Co-Owners Messing with Patent Rights

Patent,

Assume there are two co-owners to a patent that has never been licensed and one co-owner “waives all right, title, and interest” in the patent, what result?

  1. The remaining co-owner now has full exclusive rights to assert the patent; or
  2. The patent will be deemed granted to the public and therefore unenforceable.

The reason I ask this question is that this is what was alleged to have happened in the StoneEagle case.  That case involves a dispute over ownership.  In particular, StoneEagle’s brief indicates that “[b]y agreement dated July 15, 2010, Defendants waived all right, title, and interest in StoneEagle’s subsequently-issued patent.”

 

Patent Glossary Pilot Program

Patent,

By Dennis Crouch

In a new pilot program, the USPTO will offer expedited processing of patent applications that include a proper Glossary-of-Terms that define the terms used in patent claims.

Details: The pilot program is limited only to computer-related inventions (Tech Centers 2100, 2400, 2600, and the Business Methods area of 3600) and may be limited to 200 applications that petition to participate. The program runs from June-December 2014. At the time of filing, the application must include a glossary of terms within the specification that presents “positive statement[s] of what [each] term means. A glossary definition cannot consist solely of a statement of what the term does not mean, and cannot be open-ended.” The glossary is not required to define every word found in the claim set. However, it should provide definitions for key claim terminology, terms with a special definition, abbreviations, relative terms, terms of degree, and functional terminology (including means-plus-function limitations).

The pilot program is intended to provide some information about how patent applicants would use the glossaries and whether they will be useful in both better facilitating examination and result in patents with more clarity of scope. On the examination point, many patent attorneys complain that patent examiners apply unduly broad meaning to patent claim terms during the examination process. The glossary would ideally serve to head-off that initial confusion and round of prosecution that is often wasted in merely understanding the claims as submitted.

It will be interesting to see how patent applicants work within this new proposal.

Links:

Federal Circuit: An Author is not an Inventor (And Thus, a Claim of “Authorship” Does Not Raise an Inventorship Dispute).

Patent, ,

By Dennis Crouch

StoneEagle Services v. Gillman and Nextpay (Fed. Cir. 2014)

This case offers an important reminder that patent ownership is largely a matter of local law – be it state or foreign-national. The result is that disputes over ownership (as opposed to inventorship) do not raise a federal cause of action. Here, the DJ plaintiff also pled inventorship (normally a federal claim under 35 U.S.C. §256), but that claim failed to keep the case in Federal Court because there was no actual dispute over inventorship. From an academic standpoint, the case is also interesting based upon the Federal Circuit’s conclusion that a claim of “authorship” is nothing like a claim of “inventorship.”

Partnership with Joint Ownership: Several years ago, David Gillman collaborated with Bobby Allen (StoneEagle’s CEO at right) on a project to convert StoneEagle’s automotive industry electronic payment system into one that would also work to process health care claims. The subsequent patent application named only Allen. U.S. Patent No. 7,792,686. According to the documents, Gillman has never claimed to be a co-inventor of the ‘686 patent. However, based upon the collaboration agreement, Gillman was a 50% owner of the patent application. Gillman did eventually assign his rights in the application to StoneEagle.

The dispute arose when Gillman later declared at a meeting that he held ownership rights and that the patent documents were on his PC. According to the complaint “Gillman suddenly and falsely claimed that it is his patent, that he wrote the patent, that it is on his computer, and that he ‘authored’ or ‘wrote’ it, or words to that effect.’ Gillman allegedly threw down his business cards and left the meeting.”

StoneEagle then sued for declaratory judgment that it was sole owner and that Allen was the sole inventor. In addition, the lawsuit alleged a variety of state law trade secret and contract claims. The district court issued a preliminary injunction against Gillman on the trade-secret and contract claims that gave Gillman the immediate right to appeal.

The declaratory judgment act provides that

In a case of actual controversy within its jurisdiction . . . any court of the United States, upon the filing of an appropriate pleading, may declare the rights and other legal relations of any interested party seeking such declaration . . .

28 U.S.C. §2201. The Supreme Court broadly interprets the DJ act has extending to the constitutional limits of Article III jurisdiction. Thus, “the facts alleged, under all the circumstances, [must] show that there is a substantial controversy, between parties having adverse legal interests, of sufficient immediacy and reality to warrant the issuance of a declaratory judgment.” MedImmune. Here, Gillman’s attorney basically admitted that an actual case-or-controversy exists between the parties, but that controversy is over a state-law-claim of ownership and the DJ statute requires a case-or-controversy over an issue “within [the federal court’s] jurisdiction.”

In reading StoneEagle’s complaint here, the Federal Circuit found that the pleading lacks sufficient allegations of a controversy concerning inventorship.

[J]urisdiction in this case turns on whether StoneEagle’s complaint alleges a sufficient controversy concerning inventorship. It does not. . . . As StoneEagle’s only factual allegations concerning inventorship are that Gillman authored the patent application, the complaint, viewed in its totality, has not alleged a controversy over inventorship that satisfies Article III.

On remand the case will be dismissed and perhaps re-filed in Texas state court.

= = = =

The case has some interesting discussion of the role of patent attorneys in this process. Here, Gillman (a non patent-law professional) had drafted the patent application at issue. At oral arguments, Judge Rader noted that, although only certain folks are allowed to actually file a patent application with the USPTO, “anyone can help write it.” The decision then goes into some detail on how a patent drafter should not be considered an inventor:

In this case, the most favorable inference from the record in favor of StoneEagle shows only that Gillman assisted in constructively reducing an invention to practice. See Solvay S.A. v. Honeywell Int’l, Inc., 622 F.3d 1367, 1376 (Fed. Cir. 2010). Those activities confer no more rights of inventorship than activities in furtherance of an actual reduction to practice. Otherwise, patent attorneys and patent agents would be co-inventors on nearly every patent. Of course, this proposition cannot be correct.

No inventing happens by scriveners who merely write down the invention.

= = = =

In part, this decision turns on the Federal Circuit’s knowledge that copyright law is very different from patent law, although both arise from the same Constitutional provision, “authors” get copyright and “inventors” get patent. Although the court understands this distinction quite well, most people do not. On at least a weekly basis, I talk with incredibly intelligent people who get confused over the differences and their importance. [Note here – Monday’s Supreme Court oral arguments]. It looks like the DJ plaintiff could have done a much better job of providing evidence alerting the court to this real-world fact that people are confused on this topic and that Gillman’s claim of authorship was reasonably understood by folks in the room as a claim of inventorship.

