Patent Family Tree: Grandparent Invalidates Grandchild

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PatentLawPic104Zenon Environmental v. United States Filter (Fed. Cir. 2007)

At a bench trial, Zenon’s microfiltration patents were found not invalid but also not infringed. Both parties appealed, but the CAFC only needed to decide half the case — After deciding that Zenon’s asserted patent was anticipated one of Zenon’s prior patent, the issue of infringement became moot.  

The particular issue on appeal was whether Zenon’s asserted patent (the ‘319 patent) properly claimed priority to an earlier Zenon patent (the ‘373 patent).

Chain of Reference: The ‘319 patent claims to be a continuation of No. 6,294,039, which is a divisional of No. 6,042,677, which is a divisional of No. 5,910,250, which is a CIP of No. 5,783,083, which is a CIP of the ‘373 patent.

The claims in the asserted patent were disclosed in the original filing — the dispute arose because an intervening patent included only a reduced disclosure.

“In order to gain the benefit of the filing date of an earlier application under 35 U.S.C. § 120, each application in the chain leading back to the earlier application must comply with the written description requirement of 35 U.S.C. § 112.” Lockwood v. Am. Airlines, 107 F.3d 1565 (Fed. Cir. 1997).

Of course, the written description requirement can be satisfied by incorporating information by reference. That incorporation must, however, be explicit.  In one of the intervening patents, Zenon did include a reference to the ‘373 patent. However, the CAFC found that reference fell short because it did not explicitly state that it was incorporating the earlier patent by reference. (The reference was stated as follows: “details relating to … a most preferred skein are found in the parent U.S. Pat. No. 5,639,373.”).

Without the incorporation by reference of the proper written description, the asserted patent cannot claim priority to the filing date of the earlier patent. And, that lack of continuity of disclosure means that the early patent now serves as § 102 prior art.

Because it is undisputed that the ’373 patent discloses each and every limitation of the claims of the ’319 patent, and the ’373 patent was filed more than one year prior to the filing of the ’319 patent, we thus conclude that the ’319 patent is anticipated by the ’373 patent and hence invalid.3

In dissent, Judge Newman found it silly that the grandparent application would invalidate the grandchild. In addition to being silly, Newman argued that 35 U.S.C. § 120 requires that the later filing is “entitled to the benefit of the [earlier] filing date” so long as the family relationship is properly disclosed.

Ferguson Challenges PTO’s Hardened Line on Business Method Patents

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PatentLawPic103In re Ferguson (Fed. Cir. 2007) (on appeal)

Scott Harris is one of the named inventors on U.S. Patent Application No. 09/387,823. He is also representing his fellow inventors in their Federal Circuit appeal — asking the court to explicitly define patentable subject matter to include business methods.** Ferguson’s claimed invention focuses on the “concept of a marketing company devoted to selling/marketing products produced by other companies in return for a share of their profits.”  Claim 24 is representative:

24. A paradigm for marketing software, comprising: a marketing company that markets software from a plurality of different independent and autonomous software companies, and carries out and pays for operations associated with marketing of software for all of said different independent and autonomous software companies, in return for a contingent share of a total income stream from marketing of the software from all of said software companies, while allowing all of said software companies to retain their autonomy.

The application also includes method claims of using the paradigm.

The BPAI (Board) found that the claims satisfied the requirements of 35 USC 102, 103, and 112, but that they were not patentable subject matter under 35 USC 101.

§101. Whoever invents or discovers any new and useful process, machine, manufacture, or composition of matter … may obtain a patent therefor, subject to the conditions and requirements of this title.

Although difficult to find within the text of the statute, the Board found that Section 101 requires that a claim either have a “useful, concrete, and tangible result” or “transform” something into a new physical state. Because Ferguson’s claims don’t fit either of these categories, the Board held that the claims were abstract and thus unpatentable. In its decision, the Board followed the rules set forth in the PTO’s Interim Guidelines on Subject Matter Eligibility.

Ferguson’s appeal is a head-on challenge to the PTO’s guidelines — arguing that the limited tests proposed by the PTO were never intended by courts to be ‘exclusive test’ and that his claims are, in fact, patentable subject matter. 

Oral arguments are set for December 5th, and a decision likely in February or March of 2008. That decision may finally provide a clear analysis regarding the patentability of business methods.

