by Dennis Crouch

Ariosa (Roche) v. Illumina (Fed. Cir. 2017)

Interesting decision here on two different fronts: Reviewability of Ex Parte Reexamination Termination Decision; and Priority Prior Art Date for Patent Applications.

The dispute focuses on Illumina’s U.S. Patent No. 7,955,794 and arose after the inventors left Ariosa to form competitor Illumina.

License Arbitration Clause Ineffective Because it Excluded Issues of Patent Scope

Ex parte Reexamination Termination and Appeal: While the inter partes review (IPR) was ongoing Ariosa/Roche filed a set of three ex parte reexamination requests and the PTO determined that they collectively raised 18 substantial new questions of patentability. However, after siding with the patentee in the IPR, the PTAB also terminated the three pending reexaminations – finding that Ariosa had delayed unreasonably in filing the reexam requests and that the petitions were duplicative of the IPR. This was apparently the first time that the PTAB had ever collaterally terminated an ex parte reexamination. (Remember here, that reexaminations are handled by examiners not by the Board).

On appeal, the Federal Circuit refused to engage on the merits of the dismissal – rather writing a one-sentence disclaimer of jurisdiction:

Because we lack jurisdiction to review the termination of the ex parte reexamination proceedings, we dismiss the appeal of the termination of those proceedings.

Wow. PTAB has the right decision here (I think), but I continue to struggle with the no-appeal result.  The argument for no right to appeal here is two-fold: (1) in an IPR only the final written decision can be appealable, and the decision here was separate from that paper; (2) A third-party has no right to appeal dismissal of an ex parte reexamination. What we don’t know is which of these (if either), the  Federal Circuit would adopt.

Priority Prior Art Date for Patent Applications: As mentioned above,  the PTAB sided with the patentee – holding that the primary reference “Fan” was not actually prior art.  Again, rather than explaining its decision, the court simply wrote ¨Fan was not prior art.”  This is better than a R.36 affirmance without opinion, but not by much.

Ariosa’s ‘794 patent is based upon an application filed in June 2002, but claims priority back to a September 2000 provisional patent application.  The reference at issue – Fan – is not a patent but instead U.S. Patent Publication No. 2002/0172946.  That application was published in November 2002, with a February 2001 filing date, and claims back to a provisional application filed February 2000.

Under PRE-AIA 102(e), a published US patent application counts as prior art as of its filing date.  The question in the case, though was figuring out whether it is proper to stretch the date back to the provisional filing.  The problem with the provisional: although it arguably teaches the Ariosa invention, it apparently does not fully support any of the claims pending in the Fan application as published.

For its holding, the PTAB relied upon a couple of major decisions:

• In re Wertheim, 646 F.2d 527 (Cust. & Pat. App. 1981) (in a CIP situation, a child patent is given the prior art date of the parent filing only if the child’s claims were fully supported by the parent application).
• Dynamic Drinkware, LLC. v. National Graphics, Inc., 800 F.3d 1375 (Fed. Cir. 2015) (extending Wertheim to provisional application situations – “A provisional application’s effectiveness as prior art depends on its written description support for the claims of the issued patent of which it was a provisional.”).

Extending these cases, the PTAB here held that Fan did not count as prior art as of its provisional filing date since “the claims of the [published] application are [not] supported by the provisional.”  The PTAB goes well beyond the already problematic Dynamic Drinkware by placing such heavy legal merit on the claims in a published provisional application.  On appeal, however, rather than grappling with these issues, the Federal Circuit affirmed – holding simply that ¨Fan was not prior art.”

Federal Circuit Backtracks (A bit) on Prior Art Status of Provisional Applications and Gives us a Disturbing Result

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In the AIA, Section 102(e) was replaced with Section 102(a)(2).  We still lack judicial guidance on what will count as the prior art date under 102(a)(2) when the purported prior art claims priority to a larger family of applications.   ¿Notably, are Wertheim and Dynamic Drinkware still good law?

Under the post-AIA provision, a US published application is prior art to a claimed invention if it “names another inventor and was effectively filed before the effective filing date of the claimed invention.” 35 USC 102(a)(2). When considering when the purported prior art was “effectively filed,” Section 102(d) explains that a court should focus on the subject-matter for-which the prior art is being used and any parent applications where the application is “entitled” to claim a right of priority or benefit.  The prior art date will be “the filing date of the earliest such application that describes the subject matter.”

In my mind, this statutory scheme rejects Wertheim, Dynamic Drinkware and also the PTAB analysis here — which collectively further require that the claims in the application being used as prior art be sufficiently supported by the priority document.

The major caveat to this analysis is that the 102(d)(2) specifically notes that the application must be “entitled” to the priority.  That entitlement requirement could be used as a hook for a holding that an application is only entitled to a priority claim if at least one claim is fully supported by the priority filing.

Guest Post by Eric Sutton: Do You Know What your Provisional Application Did Last Summer?

I invited Prof. Dmitry Karshtedt to provide this discussion of today’s oral arguments in Oil States. Note, Prof. Karshtedt  filed an amicus brief in the case supporting the petitioner.  Read the transcript here. – DC

By Prof. Dmitry Karshtedt

This morning’s argument in Oil States v. Greene’s Energy saw a highly engaged bench. The wide-ranging argument covered everything from the expected topics of the public-private right divide and the significance of the Privy Council’s adjudications of patent rights to perhaps more surprising angles involving government takings and even disputes between travelers and airlines over lost bags.

Some of the main themes of the argument:

• Does the PTAB in the IPR exercise judicial power at all?
• How, if at all, are IPRs are different from reexams?
• What about the patentees’ settled expectations? Do they justify some form of heightened judicial review before an issued patent in existence for some time can be taken away?
• Are Due Process issues fundamentally tied to the Article III question raised in this case, or should “power” and “process” be distinguished?
• Can the PTAB adjudicate infringement?
• Do Federal Circuit appeals represent constitutionally adequate Article III supervision of the PTAB?