 

Supreme Court Opens Door on Unfair Competition Lawsuits

Patent, Supreme Court,

By Dennis Crouch

Lexmark Int’l v. Static Control (Supreme Court 2014)

In a unanimous opinion penned by Justice Scalia, the Supreme Court has ruled that standing in §1125(a) false-advertising claims are not limited to competitors. Rather, it can be sufficient that a plaintiff have a commercial injury “flowing directly from the deception wrought by the defendant’s advertising.” The standing decision here is not testing the Constitutional limits of judicial power under Article III but rather is one of statutory interpretation. In particular, the statute provides that a cause of action is available to “any person who believes that he or she is or is likely to be damaged by such act [of false advertising].” Although expanding the scope of potential plaintiffs, the court seemingly continued to hold the line against giving the statute its plain English interpretation that would allow consumer class actions.

False Patent Infringement Claims: Of interest to patent attorneys, the alleged false advertising claims here involve public allegations of patent infringement. The court writes.

First, Static Control alleged that Lexmark disparaged its business and products by asserting that Static Control’s business was illegal. See 697 F.3d 387 (6th Cir. 2012) (noting allegation that Lexmark “directly target[ed] Static Control” when it “falsely advertised that Static Control infringed Lexmark’s patents”).

Under the Supreme Court’s interpretation of the law, those statements (with the requisite intent and resulting harm) can be sufficient to create a cause of action for false advertising.

The meaning of “intellectual property”

Patent,

Energy Recovery, Inc. v. Hauge (Fed. Cir. 2014) 13-1515.Opinion.3-18-2014.1
Panel: Rader, Reyna, and Wallach (author)

At the heart of this case lies the question of “what is intellectual property?”  Here, the answer has more than philosophical implications: a finding of contempt hinges on it.

Leif Hauge was a former president of Energy Recovery, Inc. (“ERI”), a company specializing in “pressure exchangers,” which are used in reverse osmosis.  Mr. Hague and ERI apparently had a falling out, and in 2001 they entered into a settlement agreement, adopted by the district court, that included a section entitled “ABSOLUTE TRANSFER OF ALL RIGHTS IN PATENTS, PATENT APPLICATIONS AND ALL RELATED INTELLECTUAL PROPERTY, TO ENERGY RECOVERY.”  That paragraph specified that Mr. Hauge:

“irrevocably and absolutely assign[s]” to ERI “all right, title and interest along with any and all patent rights,” [], which Mr. Hauge had in “(i) the patents and patent applications . . . ; (ii) any and all patent rights . . . , intellectual property rights, property rights . . . ; and (iv) all other intellectual property and other rights relating to pressure exchanger technology predating this Order.”

Slip Op. at 8 (citations to Joint Appendix omitted).  He also agreed to a non-compete clause that prohibited him from making or selling energy recovery devices for use in RO salt water desalination for two years.  Id. at 3.

After the non-compete clause expired, Mr. Hauge obtained a new patent on pressure exchanger technology and formed a company, Isobarix, that began selling its own pressure exchanger.  In 2013, the District Court (acting on ERI’s Motion for Order to Show Cause) entered an order finding that allowing Mr. Hauge “to . . . develop new products using the very technology he assigned to ERI solely because those new inventions post-date the Agreement would render the Settlement Agreement and its assignment of ownership rights useless,” finding him in contempt of the 2001 Order, and enjoining him and Isobarix “from manufacturing and selling pressure exchangers and replacement parts for ERI’s pressure exchangers.”  Slip Op. at 4.

On appeal, the analysis focused on whether Mr. Hauge had violated clause (iv) of the agreement, which required him to “irrevocably and absolutely assign”…”all right,
title and interest along with any and all patent rights,” which he had in “(iv) all other intellectual property and other rights relating to pressure exchanger technology predating this Order.”

Here is where the split over the meaning of “intellectual property” comes into play.  ERI argued that Mr. Hauge was not, under the settlement agreement, able “to appropriate the very pressure exchanger technology” that he explicitly transferred to ERI in 2001.  This was a view that the district court apparently agreed with when it concluded that Mr. Hauge should not be allowed to “develop new products using the very technology he assigned to ERI.”  Id. at 4.  Both approaches treat “intellectual property” as meaning “technology.”  In other words, what mattered was that Mr. Hauge was allegedly using ERI’s own technology, including technical knowledge that he acquired while its president.

The Federal Circuit, on the other hand, agreed with Mr. Hauge’s view: that he had complied with the settlement agreement by “transfer[ring] ownership of the pre-Agreement pressure exchanger intellectual property.”  Slip Op. at 8.  He was “not claiming ownership of ERI’s intellectual property,” id. at 9, and “[n]othing in the 2001 Order expressly precludes Mr. Hauge from using any manufacturing process.”  Id. at 8.  Under the Federal Circuit’s approach, “intellectual property” is not treated as the technology itself, but the rights over that technology, rights that Mr. Hauge properly assigned to ERI.  (To spark yet another debate: This is, in my view, the only correct way to view the term.  Using “intellectual property” to refer to the underlying technology, as opposed to the legal regimes surrounding that technology, leads to chaos, confusion, and erroneous views about the law).

What about the argument that Mr. Hauge maintained ownership of ERI’s trade secrets, which operate a much grayer area of intellectual property law?  The Federal Circuit declined to treat these as “intellectual property and other rights,” at least for purposes of a civil contempt finding.  “Civil contempt is an appropriate sanction only if the district court can point to an order of the court which ‘sets forth in specific detail an unequivocal command which a party has violated.'”  Id.  Here, there was no such command.

Presidential Innovation Fellowship for USPTO Data Initiatives

Patent, ,

By Dennis Crouch

Can you Step Up? Patent attorneys often remember Judge Rich and his important contribution to the development of U.S. patent law. One important element of Judge Rich’s legacy is that he was just one person acting on his own, but acting with vigor, persistence, and honor. Even in trillion dollar industries, it is still the passion of individuals who drive change. The White House is looking for some such individuals to join its Presidential Innovation Fellowship. The fellowship program is administered through the office of the U.S. Chief Technology Officer, Todd Park. It is Park’s office that is also leading the charge in patent reform initiatives.

Now in its third round, the program is now looking for an Innovation Fellow to work with “Crowdsourcing to Improve Government.” From the Patent side, one White House idea is “Using the Crowd to Improve Patent Quality.”

To help ensure that U.S. patents are of the highest quality, the U.S. Patent and Trademark Office is launching a new initiative focused on expanding ways for companies, experts, and the general public to help patent examiners, holders, and applicants find “prior art”—that is, the technical information patent examiners need to make a determination of whether an invention is truly novel or “patent-worthy.” This effort will focus on driving valuable contributions to the patent process and enhancing patent quality—strengthening a process that is vital to innovation and economic growth.

