Patents Still Issuing Patents Despite No Wall Funding: USPTO operating status during government shutdown

The USPTO has indicated that it “remains in normal operating status” despite the Federal Government funding crisis.

The USPTO remains open for business as normal. This is possible because the agency has access to prior-year fee collections, which enables the USPTO to continue normal operations for a few weeks. Should the USPTO exhaust these funds before a partial government shutdown comes to an end, the agency would have to shut down at that time, although a small staff would continue to work to accept new applications and maintain IT infrastructure, among other functions.

The patent system may be helping with the Border Wall. Consider the following:

  • U.S. Pub. No. 20180273288 — directed toward border wall or fence is constructed from a plurality of existing ISO steel shipping containers which are connected together both horizontally and vertically at their corners using conventional corner locks so as to present a continuous physical barrier of any selected length. (Note the 4th floor golf cart).
  • U.S. Pub. No. 20180313200 — directed toward an underground wall that also detects “enemy” tunnels.

The Relationship between Eligibility and Functional Claiming

by Dennis Crouch

Glasswall Solutions v. ClearSwift (Fed. Cir. 2018) (non-precedential)

Glasswall’s patent claims are directed to a process of regenerating electronic files in a way that cuts-out non-conforming data. The approach here could be used as a virus filter.  U.S. Patent Nos. 8,869,283 and 9,516,045.  Although the generalized approach here is a nice goal, the Federal Circuit noted that the claims themselves did not actually claim how to achieve the goal.

The claims at issue … do not purport to claim how the invention receives an electronic file, how it determines the file type, how it determines allowable content, how it extracts all the allowable data, how it creates a substitute file, how it parses the content according to predetermined rules into allowable and nonconforming data, or how it determines authorization to receive the nonconforming data. Instead, the claims are framed in wholly functional terms, with no indication that any of these steps are implemented in anything but a conventional way.

So, taking this conclusion about these “wholly functional” terms, the next step is to ask whether that conclusion implicates any particular patent doctrine.

In O’Reilly v. Morse, 56 U.S. 62 (1853), the Supreme Court invalidated the broadest of Morse’s telegraph claims — claim 8 that had broadly claimed the process of sending messages at a distance without being limited to any particular machinery.  In Morse, the court held that the claim consisting of a single functional limitation was “too broad and cover[ed] too much ground.”  Later, in Halliburton Oil Well Cementing Co. v. Walker, 329 U.S. 1 (1946), the Supreme Court was faced with a situation closer to Glasswall‘s.  In that decision, the Supreme Court found that the claimed oil-well measuring apparatus included a wholly functional element at the invention’s point of novelty.  That lack of specificity led the court invalidate the claim as indefinite. The Halliburton Oil court wrote that it is improper for a claim to describe its “most crucial element . . . in terms of what it will do, rather than in terms of its own physical characteristics or its arrangement in the new combination apparatus.” Congress however rejected Halliburton in the 1952 Patent Act by adding the provision that elements of a combination claim may be drafted in functional form. 35 U.S.C. 112 p 6 (now 112(f)).

Back to the present case. in Glasswall, the court did not touch definiteness but rather focused its attention on eligibility under 35 U.S.C. 101 (as expanded by judicial decisions).  Here, the “wholly functional” language of the claims led the court to finding them directed to an unpatentable abstract idea.

Invalidity affirmed.


Guest Post by Profs. Frakes and Wasserman: Irrational Ignorance at the Patent Office

By: Michael D. Frakes, Duke University School of Law and Melissa F. Wasserman, The University of Texas School of Law

The Patent Office, which processes over half-a-million patent applications a year, routinely faces budgetary shortfalls, high patent examiner turnover, and a crushing backlog of patent applications.  Given this challenging environment, it is not surprising that the patent examination process generates some degree of error, including errors that culminate in the issuance of a significant number of invalid patents.  Given that invalid patents impose substantial harms on society, the question is what should we do about them?

At first glance, the solution seems straightforward:   the Patent Office needs to do more to ensure it awards patents only to those inventions that deserve them.  A seemingly promising start is to give patent examiners more time to evaluate applications.  On average, a U.S. patent examiner spends only nineteen hours reviewing an application, including reading the application, searching for prior art, comparing the prior art with the application, writing a rejection, responding to the patent applicant’s arguments, and often conducting an interview with the applicant’s attorney.  If examiners are not given enough time to evaluate applications, they may not be able to reject applications by identifying and articulating justifications with appropriate underlying legal validity.  Offering validation for these concerns, our prior empirical work tested the extent to which patent examiner time allocations are causing examiners to grant invalid patents and found that examiners were indeed allowing patents of dubious quality because they are not given sufficient time.

Even in the face of this compelling evidence, however, it is not immediately clear that the solution to the patent quality crisis is to give patent examiners more time.  While increasing examiner time allocations will decrease the number of invalid patents issued by the Patent Office, it is possible that the Patent Office is, as Mark Lemley famously wrote, “rationally ignorant.”  That is, it may be rational for the Patent Office not to screen patent applications too rigorously because there is another institutional player that could weed out bad patents:  the courts.  More specifically, Lemley argued that because so few patents are litigated or licensed, it is better to rely upon litigation to make detailed validity determinations in those rare instances rather than increasing the resources to the Patent Office to provide more thorough review of all patent applications.  Lemley supports his thesis with a cost-benefit analysis wherein he concludes that the costs associated with doubling the Patent Office’s hours to review patent applications outweighs the benefits gained by the resulting decrease in the number of invalid patents the Patent Office would issue.  Although some of the numbers in his analysis reflect hard data, the dearth of empirical evidence available to the time forced him to make several critical assumptions, including assuming (rather than estimating) how many fewer patents the Patent Office would issue if examiner time allocations were doubled.

Although it has been over fifteen years since Professor Lemley wrote his influential and widely-cited article, the debate on how to best rid ourselves of bad patents continues to rage on.   In 2011, Congress enacted the most comprehensive reform bill to the patent system in decades, and arguably favored the ex-post approach by creating a new adjudicatory tribunal at the Patent Office wherein third parties can challenge the validity of issued patents.  In 2016, for the first time in forty years, the Patent Office began a comprehensive reevaluation of examiner time allocations, arguably favoring an ex-ante approach.

