District Courts and Patent Cases, Part I

District Court, Patent, Rantanen,

By Jason Rantanen and Joshua Haugo*

During the oral argument in Octane Fitness, Justice Alito asked an interesting question about the frequency at which district court judges hear patent cases.  In response to a comment from Mr. Telscher that “I do think district court judges see a lot of patent litigation,” Justice Alito asked:

Is that really true? There’s nearly 700 district judges in the country.  If we had a statistic about the average number of patent cases that a district judge hears and receives on, let’s say, a 5 ­year period, what would it be?

Oral Argument Transcript at 14 (full transcript available here).

The question was posed in such a way as to imply that patent cases were a rare occurrence for most district court judges, and since neither counsel nor research into secondary sources provided a ready answer, we pulled data from Lex Machina to seek some insight into this issue.

Since we were interested in frequency, we looked at the number of patent cases filed between 2010 and 2013 on a per judge basis.  Our analysis shows that while patent cases are relatively common generally, their distribution is indeed highly skewed.  Nevertheless, most active judges heard at least one patent case during the time and the median number of patent cases received per judge was higher than one might expect (it’s eight).  The below chart illustrates the number of patents cases received by each judge who was active during the 4-year time period, sorted by the number of patent cases received (i.e.: the judges who heard no patent cases are to the left and the judges who heard the most patent cases are to the right, with Judge Gilstrap being judge #760).  The chart cuts off at 100 cases received, but the line continues up with seven judges receiving more than 600 patent cases each (Judges Robinson, Sleet, Andrews, Schneider, Stark, Davis, and Gilstrap).

Figure 1Methodology: To obtain the data set, we ran a search on Lex Machina for all patent cases filed between 2010 and 2013.  We then copied the judge data from Lex Machina’s dynamic filter, giving us the number of patent cases per judge.  We obtained data on all district court judges (not just those that appeared in the Lex Machina search results) from the Federal Judicial Center.  This allowed us to filter the results to include only judges that met our criteria of “active” judges for the time period (i.e.: judges that were confirmed to a district court prior to 12/31/2013 and had not retired or been terminated until after 1/1/2010).  There were a total of 760 active district court judges between 2010 and 2013, although some were active for only a short time during the window we analyzed.  We were also able to limit our data set to only judges who were active for the entire time period (i.e.: who were confirmed to a district court prior to 1/1/2010 and who did not retire or take senior status prior to 12/31/2013); a chart using this data is below.

Background Statistics: In total there were 19,325 patent cases filed before 865 judges over the four year period.  The judge with the most patent cases was Judge Gilstrap of the Eastern District of Texas, who received 1,636 patent cases. Although several judges received an extraordinary number of cases, many judges that heard patent cases had only 1 patent case filed before them during the 4 year window we examined.  

Of the 19,325 total cases heard in District Courts, 18,061 cases were heard by 760 active judges.  The remaining 1264 cases were heard by 165 judges that were primarily senior status, although there were several appellate judges sitting by designation.  For this analysis, we did not include any cases filed before judges that were not active during at least some portion of the period.

There is one important caveat to this data: it reflects patent cases received by the judges.  As a result, it does not directly report on the number of patent cases actually heard by district judges (since sometimes case settle soon after filing), nor does it directly report perhaps an even more important statistic relating to Justice Alito’s questioning, that of judges’ experience rendering substantive decisions in patent cases.  This data does, however, provide some insight into these issues because we know that both figures cannot be greater than the number of patent cases received and (unless there is a particular selection bias operating in certain districts that affects settlement rates), it seems likely that the distribution of both patent cases heard and decided would follow a similar pattern.

Analysis: The average number of cases received by active judges was 23.8 cases over the span of four years, or almost 6 cases per year, while the median was 8 cases over the four-year span.  While the highest districts in terms of filings did affect the mean, removing the three highest (the Eastern District of Texas, Central District of California, and District of Delaware) still resulted in an average of 13.3 cases per judge.  Of the active judges, there were 71 that did not receive any patent cases within the window.  Thus over 90% of active judges received at least 1 patent case filed during the window.

Additionally, we looked at the numbers for judges that were active throughout the 4 year time period, in order to get a sense of what an average “active” judge might see.  These judges were commissioned prior to 1/1/2010 and had not been terminated or retired prior to 12/31/2013 (thus excluding both judges who were on the bench for only a part of the period and judges who took senior status during a portion of the period).  For this set, there were a total of 11,096 patent cases received by 434 judges.  The average number of cases received was 25.6 with a median of 11 cases over the four-year period.  Removing the top three districts from this data set still produced an average of 20 cases and a median of 10 cases received over the four-year period.  In total, only 28 of the 434 active judges did not receive a patent case during this time; over 93% of judges received at least 1 patent case.  The graph below shows a frequency chart of only judges that were active during all 4 years (the bar on the far right reflects the fifteen judges who received over 100 patent cases during the four-year period).

Figure 2 While the numbers suggest that patent cases are not unicorns, even outside of the top three districts, there also may be some merit to Justice Alito’s concern that at least a substantial number of District Court judges do not hear more than an occasional patent case, and thus may find it difficult to determine which cases are “exceptional” based on their past experience with other patent cases.  Of course the ultimate issue may not be one of determining whether a patent case is exceptional, but in simply determining whether a complex litigation suit is exceptional.  And as to that, as Mr. Telscher observed in response to Justice Alito’s questioning about numbers of patent suits received by district court judges, “I don’t know what that number is, Your Honor. But I know that district court judges carry a widely varying docket of different areas of law and are called upon to learn the law and assess the reasonableness of those positions.”

*Joshua Haugo is a second-year law student at the University of Iowa College of Law.

Edit: Michael Risch pointed out that there may be an effect depending on how Lex Machina counts transferred cases, which he estimates at 15-20% of cases.  I’m looking into the way that Lex Machina counts these types of cases: its database certainly includes both the transferor and transferee dockets, but it does not appear to count the transferor judge as being the “judge” of the case.  Instead, it appears to only count the transferee judge.  I’ll update the post once I have a better sense of this effect.

Edit2: Based on further investigations (and subject to confirmation from the folks at Lex Machina), Lex Machina counts both the transferring court and the transferee court; in other words, its not deduplicating.  The effect of this is to artificially inflate, perhaps by as much as 15-20%, the case counts below.  This causes me to echo the caution I noted originally: just because a judge “received” a case does not mean that he or she “heard” it, let alone on the substantive merits.