More Prior Art and More Accessible Prior Art: The general thrust of this project is to figure out how to ensure that the best prior art is truly available to patent examiners. The approach has several potential prongs. We are already familiar with the ongoing application-specific prior art submissions by third parties. Some work needs to be done on that program to continue to improve its effectiveness. In addition, the government is looking for new streams of prior art coming from industry leaders such as IBM, Microsoft, Cisco, and others that can go to examiners in a form that is easily searchable. Having quality prior art is obviously critical. However, in my mind, we still have a very long way to go in terms of helping examiners find the best prior art from the millions of potential references at their fingertips. One idea that I have is that each office action rejection that is issued by an examiner could be used to automatically annotate the associated prior art references in a way that facilitates future searches by other examiners. In turn, that result may also serve as a valuable mechanism for making use of the high level knowledge held by the 9,000 USPTO examiners.

Applications will be accepted through April 7, 2014, and can be found here: https://gsafas.secure.force.com/apply

 

Bose v. SDI: Post-verdict intent

Patent,

Bose Corporation v. SDI Technologies, Inc. (Fed. Cir. 2014) (nonprecedential) 13-1347.Opinion.3-12-2014.1
Panel: Chen, Clevenger (author), Hughes

Despite being nonprecedential, this opinion is interesting because it’s the first time to my knowledge that the Federal Circuit has endorsed a “points in time” approach to an intent-based patent infringement doctrine such as inducement.

Background: Bose alleged that SDI indirectly infringes Patent No. 7,277,765, relying on both inducement and contributory infringement theories.  The district court granted summary judgment of noninfringement in SDI’s favor based a failure to meet the claim limitations as construed (for 144 of the accused products) and on a lack of intent to infringe (for the remaining product).

Intent to infringe: On appeal, the Federal Circuit reversed the district court’s grant of summary judgment as to the inducement issue. (It affirmed, however, the court’s ruling of noninfringement with respect to the other 144 products on claim construction grounds).

On the issue of intent, the Federal Circuit agreed that there were periods of time during which SDI might have possessed the requisite level of intent, and thus summary judgment as to those periods was inappropriate.  First, between the time when SDI learned of the patent and May 22, 2009, when it received an opinion of counsel, SDI may have possessed the requisite intent – that was an issue for the jury to decide:

Where the record reveals no basis for a good-faith belief sufficient to thwart liability, summary judgment of no liability cannot stand. Whether SDI had such a good-faith
belief prior to receiving the opinion of counsel is a triable issue for the jury to consider. Therefore the summary judgment incorrectly absolves SDI of liability from December 10, 2008 until May 22, 2009, when SDI received the opinion of counsel.

Slip Op. at 18.  The CAFC did conclude that for the period after SDI received the letter, it could not be liable for inducement, particularly since Bose never challenged the competency of the counsel who drafted the letter or even entered it into evidence despite possessing a copy.

But, the CAFC declined to extend that conclusion into the future – specifically, to the period after judgment would be rendered in this case:

Bose further argues that the District Court improperly allowed the opinion of counsel to absolve SDI of potential post-verdict liability. The District Court found that the patent’s validity and the iW1 device’s infringement were both triable issues for the jury. A jury could, at trial, find the patent not invalid and infringed. In this scenario, SDI’s opinion of counsel would not shield it from postverdict liability because SDI could not credibly argue that it maintained its good-faith belief of invalidity following a verdict to the contrary. The summary judgment improperly absolved SDI of potential post-verdict liability.

Slip Op. at 18.  This move is significant because it’s the first time that I’m aware of that the Federal Circuit has considered the state of mind of the accused infringer at various time periods when evaluating intent (rather than adopting some sort of “omniscient being” standpoint) or adopted a post-verdict theory that intent must follow (which both I and Tim Holbrook have argued is the right way to think about intent in inducement cases).  Here, I think the court gets the reasoning exactly right.

What does the Constitution mean by “Discoveries?”

Patent,

By Dennis Crouch

The 18th Century French Encyclopédie of Diderot & d’Alembert was an important and well-known encyclopedia available at the founding of the U.S. and well known to founding fathers, including Madison and Jefferson. The link with Madison is important since it was Madison who proposed the intellectual property clause of the U.S. Constitution – giving Congress the power to award exclusive rights for limited times. One element of the clause that has long confounded patent scholars is the meaning of “Discoveries.”

The clause: [Congress has the power] To promote the Progress of Science and useful Arts, by securing for limited Times to Authors and Inventors the exclusive Right to their respective Writings and Discoveries.

Seemingly taking its lead from the Constitution, Congress enacted that patent statute that awards rights to one who “invents or discovers.” In today’s usual parlance, a discovery is often thought more as an unearthing rather than a creation. That is confounding because of the newness requirement of patentability and the ban on the patenting of natural phenomena.

In a recent article, Professor Sean O’Connor (UW) argues that the Encyclopédie offers a key to understanding the meaning of Discovery as used in the Constitution. See O’Connor, The Overlooked French Influence on the Intellectual Property Clause (2014). His approach is a departure from the more traditional Anglo-centric view on constitutional history. A review of the translation leaves little doubt that the source is important. In particular, the ~2,000 word entry on discoveries begins as follows:

Discovery: In general this name can be given to everything that is newly found in the Arts and the Sciences; however, it is scarcely applied, and ought not to be applied, except to that which is not only new, but also curious, useful, and difficult to find, and which, consequently has a certain degree of importance. The less important discoveries are simply called inventions.

[Link to translation]. With that contemporary definition in mind, we can take it as important that the founders used the term “Discoveries” rather than “Inventions.” O’Connor argues that Discovery as found in the Constitution is consequently higher standard than mere novelty. The Encyclopédie include additional entries on “Art,” “Science,” “Inventions,” and “Writers/Authors,” and O’Connor takes these together to begin a new and interesting conversation on the meaning of the intellectual property clause.

Judge Kozinski Reversed by Federal Circuit: Google May be Liable for Street View

Patent,

By Dennis Crouch

Vederi v. Google (Fed. Cir. 2013)

This case arises from a decision by Alex Kozinski who is Chief Judge of the Ninth Circuit Court of Appeals who sat by designation in deciding on summary judgment that Google’s streetview product does not infringe Vederi’s asserted patents. U.S. Patent Nos. 7,239,760; 7,577,316; 7,805,025; and 7,813,596. Through his role on the Ninth Circuit, Judge Kozinski has played an important role in the development many areas of intellectual property and internet law. However, as with Judge Posner of the Seventh Circuit, Judge Kozinski has largely been denied any direct input in the patent context.  Here, that denial continues as the Federal Circuit has vacated Judge Kozinski’s decision — finding that Judge Kozinski erred in his claim construction that resulted in a non-infringement determination.

