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Supreme Court Update: Are Secondary Indicia of Invention Relevant to Eligibility?

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by Dennis Crouch

The Supreme Court is on recess until Feb 17.

I don’t know if my end-of-April prediction will hold true, but I do expect Neil Gorsuch to become a Justice on the United States Supreme Court.  As a 10th Circuit Judge, Gorsuch never decided a patent case, but does have a handful of interesting IP cases.

There are a few petitions filed that we have not discussed here: 

 In its newest petition, DataTreasury takes 101 for a new spin by taking the 101/103 analysis to its next logical level.  If we are going to include a 103 analysis as part of the eligibility doctrine then lets go whole hog.  Thus, DataTreasury asks: whether a court must consider secondary indicia of invention as evidence in its eligibility analysis? In the case, the Federal Circuit had affirmed the PTAB judgment without opinion under R.36. A second eligibility petition is found in TDE Petroleum Data Solutions, Inc. v. AKM Enterprise, Inc., dba Moblize, Inc. TDE asks the court to “please reconcile Diehr and Alice.” (I’m not literally quoting here).  The patent at issue (No. 6,892,812) claims a four-step process of “determining the state of a well operation.” (a) store several potential “states”; (b) receive well operation data from a plurality of systems; (c) determine that the data is valid by comparing it to a threshold limit; and (d) set the state based upon the valid data.

In Wi-LAN v. Apple, the patentee revives both Cuozzo and Markman claim construction arguments – this time focusing on “whether claim terms used to define the metes and bounds of an invention are generally given their “plain and ordinary meaning,” or are redefined (limited) to match the scope of the exemplary embodiments provided in the specification.”

duPont v. Macdermid asks whether summary judgment of obviousness is proper because of the factual disputes at issue.  Similarly, in Enplas v. Seoul Semiconductor, the petitioner argues that a finding of anticipation by the PTAB must be supported by findings each and every element of the subject patent claim is disclosed in the prior art.  In Enplas, the Federal Circuit affirmed the PTAB on a R.36 Judgment Without Appeal — it difficult for the petitioner to point to the particular deficiencies.

 

=== THE LIST===

1. 2016-2016 Decisions:

  • Design Patent Damages: Samsung Electronics Co. v. Apple Inc., No 15-777 (Total profits may be based upon either the entire product sold to consumers or a component);  GVR order in parallel case Systems, Inc. v. Nordock, Inc., No. 15-978.  These cases are now back before the Federal Circuit for the job of explaining when a component

2. Petitions Granted:

3. Petitions with Invited Views of SG (CVSG): 

4. Petitions for Writ of Certiorari Pending:

  • Claim Construction: Wi-LAN USA, Inc., et al. v. Apple Inc., No. 16-913 (“plain and ordinary meaning”)
  • Is it a Patent Case?: Boston Scientific Corporation, et al. v. Mirowski Family Ventures, LLC, No. 16-470 (how closely must a state court “hew” federal court patent law precedents?) (Appeal from MD State Court)
  • Anticipation/Obviousness: Google Inc., et al. v. Arendi S A.R.L., et al., No. 16-626 (can “common sense” invalidate a patent claim that includes novel elements?) (Supreme Court has requested a brief in response)
  • Anticipation/Obviousness: Enplas Corporation v. Seoul Semiconductor Co., Ltd., et al., No. 16-867 (“Whether a finding of anticipation under 35 U.S.C. § 102 must be supported by findings that each and every element of the subject patent claim is disclosed in the prior art?”)
  • Anticipation/Obviousness: E.I. du Pont de Nemours and Company v. MacDermid Printing Solutions, L.L.C., No. 16-905 (summary judgment of obviousness proper)
  • Jury Trial: Oil States Energy Services, LLC v. Greene’s Energy Group, LLC, et al., No. 16-712 (“Whether inter partes review … violates the Constitution by extinguishing private property rights through a non-Article III forum without a jury.”) [oilstatespetition]
  • Jury Trial: Nanovapor Fuels Group, Inc., et al. v. Vapor Point, LLC, et al., No. 16-892 (Can a party forfeit a properly demanded trial by jury without an explicit, clear, and unequivocal waiver?)
  • Is it a Patent Case?: Big Baboon, Inc. v. Michelle K. Lee, No. 16-496 (Appeal of APA seeking overturning of evidentiary admission findings during reexamination – heard by Federal Circuit or Regional Circuit?)
  • Laches: Medinol Ltd. v. Cordis Corporation, et al., No. 15-998 (follow-on to SCA); Endotach LLC v. Cook Medical LLC, No. 16-127 (SCA Redux); Romag Fasteners, Inc. v. Fossil, Inc., et al, No. 16-202 (SCA Redux plus TM issue)
  • Eligibility: TDE Petroleum Data Solutions, Inc. v. AKM Enterprise, Inc., dba Moblize, Inc., No. 16-890 (Please reconcile Diehr and Alice)
  • Eligibility: DataTreasury Corporation v. Fidelity National Information Services, Inc., No. 16-883 (secondary indicia as part of eligibility analysis).
  • Eligibility: IPLearn-Focus, LLC v. Microsoft Corp., No. 16-859 (evidence necessary for finding an abstract idea)

5. Petitions for Writ of Certiorari Denied or Dismissed:

(more…)

Supreme Court 2017 – Patent Preview

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by Dennis Crouch

A new Supreme Court justice will likely be in place by the end of April, although the Trump edition is unlikely to substantially shake-up patent law doctrine in the short term.

The Supreme Court has decided one patent case this term. Samsung (design patent damages).  Five more cases have been granted certiorari and are scheduled to be decided by mid June 2017. These include SCA Hygiene (whether laches applies in patent cases); Life Tech (infringement under 35 U.S.C. § 271(f)(1) for supplying single component); Impression Products (using patents as a personal property servitude); Sandoz (BPCIA patent dance); and last-but-not-least TC Heartland (Does the general definition of “residence” found in 28 U.S.C. 1391(c) apply to the patent venue statute 1400(b)).

Big news is that the Supreme Court granted writs of certiorari in the BPCIA dispute between Sandoz and Amgen.   The BPCIA can be thought of as the ‘Hatch Waxman of biologics’ – enacted as part of ObamaCare.   The provision offers automatic market exclusivity for twelve years for producers of pioneer biologics.   Those years of exclusivity enforced by the FDA – who will not approve a competitor’s expedited biosimilar  drug application during the exclusivity period.   The statute then provides for a process of exchanging patent and manufacturing information between a potential biosimilar producer and the pioneer – known as the patent dance.  The case here is the Court’s first chance to interpret the provisions of the law – the specific issue involves whether the pioneer (here Amgen) is required to ‘dance.’ [Andrew Williams has more @patentdocs]

A new eligibility petition by Matthew Powers in IPLearn-Focus v. Microsoft raises eligibility in a procedural form – Can a court properly find an abstract idea based only upon (1) the patent document and (2) attorney argument? (What if the only evidence presented supports eligibility?).  After reading claim 1 and 24 (24 is at issue) of U.S. Patent No. 8,538,320, you may see why the lower court bounced this. Federal Circuit affirmed the district court’s ruling without opinion under Federal Circuit Rule 36 and then denied IPLF’s petition for rehearing (again without opinion).

1. A computing system comprising:

a display;

an imaging sensor to sense a first feature of a user regarding a first volitional behavior of the user to produce a first set of measurements, the imaging sensor being detached from the first feature to sense the first feature, the first feature relating to the head of the user, and the first set of measurements including an image of the first feature, wherein the system further to sense a second feature of the user regarding a second volitional behavior of the user to produce a second set of measurements, the second feature not relating to the head of the user; and

a processor coupled to the imaging sensor and the display, the processor to:

analyze at least the first set and the second set of measurements; and determine whether to change what is to be presented by the display in view of the analysis.

24. A computing system as recited in claim 1, wherein the system capable of providing an indication regarding whether the user is paying attention to content presented by the display.