Edit3: Lex Machina confirmed that “each separately assigned civil action number is a case except, if it is an intradistrict transfer, we detag it so it does not count as a patent case.  In the event of a inter-district transfer, we will have one case with the outcome “procedural: interdistrict transfer” and the other case with whatever its outcome was.”  So what I observed above holds.

 

Federal Circuit: Jury Must Award Damages for Infringement

Patent, , ,

By Dennis Crouch

Apple v. Motorola (Fed. Cir. 2014)

Sitting by designation in the smart-device battle between Apple and Google’s proxy Motorola, famed 7th Circuit jurist Richard Posner offered the bold summary judgment conclusion that neither party had offered adequate proof of damages or ongoing harm to support injunctive relief. Here, each party had asserted infringement of three patents. However, without any remedy, the case became moot and Judge Posner dismissed the case with prejudice. The foundation for this decision was built when Judge Posner considered the lack of credibility of both sets of damages expert reports and excluded almost all of that testimony under Daubert v. Merrell Dow Pharm., Inc., 509 U.S. 579 (1993).

On appeal, the Federal Circuit has – as expected – has reversed. The majority decision has several sections, but portions regarding damages are of most interest. First, the court provides a detailed analysis of damages expert analysis and finds a number of faults with Judge Posner’s exclusionary rules. However, the court goes on to hold that, even if the damages expert testimony were properly excluded, the proper calculation for damages on summary judgment is not zero.

Once a court has found that a patent is infringed and enforceable then it has a duty to award damages “in no event less than a reasonable royalty.” Here, the Federal Circuit appears to place the burden of identifying that minimum royalty on the fact finder:

Because no less than a reasonable royalty is required, the fact finder must determine what royalty is supported by the record. . . . If a patentee’s evidence fails to support its specific royalty estimate, the fact finder is still required to determine what royalty is supported by the record. . . . Indeed, if the record evidence does not fully support either party’s royalty estimate, the fact finder must still determine what constitutes a reasonable royalty from the record evidence. . . . Certainly, if the patentee’s proof is weak, the court is free to award a low, perhaps nominal, royalty, as long as that royalty is supported by the record.

Thus, a fact finder may award no damages only when the record supports a zero royalty award. For example, in a case completely lacking any evidence on which to base a damages award, the record may well support a zero royalty award. Also, a record could demonstrate that, at the time of infringement, the defendant considered the patent valueless and the patentee would have accepted no payment for the defendant’s infringement. Of course, it seems unlikely that a willing licensor and willing licensee would agree to a zero royalty payment in a hypothetical negotiation, where both infringement and validity are assumed.

The court goes on to note that it has been unable to find any case in history where the record properly supported an infringement award of zero.

The majority was penned by Judge Reyna and joined by Chief Judge Rader. However, these two Judges disagreed on one particular point – whether Motorola’s FRAND commitment for its patent removes all possibility of injunctive relief for unlicensed infringement. Judge Reyna says yes, Judge Rader says no – and that Apple’s bad behavior as an unwilling licensee should open the door for injunctive relief.

The majority opinion also vacated Judge Posner’s SJ determination that Apple was not entitled to an injunction seemingly because of a change in claim construction that now potentially creates a causal nexus between infringement and a market harm. Writing in dissent from that portion of the opinion, Judge Prost disagreed.

Congratulations to the Winners of the Giles S. Rich Patent Moot Court Competition

Patent

Congratulations to our team from the Iowa College of Law, Joshua Galgano and Michelle Wallace, and their coaches, Prof. Christina Bohannan and Damon Andrews, for winning the national finals of the 41st Annual Giles S. Rich Patent Moot Court Competition.  Dr. Galgano is a 3L who holds a PhD in chemical and biochemical engineering; he will begin his career at Sterne Kessler Goldstein & Fox this fall.  Ms. Wallace is a 2L with a chemical engineering background; she will be working at Reinhart, Boerner, & Van Deuren this summer.  Congratulations to both!

Congratulations also to Suffolk Law School’s team of Christina Mott and Scott Chappell, coached by Even Brown, who finished in second place.  Other teams competing in the finals included Columbia, the University of Washington, the University of Utah, the University of Houston, and Michigan State.

Earlier this afternoon, the two teams argued before Judges Lourie, Tarranto, and Chen.  This year’s problem involved issues of subject matter eligibility of claims relating to DNA and of subject matter jurisdiction over a licensing dispute.  If you’re curious about the problem, it can be found here.

(Also, this morning the Federal Circuit issued its opinion in Apple v. Motorola, affirming-in-part and reversing-in-part Judge Posner.  While the three judges agreed on most issues, they disagreed on issues of injunctive relief (Judge Rader would have allowed Motorola’s request for injunctive relief to proceed and Judge Prost would not have vacated the district court’s summary denial of Apple’s request for injunctive relief) and means-plus-function claim interpretation.)  More on this opinion later.

Fifth Circuit Affirms Summary Judgment of No Malpractice Liability

Patent,

By Dennis Crouch

Sanders v. Flanders (5th Cir. 2014)

This case is an attorney malpractice lawsuit that Eric Sanders is pursuing against his Texas-based patent attorney Harold Flanders. Although the case is based on a Texas state-law claim, it enters Federal Court on grounds of diversity (Sanders is from Georgia). And, although the case involves a number of questions of patent law, those are not substantial enough to raise Federal Circuit appellate jurisdiction. See, Gunn v. Minton, 133 S.Ct. 1059 (2013) (state-law malpractice claims “rarely, if ever, arise under federal patent law.”); See also MDS (Canada) Inc. v. Rad Source Techs., Inc., 720 F.3d 833 (11th Cir. 2013). (Note, Harold Flanders is no longer on the rolls of patent attorneys).

Here, the invention in question is an “effervescent mouthwash tablet.” Over a period of nine years, Flanders prepared and filed “numerous” patent applications on behalf of Sanders. Flanders apparently did not notify Sanders of any of the office action rejections and instead allowed the applications to go abandoned. However, the district court granted summary judgment in favor of Flanders – holding that Sanders had failed to prove either causation or damages. The difficulty with patent prosecution malpractice actions is that attorney misconduct alone is generally insufficient. Rather, the allegedly injured party must also prove that the party’s outcome would have been better absent misconduct. Here, that would mean that a valuable patent would-have-issued.