The patent here covers the method of mounting a set of cameras atop an automobile to capture images as the vehicle moves throughout a geographic area. Those images are then integrated with into a system that allows virtual visual navigation.

All of the asserted claims include a limitation that the views be “substantially elevations” Here, the term elevation appears derived from architectural usage meaning a flat representation of one façade of a structure and the Google Streetview images are better thought of as a perspective view. This difference can be seen somewhat by comparing Jefferson’s Rotunda sketch with a photograph of the Rotunda.


Judge Kozinski found that the Google Streetview images were not elevation views because they show images that are curved representation of the world.

On appeal, the Federal Circuit found that Kozinski’s view of something being substantially an “elevation” view was too limiting based upon the intrinsic evidence. In particular, the patent specification discloses the use of a fish-eye lens to create a photograph of the street in “substantially elevation” form. In the usual case, a fish-eye photo of a building will not be in elevation form but instead provide a curved representation of reality. The result then, according to the Federal Circuit, is that the “substantially” element of the claim provides substantial leeway on the meaning of elevation. The broader claim construction means that now Google may well infringe.

= = = =

An interesting element of the provisional priority document (filed in 2000) is that it includes a listing of the actual software code for taking the GPS and image data to create panorama views and allow a user to navigate through those results. The inventors here, Enrico Di Bernado and Luis Goncalves actually built the system back in 2000 while graduate students at Caltech by attaching a set of cameras and a GPS monitor atop Di Bernado’s car and driving around Pasadena. The results were then made available on the City of Pasadena website.

Gone Fishing: 25 year old patent application rejected again

Patent, , , ,

By Dennis Crouch

In re Rudy (Fed. Cir. 2014)

Back in 1988, Christopher Rudy filed a patent application for a fishing hook that is both colored and translucent. An illustrative pending claim is as follows:

21. In an article of manufacture, which is a fishing hook, which is disintegrated from but is otherwise connectable to a fishing lure or other tackle and has a shaft portion, a bend portion connected to the shaft portion, and a barb or point at the terminus of the bend portion, thus itself not being a fishing lure to include a fishing lure in imitation of an insect or part of an insect to include an insect body, and which is made of suitable material, the improvement comprising where the hook is made of a suitable material, which permits transmittance of light therethrough and is colored a color, selected from the group consisting of red, orange, yellow, green, blue and purple, in nature.

In reading the claims, you might think that this is an abstract idea case since the invention is based upon the law of nature or abstract idea that the translucence and color of a fishing hook correlate with a fish’s proclivity to bite and, although the patent does claim a physical hook, that application merely uses well known technology in a way that basically occupies the same space as the abstraction itself. 

 

However, the PTO rejected the claim under 35 U.S.C. § 103 as obvious in light of the prior art. The prior art apparently teaches transparent fishing hooks as well as fishing hooks that are both translucent and colored but that are shaped like insects. Although neither of those references teach all of the elements of the claim, the USPTO found that it would have been obvious back in 1988 to combine the references to form Rudy’s invention. Rudy submitted a number of affidavits explaining the invention’s importance. However, the USPTO found those statements from the inventor and his “friends and family” to be insufficiently anecdotal to overcome the rejection. On appeal, the Federal Circuit has affirmed the rejection without opinion.

The only interesting part of the oral arguments came when the court asked the USPTO to explain why the case was still alive and pending after 26 years. The USPTO placed full blame on Mr. Rudy. Explaining that “Mr. Rudy is a very zealous advocate on his own behalf.” In particular, during this time Mr. Rudy has apparently filed thirteen amendments to the claims; seven petitions; eight extensions of time; twenty nine miscellaneous letters; enjoyed three appeals; and has abandoned his action only to later revive it to be considered again.

On remand, I expect that Rudy will amend his claims and try again.

EPO: Lies, Damned Lies and Statistics

Patent

Guest Post by Peter Arrowsmith. Arrowsmith is a patent attorney and partner at the London based firm Cleveland IP

Amid great fanfare the European Patent Office has recently released its annual report, proclaiming another record year for the office: an all-time high in the number of filings and a 2.8% increase on the 2012 figures. These figures have been quoted widely in global media, and they create a positive impression about innovation and the success of the European patent system.

On closer inspection of the underlying data, however, a different picture emerges. It is apparent from these data that the EPO base their claims on the number of direct European patent applications added to the number of international-phase PCT applications, whether or not these international applications subsequently enter the European regional phase. This is immediately striking as a very strange measure for the number of European patent applications. Technically the figures from the EPO are not incorrect because Article 153(2) EPC says that an international application that designates the EPO shall be equivalent to a regular European application. However, the figures are misleading because the majority of international-phase PCT applications do not enter the European regional phase.

A more meaningful measurement of the number of European patent applications would comprise the number of direct European patent applications added to the number of PCT applications that enter the European regional phase. By this measurement it is apparent that the number of European patent applications actually decreased by around 0.5% in the last year. Also, the total number of applications is more than 100,000 less than the number quoted by the EPO. In fact, it would appear that the number of European patent applications filed reached a peak in 2010 and that there have been significantly fewer applications in each of the following years.

The President of the EPO blogged about the statistics on 12 March 2014, saying: “The filing figures for 2013 confirm the trends of the past few years, with an overall increase (266 000 filings, +2.8% versus 2012) resulting once more in an all-time high”. Although not technically incorrect, this statement from the President is, at best, misleading. At worst the EPO are engaging in a wilful misrepresentation of the facts.

Of course, the EPO has an interest in promoting its own role in stimulating innovation. Therefore, it is not surprising that the organisation attempts to put a positive spin on facts. However, it is troubling when this spin is relied upon by governments, industry and individuals when it comes to important decisions on the patent system.

PatCon 4

Patent

PatCon4On April 4th and 5th, the University of San Diego School of Law will host PatCon 4, the largest annual conference for patent law scholars.   Over 60 patent law, economics, and business professors—as well as Federal Circuit Judge Kathleen O’Malley, USPTO Chief of Staff Andrew Brynes, and several district court patent pilot judges—will be participating.

In addition to panels on patent law doctrine, pharmaceutical & biotech patents, empirical studies of patents and litigation, remedies, commercialization, economic theory of patents, international patent law, and the history of patent law, PatCon will feature a “patent trolls” debate pitting Mark Lemley (Stanford) & Michael Meurer (BU) against John Duffy (Virginia) & David Schwartz (IIT-Chicago) on whether “hostility to patent trolls is not well justified theoretically or empirically and will likely result in bad law.”  (I’ll be there as well, presenting on a project that I’m working on that’s tentatively called “A Law and Economics Approach to Patent Assertion Entities.”)

