Following a failed en banc petition, famed inventor Gilbert Hyatt hired a new Supreme Court counsel (the famed Erwin Chemerinsky) who has now filed a petition for writ of certiorari focusing on standards for dismissing Administrative Procedure Act (APA) claims.
According to the USPTO, there are a couple of hundred patent applications still pending that were filed prior to the June 1995 patent term transformation (GATT). Of those, 99% list Gilbert Hyatt as an inventor. Hyatt is known for being tenacious. He does not give up easily. But, his filings argue that the USPTO is largely to blame for the delays.
In particular, Hyatt provided testimony of various former PTO officials of a no-patent-for-HYATT policy — “a secret agency policy to block issuance of his applications as patents, regardless of the merits of his patent claims.” The PTO created a Hyatt Unit of examiners who repeatedly referred to Hyatt as a “submariner” and tracked Hyatt applications using software they called the “submarine detector.” The group apparently distributed the shallow-fake image below depicting Hyatt applying Ted DiBiase’s finishing move – the Million Dollar Dream.
In 2018, Hyatt filed an Administrative Procedure Act (APA) suit seeking an order requiring “bona fide examination of his applications.” The lawsuit sought review under both Section 706(1) and 706(2).
The reviewing court shall—
(1) compel agency action unlawfully withheld or unreasonably delayed; and
(2) hold unlawful and set aside agency action, findings, and conclusions found to be (A) arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with law; . . .
5 U.S.C. § 706. The district court sided with the USPTO with a sua sponte summary judgment order — finding that the USPTO was already working diligently on the applications based upon its recent filing of “numerous office actions on plaintiff’s applications.” In the process, the district court (1) based its decision upon facts already developed in the administrative record and without following the usual summary judgment approach of drawing every reasonable inference in favor of Respondents; and (2) concluded that summary judgment was proper because Hyatt could not satisfy the extraordinary “mandamus standard” that the court concluded was required to prove a Section 706(1) or (2) case. These two rulings form the basis of Hyatt’s newest petition for writ of certiorari.
Petitioner Gilbert Hyatt brought this action to challenge the Patent and Trademark Office’s secret rule, attested to by former agency officials and reflected in its official actions, to deny him further patents irrespective of the merit of his applications. After finding that Hyatt had plausibly alleged this rule’s existence, the district court sua sponte entered summary judgment against him, notwithstanding clear disputes of material fact as to the agency’s actions. Expressly holding that the ordinary summary judgment standard of Federal Rule of Civil Procedure 56 does not apply in agency cases, the district court drew inferences, made credibility determinations, and decided fact disputes in favor of the agency and against Hyatt. It also held that, because there was no basis to “compel agency action unlawfully withheld or unreasonably delayed,” 5 U.S.C. § 706(1), the agency’s rule could not be “h[e]ld unlawful and set aside” as “arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with law,” id. § 706(2). The Federal Circuit upheld the district court’s decision.
This Court should grant review to decide:
1. Whether the ordinary summary judgment standard of Rule 56 applies to review of agency action, as held by the First, Fifth, Ninth, and District of Columbia Circuits.
2. Whether the mandamus standard of Norton v. S. Utah Wilderness Alliance, 542 U.S. 55 (2004), applies to claims seeking to set aside agency action under 5 U.S.C. § 706(2).
[Petition]. On the second question, in Norton, the Supreme Court held that the mandamus standard applies when seeking an order under 706(1) to compel some administrative action. Hyatt argues that an ordinary legal standard should apply to 706(2) when seeking a declaration that the agency’s past actions were arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with the law.”
The setup here is somewhat parallel to Kappos v. Hyatt, 566 US 431 (2012). In that decision, the Supreme Court held that Hyatt had a right to de novo consideration of evidence presented in a Section 145 civil action even for factual findings that had already been made as part of the prior administrative review.
The Federal Circuit’s new decision in Atlanta Gas Light Co. v. Bennett Regulator Guards, Inc. (Fed. Cir. 2022) denies appellate jurisdiction over a case where the PTAB decision involves a wholistic judgment involving non-appealable issues (time-bar vacatur of institution) and appealable issues (sanctions award). Judge Newman dissented. In my mind, the could could have logically separated its decision to focus on the sanctions issue and decide whether sanctions decision to decide whether the dismissal was appropriate and sufficient.
This case has been up and down several times. The docket includes a final written decision cancelling Bennett’s claims while also awarding monetary sanctions against Atlanta Gas for failed to update its filing regarding Real Parties of Interest (RPI). But, those decisions were later vacated by the Board itself and the proceeding terminated based upon a new interpretation of the time-bar under 35 U.S.C. § 315(b). The Board eventually concluded that termination would “most effectively resolve the issues on remand by operating as a sufficient sanction while also conforming this Decision to current Office policy.”
The problem here is that time-bar issues are not appealable institution decisions. Thryv, Inc v. Click-To-Call Technologies, LP, 140 S. Ct. 1367 (2020). On the other hand, award or denial of sanctions are properly appealable.
On appeal, the Federal Circuit recognized that sanctions were relevant to the “multifaceted” termination decision, but ultimately concluded that the time-bar issues were “central” and “the core of the Board’s decision.” As such the court found that it lacked jurisdiction over the appeal. The majority distinguishes this case from a potential appeal over “purely a sanctions decision over which we ordinarily would have jurisdiction.” Dismissed for lack of appellate jurisdiction.
The majority opinion was written by Judge Stoll and joined by Judge Lourie.
Judge Newman wrote in dissent and explained that the appellate filings here had been careful to focus on the sanctions aspect of the order. “The Sanctions Order is the only issue on appeal.”