Notes:

  • ** People Magazine Byline: If you remember, Scott Harris is a former major partner at Fish & Richardson. He left the patent litigation giant after some of Fish’s larger clients (Google) complained about being sued for infringement of patents invented (but no longer owned) by Harris.  Fish has been sued by owners of a Harris patent (and now Harris himself). Their allegations against the firm include tortious interference, defamation, and the wrongful witholding of wages. Interestingly, Jenner & Block is representing another non-practicing patent plaintiff, PA Advisors, who is suing Fish clients (Google). . . [PTT] [Patently-O][Harris Counterclaims]. Interestingly, Tom Woolston (owner of MercExchange) was also a Fish & Richardson patent attorney and prosecuted his patents while at that firm. John Phillips, managing partner of Fish & Richardson’s San Diego office is a co-owner of that company.
  • Bilski: Bilski also involves business method patenst and was argued on October 1, 2007. In the audio, Judge Moore takes seriously the seemingly novel concept that Design Patents must also fit within the the 101 guidelines.
  • LINK: At his excellent blog, Peter Zura uncovers three recent BPAI decisions that limit the patentability of software.
  • Ex Parte Yang-Huffman (link) (Software ‘per se’ is not patentable subject matter)
  • Ex Parte Kinzhalin et al. (link) (“Automated” procedure is not technical enough)
  • Ex Parte Rodriquez et al. (link) (Computer instructions are not patentable as instructions (dicta)).

ITC Section 337 Case Requires Showing That Imports Threaten US Market for Articles Protected by Asserted Patent

Patent,

OSRAM v. ITC (Fed. Cir. 2007) (non-precedential) 

Many patent litigators see the International Trade Commission (ITC) as the preferred forum for stopping imports of infringing products. In particular, when compared with district court litigation, Section 337 ITC actions move to conclusion much more quickly; offer a better chance of immediate preliminary relief; and allow for “general exclusion orders” to stop imports industry-wide (i.e., those injunctions cover particular accused infringers as well as other non-parties).  The ITC has no power to award damages — However, injunctive relief does not require that the patentee prove-up the eBay factors.

One limitation of Section 337 ITC actions is that they can only be pursued when the imports threaten a US industry for the protected article. (US industry must either exist or be “in the process of being established.”  19 USC 1337(a)(2). This ‘domestic industry test’ has been interpreted to require that the domestic product also infringe the patent. Alloc v. ITC, 342 F.3d 1361 (Fed. Cir. 2003).

In this case, the ITC’s original claim construction of a term limiting the size of luminous pigment grains resulted in a finding that OSRAM’s US sales were not covered by the patent. On appeal, the CAFC modified the claim construction holding — and consequently found that OSRAM’s products are covered by their own patent.

Judge Dyk dissented on the claim construction issue.

Notes:

  • Prosecution thoughts: This case provides a concrete example of one reason why the most important claims in a patent are usually directed at covering the client’s actual (or expected) product.
  • The claim construction issue here is actually quite interesting. The disputed limitation reads as follows: “a mean grain diameter d50 # 5 μm”. The appeal focused on whether the mean grain diameter should be calculated on a number-based average (average diameter) or a volume basis (diameter of grain with average volume). This analysis is complicated by the fact that the claimed d50 term generally indicates a median – not a mean.  Judge Dyk sided with the ITC holding that the volume based average should be used because that is the “commercial standard.” The majority chose the number based diameter calculation for reasons well-dissected by Judge Dyk.

Patent Law News

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  • PTO Battle over Rules: PTO Director Jon Dudas and Deputy Director John Doll have now been served with deposition notices from Mr. Tafas’ attorneys. The Dudas deposition is scheduled for Friday, December 7, 2007 at the law office of Kelley Drye in DC.  Deposition dates are rarely firm.
  • E.D.Texas Not Waning: Patent Troll Tracker provides more stats in response to my post suggesting that the “magnetism of the Eastern District of Texas may be beginning to wane.” (Of course, TT’s work looks to the past, and my post was primarily thinking about the future).
  • S.1145: As the Senate Judiciary committee gets rolling again. Now is the time to contact your Senator to discuss the pros and cons of various aspects of patent reform.  [Contact] Interestingly, the Senate has disbanded its Judiciary subcommittee on Intellectual Property [Link]
  • Tafas v. Dudas et al Documents: My friends at Justia have agreed to provide links to all the court documents for the Tafas case: Justia on Tafas.  On November 5, 2007, the PTO withdrew its motion for partial summary judgment under Rule 12(b)(6).
  • Be a Fellow at Princeton: Those of you ready to spend time thinking and writing about patent law might consider a Fellowship in Princeton’s Program in Law and Public Affairs. One of the six fellowships is slotted to be awarded to an IP scholar. (funded by Microsoft). “Outstanding faculty, independent scholars, lawyers, and judges” are all invited to apply. Info: http://lapa.princeton.edu. [Other patent law jobs]

The GSK Case: An Administrative Perspective

Patent,

Rai_portraitBy, Arti K. Rai*

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The already voluminous discussion of GSK[1] has not focused sufficiently on the court’s reasons for concluding that the PTO continuation rules (for reasons of brevity, I focus here only on continuation rules) probably violate the patent statute.  This reasoning is important because the court ruled against GSK’s argument that the rules were a bad idea as a policy matter (or, in the language of administrative law, “arbitrary and capricious”).  The court’s reasoning about the alleged conflict between the statute and the rules contains several errors of administrative law. 

