Customer Value Not Just Limited to the 20 Year Patent Term.

by Dennis Crouch

cxLoyalty, Inc. v. Maritz (Fed. Cir. 2021)

Maritz is in the business of designing employee incentive plans and other reward programs.  The company’s U.S. Patent No. 7,134,087 claims a computer system for using “award points” to purchase goods at a regular store by using a “shadow credit card.”  cxLoyalty is a competitor — focusing primarily on customer loyalty. Their creepy motto: “we increase customer lifetime value.”  At least they’re not focused on true zombies.

Maritz sued cxLoyalty for infringement back in 2018.  In response, the defendant filed a petition for covered-business-method review (CBM) and argued that the claims lack patent eligibility. The PTAB offered a split result:

  • Claims 1-15 ineligible;
  • Substitute claims 16-23 eligible.

On appeal, the Federal Circuit has reversed — finding that none of the claims recite patent eligible subject matter under 35 U.S.C. 101 and Alice.

The claims each occupy 3+ pages of text, but basically spell out the “computerized system” as shown below in Figure 2.  The original claim 1 was written at roughly the same level of generality used in the figure below.  The substituted claim added several limitations: requiring a “program database”; requiring the GUI to use an “internet connection”; and formatting the information from the vendor so that it can be used by the GUI system.  For the PTAB, those changes were sufficient to surpass the eligibility threshold. On appeal, however, the Federal Circuit disagreed. 

In its analysis, the PTAB found all the claims directed to the abstract idea of facilitating a commercial transaction — “a fundamental economic practice long prevalent in commerce.” Quoting Alice.  However, according to the PTAB, the substitute claims included an additional concept under the USPTO’s 2019 Revised Patent Subject Matter Eligibility Guidance, 84 Fed. Reg. 50 (Jan. 7, 2019).

The eligibility guidance is generally seen as Former Dir. Iancu’s attempt to limit ongoing damage to patent applicants based upon expansive readings of Alice & Mayo. However, it was (and is) apparent that the guidance does not closely follow binding Federal Circuit caselaw but rather takes several opportunities to favor a conclusion of patent eligibility.

On appeal, the court first noted that the eligibility guidance “is not, itself, the law” and  “does not carry the force of law.” Further, the court explained that Federal Circuit caselaw controls PTAB judgments on eligibility — not the PTO guidance.

On appeal here, the Federal Circuit concluded that the claims are ineligible — and, in particular, that the claims fail Alice Step Two.

Maritz attempts to distinguish claim 16 at both steps one and two on the basis of its added requirement that the GUI “is able to convert vendor-related information into information formatted for the GUI, which GUI-formatted information may then be provided to the claimed participants.”

Maritz argues that the added limitation constitutes a technological solution to a technological problem. However, Maritz does not contend that the claimed invention improves the use of computers as a tool by reciting a new way for computers to conduct format conversion. Nor do the claims provide any guidance as to how this purported function is achieved. Thus, claim 16 does not claim a patent-eligible technological solution to a technological problem.

At the trial, Maritz presented unrebutted expert testimony that the information conversion was not “well-understood, routine, or conventional.”  On appeal, the Federal Circuit gave no weight to that conclusory testimony and rather found that the testimony did not actually present anything to support the conclusion other than an argument that the invention as a whole was novel.  “But, as explained previously, our cases are clear that a patent claim is not eligible under § 101 merely because it recites novel subject matter.”

 

Skinny-labels; Carveouts; and Inducing Infringement

GlaxoSmithKline LLC v. Teva Pharmaceuticals USA, Inc. (Fed. Cir. 2021)

In 2020, the Federal Circuit issued an odd decision in this ANDA case.  The patent on the drug at issue (carvedilol) has expired, but GSK holds a patent on using the drug for treatment of congestive heart failure. Teva began selling the drug for other approved uses, such as hypertension and ensured that congestive heart failure was not part of its product label.  Of course, its generic product is still prescribed for that purpose.  AND, in 2011 the FDA required Teva to list congestive heart failure as one of the drug treatments — since Teva’s approval was based on GSK’s original new drug application the FDA required a label that was identical-in-content.  The result — $234 million in lost profit damages for inducing infringement. That damage award included pre-2011 acts even with the label carveout since Teva had (accurately) described its product as the generic equivalent of GSK’s product. On appeal, the Federal Circuit affirmed (split decision).

At that point Teva petitioned for rehearing, and the original merits panel of Chief Judge Prost and Judges Newman and Moore have agreed to rehear the appeal on the merits on the following question:

Whether there is substantial evidence to support the jury’s verdict of induced infringement during the time period from January 8, 2008 through April 30, 2011. We find all other issues to be sufficiently briefed.

Although there is no evidence that Teva really encouraged folks to buy and use its product for an infringing purpose, I can just imagine Teva’s confused CEO “where did this extra $200 million come from, I thought the non-infringing market wasn’t this big…”

The Court has not asked for new briefs and will be holding oral arguments later this month. The case has already generated substantial amici support.

Update – I thought my $200m comment above was funny. But, the damage award here is not actually excess Teva revenue. Rather, it is GSK’s lost profits.  Judge Prost wrote in her opinion that the Teva’s total revenue from its sales was $75 million — and the jury was told that 17.1% of the sales were for infringing uses.  So, we’re talking here about $13 million in revenue to Teva.

A world Record Inferential leap—worthy of Bob Beamon

Patent Holder Identified in Exhibit 1 vs. Does 1-254 (N.D. Ill. 2021)

I previously wrote briefly about this double-anonymous lawsuit.  The plaintiff filed the lawsuit in secret in order to avoid spooking the defendants.  The complaint was followed up by a request for temporary restraining order.  District Court Judge Matthew Kennelly quickly denied plaintiff’s request to conceal its identity and also issued an order to show cause as to why the case should not be dismissed for improper joinder under 35 U.S.C. § 299.  This ex parte situation provides an instance where it is important that the case was routed to a patent-knowledgeable judge such as Judge Kennelly.