Here the agency imposed the sanction of cancellation of extensive administrative proceedings and their final decisions of patent invalidity, which final decisions had been appealed to the Federal Circuit and affirmed with issuance of the mandate on patent invalidity. We surely have jurisdiction to receive appeal of the agency action vacating all these proceedings and decisions, and purportedly including vacatur of decisions of the Federal Circuit. Our appellate jurisdiction is surely within our statutory assignment of judicial review of decisions of the PTAB.
Missouri Senator (and my former Mizzou Law Colleague) Josh Hawley has introduced S.4171 a modest copyright proposal that would substantially reduce copyright term to 56 years (28 years if holder fails to timely file for renewal). Current Copyright term is significantly longer and does not require renewal to stay in force.
Life of the author + 70 years.
For works-made-for-hire or anonymous works 95 years from first publication or 120 years from creation (whichever expires first).
The proposal is retroactive, but only if the owner fits has a market capitalization of $150 billion and operates in the industries of “Arts, Entertainment, and Recreation” or “Motion Pictures and Videos.”
Hawley Proposed Bill. In the U.S., about 70 companies fit the market cap requirement, including Sen. Hawley’s stated target Disney.
Claim preclusion and issue preclusion are conceptually difficult, but the Federal Circuit has further confused preclusion doctrines in its patent law jurisprudence. In a series of recent decisions, the appellate court improperly created and then expanded upon a separate-and-distinct form of res judicata that it labels the Kessler Doctrine. We argued recently that this expansion is in error and should be eliminated as an improper destabilization of settled res judicata principles.[1] In a recent amicus filing, the United States Solicitor General agreed that the Federal Circuit’s precedent is in error.[2] Despite that core agreement, the SG brief is rife with misleading guidance. The SG asserted the non-legal maxim “two wrongs make a right” to effectively conclude that the Kessler expansion error was rendered harmless by compounding errors in the court’s claim preclusion doctrine. The SG’s brief implicitly calls for a wholesale reevaluation of preclusion doctrine rather than addressing the issues at hand. The brief includes other doublespeak. At one point, for example, the SG argues that Kessler remains “practically significant” and “relevant as a practical matter.” Later, the same document concludes that the question presented—i.e., the viability of Kessler—“does not have practical importance.” Of course, the law of judgments remains critically important to both ensure justice and stability.
On May 12, 2022, the Supreme Court is set to decide whether to move forward with the pending case of PersonalWeb Technologies, LLC v. Patreon, Inc., No. 20-1394 which focuses on the Federal Circuit’s aforementioned doctrinal expansions.
Kessler and its Progeny: Kessler v. Eldred is an old and largely dormant 1907 Supreme Court case permitting a manufacturer to bring an equity action to stop an infringement lawsuit against its customers.[3] The manufacturer (Kessler) had already won on non-infringement grounds against the patentee (Eldred), thus freeing Kessler to continue freely commercialize his product. The Supreme Court saw the subsequent lawsuit against Kessler’s customers as an affront to Kessler’s right to manufacture and sell as guaranteed by the non-infringement judgment.[4] A lot has happened in procedural law 1907. Some of the relevant changes here include the merger of law and equity; adoption of the Federal Rules of Civil Procedure and its expansion of claim preclusion under the broader “transaction or occurrence” test; adoption of the Declaratory Judgment Act and its expanded use in counterclaims; and allowance of non-mutual issue preclusion, especially in the defensive setting. These changes are major, but they had had all been recognized as the Restatement (Second) of Judgments was being adopted in the early 1980s. In the 40 years since, the law of judgments has remained remarkably stable, with the courts adopting the stated principles of the Restatement embodied in the two preclusion principles of claim and issue preclusion.
But, the Federal Circuit has taken the law of judgments on a major tangent: Particularly, the court has identified a third form of preclusion, the Kessler doctrine, that it offers as separate and distinct from standard principles of preclusion. The court’s Kessler doctrine operates applies to bar litigation in situations where these traditional forms of preclusion do not. Despite its references to the 1907 decision, the appellate court’s Kessler decisions are also unmoored from that original precedent. In particular, the court has applied Kessler to situations where the issue of infringement was not actually litigated or even decided; as well as apply non-mutually. The effective approach is an odd blend of issue preclusion and claim preclusion where the due process safeguards of each are relaxed or removed.
The effect of judgment is inherent to every litigation, and the confusion created by the Federal Circuit in these cases is ripe for resolution.
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[1] See, Dennis Crouch and Homayoon Rafatijo, Resorbing Patent Law’s Kessler Cat into the General Law of Preclusion, 55 Akron L. Rev. 51 (2022). We argue that the newly expanded doctrine is improper for several reasons. Most pointedly, the Supreme Court has chastised lower courts from fashioning new rules of preclusion “unmoored from the two guideposts of issue preclusion and claim preclusion.” Lucky Brand Dungarees, Inc. v. Marcel Fashions Grp., Inc., 140 S. Ct. 1589, 1595 (2020).
Oral arguments in the AI-inventorship case of Thaler v. Vidal are set for June 6, 2022. Prof. Ryan Abbott is set to argue on behalf of the patent owner (and AI creator) Stephen Thaler. Assistant US Attorney Dennis Barghaan will argue on the USPTO’s behalf.
Thaler developed an AI that he calls DABUS. DABUS apparently created two inventions–a “neural flame” and a “fractal container.” But, Thaler refused to name himself as inventor. Rather, he says that it was DABUS who did the inventing. But, the PTO refused to issue the patent without a human listed inventor. After being rejected by the PTO, Thaler filed a civil action in the E.D. Va. That court dismissed the case–holding that a non-human device cannot quality as an “inventor.” Abbott and Barghaan litigated the case below as well.
