federal Circuit’s 26 year old rule: (1) The rule is 26 years old and well settled with almost every patents now in force applied-for after the rule change.  At this point, it is Congress’s turn (not the courts) to amend the statute if its wants a policy change. (2) The actual reasoning of Fourco is quite dodgy – not the most stellar statutory interpretation.  If the Supreme Court actually takes a fresh look at the statute it may well overturn Fourco of its own accord.   Still, I expect that these arguments will not carry the day and instead that the Supreme Court will reverse the Federal Circuit.  The result would then be a major redistribution of patent infringement cases.

More Reading:

Patent Venue at the Supreme Court: Correcting a 26 Year Old Legal Error

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

Guest Post: Recalibrating Patent Venue

TC Heartland Law Professor Amicus Brief

Guest Post: The Problematic Origins of Nationwide Patent Venue.

 

 

 

Returning to our Roots with Reasonable Royalties

Patent,

A new draft paper by Professor Michael Risch (Un)Reasonable Royalties positions itself as a major reconsideration of the way that we calculate damages in patent cases.  This revolution has been brewing in academic circles, but I expect the spillovers into case law will be coming soon.  Over the past few years the Federal Circuit has pushed for more explicit discussion and explanation of damages. (See Lucent and Uniloc).  However, Risch argues that the result has been a “piling” of “rigid rules” rather than economic rationality.  (This rule versus rationality debate seems to keep coming up…)

Risch favors the economic and practical justification for the reasonable royalty floor for patent damages, but argues that courts have departed widely from the doctrine’s century-old origin — in ways that have “led to both over- and under-compensation.”  Big targets for Risch are the hypothetical negotiation and the Georgia-Pacific factors. He writes:

The hypothetical negotiation is a staple of reasonable royalty analysis by parties and courts, but it is not—as currently applied, at least—consistent with the traditional reasonable royalty framework. . . .

The [traditional] willing buyer/seller analysis might sound the same, but it is not. The negotiation includes many extraneous elements that have no place in a damages calculation, like bargaining power and a guarantee of profit. Furthermore, a focus on negotiation implies that the value of a patent must be fixed before the infringement, and successful patents should go uncompensated if the success was a surprise. Neither of these was contemplated in early cases. . . .

[R]easonable royalties are supposed to be compensatory in nature. The question isn’t what the parties would have negotiated, it is what the appropriate amount of compensation should be. . . . And that is hard enough; trying to also speculate [particulars such as] whether the parties would have negotiated a lump sum or a running royalty adds a layer of complexity that is unnecessary.

I am drawn to Risch’s approach of discarding rules for the sake of rules – especially when the rules are piled in ways that are complex and contradictory.  I like to keep in mind that a jury of non-experts will actually be deciding the damage values and so the approach also needs to be simple and logical enough for that body to rule upon.  Although my justification is that the law needs to be simplified for the jury –simple and logical rules benefit us in myriad ways.

For litigators – Professor Risch also does a nice job of explaining contradictions between current practice and older case-law that may well be ripe for court challenge.

Read the article: (Un)Reasonable Royalties

Yes, All Elements Rule Still Applies to Infringement

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Medgraph v. Medtronic (Fed. Cir. 2016)

Medgraph’s claims are directed to a set of methods “for improving and facilitating diagnosis and treatment of patients.” See U.S. Patent 5,974,124 and U.S. Patent 6,122,351.   The problem is that the claims require actions by both the computer system and also a patient/doctor.  This claim structure directly runs headlong into traditional requirement for direct infringement of a patent – that all steps of the claim be performed-by or attributable-to a single entity.

In its 2015 decision, the district court ruled that Medtronic could not be liable for infringement because there was no “showing that Medtronic itself directly infringed the method claims or that it acted as a ‘mastermind’ by controlling or directing anyone else’s direct infringement.” Citing Akamai Techs., Inc v. Limelight Networks, Inc., 786 F.3d 899 (Fed. Cir. 2015) (decision on remand from SCT).

Following the district court’s decision in this case, the Federal Circuit issued a per curiam en banc decision broadening the scope of potential attribution. Akamai Techs., Inc. v. Limelight Networks, Inc., 797 F.3d 1020 (Fed. Cir. 2015).  In this most recent en banc decision, the court held that the “single entity” theory of direct infringement can also be extended “when an alleged infringer conditions participation in an activity or receipt of a benefit upon performance of a step or steps of a patented method and establishes the manner or timing of that performance.”

On appeal here, Medgraph argued for remand to allow the district court to consider infringement under this broader theory.  However, the Federal Circuit rejected that suggestion.  The court held instead that Medgraph’s case fails on any and all theories of direct infringement because Medgraph failed to produce evidence that the missing steps were actually performed by the patient and doctor. In addition, Medgraph failed to identify evidence fitting within the new broader attribution guidelines.