In its opinion, the court begins with a discussion of a common practice in trademark litigation — to file suit naming “dozens or even hundreds of claimed infringers and counterfeiters.”  In those cases, an attachment to the complaint offers some information that partially identifies the defendants.  And, that attachment is filed under seal to avoid tipping-off the defendants before a TRO can be filed to payment processors (such as PayPal) to attach any of the defendants assets in the US. In those cases, however, the plaintiff’s name is ordinarily made public.  In response, the plaintiff has amended its pleadings to now disclose its name under the new caption

NG Imports vs. Does 1-254 (N.D. Ill. 2021)

In his order, Judge Kennelly also raised the improper joinder issue of 35 U.S.C. § 299. That provision was added to patent holders from asserting their patents against a large number of defendants in a single lawsuit and reads “For purposes of this subsection, accused infringers may not be joined in one action as defendants or counterclaim defendants, or have their actions consolidated for trial, based solely on allegations that they each have infringed the patent or patents in suit.”  In response, the patentee has alleged that all of the accused products are coming from the same “unknown Chinese manufacturer.”  That same-source linkage would seemingly be enough to allow joinder.

The amended complaint also reveals the patent at issue – US10881159.  A parallel lawsuit was previously filed in California asserting the same patent against a Chinese company. NG Imports v. Zhengzhou Kerui Electronic Commerce Company, Ltd., Docket No. 2:20-cv-09776 (C.D. Cal. Oct 23, 2020).

= = = =

The papers mention a site that I have not explored sellerdefense.cn — a site that “monitors this District’s PACER filings and screens for Plaintiff counsel’s filings as well as all Trademark and Patent filings throughout the District.”   In his opinion, the Judge found that the existence of the website as justification for sealing Plaintiff’s name an “inferential leap—worthy of Bob Beamon in the 1968 Olympics—that if it becomes known that the plaintiff has filed a lawsuit against someone, the defendants will all hide their assets. The Court is unwilling to draw this inference without some supporting evidence and argument.”

Swing and a Miss: Federal Circuit finds Claims Lack Precision – and thus Definiteness

by Dennis Crouch

Saso Golf, Inc. v. Nike, Inc. (Fed. Cir. 2021)

I have not played golf in a decade, and I had assumed that the rest of the world was following suit.  Apparently though there is still some money in the game.  When I played, I had a crazy slice.  Back then, I thought it was me.  But, it looks like Saso found a solution with some subtle shifting of the club head weighting. Basically, Saso redesigned the clubs so that more weight was on the heel-side of the club rather than the toe-side.  This means that the toe end of the club is less likely to twist during a swing. The image below shows the result.

During prosecution, the patent examiner rejected broadest claims directed toward shifting the weight because they were clearly anticipated.  At that point, Saso altered the claims to focus on re-shaping of the head of a “metallic wood type” club such as a driver. The annotated figure below shows how the heal-side has a bulge (12) and the toe-side has been shaved-down (11).

13 year of litigation involving 1 golf head patent. Saso sued Nike for patent infringement back in 2008.  It is a simple case and so I don’t have a good understanding of why it is still pending 13 years later, but the N.D. Ill. docket indicates that the case was originally assigned to Judge Blanch Manning who pushed it down to Magistrate Judge Nan Nolan.  In 2010, Judge Manning withdrew Judge Nolan from the case and the case was also transferred to Senior Judge Harry Lienenweber who issued an opinion in 2010 finding the claims “not indefinite.”  In 2011 the case was reassigned to Judge Edmond Chang soon after he joined the bench. In 2013, the case was then reassigned to Judge Andrea Wood soon after she joined the bench. By that point, no depositions had taken place and there was pretrial schedule. The docket shows no substantive entries from 2014 – 2019.  Then in November 2019, Judge Wood entered a decision finding claim 7 “too indefinite to be valid.”  That indefiniteness decision was apparently based upon a motion filed by the defendant back in 2013.

Indefiniteness: The statute requires “one or more claims particularly pointing out and distinctly claiming the subject matter which the inventor or a joint inventor regards as the invention.” 35 U.S.C. 112(b).  A claim that fails this provision is deemed indefinite and thus invalid.  In Nautilus, the Supreme Court set the standard for indefiniteness as reasonable certainty as to the scope.   Patent claims are indefinite if they “fail to inform, with reasonable certainty, those skilled in the art about the scope of the invention.” Nautilus, Inc. v. Biosig Instruments, Inc., 572 U.S. 898 (2014).  In general, the Federal Circuit sees definiteness as an extension of claim construction — and thus is for the judge to decide.  However, the issue may involve underlying factual questions — such as the understanding of someone skilled in the art.

Here, the claim at issue (Claim 7) divides up the profile of the back-side of the club into two portions.  (1) the toe side extends from “the toe” to the “most rearwardly point of the head;” and (2) the heel extends from “the  heel” to that same “most rearwardly point.”  The claim then requires that the “radius of curvature” of the toe side be “larger than the radius of curvature” of the heel side.  If you look at figure 1 above, you know what they mean — the back portion of the toe side is flatter (larger radius of curvature) and the heel side rounder (smaller radius of curvature).

The problem is that the patent does not expressly define what part is “the toe” and “the heel.” Do we know with reasonable certainty what the claim covers?  The district court said no: “With nothing suggesting where the toe side and heel side end points are located, it is not clear from where on each surface one measures to the most rearwardly point to determine the radii of curvature.”

In its opinion, the district court made the conclusion that a skilled artisan would not inherently know the boundaries of the toe and heel — “it is not clear from where on each surface one measures.” On appeal, the Federal Circuit first determined that this conclusion was a factual-finding by the district court (even though it was not properly labelled as such as required by the rules of procedure).  As a factual finding, it is due deference on appeal, and the appellate panel found no clear error. The court pointed to expert testimony that “‘toe’ and ‘heel’ are general terms” and do not define a particular point on the club. Because those elements lacked precision, the appellate panel agreed that the claim as a whole failed.

Because an artisan would not already know the bounds of the toe and heel of a golf club, and because the patent provides no guidance, we hold that claim 7 is indefinite.

Slip Op.

= = = =

If you wanted to draft a claim regarding the shape of the head disclosed in Figure 1 — using only the disclosure from Figure 1 — could you do it?

= = = =

The patentee also asked for a jury trial on the underlying factual issues leading to an invalidity conclusion. That was rejected based upon  See Markman v. Westview Instruments, Inc., 517 U.S. 370 (1996).  Of course, Markman is about claim construction and not indefiniteness.