Allyson Ho, Oil States’ counsel, lead with the argument that Inter Partes Reviews (IPRs) embody an unconstitutional transfer of judicial power to decide claims of private right between private parties without party consent or adequate Article III supervision. Justice Ginsburg asked almost immediately whether IPRs merely allow for correction of the PTO’s own errors. Ms. Ho then made an important strategic decision in conceding that, while ex parte and inter partes reexams (though a closer case) present permissible, examination-like error-correcting proceedings, IPRs differ from those earlier mechanisms because they more closely resemble an adjudication of a private-party dispute in which the PTO acts as an arbiter. Justice Kagan and Chief Justice Roberts questioned whether there is really a salient difference between IPRs and reexaminations, as the latter too allow for a process by which a third party informs the PTO that particular prior art may render an issued patent unpatentable after all. Ms. Ho, in response, stressed the high degree of third party involvement and the trial-like nature of the proceedings. In addition, she argued that in case of settlement, the PTAB generally does not complete the IPR.

The argument then moved toward the role of Congress in creating the patent right. Surely, suggested Justice Kennedy, Congress can validly limit the patent term and perhaps even shorten the patent term after issuance, so why not IPR? The response appeared to be that a grant of a patent cannot be conditioned on giving up structural rights, harkening to the discussion of the unconstitutional conditions doctrine in the petitioner’s reply brief. Even though Congress can create rights, there is a constitutional limits on how those rights can be restricted. The Chief Justice then mentioned the law of takings, suggesting that the government can take actions that devalue the right, with the Fifth Amendment sometimes entitling the aggrieved rights-holder to compensation.

The discussion then moved on to topics that have been particularly well-aired in party and amicus briefs. First, Justice Ginsburg continued to press the error correction point, pointing out that IPRs are relatively narrow in scope in that only issues of novelty and non-obviousness with specific types of prior art can be resolved in those proceedings. Ms. Ho responded that, be that as it may, 80% of IPRs also involve concurrent district court litigation, with infringement actions getting dismissed when PTAB invalidates the patent at issue. Second, Justice Gorsuch brought up the McCormick Harvesting case and its possible constitutional basis, a point which Ms. Ho embraced, but Justice Kagan then suggested that McCormick, rather, was resolved on statutory grounds. There was no further discussion of McCormick.

Ms. Ho then returned to the line between IPRs and reexams, and the earlier point that the former are really about deciding a cause between parties in a trial-like proceeding. Justice Breyer, at this point, suggested that, even if this were so, non-Article III tribunals do this all the time anyhow, as when resolving disputes between travelers and airlines over lost luggage. In addition, Justice Breyer suggested, doesn’t the Patent Act’s phrase “subject to the provisions of this title” puts patentees on notice that post-issuance non-Article III patentability determinations are possible? A point was repeated that IPRs are about an agency figuring out whether it made a mistake, with third party-input, as frequently happens in many administrative proceeding.  Moreover, Ms. Ho was questioned as to how much third-party participation is needed to make a process unconstitutional. She returned to the idea of significant third party-control.

Justice Gorsuch then brought up the point that, if patents are private rights, no non-Article III adjudication of any sort is permissible. A question then arose whether analysis would change if the IPRs existed since 1790, the year that the first Patent Act was passed, and the discussion then moved to the Privy Council. Justice Kagan observed that the role of the Privy Council in adjudging patentability over time waned but was not eliminated. Before reserving time for rebuttal, Ms. Ho made the point that the patent laws were closely intertwined with the common law from the time of the Statute of Monopolies.

Mr. Christopher Kise, arguing for Greene’s Energy, argued that IPRs simply reexamine the propriety of the original patent grant, which is not a judicial function. The action is not to extinguish the patent but simply to decide that it should not issue. In addition, argued Mr. Kise, even if the Court had to get to the public-private right distinction, it should readily conclude that patents are public rights that can be adjudicated outside Article III tribunals. At this point, an interesting question came from Justice Breyer – what about settled expectations of the patentee after some time from issuance goes by? What about investments and reliance interests? The implication seemed to be that, while of course patents can always be invalidated by courts, perhaps heightened judicial review is needed to take patents away after some time in their existence.

The Chief Justice then raised the point of Due Process and PTAB panel-stacking, and whether Congress’ power to take away patents can allow patent validity to become a pure policy tool of the executive branch. Mr. Kise contended that Due Process problems, if any, should be considered on a case-by-case basis. Justice Sotomayor brought up the point of judicial review of PTAB determinations at the Federal Circuit, to which Justice Gorsuch responded that the PTAB is not an adjunct of the district courts and can issue self-executing judgments. He also brought up the issue of vested rights in land grands. To that, Mr. Kise responded that land is core property interest in the way that patents are not, because the latter depend on the federal statute and exist for an instrumental purpose of promoting the progress of useful arts. He also contended that process issues should be separated from power issues.

As Malcolm Stewart began arguing for the government, the Chief Justice framed the point of “bitter versus the sweet” – whether the government can condition the grant of a patent on anything it likes, including stacking of the deck in PTAB proceedings. Mr. Stewart responded that, even if there were a Due Process problem, Due Process does not require Article III, as public employee tenure protection cases show. He also mentioned that expanded panels are not unlike en banc panels in the federal circuit courts, and exist principally to correct panels that diverged from precedents. Justice Breyer then brought up the issue that the IPR statute is applied retroactively to the patent at issue in this case. Mr. Stewart’s response was that patents could be reexamined since 1980 and could be invalidated in certain proceedings before then, and they could always be invalidated by courts.

Returning to the public-private rights debate, Chief Justice Roberts discussed the Schor test and whether the multi-factor analysis of Schor is conducive to investment backed-expectations. Mr. Stewart contended that, whatever the test, PTAB adjudicates private rights because liability for past money damages are not involved. The question then came up whether the PTAB can adjudicate infringement, to which Mr. Stewart responded that probably not because money damages are involved. Justice Gorsuch then asked whether the PTAB can perhaps declare non-infringement, to which Mr. Stewart responded that there is no tradition of the PTO’s making that determination. Justice Gorsuch asked about the PTO’s tradition of cancelling patents, and Mr. Stewart’s response was that the issue is really about deciding patentability, which the PTO has been doing since 1836.