On appeal, the Fifth Circuit affirmed – finding that Sanders had only presented “speculative” and “unsubstantiated” evidence of damages. (The court did not address causation because a lack of damages was sufficient to affirm).

To prevail on any of his five claims, Sanders had to demonstrate, inter alia, that Flanders’s conduct caused damages, a point he does not contest. It is well settled that damages cannot be established merely through speculation or conjecture. Granting a judgment as a matter of law with respect to damages, the district court concluded that “Sanders’s damages testimony was too speculative as to lost investors and lost profits, and unsubstantiated by competent proof as to out-of-pocket expenses and legal fees, to be recoverable.” Because we agree and affirm the district court’s grant of Flanders’s Rule 50(a) motion on this basis, we need not address whether Sanders presented sufficient evidence with respect to the element of causation—an alternative ground on which the district court granted relief.

Sanders did refile his applications in 2011 – this time with a different patent attorney. See APN 13/316,600. However, that case has also been abandoned for failure to respond to an office action rejection.

Preempting Patent Reform

Attorney Fees, Fee Shifting, Patent

By Dennis Crouch

Despite his support for gun control laws, President Obama has been a major driver of American gun sales. The theory is that folks have been buying guns them now before the President limits their sale. A similar rush appears to have been going on in patent litigation. In particular, an informally proposed amendment to the Senate patent reform bill distributed last weekend includes a clause for retroactive application – naming April 24 as the effective date of the attorney fee shifting provisions, regardless of when the bill becomes law.

(c) RETROACTIVITY – the amendments made by this subsection shall take effect on April 24, 2014, and shall also apply to any action for which a complaint is filed on or after that effective date.

The result: an unusually large number of infringement lawsuits were filed on April 23, 2014 to ensure that the new law will not be applicable. In particular, about 180 new infringement lawsuits were filed on the 23rd, more than five times the daily average. I wonder how those defendants like patent reform?

Transfer on Mandamus

Patent, ,

By Dennis Crouch

Since its 2008 TS Tech decision, the Federal Circuit has repeatedly received Mandamus requests to force transfer of patent infringement lawsuits – usually out of the Eastern District of Texas and – into other, more convenient, districts. The statute, 28 U.S.C. § 1404(a), provides district court with discretion to transfer a lawsuit to another district “for the convenience of parties and witnesses [and] in the interest of justice.” Although the transfer decision is within the district court’s discretion, TS Tech and its progeny have indicated that a court abuses that discretion by unreasonably refusing to transfer a case. Because transfer of venue is not a question of patent law, the Federal Circuit purports to follow regional circuit law – primarily that of the 5th Circuit. See In re Microsoft Corp., 630 F.3d 1361 (Fed. Cir. 2011); In re Nintendo, Co. Ltd., 589 F.3d 1194 (Fed. Cir. 2009); In re Genentech Inc., 566 F.3d 1338 (Fed. Cir. 2009); In re TS Tech USA Corp., 551 F.3d 1315 (Fed. Cir. 2008); accord In re Volkswagen of Am., Inc., 545 F.3d 304 (5th Cir. 2008) (en banc). A key element for successful motions to transfer is that the movant needs to show both that the current venue is poor that the proposed venue is much better.

The Federal Circuit just released three additional mandamus decisions, denying two and granting one. In re Altair Engineering (Fed. Cir. 2014) (mandamus motion to transfer denied); In re Groupon (Fed. Cir. 2014) (mandamus motion to transfer denied); In re WMS Gaming (Fed. Cir. 2014) (mandamus motion to transfer granted). In the past, venue transfer motions have seemed quite formalistic without really reaching the issues of justice and convenience. These opinions suggest to me that the court has improved its jurisprudence on this point:

In Altair, the petitioner asked the court to move the case against Uniloc from Texas to Michigan. In denying the petition, the Federal Circuit found it relevant that the Texas court had seen the same patent in two other cases – creating significant judicial economies. In addition, some of the relevant witnesses were also located near the Texas court. Thus, although more relevant evidence was sited in Michigan, the district court did not abuse its discretion in denying the transfer motion.

In Groupon, the court also refused to order transfer out of the Eastern District of Texas. In this case, the patentee – Blue Calypso is located in Texas and that was the site of the invention and the home of the key inventor along with all of its documents. The fact that Groupon is based in Illinois does not mean that the case should be transferred to Illinois.

Finally, in WMS Gaming, the Federal Circuit ordered the case moved from the Southern District of Mississippi to Northern District of Illinois. In the case, the patentee (MTG Gaming) sued WMS and another gambling-machine manufacturer as well as several casinos that operate in Mississippi, including MGM Resorts and Caesar’s Entertainment. The district court stayed the casino lawsuits and severed the suit involving the other manufacturer. With WMS standing alone, the Illinois venue appeared much better since it was the base of operations of the accused infringer and the patentee has no connections on its own to the Southern District of Mississippi. In addition, the Federal Circuit found that no relevant evidence or witnesses were located in Mississippi.

Four Opinions Defining “a Patient” and Is a Natural Phenomena an Act of God?

Patent, ,

By Dennis Crouch

Braintree Labs v Novel Labs (Fed. Cir. 2014)

I see this case as highlighting the most critical and problematic problem with our patent system – that patent claim scope is intentionally ambiguous and malleable. Consistent with the subject matter of the invention, this case may potentially serve as a trigger for cleaning-out the patent system.

Braintree’s U.S. Patent No. 6,946,149 (asserted claim 15) covers a “composition for inducing purgation of the colon of a patient” and is used to help prepare patients for colonoscopies. A major problem with colon cleansing is the risk of having a dramatic electrolyte shift in the body as a whole – leading to potential emergency health problems. Of course, colonoscopies have become very big business and this patent is potentially quite valuable.

Here, Braintree’s patent includes the clearly functional claim limitation of “wherein the composition does not produce any clinically significant electrolyte shifts.” The appeal is about the meaning of that the terms purgation, patient, and “clinically significant electrolyte shifts.” The panel here included Judges Dyk, Prost, and Moore. Each Judge had their own version of how the term should be construed and how that relates to infringement.