The time is ripe to revisit whether the Patent Office is, in fact, “rationally ignorant.”   Should we increase the resources at the Patent Office in an effort to increase the quality of issued patents or should we forego those marginal investments and reserve a larger residual role for the courts?  Our Article, begins to answer this question by employing new and rich sources of data along with sophisticated empirical techniques to form novel empirically driven estimates of the relationships that Lemley was forced to guess in his own analysis.

Armed with these new estimates, our Article demonstrates that the savings in future litigation costs and prosecution expenses associated with giving examiners additional time per application outweighs the costs of increasing examiner time allocations.  More specifically, we estimate that doubling examiner time allocations would cost the Patent Office approximately $660 million dollars in additional personnel expenses.  We also estimate that doubling the amount of hours allocated to review applications would result in $301 million in savings in prosecution expenses to the patent applicant driven by decreased rounds of review at the Patent Office.  Finally, we estimate federal litigation-related savings of $491 million and PTAB litigation savings of $112 million.   Though the $660 million increase in costs is significant, this amount is still exceeded by the $904 million that may be saved annually in (i) expenses covering litigation in federal court, (ii) PTAB-related legal expenses and (iii) potential savings in prosecution costs.  The efficiency gains from marginal investments at the Patent Office are even greater when considering a range of additional harms that may ensue from the issuance of invalid patents by the Agency, such as diminishing cumulative innovation, dead-weight loss, etc.  Thus, we conclude the opposite of Lemley:  society would be better off investing more resources in the Agency to improve patent quality than relying upon ex-post litigation to weed out invalid patents.  Given its current level of resources, the Patent Office is not being “rationally ignorant” but, instead, irrationally ignorant.

The current draft of our article is available on SSRN here. It’s forthcoming in the Vanderbilt Law Review in 2019, so there’s plenty of time for us to incorporate any comments you may have.

Guest Post by Prof. Yelderman: Which Kinds of Printed Publications Invalidate Patents in Court?

Stephen Yelderman is a Professor of Law at the University of Notre Dame Law School.

Continuing our study of prior art in the district court, in this post we’ll take a closer look at printed publications. As I discussed in my original post, around 13% of anticipation invalidations and 34% of obviousness invalidations rely on art in this category. (The numbers may be a touch higher than that, as a result of invalidations for which we could not determine the prior art supporting the court’s conclusion). For more background on this project, you can find the full paper here.

The potential sweep of this prior art category is breathtaking. By the terms of the statute—both before and after the America Invents Act—a printed publication found anywhere in the world can qualify as prior art. Moreover, under Federal Circuit precedent, this category includes a number of things that would seem to stretch the colloquial meaning of “publication.” For example, a single copy of a doctoral thesis stored in a university library, a drawing available only by travelling to another country’s patent office, and a posterboard displayed for several days at a conference have all been held to constitute “printed publications.” In dicta, the Federal Circuit has even suggested that a transient display of slides, or a billboard (!?) could, on certain facts, count as a printed publication.

When I teach patent law, our discussion of the printed publications category tends to dwell on these extreme possibilities. But how often do these non-traditional publications actually invalidate patents in practice?

To get a handle on this question, we further classified printed publication prior art into several sub-categories:

This chart illustrates the percentage of invalidations relying on printed publications in each sub-category, as a share of invalidations relying on printed publications at all. Encouragingly, the majority of invalidations based on printed publications relied on traditional reference publications. Just over half of anticipating publications were categorized as regularly published books and journals. Among obviousness invalidations citing a printed publication, 68% cited at least one regularly published book or journal. (The percentages of obviousness invalidations sum to more than 100% because of invalidations citing publications in multiple sub-categories.)  Though some of these regularly published books and journals may have come from obscure outlets, they are at least the kind of documents that a library might collect and an interested researcher might access.

The next sub-category—catalogs, manuals, and brochures—consists of documents distributed to teach the public about the features or availability of a product. This category is conceptually interesting for two reasons. First, though catalogs and manuals are typically mass-produced and widely disseminated, they are not usually collected in research libraries. By their nature, many publications in this category are intended to be transient. These characteristics suggest that publications in this sub-category would likely be much more difficult for a hypothetical prior art searcher to find than a regularly published book or journal.

The second reason that the catalog, manuals, and brochures category is conceptually interesting is that these documents are often evidence of a different kind of prior art entirely—that is, prior uses and sales. In fact, in a few cases we found it unclear whether a product manual was coming in as a distinct prior art reference, or as evidence about the features present in a prior sale. The fact that district courts sometimes rely on publications in this category suggests that activity prior art may be even more important than our top-level analysis suggested.

That said, catalog, manuals, and brochures were fairly insignificant in the larger scheme of things. About a quarter of anticipating printed publications fell into this sub-category. But since only 13% of anticipation events cited a printed publication, that means only about 3% of anticipation events overall relied on a catalog, manual, or brochure. Likewise, though 15% of obviousness events citing a printed publication relied on a catalog, manual, or brochure, that comes out to only about 5% of obviousness events overall. So whether one conceives of these cases as invalidity by prior sale or invalidity by printed publication, the high-level picture of prior art does not change very much.

The next sub-category—“other”—includes all identifiable printed publications not falling into the other two sub-categories. For example, we found patents that had been invalidated by poster board displays, industry whitepapers, proposals circulated at working group meetings of technical standards bodies, doctoral dissertations, and postings on Internet discussion forums. (We did not, for the record, find any cases of patents invalidated by billboards.) The good news was that reliance on potentially obscure or idiosyncratic documents like these appeared to be rare. About 19% of anticipating printed publications fell into this sub-category, amounting to just about 2% of anticipation events overall. A little more than a quarter of obviousness invalidations citing a printed publication included one in the “other” category. These constituted about 9% of obviousness invalidations overall.

There were, however, some publications that defied further classification—usually because sealed court records prevented us from finding more than a shorthand reference to the relevant document. For anticipation, this was rare enough that it could not change our results very much. But this happened frequently enough in cases of obviousness that we must acknowledge some potential uncertainty. If all of the unidentifiable publications turned out to be non-traditional publications, it’s possible that up to 16% of obviousness invalidations may have relied on a publication in the “other” category.