In rebuttal, Ms. Ho reiterated her point that Congress cannot condition a grant of a patent on taking away litigants’ structural rights and reinforced the point that appeals are not a sufficient form of Article III supervision. She ended with the point that, again, IPRs resolve disputes between two private parties.

RPost v. GoDaddy (Supreme Court 2017)

A new amicus brief supports RPost petition for writ of certiorari – arguing that lack-of-eligibility is not a proper defense to patentability. The brief has an interesting quote from P.J. Federico (co-author of the 1952 Patent Act) suggesting (by omission) that eligibility is not a litigation defense.

I’ll add a different quote from the same work where Federico explains that the old statutory provision was split into two sections: 101 (subject matter) and 102 (conditions of patentability):

One of the basic and most important sections of the old statute was R.S. 4886, which specified the subject matter for which a patent could be obtained and recited conditions for patentability. In the new code, this section has been divided into two sections, section 101 relating to the subject matter for which a patent may be obtained, and section 102 which defines statutory novelty and states other conditions for patentability.

The distinction here is important because Section 282 makes “conditions of patentability” defenses.

• P.J. Federico, Commentary on the New Patent Act, 35 U.S.C.A. 1 (West 1954).
• 17-695_ RPost Communications Ltd. v. GoDaddy.com_Amicus Brief

I will note that Federico’s commentary might not be the best source of evidence. The same passage as that quoted indicates that “lack of invention” remains a defense under the new law.  Elsewhere, Federico indicates that “the requirements for patentability of an invention are stated in sections 101, 102 and 103” and that utility, under 101 is a “condition.”

What are the Defenses to Patent Infringement?

by Dennis Crouch

The final group of amicus briefs were filed this past week in Oil States v. Greene’s Energy — This round supporting the Government’s position that Inter Partes Review (IPR) proceedings are consistent with the US Constitution.

As per usual, the briefs are largely divisible into two categories: (1) direct merits arguments focusing on congressional power to enact the IPR regime; and (2) policy briefs arguing that IPRs do important work.  I’ll note here that the focus of the policy briefs is on efficient and timely adjudication. I have not seen any of the briefs so far that recognize the third reality – that the PTAB is invaliding patents that would have been upheld by a court.  For some reason amicus consider it appropriate to identify court failures in efficiency but not to identify failures in the substantive decisionmaking.  The closest on-point is likely Apple’s Brief which promotes the “well-informed and correct” outcomes of the PTAB. 16-712bsacAppleInc.

Overall, the collection of briefs here is quite strong. The most compelling brief in my view is that filed by the well-known team of Duffy and Dabney on behalf of several groups, including the Internet Association. They write:

No decision by this Court has ever held unconstitutional a system of adjudication by an Executive Branch agency on the grounds that the system violates Article III or the Seventh Amendment. This case should not be the first.

Patents are a type of public franchise that Congress has subjected to Executive Branch determination since the founding of the Republic. …

Petitioner and its amici draw inapt comparisons between patent rights and fee simple grants in physical land, but even if patent rights could be analogized to land, the most appropriate analogy would be to leases in public lands, which are subject to administrative revocation. Like leases, patent rights are limited in time, subject to periodic payments to maintain the rights, revert to the public upon expiration, and have the attributes of personal property. Indeed, Petitioner and its amici rely on the statement in 35 U.S.C. § 261 conferring on patents the “attributes of personal property,” but if anything, that statute undermines Petitioner’s case because it strengthens the analogy between patents and leases.

16-712 bsac The Internet Association et al.

A second key brief in the set was filed by a group of law professors led by Professors Lemley (Stanford); Reilly (Kent); and Rai (Duke).  The group makes the argument that – as a creature of congressional statute rather than common or natural law – congress also has the full power to establish a system for revocation. 16-712, BSAC 72 Professors of Intellectual Property Law.  The idea behind these statements is to step around the Supreme Court’s Stern decision that expresses “skepticism about Congressional efforts to withdraw from Article III courts ‘any matter which, from its nature, is the subject of a suit at the common law, or in equity, or admiralty’ or ‘is made of the stuff of the traditional actions at common law tried by the courts at Westminster in 1789.'”  The law professor’s interpretation of these cases though is that rights whose source is statute (rather than common or natural law) can largely be further determined by Congress.  This argument skirts around prior discussions that have focused on the reality that patent cases were “law tried by the courts at Westminster in 1789.”

Adding to these legal and historical arguments is the second law professor brief – an interesting and important brief written by Professors Golden (Texas) and Lee (Fordham). 16-712 bsac Professors of Administrative Law.  An important contribution of the brief is the recognition that congress’s failure to immediately create an IPR regime back in 1779 should not be seen as preventing action today:

[At that time] Trial courts were better suited to fact-finding and evidence-taking regarding prior art than Congress or Cabinet officers. And like Britain’s Privy Council, which exercised its summary revocation power as late as 1779 and retained but did not exercise that power in the nineteenth century, Congress and Cabinet officers had other pressing responsibilities.

Golden’s Brief also side-steps the public rights debate – arguing that “any lingering concerns about encroachment on Article III judicial power are answered by the existence of a right to an appeal to the Federal Circuit that is de novo on questions of law and meaningful on questions of fact.”  See also, Prof. Hollaar, noting that the question presented is “misleading in important respects, including the inaccurate suggestion that Article III courts do not provide substantial oversight in inter partes reviews.”  16-712 bsac Professor Lee A. Hollaar; and from Intel, et al.: “At the time of the Constitution’s adoption, there was no established rule that only courts could invalidate patents.”  16-712bsacIntel.

Still, Golden and others argue that invalidating patents is a public rights question – and thus easily within Congressional power to control through administrative action.  On this point, however, the Auto Makers group (including BMW, Ford, GM, Mercedes, Toyota, VW, Volvo, and others), argue that this case is not an appropriate case for revisiting the public-rights doctrine — a project that would have significant and wide-ranging impact on administrative law in general. 16-712bsacAllianceofAutoMfrs.