What is “a patient”: The preamble of asserted claim 15 indicates that that the invention covers a composition for inducting purgation of the colon of a patient. All parties agreed that the preamble term “a patient” should be seen as limiting since it is implicitly referenced by the later reference to electrolyte shifts. Here, both the district court and Judge Moore saw the “a patient” term as indicating “one or more patients” whereas Judges Dyk and Prost saw the term as meaning “a patient population.” This ends up being important since the plaintiffs provided evidence of a patient who had received the accused product and fit within the electrolyte shift limitation. However, the “general class of patients” interpretation would require evidence that the result is generally expected in all patients.

Judge Prost: Indeed, [the “one or more patients”] interpretation would allow a composition to meet the claims even if 99 patients out of 100 experienced clinically significant electrolyte shifts, as long as one patient did not. . . . [The] application of the claim terms “a patient” leads to the absurd result of infringement even if a composition causes clinically significant electrolyte shifts in a large percentage of patients

Judge Moore: The majority believes this to be an “absurd result” because it would allow “a composition to meet the claims even if 99 patients out of 100 experienced clinically significant electrolyte shifts, as long as one patient did not.” I understand the majority’s concern. But this is a question of damages, not infringement. . . . Infringement, whether on a large or small scale, is still infringement.

Judge Dyk: (Agreeing with Judge Prost) The sole evidence in the summary judgment record concerning the percentage of individuals experiencing such electrolyte shifts is data from two clinical studies … and those data are sufficient to show that the claim limitation was not met [since] a majority of patients experienced clinically significant electrolyte shifts.

In this case, the district court had awarded summary judgment of infringement to the patentee. On remand, the district court will need to revisit whether the patentee has proof that the patient population as a whole would react to the treatment as claimed. We’ll likely see this case again on revise-and-resubmit after the district court has redone its work. Of course, there is a chance that the Supreme Court may take this case – potentially seeing it as a subject matter sequel to Sakraida (“that cow shit case”).

= = = = =

This is a bit of an off-the-wall thought, but I might question whether an infringement finding is appropriate even under Judge Moore’s interpretation. Here, we basically have a setup where one claim limitation (no-electrolyte-shift) occurs in some patients and not in others – the cause of the difference is unknown but is likely a somewhat random operation of the laws of nature. What we know is that a particular treatment protocol will usually result in an electrolyte shift, but sometimes does not have such a result. Of course, for infringement to occur, the accused infringer must practice each and every step of the invention as claimed – here that includes the “no-electrolyte-shift” limitation. Now, although patent law does not require that the accused have intented to infringe the patent, the acts that eventually resulted in infringement must have been intentional.

My question on infringement, is whether performance of that no-electrolyte-shift element is properly attributable to a deliberate act by the accused or instead should it be seen simply as an occurrence of a natural phenomena – an Act of God as the old Lords might have said. See Tennent v. Earl of Glasgow (1864).

Court Expands Doctrine of Obviousness Type Double Patenting

Obviousness, Patent, , ,

By Dennis Crouch

Gilead Sciences v. Natco Pharma (Fed. Cir. 2014)

Gilead’s two virus inhibition patents at issue in this case are quite similar to one another, although there is no priority claim creating an official family relationship between the patents. Patent Nos. 5,763,483 and 5,952,375. In a not-uncommon fashion, the application resulting in the ‘375 patent was filed first, but, because of a variety of prosecution delays, was the last to issue. The ‘375 patent is also set to be the first-to-expire. Note, after the ‘483 patent issued, Gilead filed a one-way terminal disclaimer for the ‘375 patent – limiting that patent’s term so that it cannot extend beyond the term of the ‘483 patent. Of course, that limitation is meaningless since the ‘375 patent naturally expires first anyway. The following timeline may help illustrate the relevant dates:


Double Patenting: This setup raises the prospect of obvious-type double-patenting. That doctrine is not based upon any statute, but has been applied by courts as a mechanism to prevent patentees from prolonging their patent term by obtaining a second-patent with claims that are not patentably distinguishable from the claims in the first patent. The general rule is that a terminal disclaimer cures the obviousness-type double patenting. However, here, one of the patents (the ‘483) patent does not have a terminal disclaimer.

Later Issued but Earlier Expiring Patent: The district court ruled in favor of Gilead – holding that, as a matter of doctrine, a later-issued but earlier-expiring patent cannot serve as a double-patenting reference against an earlier issued but later-expiring patent. That rule cited here by Judge Wigenton (D.N.J.) follows two Delaware district court cases stating the same proposition. Abbott Labs. v. Lupin Ltd., 2011 WL 1897322 (D. Del. May 19, 2011) and Brigham & Women’s Hosp. Inc. v. Teva Pharm. USA, Inc., 761 F. Supp. 2d 210 (D. Del. 2011). Those cases are in conflict with a PTAB decision on the same topic: Ex Parte Pfizer, Inc., 2010 WL 532133 (Bd. Pat. App. & Interf. Feb. 12, 2010).

On appeal, the Federal Circuit focused on the particular legal question: “Can a patent that issues after but expires before another patent qualify as a double patenting reference for that other patent?” The answer: Yes it can. With the result here being that the district court’s decision is in error. The majority’s reasoning makes sense – the primary purpose of the double-patenting doctrine is to prevent a patentee from unduly extending its patent term and here, Gilead is attempting to do so by an additional 22-months.

The majority opinion was filed by Judge Chen and joined by Judge Prost. Chief Judge Rader filed a dissenting opinion arguing that the court should have acted more cautiously in extending the judge-made rule. Judge Rader writes:

Under the AIA’s new “first-inventor-to-file” framework, prospective patentees are under tremendous pressure to file their applications early. I am concerned that today’s opinion will have unforeseen consequences in this new race to the Patent Office.

I would suggest that – most likely – the doctrine of obviousness-type double patenting would have never been created if the current regime had been in place way back when. Most notably, calculating patent term as 20-years from filing eliminates most potential game playing and the publication rules would typically result in an earlier filed patent being seen as prior art – even if jointly owned.

Extension and Adjustment: Although this issue has been addressed somewhat in other cases, this decision does not offer any insight as to how double-patenting applies to cases where the difference in patent term is due to a patent term adjustment or extension.

= = = = =

The currently proposed legislative patent reforms would codify the double patenting exception in a somewhat narrower fashion. This would potentially limit any further judicially motivated alterations in its scope.