 

With respect to the prospective application of the continuation rules (the very thorny issue of retroactivity in administrative law is best left for another day), analysis of whether the rules are contrary to the patent statute turns on two issues that should be decided sequentially.  First, do the rules fall within the scope of the PTO’s procedural rulemaking authority?  Second, do the rules violate the statute?

 

One mistake in the court’s opinion is that it appears to assume that analysis of the second question can be done without a complete answer to the first.   After equivocating briefly on the first question, the court jumps immediately to the alleged inconsistency with section 120 of the Patent Act.  In agreeing that GSK has “raised serious concerns” about whether the restrictions on continuations conflict with the Act, the court’s opinion relies heavily on In re Henriksen.[2]  That 1968 decision by the CCPA overturned a PTO limit on the number of continuation applications entitled to an earlier filing date under Section 120.

 

But Judge Cacheris should not have avoided deciding the question of substance vs. procedure.  If the PTO’s rules are in fact procedural, then the question of alleged inconsistency with statutory language does not turn on a 1968 CCPA case that makes no mention of administrative law principles (and, indeed, was decided at a time before it was clear that the Administrative Procedure Act even applied to the PTO).  Rather, it turns on the enormous case law that the Supreme Court has developed under its 1984 decision in Chevron v. Natural Resources Defense Council.[3]  Under Chevron and its progeny, an agency acting pursuant to authority delegated to it by Congress (here, procedural rulemaking authority under Section 2(b)(2) of the Patent Act) is entitled to interpret its organic statute so long as Congress has not “directly spoken to the precise question at issue” (Chevron step 1) and the agency’s interpretation is reasonable (Chevron step 2).

 

Assuming that Chevron applies, it is far from clear that Section 120 “speaks directly” to the limits enunciated in the PTO’s continuation rules.  Even if we assume that Section 120 does speak directly to the issue of whether the PTO can impose a bright-line bar, the PTO has argued that it does not intend an absolute limit.  According to the PTO, it will evaluate requests for a third continuation application on a case-by-case basis. Importantly, the PTO interpretations of its own regulations are entitled to very strong deference under the Supreme Court decision in Bowles v. Seminole Rock.[4]  Seminole Rock deference, which was recently reaffirmed in the 1997 Supreme Court case Auer v. Robbins,  says that an agency interpretation of its own rule is “controlling unless plainly erroneous or inconsistent with the regulation.”[5]

 

Indeed, the very strong deference of Seminole Rock is relevant even if the rules in question are substantive and thus not entitled to the application of Chevron.  Yet the opinion by Judge Cacheris does not even cite Seminole Rock.

 

These are more than fine lawyerly arguments about details.  Given the highly uncertain prospects for patent reform, and the reality that Section 2(b)(2) already gives it some rulemaking authority, the PTO has an understandable desire to engage in “self-help.”  Its current and future efforts at self-help must be judged according to the appropriate legal standards.


* Professor, < ?xml:namespace prefix ="" st1 ns ="" "urn:schemas-microsoft-com:office:smarttags" />Duke Law School.  Professor Rai’s 2003 Columbia Law Review article on patent reform focused on the balance of power between the PTO and the Federal Circuit. Arti K. Rai, Engaging Facts and Policy: A Multi-Institutional Approach to Patent System Reform, 103 Colum. L. Rev. 1035 (2003).

 

Preferred citation: Arti K. Rai, The GSK Case: An Administrative Perspective, 2007 Patently-O Patent L.J. 36, https://patentlyo.com/lawjournal.

 

[1] Tafas v. Dudas, 2007 U.S. Dist. LEXIS 80474 (E.D. Va. Oct. 31, 2007).

[2] In re Henriksen, 399 F.2d 253 (C.C.P.A. 1968).

[3] Chevron U.S. A. Inc. v. Natural Resources Defense Council, 467 U.S. 837 (1984).

[4] Bowles v. Seminole Rock & Sand Co., 325 U.S. 410 (1945).