The question on appeal:
As stated by Thaler: “whether an AI-Generated Invention is patentable.”
As stated by the Gov’t: Whether “an artificial intelligence device comprised solely of source code can[] qualify as an ‘inventor’ under the Patent Act.”
Lots of folks might resist Thaler’s suggestion that the AI is the one who invented, but at this dismissal stage of the litigation that fact is procedurally assumed to be true. Both sides in this case have good arguments, but we should probably be troubled if the result is that “two otherwise patentable inventions cannot receive patent protection” despite the statutory statement that “[p]atentability shall not be negated by the manner in which the invention was made.” 35 U.S.C. 103.
Most of the Orange Book patents do not cover a novel active ingredient or new drug. Rather, most are new methods of treatment or formulations. When a drug is covered only by method-of-treatment claims, that means that generic sales of the active ingredients does constitute patent infringement, unless the sales are somehow inducing folks to perform the method. This gets a bit complicated when a drug has multiple therapeutic uses, only some of which are patented. Obviously, generic versions should be permitted for the non-patented uses. But, we know that there is going to be a lot of substitution at the retail level because of the price differential between the brand & generic.
Skinny Label: Congress thought through this problem (a little bit). The basic approach is that the Brand (Patent Owner) must tell the FDA (under penalty of perjury) which of its labelled & approved uses are protected by patent. When approving a generic version, the FDA will respect the patent by carving-out the patented uses for the generic’s “skinny label.” Of course, doctors, pharmacists, and patients all know that the generic version is the same drug at a lower price and so go ahead and substitute the generic version even for the patented uses. In these cases we’re talking about many millions of dollars in sales. That means we have very sophisticated parties on all sides–everyone knows what is happening.
The statute does not create any express ‘safe harbor’ for the generic manufacturer against liability for patent infringement. Certainly, the manufacturer would be liable for inducement if it encouraged off-label infringing use of its product. But, does the manufacturer need to take a more active role in discouraging infringing use?
This situation was litigated most recently in GlaxoSmithKline LLC v. Teva Pharm. USA, Inc., 7 F.4th 1320 (Fed. Cir. 2021), en banc denied at GlaxoSmithKline LLC v. Teva Pharm. USA, Inc., 25 F.4th 949 (Fed. Cir. 2022). GSK sells the beta blocker carvedilol labelled for three uses:
treatment of congestive heart failure
treatment of hypertension
treatment of left ventricular dysfunction following myocardial infarction
All three uses were patented, but by 2007, patents covering the second and third uses had expired. At that point, Teva received approval for its generic version, but with a skinny label that carved-out the congestive heart failure usage. The procedural posture of the case is somewhat confusing, but the Federal Circuit eventually sided with the patentee–holding that Teva’s skinny-label along with other practices induced infringement (i.e., encouraged folks to use it for congestive heart failure).
In a recent filing, Teva’s attorney William Jay (Goodwin Proctor) indicated that Teva plans to petition the Supreme Court for writ of certiorari in the case. (Request for Extension). If Teva’s request for extension is granted, the petition will be due July 11, 2022 with any amicus in support due in early August. Teva’s failed en banc petition provides a guide for questions that it will likely ask in its petition:
(1) Can the generic manufacturer nonetheless be held liable for induced infringement based on evidence that would be available in every carve-out case—the skinny label itself and product materials that describe the generic drug product as the AB-rated generic equivalent of the brand product, but do not even mention the patented method?
(2) Even if the generic manufacturer were found to have encouraged infringement, can it be held liable for infringement that it did not cause—e.g., if the direct infringer undisputedly did not see the communication that supposedly encouraged infringement?
If you have time, I would recommend attending the USPTO’s Virtual Instructor Led Training (vILT). The training is great background for patent prosecutors because it is typically identical to what is provided to patent examiners. The Office is working through a multi-part course on how it examines 35 U.S.C. § 103 and the next 2-hour course is called Obviousness Part 2: “Writing Rejections.”
How to establish a prima facie case
Rationale for combining prior art
Communicating a rejection
Although it is online, the PTO is still limiting enrollment because it is an interactive course. For questions email vILT@USPTO.GOV or go to this link. Part 1 covered obviousness rejections and you can see the materials here. Part III will focus on “examining evidence.”
The Administrative Conference of the United States (ACUS) is an independent federal agency that’s charged with recommending improvements to administrative process and procedure. The position of Chairman is currently vacant, so the Vice-Chairman, Matthew Lee Wiener, is serving as Acting Chair. A key aspect of ACUS is soliciting input from the public.
Since at least the late 1980s, concerns have been raised that the high cost of
patent litigation deters small- and medium-sized enterprises, including
those owned by traditionally underrepresented groups, from seeking
to enforce their patents. Policymakers, scholars, and organizations have studied
whether a small-claims procedure is needed for resolving patent disputes.
They have reached different conclusions and proposed different actions.
The Department of Commerce has also considered the possibility of a
small claims patent court. Most recently, in December 2012, the USPTO
issued a Federal Register notice requesting public comment on ‘‘whether
the United States should develop a small claims proceeding for patent
enforcement’’ (77 FR 74830 (Dec. 18, 2012)).
Given ongoing interest in the topic, USPTO has engaged ACUS to conduct
an independent survey and analysis of issues associated with and options to
consider in designing a small claims patent court. A report resulting from the
study will ultimately be submitted to Congress and will address, among other
topics, whether there is a need for a small claims patent court, the feasibility
and potential structure of such a court, and the relevant legal, policy, and
practical considerations in establishing a small claims patent court.