=== THE LIST===

1. 2016-2016 Decisions:

  • Design Patent Damages: Samsung Electronics Co. v. Apple Inc., No 15-777 (Total profits may be based upon either the entire product sold to consumers or a component);  GVR order in parallel case Systems, Inc. v. Nordock, Inc., No. 15-978.  These cases are now back before the Federal Circuit for the job of explaining when a component

2. Petitions Granted:

3. Petitions with Invited Views of SG (CVSG): 

4. Petitions for Writ of Certiorari Pending:

  • Is it a Patent Case?: Boston Scientific Corporation, et al. v. Mirowski Family Ventures, LLC, No. 16-470 (how closely must a state court “hew” federal court patent law precedents?) (Appeal from MD State Court)
  • Anticipation/Obviousness: Google Inc., et al. v. Arendi S A.R.L., et al., No. 16-626 (can “common sense” invalidate a patent claim that includes novel elements?) (Supreme Court has requested a brief in response)
  • Civil Procedure – Final Judgment: Johnson & Johnson Vision Care, Inc. v. Rembrandt Vision Technologies, L.P., No. 16-489 (Reopening final decision under R.60).
  • Anticipation/Obviousness: Enplas Corporation v. Seoul Semiconductor Co., Ltd., et al., No. 16-867 (“Whether a finding of anticipation under 35 U.S.C. § 102 must be supported by findings that each and every element of the subject patent claim is disclosed in the prior art?”)
  • Post Grant Admin: Oil States Energy Services, LLC v. Greene’s Energy Group, LLC, et al., No. 16-712 (“Whether inter partes review … violates the Constitution by extinguishing private property rights through a non-Article III forum without a jury.”) [oilstatespetition]
  • Eligibility: IPLearn-Focus, LLC v. Microsoft Corp., No. 16-859 (evidence necessary for finding an abstract idea)
  • Post Grant Admin: SightSound Technologies, LLC v. Apple Inc., No. 16-483 (Can the Federal Circuit review USPTO decision to initiate an IPR on a ground never asserted by any party)
  • Is it a Patent Case?: Big Baboon, Inc. v. Michelle K. Lee, No. 16-496 (Appeal of APA seeking overturning of evidentiary admission findings during reexamination – heard by Federal Circuit or Regional Circuit?)
  • Laches: Medinol Ltd. v. Cordis Corporation, et al., No. 15-998 (follow-on to SCA); Endotach LLC v. Cook Medical LLC, No. 16-127 (SCA Redux); Romag Fasteners, Inc. v. Fossil, Inc., et al, No. 16-202 (SCA Redux plus TM issue)
  • Eligibility and CBM: DataTreasury Corporation v. Fidelity National Information Services, Inc., No. 16-883 (I have not seen the petition yet, but underlying case challenged whether (1) case was properly classified as CBM and (2) whether PTAB properly ruled claims ineligible as abstract ideas) (Patent Nos. 5,910,988 and 6,032,137).

5. Petitions for Writ of Certiorari Denied or Dismissed:
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Supreme Court Patent Cases: Post Sale Exhaustion

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by Dennis Crouch

Substantive Patent Law: Newly filed petition in Merck & Cie v. Watson Labs raises a core substantive patent issue – does the on sale bar apply to secret sales? The defendant asks:

Whether the “on sale” bar found in § 102(b) applies only to sales or offers of sale made available to the public, as Congress, this Court, and the United States have all made clear, or whether it also applies to non-public sales or offers of sale, as the Federal Circuit has held.

The Merck petition is focused on pre-AIA patents.  The PTO (and patentees) are arguing more forcefully that the AIA certainly intended to exclude secret sales from the scope of prior art in cases now pending before the Federal Circuit.

The second new substantive patent law case is Google v. Arendi that challenge’s the Federal Circuit’s limitations on the use of common sense in the obviousness analysis.  In its decision, the Federal Circuit limited KSR to combination patents and held that “common sense” cannot be used to supply missing limitations.  Google argues that the Federal Circuit’s approach is contrary to the broad and flexible obviousness analysis required by KSR.  Patentees bristle term “common sense” – they see an overly flexible analysis as providing opportunities to invalidate patents without evidence.  The question: “Did the Federal Circuit err in restricting the Board’s ability to rely on the common sense and common knowledge of skilled artisans to establish the obviousness of patent claims?”

As these new petitions were being filed, the Supreme Court has also denied the pending obviousness, anticipation, and eligibility petitions.  In addition, Cooper v. Square has also been denied.

Civil Procedure: In J&J v. Rembrandt, the defendant J&J won at trial. However, Rembrandt later learned that J&J’s expert had testified falsely and the Federal Circuit ordered the case re-opened under R.60(b)(3) that empowers district courts to revisit final judgments after a showing of “fraud …, misrepresentation, or misconduct by the opposing party.”  The various circuits follow different standards and procedures for analyzing process and J&J has asked the Supreme Court to reconcile these (in its favor).  Another CivPro petition was also filed by Eon Corp that questions whether an appellee needed to file a R.50 JMOL motion to overturn a jury verdict that was based upon a faulty legal conclusion by the district court (here claim construction).  The Question Presented is:

Whether the Federal Circuit erred in ordering entry of judgment as a matter of law on a ground not presented in a Rule 50 motion in the district court, even though the ground presented a purely legal question.

Both J&J and Eon are only marginally patent cases, the core procedure case now pending is TC Heartland that would substantially upset the status quo of patent lawsuit concentration in E.D. Texas. Briefing continues in TC Heartland. In recent weeks a set of seven amici briefs were filed on the top side.

Next week Supreme Court conference includes review of the most likely-to-be-granted petition of Impression Products, Inc. v. Lexmark International, Inc. that focuses on important questions of post-sale exhaustion of patent rights.  The setup – If I buy a used product that was made and sold by the patentee, do I still need to worry that I might get sued for patent infringement?  The Federal Circuit says yes. The Supreme Court is likely to add some caveats to that.  The US Government (Obama Administration via DOJ) has argued that the case should be reviewed and that the Federal Circuit’s position should be rejected. Both parties then filed supplemental responsive briefs.  Lexmark’s best argument here is that these principles are well settled and that Congress can take on the role of tweaking them if needed.

Upcoming Supreme Court Oral Argument: Life Tech (export of components) set for December 6, 2016.

(more…)

TC Heartland Law Professor Amicus Brief

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In TC Heartland, the accused infringer has asked the Supreme Court to reset the law of venue and give effect to the statutory statement that infringement actions be brought either (1) “in the judicial district where the defendant resides” or (2)” where the defendant has committed acts of infringement and has a regular and established place of business.”  28 U.S.C. § 1400(b).   In its 1957 Fourco decision, the Supreme Court affirmatively answered this question.  However, Fourco has been undermined by subsequent Federal Circuit decisions.  Thus, the question presented again is the same as what was originally asked in Fourco: “Whether 28 U.S.C. § 1400(b) is the sole and exclusive provision governing venue in patent infringement actions and is not to be supplemented by 28 U.S.C. § 1391(c).”

From a policy perspective, the case is seen as a vehicle for defendants who do not like being sued in the Eastern District of Texas and into more venues perceived as more defendant friendly.

A group of 50+ law and economics professors led by Mark Lemley, Colleen Chien, Brian Love, and Arti Rai have filed an important brief in support of the TC Heartland petition that I have copied below.  Their position is (1) the Federal Circuit has erred on interpreting the law; and (2) the permissive venue result has fueled many of the problems of our patent system.

= = = = =

INTEREST OF AMICI[1]

Amici are 53 professors and researchers of law and economics at universities throughout the United States. We have no personal interest in the outcome of this case, but a professional interest in seeing patent law develop in a way that encourages innovation and creativity as efficiently as possible.

SUMMARY OF ARGUMENT

28 U.S.C. § 1400(b) provides that a defendant in a patent case may be sued where the defendant is incorporated or has a regular and established place of business and has infringed the patent. This Court made clear in Fourco Glass Co. v. Transmirra Prods. Corp., 353 U.S. 222, 223 (1957), that those were the only permissible venues for a patent case.  But the Federal Circuit has rejected Fourco and the plain meaning of § 1400(b), instead permitting a patent plaintiff to file suit against a defendant anywhere there is personal jurisdiction over that defendant.  The result has been rampant forum shopping, particularly by patent trolls. 44% of 2015 patent lawsuits were filed in a single district: the Eastern District of Texas, a forum with plaintiff-friendly rules and practices, and where few of the defendants are incorporated or have established places of business.  And an estimated 86% of 2015 patent cases were filed somewhere other than the jurisdictions specified in the statute. Colleen V. Chien & Michael Risch, Recalibrating Patent Venue, Santa Clara Univ. Legal Studies Research Paper No. 10-1 (Sept. 1, 2016), Table 3. This Court should grant certiorari to review the meaning of 28 U.S.C. § 1400(b) because the Federal Circuit’s dubious interpretation of the statute plays an outsized and detrimental role, both legally and economically, in the patent system.

ARGUMENT

1. The Federal Circuit’s Expansive and Incorrect Interpretation of 28 U.S.C. § 1400(b) Allows Patentholders to Sue Anywhere in the Nation

Section 48 of the Judiciary Act of 1897 limited jurisdiction in patent cases to districts that the defendant inhabited or had a place of business and committed infringing acts. Act of March 3, 1897, c. 395, 29 Stat. 695. In 1942, this Court confirmed that “Congress did not intend the Act of 1897 to dovetail with the general provisions relating to the venue of civil suits, but rather that it alone should control venue in patent infringement proceedings.” Stonite Prods. Co. v. Melvin Lloyd Co., 315 U.S. 561, 563 (1942).

In 1948, Congress enacted 28 U.S.C. § 1400(b), specifying that “patent venue is proper in the judicial district where the defendant resides, or where the defendant has committed acts of infringement and has a regular and established place of business.” In 1957, this Court confirmed that patent venue should not be interpreted with reference to the general jurisdiction statute, holding that “28 U.S.C. 1400(b) . . . is the sole and exclusive provision controlling venue in patent infringement actions, and that it is not to be supplemented by the provisions of 28 U.S.C. 1391(c).” Fourco Glass Co. v. Transmirra Prods. Corp., 353 U.S. 222, 223 (1957).