Public Knowledge and EFF came together to file their brief with a serious pursuit of historical issues worth reading:

Pre-ratification practices in England, the colonies, and the early states consistently treat patents as a privilege granted as a matter of sovereign discretion, with the objective in granting patents being not merely to reward inventors but also to induce economic productivity to the benefit of the state and the public. And as matters of sovereign discretion, the patents of England, the colonies, and the states included conditions intended to advance economic and public interests—including, in many cases, conditions for automatic, non-judicial revocation.

EFF brief-oil-states.  Following this approach (although without the same historical research). Arris group and others argue that patent rights should not be considered Blackstonian Property.  16-712bsacArrisGroupEtc_.   Finally, on the history angle, the Dell & Facebook brief argues that the Privy Council, rather than Scire Facias,  revocation is “the closest historical analogue” to the IPR system. 16-712 bsac Dell.

Many of the briefs IPRs should be seen as the patent office correcting its own mistakes. See, GE’s brief, for example, 16-712 bsac General Electric Company; also, 16-712 bsac BSA The Software Alliance; 16-712 bsac Unified Patents Inc.; and 16-712 bsac SAP America, Inc., et al. Although not seriously questioned here, a the banking group Askeladden addes to the argument that IPR procedures are good enough to ‘statisfy the standards for the adjudication of public rights in non-Article III forums.” 16-712bsacAskeladdenLLC

On the policy side, AARP is seeking lower health-care prices for its members and has generally sided with policies that increase competition and decrease the power of patent rights. In its brief, AARP argues that IPRs are an effective tool for this goal. 16-712 bsac AARP.  I-MAK makes a parallel argument in its brief. 16-712 bsac I-MAK (“Unmerited secondary patents stifle generic competition and inflate drug prices.”). See also, 16-712bsacAAM; and  16-712 bsac America’s Health Insurance Plans;  16-712 bsac Mylan Pharmaceuticals Inc_ (“Mylan’s experiences with inter partes review highlight the pro-competitive nature of inter partes review.”). As simply middle-men in the world of commerce, the Retail Association argues that its members likewise need this somewhat more efficient mechanism for eliminating low-quality asserted patents. 16-712 bsac Retail Litigation Center; 16-712 bsac Volkwagen Group of America, Inc. (“IPR proceedings has been successful in providing a low-cost but accurate process for adjudicating patent validity.).  Adding on here, TSMC argues that IPR provide an important outlet for manufacturers to protect their stream of commerce in cases where declaratory judgment jurisdiction does not exist. 16-712bsacTaiwanSemiconductorManufacturingCo.

Following these policy arguments, the not-for-profit org KEI particularly explains how the top-side briefs incorrectly argue that the IPR system harms national innovation and wealth.  KEI’s point is irrefutable – allowing enforcement of no-invention patents doesn’t help anyone.  brief-oil-states KEI_amicus_Oil_States.

Overall, this is a powerful group of briefs that leave me believing that – in the end – the Supreme Court will leave the IPR regime in place and in power.

• Stuart Duncan Smith: Federal Circuit Eases The Burden Of Amendment In IPR
• Neal Solomon: IPRs Unduly Harm Patent Holders And Benefit Big Tech Infringers
• Section 101 Rejection Overturned. What’s Next: A Notice Of Allowance Or A Revised Office Action?
• Charles Bieneman: No Inequitable Conduct: Duty To Disclose Only Goes So Far
• Florian Mueller: Samsung Never Quits, Finally Gets Design Patent Damages Retrial
• Josh Escovedo: Verb Use Alone Does Not Constitute Genericness

Get a Job doing Patent Law                  

• Duane Morris
• Initiatives For Medicines, Access and Knowledge
• Stoel Rives
• Armstrong Teasdale
• Mintz Levin

Responsive merits briefs have been filed in Oil States v. Greene’s Energy:

• 16-712 – Government Brief
• 16-712 – Greene’s Energy Brief

The Government presents the question as follows:

Whether inter partes review comports with Article III and the Seventh Amendment.

Rather than seeing a patent right as property, the Government brief identifies patents as simply “revocable privileges” or “governmentally-conferred franchises” whose creation are not associated with any natural right of an inventor but instead are simply tools of public policy designed to “benefit the public by providing an incentive to innovate.”

For the government and patent challengers, it is important to distinguish patents on inventions from traditional “land patents” since those may not be revoked administratively.  According to the government, the distinguishing point is that the government previously owned title to land, but patent rights are a government creation:

The government in issuing a patent [for invention] does not (as with a land patent) convey title to something it previously owned, but instead grants a limited franchise whose scope and contours are wholly defined by the government itself.

Regarding the 7th Amendment challenge – the Government writes that the 7th amendment right does not apply to situations where resolution of a conflict is properly assigned to an administrative (non-Article-III) resolution.

As Greene’s Energy writes – and all parties appear to agree: “The nature of U.S. patent rights … is at the core of the constitutional question before the Court.”    What I think may be the decisive is buried in Greene’s FN4: “At the very least, patents are quasi-private rights, that is, ‘statutory entitlements * * * bestowed by the government on individuals.'”  quoting B & B Hardware v. Hargis Indus., 135 S. Ct. 1293 (2015) (Thomas concurring in trademark context).

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I’ll note here that to make its policy-case that there are too many patent applications for the PTO to properly handle, the Government perpetuated the USPTO’s false statement that “In 2015, the USPTO received more than 600,000 applications—more than three times as many as it had received two decades earlier.”  That statement includes 273,000 192,000 requests for continued examination (RCEs) as “applications.”

by Dennis Crouch

Aqua Products v. Matal (Fed. Cir. 2017) (en banc) [Aqua Products Decision]

In a nuanced set of opinions the Federal Circuit – with no clear majority opinion – holds merely that:

The final written decision of the Board in this case is vacated insofar as it denied the patent owner’s motion to amend the patent. The matter is remanded for the Board to issue a final decision under § 318(a) assessing the patentability of the proposed substitute claims without placing the burden of persuasion on the patent owner.

The ‘leading opinion’ by Judge O’Malley goes on to explain:

Because the participating judges have different views—both as to the judgment we should reach and as to the rationale we should employ in support of that judgment, as explained below, today’s judgment is narrow.

This result was supported by a 7-member panel.

The opinion package, is 148 pages in length and includes five separate opinions walking the question of deference to PTO Decisionmaking.