Proving Obvious with Post-Filing Evidence?: Yes

Patent, , ,

Sanofi-Aventis v. Glenmark (Fed. Cir. 2014)

In a post on the Patent Ethics site, Professor Hricik highlights this case with the following headline: CAFC Affirms Adverse Inference Instruction Due to Spoliation.

Post Filing Recognition of Synergy: For patent prosecutors, an important headline from the case would also be: “Synergy” of patented combination that was only recognized after the application filing can still be used to prove non-obviousness. Here, that principle was applied by the appellate panel in affirming the jury’s decision that Glenmark had failed to prove Sanofi’s patent obvious.

Some background: Sanofi’s patent No. 5,721,244 covers the combination of both trandolapril (an ACE inhibitor) and a calcium channel blocker, combined “in amounts effective for treating hypertension.” A licensed drug covered by the patent is distributed by Abbott under the brand name Tarka. Mumbai-based manufacturer Glenmark filed an abbreviated new drug application (ANDA) with the FDA requesting permission to begin selling its generic version of the drug prior to patent expiry. In order for a generic manufacturer asking to receive permission to sell a drug that that the branded manufacturer has listed in the Orange Book as covering the product, the generic manufacturer must also submit a “Paragraph IV Certification” indicating their allegation that the patent is either invalid or will not be infringed by the generic activities. See 21 U.S.C. §355(j)(2)(A)(vii).

Under the Hatch-Waxman rules, an FDA filing with a Paragraph IV certification is a form of patent infringement and here Sanfi sued – alleging infringement. That lawsuit then triggered a 30-month stay in FDA approval of the generic product. However, once the stay concluded Glenmark launched its generic product (all while the district court case continued). Glenmark’s defense was invalidity, but the jury sided with the patentee that Glenmark’s proof was insufficient and the resulting damages were $16 million in lost profits and price erosion damages.

Patent Validity: The patented invention is a combination of two known hypertension medications. However, there was no evidence that the combination was known. The question thus, was whether the combination was obvious. The appeal of obviousness questions is tricky because obviousness itself is a question of law that must be supported by factual conclusions drawn from the evidence. A jury’s factual conclusions must be supported by “substantial evidence” (a fairly low standard), but any legal conclusions are reviewed de novo. “When the question of obviousness is tried to a jury, on appeal we ascertain whether the jury was correctly instructed on the law, whether there was substantial evidence in support of factual findings necessary to the verdict, and whether the verdict was correct on the supported facts.” Here, the jury was apparently not asked to report its particularly factual conclusions but instead only whether the claims were obvious. In these black-box scenarios, the jury verdict is difficult to overturn on appeal because the implicit factual findings are so difficult to pin-down and therefore challenge.

At the time of the invention (1986) it was apparently already known to combine ACE inhibitors with CC-blockers and Glenmark argued that the use of trandolapril was merely a substitution of one known ACE inhibitor for another. Sanofi argued that there were thousands of potential ACE inhibitors and none of the prior art suggested that the particularly claimed drug (trandolapril) was the best. In reviewing these arguments, the court sided with the patentee.

Post-Filing Recognition of Benefits: Some of the “synergistic benefits” of the drug combination were not recognized until after the patent application was already filed. In the appeal, the Federal Circuit held that those benefits were perfectly acceptable as evidence of non-obviousness. The court writes: “patentability may consider all of the characteristics possessed by the claimed invention, whenever those characteristics become manifest.”

How Many Plaintiffs to Screw in a Lightbulb? Another interesting aspect of the decision is whether the four plaintiff here had standing to sue. According to the case, Sanofi-Aventis Deutschland GmbH is the owner of the patent at issue and Aventis Pharma S.A. is the exclusive licensee of that patent. Abbott GmbH contracted with Aventis for the “irrevocable sole and exclusive right” to sell the drug product under the patent and Abbott Labs is the holder of the FDA-approved new drug application. Finally, ALI is the exclusive U.S. distributor for Abbott Labs.

Based upon this mess, Glenmark argued that only Abbott Labs held rights to sue on Hatch-Waxman claims (as holder of the FDA-filing) but that it did not have standing because it was neither owner nor exclusive licensee of the patent rights. On appeal, the Federal Circuit rejected this argument – agreeing with the district court that the relationships and agreements amongst the various plaintiffs resulted in Abbott Labs holding exclusive rights to the patent and thus having standing to sue. In addition, the court saw that it was important that “all entities in the license chain joined in the suit, such that there is no danger of multiple suits for infringement.”

Searching for a Lien on a Patent

Patent

Does someone have a checklist that they could share with me on the due diligence that you may go through in the process of purchasing a patent? In particular, I’m thinking about the title search to ensure that the seller is in fact the owner and that there are no liens on the patent – e.g., that the patent is not currently being used as a security interest. How do you go about doing those searches? – Dennis

Preliminary Injunction Can Issue Even Though Patentee Does not Practice the Invention

Patent, ,

By Dennis Crouch

Trebro Mfg. v. FireFly Equipment and Steven Aposhian (Fed. Cir. 2014)

Here, the Federal Circuit holds that the district court abused its discretion in denying Trebro’s motion for preliminary injunction to stop ongoing infringement of its U.S. Patent No. 8,336,638. The patent covers sod harvesters and FireFly’s ProSlab 150 is said to infringe. This is an interesting case in terms of “troll” identity. Trebro did not itself invent the patented equipment and does not actually practice the invention. However, Trebro does compete directly with FireFly in the sod harvester business. Although the “troll” status of the plaintiff is generally irrelevant to patentability questions, many believe it is directly relevant to questions of injunctive relief.

The patented invention appears to have stemmed from an off-shoot of the Canadian sod harvester company BrouwerTurf. Trebro purchased the patent in 2013 as payment for a past debt but allowed Brower to retain a full license. Trebro then sued FireFly for infringement.

The money quote from the Federal Circuit decision is as follows: “[A] party that does not practice the asserted patent may still receive an injunction when it sells a competing product.”

Decisions like this serve as a boon for operating companies whose patent portfolios are largely based upon acquisition – such as Google.


In denying the patentee’s preliminary injunction motion, the district court made three findings. First, that the accused product did not include a vertically moveable “horizontal conveyor” as required by the asserted patent; Second that the vertical moveability limitation was of questionable novelty. Finally, the district court found ongoing competition harms (lost customers and market share) did not create any irreparable harm. On appeal, the Federal Circuit disagreed with each of these conclusions because involving misreading the patent and misapplying the law. The decision here might be seen as a contrast to the Federal Circuit’s other recent preliminary injunction decision where the court found fault with the grant of a PI. See Crouch, Substantial Unresolved Issues Unravel Preliminary Injunction.

The patent statute does not expressly permit preliminary injunctions, but does generally provide courts with authority to “grant injunctions in accordance with the principles of equity.” 35 U.S.C. § 283. The U.S. Supreme Court has discussed preliminary relief in a number of contexts and the statutory language suggests that principles from other contexts should apply in the patent situation as well. See Ebay v. MercExchange, 547 U.S. 388 (2006) and its progeny. A key to preliminary injunctive relief is that the movant is asking the court to award a remedy before making a determination of the merits of the case. That reversal of common chronology is only done with reluctance. Thus, the ordinary rule for preliminary injunctive relief is judged by the difficult-to-prove four factor test that it is (1) likely to eventually succeed on the merits of the case; (2) is to suffer irreparable harm absent an injunction; (3) that the balance of equities favor the movant; and (4) that the public interest favors injunctive relief. The requirement of “a likelihood of success on the merits” has always been confusing to me. A 10% chance of winning is still “a likelihood.” That is not how the court intends the rule to be seen. Rather, the Federal Circuit (and other courts) interprets this term as meaning the movant will more-likely-than-not win the case. A defendant can escape preliminary injunctive relief by poking holes in the case – such as demonstrating a substantial question as to whether the patent is valid or infringed.

The preliminary injunction factors have two distinguishing features when compared to the eBay factors designed for permanent injunctive relief. First, preliminary injunctions require proof of a likelihood of success on the merits. That factor tends to be heavily considered and thus makes preliminary relief more difficult to obtain. The likelihood of success factor is not considered in the context of permanent injunctive relief because that issue is generally only decided after a merits decision finding for the patentee. The eBay factors also include an additional element not found in the preliminary relief construct. That factor—that remedies available at law are inadequate to compensate for the injury—has caused some amount of academic consternation because of its extensive (perhaps entire) overlap with the irreparable harm factor. For preliminary relief, its absence of little importance because preliminary relief was not typically available in the courts of law.

Guest Post by Prof. Sichelman: Stop Bashing Academics: Why Mark Lemley, Peter Menell, and Rob Merges are Highly Qualified to Teach and Write about Patent Law

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Guest Post by Prof. Ted Sichelman, University of San Diego, School of Law

Recently, Hal Wegner has been circulating and commenting upon the qualifications of patent law professors. For example, he lists whether patent law professors at the Top Ten IP programs as ranked by US News & World Report are licensed to practice at the USPTO, have an “understanding” of international/comparative patent law, or clerked at the Federal Circuit (see below). According to Wegner, these “credentials” are “particularly” and “uniquely” valuable (in some cases, “essential”) for professors to make “optimum” patent policy reform proposals, especially those concerning PTO practice and international harmonization.

(To provide some background, I provided Wegner a list of names of all professors in the U.S. who currently teach and write about patent law at US News ranked and unranked IP programs, with the understanding that he would circulate the list to his readers. After I sent Wegner my list, without my input, he annotated it (along with other names) with various credentials and provided commentary and alternative lists, such as the one reproduced below. Because I believe Wegner’s analysis is flawed—and given my initial participation—I feel personally obligated to respond.)

NaplesNotably absent on Wegner’s list above are any professors from Stanford, Berkeley, and George Washington (GW), the top ranked IP programs in the nation. (The same holds true for many other schools, both in and outside of the top 10. I focus on the top three schools to underscore the problems with Wegner’s approach.) Rather than effectively denigrate these programs, Wegner should have recognized the transformative role that these schools have played historically (for GW) and more recently (for all three schools) in elevating patent law to a prominent place in the academy and developing unparalleled educational opportunities for future patent professionals and scholars. (more…)

Curbing Trolls by Reforming the Patent Marking Statute

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Guest Post by François deVilliers, Chief IP Counsel, Plantronics, Inc.

35 U.S.C. 287(a) provides that constructive notice of a patent may be given by marking the patented article with the patent number, and that “In the event of failure so to mark, no damages shall be recovered by the patentee in any action for infringement, except on proof that the infringer was notified of the infringement and continued to infringe thereafter, in which event damages may be recovered only for infringement occurring after such notice.”

This section is badly structured – instead of affirmatively specifying the requirements for infringement damages to accrue, the drafters addressed this issue in the negative sense only after specifying first that an article may be marked. This of course begs the question, what if there is no article to mark?

There is no duty to mark or to give notice in lieu thereof “if there is no product to mark,” as held by the Supreme Court in Wine Railway Appliance Co. v. Enterprise Railway. Equipment Co. (1936)(interpreting the predecessor statute) and by the Federal Circuit in Texas Digital Systems., Inc. v. Telegenix, Inc. Damages accrue from the moment infringement of the issued patent commences, with a six year “statute of limitations” provided in 35 U.S.C. 286.

The logic is supposedly that “[t]wo kinds of notice are specified–one to the public by a visible mark, another by actual advice to the infringer. The second becomes necessary only when the first has not been given; and the first can only be given in connection with some fabricated article. Penalty for failure implies opportunity to perform.” (Wine Railway.)

This has led to the odd situation in which a company that is vigorously engaged in the rough and tumble of commerce with its patented product, benefiting consumers, creating jobs and increasing GDP, is in a less favorable position than an entity that does nothing. What was intended to be beneficial (notice is deemed to be given by marking) has advanced the interests of the patent troll over those of the operating company.

Trolls exploit this odd situation by waiting for industries or standards to become established, or for sales to accrue, before presenting their now-inflated licensing demands. Finding a previously ignored or forgotten asset, the clichéd “Rembrandt in the attic,” is similarly rewarded. “The patent might be expiring, but we’ve got ya going back six years, buddy!”