In 1990, the Federal Circuit declined to apply this Court’s longstanding precedent and decided that the general venue statute should define interpretation of the patent venue statute.  It made this decision on the basis of a ministerial change Congress made in 1988 to 28 U.S.C. § 1391. VE Holding Corp. v. Johnson Gas Appliance Co., 917 F.2d 1574, 1583 (Fed. Cir. 1990). That statutory language changed the wording in 28 U.S.C. § 1391, from defining residence “for venue purposes” to defining residence “for purposes of venue under this chapter.” There was no indication that Congress intended this change to impact the patent venue statute.

The Federal Circuit’s conclusion that Congress’s ministerial change overruled this Court’s longstanding precedent is incorrect for at least two reasons.  First, it violates fundamental rules of statutory construction.  It is well-established that Congress “does not alter the fundamental details of a regulatory scheme in vague terms or ancillary provisions—it does not, one might say, hide elephants in mouseholes.” Whitman v. American Trucking Assns., Inc., 531 U.S. 457, 468 (2001) (citing MCI Telecomm. Corp. v. American Tel. & Tel. Co., 512 U.S. 218, 231 (1994); FDA v. Brown & Williamson Tobacco Corp., 529 U.S. 120, 159-60 (2000)).

Second, the Federal Circuit’s interpretation renders the second half of § 1400(b) largely superfluous.  That section provides:

Any civil action for patent infringement may be brought in the judicial district where the defendant resides, or where the defendant has committed acts of infringement and has a regular and established place of business.

The term “resides” in § 1400(b) must mean something different than having “a regular and established place of business.” Otherwise, there would have been no reason to include both provisions in the venue statute, or to link them through the disjunctive term “or.”  In Brunette, this Court, interpreting 28 U.S.C. § 1400(b) as well as 28 U.S.C. § 1391(d), confirmed that where a corporation “resides” is where it is incorporated. Brunette Mach. Works v. Kockum Indus., 406 U.S. 706, n.2 (1972).

Instead of parsing § 1400(b) carefully, the Federal Circuit has chosen to read the § 1391(c)(2) definition of corporate residence for general venue purposes into the specific patent venue provision.  In relevant part, § 1391(c)(2) provides that corporate defendants:

shall be deemed to reside . . . in any judicial district in which such defendant is subject to the court’s personal jurisdiction with respect to the civil action in question . . . .

For patent infringement cases, the relevant aspect of personal jurisdiction is typically specific jurisdiction, which focuses on whether the defendant’s suit-related conduct establishes a “substantial connection” with the judicial forum in question.  Walden v. Fiore, 134 S.Ct. 1115, 1121 (2014).  But a corporation will have established a suit-related “substantial connection” with, and thus be subject to jurisdiction in, any district in which it “has committed acts of infringement and has a regular and established place of business.” So the Federal Circuit’s decision to read the § 1391(c) definition of “resid[ing]” into § 1400(b) renders the second half of the latter section superfluous as to corporations, a category which includes virtually all patent defendants.  A judicial reading that renders half of a statutory provision superfluous is strongly disfavored.  United States v. Jicarilla Apache Nation, 131 S.Ct. 2313, 2330 (2011) (“‘As our cases have noted in the past, we are hesitant to adopt an interpretation of a congressional enactment which renders superfluous another portion of that same law.’” (quoting Mackey v. Lanier Collection Agency & Serv., Inc., 486 U.S. 825, 837 (1988))); Babbitt v. Sweet Home Chapter of Communities for a Great Oregon, 515 U.S. 687, 698 (1995) (noting “[a] reluctance to treat statutory terms as surplusage”).

The Federal Circuit’s expansive, and we believe incorrect, interpretation of 28 U.S.C. § 1400(b) effectively allows patent owners to file suit in any federal district where an allegedly infringing product is sold.  In re TC Heartland, LLC, No. 2016-105, at 10 (Fed. Cir. Apr. 29, 2016) (holding that jurisdiction is proper in a patent suit “where a nonresident defendant purposefully shipped accused products into the forum through an established distribution channel and the cause of action for patent infringement was alleged to arise out of those activities”).  The widespread availability of products over the internet means, in effect, that patentholders can bring their suits in any district in any state in the country.

2. Permissive Venue has Fueled and Enabled Forum Shopping and Selling, Patent Trolls, and Case Concentration

The Federal Circuit’s expansive interpretation of 28 U.S.C. §1400(b) has harmed the patent system in three distinct ways. It has led to forum selling and forum shopping, it has contributed to the growth of opportunistic patent litigation by patent trolls, and it has led to undue case concentration.

Patent lawyers today spend a great deal of time figuring out the best districts in which to file patent cases, and for good reason. The district in which you file your patent case has consequences for how much your case will cost, how long it will last, and whether you will prevail in court. Mark A. Lemley, Where to File Your Patent Case, 38 AIPLA Q.J. 401 (2010); Brian J. Love & James C. Yoon, Predictably Expensive: A Critical Look at Patent Litigation in the Eastern District of Texas, Stan. Tech. L. Rev. ___ (forthcoming, 2016).

The choice of venue enabled by the Federal Circuit’s liberal interpretation of the statute has created an incentive for courts to differentiate themselves in order to compete for litigants and “sell” their forum to prospective plaintiffs. See J. Jonas Anderson, Court Competition for Patent Cases, 163 U. Pa. L. Rev. 631 (2015); Daniel M. Klerman & Greg Reilly, Forum Selling, 89 S. Cal. L. Rev. 241 (2016).

Among district courts, the Eastern District of Texas is the clear forum of choice for patent plaintiffs. It has been the most popular venue for patent cases in eight of the last ten years. Chien & Risch, supra at 3.  Whether intentionally or not, judges in the Eastern District of Texas have adopted rules and practices relating to case assignment, joinder, discovery, transfer, and summary judgment that attract patent plaintiffs to their district. Klerman & Reilly, supra; Matthew Sag, IP Litigation in U.S. District Courts: 1994-2014, 101 Iowa L. Rev. 1065 (2016) (detailing evidence of “forum selling” and five advantages to plaintiffs of filing suit in the Eastern District of Texas).

A study of all patent cases filed from 2014 to June 2016 quantifies some of the advantages. Love & Yoon, supra.  Compared to their colleagues across the nation, judges in the Eastern District of Texas take 150 additional days on average to rule on motions to transfer, id. at 15, and are 10 percentage points less likely to stay the case in favor of an expert adjudication on the validity of the patent by Patent and Trademark Office (PTO) in inter partes review, id. at 26., despite the fact that patents asserted in the Eastern District of Texas are challenged in inter partes review more often than patents asserted in any other district. Saurabh Vishnubhakat, Arti Rai, & Jay Kesan, Strategic Decision Making in Dual PTAB and District Court Proceedings, 31 Berkeley Tech. Law J. 45, 109 (2016).  At the same time, judges in the Eastern District of Texas have adopted discovery rules that begin earlier, end sooner, and require broader disclosure than just about anywhere else in the country. Love and Yoon, supra at 19-22 (comparing discovery and other pretrial deadlines applicable in the Eastern District of Texas and District of Delaware).  In combination, relatively early and broad discovery requirements and relatively late rulings on motions to transfer ensure that defendants sued in the Eastern District of Texas will be forced to incur large discovery costs, regardless of the case’s connection to the venue.

However, not all types of plaintiffs choose to take advantage of the leverage that these rules and procedures make possible.  Patent assertion entities (PAEs), or patent “trolls” use patents primarily to gain licensing fees rather than to commercialize or transfer technology. Colleen V. Chien, From Arms Race to Marketplace: The Complex Patent Ecosystem and Its Implications for the Patent System, 62 Hastings L.J. 297 (2010) Trolls make particular use of the advantages provided by the Federal Circuit’s permissive approach to forum shopping. Since 2014, over 90 percent of patent suits brought in the Eastern District of Texas were filed by trolls established for the purpose of litigating patent suits.  Love & Yoon, supra at 9. By contrast, operating companies, individuals, and universities are more likely to sue in other districts.  Chien & Risch, supra at 3-4, 40.

The troll business model explains this difference in behavior. As the FTC’s recent report describes, “litigation PAEs” sign licenses that are “less than the lower bounds of early stage litigation costs,” a finding “consistent with nuisance litigation, in which defendant companies decide to settle based on the cost of litigation rather than the likelihood of their infringement.” Federal Trade Commission, Patent Assertion Entity Activity: An FTC Study, https://www.ftc.gov/reports/patent-assertion-entity-activity-ftc-study.   Rather than a decision on the merits and damages commensurate with the value of patented technology, litigation PAEs instead seek to leverage the high cost of litigation to coerce nuisance-value settlements keyed not to the merits of the lawsuit, but the cost of litigation.  Mark A. Lemley & A. Douglas Melamed, Missing the Forest for the Trolls, 113 Colum. L. Rev. 2117 (2013). Further, unlike operating companies that sell products, litigation PAEs generally lack customers and regular operations and therefore have the flexibility to incorporate and file suit based solely on litigation considerations, through shell companies or otherwise.