• Opinion filed by Circuit Judge O’MALLEY, in which Circuit Judges NEWMAN, LOURIE, MOORE, and WALLACH join, and in which Circuit Judges DYK and REYNA concur in result.
• Opinion filed by Circuit Judge MOORE, in which Circuit Judges NEWMAN and O’MALLEY join.
• Opinion filed by Circuit Judge REYNA, in which Circuit Judge DYK joins, and in which Chief Judge PROST and Circuit Judges TARANTO, CHEN, and HUGHES join in part.
• Opinion filed by Circuit Judge TARANTO, in which Chief Judge PROST and Circuit Judges CHEN and HUGHES join, dissenting from the judgment, and in which Circuit Judges DYK and REYNA join in part in other respects.
• Opinion dissenting from the judgment filed by Circuit Judge HUGHES, in which Circuit Judge CHEN joins.

The setup and context here is ripe for Supreme Court review.  More to come later.

The USPTO has completed its patent issuances for Fiscal Year 2017 which ends for the Federal Government on September 30, 2017.  The primary raw number  315,386 utility patents issued in FY 2017. This is the most patents issued by the USPTO in a single year and tops the record set in FY 2016 by 11k – a healthy but still modest 3.5% increase.  Although the PTO has slightly reduced its number of patent examiners, the allowance-rate for 2017 is at an all-time-high (71.4%)

USPTO Backlog of unexamined applications remains steady at about 540,000 – this is slightly more than the number of disposals (allowances + abandonments) completed by the PTO in a year.  PTO’s reported grant rate

Important mandamus order narrowing patent venue. In re Cray (Fed. Cir. 2017) [Read the Case]

Following the Supreme Court’s decision in TC Heartland, the debate has moved to interpretation of the requirement that an infringement defendant have either residence or “a regular and established place of business” in the chosen venue.

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. 28 U.S.C. § 1400(b).

In Raytheon v. Cray, the defendant is a Washington corporation with facilities in Austin and Houston – both of which are outside of the Eastern District of Texas. Still, E.D. Texas Judge Gilstrap found the company to fit within the regular and established place of business venue requirement based upon evidence that. Two Cray sales executives worked from home within the district – developing new sales and accounts worth ~ $350 million over the past 7 years.  The execs received reimbursement for certain utilities and charges within the district and publicly advertised their “office” phone numbers within E.D. Texas.

In the process of deciding its case, Judge Gilstrap also set forth an open four-factor test finding a regular and established place of business: physical presence, defendant’s representations, benefits received, and targeted interactions with the district.

As a general matter, Judge Gilstrap’s interpretation appears fairly broad, and on writ of mandamus, the Federal Circuit has rejected Gisltrap’s analysis and directed that he transfer the case to a more appropriate venue.

As a patent-focused statute, the Federal Circuit applies its own law to interpret the scope of 1400(b).  Here, the Federal Circuit interprets the requirement of a “regular and established place of business” to require three key elements: (1) a physical place within the district (2) that is a regular and established place of business (3) of the defendant.  The key focus here – regular and established place of business – i.e., a place of business that is both regular and established. According to the appellate panel these elements are requirements of the statute and all of them “must be present” for venue to be proper under the provision.   Thus:

The district court’s four-factor test is not sufficiently tethered to this statutory language and thus it fails to inform each of the necessary requirements of the statute.

According to the appellate panel, a court’s venue inquiry walk step-by-step through each of the requirements of the statute to ensure that each is present. “We stress that the analysis must be closely tied to the language of the statute.”

In looking at the application in this particular case, the Federal Circuit found that the home office and local sales were not sufficient to fill the statutory requirements.

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The decision here further solidifies the impact of the TC Heartland case — spreading jurisdiction out and away from E.D. Texas.

Of note, in its analysis, the Federal Circuit paid special attention to historical application of the statute that was originally adopted in 1897.  At that time, one congressman indicated its purpose was to “give original jurisdiction to the court where a permanent agency transacting the business is located.” 29 Cong. Rec. 1900 (1897) (statement of Rep. Lacey).  The court favorably cited pre-Federal-Circuit cases from the various circuits. Phillips v. Baker, 121 F.2d 752, 756 (9th Cir. 1941) (“A ‘regular place of business’ is, obviously, a place where such business is carried on ‘regularly’ and not merely temporarily, or for some special work or particular transaction.”); Knapp-Monarch Co. v. Casco Prods. Corp., 342 F.2d 622, 625 (7th Cir. 1965); Remington Rand Bus. Serv. v. Acme Card Sys. Co., 71 F.2d 628, 629 (4th Cir. 1934);  Am. Cyanamid Co. v. Nopco Chem. Co., 388 F.2d 818, 820 (4th Cir. 1968); Grantham v. Challenge-Cook Bros., Inc., 420 F.2d 1182, 1185–86 (7th Cir. 1969); Univ. of Ill. Found. v. Channel Master Corp., 382 F.2d 514, 516 (7th Cir. 1967); Shelton v. Schwartz, 131 F.2d 805, 808 (7th Cir. 1942).  In addition, the court revisited its important Cordis decision on point: In re Cordis Corp., 769 F.2d 733 (Fed. Cir. 1985).

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The opinion here is by Judge Lourie and joined by Judges Stoll and Reyna, and the basic holding is that the statute means the same as it did in 1897 and the same as it did in the 1940s and the same as it did in the 1980s (the last time it was interpreted directly).  Even if taken en banc, I would not expect any significant departure from this result.

By Jason Rantanen

…is still claim construction in my book.  This is true even when the claim construction focuses less on the specific meaning of individual words or phrases and more on construing the invention as a whole.

***

One of the most enjoyable things about teaching a course like Patent Law, which I’m doing again this fall, is that you get to re-read all the old classics and work through them from first principles with students who are not (yet) locked in the dogma of accepted narratives.  In other words, to see cases such as Mayo, Myriad, and Alice through fresh eyes, or to explore the evolution of post-Markman claim construction from Markman to Cybor to Phillips to Teva.  Today we worked through some of the examples that the PTO has published–for those who aren’t aware, there’s a host of them on the PTO’s website.