[5] Auer v. Robbins, 519 U.S. 452 (1997)

PTO Rule Challenge

Patent

Some food for thought:

  • GSK made two successful legal arguments against the new rules: (1) that the limitations on continuations are substantively contrary to 35 USC 120 and associated precedent; and (2) that the retroactive nature of applying the new rules to already pending applications exceeds PTO authority.
  • Even if the rule challengers win on those two arguments, the PTO would still be able to implement portions of the new rule that limit the number of claims in newly filed applications. 
  • Furthermore, the retroactive nature of the claim rules is less compelling than for the continuation rules.  The proposal does not truly limit the number of claims. Rather it only requires an “examination support document” be filed if the claim count exceeds the 5/25 limit.  While many have noted these so called ESD’s are onerous, at least one company claims an automated approach (Link).  This would increase applicant’s cost, but arguably would not harm any property rights.  Modestly increasing regulatory cost does not constitute an unlawful retroactive effect.

Notes:

The Waning of the Eastern District of Texas (as a Patent Venue)

Patent,

Although still the most popular district court for new patent cases. The magnetism of the Eastern District of Texas may be beginning to wane. Two recent cases:

  • Weinstein v. UGS Corp: This is not a patent case — however it may be indicative of the court’s new favorite word: Transfer. Here, the court transferred a civil case back to Michigan were the best locus of facts and witnesses could be found.

    • TGIP v. AT: TGIP won a $156 million patent infringement verdict — the largest patent verdict ever in the Eastern District of Texas. After the verdict, the district court erased the award — awarding judgment as a matter of law for AT&T. Apparently, the jury decision did could not properly account for technical details regarding the call authorization code timing.

Michael Smith calculates the 2007 patentee win rates at 28% (2 of 7). If Patent Reform 2007 becomes law, new filings will likely dry up quickly (becaues the venue will be improper for most cases).

Some evidence to the contrary —over 15% of new patent lawsuits filed between August 1, 2007 and November 1, 2007 were filed in the Eastern District of Texas (Westlaw Docket Reports). 

Documents:

 

 

Failure to Conduct Pre-Suit Investigation of Title Does Not Create Exceptional Case

Patent

PatentLawPic100Digeo v. Audible (Fed. Cir. 2007)

Digeo bought its patent out of bankruptcy and sued Audible for infringement. A bit of background on the patent: Two of the named inventors are brothers – Edward and Oliver Chang. Oliver signed the assignment and power of attorney forms on behalf of the estate of his “deceased brother Edward.” During litigation, the facts revealed that Edward is alive and thus, not deceased.  Digeo’s case was therefore dismissed for lack of title. (The bankruptcy purchase did not convey legal title because the assignment was forged.)

The appeal here focuses on the sole question of whether the district court properly denied Audible its attorney fees. Under Section 285 of the Patent Act, attorney fees may be awarded in exceptional cases. The CAFC has limited those exceptional cases to “bad faith” litigation that is “vexatious, unjustified, or frivolous.” 

Rule 11 Sanctions and Exceptional Case: FRCP Rule 11 has an interesting burden shifting procedure. Once a movant establishes non-frivolous allegations of Rule 11 violations, the burden shifts the the accused violator to show the reasonableness of its actions. Section 285 operates differently — there is no burden shifting and the exceptional case must be proven by clear and convincing evidence.  The two rules are linked in that a court’s finding of a Rule 11 violation can be then used to prove that the case is exceptional.  Here, there was no finding of a Rule 11 violation and Audible’s plea for a burden shifting procedure were denied.

“Therefore, the burden here is not on Digeo to show it conducted a reasonable pre-suit investigation into … its legal title…. Instead, the burden is on Audible to prove by clear and convincing evidence that the case is exceptional by showing that Digeo brought a frivolous lawsuit because it knew or should have known that it lacked legal title.”

No Heightened Standard for Bankruptcy Purchases: When you buy something “as is,” a smart buyer conducts a more thorough pre-purchase check. Audible here argued that plaintiffs who purchase patents “as is” should also live under heightened pre-filing investigation requirements because of the greater likelihood that the patent is faulty. The court disagreed with that argument — noting that even “negligent conduct does not suffice to establish that a case is exceptional.”

Walking away, the rule is that a patentee has no duty to conduct a pre-litigation title search unless he “knew or should have known its legal title was defective.”  Of course, Digeo won this battle, but lost the overall case because of the faulty title.

The court also denied Audible’s motion for additional discovery to examine any pre-filing misconduct by Digeo. Audible was unable to establish the requisite “reasonable probability that the outcome [of its Section 285 motion] would have been different had discovery been allowed.”

CAFC Finds Washington DC Drug Price Law to be Unconstitutional

Patent,

BIO and PhRMA v. District of Columbia (Fed. Cir. 2007).