Normally, the evidentiary requirement for factual findings supporting invalidity must be based upon clear and convincing evidence.  Microsoft Corp. v. i4i Ltd. Partnership, 564 U.S. 91 (2011) (“§282 requires an invalidity defense to be
proved by clear and convincing evidence.”).   Subsequently in Nautilus (2014), the court avoiding the issue as it relates to indefiniteness.  The court wrote:

The parties … dispute whether factual findings subsidiary to the ultimate issue of definiteness trigger the clear-and-convincing-evidence standard and, relatedly, whether deference is due to the PTO’s resolution of disputed issues of fact. We leave these questions for another day.

Nautilus at F.N.10.  In this case, the district court did not indicate the standard that she applied for making the factual finding and neither did the the appellate panel.

Duke Law Conference – Constitutional Principals: Administrative Adjudication and Arthrex

Jason Rantanen

In United States v. Arthrex, Inc., the Supreme Court will consider the application of the Appointments Clause to Patent Trial and Appeal Board judges–specifically, whether PTAB judges are principal officers who must be appointed by the President and confirmed by the Senate, and whether the proper remedy is to sever their statutory removal protections.

To address these issues, The Center for Innovation Policy at Duke Law and the Duke Law Program in Public Law will host a Zoom discussion on Friday, February 12, noon to 1:30 p.m. Commentators will include the Honorable Timothy B. Dyk and renowned academics whose scholarship has focused on the key patent, administrative, and constitutional issues.  Below are the details.

February 12, 2021
12:00 noon – 1:30 p.m.
Virtual [
Register here]

12:00 noon–12:45 p.m. | Panel I: IP and Innovation Policy
The Honorable Timothy Dyk
Professor John Duffy
Professor Melissa Wasserman
Moderator: Professor Arti Rai

12:45 p.m.–1:30 p.m. | Panel II: Administrative and Constitutional Law
Professor Michael Asimow
Professor Jennifer Mascott
Professor Nina Mendelson
Professor Christopher Walker
Moderator: Professor Stuart Benjamin

Contact Balfour Smith (bsmith@law.duke.edu) or Kelli Raker (kelli.raker@law.duke.edu) for more information.

 

 

Patent Term Adjustment: What Happens When Examiner Withdraws Case from Appeal?

Chudik v. Hirshfeld (Fed. Cir. 2021)

Chudik filed his patent application back in 2006. After receiving a final rejection back in 2010, Chudik filed a request for continued examination (RCE).  At that point the examiner withdrew the prior rejection, but then rejected the claims on an alternative ground.  Chukik appealed to the PTAB, but the Board did not get a chance to hear the case. Rather, the examiner again withdrew their rejection and re-opened prosecution with a new alternative ground for rejection.  That appeal-withdraw-new-ground process happened again.  Then it happened again.

Now we’re up to 2017.  Chudik had filed four appeals in the same case but the PTAB with the examiner backing-down each time.  Finally, on the fourth go-round, the examiner issued a notice of allowance after withdrawing the rejection. His patent: US 9,968,459.  Good job Chudik. The patent covers a medical device used in shoulder surgery.  This is the type of invention that – if its use becomes widespread – will use-up the whole 20-year patent term.

Patent term — You know that a patentee gets a term of 20-years from the application priority filing date (not counting provisional and foreign priority). BUT, Congress allowed for patent term adjustment in situations involving delays in prosecution.  The statute, 35 U.S.C. § 154(b), is a bit complicated and poorly written.  In general, a patentee gets extra time whenever it takes the USPTO more than three-years to issue the patent. (B-delay).  However, under the statute, the 3-year delay counter is cut-short by an RCE filing.  Thus, Chudik’s RCE filing cuts-off that form of adjustment.  The statute also provides for A-delay bonuses associated with specific deadlines. This includes issuing a first OA within 14 months and responding to most responsive-filings by the applicant within 4 months.  Overall, out of the 11 1/2 years (4246 days) in prosecution, the PTO awarded 5 1/2 years (2066 days) of PTA to the end of the patent term based upon A- and B-delays.

This appeal focuses on what is known as C-delay. 35 U.S.C. § 154(b)(1)(C). This is time added to the patent term due to appellate review by the PTAB (inter alia).  C-delay has an important caveat — it only applies in cases where “the patent was issued under a decision in the review reversing an adverse determination of patentability.” Id.  Here, although Chudik appealed to the Board four times, the examiner withdrew the rejection each time.  The PTO issued regulations regarding the statute that particularly state that an applicant “is not entitled to [C-delay] patent term adjustment for the reopening of prosecution” by the examiner.

Now, the A-Delay already accounts for some of the delay because the examiner has a bit of a deadline to withdraw the rejection.  However, Chudik found that repeated appeals cost him about 2 years (655 days) of additional patent term not accounted-for by the A-Delay provision.

On appeal, Chudik argued that (1) the appellate process should be deemed to begin when he files the notice-of-appeal; and (2) an examiner’s decision to withdraw a rejection should be interpreted under the statute as the Board “reversing an adverse determination of patentability” because it has the same impact. Chudik filed a civil action on the issue and lost.

On appeal here, the Federal Circuit did not determine the particular standard-of-review to apply to the agency action — finding that it didn’t matter because the PTO’s interpretation was also the best interpretation.

In particular, the court held that Chudik’s proposed interpretation “is, if not linguistically impossible, strained.” The provision:

[PTA provided for] (iii) appellate review by the Patent Trial and Appeal Board or by a Federal court in a case in which the patent was issued under a decision in the review reversing an adverse determination of patentability.

You decide – does this provision allow for an examiner’s withdraw of a rejection?  The court explained that a “review reversing” something requires action by the appellate tribunal (here, the PTAB).  Without a PTAB decision, the C-Delay had no effect.

In conclusion, the appellate panel offered a warning to applicants regarding RCEs:

The [loss of] nearly two years (655 days) of delay in the PTO illustrates what applicants should understand when deciding whether to request a continued examination rather than take an immediate appeal. The potential benefit of immediate re-engagement with the examiner through such continued examination comes with a potential cost.

Affirmed.

In the end, Chudik’s patent, originally filed back in 2006 is set to expire in 2032.

Patently-O Bits and Bytes by Juvan Bonni

Recent Headlines in the IP World:

Commentary and Journal Articles:

New Job Postings on Patently-O:

 

Federal Circuit: Low-level Security Measures are Abstract Ideas

In re Mohapatra (Fed. Cir. 2021)

 

The security code on your credit card seems pretty weak. Basically, it is a 3-4 digit number on opposite side of the card.  Mr. Sarada Mohapatra’s innovation was to create a more dynamic security code using an internet-based account management approach.