Finally, it’s important to remember that this data only tells us how district courts invalidate patents—not how many or why patents might be invalid in general. It is possible that cases involving non-traditional publications are more likely to settle than other cases, or, for that matter, that they’re less likely to settle. There is a significant possibility of selection effects here, which prevents us from making any inferences about patent quality overall. So, in the end, I’ll have to keep teaching those cases about slide presentations and unpublished college theses, even if “publications” like those only rarely invalidate patents in court.

Berkheimer: Patent Eligibility Changes as Technology Advances

HP Inc. v. Berkheimer, 2018 WL 6445985 (On petition at the Supreme Court)

Steven Berkheimer has filed his brief in opposition in this pending case before the U.S. Supreme Court. As is a current theme in Supreme Court briefing, the parties have proposed alternative stories within their questions presented. HP’s original petition asks whether 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 its responsive brief, the patentee Berkheimer focuses more on the procedural aspect:

Whether the Federal Circuit correctly held that additional fact-finding was necessary to resolve whether patent claim limitations such as “storing a reconciled object structure in the archive without substantial redundancy,” and “selectively editing an object structure, linked to other structures to thereby effect a one-to-many change in a plurality of archived items,” constituted “well-understood, routine, conventional activity” under Mayo Collaborative Services v. Prometheus Laboratories, Inc., 566 U.S. 66, 79 (2012)?

The brief follows a toned-down approach – arguing that in some cases there will be an underlying factual dispute on eligibility issues. For Berkheimer, his patent involves one such case:

Whether a claim limitation consists of “well-understood, routine, and conventional activity” bears no resemblance to a question of law. In this case, for instance, the dependent claims recited: “storing a reconciled object structure in the archive without substantial redundancy,” and “selectively editing an object structure, linked to other structures to thereby effect a one-to-many change in a plurality of archived items.” . . . No statute, case, or deductive legal reasoning can resolve whether this “specific method of archiving,” constitutes “well-understood, routine, conventional activity, previously engaged in by those in the field.” Mayo. That is a quintessential factual question.

One question for the Supreme Court to consider is whether patent eligibility shifts as technology advances. I.e., as some particular machine becomes “conventional,” are advances using that machine more likely to be abstract?  Berkheimer says “yes,” and that makes the underlying facts relevant to the question of eligibility.

I expect a number of briefs supporting Berkheimer’s position will be filed over the next fortnight.



Patently-O Bits and Bytes by Juvan Bonni

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Avoiding the Weeds in Fee Shifting Cases

by Dennis Crouch

Spineology, Inc. v. Wright Medical Tech, Inc.  (Fed. Cir. 2018)

Spineology owns U.S. Reissue Patent No. RE42,757 — covering a surgical tool known as an “expandable reamer.” In 2015 Spineology sued Wright Medical for infringement — accusing its X-REAM product. Basically, these are used to hollow-out marrow from inside the femur head. Below, I have included images from the asserted patent as well as the accused product.  The similarity is striking and there is some evidence suggesting that Wright Medical copied core aspects of Spineology’s approach. The problem for the patentee though, is that Wright Medical’s approach was not actually encompassed by the patented claims.


The patented claims all require an elongated hollow “body” that contains particular mechanisms.  However, the “body” term was added to the claims after filing — i.e,. the specification does not use the term “body.”  In a prior appeal, the Federal Circuit affirmed that “body” included both the shaft and the barrel near the handle.  Under that construction, the patentee admitted that X-REAM would not infringe.

After successfully defending its lawsuit, Wright then asked to be compensated for its expenditures on the case — i.e., attorney fees under 35 U.S.C. 285.

Standard U.S. practice is that each side pays its own attorneys and experts. Thus, a successful defendant may still walk away owing more than a million dollars in legal fees. Here, Wright Medical argues that it has spent more than $1.4 million to defend the case simply to win on a claim construction summary judgment.

Under Section 285, “the court in exceptional cases may award reasonable attorney fees to the prevailing party.”  Here, however, the district court declined to find an exceptional case.  On appeal, the Federal Circuit has issued a deferential ruling — holding that “the district court did not abuse its discretion in denying Wright’s motion for attorney fees under section 285.”

[W]hile Spineology’s proposed construction of “body” was ultimately rejected at summary judgment, “[t]he attempt was not so meritless as to render the case exceptional.” DCT Op. . . . And Wright cannot fairly criticize Spineology for continuing to pursue a construction not adopted by the district court in the claim construction order, since the district court declined to adopt Wright’s proposed construction as well. We see no abuse of discretion here.

In the briefing, Wright argued that Spineology’s “belief that a product has been copied is not legal justification for filing a frivolous patent infringement case.”  In its opinion, the Federal Circuit did not address the copying-belief aspect — but instead focused on the conclusion that the case was not frivolous or even exceptional.

= = = =

A portion of Wright Medical’s expenses were in preparing to counter against Spineology’s lost profits damages theories.  The district court never determined whether those theories held water since the case was dismissed at this early stage. Still, Wright Medical argued that the wild damages claims should make the case exceptional.

On appeal, the Federal Circuit refused to enter into a case-within-a-case analysis to determine whether the proffered damages theory was problematic.

Wright asks this court to basically decide the damages issues mooted by summary judgment in order to determine whether it ought to obtain attorney fees for the entire litigation. This we will not do. We will not force the district court, on a motion for attorney fees, to conduct the trial it never had by requiring it to evaluate Mr. Nantell’s “but for” calculations or royalty rates, and we—an appellate court—will certainly not conduct that trial in the first instance.

A district court need not, as Wright seems to urge, litigate to resolution every issue mooted by summary judgment to rule on a motion for attorney fees. And we need not, as Wright requests, get into the weeds on issues the district court never reached.

Although it did not say so explicitly, the Federal Circuit appears to suggest that the frivolous arguments in this case are found within the appeal itself. The court concluded its decision by awarding costs to Spineology and issuing a “reminder” to the appellant that fee awards are not to be used ‘as a penalty for failure to win a patent infringement suit.’” Quoting Checkpoint Sys., Inc. v. All-Tag Sec. S.A., 858 F.3d 1371 (Fed. Cir. 2017).

Federal Circuit Refuses to Split Hairs over Level of Enhanced Damages

by Dennis Crouch

Stryker Corp. v. Zimmer, Inc. (Fed. Cir. 2018)

In a R.36 judgment-without-opinion, the Federal Circuit has affirmed Stryker’s $250 million willful-infringement verdict against Zimmer.  In the case, the jury found the asserted claims valid and infringed and awarded $70+ million in compensatory damages.  The jury also found that the infringement was willful.