Although ACUS is seeking all comments on the topic, they’ve specifically pointed out these areas of interest:
1. Whether there is need for a small claims patent court;
2. The policy and practical considerations in establishing a small
claims patent court;
3. The institutional placement, structure, and internal organization of a
potential small claims patent court, including whether it should be
established within the Article III federal courts, as or within an Article I court,
or as an administrative tribunal;
4. The selection, appointment, management, and oversight of officials who preside over proceedings in a potential small claims patent court;
5. The subject-matter jurisdiction of a potential small claims patent court,
whether participation in such proceedings would be mandatory or
voluntary, and whether parties can remove cases to another administrative
tribunal or federal court;
6. The procedures and rules of practice for a potential small claims
patent court, including, as relevant, pleadings, discovery, and alternative
dispute resolution;
7. The remedies that a potential small claims patent court would be able to
provide;
8. The legal effect of decisions of a potential small claims patent court; and
9. Opportunities for administrative and/or judicial review of small claims
patent court decisions.
While I forsee lots of issues associated with a small claims patent court, I would imagine that the issue preclusion issues arising from an invalidity determination would be need especially carefully thought out, as well as whether patent owners could use this mechanism to bring large quantities of suits against consumers/end users who lack the resources to adequately defend themselves against a patent infringement claim.
Comments are due by July 5, 2022, and can be submitted at “info@acus.gov,” with “Small Claims Patent Court Comments” in the subject line of the message. Remember that submitted comments may be made publicly available.
Credit to Jeremy Graboyes for bringing this to my attention.
From 1793-1952, the Patent Act included a requirement that the specification “fully explain the principle” of any machine being patented. That provision was eliminated in 1952. My question, did that change reduce the disclosure requirement in any way?
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The Patent Act of 1836 included the language now found in 35 U.S.C. 112(a) and that we identify as the enablement and written description requirements. In particular, the statute required the inventor to provide “a written description of [the] invention, in such full, clear, and exact terms, as to enable any person skilled in the art or science to which it appertains, to make and construct the same.” 5 Stat. 117 (1836).
But, the 1836 statute did not stop there, it also included a further requirement for machine inventions:
and, in case of any machine, [the inventor] shall fully explain the principle, and the several modes of the application of the machine, so that it may be distinguished from other inventions.
Id. This addendum was originally part of the Patents Act of 1793 and remained in the statute until the Patent Act of 1952. It is not clear to me how the elimination of this requirement shifts the level of disclosure. What do you think?
For the chart below, I tabulated about 7,000 individual votes from the Federal Circuit Judges in patent cases decided 2014-2021. For each judge, I show the percentage of individual decisions that sided with the patent challenger; or patent owner in each case. The results here are not highly surprising. Judges Moore, Newman, O’Malley, and Stoll are all more likely to favor the patentee while Judges Lourie, Hughes, Dyk, Prost, and Reyna are relatively more likely to side with the patent challenger. Note that the differences between the judges are not huge–at most <10% difference.
This is a very rough-cut of the data. It does not include all decisions, and I used some automated techniques to identify the winner. This process was greatly aided by Jason Rantanen’s Federal Circuit Document Dataset that he makes publicly available.
The AIA substantially altered the role of the Federal Circuit and post-AIA patent challengers are much more likely to win appeals. That is why the data here is limited to 2014+.
In a divided opinion, the Federal Circuit rejected a PTAB non-obviousness decision–holding that “generic industry skepticism” is irrelevant to the question of obviousness. Auris Health, Inc. v. Intuitive Surgical Operations, Inc., 2021-1732, — F.4th —, 2022 WL 1275241 (Fed. Cir. Apr. 29, 2022). I suggest the Auris Health majority departs from KSR by again drawing sharp lines rather than allowing for a functional, flexible analysis. KSR Int’l Co. v. Teleflex Inc., 550 U.S. 398 (2007). The opinion was penned by Judge Prost and joined by Judge Dyk. Judge Reyna wrote in dissent.
The Intuitive Surgical patent is directed to a “method for performing robotic surgery.” The improvement is a servo-pulley mechanism for swapping surgical tools (e.g., scissors to scalpel to graspers). In 2018, Intuitive Surgical sued Auris Health for patent infringement. Intuitive Surgical Operations, Inc. v. Auris Health, Inc., No. 1:18-cv-01359 (D. Del.). In response, Auris petitioned for inter partes review. The PTAB instituted the IPR, but ultimately concluded in its final written decision that the claims had not been proven obvious. On appeal, the Federal Circuit has vacated and remanded.
The IPR focused on the combination of two prior art references: Smith and Faraz (US5624398 and US5824007) that collectively teach all of the claim limitations. Smith is directed to a robotic surgical system; and Faraz is directed to stand for holding surgical instruments. In its analysis, the PTAB considered evidence presented that (1) combining the two references would create some complications and (2) conventional wisdom established substantial skepticism regarding the use of robotic systems during surgery. Based upon this evidence, the PTAB concluded that a person of skill in the art would not have been motivated to combine the references in order to arrive at the claimed invention. On appeal, the Federal Circuit altered course–holding that “generic industry skepticism cannot, standing alone, preclude a finding of motivation to combine.”
There are two areas where skepticism might come into play: (1) as part of the KSR obviousness analysis considering reasons to combine references; and (2) as a secondary consideration of non-obviousness (aka objective indicia). In the second use-case (objective indicia), the Federal Circuit has previously tightened scope of relevant evidence to only those shown to have a tight nexus with the claimed invention. Here, however, the skepticism was tied to the particular claim elements, but rather was general skepticism shown to be held by persons of skill in the art “about performing robotic surgery in the first place.”