PatCon offers up to 12.5 hours of CLE credit for attorneys. More information on PatCon can be found here.

Guest Post: Patent Remedies Should Not Depend on a Patentholder’s Business Model

Patent, , ,

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

The standard justification for patents is that they are necessary to allow inventors to recoup R & D costs in the presence of low-cost copying. As the Supreme Court stated in Kewanee Oil, “The patent laws . . . offer[] a right of exclusion . . . as an incentive to inventors to risk the often enormous costs in terms of time, research, and development.” Yet, if patent law is designed to provide a “reward” for R & D related to the invention—rather than the commercialization of the invention—then why do these rewards depend on whether the inventor is an operating company that makes and sells the invention or a non-practicing entity (NPE) that does not?

In a recent article in the Texas Law Review (here), I argue that if patent law is truly concerned about R & D, then remedies should generally be the same for operating companies and NPEs for a given patented invention, because the “reward” necessary to induce the R & D for that invention should generally be the same regardless of the business model of the underlying inventor.

One reason commonly offered for varying awards is that commercializing entities should be provided an additional reward for bringing inventions to market as commercial products (or, conversely, NPEs should be penalized for not doing so). Although I am quite sympathetic to this view—and have argued as much several years ago (here)—this is decidedly not the reason the courts have used to distinguish between operating companies and NPEs.

Rather, the distinction arises historically from patent law’s importation of traditional tort law principles into remedies law. Like traditional tort remedies, a patentee who wins in court is typically entitled to be returned to the status quo ante—in other words, the state of the world that existed prior to when the infringement occurred. For money damages, this means that operating companies are generally entitled to “lost profits” on sales forgone from the infringement of the patented invention and NPEs are entitled to “reasonable royalties” for forgone licensing revenue (which, typically, are less than lost profits awards). For injunctive relief, the historical practice was to assume that all patentees were entitled as a matter of course to choose who could (or couldn’t) practice their patents. Yet, relying on the status quo ante principle, scholars and policymakers argued that NPEs—at least ones that license non-exclusively—should not be entitled to injunctions as a matter of course, because such an equitable remedy is unnecessary to return an NPE patentee to the status quo (and additionally generates a host of social costs). Such views ultimately influenced Justice Kennedy’s prominent concurrence in eBay, which has since led to the routine denial of injunctive relief for NPEs.

In my article (here), I argue that these hoary tort law principles do not achieve optimal incentives for engaging in innovative activity, because they differentiate among patentholders in ways that are entirely unrelated to the value of the underlying invention. Indeed, as soon as a patent is assigned from an NPE to an operating company its value increases because of patent remedies doctrine—an odd result. Rather than aiming to restore the patentee to the status quo, remedies law should instead provide those incentives necessary to induce a sufficient level of R & D in order to generate the invention in the first instance—perhaps with some modification if the patent-in-suit is shown to be integral to undertaking post-R & D commercialization activity (such as FDA clearance or unpatentable market testing).

This innovation-centric approach would lead to some immediate changes in remedies law. As an initial matter, the baseline assumption should be that remedies should be the same for operating companies and NPEs alike. This would entail rejecting the current statutory scheme for injunctive relief—and, hence, much of the reasoning in the majority and concurring opinions in eBay. Under my proposal, in some situations—like those involving multi-component products and high switching-costs—I argue that injunctions should be routinely denied both to NPEs and operating companies. In other situations, such as those involving simple mechanical inventions or discrete pharmaceutical chemical compositions, courts should typically issue injunctions to any type of patentholder.

As for money damages, the lost profits-reasonable royalty framework should be discarded entirely in favor of an approach that assesses the incremental economic value of the patented invention in relation to R & D costs actually expended by the patentees (and potentially third parties), taking into account failure rates, technological and market risk, and in some cases, commercialization and testing costs and risks, for the invention and similar types of inventions. This alternative framework would better align rewards with the actual costs and risks undertaken by the inventor. In circumstances in which a patent played an important role in the commercialization process, the remedy could be adjusted to further reward operating companies (or penalize NPEs).

I realize that implementing such an approach to remedies is not an overnight fix and could take many years to implement in a feasible manner. In the meantime, rather than attempting to restore inventors to the status quo, remedies law should generally ensure that the same invention yields the same reward. Doing so would better promote the innovation-centric aims of the patent system.

 

Upcoming Events of Interest

Patent
  • My former MBHB colleague Richard Carden is hosting a live Webinar on March 25, 2014 on privacy issues involved with big data with consideration of both US and international data privacy issues. Free to participate, but you must register in advance. [Link]
  • On March 20-21, the Florida Bar will be hosting its annual IP Symposium in Tampa with Chief Judge Rader, and William Covey along with a host of interesting speakers and events. A syllabus is here: http://flabizlaw.org/images/pdf/ip14.pdf.
  • Microsoft and the Hispanic National Bar Association are again co-sponsoring a summer IP Law Institute for up to twenty five Latino law students. Looks like a great event being held June 1-7. [Register by March 29, 2014]

Software Patent Eligibility: Alice Corp v. CLS Bank on the Briefs

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By Dennis Crouch

Alice Corporation Pty. Ltd. v. CLS Bank International, Supreme Court Docket No 13-298 (2014)

Later this term, the US Supreme Court will shift its focus toward the fundamental question of whether software and business methods are patentable. More particularly, because an outright ban is unlikely, the court’s more narrow focus will be on providing a further explanation of its non-statutory “abstract idea” test. The Supreme Court addressed this exclusionary test in its 2010 Bilski decision, although in unsatisfactory form. As Mark Lemley, et al., wrote in 2011: “the problem is that no one understands what makes an idea ‘abstract,’ and hence ineligible for patent protection.” Lemley, Risch, Sichelman, and Wagner, Life After Bilski, 63 Stan. L. Rev. 1315 (2011).

In this case, a fractured Federal Circuit found Alice Corp’s computer-related invention to be unpatentable as effectively claiming an abstract idea. See, U.S. Patent No. 7,725,375. In its petition for writ of certiorari, Alice presented the following question:

Whether claims to computer-implemented inventions – including claims to systems and machines, processes, and items of manufacture – are directed to patent-eligible subject matter within the meaning of 35 U.S.C. § 101 as interpreted by this Court.

Oral arguments are set for Mar 31, 2014 and a decision is expected by the end of June 2014. In addition to the parties, a host of amici has filed briefs in the case, including 11 briefs at the petition stage and 41 briefs on the merits. Although not a party to the lawsuit, the Solicitor General has filed a motion to participate in oral arguments and steal some of the accused-infringer’s time.

The invention: There are several patents at issue, but the ‘375 patent is an important starting point. Claim 1 is directed to a “data processing system” that includes a number of elements, including “a computer” configured to generate certain instructions, “electronically adjust” stored values, and send/receive data between both a “data storage unit” a “first party device.” The claims also include “computer program products” and computer implemented methods. The underlying purpose of the invention is to provide certain settlement risks during a time-extended transaction by creating a set of shadow credit and debit records that are monitored for sufficient potential funds and that – at a certain point in the transaction the shadow records are automatically and irrevocably shifted to the “real world.”

It is unclear to me what makes this invention novel or nonobvious and many believe that it would fail on those grounds. However, the sole legal hook for the appeal at this stage is subject matter eligibility. One thing that we do know is that CLS Bank is alleged to be using the patented invention to ensure settlement for more than a trillion dollars daily.

Important case: The claim structure here is quite similar to that seen in hundreds-of-thousands of already issued patents and pending patent applications where the advance in software engineering is a fairly straightforward, but is done in a way that has an important impact on the marketplace. One difference from many software patents is that the underlying functionality is to solve a business transaction problem. However, there is a likelihood that the decision will not turn (one way or the other) on that field-of-use limitation.  In his brief, Tony Dutra argues that the key here is utility, and that an advance in contract-settlement is not useful in the patent law context.

[Brief of the US Government] The most important brief in a pile such as this is often that filed by the U.S. Government. Here, Solicitor General Donald Verrilli and USPTO Solicitor Nathan Kelley joined forces in filing their brief in support of CLS Bank and a broad reading of the abstract idea test. In particular, the U.S. Government argues that none of the claims discussed are subject matter eligible. The brief begins with an importance argument – that “the abstract idea exception is patent law’s sole mechanism for excluding claims directed to manipulation of non-technological concepts and relationships.” This notion – that the abstract idea is the final and ultimate bulwark – places a tremendous pressure on the Court to create a highly flexible test. In my view, the Government largely loses its credibility with that argument – somehow forgetting about the host of other overlapping patent law doctrines that each address this issue in their own way, including requirements that any patented invention be useful, enabled, described in definite claims, and nonobvious. The ultimate backstop is likely the US Constitutional statement regarding “Inventors” and their “Discoveries.”

The government brief goes on to endorse the approach of first identifying whether the claim would be abstract if the computer technology were removed from the method claims and, if so, move on to consider whether the computer technology limitations are sufficient to transform a non-patentable abstract idea into a sufficiently concrete innovation in technology, science, or the industrial arts. “The ultimate inquiry is whether the claims are directed to an innovation in computing or other technical fields.” The brief then reviews the precedent on this topic from Bilski, Mayo and Flook.

Addressing the computer system and software claims, the U.S. Government agrees that they are certainly directed toward “machines” and “manufactures.” However, according to the government, those claims to physical products are properly termed abstract ideas because the physical elements “do not add anything of substance.”

One interesting element from the brief is that the US Government notes that, although a question of law, invalidity for lack of subject matter eligibility requires clear and convincing evidence in order to overcome the presumption of validity. In its brief, CLS Bank argues otherwise as does Google, who actually takes time to cogently spell out the argument with citation to leading authorities.

[Brief of CLS Bank] In its merits brief, CLS Bank somewhat rewrote the question presented – focusing attention on the Supreme Court’s decisions in Mayo.

Question Re-framed: An abstract idea, including a fundamental economic concept, is not eligible for patenting under 35 U.S.C. §101. Bilski v. Kappos, 130 S. Ct. 3218 (2010). Adding conventional elements to an abstract idea does not render it patent-eligible. Mayo Collaborative Servs. v. Prometheus Labs., Inc., 132 S. Ct. 1289 (2012). The asserted claim of the patents-in-suit recite the fundamental economic concept of intermediated settlement, implemented using conventional computer functions. The question presented is:

Whether the courts below correctly concluded that all of the asserted claims are not patent-eligible.

The basic setup of the CLS Bank is the argument that a newly discovered abstract idea coupled with conventional technology is not patent eligible. CLS Bank’s point is well taken that an outright win for Alice Corp. here would involve something of a disavowal rewriting of Mayo.

[Brief of Alice Corp.] Alice Corp’s brief obviously takes a different stance – and argues first that the non-statutory exceptions to patentability should be narrowly construed and focused on the purpose of granting patents on creations of human ingenuity and that the idea behind Alice’s invention is not the type of “preexisting, fundamental truth” that should be the subject of an abstract idea test. Alice also reiterated its position that the claimed invention should be examined as a whole rather than divided up as suggested by the Government brief.

[Brief of Trading Technologies, et al.] TT’s brief (joined by a group of 40 patent-holding software companies as well as Prof. Richard Epstein) argues that the “abstract idea” test is focused on scientific truths and scientific principles. In that construct, Alice Corp’s ideas regarding the settlement system would not be seen as ineligible. TT also challenges the court to think beyond the computer as “merely a calculator and that programming merely instructs the computer to perform basic mathematical calculations. “While this may have been true of many of the applications programmed on the earliest computers over 40 years ago, it is simply not the case today. . . . Viewing computers as merely calculators is completely disconnected from the reality of where innovation is occurring today and where most innovation will occur in the future.” In his brief, Dale Cook agrees and further makes the argument that a distinction between hardware and software is illusory – citing Aristotle to make his point. [Brief of Dale Cook]. Supporting that notion is the Microsoft brief that sees “software-enabled inventions” as the “modern-day heirs to mechanical inventions. [Brief of Microsoft HP]. Pushing back on this argument, Public Knowledge seemingly shows that the entire claimed method can be implemented in seven lines of software code. Thus, while some software is complex. PK makes the argument that the software at issue here is exceedingly simple.

TT also warns against the Government’s position that a strong eligibility guideline is needed in cases such as this. In particular, explains “inventions that do nothing more than use a computer to implement time-worn concepts in obvious and traditional ways will not receive patent protection notwithstanding the fact that they concern eligible subject matter. On that note, TT asks for clarification from the Supreme Court that “Mayo does not support importation of novelty, nonobviousness, and other patentability criteria into the ‘abstract idea’ analysis.”

