The following post is republished from the USPTO Director’s Blog and is authored by USPTO Director Andrei Iancu and Deputy Director Laura Peter. 

“To maintain our technological leadership, the United States must broaden our innovation ecosphere demographically, geographically, and economically.”—USPTO Director Andrei Iancu

Today, as part of Women’s History Month, the USPTO has officially launched the Expanding Innovation Hub (“the Hub”), an online platform available on the USPTO website that provides resources for inventors and practitioners to encourage greater participation in the patent system. The new platform is yet another step the USPTO has taken to broaden the innovation ecosphere, to inspire novel inventions, to accelerate growth, and to drive America’s global competitive edge. It builds on our SUCCESS Act report to Congress of 2019, as well as our Progress and Potential report on women inventors. (more…)

Solutran’s new petition for writ of certiorari asks a seemingly simple question:

Does Alice’s step one require that the claims be viewed as a whole and that consideration be given to the claimed advance over the prior art?

Solutran, Inc., v. Elavon, Inc. (Supreme Court 2020).

In the underlying litigation, the district court denied the defendant’s summary judgment motion on eligibility.  Similarly, the USPTO PTAB had refused to institute a covered-business-method review  on eligibility — explaining that the method of processing paper checks includes nothing “that would indicate that it is directed to an abstract idea at all.” On appeal, however, the Federal Circuit reversed — holding that the claims were directed to the abstract idea of crediting a merchant’s account as early as possible while electronically processing a check.

Claim 1 of U.S. Patent No. 8,311,945 is a method of processing checks and lists a four step process: (1) receiving data associated with magnetic ink character recognition (MICR) for each paper check (but not an image file of the checks); (2) crediting the merchant account; (3) subsequently scanning the checks for a digital image and (4) comparing the scanned image with the MICR information.

[Petition]

Solutran v. Evalon: Processing Paper Checks and Patent-Eligible Subject Matter

Guest post by Professor Pamela Samuelson, Berkeley Law School

In the past week 28 amicus curiae briefs were filed in the Google v. Oracle case, including one written by me and Catherine Crump (of which more below). All but two support reversal of one or both of the Federal Circuit’s copyrightability and fair use rulings.[1]

Especially significant are IBM’s brief with Red Hat arguing against the copyrightability of computer interfaces and Microsoft’s brief criticizing the Federal Circuit’s unduly rigid fair use analysis and indifference to the need for flexible rules that promote interoperability in today’s highly connected world. The briefs are substantively excellent, and significant because these firms are such prominent developers of software.

For those interested in the case who are not computing professionals, I recommend the amicus briefs submitted by 83 computer scientists and by the Developers Alliance which explain the Java API technology and why reuse of Java declarations and interfaces generally is so important to enabling compatibility. Several other briefs, including one for the Center for Democracy and Technology et al., and another for R Street and Public Knowledge, offer numerous examples of compatible software systems that benefit consumers as well as software developers

By my count, more than half of the 28 amicus briefs focus only on the copyrightability issue and another 9 address both the copyrightability and fair use issues. Only 4—the Microsoft, Tushnet, Snow, and Rauschenberg Foundation briefs–address only fair use. This was a something of a surprise given that the fair use decision seems quite vulnerable to challenge. After all, a jury rendered a verdict in favor of Google’s fair use defense, and appellate courts are supposed to defer to jury verdicts. Several amicus briefs take the Federal Circuit to task for substituting its judgment on the merits for the jury’s as to issues about which there was conflicting evidence in the record. Also much criticized are the Federal Circuit’s analysis of the four fair use factors and the manner in which it weighed the factors together.

One very pragmatic reason why some amici would prefer that the Court rule on the copyrightability issue over the fair use issue is that fair use is a fact-intensive, complex, and much debated limitation on copyright. Google may be able to litigate software interface copyright cases for a decade or more, as it has done in this case, but startups and other small and medium-size companies as well as open source developers would prefer the certainty of a no-copyright-in-interfaces rule, as several amicus briefs pointed out. If the Court rules that interfaces are not protectable by copyright law, litigation over reuses of interfaces is much less likely. And if some developer does bring suit, chances are good that the case can be won on a motion to dismiss or for summary judgment

Software developer and industry association amici point to a longstanding consensus on the distinction between interfaces and implementations: interfaces should be free for reuse as long as developers reimplement the interfaces in independently created code. The Federal Circuit’s Oracle decisions have upset settled expectations in the industry, and if the Court upholds them, it would have, as Microsoft asserts, “potentially disastrous consequences for innovation.”

The American Antitrust Institute was among the amici that emphasized the potential for copyright in program interfaces to have anti-competitive effects by entrenching dominant firms and creating barriers for new entrants in the software business. This is particularly of concern in view of network effects which, even without interface copyright monopolies, make it difficult for users and developers to switch to new systems.

The Computer & Communications Industry Association and the Internet Association amicus brief provides a historical review of the evolution of software copyright caselaw. Although a few early decisions construed copyright as providing broad protection to program structures such as interfaces, landmark decisions by the Second and Ninth Circuits recognized that interfaces which constitute the functional requirements for achieving compatibility among programs should not be protectable by copyright law. Other courts followed these rulings. The Oracle decision deviates from this body of caselaw. Some amici regard interfaces as patent, not copyright, subject matter.

The amicus brief Catherine Crump and I co-authored and submitted on behalf of 72 intellectual property scholars positioned the pro-compatibility decisions within the framework of the Supreme Court’s 19th-century rulings in Perris v. Hexamer and Baker v. Selden, which originated the exclusion of methods and systems and their constituent elements from the scope of copyright; dozens of decisions applying these exclusions; their codification in 17 U.S.C. § 102(b); and caselaw applying these exclusions to software interfaces that enable compatibility. Our brief also explains why the District Court’s alternative ruling in favor of Google’s merger defense was consistent with Baker and its progeny and that merger provides a sound basis for finding that program interfaces that enable compatibility, such as the Java SE declarations, are unprotectable by copyright law.