Here, the Federal Circuit has taken the nexus requirement used for secondary indicia and brought it forward to also apply when considering motivation-to-combine.
[W]hile specific evidence of industry skepticism related to a specific combination of references might contribute to finding a lack of motivation to combine, that’s not what we have here.
Auris Health. It seems to me that this approach is unduly restrictive and in tension with KSR’s rejection of “[r]igid preventative rules that deny factfinders recourse to common sense.” Rather, in KSR, the Supreme Court held that the question of whether a person of skill would combine references is a broad and flexible inquiry. Here, it appears that the Federal Circuit is asking for evidence relating to motivation-to-combine to be tied directly to the problem being solved. But KSR rejected that approach as well.
The Court of Appeals failed to recognize that the problem motivating the patentee may be only one of many addressed by the patent’s subject matter. . . . Under the correct analysis, any need or problem known in the field of endeavor at the time of invention and addressed by the patent can provide a reason for combining the elements in the manner claimed.
KSR. One question to consider here is whether the Supreme Court intended its analysis to by symmetrical or balanced. The Supreme Court talked about “reasons for combining” involving substantial flexibility, but did not discuss whether “reasons for not combining” should receive the same treatment. It seems obvious that this should be a balanced inquiry.
In his dissent, Judge Reyna agreed that “general skepticism toward robotic surgery” should ordinarily not be enough–by itself–to negate a motivation to combine. However, he argues that it should still may be relevant to the analysis. Here, Judge Reyna found that the Board had included this reason as one among many, and that substantial evidence thus supported the Board’s conclusion of no motivation to combine. (For example, the Board noted that the combination would restrict physician movement and would reduce surgical precision).
Judge Reyna also commented on the seeming rigid new rule:
I am also concerned that the majority opinion may reasonably be understood to announce an inflexible and rigid rule, namely that it is “impermissible” for the Board to consider evidence of artisans’ skepticism toward robotic surgery in determining motivation to combine. I find no authority for this assertion, and indeed it appears in tension, at a minimum, with the central thrust of KSR. See KSR Int’l Co. v. Teleflex Inc., 550 U.S. 398, 415, 127 S.Ct. 1727, 167 L.Ed.2d 705 (2007) (rejecting the “rigid approach of the Court of Appeals” and articulating an “expansive and flexible approach” of determining obviousness). This is particularly true when considering art in fields of endeavor that are inherently dangerous or risky. Indeed, in past cases, this court has accounted for the attitudes of medical professionals toward certain types of procedures when determining whether a motivation to combine has been adequately demonstrated. See, e.g., Kinetic Concepts, Inc. v. Smith & Nephew, Inc., 688 F.3d 1342, 1369 (Fed. Cir. 2012) (finding no motivation to combine where “doctors were not using the disclosed devices and methods to heal wounds with negative pressure because they did not believe that these devices were capable of such healing”).
Reyna in dissent.
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What’s really happening here. In my view, the problem in this case comes down to the reality that the patentee’s evidence against combining the references is quite weak, and the majority disagreed with the PTAB’s conclusion giving it weight. However, since the court must give deference to PTAB factual findings, it would have been much harder challenge the decision on that ground, especially because the obviousness analysis depends upon so many factors. So, instead of challenging the factual findings, the majority decided to create a bright rule of law barring the evidence from even being considered as relevant to the inquiry.
On Sale Bar: The Federal Circuit’s recent decision in Sunoco Partners v. U.S. Venture (Fed. Cir. 2022) focuses on the classic patent law question of whether the inventor’s pre-filing sales activity serve to bar the patent from issuing. Was the agreement an “offer to sell” and was it excused by the “experimental use” exception.
Sunoco’s patents cover systems for blending butane into gasoline. In a bench trial, N.D. Ill. Judge Pallmeyer sided largely with the patentee–finding US Venture liable for willful infringement and awarding $6 million in damages. Both sides appealed, with the infringer wanting to escape liability and the patentee wanting more money.
The “on sale bar” prohibits patenting an invention that was placed “on sale” prior to the application being filed. The patents here are pre-AIA and so the on-sale bar included a one-year pre-filing grace period. For newer patents, the one-year grace-period is limited to pre-filing sales that can be linked-back to the inventors. “On sale” is defined by the courts as a “commercial offer for sale” of an embodiment that takes place once the invention is “ready for patenting.” Pfaff v. Wells Elecs., Inc., 525 U.S. 55 (1998). In addition, sales/offers can be excused if they qualify as “experimental use.” City of Elizabeth v. Am. Nicholson Pavement Co., 97 U.S. 126 (1877) (delay excused by “bona fide effort to bring his invention to perfection, or to ascertain whether it will answer the purpose intended”). In this analysis, the court conducts a wholistic totality-of-the-circumstances analysis in considering whether the pre-filing sales were primarily for experimentation or instead primarily for profit. Allen Eng’g Corp. v. Bartell Indus., Inc., 299 F.3d 1336 (Fed. Cir. 2002).
Application of the on sale bar is a question of law as is the underlying issue of whether the experimental use exception applies. However, underlying factual conclusions made by the lower court should be given deference on appeal.
The Facts: On February 7, 2000, the inventor’s company (MCE) offered to sell and install a butane-blending system to Equilon. In the agreement, Equilon wasn’t actually pay anything for the machine, but would agree to purchase substantial butane from MCE over the next 5 years. The Feb 7 date is important. The original patent application was filed Feb 9, 2001–one year and two days later and outside the one year grace period.