After receiving the jury verdict, W.D. Mich Judge Jonker awarded treble damages for the willful behavior — “Given the onesidedness of the case and the flagrancy and scope of Zimmer’s infringement, the Court concludes that treble damages are appropriate here.”

The district court’s opinion carefully walked through the determination of whether or not to enhance damages.  Writing that “in this case, all nine Read factors favor substantial enhancement of the jury’s award.” However, the district court did not really explain its choice to award 3x compensation rather than 2x or 2.5x.

On appeal, the Zimmer focused on the 3x-limit and argued that treble damages should be “reserved for the most egregious cases” and that the level of damage enhancement must be proportional to the egregiousness of the intentional misbehavior.  In oral arguments, Chief Judge Prost offered skepticism as to the role of the appellate court to re-evaluate the level of enhancement:

You’re saying you’re agreeing there is going to be enhancement, and now we are talking about whether it should be three times, or two and a half times, or one and a quarter times. . . . It is really hard at the appellate level for us to start scrutinizing what percentage the district court should have applied. Even if . . . [the district court] went too far . . . what are we supposed to do with that?

[Oral arguments]. In its judgment, the Federal Circuit affirmed the lower court ruling without providing any reasoning. Thus, it is unclear whether the Federal Circuit (1) disagrees with the need for porportionality or instead (2) found sufficient evidence proportionality in this case to affirm.  I’ll note here that, although Chief Judge Prost suggested the difference between 3x and 2.5x is splitting hairs, the difference is about $40 million.  We must be talking here about splitting the golden hairs of the Norse goddess Sif.

Note – this case is a continuation of Stryker Corp. v. Zimmer Inc. decided by the Supreme Court in 2016.  The procedural history here is that the district court’s original judgment of enhanced damages was reversed by the Federal Circuit in its 2014 decision. The Supreme Court then took-up the case and ruled, inter alia, that an objectively reasonable defense does not excuse willfulness.  On remand, the District Court again awarded treble damages — and that award has now been affirmed.

For Digital Copyright First Sale Doctrine, “Move” Does Not Equal “Copy+Delete”

by Dennis Crouch

Capitol Records v. ReDigi (2nd Cir. 2018) [16-2321_opn]

ReDigi designed its business to take advantage of the first sale doctrine of copyright law — particularly creating a market for resale of lawfully purchased digital music files.  In the system, ReDigi first verifies that a song was lawfully purchased (e.g., via iTunes) and then migrates the digital file from the user to ReDigi servers. In the process, ReDigi first locks the song from use on the user’s system; then breaks the song into packets; deletes the song on the user’s computer; transfers the packets to the ReDigi system (copy + delete); and finally reassemble the packets on the ReDigi server.  Each packet is deleted immediately upon transfer — and so results in an unrecoverable failure if some of the packets don’t arrive at the destination. (In that case ReDigi compensates the seller).  The seller can keep using the song until it is sold — at that point the system effectively transfers possession to the new party.   Note here, that this is how the system is designed. Some folks have hacked around these precautions and so some duplicates are getting through — allowing the seller to keep listening to the music.

Recording companies sued  and won.  On appeal now, the 2nd Circuit has sided with the copyright owners — holding that the first sale doctrine does not apply here because DeRigi is making copies (first sale only applies to the actual copy sold).

In the course of transferring a digital music file from an original purchaser’s computer, through ReDigi, to a new purchaser, the digital file is first received and stored on ReDigi’s server . . . At each of these steps, the digital file is fixed in a new material object “for a period of more than transitory duration.” Cartoon Network. The fixing of the digital file in ReDigi’s server, as well as in the new purchaser’s device, creates a new phonorecord, which is a reproduction. ReDigi version 1.0’s process for enabling the resale of digital files thus inevitably involves the creation of new phonorecords by reproduction. . . .

We conclude that the operation of ReDigi version 1.0 in effectuating a resale results in the making of at least one unauthorized reproduction. Unauthorized reproduction is not protected by § 109(a).

The court then went on to hold that the use is also not a “fair use.”  In the analysis, the court correctly concluded that the ReDigi secondary market is likely to undermine the marketplace for new digital files from the Record Company.  However, I believe the court used the wrong baseline — the focus here should have been on whether the copy+move resale is a fair-use extension of the first-sale doctrine.

Locking Down Written Description and Continuations-in-Part

by Dennis Crouch

In re Tropp (Fed. Cir. 2018)

Despite the text of the 4th Amendment of the U.S. Constitution, our government has determined that US Citizens who want the privilege of travel-by-flight implicitly give up their rights of privacy.  I used to travel with a lock on my luggage.  Of course these days, that lock will likely be broken by Transportation Safety (TSA) officials in the search for bombs (and incidentally uncovering other contraband).

Tropp’s patent application is focused on a special set of luggage locks that help the TSA by providing a master key.  The application here is part of a portfolio that claims priority back to 2003-2004.  The 2003 application was followed by a continuation-in-part in 2004 that was then followed in 2012 by the present continuation-application.

During prosecution, Tropp rewrote his patent claims in this case to focus on “a set of locks” that each have dials for a traveler to use and a master key portion for TSA.  The claims require some differences among the set — splitting them into two subsets with different number of dials for locks in each subset.

During prosecution, the USPTO rejected the claims — finding that they lacked written description support.  Although the specification does describe embodiments with different numbers of dials, the PTAB held that the specification does not describe a “set of locks” that include both sets of embodiments.  This case fits within the line of written description cases where all of the elements of a claimed invention are described, but where the specification does not describe how to fit those various elements together.

On appeal, the Federal Circuit vacated-and-remanded — holding that the PTAB had failed to fully consider the additional specification provided by the continuation-in-part. Here, the CIP did add some info, but only obliquely — indicating that a single master-key could “include special locks having a multiplicity of sub-types, such as different sizes, different manufacturing designs or styles, etc.”

In its decision, the PTAB had seemly incorrectly refused to consider the added disclosure from the CIP — calling it “new matter.”   Of course, the whole point of filing a Continuation-in-Part application is to add new matter — totally permissible.   Waldemar Link v. Osteonics Corp., 32 F.3d 556, 558 (Fed. Cir. 1994) (“Claims containing any matter introduced in the CIP are accorded the filing date of the CIP application. However, matter disclosed in the parent application is entitled to the benefit of the filing date of the parent application.”).