Oracle will obviously have a different take on these issues when it files its brief due February 12. Amici in support of its position must submit their briefs within the following week.

Google will have an opportunity to file a reply brief in mid-March. Oral argument before the Court may be scheduled in late March.

= = = = =

[1] Although the American Intellectual Property Law Association is one of the briefs in support of neither party, the substance of its arguments on both the copyrightability and fair use arguments are quite close to the positions of Google and pro-interoperability amici.  The other “neutral” amici were the Robert Rauschenberg and Andy Warhol Foundations which expressed concern about a possible interpretation of fair use that would undermine artistic freedom to engage in creative reuses by artists.

by Dennis Crouch

In Athena Diagnostics, Inc. v. Mayo Collaborative Services, LLC, the Federal Circuit reaffirmed its general ruling that newly invented diagnostic methods will generally be seen as directed toward unpatentable natural laws absent some new machinery for performing the method.  Athena’s patented method is a three-step process for identifying MuSK antibodies in body fluid (such as blood): Mixing labelled MuSK with the body fluid; immunoprecipitating any antibody/MuSK complex from the fluid; and monitoring for the label in the left-over precipitate. The test is important because the existence of MuSK helps diagnose a particular form of Myasthenia gravis (MG).

In its decision, the Federal Circuit found that the core discovery here is the relationship between MuSK antibodies in the body and MG.  That relationship though is a natural law.  The court then looked to the particular steps in the method and found no inventive concept.  Even though the claims required specific chemical reactions, the specification also made clear that development of the particular steps would be within reach of one skilled in the art — once they understand that MuSK is important. The Federal Circuit decision was penned by Judge Lourie and joined by Judge Stoll.  Judge Newman wrote in dissent.  A 7-5 court then denied Athena’s petition for en banc rehearing — writing effectively that its hands were tied by Mayo & Alice.  The Athena denial is interesting because it includes eight opinions (seven substantive) that generally lament the current situation.

Athena then filed a petition asking the Supreme Court to take-up the case on the following question:

Whether a new and specific method of diagnosing a medical condition is patent-eligible subject matter,where the method detects a molecule never previously linked to the condition using novel man-made molecules and a series of specific chemical steps never previously performed.

[Petition]. Now, 11 amici briefs have filed in support of review.  Each of the briefs have lots to say, but I have included below one thought from each that I see as an important contribution:

1. Professors Jeffrey A. Lefstin and Peter S. Menell (Congress intended for patents to cover practical applications of scientific discoveries; We should all reread the original cases on the topic from England – Nielson)
2. Chicago Patent Attorneys (Noonan) (the court should focus on preemption)
3. Intellectual Property Law Association of Chicago (The test here is unduly biased against methods)
4. The Chartered Institute of Patent Attorneys (UK) (Athena conflicts “with international treaties to which the United States is a party, as well as established international practice”)
5. Biotechnology Innovation Organization (BIO) (The Federal Circuit has created a heightened inventive concept test for diagnostic methods)
6. Freenome Holdings, Inc. and New Cures For Cancers, Inc.  (Alice and Mayo are inconsistent with Dawson Chem. Co. v. Rohm & Haas Co., 448 U.S. 176 (1980)).
7. New York Intellectual Property Law Association (The Mayo test was not intended as the exclusive test)
8. Blaine Laboratories, Inc. (See Henry Schein, Inc. v. Archer & White Sales, Inc., 139 S.Ct. 524 (2019) (judicial exceptions to broad statutes are inappropriate))
9. Pharmaceutical Research and Manufacturers of America (PhRMA) (patent eligibility for diagnostic methods is a critical incentive for advancement in the field).
10. Intellectual Property Owners Association (Look to the USPTO guidance to see the trouble — especially its diagnostic method examples)
11. Honorable Paul R. Michel (ret.) (“Never before has the Federal Circuit been so splintered on a fundamental doctrine of patent law.”)

These are very interesting and important briefs. Yes, they show support, but they also include useful legal analysis.

Mayo’s responsive brief is due on November 22, 2019 with any amici in support of the current-state-of-affairs due shortly thereafter.

Guest Post by Emil J. Ali and David E. Boundy.  Emil J. Ali is a partner at Carr Butterfield, LLC, and David Boundy is a partner at Cambridge Technology Law.  More detail about the authors is provided at the end of the post.

On October 9, 2019, the White House issued two executive orders, Promoting the Rule of Law Through Improved Agency Guidance Documents, (E.O. 13891), reprinted at 84 Fed. Reg. 55235 (Oct. 15, 2019), and Promoting the Rule of Law Through Transparency and Fairness in Civil Administrative Enforcement and Adjudication (E.O. 13892), reprinted at 84 Fed. Reg. 55239 (Oct. 15, 2019). Both Executive Orders are generally directed to requiring federal agencies to “act transparently and fairly with respect to all affected parties … when engaged in civil administrative enforcement or adjudication.” E.O. 13892 goes on to explain that individuals should not be subject to enforcement actions without “prior public notice of both the enforcing agency’s jurisdiction over particular conduct and the legal standards applicable to that conduct.”