[Brief of ABL] The final brief in support of petitioner was filed on behalf of Advanced Biological Labs by Robert Sachs. ABL argues that a claim should only be seen as problematic under the abstract idea test when there are no practical alternative non-infringing ways of practicing the abstract idea. On that point, ABL further pushes for the notion that the test should be considered from the framework of one skilled in the art rather than simply the-mind-of-the-judge and based upon clear and convincing evidence. Pushing back against this notion is the brief of the American Antitrust Institute (AAI) drafted by Professor Shubha Ghosh. The AAI argues that the purpose of the Abstract Idea exclusion is to prevent undue harm to competition and innovation. Seemingly, the AAI contends that a claim directed an abstract idea is per se anticompetitive and that even when coupled with technology it may still be unduly preemptive. Oddly however, later in the brief AAI argues for a test that is not based upon market competition or preemption.

[Shultz Love Brief] A leading brief on the side of ineligibility is that filed by Professors Jason Shultz and Bryan Love on behalf of about 22 other professors. The professors make the argument that the world would be a better place without software patents. For its conclusions, the brief largely relies on the work of Brian Love, Christina Mulligan, Colleen Chien, James Bessen, & Michael Meurer. The EFF brief from Professor Pamela Samuelson, Julie Samuels, and Michael Barclay make a parallel argument: “If anything, evidence shows that the U.S. software industry is harmed by the exponential growth of vague software patents.” Without denying the problems created by software patents, Professors Peter Menell and Jeff Lefstin argue that the solution is not to rely upon the “abstract idea” test to solve that problem. IBM offers the starkest contrast to the Shultz-Love brief – arguing that the failure to clearly offer patent rights for software inventions “endangers a critical part of our nation’s economy and threatens innovation.”

The ACLU has been more frequently involved with patent law issues and was a backer of the Myriad case. In its brief, the ACLU argues that the abstract idea exception is the patent law proxy for free speech and that monopolization of abstract ideas would be a violation of the First Amendment. That conclusion is supported by the Software Freedom Law Center & Eben Moglen. The First Amendment argument has the potential of twisting on the ACLU: if the justices fail to see that patents create any First Amendment concern then they may be more likely to support a narrowing of the abstract idea exception. Notably, in the most recent patent law oral arguments on fee-shifting, Justice Roberts arguably suggested that patents did not create any first amendment concerns.

I mentioned Microsoft’s brief earlier. Microsoft argues that software should be patentable – but not the software in this case. In particular, Microsoft agrees with the notion that simply adding “a computer” to an otherwise abstract idea does not fix the problem. Microsoft’s solution is to consider “whether the claim as a whole recites a specific, practical application of the idea rather than merely reciting steps inherent in the idea itself.” Microsoft goes on to admit that its test adds little predictability.

The Intellectual Property Owners Association and AIPLA similarly argue that software “if properly claimed” is patent eligible. On its face, that argument may not sit well with the Court who may see the “as claimed” notion designed to create loopholes for sly patent drafters whose noses are made of wax. A collective brief from Google, Facebook, Amazon, and others support this notion that patent eligibility should not turn on “clever drafting.” On an ancillary (but important) point Google argues that Section 101 defenses should be considered at the outset of most cases. cf. Crouch & Merges, Operating Efficiently Post-Bilski by Ordering Patent Doctrine Decision-Making.

Should the Claim Construction Standard for PTAB Post-Grant Proceedings Be Changed?

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Guest Post by Bernie Knight. Knight is a partner at McDermott Will & Emery LLP and was USPTO General Counsel from 2010-2013.

Now that the new post-grant proceedings of the America Invents Act (AIA) have been underway for over a year, some have questioned whether the claim construction standard used by the Patent Trial and Appeal Board (PTAB) is the correct one.  Currently, proposed legislation in Congress would change the claim construction standard for PTAB post-grant proceedings from the broadest reasonable interpretation to the same standard used by district courts, i.e., one having a goal of preserving validity in deference to 35 U.S.C. Sec. 282.   Of course, outside of such legislation, the USPTO has the ability to change the claim construction standard by amending the regulations and the practice guide.  The question arises, would changing the claim construction standard improve the patent system?

The answer is no. Yet, with that said, there is a certain tension between the claim construction standard and the patent owner’s ability to amend claims in the new post-grant proceedings. Recent decisions of the PTAB have made it difficult for patent owners to amend their claims. When we decided to adopt the broadest reasonable interpretation claim construction standard, we did so under the assumption that patent owners would be able to amend their claims without significant impediments. This was a sound decision for the patent system and follow-on innovation because the claims would be amended with more precise language. It would then be easier for other companies and inventors in the same technology space to design around the amended claims. Simply put, the broadest reasonable interpretation claim construction standard seems like a fair standard in light of the patent owner’s ability to amend claims. Such an approach also seems good for the patent system and follow-on innovation.

A tension arises with this trade off because of recent decisions of the PTAB requiring the patent owner to establish that the amended claims are patentable not only over the cited prior art, but also any art of which the patent owner has knowledge. See, e.g., IPR2012-00027, paper 66 (Final Written Decision). In addition, the PTAB sometimes requires that the patent owner submit an expert declaration to establish the understanding of a person of ordinary skill in the art to determine whether the new claim limitations are obvious. At the urging of many patent owners, Congress is responding by proposing legislation that would change the claim construction standard for USPTO proceedings to the same standard employed by the district courts.

The PTAB has done a terrific job handling the onslaught of petitions that have been filed since enactment of the AIA.  It is reported that the USPTO has the third busiest patent docket in the country, after the Eastern District of Texas and the District of Delaware.   I had the pleasure of working with the PTAB in getting the final AIA rules issued and the proceedings implemented within the one year period mandated by Congress. So, here comes the “but.” This is a good time for the USPTO to look at the requirements for a patent owner’s amendment to make certain that because the claims are broadly construed, the patent owner still has a reasonable opportunity to amend the claims.

The regulations that we implemented provide that amendments will be allowed if they are supported by the written description in the application, the amendments are narrowing amendments and the amendments relate to a claim and ground upon which the proceeding was instituted. See 37 C.F.R. 42.121, 42.221. The patent owner must make an initial showing that the amended claims are patentable. The question arises how much support should be required from the patent owner at the time of the motion to amend claims and how much of the burden should be placed on the petitioner to show that the amended claims are unpatentable.

The additional requirements placed on the patent owner by the PTAB make it more difficult for a proposed amendment to survive a PTAB proceeding. An alternative approach might be to only require the patent owner to show that the amended claims are patentable over the prior art cited by the petitioner and relied on by the PTAB in instituting the proceeding. If the patent owner fails to disclose prior art that the patent owner has knowledge of and that can affect the validity of the claims, there may be a future inequitable conduct defense if the patent owner brings an infringement action. In addition, there may be a basis for an Office of Enrollment and Discipline complaint if evidence that is contrary to a position being taken at the USPTO is intentionally withheld by the patent owner. With respect to the need for expert witnesses to support the amendments, a possible alternative approach would be to place the burden on the petitioner to produce the expert to support an obviousness challenge to the new amended claims. The current PTAB decisions place that burden on the patent owner up front to disprove such an argument even before it is raised. More of the burden might be placed on the petitioner to show that the amended claims are unpatentable.