While forum shopping in general impairs the operation of law, disadvantages those who lack the resources to engage in forum shopping, and creates economic waste, Jeanne C. Fromer, Patentography, 85 N.Y.U. L. Rev. 1444, 1464-1465 (2010), the rise of the troll business model exacerbates these problems in patent litigation, creating a particularly urgent need for the Court to hear this case. This Court has previously warned against the problems of abusive patent litigation.  More than a century ago, it worried about the rise of “a class of speculative schemers who make it their business to watch the advancing wave of improvement, and gather its foam in the form of patented monopolies, which enable them to lay a heavy tax upon the industry of the country, without contributing anything to the real advancement of the arts.”  Atlantic Works v. Brady, 107 U.S. 192, 200 (1883).  And in Commil v. Cisco, this Court said:

The Court is well aware that an “industry has developed in which firms use patents not as a basis for producing and selling goods but, instead, primarily for obtaining licensing fees.” eBay Inc. v. MercExchange, L. L. C., 547 U. S. 388, 396 (2006) (KENNEDY, J., concurring). Some companies may use patents as a sword to go after defendants for money, even when their claims are frivolous.

576  U.S. __, 135 S.Ct. 1920 (2015).

Because troll suits now dominate patent litigation nationwide, their filing patterns have led to an overall concentration of 44% of all patent cases in the Eastern District of Texas in 2015. Among cases initiated 2014 through 2016, one U.S. District Judge on the Eastern District of Texas—Judge Rodney Gilstrap of Marshall, Texas—was assigned almost one quarter of all patent case filings nationwide, more than the total number of patent cases assigned to all federal judges in California, New York, and Florida combined.[2]

This level of concentration is a problem for the legal system whatever one thinks of the decisions of the Eastern District of Texas and regardless of how fair and capable the judges there are. Simply from a logistical standpoint, the current caseload in the Eastern District of Texas is problematic.  If even 10 percent of the 1,686 patent cases assigned to Judge Gilstrap in 2015 go to trial, he will need to preside over three to four patent trials per week every week for an entire year to avoid creating a backlog.

Further, when Congress decided to consolidate patent appeals in the newly-created United States Court of Appeals for the Federal Circuit, it deliberately chose to include both appeals from the United States Patent and Trademark Office and the district courts, so the new court would not hear only appeals from patent owners.  And it considered and rejected proposals to create a specialized district court to hear patent cases.  But the Federal Circuit’s interpretation of § 1400(b) has in practice created just such a court.

The current distribution of patent litigation filings is the result of strategic behavior by a specific type of patent enforcer, not an artifact of proximity to the original locus of invention or alleged infringement. Forum-shopping plaintiffs will naturally gravitate towards whatever district seems to have the most favorable rules. The effect of the Federal Circuit’s decision to expand patent venue beyond the scope of the statute and this Court’s decisions has been to create a de-facto specialized patent trial court, one chosen by litigants on one side rather than by Congress.

CONCLUSION

The Federal Circuit’s permissive venue rule has fundamentally shaped the landscape of patent litigation in ways that harm the patent system, by enabling extensive forum shopping and forum selling, supporting opportunistic patent litigation by patent trolls, and creating undue case concentration.  This Court should grant certiorari in order to curb abuse of venue based on its misinterpretation of § 1400(b).

= = = = =

[1] No person other than the amici and their counsel participated in the writing of this brief or made a financial contribution to the brief. Letters signifying the parties’ consent to the filing of this brief are on file with the Court.

[2] According to Lex Machina, between January 1, 2014 and June 30, 2016 Judge Gilstrap was assigned 3,166 new patent suits, more than the combined total of all district courts in California, Florida, and New York: 2,656. Love & Yoon, supra, at 5 (collecting these statistics).

= = = = =

Signed, Professor John R. Allison (Texas); Professor Margo Bagley (Emory); Professor James Bessen (BU); Professor Jeremy Bock (Memphis); Professor Daniel H. Brean (Akron); Professor Michael A. Carrier (Rutgers); Professor Michael W. Carroll (American); Professor Bernard Chao (Denver); Professor Tun-Jen Chiang (George Mason); Professor Colleen V. Chien (Santa Clara); Professor Andrew Chin (UNC); Professor Robert Cook-Deegan (ASU); Professor Rochelle Dreyfuss (NYU); Dr. Dieter Ernst (Honolulu); Professor Robin C. Feldman (Hastings); Professor Lee Fleming (Berkeley); Professor Brian Frye (Kentucky); Professor William Gallagher (Golden Gate); Professor Shubha Ghosh (Wisconsin); Professor Eric Goldman (Santa Clara); Professor Bronwyn H. Hall (Berkeley); Professor Yaniv Heled (Georgia State); Professor Christian Helmers (Santa Clara); Professor Joachim Henkel (Technische Universität München); Professor Susan Helper (CWRU); Professor Tim Holbrook (Emory); Professor Herbert Hovenkamp (Iowa); Professor William Hubbard (Baltimore); Dr. Xavier Jaravel (Stanford); Professor Dennis S. Karjala (ASU); Professor Peter Lee (UC Davis); Professor Mark A. Lemley (Stanford); Professor David K. Levine (WashU); Professor David S. Levine (Elon); Professor Doug Lichtman (UCLA); Professor Yvette Joy Liebesman (SLU); Professor Orly Lobel (USD); Professor Brian Love (Santa Clara); Professor Phil Malone (Stanford); Professor Michael J. Meurer (BU); Dr. Shawn Miller (Stanford); Professor Matthew Mitchell (Toronto); Professor Susan Barbieri Montgomery (Northeastern); Professor Sean Pager (Michigan State); Professor Arti K. Rai (Duke); Professor Jacob H. Rooksby (Duquesne); Professor Jorge R. Roig (Charleston); Professor Matthew Sag (Loyola Chicago); Professor Pamela Samuelson (Berkeley); Ana Santos Rutschman (DePaul); Professor Lea Bishop Shaver (Indiana); Professor John L. Turner (Georgia); Professor Jennifer Urban (Berkeley); Professor Eric von Hippel (MIT).

Supreme Court Update: Extending the ITC’s Reach Beyond US Borders

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by Dennis Crouch

Constitutional Challenge to Inter Partes Review: Although the Constitutional issues in Cooper v. Lee and MCM v. HP were law-professor-interesting, they were not substantial enough for certiorari.  The Supreme Court has now denied the Cooper and MCM petitions — leaving the IPR regime unchanged.  Although Cooper v. Square is still pending, its chances are slight. The Supreme Court has also denied certiorari in Encyclopaedia Britannica (malpractice), Gnosis (appellate review), and GeoTag (case-or-controversy).

A new 101 Challenge: In its first conference of the term, the Supreme Court denied all of the pending petitions regarding patent eligibility.  However, Trading Technologies has filed a new petition asking whether a new card game is categorically unpatentable so long as it uses a standard deck (rather than a novel deck) of cards.  My post on the case asks: Does the Patent Statute Cabin-in the Abstract Idea Exception?  That question references Section 100 of the Patent Act that expressly allows for the patenting of new use of a known manufacture.

Extra Territoriality of Trade Secrecy Law: On the trade secrecy front, Sino Legend has petitioned to review the Federal Circuit’s affirmance of the International Trade Commision’s ban on Legend’s importation of rubber resins used for tire production. The underlying bad-act was a trade secret misappropriation that occurred in China and the question on appeal asks: Whether Section 337(a)(1)(A) permits the ITC to adjudicate claims regarding trade secret misappropriation alleged to have occurred outside the United States.  A Chinese court looked at the same case and found no misappropriation.

Design Patent Damages: Oral arguments were held earlier this week in Samsung v. Apple. During the arguments, all parties agreed that (1) the statute does not allow for apportionment of damages but rather requires profit disgorgement; (2) the article-of-manufacture from which profits can be calculated may be a component of the product sold to consumers; and (3) the determination of what counts as the article-of-manufacture is a question of fact to be determined by the jury.   The only dispute then was on the factors that a jury should be considered and when the “inside gears” of a product should ever be included in the calculation.

Upcoming Supreme Court Oral Argument: SCA Hygiene (laches) on November 1; Star Athletica (copyright of cheerleader outfit) on October 31.

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Supreme Court Patent Cases – September 28 Update

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by Dennis Crouch

Cooper v. Lee and Cooper v. Square are both ask the same question: whether 35 U.S.C. §318(b) violates Article III of the United States Constitution, to the extent that it empowers an executive agency tribunal to assert judicial power canceling private property rights amongst private parties embroiled in a private federal dispute of a type known in the common law courts of 1789, rather than merely issue an advisory opinion as an adjunct to a trial court.”  The issues here are also parallel to those raised in MCM Portfolio v. HP (“Does IPR violate Article III of the Constitution?”).  The cases received a boost this month with the Court’s call for response (CFR) in Cooper v. Square.  Square had previously waived its right to respond, but its response is now expected by October 11, 2016.  Under Supreme Court R. 37, the Call for Response reopens the period for filing of an amicus curiae brief in support of petitioner. (~ due October 8, 2016).  Eight Amici Curiae briefs were filed in MCM and two in Cooper v. Lee.  In general, each brief additional brief incrementally increases the odds of certiorari.  Statistical analysis also suggests that a call for response significantly increases the odds of certiorari being granted.