Written description is a question of fact an so PTAB determination is ordinarily given deference on appeal. Here, however, the appellate panel identified the error as “failure to consider the totality of the record in assessing written description” — which is an error of law reviewed de novo on appeal.

On remand, the Board will reconsider the issue of written description — looking particularly to whether the new disclosure found in the CIP is sufficient to prove possession of the claimed “set of locks” invention.

= = = = =

I wonder whether Tropp will have a trademark problem. His patents are assigned to his small Brooklyn company “Iowa Hawkeyes LLC.”

Issue Preclusion Following a R.36 Jugdment

by Dennis Crouch

VirnetX Inc. v. Apple Inc., (Fed. Cir. December 10, 2018)

The PTAB sided with Apple in the underlying IPR proceedings, finding that VirnetX patent claims were obvious. U.S. Patent No. 8,504,696 (claims 1–11, 14–25, and 28–30).  On appeal, the Federal Circuit has refused to consider the patentability merits — rather holding that the appeal is barred by issue preclusion (collateral estoppel).

Issue preclusion involves two separate legal actions — and operates to bar a party from relitigating an issue of law or fact already decided in a separate case involving the same party.   Elements:

  1. A prior action presents an identical issue to an issue in the later action;
  2. The prior action actually litigated and adjudged that issue;
  3. The judgment in that prior action necessarily required determination of the identical issue; and
  4. the prior action featured full representation of the estopped party.

The case here started in December 2015 when Apple filed two separate IPR challenges to VirnetX’s ‘696 patent —  both relied upon a 1998 Request for Comments from the Internet Engineering Task Force (IETF) – RFC 2401 – as a key prior art reference. The PTAB followed Apple’s suggestions and determined that RFC 2401 was a prior art printed publication that rendered the claims unpatentable (when combined with other references).

Meanwhile, the RFC 2401 had already been used by the PTAB to cancel several other VirnetX patents.  In March 2018, the Federal Circuit affirmed those decisions in a R.36 No-Opinion Judgment.

Often, a R.36 Judgment (without opinion) cannot be used for issue preclusion purposes because it is impossible to tell whether the issue-at-issue was the reason for the judgment.  However, the court has ruled that “a Rule 36 judgment may serve as a basis for collateral estoppel so long as … the resolution of the issue was essential or
necessary to the Rule 36 judgment.” Citing Phil-Insul Corp. v. Airlite Plastics Co., 854 F.3d 1344 (Fed. Cir. 2017).

Here, collateral estoppel works since – in the prior appeal – each ground of unpatentability relied upon RFC 2401.  Thus, the court’s affirmance required an implicit rejection of VirnetX’s argument that the reference was not prior art. The court explains:

Indeed, in three of the seven final written decisions appealed in VirnetX I, the only issue raised was whether RFC 2401 was a printed publication. Accordingly, by affirming all
seven of the Board’s decisions, this court in VirnetX I necessarily found that RFC 2401 was a printed publication.

I’ll note here that the court particularly focused on this issue at oral arguments in the second case and the litigating attorney was forced to admit that the issue was necessary to the decision.

Other Federal Circuit decisions make clear that a R.36 judgment cannot be used for issue preclusion when there are alternative explanations for the judgment.

= = = =

As an interesting inside-issue. Oral arguments in this case were heard in September 2018.  On November 28, 2018, VirnetX filed a motion with the Federal Circuit asking the appeal to be dismissed — expressly admitting that the Rule 36 judgment had collateral estoppel effect. By then, the court had already written its almost-final-draft opinion and so denied the motion.  In this circumstance, is the decision only advisory (and thus not precedential?)

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Standing to Appeal IPR Judgments: When does a Statute Create Injury-in-Fact?

by Dennis Crouch

JTEKT Corporation vs. GKN Automotive LTD. (Supreme Court 2018)

In 2016, JTEKT (Toyota) an inter partes review (IPR) petition challenging GKN’s Patent No. 8,215,440 (2wd/4wd dual drive-train).  During the IPR, GKN disclaimed the broadest claims, and the PTO confirmed validity of the remaining claims.  Here, the key difference from the prior art was a negative limitation – that the system coupling is “without a differential gearing.”  Wanting to also cancel those claims, JTEKT appealed.  Although JTEKT and GKN are competitors, JTEKT has not yet developed a competing product — arguing (without real evidence) that the ‘440 patent was a roadblock to its development project.

On appeal, the Federal Circuit refused to consider the merits. Rather, the court found that the US Constitution prohibited the case — i.e., that JTEKT had no standing to appeal because the petitioner had not alleged any “actual injury.”

In my prior post on the case, I explained:

Standing is an oddball with IPRs.  Anyone can file an IPR request and the USPTO will consider that request.  The Patent Act directly states that a losing petitioner has a right to appeal if it loses the IPR. . . .  Still, the Supreme Court has repeatedly held that the Constitution requires an actual controversy between the parties — and that the Article III courts cannot offer advisory opinions. A particular element in question for appellate IPR standing is injury-in-fact —  “an injury that is both ‘concrete and particularized.’” Spokeo, Inc. v. Robins, 136 S. Ct. 1540 (2016)(non-IPR case).

After being denied substantive hearing at the Federal Circuit, the patent challenger has now petitioned the Supreme Court on the standing issue — the following question:

Can the Federal Circuit refuse to hear an appeal by a petitioner from an adverse final decision in a Patent Office inter partes review on the basis of lack of a patent-inflicted injury-in-fact when Congress has

(i) statutorily created the right for parties dissatisfied with a final decision of the Patent Office to appeal to the Federal Circuit,

(ii) statutorily created the right to have the Director of the Patent Office cancel patent claims when the petitioner has met its burden to show unpatentability of those claims, and

(iii) statutorily created an estoppel prohibiting the petitioner from again challenging the patent claims?

The question here is substantially the same as the petition found in the pending case of RPX Corp. v. ChanBond LLC (17-1686) (awaiting input from the Solicitor General).  There is a good chance that briefing in JTEKT will be complete before the Solicitor submits the government brief in RPXJTEKT would be a good companion case to RPX because it presents the added element of competitor challenge.