Earlier in 2007, the CAFC found a the District of Columbia’s new Drug Price Law to be unconstitutional as preempted by the patent laws. The law would have prohibited a manufacturer from enforcing a minimum retail price restriction or from charging “excessive prices” for patented drugs. (I.e., not more than 30% more than is charged in Canada or the UK). The appellate panel found that those limits conflicted with the incentive goals of the patent laws because they would limit the “full exercise of market power.”  In October 2007, the CAFC also denied a rehearing en banc. That denial includes two interesting opinions:

Judge Dyk in Favor of Rehearing: Judge Dyk recognizes the broad holding of the original CAFC opinion — that “any state law regulating the prices of patented pharmaceutical products would likely be preempted as a result of the panel’s holding.”  In Judge Dyk’s opinion, a rehearing is not necessary to change the outcome — but rather to change misguided language in the decision.  In particular, Judge Dyk notes that the majority’s discussion of the “full exercise of market power” is overly broad:

“A patent grant is designed not to allow the patent holder to exploit the grant for the maximum profit that the market will bear, but merely to confer a right of exclusivity.”

There are many proper state activities that limit a patentee’s market power. These include:

  • Taxing the sale of patented products;
  • Regulating the sale of patented products (such as tobacco formulations and unsafe lamp oil);
  • Prohibiting the sale of patented products (such as casino games); and
  • Prohibiting price-fixing agreements on patented products.

Judge Dyk argues that like these, price regulation — especially the prohibition on international price discrimination — are not preempted by the Patent Act (even though they may be bad policy).

Judge Gajarsa argued against Judge Dyk’s position — In the process, however, Judge Gajarsa essentially rewrote the panel decision. Arguing that the decision is not based on a requirement that a patentee have full market power but rather, that the DC act is preempted because it upsets the careful balance of rights and incentives created by the US Government in the area of pharmaceutical development.

This case could easily go to the Supreme Court.

Court Blocks PTO Rules on Eve of Effective Date; All Four Equitable Relief Factors Suggest Injunction

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Tafas v. Dudas (E.D. Va. October 31, 2007)

After a two-year long notice, comment, and review process, the US Patent & Trademark Office (PTO) published a set of final rules in August 2007 to effectively limit the number of claims filed in each patent application and to limit the number of continuation applications stemming from an original patent application.  (Current rules allow unlimited claims and unlimited continuations).  Tafas, an individual inventor, immediately filed suit — asking the Virginia based Federal Court to block the rules. Later, Glaxo Smithkline (GSK) filed a preliminary injunction to stop the rules before their November 1, 2007 effective date. Other parties, including the AIPLA, Élan, Hexas, the Roskamp Institute,and Tikvah Therapeutics, IBM, SanDisk, & Senator Schumer, then filed briefs or declarations supporting preliminary relief.

In granting the requested preliminary injunction, the district court walked through the four relevant factors: (1) likelihood that the plaintiff will succeed on the merits of the case; (2) irreparable harm without an injunction; (3) a balance of hardships weighing in favor of an injunction; and (4) the public interest supporting an injunction.  Although the four factors are considered as a whole, the first to factors are clearly the most important and must always be proven.

Likelihood of Success: In its brief analysis of the issues, the court found a “genuine possibility” that the PTO will lose. In particular, the Court noted two particular GSK arguments as likely winners: (1) the facial illegality of limiting the number of continuation applications under 35 USC 120; and (2) problems created by the retroactive effect on settled rights. A third argument – vagueness of the ESD requirements – also has some value according to the Court.

Continuation Applications: 35 USC 120 can be read various ways, but the Court found that Federal Circuit law “suggests that a decision by the PTO to limit the number of continuing applications would run contrary to the mandate of Section 120.”  See Symbol. This conclusion is made easier because the PTO would deserve no rulemaking deference for any rules that extends into substantive grounds. GSK’s position on the illegality of claim limitations is not as strong because there is no statutory provision to the contrary. Thus, the court found that “neither party can claim a strong likelihood of success on this issue.”

Retroactive Effect: The doctrine of retroactive effect is interesting here. Unless expressly granted by Congress, an agency’s rulemaking cannot be retroactive. The court found vested rights in the ability to file continuations and claims under the old rules. Those rights vested at the time when the patentee chose to file for patent protection and give up trade secret protection.

While “an individual [that] discloses his trade secret to others who are under no obligation to protect the confidentiality of the information, or otherwise publicly discloses the secret,” loses that property right, Rucklehaus, 467 U.S. 1002, the Final Rules retroactively alter the bargain on which inventors like GSK rely in making their decision to surrender their rights. The Final Rules thus impair GSK’s right to this bargain.

ESD Requirements: The after publishing the final rules, the PTO published a series of clarification papers and guidelines for how to properly prepare an examination support document (ESD) under the new rules. The Court turned that guidance on its head — suggesting an admission of vagueness and noting that the additional guidance cannot be used to help vague rules overcome due process violations.

An alternative way to block the rules is to show that they are “arbitrary and capricious.” The Court found the PTO’s reasoning coherent enough to give the agency a pass.