I wrote earlier this week about the new IPR process challenge in Ethicon where the patentee has challenged Director Lee’s delegation of institution decision authority to the PTAB.  The case is one of statutory interpretation but uses the separation-of-function doctrine as an interpretive guide. The same question is also presented in LifeScan Scotland, Ltd. v. Pharmatech Solutions, Inc.  Both petitioners (Ethicon and LifeScan) are owned by J&J.

The final new petition is a personal jurisdiction case: Mylan v. Acorda.  The Hatch-Waxman setup involved Mylan preparing and filing its abbreviated new drug application that created a cause of action for infringement under 35 U.S.C. 271(e)(2). Although the ANDA preparation occurred in West Virginia and the filing in Maryland, the infringement lawsuit was filed by Acorda in Delaware.  Mylan asks: “Whether the mere filing of an abbreviated new drug application by a generic pharmaceutical manufacturer is sufficient to subject the manufacturer to specific personal jurisdiction in any state where it might someday market the drug.”  The argument builds on the non-patent decision Daimler AG v. Bauman, 134 S. Ct. 746 (2014). In the pro-business case of Daimler, the Supreme Court reduced the scope of general personal jurisdiction to states where the defendant company is incorporated or has its personal place of business.

 

In the claim construction front, the Supreme Court also called for a response in Google v. Cioffi. In that case Google suggests an interpretative principle of “strictly construing” amended claim language against the patentee. [GoogleCioffiPetition]

On the merits side – we have three patent cases pending oral arguments.  First-up is the design patent damages case of Apple v. Samsung.   Although not a party, the Solicitor General has requested to been granted leave to participate in oral arguments.   Its brief, the SJ argued (1) Section 289 does not permit apportionment but rather requires award of the infringers profits on the relevant article of manufacture; but (2) the article of manufacture can be a “component” rather than a finished product sold to end-users.  In the end, the SJ argues that the jury should have been tasked with determining the appropriate article-of-manufacture and that the case should be remanded to determine whether a new trial is warranted.  Briefing continues in both SCA Hygiene (laches) and Life Tech (Component Export liability).

 

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Supreme Court Patent Cases: Malpractice, Obviousness, and Venue

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by Dennis Crouch

The Supreme Court will begin granting and denying petitions in early October.  Meanwhile, several new petitions are now on file.  Last week I wrote about the TC Heartland case as a mechanism for limiting venue. Without any good reason, the Federal Circuit overruled a 1957 Supreme Court case that had strictly limited patent venue as spelled out in the patent venue statute 1400(b).  See VE Holdings (explaining its overruling of Fourco Glass). A result of VE Holdings is the expansive venue availability that facilitated the rise of E.D. Texas as the most popular patent venue. TC Heartland simply asks the Supreme Court reassert its Fourco holding – something that could almost be done with a one-line opinion: “REVERSED. See Fourco Glass Co. v. Transmirra Products Corp., 353 U.S. 222 (1957).”  The best arguments for the Federal Circuit’s approach are (1) the reasoning of Fourco itself is a bit dodgy; and (2) VE Holdings is well settled doctrine (decided 26 years ago) and Congress has revised the statutory provisions several times without amending.  As a side note, several members of Congress have suggested they will act legislatively if SCOTUS fails to act.

Two new petitions (Grunenthal v. Teva and Purdue v. Epic) stem from the same Federal Circuit OxyContin case and focus on anticipation and obviousness respectively.  Grunenthal v. Teva questions how ‘inherently’ operates for anticipation purposes.   Purdue suggests that – despite the final sentence of Section 103, that the actual circumstances of the invention should be available to help prove non-obviousness (but still not be available to prove obviousness).   Another new petition includes the BPCIA case Apotex v. Amgen that serves as a complement to the pending Sandoz case questioning the requirements and benefits of providing notice of commercial marketing.

Finally – Encyclopedia Britannica v. Dickstein Shapiro is a patent prosecution malpractice action.  The lower court held the lawyers harmless since Alice would have invalidated the patents even if drafted to perfection. The petition asks whether Alice Corp can excuse patent prosecutors from alleged prosecution errors made well prior to that decision.

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Supreme Court Patent Cases: Previewing the October Term 2016

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by Dennis Crouch

When the Supreme Court’s October 2016 Term begins in a few weeks, its first patent hearing will be the design patent damages case of Samsung v. Apple. In Samsung, the Court asks: Where a design patent is applied to only a component of a product, should an award of infringer’s profits be limited to those profits attributable to the component?  The statute at issue – 35 U.S.C. § 289 – indicates that, someone who (without license) “applies” the patented design (or colorable imitation thereof) to an article of manufacture, “shall be liable to the owner to the extent of his total profit.”  Up to now, courts have repeatedly held that the “profits” are profits associated with the product (i.e., the article of manufacture) being sold, but Samsung is asking that the profits be limited only to components of the product closely associated with the patented design.  Although Apple’s position is supported by both the text and history and is the approach easiest to calculate, I expect that many on the Court will be drawn to the potential unjust outcomes of that approach.  Apple wins in a 4-4 split.  Oral arguments are set for October 11, 2016.

The court has granted certiorari in two other cases for this October 2016 term with briefing ongoing. In Life Tech v. Promega, the court again takes up the issue of exporting components of a patented invention and the extraterritorial application of US law.  35 U.S.C. § 271(f)(2). The question here is whether export of one component can legally constitute the “substantial portion of the components” required by statute for liability to attach.  In the case, the component (Taq) is a commodity but is also an admitted critical aspect of the invention. In SCA Hygiene v. First Quality, the Court asks whether the equitable defense of laches applies in patent cases.  The case is a follow-on to the Supreme Court’s 2014 holding in Petrella v. MGM that laches does not apply in copyright cases.  In its decision, the Federal Circuit distinguished Petrella based both upon statutory and policy arguments. Oral arguments in SCA are set for November 1, 2016.

The three pending petitions most likely to be granted certiorari are Impression Products (exhaustion); Amgen (BPCIA); and GlaxoSmithKline (antitrust reverse payments)   However, these cases are awaiting views of the Solicitor General — which likely will not be filed until well after the presidential election.

A substantial number of cases are set for the Supreme Court’s September 26 conference.  These include the constitutional challenges to IPR coming in MCM and Carl Cooper as well as the interesting eligibility case of Genetic Tech v. Merial.

It looks to be an interesting term.

The big list:

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Patentlyo Bits and Bytes by Anthony McCain

Patent

Get a Job doing Patent Law

Bard v. W.L. Gore: Revisiting Willful Infringement (Again)

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By Jason Rantanen

Bard Peripheral Vascular, Inc. v. W.L. Gore & Associates, Inc. (Fed. Cir. 2015) 14-1114.Opinion.1-7-2015.1
Panel: Prost (author), Hughes (concurring), Newman (dissenting)

Professor Tom Cotter has an excellent write-up of this opinion over on his blog, Comparative Patent Remedies.   The main issue involves willful infringement: applying the de novo standard of review to the objective prong of the willfulness inquiry, as per Seagate and the earlier Bard decision, the majority affirmed the district court’s conclusion that Bard willfully infringed because its noninfringement defense is not “susceptible to a reasonable conclusion of no infringement. ” Judge Hughes wrote separately to reiterate his “belief that the full court should review our willfulness jurisprudence in light of the Supreme Court’s recent decisions” in Highmark  and Octane Fitness.  Judge Newman dissented; in her view, the majority failed to apply the de novo standard of review required by Seagate; applying that standard, the district court erred.   Judge Newman also questioned the imposition of double damages.

Judge Hughes’ concurrence, like Judge O’Malley’s concurrence in Halo v. Pulse last fall, suggests that the Federal Circuit remains divided on the appropriate legal standard for willful infringement post-Highmark and Octane Fitness.  Panels remain bound by the de novo standard set out in Seagate, but Judges Hughes and O’Malley strongly believe that the court should reconsider that precedent.  It may be only a matter of time before the Federal Circuit either addresses this divide en banc or the Supreme Court grants cert.  It’s also possible that the Court will provide some guidance on the issue in Commil v. Cisco; we’ll know later this year.

 

Halo v. Pulse: Escaping Willfulness with Ex Post Reasoning

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by Dennis Crouch

Halo has petitioned the Federal Circuit to rehear its electronics patent case against Pulse with two questions presented:

  1. Willfulness: Whether an infringer who subjectively knew pre-suit that it was infringing a valid patent (after being given notice of the patent, and failing to design around, seek a license, or stop infringing) can use an unsuccessful defense developed post-suit as a per se bar to liability for pre-suit willful infringement, despite the flexible text of 35 U.S.C. § 284.
  2. Sale/Offer for Sale: Whether a requirements contract for a patented product that is negotiated and executed in the U.S., subject to California law, and includes binding pricing and quantity terms constitutes a “sale” and “offer for sale” under 35 U.S.C. § 271(a).

The petition is well designed and holds a strong possibility of review.  In the original panel decision, Judge O’Malley (joined by Judge Hughes) called for en banc review of the court’s willfulness jurisprudence. Jason Rantanen wrote more here.  The case also has interesting links with Commil v. Cisco that is now pending before the Supreme Court.

Regarding the Sale issue, I see less merit. As Lucas Osborne writes, although the contract was negotiated and signed within the US, the actual performance was to be done outside of the US.  In the litigation, the patentee was able to capture royalties for all of the products imported into the U.S., but here is seeking damages for worldwide sales.

Inter Partes Review: An Unconstitutional Delegation of Judical Power

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Carl Cooper has now filed his constitutional challenge to the Inter Partes Review (IPR) system — arguing that the system is an unconstitutional delegation of judicial power to an administrative agency. [Petition: Cooper v. Lee]

Question presented:

Whether 35 U.S.C. §318(b) violates Article III of the United States Constitution, to the extent that it empowers an executive agency tribunal to assert judicial power canceling private property rights amongst private parties embroiled in a private federal dispute of a type known in the common law courts of 1789, rather than merely issue an advisory opinion as an adjunct to a trial court.

The brief here is well-written because it focuses on the tight issue of parallel court/proceedings and the history:

No previous court has ever approved delegating validity-determination authority over common-law-adjudicated property rights to a non-Article III decisionmaker.

And, the petition suggests a way-out via an advisory opinion from the PTAB:

[T]his Court may make the process constitutionally sound by doing what it has always done under these circumstances: make the outcome of inter partes review advisory and subject to de novo treatment in an Article III trial court. So corrected, inter partes review may still identify and appropriately target “junk patents,” though an Article III trial court will need to perform the final act of invalidation.

 

Cooper also suggests that the court link this case to Cuozzo:

This Court may thus hear the two cases together, the one raising smaller issues (Cuozzo) alongside the one raising larger issues (this case). That would secure a more complete vetting of administrative agency authority.

Obviously, a favorable decision here could render Cuozzo completely moot, and wouldn’t that be quite interesting.

 

USPTO News

Patent
  • USPTO has a new data viewer with direct data access: PatentsView
  • USPTO earlier created a pilot program for streamlining PTAB ex parte appeals.  However, the nature of those appeals limited the process only to entities with multiple appeals pending.  The Office has now launched a second track focused on small and micro entities that only have one appeal pending. LINK.
  • USPTO has created a new tool for scheduling interviews – “USPTO AIR” available here: http://www.uspto.gov/patent/laws-and-regulations/interview-practice

Supreme Court: Problem of Divided Ownership

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by Dennis Crouch

The general rule is that all co-owners of a patent must join together as plaintiffs less the case be dismissed.  In STC.UNM v. Intel, the Federal Circuit ruled that, while co-owners are necessary parties, they may not be involuntarily joined.  That decision is in some tension with Fed. R. Civ. Pro. Rule 19 that empowers a court to order the joinder of a necessary party.  In the case, STC and Sandia National Labs co-own U.S. Patent No. 6,042,998, but Sandia refused to participate in the case.

In a new filing, STC has petitioned the Supreme Court for a writ of certiorari with the following question:

Rule 19 of the Federal Rules of Civil Procedure provides that where a necessary party to a lawsuit has not been joined, “the court must order that the person be made a party.” The Court of Appeals for the Federal Circuit ruled below that Rule 19 is “trumped” by a purported “substantive rule” that a co-owner of a patent can “impede an infringement suit brought by another co-owner.” The majority opinion below stands in stark contrast to this Court’s precedents. For over seventy years, this Court has rejected every statutory challenge to a Federal Rule that has come before it.

The petition particularly argues that the Federal Circuit decision is in conflict with Sibbach v. Wilson, 312 U.S. 1 (1941) and its progeny.

The original decision was authored by Judge Rader (joined by Dyk) with Judge Newman in dissent.  In its 6-4 en banc denial, Judge Dyk authored an opinion concurring with the denial (joined by Moore and Taranto) while both Judges Newman (joined by Lourie, O’Malley, and Wallach) and O’Malley (joined by Newman, Lourie and Wallach) dissented from the en banc denial.

I give the case a better-than-average odds for certiorari and, if granted, the court would likely reverse.

= = = = =

The ownership-tale of the case is a seeming malpractice nightmare.  Briefly, the invention stems out a joint research project between employees at UNM and Sandia.  Three of the named inventors were UNM employees while the fourth (Draper) worked at Sandia.  In 1996, Draper signed an assignment of his rights in the first patent to UNM but then a few months later assigned his rights to Sandia and the new assignment was filed as correction being “made in error” since it had erroneously identified Draper as an employee of UNM.  UNM did not challenge this new filing, but at times in the subsequent decade made several statements regarding its sole ownership of the first patent.

The patent in suit is is based upon the first patent but excludes Draper as an inventor.  (UNM later filed a certificate of correction to formalize the relationship as a continuation in part).  Because of the difference in inventor-employer rights, it would seem that UNM would have full rights to the continuation.  However, in order to overcome an obviousness-type-double-patenting rejection, UNM filed a terminal disclaimer in the second case, linking its term and ownership to that of the first patent. Of course, at the time, the two patents seemingly did not have the same ownership structure and UNM indicated to the USPTO that it was “the owner of record of a 100 percent interest” in the second patent.  In the present lawsuit, however, STC eventually admitted that the corrected Draper assignment was effective to give Sandia ownership rights in both the first patent and the second.  And that admission appears to be treated as an assignment of rights to Sandia if such is necessary.

= = = = =

Wegner recognized the case in his final top-ten:

Coffee and Claim Construction: The Plain and Ordinary Meaning of “Barcode”

Patent

Guest Post by Jordan Duenckel. Jordan is a third-year law student at the University of Missouri and a registered patent agent. He has an extensive background in chemistry and food science.  

A recent Federal Circuit opinion, K-Fee v. Nespresso, 2022-2042, — F.4th — (Fed. Cir. Dec. 26, 2023), arises from an infringement suit filed by K-fee System GmbH against Nespresso USA, Inc. in the Central District of California and revives a coffee controversy. K-fee owns three related patents (the ‘176, ‘177, and ‘531 patents) concerning coffee capsules that display information via a “barcode” which is read by the coffee machine to control the beverage production process. The key dispute is over the meaning of “barcode” and whether there was any prosecution disclaimer.

The technology underlying the dispute is individual coffee pods that have a barcode located on the outer rim of the pod that the coffee machine can read to self-adjust temperature, water amount, and other characteristics to brew different types of coffee all without user input creating a “one touch” gourmet coffee maker. Depending on the pod, our Nespresso machine can make expresso, a double expresso for the wife, or just a cup of black coffee for me. 

K-fee owns U.S. Patent No. 10,858,176 and claim one reads in part:  

1. A method of making a coffee beverage comprising: 

providing an apparatus including a barcode reader; 

inserting a first portion capsule into the apparatus, the first portion capsule including . . . an opposing bottom side with a first barcode located on the bottom side, . . . ; 

reading the first barcode with the barcode reader; 

controlling a production process of a first coffee beverage based upon the reading of the first barcode; 

The initial issue is the plain and ordinary definition of a barcode as both parties agree that the plain and ordinary definition is appropriate but disagree about what that meaning is. The district court issued a claim construction order construing “barcode,” relying on statements K-fee made distinguishing certain prior art (Jarisch) during prosecution of a related European patent before the European Patent Office (EPO). Based on K-fee’s statements that Jarisch discloses a “bit code” rather than a barcode, the district court construed barcode to exclude the type of bit codes in Jarisch. The district court granted summary judgment of non-infringement to Nespresso, finding that its accused coffee capsules use a code identical to Jarisch’s bit codes.  

The Federal Circuit reviewed appeal of the claim construction de novo because the claim construction relied only on intrinsic evidence. The claims and specification did not define “barcode,” so the court looked to the prosecution history, specifically K-fee’s statements distinguishing the Jarisch reference before the European Patent Office. Specifically examined were what the statements would indicate to a person having ordinary skill in the art about the meaning of “barcode.” K-fee presented evidence consisting of quotes from technical publications describing “barcode” as a code with bars of varying widths. K-fee also explicitly stated “the [skilled artisan] at all times defines the term ‘barcode’ as a line code constructed of bars having variable widths.” Additional confirmation is in K-fee’s statement that standard UPC retail barcodes fall within the scope of its claims. Since K-fee did not describe anything about how retail barcodes encode data, this further indicates K-fee was focused only on the visual appearance of varying width bars when referring to “barcodes.” 

Judge Taranto concludes a skilled artisan would not understand K-fee’s statements as excluding all bit codes from the scope of “barcode.” He specifically points to K-fee explicitly stating that retail barcodes like UPC codes are barcodes, even though they contain binary code elements. Citing Phillips v. AWH Corp.,415 F.3d 1303, 1312-17 (Fed. Cir. 2005), Judge Taranto found that the ordinary meaning of “barcode” to a relevant artisan focuses on visual appearance – i.e. a linear sequence of visually non-uniform width bars and concluded that the district court erred in narrowing the ordinary meaning of “barcode” based on K-fee’s statements to the EPO.  