PetitionJTEKT_Petition (Filed by Todd Baker and Lisa Mandrusiak at Oblon)

Standing on Appeal: Being a Competitor with ongoing Product Development Not Sufficient for IPR Appellate Standing

POP! – Precedential Opinion Panel takes on Late-Joinder Attempt

by Dennis Crouch

In September 2018, the USPTO rewrote several Standard Operating Procedures (SOPs) for the Patent Trial and Appeal Board (PTAB). Revised SOP2 creates the Precedential Opinion Panel (POP) to be convened to rehear issues of “exceptional importance” as well as for re-designating prior opinions as precedential, when deemed appropriate.  According to SOP2, the Precedential Opinion Panel will “typically” include the PTO Director, Commissioner for Patents, and the PTAB Chief Judge.

In what I believe is the first such precedential panel, the POP is set to review a prior PTAB decision in Proppant Express Investments, LLC (PropX) v. Oren Technologies, LLC (Oren), IPR2018-00914, with POP constituting the panel of Dir. Iancu, Com. Hirshfeld, and Chief Judge Boalick. The rehearing will focus on the practice of issue and party joinder under 35 U.S.C. § 315(c) — particularly focusing on the three questions:

  1. Under 35 U.S.C. § 315(c) may a petitioner be joined to a proceeding in which it is already a party?
  2. Does 35 U.S.C. § 315(c) permit joinder of new issues into an existing proceeding?
  3. Does the existence of a time bar under 35 U.S.C. § 315(b), or any other relevant facts, have any impact on the first two questions?

Amicus briefs (15 pages) are authorized, and should be submitted to by December 28, 2018.

Section 315(c) indicates that, after institution of an IPR, the Director may, “in his or her discretion”, join “any person who properly files” an IPR petition that the Director “determines warrants … institution.” Section 315(b) bars institution of IPR proceedings for petitions filed more than one year after the petitioner (or privy) was served with an infringement complaint of the patent at issue.

In the case here, PropX filed a first IPR petition against Oren’s patent and then later filed a second petition against the same patent raising an additional issue along with a 315(c) joinder request (to join the second case with the first). One problem with the second petition was that it was filed after the 1-year deadline of 315(b).  PropX argued that the 315(b) deadline does not apply to joinder cases under 315(c).  A second problem is that 315(c) appears to be focused on joinder of parties — not the same party joining additional issues.

In its decision, the PTAB sided with the patentee and refused to allow the late-filed issue joinder petition — denying institution.  It is that decision that the Director Iancu and his team will now review.   Note here that the PropX decision was not one of first impression.  Prior panels came out the other way.  See, Target Corp. v. Destination Maternity Corp., Case IPR2014-00508 (Paper 28) (PTAB Feb. 12, 2015) (concluding that 35 U.S.C. § 315(c) permits a petitioner to be joined to a proceeding in which it is already a party); Nidec Motor Corp. v. Zhongshan Broad Ocean Motor Co., Case IPR 2015-00762 (Paper 16) (PTAB Oct. 5, 2015).

Although the 315(b)/315(c) decision has not been identically addressed by the, in dicta, Judges Dyk and Wallach wrote that it is “unlikely that Congress intended that petitioners could employ the joinder provision to circumvent the time bar by adding time-barred issues to an otherwise timely proceeding.” Nidec Motor Corp. v. Zhongshan Broad Ocean Motor Co. Ltd., 868 F.3d 1013, 1019 (Fed. Cir. 2017) (2-member concurring opinion)

= = =

Patent at issue: 9,511,929, covering a container for storing and transporting “large volumes of proppant.”

Of Brownies and Other Nutty Desserts: Supreme court considers whether the “on sale” bar is limited to public sales

Guest Post by Dmitry Karshtedt, Professor at GW Law.  Prof. Karshtedt attended the Supreme Court oral arguments in Helsinn v. Teva, and provides the following discussion.  A transcript of the arguments is available here: Helsinn Transcript.

The oral argument in Helsinn Healthcare v. Teva Pharmaceuticals had a little bit of everything. First, the Court extensively aired the statutory interpretation question whether the phrase “otherwise available to the public” in the America Invents Act (AIA) expanded or contracted the universe of prior art or perhaps did a bit of both. More to the point of the question presented, the advocates argued extensively over whether the statutory revision modified the meaning of “on sale.” Second, the Justices explored weighty issues of patent policy, such as the role of Section 102 in preventing withdrawal of inventions from the public domain and effective extensions of patent term through pre-patent secret commercial exploitation. Third, undergirding these points were debates on the notion of “congressional ratification” and the role of various facets of legislative history in statutory interpretation—and even what an ordinary consumer would understand “on sale” to mean. As one would expect, there was no shortage of creative hypotheticals, one of which generated an extensive discussion of the meaning of “brownie.” All in all, the Court repeatedly praised the advocates for excellent briefing, and the Chief Justice promised that the Court will issue an excellent opinion—another thing to look forward to in 2019!

Petitioner’s counsel, Kannon Shanmugam, began the argument with the point that the AIA “clarified” the meaning of “on sale” with the phrase “otherwise available to the public.” He explained a that a private offer to his friend on the opposing side, William Jay, should not be a patent-barring event, but an offer to the courtroom audience to sell something to the highest bidder would be. This contention drew immediate, skeptical responses from the Chief Justice and Justice Kavanaugh. Isn’t the phrase “on sale” self-defining, and thus in no need of clarification? And, as relevant to this case, doesn’t a private offer still put something “on sale” under the plain meaning of this term—why should a public availability requirement be read in? Justice Breyer then entered the discussion with the policy argument that, since the time of Pennock v. Dialogue, the purpose of the on sale bar has been to prevent extensions of patent monopolies via initial commercial exploitation of the invention followed by patenting. Petitioner’s response here was that the precedent is better read as focusing on protection the public domain after the public has gained possession of the invention, which implies some level of public availability. In addition, in a point that the government later returned to, the counsel explained that the “extension” policy cannot be all that robust because the on sale bar clearly cannot reach certain pre-patent invention exploitation activities, such as using the invention to draw in venture funding.