By the time this delayed claim is presented, the alleged infringer or standards-setting body has had no opportunity to mitigate the effect of the claim by adopting different technology or taking other steps. They’re stuck with the cost and disruption of trying to resolve a claim that might not have existed, or might have existed on a much smaller scale, had they received timely notification of the patent. Dubious claims are also more intimidating, merely because of the amount at issue. The alleged infringer is penalized by the delay, while the idle or covert or brand-new patent owner benefits.

Such exploitation also contravenes a fundamental goal of the marking statue, which is to protect against innocent infringement. Nike, Inc. v. Wal-Mart Stores, Inc. (Fed Cir 1998).

But, you may say, what of the inventor in the garage, who doesn’t have the needed capital or expertise to commercialize their patent? What if a company is exploiting the patented technology in a faraway city? Shouldn’t this inventor be entitled to fair compensation? Of course. But that is what the internet and its search engines are for. Times have changed – if someone is making money off a patented product, a patentee will be able to find it and send a notice letter. At a minimum, even if the patent is not directed to a findable product, it is easy enough to identify likely infringers or companies that might be interested in licensing the patent.

The onus should be on the patent owner to assert their rights – use it or lose it. A simple patent reform could affirmatively specify that damages only accrue after actual or constructive notice, and that constructive notice can be given by marking. If it is not possible to mark, then actual notice should be required. Patent numbers for method patents can be included on products produced by the method, on devices that practice the method, in documentation accompanying software that practices the method, or on websites or in apps that practice the method. If it is really impossible to avail yourself of the benefit of constructive notice by marking, then the onus is on you to police your rights.

It is amazing that nobody has addressed this issue in current patent reform efforts directed to curbing the patent troll problem. The marking statute should protect innocent infringers and it doesn’t. Marking should benefit those who practice the patent, but the current state of the law benefits those who don’t.

 

Off-the-Record Examination: Is Conventional Wisdom Wrong?

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By Dennis Crouch

Interview summaries. In a recent post, Professor Chao discussed the common practice of examiner interviews where the patent attorney discusses outstanding issues with the patent examiner. No transcript or recording of the discussion is kept, although there is a requirement that a summary of the interview and its results be written and placed within the file history. Professor Chao argues that the summaries are insufficient because all-too-often, a seemingly valid rejection simply vanishes following an examiner interview. For evidence, Chao also cites discussions at a recent Stanford Law School conference “where two prominent professors separately complained about how opaque the interview process was.”

Although Chao’s proposal has significant practicality problems, I also had the same sense of the problem — that the interview summaries create opacity in a process where transparency should rule. However, since Chao’s essay was posted, I have followed up with two “reality checks” that have raised my optimism on interviews.

First the rule — MPEP §713.04 walks through a number of elements that are required as part of an interview summary. These requirements include a fairly detailed list:

The complete and proper recordation of the substance of any interview should include at least the following applicable items:

(A) a brief description of the nature of any exhibit shown or any demonstration conducted;

(B) identification of the claims discussed;

(C) identification of specific prior art discussed;

(D) identification of the principal proposed amendments of a substantive nature discussed, unless these are already described on the Interview Summary form completed by the examiner;

(E) the general thrust of the principal arguments of the applicant and the examiner should also be identified, even where the interview is initiated by the examiner. The identification of arguments need not be lengthy or elaborate. A verbatim or highly detailed description of the arguments is not required. The identification of the arguments is sufficient if the general nature or thrust of the principal arguments can be understood in the context of the application file. Of course, the applicant may desire to emphasize and fully describe those arguments which he or she feels were or might be persuasive to the examiner;

(F) a general indication of any other pertinent matters discussed;

(G) if appropriate, the general results or outcome of the interview; and

(H) in the case of an interview via electronic mail a paper copy of the contents exchanged over the internet MUST be made and placed in the patent application file as required by the Federal Records Act in the same manner as an Examiner Interview Summary Form, PTOL-413, is entered.

The requirement is detailed, and the point is that interviews are not “off the record” even if not audio-recorded or transcribed. One problem with these requirements is that they lack an enforcement mechanism other than the examiner’s “careful review.” There is no direct way to challenge a patent issued because of an inadequate interview summary other than inequitable conduct — a defense that requires substantial proof of intent to commit fraud. Still, patent attorneys are bound by the ethics requirements to comply with the law in good faith and act with candor in all dealings with the USPTO — the result is that we should largely expect compliance with the required standards. Helping this along, the interview summary form now particularly asks applicants to describe the issues discussed, claims discussed, prior art discussed, and the interview substance.

Looking at the Interview Summaries: After reading through the rule, I then thumbed through a handful of interview summaries and have been happy to see that, in fact, the invention summaries are generally detailed pointing to the particular issues discussed and the resolution of those discussions. Now, the summaries are not as detailed as you might see in an office action rejection or subsequent response, but they do provide substantial context, meaning, and understanding.

To find these, I first downloaded the PAIR files for a random set of recently issued patents and then sorted them to find file histories where issuance/notice of allowance occurred fairly quickly following the interview since that represents the complained-of situation. The four below are simply the first for interview summaries that I looked-at:

Application No. 13/308105:

Attorney had proposed more restrictive claim language in accord with examiner’s determination of un-obvious claims over the prior art and also proposed withdrawn subject matter directed to encapsulated forms. Examiner to enter the amendment over currently pending claims with consideration to be given to a divisional for the encapsulated invention when presented. See examiner’s amendment for allowed claims of current case.

Application No. 12/875,772:

The examiner indicated amending the claims to more clearly identify “the first processor,” “the second processor”, and the “processing components” as depicted in figure 2 would overcome the prior art rejection in Key in view of Fukushima.

Application No. 13/117,944:

Prior art discussed: Bednar

Applicant called to discuss the invention and potential differences between the prior art and the disclosed invention. Applicant discussed a couple of amendments to the independent claim to attempt to overcome the current prior art. It was suggested to the Applicant to add a limitation to further define the spacer to be vibration dampening or made of a vibration dampening material in addition to the spacer extending past or beyond the cable slot toward the riser so that it is not only present in the cable slot and so it may support also add support the barrel. These limitations appear to be fully supported by the figures and do not appear to be present in the prior art reference as Bednar only shows the spacer/dampeners to be present in the cable slot portion of the barrel. These limitations will also require an updated search and therefore no determination of patentability has been made. When these amendments are filed the examiner will update the prior art search and reconsider the currently applied rejection.