Thus, the PTO’s rationale appears to be sufficient to satisfy arbitrary and capricious review, and the Court will find that GSK has not shown a real likelihood of success on this issue.

Irreparable Harm: The Court agreed that the “uncertainty” created by the new regulations was sufficient to cause irreparable harm because they would change investment and patent filing incentives. Without an injunction, GSK would be unable to recover from its lost protection if the rules are ultimately determined to be invalid.

Balance of Hardships: For the preliminary injunction, the balance of hardships weigh in GSK’s favor because GSK’s woes are instant once the new rules are effective. On the other hand, the PTO will simply experience a gradual continued increase in pendency.

Public Interest: The public interest is in a stable patent system. Thus, a preliminary injunction to preserve the status quo is appropriate.

Notes:

PTO Continuation and Claim Rules Temporarily Blocked by District Court

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On October 31, 2007, Judge Cacheris of the Eastern District of Virginia held court in the case of Tafas v. Dudas. In that case, several plaintiffs have joined together in an attempt to block implementation of a set of new patent prosecution rules proposed by the USPTO. The jist of those rules would be to effectively limit the number of claims filed in each patent application and to limit the number of ‘continuation’ applications that may stem from any original patent application.

At the conclusion of the hearing, the Court issued an oral decision temporarily enjoining the PTO from implementing the new rules that were set to become effective on November 1, 2007. John White, who attended the hearing, noted that the crowd clearly supported the plaintiffs and were quite relieved by the decision. Jill Browning of the Ashe firm also attended today’s hearing and provides the following analysis of Judge Cacheris’ hearing on the PTO’s Continuation and Claim Limitations:

With respect to the arguments presented, the Court was clearly well prepared on all the issues.  The attending members of the patent bar (of which there were many) were grateful to the Court for making its decision granting the injunction before the critical November 1 deadline and before the rules had a chance to become effective.   

The Court, at the outset, asked why GSK had delayed in filing its motion.  GSK indicated that the rules issued in August, 2007, were so different from the rules the public commented on in January, that, given the complexity of the rules, GSK’s filing of the motion was timely.  On this point, the USPTO later argued that the Final Rules were merely a “logical outgrowth” of the public comments provided and, thus, acceptable under the law.  GSK took issue with this point, but indicated that this topic would be more germane to the summary judgment briefing and did not need to be decided now. 

GSK began its argument by focusing on the public interest.  GSK argued that the public’s interest would best be served by not implementing the rules and, as support for this, pointed out that every amicus and declaration (and a letter from a Senator) filed by a third party had supported GSK’s position, as opposed to the USPTO’s. [Link] GSK pointed out that the public interest would best be served by maintaining the status quo, as opposed to implementing rules that would require applicants (and specifically GSK) to make substantive choices and decisions regarding their patent portfolios that could never be “undone.”  One particularly persuasive point GSK made during argument wsa that the “contract” between the applicant and the government (i.e., the applicant discloses its trade secret in return for patent protection) was broken by the USPTO’s enactment of the rules.  GSK pointed out that the “quid” of submitting the applications was already accomplished, and now the USPTO wanted to change the “quo.” 

In response, the USPTO argued that the USPTO was not deaf to the public outcry – but that the outcry of “change is bad” is not enough to outweigh an agency’s need to conduct its business in a way that alleviates an over burdened system.  In fact, at one point the USPTO, in a somewhat contradictory argument, noted that it was not enacting a “mechanical” rule eliminating additional continuations. Rather, the rules were simply directed at a way to relieve an overburdened system.  The USPTO stated that the New Rules would increase efficiency and decrease backlog.

GSK rebutted the USPTO’s argument that a delay would cause irreparable harm (i.e., loss of money in changing to the new implementation) by pointing out that the money was already spent, and delaying the implementation of the rules would not cause the USPTO to lose additional money.  On rebuttal, the USPTO indicated that the government would have to expend additional money re-training the examiners, as they could not be expected to maintain their understanding of such complicated and detailed rules for any extended period of time.

With respect to the merits of the case, the Court specifically asked each party whether the USPTO was acting in an arbitrary and capricious manner.  While GSK indicated that they did not need to address this question until summary judgment briefing, it believed that the USPTO was so acting, as evidenced by the Final Rules contradicting over 100 years of court precedent.  The USPTO, in response to the Court’s question, clung to the argument that the rules were merely procedural, and, thus, are well within the USPTO’s authority.  The USPTO also indicated that the 10,000 page record, which included a public comment period, supported the USPTO’s careful and extensive consideration of the issues and stands in stark contradiction to any allegation that the USPTO acted in an arbitrary and capricious manner.