Judge Kavanaugh then returned to the statute. If Congress sought to modify the meaning of “on sale,” then weren’t there clearer ways to do this, and didn’t early drafts of the AIA actually have some direct language abrogating the “secret prior art” case law? Further, Justice Ginsburg asked the petitioner to clarify whether or not he thought the AIA was actually a change in the law on the “secret prior art” point. Petitioner’s response here was that Congress wanted to keep the term “on sale” to retain much the underlying jurisprudence around it (such as the “ready for patenting” test) while abrogating certain outlier Federal Circuit cases like In re Caveney and Special Devices, which deemed secret sales to be patent-barring. That, in his view, was not inconsistent with adding an extra “catchall” category of publicly available art that didn’t formally fall into any of the preceding categories. He also maintained that the petitioner’s reading of the AIA was not inconsistent with Supreme Court case law, which has not endorsed the lower-court secret prior art decisions, so there was no clear rule for Congress to ratify in this area. Finally, he explained that the AIA’s first-to-file rule would discourage pre-patent commercial exploitation.

Judge Kavanaugh then referred to the Law Professors’ amicus brief, led by Mark Lemley, which maintained that the Court did indeed endorse the secret prior case law. Petitioner disagreed here, and reiterated that none of the Supreme Court on sale or public use rulings would be disturbed under Helsinn’s reading of the AIA. Justice Breyer countered with a discussion of Bonito Boats, which did address the notion of a “monopoly” going beyond the patent term, though in a different context. He also suggested that perhaps the petitioner’s real argument is that the transaction at issue in this case doesn’t really fit within the definition of the sale. Petitioner offered a variation on this theme, suggesting that a contract with a distributor subject to various contingencies was maybe not the kind of a sale meant to be covered by Section 102.

Malcom Stewart, representing the Solicitor’s office, then argued in support of Helsinn. He emphasized the point that MGI, Helsinn’s “buyer,” was only an intermediary, and there was no assurance of a passage of title to MGI—let alone to the end user of a drug at issue in this case. Indeed, the consumer might not see a transaction at issue in Helsinn as a sale at all. This situation contrasts with Pfaff, which the parties and the government seem to agree remains good law post-AIA, as Pfaff involved a firm offer to an end user. Justice Sotomayor retorted that, surely, commercial entities understand a sale to a distributor to still be a sale, as the product has left the hands of the inventor and begins to wind its way through the stream of commerce. Moreover, she maintained that there seemed to be no precedent, or even textual support, for the government’s definition.

Justice Kagan then picked up on a particularly important point in this case. Was there really settled law in this area, and did it include secret sales as prior art? The government responded that there was no such settled law, and what Congress was doing in the AIA is clarifying and modifying some prior decisions, rather than ratifying any secret prior art rule. Assuming such a rule was in fact settled, the government conceded that the “otherwise available to the public” phrase would be an oblique way to overturn it. Justice Kavanaugh amplified this point, again noting that more direct efforts to overturn the secret prior art case law have failed (which, incidentally, also suggests that such case law was at least somewhat settled). Here, the government responded by contending that the early proposals have failed because they were going so far as to take non-informing sales to the public out of the universe of the prior art, an unpalatable proposal. Instead, Congress reached a happy medium by overturning some outlier secret prior art case law, but not non-informing public sale case law.

William Jay argued for respondent. He started with the plain language argument that the phrase “on sale” just means “sold” or “subject to an offer for sale”—no public availability is required. The “otherwise available to the public” art is an entirely different category. Here, justice Alito zeroed in on the meaning of “otherwise available to the public.” That phrase would seem incompatible with the notion that “on sale” means “on sale publicly or on sale privately.” Indeed, the string “on sale publicly, on sale privately, or otherwise available to the public” seems incoherent. The response was that some “on sale” events are surely public, and if the “otherwise available to the public” does refer back to “on sale,” it concerns only those the public sales (of course, a possible response here is that a sale, any sale, is simply deemed in the eyes of the law to make the invention “available to the public”). Petitioner further contended that the new Section 102 is better read as mainly adding an extra category of prior art, such as oral presentations, with the “otherwise available to the public” language—and it would be odd to have a category broadening the definition of prior art that at the same time narrowed it by eliminating secret sales from the definition.

After noting that other countries do not seem to recognize secret art as patent-barring, Justice Sotomayor returned Mr. Jay to Justice Alito’s “otherwise” question. He responded that the role of “otherwise” is, in part, to avoid the potential for interpreting terms like “printed publications” so as to include non-public documents and, more generally, to prevent unsettling the other categories by making clear that “otherwise available to the public” is a residual category of its own. Justice Breyer continued with an inquiry into the phrase by noting that a hypothetical string of “basketball, running, swimming, or otherwise -­ or games that otherwise involve a ball” as being incoherent. Respondent explained that, while awkward, this phrase doesn’t change the meaning of “swimming” into something like water polo. Justice Kagan added a particularly insightful hypothetical: “suppose I say don’t buy peanut butter cookies, pecan pie—this is the key one, ready—brownies, or any dessert that otherwise contains nuts. Do I—do I violate the injunction if I buy nutless brownies?” The implication, of course, is that nutless brownies are ok to buy, and maybe by analogy then non-public sales (like nutless brownies) are not a danger from the inventor’s perspective. The response here was that, while brownies might have nuts or be nutless, a notion of sale encompasses both public and private sales, though Justice Kagan retorted than maybe the meaning sale is not so clear. Justice Kavanaugh returned to point that maybe “otherwise available to the public” is there to summarize the preceding terms, but Mr. Jay’s response that “on sale” has a definitive meaning—”make available to a willing purchaser”—that this phrase could not unsettle.

Justice Gorsuch asked whether, assuming “on sale” is at all ambiguous, the PTO is entitled to some deference to its interpretation, which excludes secret prior art. The respondent countered that, as a plain language matter, that interpretation is just not persuasive. He then maintained that there is no dispute that the transaction at issue in Helsinn was a sale, and that the industry would so understand it. Indeed, he noted that most drugs are sold to distributors, and rule that such a transaction is not a sale will be unduly lenient to the pharmaceutical industry. Justice Kagan then finally brought up the point of third-party secret sales (the fact that Section 102 is party-neutral always seemed important to me), and Mr. Jay responded that they are patent barring. This is correct—the holding in Caveney supports this point. But the implication of this law for the “inventor forfeiture” view was unfortunately not further explored.

In rebuttal, petitioner emphasized the context of the phrase “on sale” and maintained that respondent’s reading would read the word “otherwise” out of the statute. The next “otherwise” string was from a case called United States v. Standard Brewery, which concluded that the phrase “beer, wine, and other intoxicating liquor” excluded alcohol-free beer. After presenting this example, Mr. Shanmugam maintained that there is no legislative history support for respondent’s interpretation. Perhaps more importantly for making the Court comfortable with its position, he reiterated that Pfaff would not be overruled under Helsinn’s interpretation of the AIA. Thus, the parties and the government all agree at least on that. As a patent law Professor, I took this to heart because, whatever happens in Helsinn, my Section 102 notes will not be completely upended by whatever the Supreme Court decides.


Agency Bad Guidance Practices at the Patent and Trademark Office: a Billion Dollar Problem

David Boundy’s writing often focuses on the intersection between administrative procedure and Patent Office operations. In his new Patently-O Law Journal essay, Boundy explains the role of guidance (the MPEP, memoranda to examiners, checkboxes on forms, etc. — anything the PTO uses to govern the public or its employees outside the Code of Federal Regulations). Boundy explains when the PTO may act by guidance vs. when the PTO must use a full statutory rulemaking procedure.

Boundy walks through how bad PTO guidance practices is leading to lost patent protection, companies not formed, companies that fold because of delays and unpredictability of their patent applications, business opportunities not pursued, and similar economic effects, etc.  He estimates the cost as several billion dollars per year.

Boundy’s essay then explains how that law applies to several specific rules that PTO improperly promulgated by guidance that create difficulties for patent applicants.

  • Example 1: The secret 2007 restriction memo
  • Example 2: Unpublished rules for ADS submission of bibliographic data
  • Example 3: MPEP § 2144.03(C) misstatement of the law of intra-agency Official Notice
  • Example 4: MPEP § 1207.04 and an examiner’s power to abort an appeal
  • Example 5: the PTAB’s Trial Practice Guide (The right way)

Boundy’s essay is directly relevant to the pending en banc petition in Hyatt v. USPTO that challenges the agency’s right to “reopen prosecution” following a second rejection rather than allowing issues to be appealed.  Although the Federal Circuit ruled that Hyatt’s petition was time-barred, Boundy explains, inter alia, that PTO procedural failures likely divested the agency from any statute of limitations defense.  See, e.g., National Resources Defense Council v. Nat’l Highway Traffic Safety Admin, 894 F.3d 95, 106 (2d Cir. 2018) (a rule does not go effective until published in the Federal Register, and that’s the event that commences the limitations period). 

Read it here:

  • David A. Boundy, Agency Bad Guidance Practices at the Patent and Trademark Office: a Billion Dollar Problem, 2018 Patently-O Patent Law Journal 20. (Boundy.2018.BadGuidance)
Prior Patently-O Patent L.J. Articles:


Person (Having) Ordinary Skill in the Art

by Dennis Crouch

One ongoing debate among patent attorneys is the proper abbreviation of the statutory phrases “person having ordinary skill in the art,” 35 U.S.C. 103, and “person skilled in the art,” 35 U.S.C. 112(a).

I prefer PHOSITA (Person Having Ordinary Skill In The Art) while many of my colleagues use POSITA (Person having Ordinary Skill In The Art) and in their recent petition to the Supreme Court, Mylan uses POSA (Person having Ordinary Skill in the Art), which was the abbreviation used by District Court Judge Stark in the case. Wikipedia also suggests PSITA (Person Skilled In The Art), which maps the language of section 112(a) instead of section 103.

I’m personally drawn to PHOSITA’s exact match to the statutory language of section 103, and I see capital “H” as strong and stable letter.  At the same time, I can understand why a party wanting to bolster the credibility the fictitious artisan might prefer POSITA since POSA suggests a “poser” with a Trans-Atlantic accent and the PHO beginning of PHOSITA also suggests falsity.

For its part, the Supreme Court has not used any of these abbreviations. At the Federal Circuit, most obviousness decisions also don’t use any of the abbreviations.  However, Judge Wallach regularly uses PHOSITA and Judge Reyna tends to use POSITA.  Several judges have also referred to a POSA, but almost always in the context of quoting a district court or expert opinion.   I don’t find any reference to PSITA in court cases.

The chart below shows that the PTAB’s favorite is POSITA with 68% of the cases having abbreviations.  Still, most PTAB cases just spell out the rule without any abbreviation at all.

With the PTAB’s trend so strongly toward POSITA, I’m going to reconsider my PHOSITA habit and try out POSITA for a few months to see if it fits.  Of course, I am still sour about my P-Tab loss (I was calling for P-T-A-B).

Minimum Contacts for Declaratory Judgment Jurisdiction

by Dennis Crouch

Maxchief Investments v. Wok & Pan, Indus. (Fed. Cir. 2018)

This is a fairly simple case case. Maxchief filed a declaratory judgment lawsuit against patentee Wok in E.D.Tennessee.  The case was dismissed though because Wok&Pan lacked sufficient minimum contacts with the state of Tennessee under Int’l Shoe.

For specific jurisdiction in a patent DJ action, the court has particularly held that the focus should be on the defendant-patentee’s contacts with the forum state only as they “relate in some material way to the enforcement or the defense of the patent.”  In this case, Wok did send infringement notice letter’s to Maxchief’s lawyer in Tennessee — however, the appellate court found those letters didn’t constitute sufficient contacts with Tennessee since the letter alleged that Coleman (a KS company) was infringing, not Maxchief.  The court went on to hold – in the alternative – that “sending notice letters of patent infringement” is not enough to create jurisdiction.  This outcome should be distinguished from Xilinx where minimum contacts were found based upon (1) infringement notice letters and (2) a representative traveling to the state to discuss the alleged infringement.  Xilinx, Inc. v. Papst Licensing GmbH & Co. KG, 848 F.3d 1346 (Fed. Cir. 2017).

Under Section 293 of the Patent Act, foreign patent holders – such as Wok – can be sued in the DC Eastern District of Virginia District Court unless they have filed papers with the PTO designating a domestic representative.  D.D.C. is not a hotbed for patent infringement lawsuits, only one has been filed thus far in 2018. [I had forgotten that this provision was amended in the AIA, moving default venue against foreign patent owners from DC to E.D. Va.]