Executive Orders 13891 and 13892—in General

For the most part, Executive Orders 13891 and 13892 are simple reminders and restatements of long-standing requirements of the Administrative Procedure Act (APA). For example, E.O. 13891 § 1 and E.O. 13892 § 3 remind agencies that they may not enforce “rules” against the public unless those rules are promulgated as “regulations,” in full compliance with the APA and similar laws. E.O. 13892 § 3 and § 4 remind agencies that the APA allows agencies to use sub-regulatory guidance documents to “articulate the agency’s understanding” of other law, or announce tentative positions, but may not apply those soft-edged understandings as if they were hard-edged enforcement standards, unless the agency has followed certain procedures required by the APA. E.O. 13891 and 13892 each state that agencies have sometimes inappropriately exerted authority, without following statutorily-required procedures.

In addition, Executive Orders 13891 and 13892 go above statute to add a few additional requirements for fairness and transparency.  These above-statutory requirements ask agencies to give notice of all their sub-regulatory guidance documents. Covered guidance documents are defined to include anything to which the agency intends to give prospective effect, that is promulgated without the formality of “regulation” (E.O. 13291 § 2(b)). That class includes the Manual of Patent Examining Procedure, the Patent Trial and Appeal Board’s Trial Practice Guide, and the Manual of Trademark Examining Procedure, and likely includes decisions of the Patent Trial and Appeal Board, Trademark Trial and Appeal Board, and OED on which the agency intends to rely for future effect, including ones the USPTO considers “precedential.” (These decisions are excluded from coverage to the extent they decide past issues in specific cases, E.O. 13892 § 2(c)(iv); they’re covered only to the extent an agency relies on them for future effect.) For example, E.O. 13892 requires agencies to “afford regulated parties the safeguards described in this order, above and beyond those that the courts have interpreted the Due Process Clause of the Fifth Amendment to the Constitution to impose” (emphasis added). E.O. 13892 explains that agencies, like the USPTO, must work to “foster greater private-sector cooperation in enforcement, promote information sharing with the private sector, and establish predictable outcomes for private conduct.”

Among the new requirements added by Executive Orders 13891 and 13892 to promote transparency and predictability are the following:

• Each agency must list all its sub-regulatory guidance documents in one consolidated database of its web site, which must be indexed and searchable. The public should be able to rely on two sources, the Federal Register and one web page, rather than being in a sports bar confronted with twenty screens following twelve simultaneous games. Agencies should avoid relying on guidance documents that pop up without prior notice, or confound the public with fragmented guidance flowing through dozens of web pages, the Official Gazette, the Federal Register, several manuals and guides that are updated without statutorily-required notice, several email lists, web widgets, and the like.
• After the Office of Management and Budget issues further implementing guidance, agencies will have a year to purge guidance documents of invalidly-promulgated requirements. We expect that, by the end of 2020, MPEP §§ 714.14, 802.01, 819, 1207.04, the 2015 rewrite of MPEP § 601.05(a), and Ex parte Quayle, among others, will be reviewed. They must either be repromulgated as regulation with full cost-benefit analysis, or else dropped.
• The orders set additional procedures to promulgate, and provide ongoing periodic review, of various sub-regulatory guidance documents.

The Orders then return to statutory underpinnings, and require agencies to apply them in a consistent and predictable fashion.

“Unfair surprise”

“When an agency takes an administrative enforcement action, engages in adjudication, or otherwise makes a determination that has legal consequence for a person, it may apply only standards of conduct that have been publicly stated in a manner that would not cause unfair surprise.” E.O. 13892 § 4. Anyone that has ever phoned the USPTO and been told that words on a page don’t mean what the words look like they mean will be reassured that that is never supposed to happen again after October 9, 2019.

Moreover, the definitions section of E.O. 12892 highlights the breadth of what it means for an Agency’s position to be an “unfair surprise,” as discussed in Christopher v. SmithKline Beecham Corp., 567 U.S. 142 (2012). In Christopher, the Supreme Court noted that agencies are required to provide fair warning regarding the conduct that a regulation requires or prohibits and can’t rely on principles of judicial interpretation to save an unfairly-vague rule or give it enforceable “teeth” ex post. See 567 U.S. at 156. E.O. 13892 explains that agencies “must avoid unfair surprise not only when it imposes penalties but also whenever it adjudges past conduct to have violated the law.” E.O. 13892 appears to be a step in the right direction to help inform practitioners (and others) about the practical implications of otherwise innocuous conduct.

When an agency states a position in sub-regulatory guidance, the law has long recognized that the agency may not stand on that guidance as the last word; rather, the agency must entertain alternative positions. “Interpretive rules do not have the force and effect of law and are not accorded that weight in the adjudicatory process.” Perez v. Mortgage Bankers Ass’n., 135 S.Ct. 1199, 1204 (2015). E.O. 13892 § 6 requires the agency to give an aggrieved person an opportunity to be heard to contest an agency guidance position, and give a written decision that articulates a basis for its action.

Example: the Office of Enrollment and Discipline

The Office of Enrollment and Discipline (OED) may be considered as one example office within the USPTO, which may have to retool to comport its conduct to the new Executive Orders. Simply reading 37 C.F.R. Part 11 and the Final Orders issued by  OED does little to instruct practitioners of the practical standards applied by OED, or implications of practitioners’ conduct. While OED appears to attempt to provide helpful guidance to practitioners into Final Orders, much of this guidance is after the USPTO has already disciplined others, who themselves likely were not aware of the ramifications of their own acts, omissions, or mistakes. While OED may inform individual practitioners that their response to a Request for Information is an opportunity under 5 U.S.C. § 558(c) to demonstrate compliance with the USPTO Rules of Professional Conduct, OED often finds that compliance to be “too little too late,” leaving practitioners subject to discipline.

Of course, many practitioners claim they either never heard of OED because they practice only in trademark law, or they were not properly informed that their conduct, including outside of patent and trademark law, implicated OED’s interpretation of the USPTO Rules of Professional Conduct. Many practitioners, on first hearing of an OED position asserted against them in a Request for Information and Evidence (the typical “first knock at the door” from OED), complain of unfair surprise, because the USPTO does not give practitioners fair advance notice of its standards. That is truly a fair criticism, often not understood by OED.

Case in point—OED’s “publication” of decisions does not comport with legal requirements set by the APA, at least if the agency intends to rely on these past decisions as precedent for future decisions. 5 U.S.C. § 552(a)(1) and (2) (and now E.O.s 13891 and 13892) require agencies to publish their adjudicatory decisions in the Federal Register, and/or provide useful indexing on their websites (depending on the level of future reliance the agency intends to apply to its own past decisions). Admittedly, OED does publish its decisions on its website and in the Official Gazette, but only those who know where to look can find them, and they aren’t “indexed” as required by law. Truly, it is troubling to see the “enforcement arm” of the USPTO, which has the power to end careers, exercise discretion without careful observance of statutory due process. Furthermore, many such practitioners are caught in the reciprocal discipline web, as we described in an earlier post on Mr. Ali’s blog, which could result in double disbarment by the USPTO.

Implementation for the USPTO

The USPTO faces a scramble to clean up decades of noncompliance with law. With very few exceptions, Executive Orders 13891 and 13892 are simply restatements of principles that have been in effect for decades, under the Administrative Procedure Act (in effect since 1948), Regulatory Flexibility Act (since a large statutory amendment in 1996), Paperwork Reduction Act (1995), Executive Order 12866 (1992), prior Executive Orders 13258 and 13422 (which were in effect until 2009, and significantly overlap with E.O. 13891), and the Bulletin on Agency Good Guidance Practices, 72 Fed. Reg. 3432 (2007). The USPTO has on occasion expressed overt hostility to Presidential authority. For example, in 2011, one of the USPTO’s senior-most officials plainly refused to implement one of these predecessor orders of the President of the United States.[i] Because of these decades of what appears to be noncompliance, what should be a straightforward addition to various pages of the USPTO’s website may require a ground-up rebuild of the USPTO’s compliance/regulatory function, and review of the entirety of the USPTO’s regulatory corpus.

Long-standing statutory requirements that might now be implemented because of the two Orders, and corrective action we may expect from the USPTO, include:

• Agencies must observe requirements of the Paperwork Reduction Act (E.O. 13892 § 8(b)) and Regulatory Flexibility Act (E.O. 13892 § 10), two statutes of which the USPTO has been particularly dismissive. For example, the Regulatory Flexibility Act requires agencies to avoid imposing costs on small entities. The USPTO’s analyses have historically only considered the effect on small entity applicants, and ignored to effects on small entity law firms. The USPTO’s Paperwork Reduction Act filings fail to reflect the regulations that define scope of coverage, e.g., 5 C.F.R. § 1320.3(b)(1) and (c)(4)(i). The USPTO should, by new regulation that restates existing law for guidance of USPTO staff, require staff to perform required cost-benefit analyses.
• PTAB decisions, to be “precedential” or otherwise relied on, must be published in the Federal Register. 5 U.S.C. § 552(a)(1); E.O. 13892 § 3. In winter 2018-19, when one of the Vice Chief APJ’s was answering Q&A questions at a conference, one of the authors, Mr. Boundy asked why the PTAB did not publish its precedential decisions as required by statute. The answer was “Mr. Boundy, aren’t you elevating form over substance?” Mr. Boundy pointed out that the requirement was statutory. Mr. Boundy indicated several similar anecdotes in his brief to the Federal Circuit in Facebook v. Windy City. We have now had nearly a year to see how much weight statutes carry with the PTAB, if a reminder comes from a member of the public. Perhaps a reminder coming from the President will be more effective.
• O. 13891 § 4 requires all agencies to promulgate regulations governing promulgation and amendment of guidance documents. One of the key requirements required by E.O. 13891 is that the agency must inform all its employees that guidance documents do not bind the public. See also E.O. 13892 § 3. That’s always been the law; now the USPTO will be obligated to inform and train its examiners and petitions decision-makers that they are not to cite the MPEP in any manner adverse to applicants. (The USPTO may use guidance to give tentative resolutions of ambiguity, but not to create new obligations or attenuate rights.) One of our recent articles, Agency Bad Guidance Practices at the Patent and Trademark Office: a Billion Dollar Problem, laid out the magnitude of the problem.  Another recent article, The PTAB is Not an Article III Court, Part 3, spelled out a good first draft of the necessary regulations.

Practical implementation for the public

Some practical implications for practitioners are immediately clear, as the White House reminds parties of rights they’ve had under statute and regulation for decades. Others will become clearer over time, as the Office of Management and Budget issues implementing guidance, as the USPTO implements the Orders and guidance, and as OED and the rest of the USPTO issue decisions. Practitioners should review forthcoming regulations and notices published in the Federal Register. For example, going back to our case study with OED, the office may propose procedures under this Executive Order, which discusses self-reporting, voluntary information setting, and other actions related to practitioners. Of course, those practitioners currently facing OED proceedings may benefit from this Executive Order by offering an explanation that the public was not properly put on notice of OED’s newfound interpretations of its rules.

We hope to see the USPTO create a dialogue with stakeholders of all shapes and sizes, and institute a new commitment to the rule of law, with predictable compliance with statutes, regulations, and Executive Orders. We’re available to help in any way we can. Director Iancu, you know where to find us.

[i] Then-Acting Associate Commissioner for Patent Examination Policy Robert Bahr, Decision on Petition, 10/113,841 (Jul. 14, 2011) at pages 19-20, refusing to implement the Bulletin for Agency Good Guidance Practices, OMB Bulletin 07-02 (Jan. 18, 2007), reprinted in 72 Fed. Reg. 3432-40 (Jan. 25, 2007). The Bulletin carries the same binding effect against agencies as an executive order.

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Emil J. Ali is a partner at Carr Butterfield, LLC where his practice includes advising and representing intellectual property attorneys in ethics investigations and litigation matters before the Office of Enrollment and Discipline (OED), as well as various state bars. Mr. Ali also provides conflicts and compliance advice to various law firms and in-house departments regarding managing effective compliance policies, and transitioning intellectual property professionals.

Mr. Ali is active in several intellectual property and ethics associations, and serves as the Vice-Chair of the ABA-IPL Ethics & Professional Responsibility Committee as well as being part of the Oregon State Bar Unlawful Practice of Law Committee. In addition to being a Registered Patent Attorney, Mr. Ali is admitted to practice in California, the District of Columbia, and Oregon. Emil writes about intellectual property legal ethics and OED procedure at www.oedethicslaw.com/blog.

David Boundy is a partner at Cambridge Technology Law. Mr. Boundy practices at the intersection of patent and administrative law, and consults with other firms on court and administrative agency proceedings, including PTAB trials and appeals. In 2007–09, Mr. Boundy led teams that successfully urged the Office of Management and Budget to withhold approval of the USPTO’s continuations, 5/25 claims, information disclosure statements, and appeal regulations under the Paperwork Reduction Act. In 2018, the Court of Appeals for the Federal Circuit asked Mr. Boundy to lead a panel of eminent administrative law academics and the President’s chief regulatory oversight officer in a program at the court’s Judicial Conference on administrative law issues. Judge Plager recommended Mr. Boundy’s article published in ABA Landslide, The PTAB is Not an Article III Court, Part 1: A Primer on Federal Agency Rulemaking, to the patent bar. Another recent article, The PTAB is Not an Article III Court, Part 3: Precedential and Informative Opinions explains the role of sub-regulatory guidance. He may be reached at DBoundy@CambridgeTechLaw.com.

by Dennis Crouch

Athena Diagnostics, Inc. v. Mayo Collaborative Services, LLC (Fed. Cir. 2019)

In a 7-5 decision, the Federal Circuit has denied Athena’s petition for en banc rehearing on the question of eligibility of diagnostic patents. As discussed below, the en banc denial includes eight (8) separate opinions — all of which call for Supreme Court or Congressional intervention. Judge Moore explains:

This is not a case in which the judges of this court disagree over whether diagnostic claims, like those at issue in Athena, should be eligible for patent protection. They should. None of my colleagues defend the conclusion that claims to diagnostic kits and diagnostic techniques, like those at issue, should be ineligible. The only difference among us is whether the Supreme Court’s Mayo decision requires this outcome.

Athena and its co-petitioners Oxford University and the Max-Planck institute asked the Federal Circuit to address two particular questions:

1. Whether this Court now recognizes a categorical bias against patent claims to methods of diagnosis, an impermissible expansion of the Supreme Court’s narrowly defined judicial exception to patent eligible subject matter under 35 U.S.C. § 101.
2. Whether courts may now exclude claim elements that they deem “conventional” in determining whether the claim is “directed to” patent eligible subject matter, or does Supreme Court authority requiring that claims be assessed “as a whole” still apply in Section 101 analysis.

Athena’s claim at issue covers a method for diagnosing neurotransmission disorders by obtaining “bodily fluid” and running a set of lab tests to identify whether the fluid contains a “MuSK” complex.  I described the patent in a prior post:

Diagnosis: Ineligible

In its original decision, the Federal Circuit found the claim directed to an ineligible preexisting law of nature: “the correlation between the presence of naturally-occurring MuSK autoantibodies in bodily fluid and MuSK-related neurological diseases.” The court found the additional concrete steps in the claim were all “standard techniques in the art” and thus did not rise to a patentable inventive concept.

The en banc denial includes eight (8) separate opinions

• Concurring opinion by Judge Lourie: Although we disagree with the Supreme Court, we are bound by its precedent. Thus, there is no need to revisit this case. (joined by Judges Reyna and Chen)
• Concurring opinion by Judge Hughes:  “[T]his is not a problem that we can solve. As an inferior appellate court, we are bound by the Supreme Court. . . . I, for one, would welcome further explication of eligibility standards in the area of diagnostics patents.” (joined by Chief Judge Prost and Judge Taranto)
• Concurring opinion by Judge Dyk: Section 101 is necessary — sometimes it is the only defense against overbroad patents that would stifle future discoveries.  However, the claims in this case are specific enough and have proven utility an provide the Supreme Court with a good vehicle “to refine the Mayo framework.” (Joined by Judge Hughes, and partially joined by Judge Chen)
• Concurring opinion by Judge Chen: Under Diehr, the claims are patent eligible — but not under Mayo.
• Dissenting opinion by Judge Moore: The claims in this
  case should be held eligible, and they are distinguishable
  from Mayo — especially when that case is read in light of Myriad. (joined by Judges O’Malley, Wallach, and Stoll)
• Dissenting opinion by Judge Newman: Medical diagnostics methods are critically important for society and the patent system should encourage their development.  Mayo does not create any anti-diagnosis rule. (joined by Judge Wallach)
• Dissenting opinion by Judge Stoll:  Although the decision here is foreclosed by Mayo, the court should rehear the case because it is so important. (joined by Judge Wallach)
• Dissenting opinion by Judge O’Malley: The Supreme Court is simply wrong in its statutory interpretation of 35 U.S.C. 101. 

The statements here by the judges have no direct impact on the law and are all 100% dicta.  That said, this collection of opinions is designed to send a powerful signal to both the Supreme Court and – perhaps more importantly to Congress – that all members of the “high patent court” see a major problem with the law as it stands now.

Of some interest – the judges were almost uniformly all careful to focus their attention on medical diagnosis inventions — suggesting a targeted solution that would not extend to business methods and other information-based inventions.

DODOcase recently petitioned the Federal Circuit for en banc rehearing on patent licensing law.  The petition raises two questions – paraphrased below:

1. Should a general forum selection clause (“disputes shall be litigated before . . . California [Courts]”) be interpreted to exclude AIA trials brought by the licensee?
2. What is the enforceability of a license term that prevents a licensee from filing an AIA trial petition (inter partes review of post grant review).

For its part, the Federal Circuit opinion held that the generic forum selection clause did indeed prevent an AIA petition brought by the licensee and assumed that the clause was enforceable – not even considering the impact of Lear.

Two groups have now filed amicus briefs supporting the petition.

Law Professors: A group of 21 law professors signed-on to a brief drafted by Stanford’s IP Clinic run by Phillip Mallone.  The brief explains that Lear, Inc. v. Adkins, 395 U.S. 653 (1969), should apply with equal strength (if not more) to contracts barring AIA Trial Challenges by the licensee.

The panel’s sweeping elevation of boilerplate forum selection clause language is contrary to Congress’s clear intent to allow and even facilitate licensee validity challenges before the PTAB. Lear requires courts to consider the exceptionally important patent policy interests in validity challenges. Because the panel failed to engage in any such consideration and ignored binding precedent, this Court should grant rehearing to correct the error.

An industry brief was also filed by a group of companies, including SAS, Vizio, Zilinix, and Garmin as well as the Consumer Electronics Ass’n and Engine.  This brief argues that the federal circuit misinterpreted the contract — arguing that boilerplate forum selection clauses pre-AIA licenses should not be interpreted to limit AIA trials.  The Brief also explains that the licensing parties already knew and understood at the time of drafting that the terms restricting validity challenges by the licensee were not enforceable.

Read the briefs:

• [Non Precedential Federal Circuit Decision]
• [En Banc Petition]
• [Amicus Brief IP Profs]
• [Amicus Brief Industry]

Contracting Around AIA Trials

by Dennis Crouch

[Oral Arguments Transcript]

Today, the Supreme Court heard oral arguments in the business method review case of Return Mail Inc. v. U.S. Postal Service.  The basic question in the case is whether the United States government (here the USPS) counts as “a person who is not the owner of a patent.”  If the US is a person, then it has standing to file a petition for inter partes review, post grant review, covered business method review. See 35 U.S. Code § 321.* Question presented:

Whether the government is a “person” who may petition to institute review proceedings under the Leahy-Smith America Invents Act.

The patentee (Return Mail) owns patents covering ways to more efficiently sort mail — and the prime potential infringer/licensee is the USPS. For their part, the USPTO and Federal Circuit both concluded that the US is a “person” in this context, while noting that there is “no hard and fast rule of exclusion, and much depends on the context, the subject matter, legislative history, and executive interpretation.”

The AIA does not define “person,” but Title 1 of the U.S.Code does have a definition that extends to companies, but does not appear to include governments.

The words ‘person’ and ‘whoever’ include corporations, companies, associations, firms, partnerships, societies, and joint stock companies, as well as individuals.

1 U.S.C. § 1 (the Dictionary Act). Although the definition does not expressly include governments, it also does not expressly exclude them either. In 2000, the Supreme Court stated that the sovereign is usually not treated as a “person” in U.S. law. Vt. Agency of Nat. Res. v. US ex rel. Stevens, 528 U.S. 765 (2000).  The flip-side of this is we’re really clear on the fact that a government can obtain a patent even though Section 102 of the patent act states that “A person shall be entitled to a patent …”.  At other points, the patent act uses “person” to refer only to humans.  See 35 U.S.C. 3 (“The Director shall be a person.”).

Covington attorney Beth Brinkman argued for the petitioner Return Mail and Deputy SG Malcolm Stewart on behalf of the US Postal Service.

Ms. Brinkman began as follows:

MS. BRINKMANN: The term “person” in this case does not extend to include the government for three reasons. First, the other branches rely on the Dictionary Act definition of person and this Court’s presumptive definition of “person” to not include the government. That is a stable framework that’s critical to that communication between the branches.

Second, the estoppel that was enacted by Congress specifically references the jurisdiction of the district court and the International Trade Commission, not the Court of Federal Claims, where the government’s patent litigation takes place, reinforcing the definition of “person” not to include the government.  . . .

And the third point I wanted to make, Your Honor, was that this does not exclude the government from going after bad patents. To the contrary, the government … [already] has the most powerful tools to do that.

Justice Ginsberg took an active role in oral arguments — and quickly got to the point of why:

JUSTICE GINSBURG: Why would Congress want to leave a government agency out of this second look if the idea is to weed out patents that never should have been given in the first place?

MS. BRINKMANN: Because the government already has opportunities through both the reexamination and through challenging the validity. All of the grounds for validity can be challenged in the Court of Federal Claims.

For its part, the Government argued that the Dictionary Act definition does not hold sway here because of the context — however, the Justices did not appear to really buy into his arguments.

MR. STEWART: I would say that the strongest contextual evidence [for defining person to include gov’t] is that the word “person” in the provisions that define IPR and CBM review is used to make available to the general public a procedural mechanism, an advantage. It’s made available on a widespread basis.

JUSTICE GORSUCH: Isn’t that flipping the presumption? I mean, the presumption is that “person” doesn’t include the government, and you’re suggesting, well, because “person” is broad and it’s a big term, it includes the government.

MR. STEWART: I think there are at least two or three different prerequisites to my theory about the context. The first is that it is making available a benefit as opposed to imposing a disadvantage. And that goes all the way back to Dollar Savings Bank in the 19th Century.

The second is that the benefit is broadly available. . . .

The third is that there is no evident reason that Congress — that Congress would have wanted to exclude federal agencies because the rationales for creating these mechanisms in the first place apply equally when the federal agency is the
requestor.

JUSTICE KAGAN: I guess what I was hoping for was that you would have an argument from particular statutory provisions.

JUSTICE KAVANAUGH: Because we start from the baseline of the government’s not a person, is you need the context to strongly support you.

Ms. Brinkman chimed-in on the not-a-person presumption — rhetorically asking:

MS. BRINKMANN: The question is, is there anything affirmative to indicate that the government was included?

Although I enjoy the theoretical debate about whether a government is a person. I don’t see this as one of the important burning questions in patent law.  Justice Kavanaugh focused on that issue in his discussion with the Mr. Stewart:

JUSTICE KAVANAUGH: If you were not to prevail here, what would the real world problems be for the government?

MR. STEWART: You know, I’m told by the PTO that in the years since the AIA was enacted, federal agencies have submitted 20 requests for all forms of AIA post-issuance review combined.
I mean, if you look at it from the standpoint of the government’s overall litigation efforts across all subject matters, it’s pretty small.

As some have suggested, perhaps it is best for the Court to play in this sandbox rather than addressing core patent law issues.

—

* Note, Section 321 applies to Post-Grant Review, but the Business Method Review (CBM) program follows the same requirements as indicated by Section 18 of the AIA. Section 18 is not codified in the U.S.Code because it is a sun-setting provision rather than permanent.

by Dennis Crouch

Hikma Pharmaceuticals USA Inc., v. Vanda Pharmaceuticals Inc. (Supreme Court 2019)

I wrote earlier about the Federal Circuit’s decision on Vanda’s drug dosage claims that have two basic steps:

1. Determining whether a patient is likely a poor metabolizer of the drug iloperidone based upon DNA analysis (i.e., if the patient has has the CYP2D6 genotype)
2. Administering iloperidone at a lower dose to predicted poor metabolizers in order to reduce the risk of “QTc prolongation” for poor metabolizers.

In the case, iloperidone was already known as a drug treatment and that some folks were poor metabolizers in a way that created the risk.  For poor metabolizers, the lower dose is still effective (since the drug stays in the body longer).  A remaining problem though was how to predict who should get the low dosage.  The core discovery here is that a genetic difference explains the risk, and the inventors made that discovery and then implemented it with its administration steps.  The question then is whether this approach is patent eligible.

I previously explained my position in the case as follows:

(1) Vanda’s claims should be patent eligible [on policy grounds]; (2) but the claims are not patent eligible under Mayo Collaborative Services v. Prometheus Laboratories, Inc., 566 U.S. 66 (2012) and Alice Corp. Pty. v. CLS Bank Int’l, 134 S. Ct. 2347 (2014).

The Federal Circuit disagreed with my second conclusion and in a 2-1 decision held the claims eligible.  Patent challenger Hikma (formerly West-Ward) has petitioned the Supreme Court review and that petition is supported by two strong amicus briefs:

• Hikma Pharmaceuticals USA Inc., et al. v. Vanda Pharmaceuticals Inc.
• Petition
• IP Law Professor Brief (with Engine Advocacy and R-Street Institute).
• Association for Accessible Medicines Brief (“AAM”) along with generic manufacturers Inventia and Mylan.

All three briefs say basically same thing — The Federal Circuit’s Vanda decision conflicts with Mayo and Flook. “The Federal Circuit’s decision effectively overturns this court’s precedents, thwarts the proper development of patent eligibility law, and will lead to countless improperly issued patents.”

The Law Professor Brief was filed by Stanford’s IP Clinic – although neither Mark Lemley nor Lisa Larrimore Ouellette signed-on.  Professors Josh Sarnoff (DePaul) and Katherine Strandburg (NYU) substantially drafted the brief.  Top pharma-patent litigator Douglass Hochstetler (KelleyDrye) filed the AAM brief.

by Dennis Crouch

The Supreme Court has repeatedly held that patent eligibility is a question of law. However, in Berkheimer, the Federal Circuit added some nuance — writing that the issue can include underlying issues of fact. Judge Moore explained:

Berkheimer and Aatrix stand for the unremarkable proposition that whether a claim element or combination of elements would have been well-understood, routine, and conventional to a skilled artisan in the relevant field at a particular point in time is a question of fact.

Berkheimer v. HP Inc., 890 F.3d 1369 (Fed. Cir. 2018) (en banc denial). In the lawsuit between Mr. Berkheimer and HP, the result of the underlying-material-fact revelation meant that the case was improperly dismissed on summary judgment. Rather, on remand, the court will need to be presented evidence and make appropriate factual conclusions before ruling on the eligibility question.

In its petition to the U.S. Supreme Court, HP does not directly confront the Federal Circuit holding regarding underlying facts – but instead directs the the court to a non-decided question about whether Berkheimer makes eligibility a jury question.

HP v. Berkheimer Question: The question presented is whether patent eligibility is a question of law for the court based on the scope of the claims or a question of fact for the jury based on the state of the art at the time of the patent.

In my view, the question presented by HP’s attorneys intentionally creates confusion as the Federal Circuit did not rule (1) that eligibility is a question of fact; or (2) that any aspect of the eligibility question goes to a jury.  Rather, the Federal Circuit has repeatedly ruled, including in Berkheimer, that the question of “eligible subject matter is a question of law.”  I’ll also note that no court following Berkheimer has seen eligibility itself as a question of fact or attempted to get a jury verdict on the issue.  I contacted David Salmons (counsel of record for HP) to see what I’m missing about the misleading question, but he did not respond.

Despite my misgivings about the actual question asked, the petition implicitly raises important questions of (1) whether eligibility may be based upon underlying questions of fact; and (2) the relevance of  the “state of the art” in eligibility analysis (i.e., what is an “inventive concept”).

The petition has some legs — with six amici briefs and a request from the court for a responsive brief from Berkheimer:

• Brief amici curiae of Electronic Frontier Foundation and R Street Institute
• Brief amici curiae of T-Mobile USA, Inc., and Sprint Spectrum L.P.
• Brief amicus curiae of Computer & Communications Industry Association
• Brief amicus curiae of Engine Advocacy
• Brief amicus curiae of Askeladden LLC
• Brief amici curiae of Check Point Software Technologies, Inc. and CableLabs

Of these briefs, Askeladden’s brief from Carter Phillips has an important section walking through jurisprudence on adjudicative facts vs legislative facts.  Engine Advocacy’s brief was filed by Stanford Law Clinic Director Phillip Malone and does a good job of explaining how Post-Alice 101 is good at ending lawsuits early and cheaply, and that Berkheimer is upsetting that system. CCIA’s brief does a good job of walking through the ways that courts have been dealing with eligibility questions on the pleadings and at summary judgment.  I have not fully read the others.

Mr. Berkheimer’s brief is due December 5, 2018 — We’ll do another post at that point talking through the various positions and the variety of issues raised in this important case. [Full Docket with Briefs].

= = = = = =

The patent at issue here is U.S. Patent No. 7,447,713, which issued back in 2008.  At that time, I hardly even talked about eligibility in my patent law class because the door was so wide open.  The ‘713 patent is broadly directed to “archiving and outputting documents or graphical items.”  The Federal Circuit found claim 1 was properly held ineligible, but ruled that there were some underlying factual disputes about whether claims 4 and 5 crossed into the eligibility threshold.

Claim 1. A method of archiving an item comprising in a computer processing system:

presenting the item to a parser;

parsing the item into a plurality of multi-part object structures wherein portions of the structures have searchable information tags associated therewith;

evaluating the object structures in accordance with object structures previously stored in an archive; [and]

presenting an evaluated object structure for manual reconciliation at least where there is a predetermined variance between the object and at least one of a predetermined standard and a user defined rule.

Claim 4. The method as in claim 1 which includes storing a reconciled object structure in the archive without substantial redundancy.

Claim 5. The method as in claim 4 which includes selectively editing an object structure, linked to other structures to thereby effect a one-to-many change in a plurality of archived items.

by Dennis Crouch

The traditional rule of assignor estoppel prevents prior owners of a patent from later challenging the validity of the patent.  The doctrine stems from old property law cases and is based upon the idea is that the assignor “should not be permitted to sell something and later to assert that what was sold is worthless, all to the detriment of the assignee.” Diamond Scientific Co. v. Ambico, Inc., 848 F.2d 1220 (Fed. Cir. 1988); see Westinghouse Elec. & Mfg. Co. v. Formica Ins. Co., 266 U.S. 342 (1924). Of course, most ‘assignors’ are inventor-employees who assign away rights well before even conceiving of their inventions.  In his 2016 article, Mark Lemley argued that:

[T]he doctrine is out of touch with the realities of both modern inventing and modern patent law, and that it interferes with both the invalidation of bad patents and the goal of employee mobility.

Mark A. Lemley, Rethinking Assignor Estoppel, 54 Hous. L. Rev. 513 (2016).

In Arista Networks, Inc. v. Cisco Sys., Inc., 2017-1525, 2018 WL 5851331 (Fed. Cir. Nov. 9, 2018), the Federal Circuit was faced with the question of whether assignor estoppel applies to prevent an assignor from later challenging a patent in an inter partes review proceeding. In that framework, the court sided with Lemley and agreed to rethink the doctrine — holding that an inventor is not estopped from challenging his assigned patent in an IPR proceeding.

In this case, the inventor-professor-billionaire David Cheriton was formerly employed as Cisco’s chief product architect.  After inventing an improved “logging module,” Cheriton assigned rights to Cisco who patented the invention. The assignment included several promises , including a promise to “do everything possible to aid said assignee, their successors, assigns and nominees, at their request and expense, in obtaining and enforcing patents for said invention in all countries.”  Cheriton later left Cisco and founded Arista.  At that point, Cisco turned around and sued Arista for infringement.  Arista responded with the IPR challenge.

On appeal, the Federal Circuit began with a consideration of the common law approach — “that assignor estoppel is a well-established common-law doctrine that should be presumed to apply absent a statutory indication to the contrary.”  Although the AIA obviously did not mention the doctrine, the appellate court found that the law had an “evident” statutory purpose that is contrary to the doctrine. In particular, the court focuses on Section 311(a) that states:

(a) In General.— Subject to the provisions of this chapter, a person who is not the owner of a patent may file with the Office a petition to institute an inter partes review of the patent.

In reading the statute, the court decided that “plain language of this statutory provision is unambiguous. . . The plain language of § 311(a) demonstrates that an assignor, who is no longer the owner of a patent, may file an IPR petition as to that patent. . . . In sum, we conclude that § 311(a), by allowing “a person who is not the owner of a patent” to file an IPR, unambiguously dictates that assignor estoppel has no place in IPR proceedings.”

The legal analysis by the court could fairly be called low quality because it does not contend with the many other areas of patent law (and other areas of law) that allow for departures from the statute in order to allow for traditional common law doctrines.  Take for instance, Section 282(b) that provides invalidity as a defense in “any” infringement lawsuit — of course as discussed above the court has held that 282(b) does not eliminate assignor estoppel.

I will note that the appellate panel questioned the ongoing viability of assignor estoppel as it applies in any patent case, but decided to narrowly focus its decision here on IPR proceedings rather than patent law cases as a whole.