As I’ve read through the patent eligible subject eligibility cases again, I’m struck by the extent to which the courts engage in what I can only describe as claim construction–but a very different type of claim construction than what’s contained in the countless opinions deciding the meaning of individual claim terms over the last two decades.  Those cases address the meaning of individual terms or phrases in a patent claim, often in a way that is dispositive of an infringement, novelty or nonobviousness issue.

The different type of claim construction that I’m talking about is what courts necessarily do when conducting a patent eligible subject matter analyses (and perhaps nonobviousness and enablement as well): construe the invention from the claims rather than interpret a particular word or phrase. None of the judicial opinions talk about what they’re doing as claim construction, but that seems to me to be exactly what it is.

The idea that courts describe patent claims in words other than those of the claims themselves during patent eligible subject matter inquiries is nothing new–to the contrary, it’s a frequent complaint about the Supreme Court’s patent eligible subject matter cases.  Usually, it’s referred to as determining what the claims are “directed to,” or, in the second part of the Mayo/Alice inquiry, the search for an “inventive concept.”

But if claim construction is understood as the translation  of the words of a patent claim into text that will have meaning for the person deciding a legal issue such as infringement or validity, then discussions of the patent claims in the context of patent eligible subject matter analyses would seem to be exactly that.  Alice offers an obvious example: there, the Supreme Court explained that “[o]n their face, the claims before us are drawn to the concept of intermediated settlement,” (an abstract idea, failing Mayo step 1), and that “viewed as a whole, petitioner’s method claims simply recite the concept of intermediated settlement as performed by a generic computer” (thus failing Mayo step 2).  Put another way, the Court took the words of the claim, gave them legally operative meaning, and then assessed whether that legally operative meaning against the criteria of abstract idea and inventive concept.  That’s claim construction.

I can see some pushback here from folks who think of claim construction solely as the process of determining the meaning of individual words or phrases in a claim–in other words, as  questions of accuracy about the meaning of words.  The sharp focus on the meaning of individual claim terms has dominated thinking about patent law for the last two decades, but I think it’s a mistake to view claims only as individual limitations.  That approach is useful for inquiries such as literal infringement or novelty, but it’s of less use when conducting other types of patentability or validity analyses.  I’m not suggesting that claim term interpretation is irrelevant to patent eligible subject matter or enablement inquiries–sometimes the meaning of individual terms matters quite a bit.  But what I see courts doing again and again in the patent eligible subject matter cases is to read the claims to arrive at a construction of the invention, rather than resolve disputes about the meaning of particular terms.

My thinking in this area is heavily influenced by Andres Sawicki’s forthcoming article The Central Claiming Renaissance.  Professor Sawicki argues that the Supreme Court’s re-invigoration of patent eligible subject matter has been accompanied by a rebirth of “central claiming”: the idea that “courts use both the specification and the claims to situate the inventor’s work in the context of the technological field to understand just what it is that the inventor contributed.”  Id. at 10.  Sawicki observes that the Mayo/Alice analysis necessarily requires a determination of the inventor’s contribution–and particularly, whether that is the type of thing that is patent eligible subject matter.  Consistent with the idea of central claiming, he suggests that in identifying the inventor’s contribution, the Supreme Court looked mostly to the the specification when making this determination in Bilski, Mayo, and Alice,  even as he acknowledges the important role the claims play in what the Court was doing.  Id. at 23-35.

While I mostly agree with Professor Sawicki’s analysis of the Supreme Court’s patent eligible subject matter cases,  I think the article gets over-invests in the concept of “central claiming.”  As Sawicki recognizes, even when conducting the Mayo/Alice analysis, courts are still construing the actual claims, not the written description, to identify the invention.   They draw on the written description, but so too does conventional claim term interpretation.  I’m also hesitant because what’s involved isn’t “claiming;” it’s the process of construing an existent claim.   That said, I don’t have any sticky words to describe this alternate approach to claim construction.  The best I’ve come up with are “whole claim construction,” “invention-focused construction,” or “inventive contribution construction” as contrasted with “claim term interpretation.”

***

Why does it matter whether we call what the court’s doing “claim construction?” After all, a rose by any other name still smells as sweet.

There are a few reasons.  First, the old adage that “the name of the game is the claim” is just as true when courts are construing the claims in a general sense as it is when courts are engaged in term-based constructions.  As patent practitioners know, how the court articulates the claims for Mayo steps 1 and 2 matters–and can even be dispositive, as the recent case of Visual Memory LLC v. NVIDIA Corp. shows.  Recognizing that the courts are engaged in type of claim construction has the benefit of focusing the parties’ arguments on an issue that may determine the outcome of the case.

A second benefit from recognizing that courts are engaged in claim construction in the patent eligibility inquiry is that the discussion can then turn to what constitutes an abstract idea.  Sure, the court’s construction matters, but so too does the question of what an abstract idea actually is.  Untangling these two issues–the construction of the claim and the meaning of “abstract idea”–may bring clarity to the second one.

A third reason why we should acknowledge that there’s a type of claim construction going on in patent eligible subject matter analysis is because the Federal Circuit’s opinions don’t.  Recognizing that the courts are engaged in a type of claim construction raises an important question: we have a complex methodology and approach to interpreting claim terms; what then is the methodology for this other type of claim construction that the courts are doing?  As the patent eligible subject matter jurisprudence develops, methodological variants are emerging that reflect sharp differences in the way that claims are being construed when conducting the patent eligible subject inquiry.  Some of these divisions present the same types of issues as the conventional claim term interpretation cases raise, such as “how much weight to give the specification?,” while others present new divisions, such as the question of “at what level of generality the claims should be read?”