The Examiner rejected the claims as obvious, indefinite, and failing to claim patent eligible subject matter. On appeal, the PTAB reversed the obviousness conclusions, but maintained the rejection on the other grounds.  When Mohapatra raised the case to the Federal Circuit, the Solicitor’s office also dropped the indefiniteness challenge — leaving only the eligibility issue.

 

Mohapatra began his argument with a tradition-and-justice issue.  He pointed to many patents issued over the past 20 years relating to the same subject matter.  (note, Mohapatra represented himself pro se). The appellate court rejected this argument out-of-hand, concluding that “issuance of other patents in the same field of technology is not a ground for challenging the rejection of a subsequent application.” See In re Wertheim, 541 F.2d 257 (CCPA 1976) (“[I]t is immaterial in ex parte prosecution whether the same or similar claims have been allowed to others.”).

On the merits of Section 101, the court found that the claims are directed to the abstract idea of facilitating “an individual to alter the identification code associated with a financial instrument, such as a credit card, to protect against fraud.”  Mohapatra’s invention is limited in a number of ways and does not preempt all uses of this idea, but the court explained:

The fact that the claims are directed to a specific subset of that abstract idea—in this case, enabling a credit card user to change the security code on the card by using a web application—does not render the idea any less abstract.

Further, abstract-idea innovations may provide societal or personal benefits, but remain unpatentable: “The idea of changeable personal-identification numbers may be beneficial. But it is also abstract and therefore not patentable without more.”

At Alice Step 2, the court found no additional inventive concept beyond standard additions such as doing-it-on-the-web and storing the information on a computer.

[These functions] amount to no more than the implementation of an abstract idea on a computer operating in a conventional manner. That is not enough to convert an abstract idea into patent-eligible subject matter.

Rejection Affirmed.

= = = =

The following claim 18 was seen as representative for the appeal:

18. A method for countering credit card fraud arising from compromised credit card information by utilizing cardholder changeable card security code (CSC; also known as card verification value CVV2 or card verification data CVD or card identification code CID or card verification code CVC2) comprising:

a) A card issuer enabling change of card security code printed on the card, by

allowing cardholder to choose a new security code value as often as cardholder wishes,

facilitating recordation of chosen card security code by the cardholder by providing an internet connected card account management facility,

using most recently recorded card security code to verify subsequent transaction authorization requests without requiring any change in existing credit cards, terminals, equipment, computer software and communication protocols used in transaction authorization, and

denying transactions when card security code provided during authorization does not match card security code on record;

b) Cardholder changing card security code any time s/he deems it necessary to mitigate risk from possible card security code compromise, by

selecting a new security code value to be used as personal secret separate from the card without requiring assistance from any software program running on any device,

ensuring that selected new security code value is different from the printed code on first change and is different from last recorded code on subsequent changes,

recording the new card security code value using issuer provided internet connected card account management facility, and

remembering and providing the new card security code when prompted during subsequent credit card authorizations.

Published Appn. [PDF: CreditCardSecurityPatentApp]

PTAB Decision

= = = =

Question – Can you read through this specification and find anything patent eligible for Mr. Mohapatra that he could use on remand? 

The Deere v. Gramm Analysis

by Dennis Crouch

Deere & Co. v. Gramm (Fed. Cir. 2021).

In 1966, the US Supreme Court decided Graham v. John Deere, and established the framework for adjudging obviousness under the 1952 Patent Act. In the processes Graham’s plow patent was deemed obvious.  In this new case, Deere is looking to invalidate Richard Gramm’s patent. This time though the patentee prevails.

Gramm’s  US Patent No. 6,202,395 covers a sensor and controller for the head-height of a combine harvester.  The case is interesting because of its similarity to the spring-loaded shear in the 1966 case. Here, “a flexible sensor arm that engages the soil and is
dragged across the ground” as the giant tractor rolls along.

The particular novel aspects of the invention here appear to be related to what happens when the Combine is placed in reverse — we don’t want to bob to snap off.  The solution is a spring (“biasing means”) for keeping the arm at an incline but allows for displacement when you reverse.  The spring then uses Hooke’s Law to encourage the sensor arm to return to its original position.

Deere petitioned the USPTO for inter partes review (IPR). Although the Board granted the petition, it eventually sided with the patentee and found that none of the challenged claims had been proven obvious. The case has included some partial institution mix-up following SAS, and the CAFC has previously affirmed the holding with regard to some of the claims, this appeal is related to claims 12-26.

Claimed Biasing Means: That spring discussed above – the claims require a “biasing means for urging said arm to a selected inclined orientation relative to
vertical …”  The parties agree that the claim term is properly interpreted as means-plus-function because “biasing” is a functional limitation rather than structural. Further, the patent document discloses a “coiled spring” that performs the claimed function. Thus – as required by the text of 112p6, the claim limitation is interpreted as requiring a coiled spring “and equivalents thereof” that performs the same function.

In the IPR, this limited view of “biasing means” was helpful to the patentee because it narrowed the scope of prior art that read upon the invention.  On appeal, the Federal Circuit confirmed that the prior art reference (US3611286) did not disclose the biasing means. An image from the prior-art patent is below.  To be clear, the reference does disclose a coiled spring, but it did not operate in the same way — to urge the arm to move toward an “inclined orientation.”

 

The true key controversy of the appeal was really about whether this issue should be reviewed de novo as a claim construction dispute or instead with substantial deference as a factual finding regarding the scope of the prior art.  As usual, the appellant wanted de novo review, but the Federal Circuit refused:

First and foremost, we reject Deere’s attempt to obtain de novo review of a factual finding by reframing it as though it presents a claim construction issue. . . . .

Here, after construing the biasing means limitation, the Board determined that [the prior art] did not teach the first function of the biasing means. That is a factual finding subject to appellate review for substantial evidence. . . . Deere attempts to contort the Board’s opinion by suggesting that the Board actually misconstrued the claim in such a way so as to not read on the teachings of Cleveland. We are not persuaded by that argument, which seeks to blur the clear delineation in the law between the two steps of the invalidity analysis.

Slip Op. Notably, the court does not actually do a very good job of explaining why this particular dispute is not a claim construction dispute except that the PTAB did not see it as claim construction either.