If the requirements for a patent owner amendment were less onerous, then a much stronger case can be made that the broadest reasonable claim construction standard should be retained. Without the ability to reasonably amend the claims, the broadest reasonable interpretation claim construction standard seems a bit unfair to the patent owner because the claims are broadly construed with little opportunity to amend.

The views expressed here are solely those of the author and do not necessarily reflect the views of McDermott Will & Emery or its other partners.

Footnote 11 in Pfaff

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My Patent Law class just finished up anticipation, which included a discussion of the on-sale bar issues in Pfaff v. Wells Electronics, 525 U.S. 55 (1998).  Footnote 11 always makes me laugh (and sometimes even my students) given what was to come in the decade and a half after Pfaff in opinions such as KSR, eBay, Bilski, etc.:

Petitioner correctly argues that these provisions identify an interest in providing inventors with a definite standard for determining when a patent application must be filed.  A rule that makes the timeliness of an application depend on the date when an invention is “substantially complete” seriously undermines the interest in certainty.11

11The Federal Circuit has developed a multifactor, “totality of the circumstances” test to determine the trigger for the on-sale bar. See, e. g., Micro Chemical, Inc. v. Great Plains Chemical Co., 103 F. 3d 1538, 1544 (1997) (stating that, in determining whether an invention is on sale for purposes of § 102(b), “`all of the circumstances surrounding the sale or offer to sell, including the stage of development of the invention and the nature of the invention, must be considered and weighed against the policies underlying section 102(b)’ “); see also UMC Electronics Co. v. United States, 816 F. 2d 647, 656 (1987) (stating the on-sale bar “does not lend itself to formulation into a set of precise requirements”). As the Federal Circuit itself has noted, this test “has been criticized as unnecessarily vague.” Seal-Flex, Inc. v. Athletic Track & Court Construction, 98 F. 3d 1318, 1323, n. 2 (1996).

525 U.S. at 65-66.  Link to the Court’s opinion.

Danisco v. Novozymes: DJ’s and pre-issuance activity

Patent

Danisco US Inc. v. Novozymes A/S  (Fed. Cir. 2014) 13-1214.Opinion.3-7-2014.1
Panel: Lourie (author), Prost, O’Malley

On August 28, 2012, Patent No. 8,252,573 issued to Novozymes.  That same day, Danisco filed a Declaratory Judgment action in federal district court seeking a judgment that its Rapid Starch Liquefaction (“RSL”) product did not infringe the single claim of the ‘573 patent and that the claim was invalid.  The district court dismissed Danisco’s actions, concluding that it “was filed prior to the time Novozymes took, or even could have taken, any affirmative action to enforce its patent rights.”  Novozyme’s only conduct, the court observed, was prior to the issuance of the patent and while that could support a conclusion that an actual controversy exists, jurisdiction could not be based on those acts alone.

On appeal, the Federal Circuit (channeling, perhaps, the Supreme Court) treated the district court’s ruling regarding pre-issuance activity as an improper bright-line rule:

The district court’s categorical distinction between pre- and post-issuance conduct is therefore irreconcilable with the Supreme Court’s insistence on applying a flexible totality of the circumstances test, its rejection of technical bright line rules in the context of justiciability, and our own precedent.

Slip Op. at 10.  The Court itself has declined to develop a bright line rule for determining whether there is an Article III case or controversy and the Federal Circuit judges “are likewise not inclined to do so now.”  Rather, the existence of a justiciable controversy involves a flexible totality of the circumstance analysis.

Examined in that light, the Federal Circuit concluded that this case satisfied the case or controversy requirement.  The parties were close competitors in the same field and Novozymes had twice sued Danisco or its predecessors in interest for patent infringement over related products.  But for Novozymes’ behavior during the prosecution of the ‘573 patent and Danisco’s own patent on a RSL product, however, the totality of the circumstances test would probably not have been met.  Novozymes repeatedly sought interferences between them, contending that its patent application covered the same subject matter as Danisco’s patent and that it was entitled to priority.  When the examiner twice rejected Novozyme’s request for an interference, Novozyme took one more action:

Although under no regulatory obligation to do so, Novozymes then submitted public comments to the PTO “in order to clarify [for] the record” its belief that the α-amylase variant claimed by Danisco’s ’240 patent “fall[s] within the scope” of its own claim, which later issued to Novozymes as the sole claim of U.S. Patent 8,252,573 (the “’573 patent”) on August 28, 2012, claiming the benefit of priority from a provisional application filed June 7, 2001. Id. at 456–59. Novozymes further commented that it refused to “acquiesce” to or otherwise be “estopped” by what it deemed to be the examiner’s erroneous and “overly narrow” view of Novozymes’s claim scope, which consequently did not allow Novozymes to invalidate Danisco’s ’240 patent or to claim priority over the ownership of the BSG E188P α-amylase variant invention. Id.

Slip Op. at 4. The Federal Circuit viewed this as an “allegation that Danisco’s α-amylase variant is encompassed by and would infringe the claim that issued in Novozymes’s ’573 patent.”  Id. at 9.  The court also noted that there was no Already v. Nike-style covenant not to sue that might moot the controversy.  Considering all the circumstances, the panel concluded that the case or controversy requirement was met here, and returned the case to the district court for proceedings on the merits.

Although not a new holding, the Federal Circuit also ruled that the fact that Novozyme had never affirmatively accused Danisco’s products of infringing the patent was not dispositive on the question of whether an actual controversy exists.

A Patentee Must Prove Infringement (Or Else Lose)

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By Dennis Crouch

Medtronic v. Boston Scientific (Fed. Cir. 2014)

Earlier this year, the Supreme Court issued a decision in this case – holding that the patentee has the burden of persuasion on the issue of infringement – even in cases that arise as a declaratory judgment action brought by a licensee in good standing against the patentee. The original Federal Circuit panel opinion had shifted the burden in this situation to the DJ plaintiff alleging non-infringement.

On remand, the Federal Circuit panel has modified its opinion – holding that the district court had properly sided with the DJ plaintiff in finding non-infringement.

The basic issue here was that neither party provided evidence sufficient to either prove or disprove infringement of the Boston Scientific patents. In that situation, the party with the burden of persuasion loses. We know from the Supreme Court decision that the patentee always has the burden of persuasion on infringement and therefore that Boston Scientific loses.

Note: Updated on 3/12 to correct parties.