“The district court also correctly concluded that Medtronic was not liable under a theory of indirect infringement, because indirect infringement is predicated on direct infringement. That rule was also unaffected by Akamai V, so the outcome would, again, not change if we were to vacate and remand. ”

Dismissal Affirmed

= = = =

I was curious how the patentee here thought it might win without proving infringement of each element. In its reply brief, Medgraph explained that (1) Medtronic instructed users to practice the claim steps; and (2) Medtronic ‘admits’ that about 20% of patients used the system in an infringing manner.  This admission came from Medtronic’s appeal brief that stated “the record shows that approximately 80 percent of customers in fact use the system in this non-infringing way.”  This evidence coupled with its expert testimony are, according to Medgraph, enough to prove infringement. See Vita-Mix Corp. v. Basic Holding, Inc., 581 F.3d 1317 (Fed. Cir. 2009) (circumstantial evidence sufficient); Moleculon Research Corp. v. CBS, Inc., 793 F.2d 1261, 1272 (Fed. Cir. 1986) (“[c]ircumstantial evidence is not only sufficient, but may also be more certain, satisfying and persuasive than direct evidence.”).

= = = =

Although the Federal Circuit’s most recent Akamai decision loosened the knot a bit on the strict single-entity requirement, it remains a tough requirement.  Here, for instance, it does not appear to be enough that an accused infringer instructed its customers on how to use its system in a way that infringes.  Rather, liability under Akamai will only be created if the alleged infringer requires that those steps be followed or receives some benefit upon their performance.

Power Integrations v. Fairchild Semiconductor

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By Jason Rantanen

Power Integrations, Inc. v. Fairchild Semiconductor International, Inc. (Fed. Cir. 2016) 15-1329.Opinion.12-8-2016.1
Panel: Prost, Schall, Chen (author)

This appeal is the latest in a long-running patent saga between Power Integrations and Fairchild.  Each asserted patents against the other; each won as to liability against the other. The most interesting aspect of this opinion is its discussion of inducement, in which the court rejects a jury instruction on inducement that expressly stated that the third party’s direct infringement “need not have been actually caused by the [accused inducer’s] actions.”

Background:  The complexity of this appeal is illustrated by the opinion’s 8 bullet-point summary of its holdings.   The jury found that Power Integrations’ Patent Nos. 6,107,851 and 6,249,876 were not anticipated and were directly and indirectly infringed by Fairchild and that Fairchild’s Patent No. 7,259,972 was not obvious and was infringed by Power Integrations under the doctrine of equivalents (but was not literally infringed or indirectly infringed by Power Integrations).  The jury also found Power Integrations’ Patent No. 7,834,605 neither anticipated nor obvious.  Following trial, the district court granted judgment as a matter of law that Fairchild directly infringed this patent.  The district court granted a permanent injunction against Fairchild and declined to grant an inunction against Power Integrations.

Fairchild appealed and Power Integrations cross-appealed.

Inducement: The indirect infringement issue involved 35 U.S.C. § 271(b), a one sentence provision at the heart of several significant opinions over the last few years.  Section 271(b) reads “[w]hoever actively induces infringement of a patent shall be liable as an infringer.”  Basic elements of an inducement claim include some type of action by the alleged inducer to encourage acts by a third party, an awareness that the third party’s acts would infringe a patent, and actual direct infringement by a third party.

The full jury instruction takes up almost a page and a half of the opinion.  The critical passage on appeal reads:

In order to establish active inducement of infringement, it is not sufficient that others directly infringe the claim. Nor is it sufficient that the party accused of infringement was aware of the acts by others that directly infringe. Rather, in order to find inducement, you must find that the party accused of infringement intended others to use its products in at least some ways that would infringe the asserted claims of the patent. However, that infringement need not have been actually caused by the party’s actions. All that is required is that the party took steps to encourage or assist that infringement, regardless of whether that encouragement succeeded, or was even received.

Slip Op. at 22 (emphasis in opinion).  The problem, in the court’s words, was that “[t]his instruction left the jury with the incorrect understanding that a party may be liable for induced infringement even where it does not successfully communicate with and induce a third-party direct infringer.”  Id. at 23.  Rather, inducement “requires successful communication between the alleged inducer and the third-party direct infringer.”  Id.  Quoting from Dynacore Holdings Corp. v. U.S. Philips Corp., 363, F.3d 1263, 1274 (Fed. Cir. 2004), the court observed “[w]e have further held that “[t]o prevail under a theory of indirect infringement, [plaintiff] must first prove that the defendants’ actions led to direct infringement of the [patent-in-suit].”  Id. at 24.  Thus, “a finding of induced infringement requires actual inducement.”  Id.  In terms of doctrine, the court situates this inquiry in the requirement of inducement itself.