Application No. 13/685,368

The examiner and applicant’s representative discussed a set of proposed Examiner’s amendments to place the application in condition for allowance. The amendments set forth clarity, proper antecedent basis, and suitable claim structure to overcome any issues with respect to 35 U.S.C. 101 and 112. The specifics of agreements reached are incorporated in the replacement listing of the allowed claims as set forth in the examiner’s amendment section of the attached notice of allowability. Consequently, the discussion and agreements reached resulted in the allowance of the instant application.

To my eyes, these interview summaries do a very good job of providing information to the world regarding the issued discussed, the conclusion drawn, and the reasoning for those conclusions. Of course, more detail is possible and may be preferable, but this small sample has gone a significant way toward changing my view of the off-the-record nature of examiner interviews.

Why No Patent Revivals?

Patent

By Dennis Crouch

Once a patent issues, the patentee must pay a regular maintenance fee to keep the patent in force. The PTO offers a six-month grace period following the due date where the maintenance fee can still be paid (plus a surcharge) without justifying the delay. At that point, the patent is deemed expired. However, the USPTO allows subsequent revival under either the (low) unintentional or (high) unavoidable standard.

The chart above shows data for patents that were revived (data through April 8, 2014). The chart shows a steep decline in revival that began in 2011. If Q1 of 2014 is indicative, this year there will be fewer than 200 of these revivals. At this point, I don’t know the cause of the steep decline – thoughts on why?

Substantial Unresolved Issues Unravel Preliminary Injunction

Patent,

By Dennis Crouch

Vasculary Solutions v. Boston Scientific (Fed. Cir. 2014)

In a one-paragraph non-precedential decision, the Federal Circuit has vacated the district court’s preliminary injunction.

A preliminary injunction is a ‘drastic and extraordinary remedy that is not to be routinely granted.’ Nat’l Steel Car, Ltd. v. Canadian Pac. Ry., Ltd., 357 F.3d 1319, 1324 (Fed. Cir. 2004) (citing Intel Corp. v. ULSI Sys. Tech., Inc., 995 F.2d 1566, 1568 (Fed. Cir. 1993)). As evidenced by the extended argument before this court, there are too many unresolved issues at this stage of the case and the record is too incomplete on issues of claim construction, infringement, and ultimate validity to warrant the grant of a preliminary injunction. For these reasons, we vacate the preliminary injunction.

A preliminary injunction requires that the movant (typically the patentee) show a likelihood of success on the eventual merits of the case. Here, the court’s basic take-away is that the “likelihood of success” should be based on a substantially complete understanding of the merits and not merely a guess.

Individual Inventors, Corporate Owners

Patent

By Dennis Crouch:

Professor Orly Lobel has an excellent Op-Ed in today’s New York Times titled “My Ideas, My Boss’s Property” that highlights her work on how non-compete agreements stifle performance. This work follows the work of AnnaLee Saxenian who’s 1994 book explained why Boston fell behind Silicon Valley in the tech race. Regional Advantage: Culture and Competition in Silicon Valley and Route 128. Saxenian’s 2006 book takes a further step and further explores how “brain circulation” is a key to regional success. See, The New Argonauts: Regional Advantage in the Global Economy.

Medtronic: Patent Enforcement will Kill Patients

Patent

By Dennis Crouch

[Update – In an order released only hours after Medtronic’s emergency motion, the Federal Circuit has asked for immediate briefing on whether to grant a stay of preliminary relief – a decision is expected by the expiry of the district court’s seven business day temporary reprieve.]

Edwards Life Science v. CoreValve and Medtronic (Fed. Cir. 2014)

In an emergency motion, Medtronic has asked the Federal Circuit to stay a preliminary injunction blocking sale of the Medtronic’s CoreValve aortic heart valve replacement system. Delaware district court Chief Judge Gregory Sleet ordered the preliminary injunction and would enforce the injunction pending outcome of the appeal did grant a seven–business-day stay to allow for an emergency appeal.

Medtronic writes:

A stay should be entered and this appeal expedited because, if the injunction were permitted to go into effect, treatable patients may unnecessarily die in the name of already expired patent rights. Put simply, the calamity to public health that would result from the injunction is premised on a legally improper extension of patent rights. The injunction bans the sale of Medronic’s life-saving CoreValve system (“MCS”) and precludes the training of additional hospitals and other medical care facilities to use MCS. MCS is a unique and revolutionary minimally invasive aortic heart valve replacement system that is fundamentally different than the only similar product in the U.S. market, which is the Sapien product line of Plaintiffs-Appellees Edwards Lifesciences AG and Edwards Lifesciences LLC’s (collectively, “Edwards”). The MCS replaces diseased aortic heart valves in dying patients who may not survive traditional surgery.

There are basically two arguments here: (1) that the public interest weighs in favor of denying injunctive relief and (2) that the patent is not enforceable because it has expired (infringement has already been determined).

The district court agreed that some lives may be lost and attempted to mitigate that damage by ordering the parties to find some resolution so that “patients who cannot be helped by Edwards’ devices” can receive the CoreValve system since it is “a safer device and … patients in whom it is implanted have better outcomes with a lower risk of death.” Medtronic argues that the order is not enough to save lives.

Wall-street analysts are not known for their humanity, but in their note on the case, even the JP Morgan Analysts questioned: “How does a judge take a product off the market that has shown an ability to reduce mortality?”  Of course, Medtronic has not been giving these away but instead sells the valves for $30,000 each.

The enforceability question is interesting the patent expired in May 2012, but the FDA has granted an interim extension of patent rights under 35 U.S.C. § 156 (for delays in FDA approval). One limitation of a patent term extension is that ordinarily, the extension does extend the term of the entire patent, but instead is “limited to any use approved for the product.” In Merck v. Kessler (Fed. Cir. 1996), the court interpreted this as extending only to “the product on which the extension was based.” Here, Medtronic argues that its product – although perhaps covered by the original patent – is different from Edwards approved product (Sapien) and therefore is not covered by the term extension.

The district court considered these issues and decided that the clear language of Section 156(b) was limited approved uses not approved products. And, since the accused infringing product has the same use (valve transplant), then the patent covers it as well.

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The case highlights an important strategic concern for injunctive relief, although district court judges have the power to stay injunctive relief pending appeal, there is no right to such a stay and courts regularly refuse to grant stays pending appeal.

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