As a first pass at this idea, here are a few different ways that “invention-focused construction” can be done:

• At one extreme is the ipsis verbis methodology: to repeat the words of the claim and nothing but.  Only those words, and perhaps interpretations of some key terms, suffice.  One might picture an attorney standing before a judge who repeatedly asks “what’s the invention?” while the attorney dutifully recites the words of the claim again and again, neither understanding why the other doesn’t get it.
• At the other extreme is a claim construction untethered from the claims themselves.  An example might be to construe a claim to a typewriter as being to a hot dog.  While this example is absurd, the point is to illustrate that there is a range from ipsis verbis to a construction of the invention that has no connection to the claims.
• Another dimension of the invention-focused construction involves the degree to which the construction hones in on the inventor’s contribution.  To borrow from the USPTO’s gunpowder example, the “inventive concept” of a claim to “an intimate finely-ground mixture of 75% potassium nitrate, 15% charcoal and 10% sulfur” isn’t the individual ingredients; those already exist in nature.  Rather, the “invention” is the combination of the ingredients, or the specific ratios, or that they are finely ground in the mixture.
• Alternately, the court may treat the claim as a whole as the “invention,” not caring about which part of it constitutes the inventor’s contribution to the art.  I struggle with applying this approach: how do you conduct an analysis of whether the invention is eligible subject matter when you aren’t focusing in on what is new?

In my next post I’ll write more about how these different approaches recently manifested in the Visual Memory case that Dennis blogged about last month.

by Dennis Crouch

Oil States Energy Services, LLC, v. Greene’s Energy Group, LLC., now pending before the Supreme Court raises one important question:

Issue: Whether inter partes review … violates the Constitution by extinguishing private property rights through a non-Article III forum without a jury.

In June 2017, the Supreme Court granted certiorari and briefing is expected to continue through November 2017.

One amicus group did not wait till their filing deadline but instead has preemptively filed a brief “in support of neither party” even before any of the party briefs have been filed. Professor Tomás Gómez-Arostegui has focused on IP legal history for the past decade joined with British legal history scholar Sean Bottomley to establish several basic historical points:

Records from the 18th century are unequivocal and demonstrate that juries decided validity questions (including novelty) at several stages of the life of a patent. Juries were tasked with determining validity during infringement litigation, whether initiated at law or in equity; during court proceedings for revoking patents; and sometimes during patent prosecution. For a time, the Privy Council could also revoke patents, but it last did so in 1779. . . .

[READ THE BRIEF: 16-0712 ac H Tomas Gomez-Arostegui]

A primary thrust of the brief is to challenge the conclusions made by Mark Lemley in his article, Why Do Juries Decide if Patents are Valid?, 99 Virginia L. Rev. 1673 (2013).  The brief “corrects recent misconceptions on the subject, including those
appearing in [the Lemley] article relied upon by the parties.”

Fairly silly way to conduct business, but the constitutional permissiblity of the AIA Trial regime will depend upon whether revocation of patent rights were handled by jury trials in England around the time the Bill of Rights was adopted.  As the Supreme Court has repeatedly affirmed, “The right of trial by jury thus preserved is the right which existed under the English common law when the Amendment was adopted.” Balt. & Carolina Line, Inc. v. Redman, 295 U.S. 654 (1935).  Although its fairly complex, the basic questions are (1) is revocation a common-law question (as opposed to one of equity) and if so (2) was it handled by a jury?   This is where Prof. Gómez-Arostegui steps in, writing:

• In infringement actions: “the validity of a patent (if contested) was always decided at law, regardless of where the plaintiff initially filed. Moreover, the law courts would always try the case before a jury unless the parties had [otherwise] stipulated.”
• In injunction actions filed in the Court of Chancery, the court would generally force the parties to file a separate common law action in order to permit the jury to resolve validity.
• “[J]uries regularly decided the following issues related to validity: (1) whether the invention was new; (2) whether the patentee was the actual inventor of the purported invention; (3) whether the invention was useful; (4) whether the specification accurately described the claimed invention; and (5) whether the specification enabled a person working in the relevant art to construct the item described in it.”
• “In a recent article, Professor Lemley argues that an ultimate or overarching issue of validity existed in the late 18th century that was ‘not itself a question
  of fact,’ but was instead a question of law. . . . Given the significance of this assertion, and the fact the Respondent has already relied upon it, it requires close inspection. In short, Lemley is incorrect and he cites no authorities that support the proposition.”
• Patent revocation via writ of scire facias did operate via the Court of Chancery.  However, according to the brief here, “The Court of Chancery always sat as a law court in these instances and always sent issues of fact related to validity to the King’s Bench for a jury trial.” “Notably, scire facias did not require fraud or inequitable conduct, as the Federal Circuit claims [in Lockwood].”

One big gap for Gómez-Arostegui is with regard to the Privy Counsel who “could also revoke patents” including when “not new.”  The last revocation in this manner was 1779 on an issue of national security.  There are, however, no records of any petitions filed after 1780 and contemporary writing suggest that the revocation process moved entirely to scire facias.   The brief suggests that, if it were available, parties would have continued to push through the Privy Counsel because scire facias was so expensive and complicated.

= = = =

Now, lets say that the Supreme Court buys the notion that patent validity was a question of law requiring a jury trial, there is still another line of important Supreme Court precedent saying that “the Seventh Amendment is generally inapplicable in administrative proceedings, where jury trials would be incompatible with the whole concept of administrative adjudication and would substantially interfere with the . . . . [agency’s] role in the statutory scheme.” Curtis v. Loether, 415 U.S. 189, 194-95 (1974), quoted in Greg Reilly, The Constitutionality of Administrative Patent Cancellation (2017).

Personal Audio v. Electronic Frontier Foundation (EFF) (Fed. Cir. 2017)

On appeal, the Federal Circuit has sided with the USPTO — affirming the IPR final judgment of unpatentability of Personal Audio’s US Patent No. 8,112,504.  The patent claims a system for “disseminating media … episodes in a serialized sequence.”

The most interesting question addressed by the court is whether the original Inter Partes Review (IPR) Requester – EFF – has standing to to participate as a party.  The problem for standing is that EFF is a public-interest organization that promotes online civil liberties.  EFF was not threatened by the ‘504 patent, but instead filed the IPR petition as part of its general public interest campaign against “stupid patents.”  EFF thus doesn’t appear to meet the “case or controversy” standard required by Article III of the U.S. Constitution.