The Court also asked each party what makes the New Rules “substantive” vs. “procedural.”  GSK argued that the rules were substantive primarily because the rules represent a break with over 100 years of substantive patent practice (focusing primarily on the ability to file unlimited continuations, excepting very narrow prosecution laches situations that should be applied on a very limited case-by-case basis).  The USPTO responded by arguing that the Final Rules were procedural because they do not affect the substantive rights of applicants to file, and do not even limit the number of continuations that an applicant can file – the applicant, to file additional applications (i.e., more than the 2 + 1) need only file a petition, which will be decided on a case-by-case basis.

GSK argued that the effect of the Final Rules was, in fact retroactive because it impaired the rights of a party, relying on Supreme Court precedent.  The USPTO indicated that Final Rules were not retroactive, merely because they “upset expectations” and that there is no property right in a patent application or in any particular procedure adopted by the USPTO.   

While, as the USPTO pointed out, an injunction is an extraordinary measure, GSK argued out that agencies are enjoined “all the time” when they promulgate rules that are challenged as being beyond the agencies’ authority.  Apparently, the Court agreed with GSK.  The reasoning for Judge Cacheris’ decision will be found in an opinion that he will issue before close of business today.

1.  When we can expect a final decision on the merits:  The summary judgment briefing schedule that the USPTO had agreed upon with Tafas appears to no longer be in effect for several reasons.  First, the USPTO claims that the expedited briefing schedule was agreed to based on Tafas’ agreement not to seek an injunction.  The USPTO indicated that Tafas reneged on the agreement and joined the motion for a preliminary injunction or TRO and, thus, this alone was grounds to vacate the government’s agreement.  Second, even if the court determined that Mr. Tafas’ actions did not repudiate the agreement, given the additional amicus briefs, and joining GSK as a party, the USPTO requires additional time to adequately address the briefs.  Further, the USPTO pointed out that, because the injunction was granted, plaintiff’s arguments for a speedy hearing on the summary judgment motion are less pertinent.  The Court instructed the parties to attempt to agree on a briefing schedule.  Hopefully, the briefing schedule will be presented as an order so that we will be able to determine when it will be heard, as this will determine when ultimate resolution of the case.

Of course, the preliminary injunction is not a decision on the merits of the rules — it is only preliminary relief. A full decision will likely be delayed until at least early January.  The PTO may still choose to appeal.

In other prosecution news… New IDS rules are expected to be published soon.

Preliminary Injunction Order

Patent,

Text of the Preliminary Injunction order from Judge Cacheris:

4) Defendants [USPTO & Director Jon Dudas] are preliminarily enjoined from implementing the Final Rules titled “Changes to Practice for Continued Examination Failings, Patent Applications Containing Patentably Indistinct Claims, and Examination of Claims in Patent Applications”;

5) Defendants are preliminary enjoined from issuing new regulations restricting the number of continuing applications, the number of requests for continued examination, and the number of claims that may be filed with the PTO;

6) This Order shall expire upon the entry of a final judgment in this matter, unless otherwise ordered by the Court.

Patent Prosecution Notes

Patent,
  1. The MPEP was recently updated to include examination guidelines in light of KSR v. Teleflex: MPEP; Bluepages. The update to MPEP 706.02(j) reads as follows:  

35 U.S.C. 103 authorizes a rejection where, to meet the claim, it is necessary to modify a single reference or to combine it with one or more other references. After indicating that the rejection is under 35 U.S.C. 103, the examiner should set forth in the Office action:

  1. the relevant teachings of the prior art relied upon, preferably with reference to the relevant column or page number(s) and line number(s) where appropriate,
  2. the difference or differences in the claim over the applied reference(s),
  3. the proposed modification of the applied reference(s) necessary to arrive at the claimed subject matter, and
  4. an explanation >as to< why >the claimed invention would have been obvious to< one of ordinary
    skill in the art at the time the invention was made.

. . . It is important for an examiner to properly communicate the basis for a rejection so that the issues can be identified early and the applicant can be given fair opportunity to reply. Furthermore, if an initially rejected application issues as a patent, the rationale behind an earlier rejection may be important in interpreting the scope of the patent claims. Since issued patents are presumed valid (35 U.S.C. 282) and constitute a property right (35 U.S.C. 261), the written record must be clear as to the basis for the grant. Since patent examiners cannot normally be compelled to testify in legal proceedings regarding their mental processes (see MPEP § 1701.01), it is important that the written record clearly explain the rationale for decisions made during prosecution of the application.

See MPEP § 2141 – § 2144.09 generally for guidance on patentability determinations under 35 U.S.C. 103. . .