Judgment Affirmed in Favor of Patentee

Bridgegate and Property Law

by Dennis Crouch

An expansive notion of “property” also allows for expansive criminal prosecution.  As an example, the Federal Wire Fraud statute makes it a crime to use the “wires” to move forward with “any scheme or artifice to defraud, or for obtaining money or property by means of false or fraudulent pretenses, representations, or promises.”  18 U.S.C. § 1343.

Case-in-point is Kelly v. U.S., 140 S. Ct. 1565 (2020).  Kelly case involves George Washington Bridge lane closing scandal known lovingly as “Bridgegate.” In 2013, Chris Christie was Governor of New Jersey seeking reelection (he won).  His deputy Chief of Staff Bridget Kelly (and others) had caused the bridge lanes to be closed (via text messages) “for a political reason—to punish the mayor of Fort Lee for refusing to support [Christie’s] reelection bid.”  Kelly was prosecuted and criminally convicted for property fraud — both wire fraud as well as fraud on a federally funded program.    The Second Circuit affirmed.

 These statutes require the use of fraud for the purpose of obtaining “property.”  The Supreme Court took up the case and reversed the convictions — holding that Kelly’s actions were not designed to obtain money or property and thus do not violate the statutes.  The court recognized the abuse-of-power: “But not every corrupt act by state or local officials is a federal crime.” (Unanimous opinion authored by Justice Kagan).

The evidence the jury heard no doubt shows wrongdoing—deception, corruption, abuse of power. But the federal fraud statutes at issue do not criminalize all such conduct. Under settled precedent, the officials could violate those laws only if an object of their dishonesty was to obtain the Port Authority’s money or property.

The Government pointed to the following property frauds: commandeering of bridge lane access; diverting the “wage labor” of federal employees.  While the bridge itself can be considered Property, the actions here, according to the court, were a “quintessential exercise of regulatory power” rather than a scheme to “appropriate the government’s property.   The court noted that a “public employee’s paid time” is also the property of the government. According to the court, the use of employee time was “incidental to” the lane-closure purpose — the use of that portion of the government’s property was not the “object of the fraud” as required under Cleveland v. U.S., 531 U.S. 12, (2000) (the statute “requires the object of the fraud to be ‘property'”).

= = = = =

The decision here offers an interesting dichotomy regarding property and property rights. On the one hand, the Court offers a broad conception of what counts as property — including a conclusion that an employer “owns” the time employees are spending working (this seems like a pre-civil war conclusion). On the other hand, the Court weakens property rights by reinforcing its prior conclusions that major regulatory actions that shift the owner’s ability to use its property do not count as property rights violations.  This same dichotomy is seen in patent law with the advent of inter partes review; and is a longstanding element of zoning law.

In January 2011, the Supreme Court vacated and remanded (GVR) a parallel case in Blaszczak v. U.S., 20-5649, 2021 WL 78043 (U.S. Jan. 11, 2021) “for further consideration in light of Kelly v. United States, 590 U.S. –––– (2020).”  In that case, the Second Circuit held that “confidential information” about an upcoming regulatory action was a property right whose “embezzlement” could serve as a basis for property fraud under the statute.  In its decision, the Second Circuit did not use the term “trade secret” but rather suggested that the information was property because it was a “thing of value.” quoting U.S. v. Girard, 601 F.2d 69 (2d Cir. 1979). The outcome of Blaszczak will end up giving us a lot more information about the meaning of property in the US.

 

 

Supreme Court sides with Germany: Immunity against Lawsuit for Taking Domestic Property

by Dennis Crouch

The Supreme Court has issued a unanimous decision in the stolen-art case of Federal Republic of Germany v. Philipp.

The claimants in the case are heirs to German Jewish art dealers who purchased a set of medieval Christian relics known as the Guelph Treasure (Welfenschatz) from the Duke of Brunswick in 1929 (although by then the Duke had already abdicated).

As the Nazi government rose to power, the dealers were coerced to sell the collection back to the State (Prussia), allegedly for for 1/3 of their value.  After WWII, the US took possession of the collection but then later handed the collection back to Germany and the art is on display in a Berlin museum.

The heirs perused claims in Germany, but the special German Advisory Commission for the Return of Cultural Property Seized as a Result of Nazi Persecution, Especially Jewish Property found that the sale had not been taken under duress.

Later, the heirs sued Germany in the US, asserting a set of common law replevin, conversion, declaration of ownership, unjust enrichment, fraud, breach of good faith, etc.

Normally a Sovereign Nation such as Germany is granted sovereign immunity in U.S. Federal Court. Although the core of Sovereign Immunity stems from international tradition, US also has a statute on point — the Foreign Sovereign Immunities Act (“FSIA”).  FSIA has a number of express exclusions from the general rule of immunity.  The salient exception here allows US courts to hear lawsuits against foreign states where the claim is for “property taken in violation of international law.”

The D.C. Circuit court found no immunity-holding that the plaintiffs had properly alleged that the coerced sale was “an act of genocide because the confiscation of property was one of the conditions the Third Reich inflicted on the Jewish population to bring about their destruction.”

In its unanimous opinion, the Supreme Court has vacated and remanded — holding that the FSIA exceptions do not extend to protect human rights. And, in particular, the law does not open the door to allowing US courts decide whether a particular country violated the human rights of its own citizens.  Further, when a country unlawfully takes the property of its citizens, that taking is a purely domestic matter that does not implicate international law.

We need not decide whether the sale of the consortium’s property was an act of genocide, because the expropriation exception is best read as referencing the international law of expropriation rather than of human rights. We do not look to the law of genocide to determine if we have jurisdiction over the heirs’ common law property claims. We look to the law of property.

And in 1976 [the year FSIA was passed], the state of that body of law was clear: A “taking of property” could be “wrongful under international law” only where a state deprived “an alien” of property.

Slip Op.  This outcome follows the international norm that gives countries a free-pass under international law for violations of the human rights of its citizens.

As the International Court of Justice recently ruled when considering claims brought by descendants of citizens of Nazi-occupied countries, “a State is not deprived of immunity by reason of the fact that it is accused of serious violations of international human rights law.”

Slip Op. quoting Jurisdictional Immunities of the State (Germany v.
Italy), 2012 I. C. J. 99, 139 (Judgt. of Feb. 3).

On remand, there will likely be more arguments. In particular, the plaintiffs will likely argue that their ancestors were not German nationals at the time of the sale – thus prompting an international taking.  Germany will also respond with a comity argument — even if it lacks sovereign immunity, the court should use its discretion to not hear the case.

Sequencing-by-synthesis: Illumina defeats Columbia’s patents

Columbia University v. Illumina, Inc. (Fed. Cir. 2021) (nonprecedential opinion)

In this IPR decision, the PTAB cancelled claims from five patents owned by Columbia — finding them obvious. US Patent Nos. 9,718,852 (clm 1); 9,719,139 (clm 1); 9,708,358 (clm 1); 9,725,480 (clm 1); and 9,868,985 (clms 1-2).   The patents are all related to methods of sequencing DNA using “sequencing-by-synthesis.”  Illumina believes that it owns the process. Columbia felt otherwise and sued Illumina for patent infringement in D.Del. That lawsuit has been stayed since July 2018 as the court awaits these IPR decisions. On appeal, the Federal Circuit has affirmed.

Here is a fairly easy to understand video about  how this work:

The likelihood of winning an appeal certainly depends upon the merits of your case.  The second most important factor is the level of deference afforded to the lower-tribunal.   The Federal Circuit gives deference to any factual findings made by the PTAB in its IPR decisions.  In particular, a PTAB finding of fact will be affirmed if it is based upon “substantial evidence.”  The words “substantial evidence” might sound like a lot of evidence, it is actually a quite easy threshold.  A decision is based upon “substantial evidence” if it is supported by “more than an iota” of evidence or if “a reasonable mind might accept the evidence to support the finding.”  On the other hand, questions of law are reviewed without deference — de novo.

Obviousness is a question of law reviewed de novo.  However, the ultimate conclusion of obviousness is always based upon a large number of factual findings, “including the scope and content of the prior art, differences between the prior art and the claims at issue, the level of ordinary skill, and relevant evidence of secondary considerations.”   See my simple tip-of-the-mountain drawing below.

Here, the patentee challenged three factual findings by the Board, and the Federal Circuit found that each finding was supported by enough evidence to pass muster.  The three topics: motivation-to-combine; and two reasonable-expectation-of-success arguments.

The patentee argued someone skilled in the art would not have been motivated to combine an allyl capping group into a sequencing-by-synthesis approach.  Their particular argument, was that a prior art reference indicated some problems with use of the capping group and thus discouraged its use.  As supporting evidence, Columbia pointed to the fact that other researchers ceased related experiments after the reference was published.  On appeal, however, the Federal Circuit noted that this “teaching away” argument requires “clear discouragement” which was not proven. Although the reference did not show the experiment to be a smashing success, it also was not a failure.  Thus, while researchers might have considered better alternatives based upon the reference, it did not actually teach-away.

While it may be true that … scientists ultimately chose to research alternative capping groups, “just because better alternatives exist in the prior art” does not mean that an inferior alternative “is inapt for obviousness purposes.” Quoting In re Mouttet (Fed. Cir. 2012).

Thus, the PTAB’s finding of motivation to combine was supported by substantial evidence.

Obviousness affirmed.

Not huge, but is it time to amend Section 145 to allow patent applicants to file their civil action in any venue that houses one of the National or Regional Patent Offices? (E.D.Va.; N.D.Cal.; N.D.Tex.; E.D.Mich.; D.Col.). Here is the current law:

35 U.S. Code § 145 – Civil action to obtain patent

An applicant dissatisfied with the decision of the Patent Trial and Appeal Board … may, unless appeal has been taken to the … Federal Circuit, have remedy by civil action against the Director in the United States District Court for the Eastern District of Virginia. . .

 

Secret Patent Holder vs 254 Unnamed Defendants

Chicago patent attorney Kevin Keener recently filed the following action in N.D. Ill. Federal Court.  You’ll note that the name of the patentee was filed under seal as was any identifying information about the asserted patent.  The infringers are unknown but likely “foreign” individuals and unincorporated businesses who are selling infringing items to US customers via Amazon.com and other “infringing webstores.”  Amazon has not been named as a defendant.

Read the complaint: doe v doe 

The patentee argues that the secrecy is important because of the “risk that Defendants will transfer assets or destroy evidence upon learning of Plaintiff’s identity and patent.”  The case has been assigned to Judge Matthew Kennelly as part of the Patent Pilot.

The complaint twice refers to its “design” and never to an “invention.” This makes me think it is likely a design patent case.

Although the defendants are unknown and are believed to be foreign, the patentee alleges that the N.D.Ill. “Court has personal jurisdiction over Defendants in that they transact business in the State of Illinois and in the Northern District of Illinois.”  Regarding venue, the complaint alleges lots of potential connections, but fails to cite the statement in 28 U.S.C. § 1391(c)(3) that a foreign defendant “may be sued in any judicial district.”

Presumably, the plaintiff may be seeking an immediate temporary restraining order under R.65.  However, the rules limit the court’s ability to act and at least require an “affidavit or a verified complaint” stating particular facts which  “clearly show that immediate and irreparable injury, loss, or damage will result to the movant before the adverse party can be heard in opposition.” Id. It is possible that such a document was filed under seal.

via @jngross

 

 

Federal Circuit: Anticipation not Inherent to Obviousness Argument

by Dennis Crouch

M&K Holdings, Inc. v. Samsung Electronics Co., LTD. (Fed. Cir. 2021)

M&K’s U.S. Patent No. 9,113,163 covers a “method of decoding moving picture.”  There is some history between Samsung and M&K’s family of companies, whose patents also originate in Korea.  This appeal stems from an IPR final written decision finding the challenged claims invalid.

Decide only the Issues Raised: The first bit here is easy but quirky.  The petition challenged claim 3 of the ‘163 patent as obvious. The PTAB found the claim unpatentable as anticipated, but did not perform an obviousness analysis.  On appeal, the Federal Circuit vacated — holding that the PTAB “deviated impermissibly from the invalidity theory set forth in Samsung’s petition.”  For its part, Samsung argued that the anticipation holding was no-problem. Just like the vast-majority-of-cases, the anticipation here is inherent in the obviousness theory.  In particular, we have the same prior art — its just that the PTAB only needed the primary reference.  In its petition, Samsung suggested a second reference showing the “predetermined block” claim limitation.