On appeal, the Federal Circuit looked to the contract and its own prior precedent to conclude that a purchase agreement is a classic offer to sell. The proposal expressly stated that “ownership and title to the Equipment” would be conveyed. The district court found effectively that the equipment was being given away since the “the contract did not require Equilon to pay MCE anything in exchange for the system in the normal course of events.” On appeal, though the Federal Circuit sided with the patent challenger–holding that the contract required transfer of title as part of the consideration for Equilon’s agreement to purchase butane. Using its de novo power, the appellate court rejected the district court’s offer’s interpretation and found that it constituted an offer for sale. The court cited a prior decision on point. Netscape Commc’ns Corp. v. Konrad, 295 F.3d 1315 (Fed. Cir. 2002) (offer to make a “remote database object . . . in exchange for four months full time employment or no more than $48,000” was a “commercial offer for sale”).
Experimental use: Even if thought it is an offer for sale, it could be excused based upon a conclusion of experimental use. Here, the court’s test is whether the offer was “primarily [for] experimental purposes.” The offer included a sections for both “pre-installation testing” and “post-installation testing.” On appeal, the Federal Circuit found that those contract provisions do not necessarily indicate any intent to experiment with the system design or to ensure that the invention works. Rather, those testing provisions could instead simply be for ensuring that the particular embodiment was tuned correctly. Further, the Federal Circuit found that there was no reason why the sale was needed to further any design experimentation.
Sunoco’s analogy to the Supreme Court’s seminal City of Elizabeth case falls flat. While “the nature of a street pavement,” the invention in that case, “is such that it cannot be experimented upon satisfactorily except on a highway, which is always public,” Sunoco does not dispute that MCE’s pre-installation testing was conducted at [a different contractor’s site], and could have been performed before offering to sell the system.
Slip Op. The district court had excused the prior offer as experimental use, but on appeal, the Federal Circuit reversed that as well. “These tests are not experiments, but are acceptance tests to confirm that the equipment is properly blending butane—that is, that it is working as promised.” Id.
Here, the testing described in the Equilon agreement occurred to effectuate the sale, rather than the sale occurring to occasion the testing. Therefore, we conclude that the Equilon agreement was an offer for sale made to commercially exploit the invention rather than primarily for experimental purposes. On that basis, we reverse the district court’s experimental-use determination and vacate its infringement determination.
At trial, the district court did not decide whether the invention was “ready for patenting” at the time of the offer. That second prong of Pfaff could still excuse the prior offer on remand. The defense will need to show either (1) reduction to practice or (2) a sufficient and enabling written description of the invention — one of which must have occurred prior to the offer date.
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This case is one where savvy patent attorneys would have helped: (1) filing the patent application earlier; or (2) drafting the contract so that it is not a “sale.”
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Software License: One question I have in this case involves the onboard software. The patent claims here include software elements: a “process control unit [that] generates a ratio input signal …” The sales contract though was quite clear that the equipment was being sold, but the software was only subject to “a license.” An offer to license is distinct from an offer to sell. However, the Federal Circuit has several times suggested that licensing of software code can constitute a “sale.”
[A] commercial transaction arranged as a “license” or a “lease” of a product or a device … may be tantamount to a sale (e.g., a standard computer software license), whereupon the bar of § 102(b) would be triggered because “[t]he product is … just as immediately transferred to the ‘buyer’ as if it were sold.”
In re Kollar, 286 F.3d 1326, 1331 n. 3 (Fed. Cir. 2002) quoting Group One, Ltd. v. Hallmark Cards, Inc., 254 F.3d 1041, 1053 (Fed.Cir.2001) (Judge Lourie Concurring). In Minton v. National Association of Securities Dealers, Inc., 336 F.3d 1373 (Fed. Cir. 2003), Judge Lourie wrote for the majority and concluded that a “lease” of software constituted an invalidating offer for sale. These cases (and others from the Federal Circuit) appear in tension with the consistant refrain that the on sale bar is guided tightly by Article 2 of the UCC and its focus on “sale” rather than licenses or leases.
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Enhanced Damages: On appeal, the Federal Circuit vacated the district court’s award of enhanced damages — finding an abuse of discretion. In particular, the district court had excluded testimony and opinion evidence from the defendant’s attorney John Manion because of his confusion during testimony. On appeal, the Federal Circuit concluded that the confusion was created by the cross-examining attorney who had created a new term on the spot. “The record shows that Manion was merely confused by an unfamiliar term—’online rack tank’—that Sunoco’s attorney was using.” Id. On remand, the court will need to reassess if the infringement remains sufficiently egregious to allow for enhanced damages.
Judge Prost wrote the opinion here, joined by Judges Reyna and Stoll.
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Thanks to the comment from kotodama. I have updated the post to correct a date error.
Earlier this month, I posted a short essay about recent enablement cases at the PTAB. Section 112(a) includes three disclosure requirements: written description; enablement; and best mode. I would further divide written description into two categories: new matter and Ariad-style. Thus we get:
New Matter Written Description: Any amendments made to the claims during prosecution must be supported by the originally filed specification. In particular, the original specification must show ‘possession’ of the newly claimed invention. During prosecution, this is also captured under 35 U.S.C. 132(a) (“No amendment shall introduce new matter into the disclosure of the invention.”)
Ariad-Style Written Description: Originally filed claims may also lack written description if the four-corners of the specification fail to show the inventor was in possession. The court in Ariad explained that a “a vague functional description” may be insufficient as it likely describes the unpatentable problem rather than a patentable solution. Ariad Pharmaceuticals et al. v. Eli Lilly and Company, 598 F.3d 1336 (Fed. Cir. 2010) (en banc).