The Federal Circuit decided a somewhat similar standing question in Consumer Watchdog v. Wisconsin Alumni Research Foundation, 753 F.3d 1258 (Fed. Cir. 2014).  Consumer Watchdog also involved a public-interest organization challenging a patent via AIA-Trial. Standing wasn’t a problem for the trial itself since the PTAB is not an Article III court – and so the constitutional requirement didn’t apply.  However, the Federal Circuit dismissed Consumer Watchdog’s appeal (it lost the case at the PTAB) on standing grounds.

EFF case has a slightly different posture since it won at the PTAB – with the patent being held invalid.  The appellant Personal Audio clearly has standing since its patent has been judged unpatentable, and the question is whether EFF has standing to participate as an appellee despite its lack of a direct interest in the outcome.  For the Federal Circuit, that posture makes the difference:

Here, the party invoking judicial review is Personal Audio; it is apparent that Personal Audio, on cancellation of its patent claims by the PTAB, has experienced an alteration of “tangible legal rights . . . that is sufficiently ‘distinct and palpable’ to confer standing under Article III.” Virginia v. Hicks, 539 U.S. 113, 121 (2003) (internal citations omitted). With Article III satisfied as to the appellant, EFF is not constitutionally excluded from appearing in court to defend the PTAB decision in its favor.

The court then went on to side with EFF and PTAB on the merits – confirming the claims as unpatentable.

I would suggest that the Federal Circuit’s decision on the standing issue here does not fully explore the somewhat complex precedent on the standing issue.  In particular, the court wrongly focuses its standing decision on the position of the appellant.  The Supreme Court has explained several times that all parties must have an ongoing case-or-controversy:

[T]he opposing party also must have an ongoing interest in the dispute, so that the case features “that concrete adverseness which sharpens the presentation of issues.”

Camreta v. Greene, 131 S. Ct. 2020, 2028 (2011) (quoting Los Angeles v. Lyons, 461 U.S. 95, 101 (1983)).  I’ll note here that my reading of Camreta and Lyons is that both are addressing the Constitutional requirement – thus the AIA statutory statement allowing parties to appeal is inapplicable.

The Federal Circuit relied upon another line of Supreme Court cases – notably ASARCO Inc. v. Kadish (1989).  In that case we similar situation where the petitioner was clearly harmed by a lower state-court decision but the respondent probably did not itself have sufficient case-or-controversy standing.  In its decision on the case, the Supreme Court began with a recitation of standing – noting that the petitioner’s harm was sufficient: “We determine that petitioners have standing to invoke the authority of a federal court and that this dispute now presents a justiciable case or controversy for resolution here.”  ASARCO.  The problem with this holding is that it speaks  only to the case as a whole rather than standing of the particular party.

by Dennis Crouch

IPCom v. HTC (Fed. Cir. 2017)

After IPCom sued HTC for infringing its U.S. Patent No. 6,879,830, HTC countered with its PTO request for inter partes reexamination of the asserted claims.  While the AIA Trials (i.e. inter partes reviews) are heard directly by a PTAB panel, reexaminations are first decided by a patent examiner before being appealed to the PTAB.  Here, the examiner initially sided with the patentee – finding the challenged claims patentable.  However, the Board issued a new grounds of rejection for most of the claims.  That obviousness rejection was later sustained (even after a claim amendment).  On appeal, the Federal Circuit has largely affirmed, but reversed a portion of the claim construction — this time the limits of means-plus-function claiming has helped the patentee.

One limitation found in challenged claim 1 requires: an arrangement for reactivating the link with the first base station if the handover is unsuccessful.

Although not written in means-plus-function language, the nonce word “an arrangement for” without further recited structure easily qualifies under 35 U.S.C. 112 p6.

Section 112 p6 (now 112(f)): An element in a claim for a combination may be expressed as a means or step for performing a specified function without the recital of structure, material, or acts in support thereof, and such claim shall be construed to cover the corresponding structure, material, or acts described in the specification and equivalents thereof.

It turns out that the Federal Circuit already construed this very phrase as means-plus-function in its 2012 decision involving the same patent. HTC Corp. v. IPCom GmbH & Co., 667 F.3d 1270 (Fed. Cir. 2012).  However, when conducting its broadest reasonable construction of the claim limitation, the PTAB failed to particularly tie the MPF limitation to the structure (here algorithm) recited in the specification.  Rather, for the PTAB apparently any arrangement for achieving the stated function would fall within the claim scope.  On appeal, the Federal Circuit rejected the PTAB approach and instead held that a means plus function claim term is limited by the scope of the structural recitations found in the specification – even under the PTO’s broadest reasonable interpretation.

The decision here is not new law but instead parallels the important MPF case of In re Donaldson Co., 16 F.3d 1189, 1193 (Fed. Cir. 1994) (en banc).  In Donaldson, the PTO argued that the BRI construction of a means-plus-function claim term should encompass “any means capable of performing the recited function.”  On appeal, the en banc Federal Circuit rejected that argument – holding instead that even under BRI, construction of a means-plus-function limitation “must look to the specification and interpret that language in light of the corresponding structure, material, or acts described therein, and equivalents thereof.”

Like Donaldson, the Board here impermissibly treated the means-plus-function limitation in its patentability analysis as if it were a purely functional limitation.

On remand, the PTAB will need to reevaluate the scope of the claims and then determine whether the recited prior art discloses the requisite particulars.

[DECISION]

USPTO Director Michelle Lee has announced her resignation — noting that “It has been the professional experience of a lifetime [and] a true privilege serving our country by supporting what I believe to be some of America’s greatest heroes—our inventors and entrepreneurs.”  The resignation appears to be effective immediately. Prior to joining the USPTO, Lee was chief patent counsel for Google, and I expect that Lee will return to high-level industry position.

Lee will be known as a stabilizing force – managing the agency during these tumultuous post-AIA and post-ALICE years.  Although critics suggest that she is not sufficiently pro-patent-property-rights, the PTO has continued to issue a record-number of patents each year.  Although the timing is a surprise, Lee was an Obama appointee and the departure itself is not a surprise.

There has been no word from the White House or Commerce Department on a successor.  It is unclear to me at this point whether Tony Scardino (current acting deputy director) or Drew Hirshfeld (current Commissioner of Patents) will be tapped as Acting Director.