I am sympathetic to Nespresso’s concern that the focus on visual appearance as to ordinary meaning misses some of the nuance about what the barcodes actually represent and that a relevant artisan would consider their functional purpose. As construed by Judge Taranto, “varying-width visual appearance of the bars” is an extraordinarily broad claim construction that seems to expand the claim scope significantly compared to the more narrow district court construction.    

The corollary issue is whether K-fee’s statements to the EPO are disclaimer of claim scope. Nespresso alleges that K-fee’s statements to the EPO constitute surrender of claim scope that would include their Vertuo coffee pod product. The court notes disclaimer requires “clear and unmistakable” statements, unequivocally disavowing claim scope. Looking at K-fee’s EPO submissions, statements about bit codes being excluded from barcodes were ambiguous rather than clear. For example, K-fee said a barcode “can be, but is not necessarily, a bit code.” This directly contradicts disclaimer of all bit codes. 

Judge Taranto concludes that the prosecution history as a whole does not show K-fee clearly disclaimed any portion of the ordinary meaning of “barcode.” The only thing K-fee clearly distinguished was the Jarisch reference itself, which does not expressly disclose varying width bars. Multiple instances indicate some possible indicia that K-fee disclaimed some scope however, it was not “clear and unmistakeable” as required to find disclaimer.  Therefore, reversing the district court’s construction of “barcode” also necessitated reversing the summary judgment of non-infringement that was based entirely on the erroneous claim construction.

Enablement, Written Description, and Anticipation: Takeaways from United Therapeutics v. Liquidia

Patent

by Dennis Crouch

The Federal Circuit recently affirmed a district court decision in United Therapeutics Corp. v. Liquidia Technologies, Inc., providing guidance on enablement, written description, and claim construction for method claims. The case involved patents covering treating pulmonary hypertension with treprostinil.

United Therapeutics Corp. v. Liquidia Technologies, Inc., 2022-2217, 2023-1021 (Fed. Cir. July 24, 2023)

United Therapeutics sued Liquidia for infringing two patents  covering the treatment of pulmonary hypertension using the drug treprostinil (US10716793) and a purified form of the drug itself (US9593066).  The patentee won on the treatment patent but lost on composition patent, with the district court holding that the broader composition claims were anticipated while the narrower claims were not infringed.  Both sides appealed, and the Federal Circuit affirmed on all grounds.

Enablement/Written Description of Unclaimed Variants

A key issue is whether the claims lack enablement and written description. The  treatment claims are directed to “treating pulmonary hypertension,” and the defendant argued that the claim was unduly broad in its swath. In particular, the specification provides guidance only for certain types of pulmonary hypertension.  No disclosure is given for how to treat Group 2 Pulmonary Venous Hypertension.

The Federal Circuit rejected this argument:

Liquidia essentially asks us to treat Group 2 PH as a claimed species within a larger genus (i.e., all five groups of pulmonary hypertension). But analogizing a subset of patients having a variant of a particular disease to traditional genus and species claims is inapt. It would be incorrect to fractionate a disease or condition that a method of treatment claim is directed to, and to require a separate disclosure in the specification for each individual variant of the condition (here, an individual group of pulmonary hypertension patients) in order to satisfy the enablement and written description provisions of 35 U.S.C. § 112, unless these variants are specified in the claims.

Slip Op. This decision provides important guidance for drafting and prosecuting method claims, making clear that the specification does not need to address every possible disease subtype or non-responsive patient population to satisfy 35 USC 112, as long as those limitations are not captured in the claims.  Specifications need not address every disease subtype or patient population, as long as not expressly captured in the claims.  It will be interesting though to see how this precedent sits along side the recent focus on “full scope” disclosure.

The court also dug into the details to find that the treatment improved Group 2 PH hemodynamics (the studied marker of improvement) even if it also increased mortality of those patients.  That death problem “may be an issue for the FDA. But our focus is on the claimed invention. And on this record, with the district court’s claim construction, the claims are adequately enabled.”

Claim Construction and Safety/Efficacy Limitations

As mentioned, the claims are directed to “[a] method of treating pulmonary  hypertension comprising administering … a therapeutically effective single event dose …”  The accused infringer argued that this language should be construed to require a showing of both safety and efficacy. On appeal though the appellate panel agreed with the district court that “therapeutically effective” had been particularly defined in the specification is improving hemodynamic values and the preamble language of treating PH “does not import any additional efficacy limitations or any safety limitations.”  Again, the court washed its hands of any safety or efficacy concerns: “Questions of safety and efficacy in patent law have long fallen under the purview of the FDA. . . We decline to insert the FDA’s responsibilities into claims by importing requirements where they do not recite such limitations.”

Product-by-Process Claims

Some of the composition claims were directed to a product (treprostinil) prepared  by a particular process (alkylation and hydrolysis). When judging this type of product-by-process claim for anticipation purposes, courts ignore the process limitation.  The question becomes simply whether the prior art discloses the claimed product even if created by some different or not disclosed process. “As these claims are product claims, they are anticipated by a disclosure of the same product irrespective of the processes by which they are made.” Slip Op.  Here, the defendant had provided such a references.

Affirmed.

Accused Infringer’s Penalties for Violating Consent Order Remain – Despite Patent being Later Found Invalid

Patent

by Dennis Crouch

DBN Holdings (DeLorme) v. International Trade Commission (Fed. Cir. 2022)

This case is a bit complicated procedurally — the basic facts are here:

  1. BriarTek’s brought an ITC action against DeLorme (now DBN) asserting U.S. Patent No. 7,991,380 covering “two-way global satellite communication devices.”  DBN settled that dispute and agreed to stop importing the accused products.
  2. But, DBN actually continued to import covered products and the ITC assessed a civil penalty of $6.2 million for violation of the consent decree.
  3. After being charged with the penalty, DBN filed an action in Federal Court seeking a declaration that the patent claims were invalid.  DBN won the case and the invalidity was affirmed on appeal.  Once the patent was invalidated, the consent decree (by its terms) no longer barred DBN from importing products.  However, DBN also wanted to escape from the $6.2 million fine for its pre-invalidation violations.
  4. The ITC refused to relieve DBN from payment of the fine — finding it “res judicata” based upon a prior affirmance of the fine by the Federal Circuit.  Back on appeal in 2018, the Federal circuit vacated that judgment — holding instead that the ITC possessed authority to rescind or modify the civil penalty in light of the invalidity of the relevant patent claims.
  5. Back on remand, the ITC maintained the penalty — finding that the ex post invalidation did not free DBN from penalties associated with its bad faith violation of the consent orders and disrespect to the ITC.  This last decision is what is on appeal now, and the Federal Circuit has affirmed.

The Federal Circuit explains:

By entering the consent order, DBN agreed to discontinue any violation of Section 337. The ITC, in turn, terminated the investigation as required. From a contractual perspective, the breach of this promise provides the ITC a distinct ground for imposing a civil penalty. DBN agreed to the terms of the consent order, and those terms “unambiguously indicate[] that the invalidation trigger—like the expiration and unenforceability triggers—applies only prospectively.” Had the consent order been written in retrospective terms, DBN might have a stronger argument that the invalidation of the asserted claims renders the consent order null and void, or that modification is required. But under the clear terms of the consent order, DBN remained potentially liable for any violations up to the time of invalidation.

Slip Op. Judge Reyna’s opinion provides a rough roadmap for accused infringers entering into consent decrees — endeavor to negotiate retrospective terms regarding invalidity. This would look like something along these lines: “Defendant agrees to no longer import or sell any products infringing the asserted claims . . . . If the patent is later found invalid, Defendant will no longer be bound by the consent decree and the court will reconsider any prior adverse judgments against Defendant in light of the new invalidation.”

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The prospective/retrospective considerations here point toward a philosophical question of whether an invalidity decision is should be seen as an action cancelling a patent or instead is merely revealing that the patent has always been invalid.  The consent order in this case agreement particularly states that DBN won’t import products “that infringe claims 1, 2, 5, 10–12, and 34 of the ’380 Patent.”  One argument here is that the proper interpretation of “infringe” assumes patent validity.  Once we figured out that the patent is invalid, doesn’t that mean that it was always invalid?

 

Easy Patent law Quiz for 2021:

Patent

You should be able to easily answer these questions: 

Prof. Crunch stays fit with his rebounder (a mini-trampoline).  These already exist, but Crunch has designed a new model that includes a handle (for stability) and also a touchscreen control that can be used to stream audio/video instructions.  (These are shown in the figure below). He plans to sell a higher end model that includes displaying the bouncing-tempo on the screen and also energy-exerted (using movement-sensors in the rubber-bands or springs).

Crunch recently filed a utility patent application (February 2021) with the USPTO seeking to patent the following two claims:

1. An exercise apparatus comprising: 
  a mini-trampoline; 
  a support handle secured to the mini-trampoline that includes a grip-bar; and
  a touch-screen electronic device attached to the support handle and configured with software for displaying real-time exercise instructions. 

2. The apparatus of claim 1, further comprising motion sensors attached to the mini-trampoline and configured to provide data to the touch-screen electronic device and wherein the touch-screen electronic device is configured to use the data provided to calculate and display energy-exerted by a user in real-time.

Crunch admits that all of the elements of his invention were individually available in the prior art.  In particular, mini-trampolines with handles were already available, as were touch screens for displaying real-time instructions. Likewise, motion sensors are available, as well as algorithms for calculating energy use while trampolining.  However, he has not seen any prior art that combines everything together in this particular way.

Question 1. (100 words) Are Crunch’s claims directed toward eligible subject matter?

Question 2. (80 words) Provide a concise argument why the USPTO should reject claim 1 as indefinite.

Question 3. (300 words) Based upon what you know so far, do Sections 102 or 103 create any hurdle to patentability?

Question 4. (100 words) Five years later … Crunch has obtained his patent exactly as claimed above and business is booming.  Crunch recently found that GummyBearCo is selling a product that he thinks is infringing his claim 1. The only differences are that (1) it is a large 15-foot trampoline and (2) there is no “handle” per se. Rather, the screen is simply mounted to a pole at the edge of the trampoline. Also, although the GummyBearCo product is sold in the USA, it is actually manufactured in China. Can he prove infringement?

Here’s a Quarter … : Continued Tricks in Defining what as a Covered Business Method Patent

Patent

SIPCO, LLC v. Emerson Electric Co. (Fed. Cir. 2019) On appeal from CBM2016-
00095 (Covered Business Method Review).

In its final written decision, the PTAB sided with the patent challenger Emerson Electric — finding claims of SIPCO’s U.S. Patent 8,908,842 invalid as lacking eligibility and as obvious. Claims 1, 7, 9, 16, and 17.

The patent at issue requires a “low-power transceiver” connected to the internet and wirelessly connected to a remote device.  The patent included dependent claims 3 and 4 that defined the remote device as a “vending machine” and “ATM” respectively.  However, those claims were disclaimed during prosecution — and part of appeal argument is the role of disclaimed claims in construction of the remaining claims.

Note for younger attorneys, the item labeled 110 is a “pay phone.”

Covered Business Method Review (CBM) allows a third-party to challenge to certain business-method patents in an AIA-Trial.  Inter partes review (IPR) proceedings are limited to novelty and obviousness challenges and “only on the basis of prior art consisting of patents or printed publications.”  35 U.S.C. 311.  Post-grant review (PGR) proceedings have much broader scope — any condition of patentability except best-mode. 35 U.S.C. 321.  However, PGR proceedings may only be filed against post-AIA patent and must be filed within 9 months of issuance.

The third category – CBM – has the same scope of patentability challenges as PGR  (including eligibility, enablement, and indefiniteness), but can only be filed against patents that meet the definition of a “covered business method patent”

a patent that claims a method or corresponding apparatus for performing data processing or other operations used in the practice, administration, or management of a financial product or service, except that the term does not include patents for technological inventions.

SEC. 18 of the AIA. Looking at the definition above, you’ll note that this is a narrow definition of a “business method” patent — especially the notion that it cannot cover “patents for technological inventions.” (Technological is left undefined in the statute).  Note, the CBM provisions are not codified in Title 35 because the program is not permanent — it is set to sunset 8-years after the first CBM was permitted to be filed. My calculation of that date is September 16, 2020 and no new petitions will be accepted after that date.

NonAppealable: In the appeal, SIPCO argues that its patent is a technological invention and thus should be immune from CBM challenge. And, although the PTO’s decision to initiate a CBM proceeding is “nonappealable,” the Federal Circuit has repeatedly ruled that it can review the PTO decision of whether the challenged patent satisfies the legal limits of the CBM process — i.e., whether the patent challenged in a CBM is a technological invention.

Two Step Test for Technological: The USPTO has issued regulations defining technological inventions as requiring (1) recitation of a nonobvious technological feature; and (2) solving a technical problem using a technical solution.  37 C.F.R. § 42.301(b).  Thus, claims that recite “post-solution” technology could still be deemed not technological.  A reminder here – that the judgment of whether a patent is amenable to CBM review is considered on a patent-by-patent basis — it is either all-in or all-out — and not on a claim-by-claim basis.

After reviewing “both the claims and the specification,” the Federal Circuit concluded that the invention satisfied step two of the two step test – the invention “implements a communication system that connects an unconnected, remote device with a central station . . . by taking advantage of a set of intermediate nodes … connected to the central station over an existing communication network.”  The patent discusses the problems of signal interference, contention, and hacking — and offers its solution of using a “two-step” communications and low-powered transceivers that limit transmission range.  The PTAB had not considered step 1 and so on remand the PTAB will consider whether the claims recite nonobvious technological features.  Although the court left this issue for the PTAB to decide, it noted that the nonobviousness here might be a different sort of analysis than what is used for Section 103.

Low Power = Limited Range: The Federal Circuit’s conclusion of technological solution is substantially based upon a narrow claim construction of the term “low power transceiver.”  The court found that the term should be interpreted (as properly read in light of the specification) as meaning a transceiver with a limited transmission range.  That result comes from one of the goals of the invention — avoiding conflict between transceiver communications. “It is only if the signal transmission is limited in range that the problems of unwanted circumvention, contention, and unlawful interception of the electromagnetic signals described in column six [of the patent] are alleviated.”  This construction differs from the PTAB who had found the “low power” aspect of the transceiver did not necessarily limit its range to only a few feet. This “limited range” aspect of the invention appears to be the major key to the technological result.

Writing in dissent, Judge Reyna argued that the construction of “low power” as meaning “low range” involves “improperly reading a functional limitation into the claim from a preferred embodiment.”

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Looking back to the Vending Machine and ATM limitations of cancelled Claim 3 & 4. The PTAB used those claims (and the written description) to conclude that the invention was “financial” in nature — a qualifying characterization for CBM review.  On appeal, the majority affirmed the agency’s determination.

As the Board explained, claims 3 and 4 recite the remote device being associated with an ATM or vending machine. The patent expressly contemplates that the information communicated through the claimed system is financial information that identifies the user’s bank account and the user’s identity. The Board is correct in its assessment that the concept of communicating financial information from a device associated with an ATM to a central location is “central to the operation of the claimed device” in claim 3.

Those two claims were disclaimed and SIPCO originally argued that they could not be used to show that the patent was a CBM patent.  However, at oral arguments SIPCO’s attorney conceded that it was proper for the PTO to consider those claims in its analysis.

NewEgg Denied its Fees Again

Patent

Site Update v. CBS Corp and NewEgg (Fed Cir. 2016)

Back in 2010, Site Update sued a broad set of companies for infringing its Reissued Patent No. RE40,683. The patent claims appear to broadly cover a method of using an XML Sitemap to update search engine data.  As is its policy, NewEgg refused to settle the case and, following a claim construction decision favoring the defendant, the district court entered a stipulated dismissal with prejudice.  At that point, however, NewEgg requested that the case be deemed “exceptional” and that it be compensated its reasonable attorney fees under 35 U.S.C. § 285.

The district court originally rejected the fee request. However, that decision was prior to Octane Fitness and, on appeal, the Federal Circuit previously remanded and asked for reconsideration under the Supreme Court’s new precedent.  On remand, N.D. California Magistrate Judge Grewal* again denied a fee award — listing eight reasons:

(1) Site Update’s proposed claim constructions were not “so weak that this case stands out from others because [Site Update] abandoned its reliance on these constructions when it was given the opportunity to do so”;

(2) Site Update’s argument that its means-plus-function terms should be given a broad construction did not make the case exceptional;

(3) Site Update’s positions on necessary structures were “unartful,” but not so frivolous to be exceptional;

(4) Site Update’s position on structures “strains credibility,” but was not so unreasonable as to warrant fees;

(5) an incorrect proposed claim construction is not exceptional;

(6) Site Update’s infringement theories had flaws, but losing does not compel fees;

(7) Site Update’s willingness to settle does not make the case exceptional; and

(8) deterrent policy considerations are inapposite in this case

On appeal, the Federal Circuit directly followed Supreme Court precedent giving a district court discretional authority to determine fee awards and requiring deference on appeal.

Although reasonable minds may differ, the district court ruled from a position of great familiarity with the case and the conduct of the parties, and it determined that Site Update’s tactical blunders and mistakes do not warrant fees under 35 U.S.C. § 285. The district court noted that Site Update tried and failed, but losing a case does not make it exceptional. . . . [U]nder the circumstances of this case, our review authority is limited to whether a district court’s findings are supported by evidence and sound reasoning. . . . In this case, because we do not believe that the district court based its ruling on an erroneous view of the law and we are not left with a definite and firm conviction that the district court erred in its assessment of the evidence or otherwise abused its discretion, we cannot say that the district court erred. For these reasons, we affirm.

In the appeal, the Federal Circuit noted that – this time, NewEgg was the one with an unreasonable position — demanding a “de novo review of the district court’s findings” despite recent Supreme Court precedent to the contrary.   However, the Federal Circuit followed its usual practice of requiring each party to bear its own costs of the appeal.

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* I assume that the parties agreed that these issued could be properly decided by the Magistrate Judge.