Enablement: The original specification must enable a person of skill in the art to make and use the invention without undue experimentation.
Best-Mode: The original specification must disclose the best mode for carrying out the invention–if one is known by the inventors. Best mode can only be raised during prosecution and is not available as a validity defense in litigation. 35 U.S.C. 282 (as amended by AIA 2011).
Of these for 112(a) rejection types. I suggest that patent examiners are primarily focusing on Number 1, New Matter Written Description. These new matter rejections are the most straightforward: (a) check to see if newly added language is supported by the specification; (b) if no, reject. Although the US rules on new matter are looser than some other jurisdictions (such as EPO), a prima facie rejection is still an ‘internal research project’ that can largely be accomplished with a quick scan of the document and CTRL-F.
The other three types of 112(a) rejections are more difficult for patent examiners because they require expansive analysis facts–delving into what would be understood by someone of skill in the art and asking questions about ‘what is missing’ without the aide of a comparison guide. In the case of best-mode, the inquiry requires subjective information about what was known by the inventor at the time of filing–something that is generally impossible for the examiner to research absent a request for information from the inventor.
By Sarah Burstein, Professor of Law at the University of Oklahoma College of Law
In December 2020, the USPTO put out a request for comments on “The Article of Manufacture Requirement.” (For prior PatentlyO coverage, see here.) Last week, at Design Day 2022, the USPTO announced that it had completed its summary of those comments. That summary is available here.
In the request for comments, the USPTO floated the idea of issuing design patents for what they are now calling “designs for projections, holograms, and virtual and augmented reality (PHVAR).” Presumably, this acronym is meant to suggest that these are new types of designs, uncontemplated by Congress when it passed statutes that—according to some—are in need of “modernization.”
But projected designs aren’t new.
As we explained in our law professor comments, designs for “magic lantern” projections go back at least as far as the 17th century. So the concept of projected designs was well-established by the time Congress passed the first design patent act in 1842—not to mention when it codified the Patent Act in 1952. Projected designs are simply not some new, unforeseen concept.
There may be new types of projection machines today, but this type of design is not new.
The USPTO suggests that the scope of design patentable subject matter “should be reevaluated in order to incentivize and protect innovation in new and emerging technologies.”
But it is not—and should not—be the role of the design patent system to incentivize or protect new machines. We have utility patents for that.
Furthermore, projected designs are not as the USPTO seems to suggest, unprotected today. Projected images qualify as pictorial, graphic, or audiovisual works that are already protected—costlessly and immediately upon fixation—by copyright. It can’t be seriously suggested that Congress was unaware of projected designs when it passed the broad definitions of protectable subject matter in the Copyright Act of 1976. It’s clear from the definitions that one form of projected creativity, cinema, was very much on Congress’ mind. See, e.g., 17 U.S.C. § 102(a)(6) (providing protection for “motion pictures and other audiovisual works.”).
Again, the type of projector may be new, but the type of work is not.
So why push for design patents when copyright is already available? There may be some who just want to accrue as many belts and suspenders as their IP budgets will allow. But that alone is not a good enough reason to expand design patentable subject matter.
It may be that, for at least some potential applicants, the goal is to avoid the requirements of copyright law. In Feist v. Rural, the Supreme Court held that a work must have “minimal creativity” to be protected. Thus, to gain copyright protection, a work must “possess some creative spark, ‘no matter how crude, humble or obvious’ it might be.” This is, according to the Supreme Court, a requirement of the Progress Clause.
Minimal creativity is a low bar. Yet the USPTO has granted numerous design patents for designs that fall below it—especially in the context of computer-generated designs. In theory, novelty and nonobviousness could be a higher bar but, in practice, that is not the case.
So let’s all be clear:
These are not new types of designs.
They’re not unprotected—unless they fail to meet the low constitutional threshold set in Feist.
New USPTO Director Kathi Vidal is working through the details of how to run the AIA-Trial Director Review program. For now, she has promised transparency as the interim process is developed and is seeking public input.
Once an IPR is instituted, the statute calls for the PTAB to issue a written decision on whether to cancel the challenged claims. That decision is then immediately appealable by the losing party, at least according to the statute. In Arthrex, the Supreme Court held that PTAB judges are not proper principal Officers of the United States and therefore do not have authority to speak for the US on important matters such as cancelling private property rights. The Supreme Court then offered a non-statutory solution of inserting a director-review process following the PTAB decision prior to appeal. The result then is that the decision will be given the imprimatur of the Director who is a Principal Officer since she was appointed by the President and Confirmed by the Senate.
As I mentioned, the new Director Review was created by the Supreme Court on the fly without setting any clear bounds for its procedure or Director reasoning. Questions:
To what extent can the Director take into account outside lobbying or outside evidence? Lets say, for instance, that the Director reads NYTimes editorials.
To what extent can the Director base her decision on issues apart from those listed in the IPR statute (e.g,. novelty and obviousness). For instance, is it permissible for the Director to consider US global competitiveness and impact on the marketplace?
To what extent must the Director personally conduct and decide the reviews rather than delegate that responsibility.
Dir. Vidal is committed to make this an open process and the PTO will likely issue a Request for Comments in the coming weeks.
I was reading recent PTAB ex parte cases looking to see how the Office is handling enablement questions. The first three cases I read all involved the same setup: The examiner made a rejection that that the PTAB suggests might have been better suited as an enablement rejection. For example, in Ex Parte Sugimoto (PTAB 2022), the PTAB explained that “the Examiner conflates enablement with indefiniteness.” The PTAB then noted similar sentiment in Ex parte Nunes (PTAB 2022). In Nunes, the examiner had rejected the drone-aircraft claims as indefinite based upon the specification’s failure to define how the thrusters compensated for wind gusts. On appeal, the PTAB concluded that the rejection would have been better suited as an enablement rejection:
[T]he Examiner’s concerns relate more to whether Appellant has made an enabling disclosure of the described functionality, as opposed to whether the recited functionality is indefinite. The claim is clear as to the structure required by the claim (e.g., a plurality of shrouded laterally oriented thrusters) and the functionality required by the claim (e.g., compensate for gusts of wind and force a descent).
Id. I’ll note that in Nunes, the PTAB affirmed the indefiniteness rejection on other grounds. In particular, the claims required “precise” positioning but the specification did not include “standard for measuring” the degree of precision.
Finally, in Ex parte Kim (Fed. Cir. 2022), the PTAB explained: “To the extent the Examiner’s rejection implicates the enablement requirement of that statute, we decline to speculate in that regard here, for the rejection is based solely on the claimed invention’s failure to comply with the written description requirement, not the enablement requirement which is a separate and distinct requirement under § 112.” I ran across this same situation later in Ex parte Palmer(PTAB 2022).
I kept reading and came to Ex parte Oda (PTAB 2022). Although that decision mentions enablement, it is in the context of whether the asserted prior art is enabling. In the case, the PTAB concluded that the patent applicant had failed to overcome the presumption that the prior art is ‘enabling.’
On the fifth try, I came upon Ex parte Mersel (PTAB 2022). The Mersel application discloses methods of treating autoimmune diseases, such as Chron’s disease. The examiner rejected the claims for lack of enablement after concluding the specification lacked evidence to support the theory that the proffered method (administering β2m) would treat Chron’s disease. On appeal, the PTAB noted that the claims do not recite treatment of any disease, but rather only recite the cell-level result of “restoring normal heavy chain β2m molar ratio.” According to the PTAB, the application enables this result by teaching how to deliver the particular peptide to the cell membrane. “There appears to be ample explanation and data in the Specification from which an ordinarily skilled artisan could make and use the invention as claimed.” Id.
I finally came across a seemingly proper enablement rejection in Ex parte Makotoiwai (PTAB 2022). The case claims a particular “nitride crystal substrate” used in semiconductor manufacturing. The examiner concluded that the substrate/device “can not be reproduced based upon the disclosure.” The Board eventually reversed this decision – deciding that the applicant’s arguments were slightly better.
In the end, this was a fairly disappointing reading journey and helps restore my prior thoughts that a separating the written description and enablement requirements has born more confusion than fruit.
Another new petition for certiorari has re-asked the American Axle questions:
What is the appropriate standard for determining whether a patent claim is “directed to” a patent-ineligible concept…?
Is patent eligibility (at each step of the Court’s two-step framework) a question of law for the court based on the scope of the claims or a question of fact for the jury based on the state of the art at the time of the patent?
[Petition] Spireon is the maker of LoJack and has millions of vehicle tracking systems in operation. Procon provides similar services as well.
Spireon’s U.S. Patent No. 10,089,598 is directed to a method of managing vehicle inventory at an auto dealership using a “location device” (such as a GPS receiver or other positioning system designed to be attached to the vehicle). Claim 1 includes the following steps:
In the Server DB: Associate the location device with the dealer’s group of ‘available location devices’;
Communicatively couple the device with a vehicle;
Once coupled, transmit a connection notice that includes a vehicle identifier and location device identifier;
In the server DB: Associate the location device with the vehicle and remove it from the list of ‘available location devices’; and
Receive current location from the location devices. [Full text of Claim 1 is below]
In the case, Procon filed a declaratory judgment action. The district court dismissed the case on the pleadings — finding the claims directed to an abstract idea. The Federal Circuit then affirmed without opinion.
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Off the Shelf: The patent specification indicated that “the location device may be an off-the-shelf tracking device for a vehicle, for example for use by an end user, for user-based insurance, for fleet management, for managing driver behavior, and/or the like.” The district court relied upon this statement to conclude that the location device did not include any inventive concept. In its petition, the patentee argues (I think correctly) that the “off-the-shelf” statement should be interpreted as contemplating the invented device being sold in retail stores, not that it could already be found on retail stores pre-invention.
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1. A method for managing a vehicle inventory for a dealer implemented by a computer having a processor and a memory, the method comprising:
while a location device is not communicatively coupled with a vehicle, associating the location device with a dealer’s group of available location devices in the memory, wherein the dealer’s group of available location devices comprises location devices owned by the dealer that are not coupled with any vehicle;
communicatively coupling the location device with a vehicle;
in response to the location device becoming communicatively coupled with the vehicle, the location device transmitting a connection notice over a network, the connection notice comprising a vehicle identifier and a location device identifier;
receiving, by the computer, the connection notice from the location device over the network;
in response to the connection notice received by the computer, the processor: associating the location device identifier with the vehicle identifier in the memory; and disassociating the location device from the dealer’s group of available location devices in the memory; and
receiving, by the computer, current location information from the location device.
2. A method for managing a vehicle inventory according to claim 1, wherein the vehicle identifier comprises a VIN of the vehicle and the location device identifier comprises a location device serial number.
15 years ago, several studies announced the “death of the doctrine of equivalents” post Festo. The chart below shows that courts have continued to write opinions about the DOE, and there have been several major cases where the doctrine was an important element of the patentee’s win.