On appeal, the Federal Circuit found notice lacking since Samsung’s original petition stated that the primary reference did not disclose the “predetermined block.” According to the court, if M&K had known about the anticipation argument, it might have shifted its argument about the scope of claim 3.  The cynicism here is relevant – the Federal Circuit is recognizing and even encouraging parties to shift their patent claim meaning arguments depending upon the circumstances. This outcome can be linked with the court’s conclusion in Egenera, Inc. v. Cisco Systems, Inc. (Fed. Cir. 2020). In that case, the court permitted the patentee to shift its arguments regarding claim meaning and patent scope as the case moved through various tribunals.

In the end, the difference here between anticipation & obviousness was sufficient enough for the court to find an APA violation by the PTAB in finding the claim anticipated.

Printed Publication: The patentee also challenged the decision by arguing that some of the references relied upon were not actually prior art. We have three references at issue that were all uploaded to a website controlled by the Joint Collaborative Team on Video Coding (“JCT-VC”):

  1. Bross et al., WD4: Working Draft 4 of High-Efficiency Video Coding, JCTVC-F803 (version 3) (uploaded Sept. 8, 2011).
  2. Park et al., Modifications of Temporal MV Memory Compression and Temporal MV Predictor, JCTVC-E059 (version 4) (uploaded Mar. 19, 2011).
  3. Zhou, Non-CEP9: Modified H Position for Memory Bandwidth Reduction in TMVP Derivation, JCTVC-G082 (version 1) (uploaded Nov. 9, 2011).

All three were uploaded to the server, and the patentee argued that a person of ordinary skill in the art could not have found Park or Zhou using reasonable diligence before the patentee’s priority date of December 13, 2011.  Here, the references were each discussed at a JCT-VC development meeting of ~200 people prior to that date, and those meetings were not subject to “any expectation of confidentiality.”  The documents were hosted in downloadable form, and could be searchable by title.  Further, JCT-VC was a “prominent” group within those skilled in video-coding technology and those outside the group would have found the website.   In reviewing the relevance of these facts, the Federal Circuit asked “whether the channel through which the references were publicized is prominent or well-known among persons of ordinary skill in the art.”  These facts came together to allow the Federal Circuit to affirm the “Board’s finding that persons of ordinary skill in video-coding technology could have accessed Park and Zhou with reasonable diligence through the JCT-VC organization. None of M&K’s arguments undermine the Board’s finding that Park and Zhou were publicly accessible and its conclusion that those references constitute printed publications within the meaning of 35 U.S.C. § 102.”

Note here that this decision is in some serious tension with Samsung Elecs. Co. v. Infobridge Pte. Ltd., 929 F.3d 1363 (Fed. Cir. 2019) (Version 4 of the same working draft not prior art).  That decision involved a patent from the same inventor, Soo Mi Oh.

= = =

One oddity of this case is the priority dates.  The patent application at issue was actually filed in September of 2012 but claims priority back to two Korean applications filed in 2010 and early 2011 and then a PCT application filed in Korea on December 13, 2011.  The PCT application includes additional matter that is found in the claims. The patentee did not attempt to prove an earlier invention date.  So, the December 13, 2011 date was used as the critical-date for 102(a) prior art.

Patently-O Bits and Bytes by Juvan Bonni

Recent Headlines in the IP World:

Commentary and Journal Articles:

New Job Postings on Patently-O:

SkyRise Miami: Patented

Jeff Berkowitz is a Miami real estate developer, lawyer, and now inventor.  Berkowitz, along with architect Bernardo Fort Brescia and civil engineer Ronald Klemencic were recently awarded a design patent on their design for SkyRise MiamiD908917 (“The ornamental design for a building as shown and described.”). The building is apparently now under construction, although at a somewhat delayed pace.

The design patent took-up 3 1/2 years of prosecution. That is an unusually long time for a design patent.  The examiner initially issued a restriction requirement because two sets of drawings had been submitted. Subsequently, the examiner identified inconsistencies in the various views that required repeated correct.

One additional trick in the case is that the tower was originally proposed back in 2013.  The image below comes from around then and is certainly prior-art.

An illustration of the Skyrise Miami building.

 

Guest Post: Pandemic drug shortages: Is compulsory licensing the answer?

Ed. Note: Prof. Sapna Kumar has been working on international intellectual property law issues for decades. In fact, I believe we were students in the same international IP course at the University of Chicago way back when, along with Prof. Rantanen. I asked Prof. Kumar to provide some of her thoughts on how our international IP system is responding to the COVID-19 Pandemic. A draft of her recent on-point article is available online: Compulsory Licensing of Patents During the Pandemic.

By Sapna Kumar, Law Foundation Professor of Law at the University of Houston Law Center

Due to the global nature of the COVID-19 pandemic, vaccines and treatments are in short supply and prohibitively expensive for many countries. For this reason, some scholars and foreign governments have argued that all IP rights should be suspended for such drugs for the duration of the pandemic. Others have made the more modest recommendation that countries be permitted to use compulsory licensing under TRIPS Article 31 to produce generic versions of needed drugs, in exchange for paying “adequate remuneration in the circumstances of each case” to the patent holder. This raises the question of whether patent rights are creating an impediment to getting people needed drugs during the pandemic.

The United States has not been particularly consistent in its attitude towards non-permissive government use of patented inventions and compulsory licensing. In the 1950s and 60s, it imported patented drugs from generic manufacturers to cut costs. During the anthrax scare in the early 2000s, after Canada licensed Bayer’s patented Cipro drug to a generic manufacturer, the U.S. government threatened to do the same to help negotiate a better price. Since 2010, there have been at least three cases of patent holders seeking compensation for the government’s unauthorized use of their defense-related inventions.

Notwithstanding the U.S. government’s regular unauthorized use of patented inventions, it has been quick to punish countries that use compulsory licensing to provide life-saving drugs to its citizens. When South Africa was suffering from the worst of the AIDS epidemic and seeking to import generic antiretroviral drugs, the Clinton administration placed South Africa on the Special 301 Report Watch List. Subsequent Democratic and Republican administrations have punished other countries seeking to utilize Article 31 to provide drugs to people who would otherwise go without treatment.

This brings us back to the current shortage of COVID-19 vaccines and treatments. Whether IP rights are harming patients and whether compulsory licensing can help depends, at least in part, on the type of drug at issue. Consider Gilead’s small-molecule drug remdesivir, which can be used as a COVID-19 treatment and was scarce during 2020. The Bangladeshi company Beximco was able to independently recreate remdesivir in just a few months. It began selling its generic equivalent in May, more than a month before any of the Gilead-licensed facilities began production. Other Bangladeshi companies soon began producing the generic, leading to a growing surplus that allowed Bangladesh to export to at least 21 other countries. As a Least-Developed Nation, Bangladesh is exempt from various TRIPS requirements, which allowed it to recreate the patented drug without retaliation.

Consequently, in the Summer of 2020, remdesivir was not scarce in Bangladesh, nor was it scarce in low- and middle-income countries that were able to buy from Gilead-licensed generic manufacturers beginning in late June. Yet during the same time period, the United States was facing an acute shortage and had to ration the drug. This tells us that the U.S. shortage was likely based on patent rights—Gilead failed to maximize all available production facilities and failed to grant countries like the United States access to drugs produced under license in countries like India. Had the government issued a compulsory license, it would have lessened the shortage.

Compulsory licensing, however, is not a cure-all for drug shortages. Biologics, including vaccines, can be difficult to recreate without know-how that is protected by trade secrecy. Issuing a compulsory license won’t force companies to divulge the optimal manufacturing conditions for producing the drug. Moreover, compulsory licensing won’t increase a supply of a needed drug if there is a shortage of raw materials or manufacturing capability—as is currently the case with various COVID-19 vaccines.

Consequently, for the current pandemic, compulsory licenses or other mechanisms for circumventing patent rights are only going to be useful for countries that will not be receiving an adequate vaccine supply in the near future and that have access to needed raw materials and manufacturing facilities. For countries like the United States that have pre-purchase agreements and the means to buy more vaccines, a compulsory license may not be helpful in the near term, given the amount of time it would take to recreate the drug. But for at least some low- and middle-income countries, compulsory licensing could make it possible to save lives, especially if revaccination is periodically required.

Any move that is taken with regard to IP rights during pandemics must be done with an eye towards not threatening drug development for future pandemic responses. Suspending all IP rights for the duration of the pandemic will give pharmaceutical companies little incentive to develop new drugs when the next pandemic arises, absent a change in how we incentivize drug development. But the same is not true for compulsory licensing and government use of patents. There is scant empirical evidence that the practice harms innovation, given that adequate remuneration must be paid under TRIPS. This is particularly true for licenses issued by low-income countries, which spend little on drugs compared to high-income countries.

One lesson from the pandemic is clear: the United States needs to reassess its inconsistent approach towards government use and compulsory licensing of drugs and should reassess the lack of concessions that it asks for when it pours billions of dollars into private pharmaceutical companies. Current U.S. law does not make it easy enough for a willing third-party manufacturer to petition for a license to a scarce drug, as several prior drug shortages have illustrated. U.S. agencies also need to expressly address know-how in their contracts when providing funding for research. Federal funding recipients that develop a drug or treatment should be required to utilize out-licensing to generic manufacturers to keep pace with demand after an initial grace period, in exchange for fair compensation.

Finally, the United States needs to join the European Union in revisiting its ugly practice of punishing low- and middle-income countries that utilize compulsory licensing to provide life-saving drugs to its citizens. If South Africa or other countries are forced to utilize compulsory licensing to produce COVID-19 drugs, will we repeat the mistakes we made during the AIDS epidemic? Or will we recognize that a global pandemic represents the kind of extenuating circumstance that TRIPS Article 31 was meant to address?

Are Patents Free for the Taking; or Does the Law Require Just Compensation?

by Dennis Crouch

Christy, Inc. v. US (Supreme Court 2021)

This is a super interesting patent-as-property case. In 2018, Christy filed a class-action lawsuit asserting that the cancellation of its patent via Inter Partes Review was taking subject to the due process requirements of the Constitution as well as the Fifth Amendment requirement of “Just Compensation.”

… nor shall private property be taken for public use, without just compensation.

Christy also argued that the payment of USPTO maintenance fees, without refund, constitutes an “illegal exaction.”   The Court of Federal Claims rejected Christy’s argument as did the Court of Appeals for the Federal Circuit.

  • Christy, Inc. v. United States, 141 Fed. Cl. 641 (Ct. Fed. Clm. 2019);
  • Christy, Inc. v. United States, 971 F.3d 1332 (Fed. Cir. 2020).

Now, Christy has the case up to the Supreme Court with the following two questions:

Petitioner Christy, Inc. obtained a patent after following all the steps and rules and paying all of the fees demanded of it. Upon trying to assert its property rights embodied in the patent against an accused infringer, the Government invalidated the patent during Inter Partes Review (“IPR”) initiated by the accused infringer because it had allegedly been mistakenly issued. Christy, Inc. received no compensation for its property nor return of the fees it paid. In that context, the Questions Presented are:

1) When a duly-issued patent is invalidated through a post-grant review process (such as an IPR), must compensation be paid under the Takings Clause?

2) When a duly-issued patent is invalidated through a post-grant review process (such as an IPR), should the issuance and maintenance fees that were demanded by the government by mistake be returned?

[Christy-v-USPTO_Petition4Cert].

The Federal Circuit offered a very low quality opinion on the issues here.  In particular, the Federal Circuit simply stated that it was bound by a prior decision holding that “cancellation of patent claims in [an] inter partes review cannot be a taking under the Fifth Amendment.”  The prior decision is Golden v. U.S., 955 F.3d 981 (Fed. Cir. 2020) where Larry Golden represented himself pro se. In that decision, the court also did not explain its decision but rather simply cited to another prior case, Celgene Corp. v. Peter, 931 F.3d 1342 (Fed. Cir. 2019).  In Celgene, the court likewise did not examine the issue of takings, but rather cited to its older decision of Joy Technologies, Inc. v. Manbeck, 959 F.2d 226 (Fed. Cir. 1992) and Patlex Corp. v. Mossinghoff, 758 F.2d 594 (Fed. Cir. 1985).  However, neither of these cases addressed the takings clause they focused instead on alleged violation of due process.  So, as is often the case, the trail Federal Circuit self-citation leads nowhere.

I don’t expect the patentee to prevail in this case, but that will only be based upon the Supreme Court’s rejection of its own prior statements.

A patent for an invention is as much property as a patent for land. The right rests on the same foundation and is surrounded and protected by the same sanctions. Consolidated Fruit-Jar Co. v. Wright, 94 U.S. 92, 96 (1877).

Briefing in the case will continue through the spring.

= = =

U.S. Patent No. 7,082,640