Although the court does not come right out and say it, this is fundamentally a theory of causality in inducement.  In other words, it is not enough that the alleged inducer engage in acts intended to result in direct infringement by a third party and that the third party directly infringes.  At a minimum, there must be a successful communication between the two.  Attempted inducement is not enough; there must be “actual inducement.”  This interpretation  is further bolstered by the court’s rejection of the language in the jury instruction stating that “infringement need not have been actually caused by the party’s actions.”   That said, despite the invitation to address causality presented by the jury instruction, the court conspicuously avoids describing its holding in those terms.  Nowhere outside of the jury instruction and a few unrelated places does a permutation of “caus” appear.

Even as it recognized a requirement that there be some link between the acts of the alleged inducer and the directly infringing acts,  however, the Federal Circuit was not willing to go so far as to say that Fairchild did not induce infringement  as a matter of law.  After rejecting Fairchild’s argument on the lack of sufficiency of the evidence generally, the Federal Circuit dismissed its argument on nexus between Fairchild’s acts and the ultimate direct infringement.  Fairchild contended

that Power Integrations introduced evidence of only three acts of direct infringement—sales of an HP printer, Acer notebook computer, and Samsung notebook computer containing infringing Fairchild controller chips—and that Power Integrations was required to present evidence that Fairchild specifically induced HP, Acer, Samsung, or the retailers from which Power Integrations purchased the infringing products to incorporate the infringing controller chips into products bound for the United States.

Id. at 30.  The Federal Circuit rejected the argument that such specificity was required in the nexus.  “While none of [Power Integrations’  evidence can be directly linked to the particular HP printer, Acer notebook computer, or Samsung notebook computer Power Integrations
introduced at trial as representative acts of direct infringement, it was sufficient to allow the jury to find that Fairchild had induced its customers (including HP, Acer, and Samsung) to infringe as a class. This is all that we require.”  Id. at 31.  “Indeed, we have affirmed induced infringement verdicts based on circumstantial evidence of inducement (e.g., advertisements, user manuals) directed to a class of direct infringers (e.g., customers, end users) without
requiring hard proof that any individual third-party direct infringer was actually persuaded to infringe by that material.”  Id.

Thus, although some evidence of a link between inducer’s acts and the directly infringing acts is required, it need not be with the level of specificity that might need to be shown in other contexts.  Absolute precision of proof as to the machine in the courtroom is not necessary.  And yet, some proof of a link must be present.  Here, the court concluded, there was sufficient evidence for a reasonable jury to find that necessary link.

At this point you might be asking why all of this mattered, given that Fairchild did not appeal the jury verdict that it directly infringed the patents.  The reason is because the finding of inducement greatly expanded the scope of Fairchild’s liability beyond its direct infringement in the United States.  Based on its decision on inducement, the Federal Circuit vacated the district court’s grant of Power Integrations’ motion for a permanent injunction against Fairchild.  Of course, given that these issues are being remanded to the district court, it is conceivable that the outcomes of both could ultimately be the same.

Practice commentary: The opinion contains a simple articulation of the requirements of an inducement claim that rearranges the conventional elements.  Near the beginning of its discussion of the jury verdict, the court describes the elements as follows:

In other words, Power Integrations was required to prove that: (1) a third party directly infringed the asserted claims of the ’851 and ’876 patents; (2) Fairchild induced those infringing acts; and (3) Fairchild knew the acts it induced constituted infringement.

In my view, this version is much easier to understand than the usual way inducement is articulated.

Anticipation: The court’s review on anticipation of the ‘605 patent is also interesting as an example of a jury verdict of no anticipation being overturned on appeal.   Here, Fairchild bore a double-burden on Power Integrations ‘605 patent: not only did it bear the burden of proving that the presumptively-valid claims were anticipated, but it also had to convince the Federal Circuit on appeal that the jury’s finding to the contrary was unsupported by substantial evidence.  Fairchild was helped on appeal by the relative narrowness of the disputed evidentiary issue.  On that particular issue, the court concluded that Power Integrations’ own expert had testified that the critical element required by the claims was disclosed by the prior art reference.

Doctrine of equivalents: The main point here is Power Integrations’ successful claim vitiation argument.

Edit: Added the opinion itself.

JobDiva: Service Mark for Software

Patent,

JobDivaby Dennis Crouch

Here, the Federal Circuit rejects the TTAB’s requirement for “something more” than selling software in order to protect a service mark. The court instead redirects the inquiry to ask whether provisioning of the software provides the indicated service. 

In re JobDiva (Fed. Cir. 2016) [JobDiva]

Service Mark: JobDiva holds two registrations for its name JobDiva for use in job placement services and computer services for facilitating job placement.

Tables Turned: After JobDiva brought an action to cancel its competitor’s JobVite mark, the Board turned the table and instead cancelled JobDiva’s marks — finding the marks abandoned because JobDiva had failed to prove use in connection with the appropriate classes.  Namely, although JobDiva did use its mark to identify its software — selling software is not providing a job placement service.

A term that only identifies a computer program does not become a service mark merely because the program is sold or licensed in commerce. . . . Such a mark does not serve to identify a service unless it is also used to identify and distinguish the service itself, as opposed to the [computer] program.

The Lanham Act provides for cancellation on grounds of abandonment. “Nonuse for 3 consecutive years shall be prima facie evidence of abandonment.”  Adding to this, the Federal Circuit has previously ruled that the abandonment question should focus on whether “the mark has not been used for the goods or services specified in the registration” during that time period. See On-Line Careline, Inc. v. Am. Online, Inc., 229 F.3d 1080 (Fed. Cir. 2000).

Software Service: On appeal here, the Federal Circuit has vacated the abandonment decision – holding that the Board asked the wrong question about JobDiva’s use.

The Board required JobDiva to prove that it used its marks on more than just software because its software sales alone could not, in the Board’s view, constitute personnel and recruitment services. We disagree with the Board’s approach. The proper question is whether JobDiva, through its software, performed personnel placement and recruitment services and whether consumers would associate JobDiva’s registered marks with personnel placement and recruitment services, regardless of whether the steps of the service were performed by software.

The decision here makes sense and takes a practical approach that fits with the ongoing trend of providing software as a service rather than a product.

Coming in 2017: Reforms to Copyright Law and the Copyright Office

Patent,

First proposal:

  • While keeping the Copyright Office within the Legislative Branch, separate it from the Library of Congress.  I have previously suggested the more dramatic action of joining the Copyright Office with the Patent & Trademark Office to allow for better coordination of rights. 
  • Modernize copyright office technology. PLEASE DO THIS! 
  • [Copyright-Reform.pdf]

Mike Masnik (Techdirt) writes: Congress Proposes First Stages Of Copyright Reform, And It’s Not Good.

 

Lemley-Oliver-Richardson: Patent Purchases and Litigation Outcomes

Articles and Publications, Journal, Patent, , , , , , ,

The sales market for patent rights continues to vex analysts – especially in terms of valuation. In their Patently-O Patent Law Journal article, Professor Mark Lemley teams up with the Richardson Oliver Group to provide some amount of further guidance.  The article particularly considers how patent litigation outcomes vary according to the identity of the patentee (ownership) and the manner in which the patent was obtained (source).

We analyzed the data based on ownership and source to test our intuitions about how successfully purchased patents can be litigated. The results, especially, when analyzed based on the entity type produced both confirmatory and surprising results. For example, the intuition that companies generally do better with their own patents was confirmed. In contrast, surprisingly, inventor-started companies fared better with purchased patents. Purchasers can use the results of this analysis to inform future modeling and purchase decisions.

Mark A. Lemley, Erik Oliver, Kent Richardson, James Yoon, & Michael Costa, Patent Purchases and Litigation Outcomes, 2016 Patently-O Patent Law Journal 15.

Read the Article: Lemley.2016.PatentMarket

Prior Patently-O Patent L.J. Articles:

  • Bernard Chao and Amy Mapes, An Early Look at Mayo’s Impact on Personalized Medicine, 2016 Patently-O Patent Law Journal 10 (Chao.2016.PersonalizedMedicine)
  • James E. Daily, An Empirical Analysis of Some Proponents and Opponents of Patent Reform, 2016 Patently-O Patent Law Journal 1. (Daily.2016.Professors)
  • Tristan Gray–Le Coz and Charles Duan, Apply It to the USPTO: Review of the Implementation of Alice v. CLS Bank in Patent Examination, 2014 Patently-O Patent Law Journal 1. (GrayLeCozDuan)
  • Robert L. Stoll, Maintaining Post-Grant Review Estoppel in the America Invents Act: A Call for Legislative Restraint, 2012 Patently-O Patent Law Journal 1 (Stoll.2012.estoppel.pdf)
  • Paul Morgan, The Ambiguity in Section 102(a)(1) of the Leahy-Smith America Invents Act, 2011 Patently-O Patent Law Journal 29.  (Morgan.2011.AIAAmbiguities)
  • Joshua D. Sarnoff, Derivation and Prior Art Problems with the New Patent Act, 2011 Patently-O Patent Law Journal 12 (sarnoff.2011.derivation.pdf)
  • Bernard Chao, Not So Confidential: A Call for Restraint in Sealing Court Records, 2011 Patently-O Patent Patent Law Journal 6 (chao.sealedrecords.pdf)
  • Benjamin Levi and Rodney R. Sweetland, The Federal Trade Commission’s (FTC) Recommendations to the International Trade Commission (ITC):  Unsound, Unmeasured, and Unauthoritative, 2011 Patently-O Patent Law Journal 1 (levi.ftcunsound.pdf)
  • Kevin Emerson Collins, An Initial Comment on King Pharmaceuticals: The Printed Matter Doctrine as a Structural Doctrine and Its Implications for Prometheus Laboratories, 2010 Patently-O Patent Law Journal 111 (Collins.KingPharma.pdf)
  • Robert A. Matthews, Jr., When Multiple Plaintiffs/Relators Sue for the Same Act of Patent False Marking, 2010 Patently-O Patent Law Journal 95 (matthews.falsemarking.pdf)
  • Kristen Osenga, The Patent Office’s Fast Track Will Not Take Us in the Right Direction, 2010 Patently-O Patent L.J. 89 (Osenga.pdf)
  • Peter S. Menell,  The International Trade Commission’s Section 337 Authority, 2010 Patently-O Patent L.J. 79
  • Donald S. Chisum, Written Description of the Invention: Ariad (2010) and the Overlooked Invention Priority Principle, 2010 Patently‐O Patent L.J. 72
  • Kevin Collins, An Initial Comment on Ariad: Written Description and the Baseline of Patent Protection for After-Arising Technology, 2010 Patently-O Patent L.J. 24
  • Etan Chatlynne, Investigating Patent Law’s Presumption of Validity—An Empirical Analysis, 2010 Patently-O Patent L.J. 37
  • Michael Kasdan and Joseph Casino, Federal Courts Closely Scrutinizing and Slashing Patent Damage Awards, 2010 Patently-O Patent L.J. 24 (Kasdan.Casino.Damages)
  • Dennis Crouch, Broadening Federal Circuit Jurisprudence: Moving Beyond Federal Circuit Patent Cases, 2010 Patently-O Patent L.J. 19 (2010)
  • Edward Reines and Nathan Greenblatt, Interlocutory Appeals of Claim Construction in the Patent Reform Act of 2009, Part II, 2010 Patently‐O Patent L.J. 7  (2010) (Reines.2010)
  • Gregory P. Landis & Loria B. Yeadon, Selecting the Next Nominee for the Federal Circuit: Patently Obvious to Consider Diversity, 2010 Patently-O Patent L.J. 1 (2010) (Nominee Diversity)
  • Paul Cole, Patentability of Computer Software As Such, 2008 Patently-O Patent L.J. 1. (Cole.pdf)
  • John F. Duffy, The Death of Google’s Patents, 2008 Patently O-Pat. L.J. ___ (googlepatents101.pdf)
  • Mark R. Patterson, Reestablishing the Doctrine of Patent Exhaustion, 2007 Patently-O Patent L.J. 38
  • Arti K. Rai, The GSK Case: An Administrative Perspective, 2007 Patently-O Patent L.J. 36
  • Joshua D. Sarnoff, BIO v. DC and the New Need to Eliminate Federal Patent Law Preemption of State and Local Price and Product Regulation, 2007 Patently-O Patent L.J. 30 (Download Sarnoff.BIO.pdf)
  • John F. Duffy, Are Administrative Patent Judges Unconstitutional?, 2007 Patently-O Patent L.J. 21. (Duffy.BPAI.pdf)
  • Joseph Casino and Michael Kasdan, In re Seagate Technology: Willfulness and Waiver, a Summary and a Proposal, 2007 Patently-O Patent L.J. 1 (Casino-Seagate)

Judging Ex Parte Cases

Patent

My research inquiry – Have you read any great writing on the difference between the process of judging a contested case vs an uncontested (or ex parte) case?  [email me: dcrouch@patentlyo.com]

In the contested situation, a judge is free to be neutral and rely upon the each party to identify deficiencies in the opposing party’s arguments.  In the ex parte case, such as patent examination, there is no party voicing opposition.  The need for that voice is partially eliminated by the heightened duty of candor in these cases, but only partially.   How does the examiner fill the role of both judge and partial voice-of-opposition in this situation?

What it takes to Prove a Motivation to Combine

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by Dennis Crouch

In re NuVasive (Fed. Cir. 2016)

In an important obviousness decision, the Federal Circuit has reversed the PTAB IPR decision – holding that the PTAB failed to sufficiently explain its ruling that a person having ordinary skill in the art (PHOSITA) would have been motivated to combine the prior art teachings to create the patented invention.  Although expressing its intent to follow KSR, the court here comes closer to trodding upon that (oft maligned) precedent.

The case involves an Inter Partes Review (IPR) challenge of NuVasive’s spinal fusion implant patent (U.S. Patent No. 8,361,156).  The claims require that the implants include, inter alia, radiopaque markers on the medial plane. The PTAB found the claims invalid as obvious based upon a collection of prior art references related to spinal fusion.

Doctrine of Obviousness: A claim is invalid if the differences between the prior art and the claim (considered “as a whole”) would have been obvious to PHOSITA considering the issue at the time the invention was made.  35 U.S.C. § 103.

Motivation to Combine: In many US obviousness cases, each of the claim limitations are found in some form within the body of prior art imputed to PHOSITA and the obviousness question becomes whether it would have been obvious to combine those references to form the claimed invention. In KSR Int’l Co. v. Teleflex Inc., 550 U.S. 398 (2007), the Supreme Court held that the motivation to combine references need not be found expressly in the prior art itself but may be explained by the fact finder using common sense.  Still, the KSR Court wrote that it “can be important to identify a reason that would have prompted [PHOSITA] to combine the elements in the way the claimed new invention does.”  Extending that decion, the Federal Circuit ruled that the PTAB must (1) “articulate a reason why a PHOSITA would combine the prior art references”; (2) have an adequate evidentiary basis for that finding; and (3) provide a “satisfactory explanation” for the motivation finding that includes an express and “rational” connection with the evidence presented.  See, In re Lee (conclusory statements are insufficient); Cutsforth v. MotivePower (must positively explain motivation – not just reject arguments against motivation); and Arendi v. Apple (PTAB “cannot rely solely on common knowledge or common sense to support its findings” of motivation).

Here, the basic question is whether it would have been obvious to combine prior art teaching the spinal fusion implant with references showing the use and importance of radiopaque markers in implants.  However, according to the appellate panel, “the PTAB failed to explain the reason why a PHOSITA would have been motivated to modify [the prior art], to place radiopaque markers ‘proximate to said medial plane'” as required by the challenged claims.

After discrediting the PTAB decision, the court also looked at the evidence presented by the challenger Medtronic.  Medtronic’s expert had explained that the motivation for adding the additional markers would be to provide surgens with “additional information” and that it would have been common sense to add the additional markers.

Medtronic’s arguments amount to nothing more than conclusory statements that a PHOSITA would have been motivated to combine the prior art references to obtain additional information.  According to the court, these “arguments amount to nothing more than conclusory statements” and thus should not be credited.  One key reference did explain that the medial markers were beneficial during the alignment process.  However, the Federal Circuit rejected that reference because it was published after the patent-in-question’s priority date and not cited in the prior art references.  Because they came after the priority date, the court found that the motivation “could not have been obtained . . . at the time of the invention.”

LifeTech v. Promega Oral Arguments: What is a ‘Substantial Portion’ of the Components

Patent

by Dennis Crouch

Life Technologies Corp. v. Promega Corp. (Supreme Court 2016) [LifeTechTranscript]

Today the Supreme Court heard oral arguments in LifeTech v. Promega. The case focuses on the statutory interpretation of 35 U.S.C. § 271(f)(1) (export of components of patented invention).  The ordinary rule of U.S. patent law is that patent rights are territorial – a U.S. patent covers only infringement within the US territorial lines.  As they say, if you want to sue someone for infringing acts in the UK, then get a UK patent (or perhaps soon an EPO patent).  Section 271(f) of the US patent act pushes a bit against the extra-territorial limitation by creating liability for unauthorized supply or export from the US of “all or a substantial portion of the components of a patented invention . . . in such manner as to actively induce the combination of such components outside of the US in a manner that would infringe the patent if such combination occurred within the US.”

The case at hand involves a patented genetic test being performed in the UK. The accused infringer had exported from the US a commodity enzyme (Taq polymerase) necessary for the test.  LifeTech argues: “the only contact that any of this has with the United States is the fact that a single, commodity product is shipped to England as part of the process for the fabrication of these particular kits.”  As a point of fact, there was some debate at oral arguments about whether, at the time when infringement began, quality Taq was available from non-US sources.

The question before the Supreme Court is whether this single commodity component can satisfy the statutory test of “all or a substantial portion of the components” of the patented invention.

Issue: Whether the Federal Circuit erred in holding that supplying a single, commodity component of a multi-component invention from the United States is an infringing act under 35 U.S.C. § 271(f)(1), exposing the manufacturer to liability for all worldwide sales.

Because the Federal Circuit sided with the patentee (finding infringement) oral arguments began with petitioner (adjudged infringer) represented by Carter Phillips.  The Obama Administration (DOJ brief not signed by PTO) sided with the petitioner and was represented by Zachary Tripp; and Seth Waxman represented the patentee-resondent.

Although I see this is a statutory interpretation question Carter Phillips began the discussion with a statement that this is “largely an international trade case.”  The purpose of that focus is to remind the court of its prior international trade jurisprudence, including Microsoft v. AT&T, where it tends to interpret US law in order to limit extraterritorial application.

On the actual statutory interpretation, Justice Alito asked “Does ‘substantial portion’ mean a majority?”  Phillips replied: “I think it means substantially more than a majority. I would say that it has to be approximating or very close or tantamount to all. [In the case at hand] I would have thought at least four [of the five components] would have to be [exported]. But you know, in many instances, my guess is the right answer may well be five [out of five].”  The US Gov’t largely agreed with this – arguing that there should never be 271(f)(1) liability for exporting a single component but instead the export must reach “all or something tantamount to all of the components.”

Returning to the “substantial portion” language, Justice Kagan offered the following hypothetical:

JUSTICE KAGAN: If I said to you, Mr. Tripp, a substantial portion of my former clerks have gone into government work, how many would I mean?

MR. TRIPP: I think with any of these things, the interpretation of substantial depends entirely on its context and its purpose, and — and — and so this term is used in just, like, a countless array of ways in the law.

JUSTICE KAGAN: So you’re not pinning this on the — on the language here, the substantial portion means almost all?

MR. TRIPP: Well, no —

Essentially, the Goverment’s response here matches with LifeTech’s argument that “substantial portion” is rather ambiguous and so the court must supply a meaning while keeping in mind the principle against extra-territorial application.

Carter Phillips interpretation that a “substantial portion” means “approximately all” comes from the background behind the enactment of 271(f) — that is the overruling of Deepsouth where all the components were being exported but in an unassembled fashion.

JUSTICE KAGAN: Where — where do you get that from? What’s the principle there?

MR. PHILLIPS: Because all Congress wanted to do was to close a loophole [created by Deepsouth] where you’re essentially doing nothing but violating U.S. patent law and avoiding it by simply offloading it at the last second.

JUSTICE KAGAN: Well, how do we know that that’s all Congress wanted to do?

MR. PHILLIPS: [Changing the subject] the presumption against extraterritoriality would drive you in the opposite direction. Even if you could reasonably read the language either way.

MR. TRIPP: [answering the same question] So we’re trying to give a gloss on substantiality in light of the context and purpose of this statue as — as we understand all of 271(f) is designed to shore up the basic restrictioning and is actually making a patented invention in the United States and then shipping it abroad. Both of the provisions get at that. We think (f)(1) [should be limmited to] situations that resemble the Deepsouth paradigm.

Mr. Waxman rejected this analysis and instead argued that the statute “can be read in a commonsense way.” In addition, Mr. Waxman noted that 271(f)(2) itself overturns Deepsouth. 

LifeTech has also argued for a “quantitative” approach to finding “substantial portion” of the components — counting the number of components — rather than a qualitative approach. Pushing-back, Chief Justice Roberts noted “It seems to me that the significance of the component would be the most important consideration.”  Mr. Tripp responded that the “significance” question would be a “black hole that’s not going to get you anywhere.”  Of course, the Court has entered into this black hole on several occasions. Consider, for instance Quanta, where the court focused on the inventive or core aspects of the claims.

Regarding the quantitative approach, Mr. Waxman interjected here with a pharmaceutical example:

MR. WAXMAN: Let’s assume that you have a patented pharmaceutical, a tablet that, you know, remediates a disease. As is commonplace in these combinations, it has one active ingredient, and it has five inert ingredients that are as easy to pick up as you can imagine. The thing that is exported the factory overseas, which by the way is never liable under the statute because the statute only applies to conduct in the United States, they they’re happy to go down to their local warehouse and get the the five inert ingredients. But the molecule that does all the work, they import from the United States.

Under the approaches proposed by Lifetech and the US Gov’t, the exporter here would not be liable (perhaps rightly so).  One thing that Mr. Waxman failed to argue was an actual positive test for what counts as a “substantial portion.”  His approach instead would be to simply give the case to the jury to decide whether a substantial portion had been supplied or exported.  As a back-up, perhaps instruct the jury that “‘substantial’ means considerable in importance and/or amount.”

In Microsoft, the Supreme Court suggested that “components” for 271(f) purposes are the elements of a claimed invention.  Focusing on that point, Justice Sotomayor astutely asked “When a [patent] claim is [issued], how is the determination made of what the elements are? Do the elements’ determinations sort out the common from the uncommon in a patent claim?”  My answer here is that there is no specific definition by the patent office of what counts as an element or component and what is simply a limitation associated with a component. Responding, the US Gov’t simply said that “in most cases it actually won’t be that difficult.”  For the case-at-hand, the parties apparently agreed that the patent lists five components.

Perhaps channeling the Samsung v. Apple decision also released on December 6, 2016, Justice Breyer challenged the US Gov’t approach as too complex:

JUSTICE BREYER: But why do we have to go into the details here? I mean, it did strike me as an instance where maybe the less said by us the better. I mean, would you be happy if we say ‘it means what it says?’

‘All or substantially all’ means a whole lot. Or what you said, tantamount to all.

Of course, as is his wont, Justice Breyer here confused the language. The statute does not require “all or substantially all” but instead “all or a substantial portion.”   Mr. Tripp did not correct Justice Breyer on this even though he had full opportunity.  Mr. Waxman did offer the correction “And, Justice Breyer, I do want to correct one thing. You — you inadvertently kept saying this is all or substantially all. It’s not ‘all or substantially all’ – It’s ‘all or a substantial portion.'”  As a point of interpretation, Mr. Waxman indicated that many statutes do use the term “substantially all” and that should be seen as more rigorous of a standard than “a substantial portion.”

As with all Federal Circuit patent cases before the Supreme Court, reversal is likely.  However, I expect the reversal to be primarily a rejection of a hard-line interpretation of the Federal Circuit opinion.  I do not expect the Supreme Court to impose a quantitative limit on “substantial” but instead leave that question as one that must be proven to a jury as an element of infringement under Section 271(f).

 

Samsung v. Apple: Design Patent Damages May be Limited to Components

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by Dennis Crouch

Samsung v. Apple (Supreme Court 2016)

In a unanimous opinion authored by Justice Sotomayor, the Supreme Court has reversed the Federal Circuit in this important design patent damages case.  Although the case offers hope for Samsung and others adjudged of infringing design patents, it offers no clarity as to the rule of law.

The decision centers on the special statutory provision for damage awards in design patents – 35 U.S.C. § 289.  Section 289 provides for the significant remedy of profit disgorgement based upon a defendant’s use of the patented “article of manufacture.” The infringer “shall be liable to the owner to the extent of his total profit.”

The challenge in Samsung v. Apple is whether to calculate the award based upon Samsung’s profits for its smartphone devices as a whole or instead whether profits could be narrowed to profits associated with individual components (such as the screen or phone body shape) even though those components are not sold directly to the consumers.

Siding with the infringer Samsung, the court held that the statute allows for damages to be applied at the component level since components are also “articles of manufacture.” The court also indicated that the product as a whole is also an article of manufacture.

[T]he term “article of manufacture” is broad enough to embrace both a product sold to a consumer and a component of that product, whether sold separately or not. Thus, reading “article of manufacture” in §289 to cover only an end product sold to a consumer gives too narrow a meaning to the phrase.

Thus, it will be up to courts to figure out which to level applies in particular cases.

No Test: Here, the court refused to offer any opinion as as to (1) how a judge or jury might go about deciding whether the profits apply to the product as a whole or instead to an individual component or (2) whether – in this case – the profits should be applied to the entire Samsung Galaxy smartphones or only to the individual components.  The problem, according to the Court, was inadequate briefing. “We decline to lay out a test for the first step of the §289 damages inquiry in the absence of adequate briefing by the parties.”  On remand, the Federal Circuit may grapple with these issues — what is the best test?

Defining Article of Manufacture:  In the decision, the court offered what it termed a “broad” meaning of “article of manufacture” as “a thing made by hand or machine.”  Although broad, the definition appears to exclude digital and virtual designs.   I query here whether Apple’s patented “graphical user interface for a display screen” at issue in this case fits this definition. USD0604305Sale of an Article of Manufacture: One problem with the decision is how it intermingles Section 171 with Section 289.  Section 171 can be thought of as the 101-of-design-patents and allows for the patenting of “any new, original and ornamental design for an article of manufacture.” Once issued, the design patent may be asserted either under the general patent statutes Section 271/284 (infringement/damages) or else under the alternative design patent alternative codified in Section 289.  The statute expressly allows for either option, but forbids double-collection of damages.  The distinction: Although Section 171 may well allow for patenting of a component or portion of a device (see below), it does not necessarily follow that an infringement action would lie in Section 289 for such a component – since that section requires a sale of the patented article of manufacture.   Perhaps all of this will be baked into the Federal Circuit test.

Component-Based Design Patents: Of some interest, the Court accepts as a given that design patents may properly cover a component of a multi-component invention. In the process, it affirmatively cites Judge Rich’s 1980 Zahn decision that allows for design patents covering partial components even when non-discrete or incomplete. Application of Zahn, 617 F. 2d 261 (CCPA 1980) (“Section 171 authorizes patents on ornamental designs for articles of manufacture. While the design must be embodied in some articles, the statute is not limited to designs for complete articles, or ‘discrete’ articles, and certainly not to articles separately sold . . . ”).  This goes beyond the also-cited old case of Ex parte Adams, 84 Off. Gaz. Pat. Office 311 (1898) (design patents allowed on movable/separable components).

Read the short decision: SamsungAppleDecision.

Top Patent Law Stories of 2016

Patent

If you miss my patent law year-in-review talk in Snowmass on January 6, do not worry – Patent Docs authors Donald Zuhn, Kevin Noonan, and Michael Borella will be offering their 10th annual live webinar on the “Top Patent Law Stories of 2016.” January 18, 2017 from 10:00 am to 11:15 am (CT).  Free, but pre-registration required (here).  CLE credit is pending for the states of California, Illinois, New Jersey, New York, North Carolina, and Virginia.