Materials from Tafas/GSK v. Dudas: Challenging the PTO’s new Rules

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Documents:

  • Supporting Preliminary Injunction and Restraining Order against PTO:
  • Opposing Preliminary Injunction and Restraining Order:
  • Declarations:
  • Other:

    • Translogic Challenges (1) the Constitutionality of BPAI Decisions and (2) CAFC’s Retroactive Application of a PTO Proceeding to a Jury Verdict

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    In re Translogic (Fed. Cir. 2007)
    Translogic v. Hitachi ( Fed. Cir. 2007)

    In parallel proceedings, Translogic won its patent infringement case in a jury trial against Hitachi (jury agreed that the claims were valid) and lost its BPAI reexamination appeal (BPAI found claims invalid). Both appeals reached the CAFC at roughly the same time and were decided the same day with the following holding: 

    •  In re Translogic: BPAI affirmed; claims are obvious.
    • Translogic v. Hitachi: Based wholly on the above decision, the jury verdict vacated because claims are obvious.

    Translogic has now requested an en banc rehearing of this unusual pair of cases decisions: 

    Unlawful BPAI Composition: In a recent article, Professor John Duffy challenged the current process of appointing BPAI judges as unconstitutional. John F. Duffy, Are Administrative Patent Judges Unconstitutional? , 2007 Patently-O L.J. 21.  The crux of the Duffy article is that these administrative judges must be appointed by either the head of the Commerce Department or the President. I.e., appointment of these officers by lower level offices, such as the under-secretary, is unconstitutional. Art. II, § 2, cl. 2.  In Translogic’s favor, the Supreme Court has created “broad standing rules” that that do not require specific ‘injury’ due to botched appointment. Likewise, Translogic argues that court precedent provides standing despite a failure to raise this issue at the BPAI or in the original CAFC case. Professor Duffy’s article also found its way to Congress – HR 1908 would amend Section 6 of the Patent Act to require the Secretary of Commerce to appoint the BPAI members. Of course, this issue calls into question most recent BPAI decisions.

    Antiretroactivity Doctrine: Of course, if the BPAI’s decision is vacated, the CAFC must then take a second look at its summary decision in the infringement case.  Translogic also argues that the vacatur violates the Supreme Court’s “antiretroactivity doctrine.”  Under that doctrine, later cancellation of an issued patent should not be used to overturn a prior jury verdict. Although in dicta, the Supreme Court spoke on this very issue — noting that “title to these moneys [damage awards] does not depend upon the patent, but upon . . . judgment of the court.” Moffitt v. Garr, 66 US 273 (1861).  In any event, the patent is not invalid until the PTO issues a certificate of cancellation under 35 USC 307. Thus, the holding is at least severely premature.

    Jury Trial and Reexamination: The 7th Amendment right to a jury trial also includes a right not to have a jury verdict reexamined by a Court except according to the rules of Common Law. Translogic’s argument here is that the CAFC decision violates this right because it nullifies the jury verdict “without applying any appellate standard of review, based solely on its affirmance of a Board decision that explicitly reexamined facts tried to the jury.”

    Notes:

    • Thanks to Hal Wegner for noting this case in an email to the author.

    Emergency Motions at the CAFC

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    There is a good possibility that late on Halloween night, the CAFC will receive an emergency motion for a preliminary injunction or temporary restraining order. How does this work:

    • Jurisdiction: The CAFC has jurisdiction to immediately hear an appeal to a district court’s denial of injunctive relief under 28 USC 1292 (granting jurisdiction over grants & denials of injunctions) The CAFC has jurisdiction over all cases arising under hte patent laws . 28 USC 1295 This case clearly arises under the patent laws because the complaint asserts that the patent laws preclude the PTO from taking these actions.
    • Timing: Normally, a respondent is given at least eight days to respond to a motion in appellate court. FRAP 27.  However, the appellate court can shorten that time by giving ‘reasonable notice.’ A temporary order to ‘preserve the status quo’ would not need any notice.
    • Emergency Motions:The CAFC has no specific procedure to deal with emergency motions.
    • Lone Judge: At the CAFC, most emergency motions involving preliminary injunctive relief are decided by a full three-member panel. However, a single judge will, on occasion, make the determination. In, Tivo v. EchoStar, for instance, Chief Judge Michel issued a temporary stay pending consideration by the full panel. The Federal Rules of Appellate Procedure provide room for a single circuit judge to “act alone on any motion.”

    Documents:

    Patent Reform in the Senate

    Patent
    • The Senate continues an internal struggle over patent reform. Although a majority of Senators support the proposed reform measures, the majority does not yet have the 60 votes necessary to close debate. 
    • Although the Democrats have been more strongly supporting patent reform, the Senate Bill (S.1145) is clearly bi-partisan. Co-Sponsors include the following Republicans: Orrin Hatch; John Cornyn; Larry Craig; Michael Crapo; Gordon Smith; Roberts; Bennett. