by Dennis Crouch

Mylan v. IRS, No. 22-1193, — F.4th — (3d Cir. July 27, 2023)

In a recent tax appeal, the Third Circuit court of appeals afformed that legal expenses incurred by generic drug makers to defend against patent infringement suits brought under the Hatch-Waxman Act are deductible as ordinary and necessary business expenses. This aligns with longstanding precedent treating patent litigation defense costs as deductible for the alleged infringer.

Mylan had deducted over $100 million in litigation expenses for the periods of 2012-2014 it occurred in defending patent infringement lawsuits brought against the generic manufacturer after it submitted abbreviated new drug applications (ANDAs) with paragraph IV certifications challenging the respective patents.  The IRS disallowed the deductions and issued notices of deficiency to the company — concluding that instead the litigation costs should be capitalized under I.R.C. § 263 (and associated regulations) as costs to acquire intangible assets (the FDA drug approvals).   The capitalization process requires amortization over 15 years rather than permitting immediate tax relief offsetting current income.

Mylan petitioned the U.S. Tax Court for redetermination and won a holding that litigation costs were deductible business expenses, rejecting the IRS’s position that they should be capitalized.  The IRS Commissioner then appealed to the 3rd Circuit who affirmed.

In the appeal, the IRS argued that litigation costs should be capitalized under Treas. Reg. §1.263(a)-4(b)(1)(v) as amounts paid to facilitate the acquisition of the FDA drug approvals, which are intangible assets.  The 3rd Circuit rejected that argument, holding that lawsuits by the branded manufacturers do not facilitate FDA approval.  The court noted that the FDA can approve an ANDA regardless of the litigation outcome and also that not every ANDA results in litigation so it is not a required step in the process.  Although litigation is a contemplated aspect of the Hatch-Waxman process, that does not convert the litigation into an approval requirement.  The court also noted that disparate tax treatment between generics and brands would undermine Hatch-Waxman.

The Third Circuit had previously held that litigation expenses a patentee incurs in enforcing its patents are ordinary and necessary business expenses because they are “peculiarly normal to the business in which … [patentee] taxpayers [a]re engaged.” Urquhart v. Commissioner, 215 F.2d 17, 19 (3d Cir. 1954). The court in Mylan reasoned that generic manufacturers defending infringement suits are engaged in functionally the same activity as patentees enforcing patents. Thus, the court concluded that deductibility should not differ based on whether litigation expenses are incurred by the patentee or alleged infringer. In the court’s view, “[i]t makes no difference in deciding the question of deductibility whether the patent litigation expenses are incurred by the patentee or the alleged infringer. Nor does it matter that the deductibility question arises in the context of an ANDA suit.”

Generic manufacturers relying on deductibility of these litigation costs will benefit from the ruling. If the fees had to be capitalized, it would substantially increase costs and undermine their incentives to challenge weak patents under Hatch-Waxman.

By Dennis Crouch

The nexus requirement serves as a threshold that must be met before secondary indicia will be even considered as relevant to the obviousness inquiry.  In its recent Volva Penta decision, the Federal Circuit found that the PTAB had  (1) created too high of a burden to prove nexus and (2) been unduly dismissive of the patentee’s evidence of commercial success and copying.  The case reinforces the notion that patentees should attempt to include some claims that are largely coexistive with its product line, especially in today’s world of likely copying. The case also serves as a reminder that product copying still caries significant weight in the obviousness analysis. Volvo Penta of the Americas, LLC v. Brunswick Corp., 22-1765, — F.4th — (Fed. Cir. August 24, 2022).

For several years, Volvo Penta has been selling a boat engine drive where the propellers are forward facing and thus tucked under the boat. The setup, known as a tractor-type stern drive, pulls the boat forward rather than traditional rear-facing propellers that push.  The drive has been a commercial success, especially for boats with nearby swimmers because the forward facing propellers offer potential safety advantage.

In 2020, Brunswick launched a competing product under its Mercury brand and, on the same day as its product launch also filed an IPR petition challenging Volvo’s US Patent 9,630,692.  The PTAB granted the petition and ultimately sided with the petitioner by holding that the claims would have been obvious based upon a combination of the prior art references.   On appeal, however, the Federal Circuit has vacated and remanded–ordering the PTAB to take a fresh look at the secondary indicia of nonobviousness such as commercial success and copying.

Obviousness analysis primarily focuses on comparing the claimed invention against the prior art and using that consideration to guess whether the gap would have been obvious to fill at the time of the invention.  But, the

Obviousness analysis primarily focuses on comparing the claimed invention against the prior art and using that consideration to guess whether the gap would have been obvious to fill at the time of the invention. But, the analysis should not end there. Secondary indicia of nonobviousness, also referred to as objective evidence, provide real-world, albeit indirect insights into the obviousness determination. Evidence of commercial success, long-felt but unsolved need, failure of others, industry praise, and copying can indicate that an invention was not obvious to those skilled in the art at the time, even if it appears so in hindsight. While secondary considerations do not control the obviousness conclusion, they must be considered as part of the totality of the evidence when presented by the patentee.  At times, the objective evidence is considered the most probative and cogent evidence of nonobviousness.

In recent years, the courts and patent office have been restricting the use of objective evidence of nonobviousness by applying a tight nexus requirement.  Before the evidence is given any consideration, the patentee must show a nexus between the invention as claimed and the objective evidence of nonobviousness.  This nexus requirement is designed to ensure, for instance, that commercial success is due to qualities of the invention being patented rather than some other advance or perhaps simply marketing.  Nexus can be established via a presumption when the evidence is tied to a product that embodies and is coextensive with the claims. Brown & Williamson Tobacco Corp. v. Philip Morris, Inc., 229 F.3d 1120 (Fed. Cir. 2000). Even without a presumption, nexus can be shown by tying the evidence to the “unique characteristics of the claimed invention.” Fox Factory, Inc. v. SRAM, LLC, 944 F.3d 1366 (Fed. Cir. 2019). The patent owner bears the burden of establishing nexus. WMS Gaming Inc. v. Int’l Game Tech., 184 F.3d 1339 (Fed. Cir. 1999). Nexus is not limited to only novel features, but considers the invention as a whole. Chemours Co. FC, LLC v. Daikin Indus., Ltd., 4 F.4th 1370 (Fed. Cir. 2021).

Here, the PTAB found that Volvo Penta was not entitled to a presumption of nexus between the claims and the objective evidence. It held that even though the Forward Drive and Bravo Four S embodied the claims, Volvo Penta did not provide sufficient arguments regarding coextensiveness. The PTAB also found that Volvo Penta did not otherwise demonstrate nexus by identifying the unique characteristics or merits of the claimed invention tied to the objective evidence presented.

On appeal, the Federal Circuit vacated.  The court noted that Volvo Penta expressly argued the commercial success of the Forward Drive was tied to the “steerable tractor-type drive” recited in the claims. Volvo Penta cited internal Brunswick documents discussing the need to match the capabilities of the Forward Drive in developing the Bravo Four S. This demonstrated a nexus between the Pulling-type stern drive in the claims and the objective evidence.  While Volvo Penta’s arguments on coextensiveness may have been fairly minimal, the court found them sufficient to show nexus by tying the evidence to the specific claimed feature of a tractor-type stern drive. The undisputed evidence showed boat manufacturers strongly desired this feature in Volvo Penta’s product. Thus, the Federal Circuit found Volvo Penta established the required nexus between the claims and objective evidence.

The Federal Circuit also determined the PTAB’s analysis and weighing of the objective evidence was deficient in several ways.

First, the court found the PTAB’s assignment of “some weight” or “very little weight” to the various secondary considerations was overly vague. This was problematic even if the individual weights were supported, because the PTAB provided no insight into its summation finding that collectively the evidence only “weighed somewhat” in favor of nonobviousness. As the court noted, it is unclear whether “some weight” has the same meaning across different factors.

Second, for certain factors like copying, the PTAB’s assignment of weight contradicted its own factual findings. The PTAB found evidence showing Brunswick copied the Forward Drive in developing its competing Bravo Four S product. However, despite noting that copying is usually considered “strong evidence” of nonobviousness, the PTAB only gave copying “some weight.” This  seeming inconsistency was not explained by the PTAB in its final written decision.

Third, the PTAB dismissed or overlooked aspects of the evidence related to long-felt need, praising comments, and commercial success, and the appellate panel found that those potential gaps might have altered the weight designation.  On these points, the court cited cases focusing on the PTAB’s duty to explain and support its factual and legal conclusions. See, e.g., Pers. Web Techs., LLC v. Apple, Inc., 848 F.3d 987 (Fed. Cir. 2017) (remanding in view of the Board’s failure to “sufficiently explain and support [its] conclusions”); In re Nuvasive, Inc., 842 F.3d 1376 (Fed. Cir. 2016)(same).

The Federal Circuit’s decision in Volvo Penta provides important guidance for patent applicants and owners seeking to overcome obviousness challenges. It reemphasizes potentially important role that objective evidence plays in the obviousness determination, and shows that the nexus requirement should not be applied overly restrictively. While patentees must establish nexus, a limited amount of support tying the objective evidence to the claimed invention as a whole can be sufficient.  The court also makes clear that the PTAB must fully and fairly consider all relevant objective evidence, avoid ambiguous weighing, and sufficiently explain any dismissal or discounting of probative evidence. Vague labels like “some weight” are unhelpful. Findings that contradict the evidence, like affording copying only minimal weight, will draw enhanced scrutiny.

By: Suzanne Harrison, Chair of the Patent Public Advisory Committee (PPAC) at the USPTO.  This post is part of a series by the Diversity Pilots Initiative, which advances inclusive innovation through rigorous research. The first blog in the series is here and resources from the first conference of the initiative are available here.

In July 2021, the USIPA hosted a DEI in innovation conference and launched The Diversity Pledge, alongside 30 founding Pledgee companies who agreed to increase the participation of under-represented inventors (URIs) in their own firms.  Currently, over 50 technology companies have committed to the Diversity Pledge from both the US and Europe across a variety of different industries as well as over 25 law firms and consulting firms as pledge supporters. On August 1^st, we held the second conference on Increasing Diversity in the Innovation Ecosystem with the USPTO and showcased what companies, law firms, universities and the USPTO are doing in their respective organizations to increase DEI within inventorship, innovation and the IP profession.

When we created the Diversity Pledge, our hope was to create more transparency in innovation and inventorship inclusivity, by creating a standard metric for companies to report on their DEI reports.  What we have come to realize however, is that increasing diversity and inclusivity in innovation is not only an equal-opportunity social imperative, it is a common sense means to improve R&D efficiency, corporate ROI and it is also a necessity for maintaining and increasing national competitiveness. Because we can’t afford to leave our most talented people on the sidelines, the goal must be actionable, not performative.

So, two years into this movement, what have we learned?  Creating a metric and asking companies to focus on improving it has led them to implement best practices, try out a variety pf process improvements which have led to substantive changes.  Of the 50 Pledgee companies, 30 of them participated in our first round of reporting, as not all of them had been Pledgees long enough to have a full year of data to report.  Of the 30 reporting, 17 provided women inventor rates (WIR) for year 1 and 6 provided the WIR rate for year 2. You can see the results in Figure 1 below:

Figure 1

For clarity, Pledgees were not required to report their WIR numbers, but chose to do so.  So, for the 6 Pledgees that reported two years of data, we can see that focusing on increasing inclusivity in inventorship for women, led to an average increase of women on patent applications of 23%.  For comparison, the US national WIR as determined by the USPTO is 13% so our Pledgees mean WIR in both year 1 and 2 are above the national average.  How are companies achieving these results?  At the conference we heard about a number of different things companies are doing.  First, mentoring women on the inventorship process and how they can improve their invention disclosure and patent application success rates.  Companies are also looking at how to better integrate underrepresented inventors into the innovation process and how to ensure both their voices and ideas are heard and incorporated.  Many of these efforts are being piloted by companies, and groups such as the Diversity Pilots Initiative (DPI) are crucial to helping us determine what actually works versus “seems” to work.   Many Pledgees have worked with DPI and have determined what interventions are successful and have allowed us to genericize those efforts and promulgate within Pledgees for continued success.

Two years ago, companies were focused on having us explain the value they would receive by focusing on inclusivity in inventorship or DEI in general.  While we still get occasional questions about this, recent data from both Gartner and World Economic Forum show that diverse teams within corporations, will exceed their financial targets, and drive a higher average revenue from innovation.  For companies this often translates to higher revenue and/or profit, increased employee retention, and lower hiring costs (as potential employees are interested in working for companies that appear more inclusive). But the real value for the nation, comes from increased employment and higher state and national gross domestic product (GDP).  This focus on jobs and GDP has caught the attention of both the Department of Commerce (DoC) and the USPTO.  Between the DoC and the National Science Foundation (NSF), these two agencies are investing over $1.3 billion in revitalizing America’s innovation ecosystem.  Finding out that one can use patent data to help visualize who is and is not participating in our innovation ecosystems, helps us figure out who to include in this process.

Additionally, the work Diversity Pledgees are doing is laying the groundwork for how companies, universities and law firms can make meaningful contribution to not only their own profitability, but also to our national economic and technological success. This point was made crystal clear in the fireside chat with Director Kathi Vidal and Deputy Secretary of Commerce Don Graves at the conference.  In my 30 years as an IP practitioner, I cannot recall ever hearing anyone from the DoC talk about the importance of IP and innovation to the economy.  While we all intuitively believe that focusing on DEI is the right thing to do, finding out that it can truly help the nation is invaluable.  So, if you haven’t started on your DEI journey yet, what are you waiting for?  Knowing you can make an impact for both your company and country seems like a no brainer.

Three Key Take-Aways

• Immediate Innovation Impact: Pledgee companies focusing on DEI report an average 23% increase in women on patent applications, surpassing the US national WIR.
• National Competitiveness Boost: DEI initiatives, supported by the DoC and USPTO, are highlighted as essential for improving national employment rates and GDP.
• Blueprint for Profitable Inclusion: The Diversity Pledge and collaborations like DPI are helping organizations elevate DEI, enhancing both their profitability and national economic success.

If you find this insight compelling and want to stay informed on the latest developments, sign up for the DPI research updates today!

By: Abhay Aneja, Assistant Professor of Law, University of California, Berkeley, Diversity Pilots Initiative Researcher, Gauri Subramani, Assistant Professor in the Department of Management, College of Business, Lehigh University and Diversity Pilots Initiative Researcher, and Oren Reshef, Assistant Professor of Strategy, Washington University in St. Louis.  This post is part of a series by the Diversity Pilots Initiative, which advances inclusive innovation through rigorous research. The first blog in the series is here, and resources from the first conference of the initiative are available here.

About 86% of all patent applications are submitted by men or all-male teams. This underrepresentation of women gets worse as the patent approval process runs its course. In other words, patent applications from women and teams with higher female representation are less likely to convert into granted patents. Why is this happening?

An essential feature of the patent process is that it is highly iterative, so rejection occurs often, as the figure below of the evaluative trajectory of patent applications shows.  While over 80% of applications face rejection, it is crucial to note that rejection does not necessarily indicate the impossibility of moving forward with that invention. Applicants can respond to rejections and continue in the patent process. However, research indicates that female patent applicants are less likely to follow up after rejection, contributing significantly to the lower conversion rate of applications to granted patents.

A potential approach for overcoming female tendencies not to push forward or fight in response to rejection relates to whether the patent applications are affiliated with attorneys or firms. When applications are affiliated with firms, the process is typically managed by patent committees comprised of specialized experts, such as patent attorneys, who have lots of experience determining whether proposed ideas can be patented. Not only can these experts craft applications strategically, but they can also manage communications with patent examiners. For instance, they may help with responding to a rejection.

Although it is no surprise that both men and women benefit from the support of patent professionals, interestingly, female applicants derive much more significant gains than men from firm and attorney affiliations. This suggests that access to information and financial resources provided by firms and attorneys is particularly valuable for female patent applicants, potentially compensating for lower response rates to rejection and the other barriers women commonly face before applying for a patent (e.g., limited professional networks). However, the proportion of male inventors affiliated with firms or attorneys is higher than that of female inventors.

The underrepresentation of women in the field of innovation has far-reaching implications for our society. We are losing the opportunity to benefit from valuable contributions and perspectives just as much as the underrepresented population in innovative activities. From a macroeconomic perspective, this is a significant loss of potential economic growth. However, while the underrepresentation of women hurts society overall, it hurts women the most.

Research demonstrates that women are more likely to develop innovations that serve the needs of other women. For instance, the first disposable diaper was created by a mother, who herself was exposed to the issue many other women also face. Therefore, if female inventors are underrepresented, women more broadly are underserved because the innovations that may serve women’s specific needs are less likely to exist. Also, participation in innovation leads to individual-level benefits. Patents enable inventors to commercialize their inventions, benefit from increased wages, and enhance their employability. Women are obstructed from the opportunity to have access to these tangible pecuniary benefits.

The underrepresentation of women in the patent process is a critical issue that needs our attention. It is easy to think that women who apply for patents are probably more resistant to negative feedback because they’re already a highly self-selected group who have persisted in their endeavors against many obstacles. However, this is not necessarily true. A robust body of research illustrates that demographics are important in career choices and trajectories. Children born into the wealthiest 1% of society are ten times more likely to be inventors than those born into the bottom 50%. Female college graduates are much less likely to transition to STEM jobs. Even if female students eventually enter those fields, female academics and scientists are less likely to patent than male academics and scientists, partially due to their limited professional networks.

Also, the small proportion of women who do end up participating in innovation are often disadvantaged by biased evaluations of their accomplishments and capabilities as compared to similarly qualified men. These hurdles throughout the process inhibit women from becoming scientists or participating in innovation. It is crucial to address these challenges at each stage of the pipeline with interventions such as providing better access to information and free legal representation. By recognizing and tackling these obstacles, we can foster a more inclusive and supportive environment for women in innovation.

Measures such as improving access to information, providing free legal representation, and dismantling gender biases in evaluations can advance diversity in innovation. More representation of women in the field will not only foster economic growth but also lead to innovations that cater to the diverse needs of our world. I urge you to join our efforts to support women and bridge the gender gap in innovation.

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by Dennis Crouch

Steuben Food recently lost its infringement case against Shibuya Hoppmann with the district court holding (1) the doctrine of equivalents (DOE) cannot extend to cover the accused aseptic bottle filling technique and further (2) the reverse doctrine of equivalents shields the defendant against charges of literal infringement.  Steuben Foods, Inc. v. Shibuya Hoppmann Corp., No. 1:19-cv-02181-CFC, 2023 WL 2498810 (D. Del. Mar. 14, 2023) (U.S. Patent Nos. 6,209,591; 6,536,188; and 6,702,985) (Chief Judge Connolly). The case is now pending on appeal at the Federal Circuit with the successful defendant’s responsive brief due in mid-September.

• SteubenFoods Appeal Brief
• District Court Decision

There is fierce competition in the bottling industry, and Shibuya sold bottling lines to a major Steuben customer.  Steuben sued Shibuya on three patents and initially won with a jury awarding $38 million in infringement damages.  However, Chief Judge Connolly rejected the jury verdict by issuing a Judgement Notwithstanding the Verdict, holding that no reasonable jury could have found infringement.  The rules of civil procedure now identify JNOV as the perhaps more politically correct name of Judgment as a Matter of Law (JMOL).  The new name avoids the inconvenient truth that the process involves the rejection of a constitutionally protected jury decision.

Based upon what I’ve read — that admittedly does not yet include the appellee’s brief — I would side with Steuben Foods in this one.  Judge Connolly was too aggressive at rejecting the jury verdict of infringement; too aggressive at applying the vitiation doctrine to a single word within the claim; and too aggressive at applying the long dormant reverse doctrine of equivalents.

= = =

Judge Connolly’s JMOL decision turns on two controversial patent law doctrines – the doctrine of equivalents and its inverse, the reverse doctrine of equivalents.

Doctrine of Equivalents

The doctrine of equivalents allows a patentee to establish infringement, even when an accused product or process does not literally fall within the claims of the patent, if the accused product or process contains only insubstantial differences from the patent claims. The Supreme Court recognized the doctrine of equivalents in Graver Tank & Mfg. Co. v. Linde Air Products Co., 339 U.S. 605 (1950), explaining that it operates to prevent copying that makes only minor, insubstantial changes to avoid the literal scope of the claims. The doctrine is justified on the basis that language has inherent limitations in capturing the true scope of an invention, so equivalents help protect the inventor and promote innovation. However, the doctrine is controversial because it expands patent scope beyond literal claim terms, reducing public notice and potentially ensnaring later-developed technologies in infringement. The Supreme Court placed key limitations on the doctrine in Warner-Jenkinson Co. v. Hilton Davis Chemical Co., 520 U.S. 17 (1997), requiring equivalence to be assessed on an element-by-element basis and prohibiting vitiation of claim limitations.

Steuben’s ‘985 patent covers a sterilization machine and includes the following element: “wherein said atomized sterilant is intermittently added to said conduit.”  Claim 1 (emphasis added).   The problem though is that the accused device was shown to add the sterilant continuously. Although the jury found infringement by equivalents, the district court reasoned that the doctrine of equivalents could not apply in this type of binary situation.  That lead to the court’s conclusion that allowing equivalents for continuous operation would vitiate the intermittent operation limitation.   On appeal, Steuben contends the court ignored precedent against using a ‘binary choice’ approach to vitiation. See, Deere & Co. v. Bush Hog, LLC, 703 F.3d 1349, 1356–57 (Fed. Cir. 2012) (“Courts should be cautious not to shortcut this inquiry by identifying a ‘binary’ choice in which an element is either present or ‘not present.'”).   The patentee also argues that substantial evidence supported the jury’s equivalents verdict based on applying the proper function-way-result test.

This aspect of the dispute thus raises important questions about how narrowly the doctrine of equivalents should be applied. And, in addition, it challenges the power distribution between judge and jury in finding infringement.

Reverse Doctrine of Equivalents

A more surprising aspect of Judge Connolly’s decision is his application of the reverse doctrine of equivalents.  Reverse DOE allows an accused infringer to escape liability, even if its product or process literally satisfies every element of the patent claim, if the accused product or process is so substantially changed in principle that it performs the same or a similar function in a substantially different way. The doctrine originated in Supreme Court precedent such as Graver Tank and was designed to prevent unwarranted extension of patent scope over later-developed technologies functioning in new ways. However, the doctrine is controversial because it negates what would otherwise constitute infringement under the statute, conflicts with literal claim interpretation, and is seldom applied by courts today.

For the ‘591 patent, the lower court rejected the jury verdict of infringement based upon the reverse DOE — holding that the accused product operated “in a substantially different way” from Steuben’s invention as described in its specification.  Here, the claims required a “second sterile location.” Steuben accomplished this with a redesign of filling valves to avoid attracting contaminants and use of sterilant.  On the other hand, the accused product used a bellows surrounding the valve stem to prevent contamination.

The district court found the accused product’s approach to fit within the literal claim scope, but still non infringing because the approach was radically different from that described in Steuben’s specification.

In the case, Shibuya provided expert testimony of the key differences of operation by comparing the accused product against the disclosed embodiments.  During the trial, the patentee focused on the claim language and did not attempt to rebut the argument that the underlying approaches to create the sterile region was quite different.  (Steuben also apparently mischaracterized the patents disclosure). In its JMOL decision, the court concluded that the unrebutted evidence of significant difference was enough to entitle Shibuya to JMOL of noninfringement under the reverse doctrine of equivalents.  The court emphasized here that the critical issue is whether the accused device is so far changed in principle that it operates substantially differently from the claim, even if it literally infringes.

On appeal, Steuben argues the court fundamentally misapplied Reverse DOE analysis by comparing Shibuya’s device to patent specifications rather than the actual claims. It also contends the Reverse DOE improperly negates infringement, conflicting with the Patent Act.

The Federal Circuit now has the opportunity (and duty) to shape the law on these two important equivalents doctrines. On the doctrine of equivalents, the court can provide guidance on applying a legal test of vitiation versus the factually intensive function-way-result test.  In the lead up to the recent Amgen decision, many of us have had ongoing discussions about the relationship between disclosure doctrines (enablement/WD) and the doctrine of equivalents.  As one doctrine is locked-down, there is more pressure to expand the other.  With so much focus on the disclosure side, it may be time to ease up on the DOE limitations.

For the reverse doctrine of equivalents, the court can clarify if this much maligned doctrine still remains viable in today’s statutory framework.  And if so, the court should delineate the proper role of the reverse doctrine versus literal claim interpretation. As with DOE, I would argue that reverse DOE should be given to the jury to decide rather than JMOL.

The appeal was filed by Cook Alciati (Steuben’s former Chief IP Counsel, now in private practice at Gardella Grace). A team from Sterne Kessler, apparently led by appellate specialist JC Rozendaal represents the defendant-appellee.

by Dennis Crouch

The Supreme Court’s landmark 1950 decision in Graver Tank & Mfg. Co. v. Linde Air Products Co., 339 U.S. 605 (1950) is one of the court’s most cited patent cases.  The decision established important guideposts for applying the doctrine of equivalents (“DOE”), including consideration of the prior art and a focus on the substantiality of differences. While courts today emphasize evaluating equivalence on an element-by-element basis, Graver Tank‘s substantive analysis remains highly influential.

Linde Air Products held a patent on welding fluxes using alkaline earth metal silicates. US Patent No. 2,043,960. Graver Tank’s flux substituted manganese silicate, which was not an alkaline earth metal. Though Graver Tank’s flux did not literally infringe, the Court found it performed “the same work in substantially the same way [to] accomplish substantially the same result.”  This has become known as the function-way-result or tripartite test.

Over the past 70 years, Graver Tank’s doctrine of equivalents analysis has been instrumental in assessing infringement and remains a key tool for patentees to enforce their rights against insubstantial changes. At the same time, the doctrine has been further shaped and limited. Courts today emphasize an element-by-element approach rather than looking at the product as a whole. Warner-Jenkinson Co. v. Hilton Davis Chemical Co., 520 U.S. 17 (1997). Prosecution history estoppel limits the doctrine for claims amended or argued during patent prosecution. Id, See also, Festo Corp. v. Shoketsu Kinzoku Kogyo Kabushiki Co., 535 U.S. 722 (2002).  And, the doctrine of vitiation precludes a finding of equivalence when it would effectively eliminate or “vitiate” a claim limitation. See, Freedman Seating Co. v. American Seating Co., 420 F.3d 1350 (Fed. Cir. 2005) and Depuy Spine, Inc. v. Medtronic Sofamor Danek, Inc., 469 F.3d 1005 (Fed. Cir. 2006).

In Warner-Jenkinson, the Supreme Court reaffirmed the viability of the doctrine of equivalents, but placed some limitations on its application. Specifically, the Court held that the doctrine must be applied to individual elements of a claim, not to the invention as a whole. The Court also held that prosecution history estoppel can bar the doctrine of equivalents when an amendment or argument during patent prosecution surrenders subject matter that would otherwise fall under equivalents.  In Festo, the Supreme Court provided more detail on prosecution history estoppel (PHE)–establishing a a presumption against application of the doctrine of equivalents for claim limitations that were amended during patent prosecution for reasons related to patentability.

In Graver Tank, the Court had applied the doctrine to find infringement based on the substantial similarity of the overall compositions at issue. Under the standard set forth in Warner-Jenkinson, the Graver Tank analysis would likely have compared the “alkaline earth metal silicate” and “manganese silicate” elements specifically to determine their equivalence. Additionally, prosecution history estoppel may have precluded equivalence, if the reason alkaline earth metals were claimed was to overcome a rejection during patent prosecution.

The rise of these legal limitations has given judges tools to more frequently dismiss DOE claims on summary judgment or JMOL.

As the chart shows above, courts continue to cite and rely upon Graver Tank. The following are typical reasons:

• To support application of the doctrine of equivalents generally and reference the “function-way-result.”
• To emphasize that minor or insubstantial differences do not avoid infringement.
• To note that equivalents is a question of fact for the jury to decide rather than a question of law.  Typically, expert testimony will provide the key underlying evidence.

On the fact/law issue, the majority opinion explains that a question is more likely to be factual in nature when it requires specific scientific knowledge. “Particularly is this so in a field where so much depends upon familiarity with specific scientific problems and principles not usually contained in the general storehouse of knowledge and experience.” Id. This quote has been cited by a number of courts in other fields when attempting to determine whether a particular issue is legal or factual.

One important note is that this post focuses on the majority opinion penned by Justice Robert Jackson.  Justices Hugo Black and William Douglas jointly wrote a dissent concluding that patents should be limited to their literal scope based upon the claim language.  The dissent argued that the DOE undermined the statutory requirement for clear patent claims.  See 35 U.S.C. 112(b) (“claims particularly pointing out and distinctly claiming”).

By Jason Rantanen

I’m getting ready to teach my Fall 2023 Patent Law class, and that means updating the granted utility patents graph that I do every few years.  This year’s version shows U.S. utility patents granted per year from 1840-2022:

Data for 2023 isn’t included in the table, but as of July 25, 2023, the authority file contains just 171,556 patents.  If the pace remains the same, that would work out to about 294,000 patents granted this calendar year–around 10% fewer than 2022 (327,482 granted patents) and around 18% lower than 2020 (356,640 granted patents). (In contrast, at the end of July 2022 there were 186,500 patents listed on the Authority file.) But my sense is that the drop from 2022 may be due to a delay in actually publishing the granted patents rather than reflecting a decline.

In fact, looking at the USPTO’s reported statistics, I’d actually expect more issued patents in 2023 than in 2022.  Filings are continuing to trend slightly upwards (there were 457k non-RCE UPR filings in FY 2022, as compared with 450k in FY 2020 and 427k in FY 2018). Allowances are up slightly as well: 253k allowances so far in 2023, as compared with 247k at the same point in 2022. So the decrease in granted patents relative to last year may be the result of a delay between allowance and publication. If you have any insights into this, I’d love to hear them.

One thing that does appear to be real is a drop in allowances relative to 202o, which had 278k allowances by the end of June. This doesn’t appear to be the result of fewer applications or a lower allowance rate–instead, there’s been a large growth in the unexamined application inventory from 570k (June 2020) to 735k (June 2023).

Methodology:

I imported the 2023-07-25 Patent Grant Authority file into STATA and tabulated the number of A1, B1 and B2 kind code records by year.  (For those who might be confused by the use of A1, the authority file uses A1 to indicate pre-2001 utility patent grants).  I included patents that are marked as Withdrawn.  The above graph uses calendar years (Jan. 1 – Dec. 31) instead of FY (fiscal years: Oct 1 to Sept. 30).  To predict 2023, I divided the grants as of the 7/25 by 7, then multiplied by 12; the number is similar if weeks are used. Data on filings and allowances comes from the detailed spreadsheet at the bottom of https://www.uspto.gov/dashboard/patents/.

by Dennis Crouch

In re Universal Electronics, Inc., No. 2022-1716 (Fed. Cir. Aug. 15, 2023) (non-precedential)

This was a consolidated appeal from two Patent Trial and Appeal Board (PTAB) decisions affirming the rejection of claims from Universal Electronics, Inc.’s (UEI) U.S. Patent Application Nos. 12/645,037 and 16/279,095 as obvious under 35 U.S.C. § 103.  On appeal, the Federal Circuit has affirmed.

The typical approach to obviousness determination is for the examiner to mentally divide the claimed invention into a number of individual elements, and then search for the individual elements within the prior art.  If the examiner finds all of the limitations, then the only key question that remains is whether the combination would have been obvious. Under KSR, that outcome does not necessarily require further evidence, but typically focuses on questions of whether PHOSITA would have been motivated to combine the references to create the invention, and have a reasonable expectation of success of that endeavor.  On the other hand, based upon my experience, examiners are much more uncomfortable finding claims obvious where particular elements are not found in the prior art. This difference is reflected in KSR and other older cases where the Supreme Court has been most critical of patents merely claiming a combination of known elements.

As a prosecution strategy, patentees have some control over the “size” of each element through their organization of claim language.  Here though, the patentee attempted to do this via argument, but ultimately failed. Lets look at the rejection and the arguments here:

The claims at issue relate to a system and method for providing improved user input functionality on a controlling device, such as a universal remote control. Representative claim 1 of the ‘037 application recites determining and then using a particular “touch location” on a touch sensitive surface to retrieve command data from a library stored in the controlling device’s memory. The Examiner rejected the claims as obvious over two prior published patent applications, Fisher and Dresti. Fisher discloses determining a touch location and using it to control an appliance. Dresti discloses retrieving command data from a library in the remote control’s memory.

The patentee argued that a key component of the invention was not found in the prior art. In particular, UEI argued that neither reference individually taught the limitation of a “controlling device that uses a determined touch location to retrieve command data from a library of command data stored in a memory of the controlling device.”  Admittedly, each individual bit of this limitation was found in one of the prior art references, but the patentee argued that this feature should be treated as an entire limitation.

On appeal, the Federal Circuit found the argument unpersuasive, concluding that the rejection properly relied upon a combination of prior art to teach all of the claim limitations.  As the patentee here attempted, attorneys can argue against dividing the claims into smaller pieces. However, it is an uphill battle once the examiner and PTAB have defined the elements narrowly and found them in separate references.

The takeaway may be that attorneys should advocate for the broader, unified view of the invention during early prosecution to avoid being boxed into a narrow element-by-element approach. Carefully crafted claims and thorough responses emphasizing the integrated advance can help shape the analysis in the desired direction. But as this case shows, it can be difficult to overcome once piecemeal elements are embedded in the record.

Unfortunately, the non-precedential opinion does not provide any detail analysis for when a tribunal be satisfied with micro vs macro elements. But, I can imagine that we’ll look to the claim language, specification disclosure, and PHOSITA knowledge.

This is the same issue that arises during infringement analysis with application of the doctrine of equivalents.

Thus, the PTAB’s conclusions that the claims would have been obvious over the cited references.

Judges: Circuit Judges Reyna, Taranto, and Stoll

by Dennis Crouch

Incept LLC v. Palette Life Sciences, Inc., No. 21-2063 (Fed. Cir. Aug. 16, 2023) (Majority by Judges Schall and Taranto; Dissent-in-part by Judge Newman)

The most interesting line in the case for appellate attorneys (and legal scholars) is probably the court’s law/fact distinction in the context of obviousness analysis.  The majority wrote: “We see no reversible error … whether viewed as a factual one about the level of [commercial] success or a legal one about the weight of any such success in the overall obviousness analysis.”  The law/fact divide is important because of the evidentiary requirements in the first instance and the standard for review on appeal. Here, the court makes clear that the weight given to any objective indicia of non-obviousness is a question of law rather than a question of fact.  The result then is that its analysis can generally be based upon reason rather than evidence, and that issue is one that will be heard de novo on appeal.

The second issue of importance is as another data point in the forest-trees  anticipation analysis in situations where the prior art discloses thousands of potential embodiments.  The court has repeatedly held that such a reference is only anticipatory if a person of skill would have immediately envisaged the invention now being claimed.  In this case, the court took a relatively broad view of what constitutes anticipation — focusing on the level of specificity in the claims and guideposts such as the purpose of various elements in the claim.  In the end, the patentee lost and the claims were found invalid.

Finally, the case includes another dissent from Judge Newman.

= = =

Incept’s patents cover a method for treating cancer that involves injecting a biodegradable filler gel prior to radiation treatment in order to increase space between the the tissue being treated and the closest body organs.  Afterwards, the gel biodegrades and so does not need to be removed. U.S. Patent Nos. 8,257,723 and 7,744,913.  Palette Life Sciences initiated IPR proceedings and the PTAB eventually found the challenged claims unpatentable as anticipated/obvious.  On appeal, the Federal Circuit has affirmed with Judge Newman offering a partial dissent. The dependent claims include various forms of the filler, such as thixotropic polymer, collagen, a polysaccharide, or hyaluronic acid.

Wallace discloses millions of possible compositions, and the patentee argued that the Board engaged in improper retrospective construction of the invention by picking and choosing various elements from the disclosure.  The idea then is that one skilled in the art could not have “at once envisaged” the various species claimed by Incept.  On appeal, the majority sided with the Board, holding that “Wallace expressly describes compositions that have the claimed characteristics of, and are used for the same displacement purpose as, the compositions referred to in the ’723 patent claims challenged as anticipated.”

Incept cannot use the fact that Wallace describes multiple compositions to evade an anticipation finding where Wallace provides “as complete detail as is contained in the patent claim,” such that a skilled artisan would have understood that Wallace’s compositions had the same generic properties as those in the ’723 patent claims.

In her opinion, Judge Newman took the majority to task for ignoring limitations in narrower dependent claims.

The majority appears to hold that, when the broader claim is anticipated, the dependent claims are automatically anticipated. That is not the law. Each claim must be considered as a whole, including all its limitations. . . . A generic prior disclosure does not anticipate all of its embodiments, including novel specific embodiments, whether or not the facts are such that the generic disclosure may render the embodiment obvious.

The problem with Judge Newman’s arguments here is that the patentee only barely argued the dependent claims, and the majority recognizes this at least to most of the dependent claims – noting that Incept had failed to provide specific arguments directed to those claims.

Other claims were found obvious by the PTAB and the majority again affirmed that holding. The patentee had provided evidence of commercial success — showing that most prostate cancer treatments in the US used an injectable  known as “SpaceOar” exclusively licensed from the patentee.  The Board refused to give any weight to the commercial success because the sales numbers provided included free and replacement versions, without accounting for those numbers.   In addition, the Board found the patentee’s expert testimony not credible and not supported by evidence.

Judge Newman’s dissent noted that “It is undisputed that the Incept product
experienced regular increases in annual commercial sales, and at the time of trial Incept had obtained 55% of the market for comparable products. Palette’s only criticism of Incept’s commercial information was that Incept also gave free samples. The majority now holds that Incept’s commercial sales cannot be considered as a measure of commercial success because some product was provided free of charge.”

= = =

Independent claim 1 of the ’723 patent recites:

1. A method of delivering a therapeutic dose of radiation to a patient comprising

introducing a biocompatible, biodegradable filler between an organ and a nearby tissue to increase a distance between the organ and the tissue, and

treating the tissue with the therapeutic dose of radiation so that the presence of the filler causes the organ to receive less of the dose of radiation compared to the amount of the dose of radiation the organ would receive in the absence of the filler,

wherein the filler is introduced as an injectable material and is a gel in the patient, and

wherein the filler is removable by biodegradation in the patient.

by Dennis Crouch

On August 15, 2023, the Judicial Conference Advisory Committee on Civil Rules published proposed amendments to Rules 16 and 26 of the Federal Rules of Civil Procedure. One of the goals of these amendments is to encourage parties to address issues relating to claims of privilege and work product protection early in litigation. This could be particularly impactful for patent cases, which frequently involve extensive disputes over these very issues.  The proposal would also retitle Rule 16(b) to include both scheduling and case management (the current version just focuses on scheduling).

Rule 26(b)(5)(A) focuses on the the procedure for “claiming privilege” as an reason for refusing to comply with an otherwise valid discovery request or disclosure requirement.  A party generally has to:

(i) expressly make a claim of privilege; and

(ii) create a privilege log that describes the nature of the thing withheld.

The privilege log will be disclosed to the other side and it is something of an art to describe the items without putting the other side on the trail of the protected information. Note – I use privilege here as an overarching term. The rule applies to items/information protected by both privilege and work product rules.

The proposed amendment to Rule 26 requires parties to discuss and include in their discovery plan the method they will use to comply with Rule 26(b)(5)(A).  This will likely include some information about the contents of the privilege log; manner and timing of the exchange; etc.  Similarly, the change to Rule 16 make discussion of this plan an optional aspect of the Judge’s 16(b) scheduling order.

Patent cases often involve the assertion of attorney-client privilege and work product protection over large volumes of technical, financial, and legal documents. At times, litigation between competitors centers on highly confidential corporate information that parties often seek to protect as privileged.  Producing privilege logs describing all of these documents can be extremely burdensome and costly.  The amendment encourages parties to agree upfront on efficient ways to approach this task, such as through categorical designations or date ranges rather than document-by-document listings.

The proposed amendment to Rule 16 allows the court to include provisions about privilege issues in its scheduling and case management orders. With an early understanding of the volume and type of potentially privileged materials involved, the judge can build in procedures for timely resolution of any disputes. For example, the order could provide for rolling productions of privilege logs on a regular schedule.

Getting ahead of privilege disputes will be especially useful in patent cases, where objections often arise late in discovery — and key documents are often hidden behind that privilege wall. Last-minute disagreements can derail case schedules. An orderly process set forth in the case management order will allow privilege issues to be dealt with efficiently as they arise, without disrupting the rest of the litigation.  To be clear though, the new rule is quite incremental and is subject to substantial abuse by parties who seek to hide documents using weak privilege arguments.

While application will depend on the specifics of each case, these amendments represent a step in the right direction. Patent litigators should be prepared to have detailed discussions about privilege during the Rule 26(f) conference and seek early guidance from the court.

The Rule 16/26 proposals begin on page 120 of the following PDF document released by the Judicial Center: https://www.uscourts.gov/sites/default/files/2023_preliminary_draft_final_0.pdf.

by Dennis Crouch

One-E-Way, Inc. v. Apple Inc., 22-2020 (Fed. Cir. Aug. 14, 2023) (nonprecedential) (Opinion by Chief Judge Moore, joined by Judges Lourie and Stoll).

The district court sided with Apple on summary judgment, finding no infringement. On appeal, the Federal Circuit has affirmed, holding that Apple’s accused Bluetooth products do not infringe One-E-Way’s patents.  Although the parties had agreed to the construction of the “unique user code” term, they disagreed over the construction-of-the-construction.  On appeal, the court treated this meta-construction effectively as a form of claim construction — looking for the ordinary meaning rather than a contract-like interpretation that would have looked more toward discerning the intent of the parties.

One-E-Way sued Apple for infringing the claims of two patents related to a wireless digital audio system that allows private listening without interference. The system uses a transmitter connected to an audio source and a receiver connected to headphones. The transmitter contains a code generator that generates a “unique user code” associated with a specific user to allow pairing between the transmitter and receiver.

During the infringement litigation, the parties agreed to construe “unique user code” as a “fixed code (bit sequence) specifically associated with one user of a device(s).” Although Apple’s Bluetooth products do transmit a unique code to establish the connection, the code is not unique to the user, but rather it is unique to the Bluetooth device.  The district court agreed with Apple’s assessment and granted summary judgment of non-infringement.

On appeal, One-E-Way argued that the “unique user code” limitation is still met by Apple’s accused Bluetooth products. Specifically, One-E-Way contended that even though the Bluetooth address codes are associated with devices, the codes are still associated with individual users through operation of the device. In other words, One-E-Way argued that Bluetooth pairing to a particular device is equivalent to pairing with a specific user.  This argument makes the assumption that each device is limited to just “one user.” Although that assumption is not strictly true, I expect that it holds true in 99% of cases.  For a while, I shared Bluetooth headphones with one of my daughters–it did not work well at all.

The Federal Circuit rejected this argument, finding that it was inconsistent the claim construction which clearly states the code is associated with “one user.” rather than the device itself.  Even if the Bluetooth address code is associated with a user through use of the device, the code remains fundamentally associated with the device. The Federal Circuit found no evidence that the code itself becomes directly linked to the user, rather than the device, through pairing and use.

The arguments in this case are somewhat meta. The parties are not arguing about claim construction per se, but rather construction of the construction.  In the appeal, the Federal Circuit considered the “plain and ordinary meaning of the agreed-upon construction” and concluded that it required required a more direct link to a user.   As it would with ordinary claim construction, the court looked to the specification for support.  In particular, the court noted that the patent specifications “distinguish between users and devices when describing the purpose of the invention” and recognized the problem of conflict that I had with sharing Bluetooth accessories. “The patents’ consistent reference to ‘user’ and ‘device’ as distinct entities and association of the unique user code with ‘user’ supports the district court’s conclusion that ‘one user of a device’ does not mean the device itself.” Slip Op.

Non-infringement affirmed.

= = =

The patents at issue are:

– U.S. Patent No. 10,129,627
– U.S. Patent No. 10,468,047

The ‘627 and ‘047 patents share the same specification. The court treated Claim 1 of the ‘627 patent as representative.

by Dennis Crouch

The Federal Circuit’s new decision in Rembrandt Diagnostics, LP v. Alere, Inc., 2021-1796 (Fed. Cir. Aug 11, 2023) complements the court’s recent decision in Axonics, Inc. v. Medtronic, Inc., 2022-1532 (Fed. Cir. Aug. 7, 2023). Ordinarily, an IPR petitioner must stick to the arguments and reasoning that it sets forth in the original petition.  These two cases take a contrary position and permit the petitioner to shift as late as the  final reply brief. The court permits these changes only if responsive to new arguments by the patentee and sufficiently linked to previously raised arguments.

This post focuses on Rembrandt.  A prior post looked at Axonics.

Rembrandt was previously before the Federal Circuit on the full-institution issue that the Supreme Court addressed in SAS Institute.  The PTAB had originally instituted Alere’s IPR petition on some but not all grounds presented.  In its 2019 decision, the Federal Circuit affirmed the PTAB’s claim construction but remanded for the PTAB to consider non-instituted grounds.   On remand, the PTAB instituted on all grounds and eventually concluded that additional claims were also unpatentable as obvious. On appeal this time, the Federal Circuit has affirmed — finding that the PTAB had properly found the claims obvious.

Rembrandt owns U.S. Patent No. 6,548,019 related to assay test strip devices for testing biological fluids.  As the figure shows, the setup is quite simple and allows for multiple strips to be tested at once.

One of the key issues raised on appeal was the presentation of new theories mid-stream by the petitioner Alere.  In particular, Rembrandt pointed to Alere’s reply brief as offering new theories.

Rembrandt argued Alere raised new theories about cost/time savings as a motivation to modify the MacKay reference to hold multiple test strips. However, the Federal Circuit found this was responsive to Rembrandt’s argument that there was no motivation to modify MacKay. Further, the cost/time savings was viewed as properly expanding on Alere’s previous “efficiency” argument.

Alere’s reply argument discussing cost and time savings has a nexus to Rembrandt’s prior argument and is responsive. It refutes Rembrandt’s assertions that there is no motivation to add multiple test strips or an expectation of success. And by discussing time and cost savings as a form of efficiency, it also properly expands on and is a fair extension of its previously raised efficiency argument.

Slip Op.

The Federal Circuit found an alternative reason to affirm — holding that forfeited its argument.  Before the PTAB, Rembrandt had generally objected to new theories presented by Alere.  However, the Federal Circuit concluded that generic objection was insufficient to timely assert its right. The Federal Circuit’s position was bolstered by the fact that Rembrandt had made a very specific objection regarding another new-theory issue that is not on appeal. “We hold that Rembrandt’s generic objection is insufficient to constitute a proper objection—especially because Rembrandt expressly objected to other allegedly new theories without doing so here.”

In addition to these procedural issue, the court also concluded that the Board’s conclusions were supported by substantial evidence. A key here is that Rembrandt did not provide expert testimony to rebut Alere’s expert. The prior art and expert testimony provide substantial evidence to support the PTAB’s findings on the teachings of the prior art and motivation to combine.

by Dennis Crouch

The Federal Circuit’s recent Axonics decision reflects an ongoing tension between IPR petitioners and patent owners concerning litigation strategies and procedural fairness. A prevalent patentee strategy aims to force the petitioner to lock in specific arguments, only to provide a game-changing response later on.

In Axonics, the patentee offered a new claim construction proposal in its post-institution response. On appeal, the Federal Circuit determined that it was only just, and mandated by the APA, for the petitioner to present new responsive arguments and evidence in its reply briefing. Additionally, the court suggested that the patentee should then have the opportunity to submit further evidence in a sur-reply. The PTAB had adopted the patentee’s claim construction proposal and refused to consider Axonics reply arguments and evidence — finding them to represent improper new arguments.  The Federal Circuit vacated that decision and sent the case back down for reconsideration.

Sandbagging Risk and the Need for Balance

In his opinion for the court, Judge Dyk quotes from the oral argument transcript after getting an admission from Medtronic’s attorney (Naveen Modi from Paul Hastings) that the PTAB approach risks sandbagging by the patentee:

The Court: “But isn’t there a risk here of sandbagging, that you realize there’s a good claim construction argument, [and] you leave it out of your preliminary response. If you argued it in your preliminary response, then maybe institution would be denied and there would
be no estoppel. But if you hold back on the argument and wait to make it until the response, then you get the estoppel. Isn’t there a risk of that?”

Medtronic’s counsel: “Certainly, your honor, there is a risk of that . . . .”

Oral Arg. at 14:24–51.  Modi went on to explain that the risk could also affect the petitioner. The new rule permits the petitioner to provide an unreasonable initial claim construction, then present new evidence later if challenged. Here, the court explicitly concluded that petitioners are not bound to preemptively address all potential reasonable claim interpretations.

Important Caveats and Ongoing Questions

The case has some important caveats regarding what argument/evidence can be provided in reply.  The court made clear that a petitioner cannot raise entirely new prior art references in a reply to a patent owner’s response: “a petitioner may not in reply rely on new prior art to teach a claim limitation.”  And, the court refused to decide an intermediary question of whether the petitioner can rely upon “new embodiments” from the already presented prior art in order to counter a new claim construction proposal. “We leave for another day the question of whether, when presented with a new claim construction, a petitioner can rely in its reply on new embodiments from the prior art references that were relied on in the petition.”  That particular situation was not at issue because “Axonics, in the reply, relied on the same embodiments as it relied on in the petition.”

In essence, while a petitioner cannot introduce entirely new prior art references in a reply, it remains an open question whether new portions or embodiments from the same preexisting references can be cited to address a new claim construction proposed post-institution.

Striking a Middle Course

In this frame, the decision shows the Federal Circuit steering a middle course – allowing petitioners to respond to changed claim constructions with arguments tied to the same prior art, while prohibiting entirely new prior art in replies. Ongoing cases will likely continue to shape the precise boundaries between fair response and improper new arguments in this contentious field.

Citation: Axonics, Inc. v. Medtronic, Inc., 2022-1532 (Fed. Cir. Aug. 7, 2023) (opinion by Judge Dyk, joined by Judges Lourie and Taranto).

In July 2023, the same panel released a separate decision involving the same parties and also siding with the petitioner Axonics in holding that Board erred in its obviousness analysis by improperly framing the motivation-to-combine inquiry. [LINK]

The result: Although the Board sided with the patentee on the four challenged patents, the Federal Circuit vacated those holdings and given the petitioner another chance to prove its case. and See U.S. Patent Nos. 8,036,756, 8,457,758, 8,626,314, and 8,738,148.  As with most Medtronic patents, the inventions are super interesting. One set relates to implanting a neurostimulation lead and the second set relates to transcutaneous charging of implanted medical devices.

by Dennis Crouch

The Federal Circuit Special Committee has released a 100+ page report that recommends Judge Pauline Newman be suspended for her refusal to comply with the committee’s order that would permit an independent doctor conduct a mental or physical examination.   The proposed suspension for “one year or until she complies.”  This report will be delivered to the Judicial Council that will make its own decision.  I expect that the Judicial Council will agree with the sanction.

The committee consisting of Chief Judge Moore, former Chief Judge Prost, and Judge Taranto concluded that it had authority and a reasonable basis to order medical examinations and records from Judge Newman.  And, her refusal to cooperate constitutes misconduct with no good cause shown. Her arguments attempting to justify her refusal were each addressed and rejected by the committee.

Most pointedly, Judge Newman had provided her own medical report purporting to show her competence. The committee rejected that report as inadequate — giving it “no weight”:

• Source of Expert: The neurologist was chosen and engaged by Judge Newman herself, rather than being an independent expert selected by the Committee. This raised concerns about impartiality.
• Limited Scope: The report indicates only a limited examination was performed, not the comprehensive medical and mental health evaluations ordered by the Committee.
• No Opportunity to Question: The Committee and its experts had no ability to question the doctor, assess credibility, or probe his evaluation methods.
• Incomplete Conclusion: The report concludes there is no disability, but does not seem to thoroughly evaluate Judge Newman’s mental fitness to fulfill her judicial duties.
• Contrary Evidence: The report appears to ignore or downplay the contrary evidence of cognitive issues cited by the Committee.

In essence, the Committee found the report lacked credibility and thoroughness. Judge Newman had raised additional issues:

• Due Process and Recusal: Judge Newman argued the proceedings violate due process and required judicial recusal. The committee found they follow appropriate procedures and do not violate any of Judge Newman’s rights.
• Bias Arguments: Judge Newman alleged bias by the Judicial Council and Committee. The committee found no evidence of bias in the Council’s actions to suspend case assignments or the Committee’s prior orders.
• Staffing/Resources Arguments: Judge Newman claimed she was deprived of necessary staff and equipment. The committee found no merit to these arguments.
• Transfer Request Arguments: Judge Newman requested the matter be transferred to another circuit. The committee found no basis for such transfer.
• Cooperation Arguments: Judge Newman asserted she has cooperated and the orders were defective. The committee found she clearly refused to undergo medical exams and that the orders were proper.
• No Reasonable Basis Arguments: Judge Newman argued the committee lacked reasonable basis for orders. The committee pointed to staff concerns, case delays, and expert recommendation as providing reasonable basis.

July 31, 2023 Report and Recommendation

Newman’s separate lawsuit in D.C.Circuit seeking a declaratory judgment has not really moved.  The Special Committee indicated the view that their process was the proper venue rather than district court.

* The image above comes from the Montreal Cognitive Assessment (MOCA) that was given to Judge Newman by her neurologist. MOCA-Test-English. It was only partially completed because she had a broken wrist at the time and so was not able to trace the dots, draw the cube, or draw the clock.

by Dennis Crouch

Moderna filed a patent infringement lawsuit against Pfizer and BioNTech in August 2022, alleging that the defendants COVID-19 vaccine infringes three patents related to Moderna’s mRNA vaccine technology.  United States Patent Nos. 10,898,574, 10,702,600, and 10,933,127. The lawsuit centers around two key components of Moderna’s mRNA platform that it claims Pfizer copied – the use of modified nucleosides like 1-methylpseudouridine and the encoding of a full-length coronavirus spike protein. Moderna asserts that it pioneered these innovations years before the COVID-19 pandemic and patented them between 2011-2016. The complaint alleges Pfizer and BioNTech initially tested different vaccine designs but ultimately chose to copy Moderna’s approach, despite being aware of Moderna’s patents. In the lawsuit, Moderna is seeking monetary damages for patent infringement but not injunctive relief taht would remove the Pfizer vaccine from the market. Although Moderna pledged not to enforce its COVID-19 patents during the pandemic, it signaled in March 2022 that expected companies to respect its intellectual property rights going forward.

In its response, Pfizer denied Moderna’s allegations of patent infringement and explained that it independently developed its COVID-19 vaccine without copying Moderna’s technology. Pfizer argues that Moderna’s patents are invalid because of the way they reach beyond Moderna’s actual contributions to mRNA technology and improperly claim fundamental discoveries made by other scientists.  In this vein, Pfizer raises several affirmative defenses, including invalidity and non-infringement of the asserted patents. Pfizer also asserts defenses based on implied license, waiver, and acquiescence stemming from Moderna’s public pledge not to enforce its COVID-19 patents during the pandemic.  As is usual, the answer also includes counterclaims that mimic the affirmative defenses — seeking declarations that the patent claims are invalid, not infringed, and unenforceable against Pfizer.  Here, these particular pleadings are rather limited and, for the most part, generally assert “35 U.S.C. 101, 102, 103, and/or 112.”

Docs:

• Moderna v Pfizer Complaint
• Moderna v Pfizer Answer
• Moderna v Pfizer DCT Claim Construction

The case is slowly moving forward in before Judge Richard Stearns with a trial rougly set for Fall 2024. Most recently, Judge Stearns issued a claim construction order following a Markman hearing.  As is common, the patentee did not ask for any construction, the defendants asked the court to define several terms.  Some of the proposals ask for broad definitions of certain terms (that would help Pfizer prove invalidity); while others sought narrow definitions of other terms (that would help Pfizer avoid infringement).  I tried to note the impact of the various constructions below. As you can see, each party won and lost arguments, but in the whole this looks like a good decision for Moderna.

• The court adopted a broad definition of “unmodified mRNA” suggested by Pfizer that includes a statement that “Unmodified may, but does not always, refer to the wild type or native form of a biomolecule.”  (This will help Pfizer prove invalidity)
• For the term “betacoronavirus,” the court rejected Pfizer’s argument that it is limited to betacoronaviruses in existence at the time of filing. The court found the intrinsic evidence indicates the term encompasses betacoronaviruses discovered after the filing date.  (This will help Moderna prove infringement)
• The court construed “S protein” as simply “spike protein, a structural protein forming a spike.” It declined to include functional limitations proposed by Pfizer.  (This will help Moderna prove infringement)
• The court construed “open reading frame” to apply to both DNA and mRNA. Pfizer had suggested limiting the term to just DNA contexts. (This helps Moderna prove infringement).
• The court construed the term “mRNA” to mean “messenger RNA, i.e., a ribonucleic acid (RNA) that encodes a polypeptide and can be translated to produce the encoded polypeptide.” This roughly aligns with Moderna’s proposed construction.   Pfizer had asked that for a definition that included mRNA as a “template for encoding” a polypeptide.  (It is not clear to me the impact of this ruling, however it likely favors Pfizer’s invalidity arguments focusing on whether certain prior art references sufficiently disclose mRNA).

For those of you new to claim construction, the district court is charged with defining terms used in the patent claims when they are a bit too unclear, or when the parties are disputing over their meaning.  The basic approach is that the court should provide the meaning that would a person of ordinary skill in the art would give to the terms at the time of the invention, and after reviewing the claims, the specification, and the prosecution history. See Phillips v. AWH Corp., 415 F.3d 1303 (Fed. Cir. 2005) (en banc). Extrinsic evidence such as dictionary definitions and expert opinion can play a role, but is usually secondary to the intrinsic evidence.  This ruling on claim construction is really setting of the stage, with the real action coming soon via summary judgment motions and eventually the trial.

In my analysis above, I noted some inference about the impact of the various claim construction rulings. Please note that the parties have not yet briefed these issues and so we’ll see what happens.  There may be an immediate summary judgment motion, but I don’t see that as likely until the close of discovery.  It is important to remember that claim construction is not a final determination on infringement or invalidity, but  simply provides interpretations of disputed terms that will be used in those later determinations. In addition, parties often ask a court to reconsider its claim construction.

Although Pfizer obviously does not want to be liable for patent infringement here, Pfizer also holds and is seeking numerous patents on its own related technology.  I expect that Pfizer’s invalidity arguments will be targeted toward specific concerns with the Moderna patents rather than attempting to substantially expand the law.  We might see a different strategy if a non-profit or consumer-focused group had filed. We saw the latter in the Supreme Court’s 2013 Myriad decision.

= = =

Claim 1 of the ‘600 Patent is directed to the mRNA composition designed to encode a betacoronavirus spike protein or subunit, formulated in a lipid nanoparticle.

1. A composition comprising: a messenger ribonucleic acid (mRNA) comprising an open reading frame encoding a betacoronavirus (BetaCoV) S protein or S protein subunit formulated in a lipid nanoparticle.

Note that the court broadly defined betacoronavirus to include later-invented forms.  This leaves the claim open to enablement and written description challenges.

The ‘574 patent claims methods of using modified messenger RNA (mmRNA) with reduced immune activation properties compared to unmodified mRNA and also a slightly different composition claim. Unlike the ‘600 patent, these do not focus on the spike protein but are more generic versions of using the mRNA technology.

1. A method of producing a polypeptide of interest in a cell in a subject in need thereof, comprising administering to the subject a pharmaceutical composition comprising a modified messenger RNA (mmRNA) such that the mmRNA is introduced into the cell, wherein the mmRNA comprises a translatable region encoding the polypeptide of interest and comprises the modified nucleoside 1-methyl-pseudouridine, and wherein the pharmaceutical composition comprises an effective amount of the mmRNA providing for increased polypeptide production and substantially reduced innate immune response in the cell, as compared to a composition comprising a corresponding unmodified mRNA.

2. A pharmaceutical composition comprising: a plurality of lipid nanoparticles comprising a cationic lipid, a sterol, and a PEG-lipid,

wherein the lipid nanoparticles comprise an mRNA encoding a polypeptide, where in the mRNA comprises one or more uridines, one or more cytidines, one or more adenosines, and one or more guanosines and wherein substantially all uridines are modified uridines.

Finally, the ‘127 patent claims methods of administering a composition comprising mRNA encoding a betacoronavirus spike protein formulated in a lipid nanoparticle.  These claims specify percent ranges for ionizable cationic lipid, neutral lipid, cholesterol, and PEG-modified lipid components in the lipid nanoparticle.

1. A method comprising administering to a subject a messenger ribonucleic acid (mRNA) comprising an open reading frame encoding a betacoronavirus (BetaCoV) S protein or S protein subunit formulated in a lipid nanoparticle in an effective amount to induce in the subject an immune response to the BetaCoV S protein or S protein subunit, wherein the lipid nanoparticle comprises 20-60 mol % ionizable cationic lipid, 5-25 mol % neutral lipid, 25-55 mol % cholesterol, and 0.5-15 mol % PEG-modified lipid.

by Dennis Crouch

As I was reading the Federal Circuit’s nonprecedential decision in Realtime Data v. Array Networks, I noted the court’s repeated statements about how the broad functional claims lacked support in the specification.   Although I knew this was an eligibility case, the language made me think enablement and written description.  Then I reached Judge Newman’s dissenting opinion that begins:

This is properly an enablement case. . . . § 101 was never intended to bar categories of invention in this way. This judicial exception to eligibility is an unnecessary and confusing creation of the courts. This case is an example, for the enablement requirement of § 112 is better suited to determining validity of these claims than is the distortion of § 101. I respectfully dissent, and would remand for determination of validity under § 112.

Slip Op. (Judge Newman in Dissent).

The seven patents here all relate to methods of selectively compressing files to improve speed/storage capacity.  The basic idea behind the inventions is to quickly figure out whether it would be faster to compress & store a data block rather than simply store the uncompressed block.  This generally appears to be a technical question whose solution should be patentable, but the district court all the claims ineligible as directed to one or more abstract ideas.  For  instance US10019458 was deemed directed to the abstract idea of “compressing data using two distinct lossless compression algorithms such that the time to compress and store the first data block is less than the time to store the uncompressed data block.”  On appeal, the Federal Circuit affirmed, finding the claims directed to abstract ideas and lacking any eligible inventive concept under Alice Step 2.

The majority opinion included substantial animus to functional claim limitations:

• Ineligible if simply “claiming only a result.”
• Ineligible if merely “stating a functional result.”
• Ineligible if fail to “identify how the functional result is achieved by limiting the claim scope to structures specified at some level of concreteness.”

The policy debate over functional claiming is longstanding as was evident in the Supreme Court’s recent decision in Amgen v. Sanofi. This case continues that debate in the context of 101.

The majority opinion was written by Judge Reyna and joined by Judge Taranto.  The majority opinion does not reference enablement or Judge Newman’s dissent.

Newman’s dissent is only 3 pages and begins with the argument that the claims should be evaluated under 35 USC 112 for enablement, not 101 for eligibility.  Newman argues the enablement requirement of 112 already addresses overbroad functional claims by requiring the specification teach how to make and use the invention. Using 101 eligibility to target functional claims is therefore unnecessary.  Of course eligibility offers a short-cut for judges and accused infringers.

Judge Newman also makes the larger claim that section 101 was never intended to be a “limitation on patentable subject matter” but rather merely an introduction to the statute.  Expanding upon this, she criticized the judicial exceptions to 101 eligibility created by the courts as an “unnecessary and confusing creation” and identified the the current 101 law a “distortion” of the statute that creates “uncertainty” and “stifles innovation.”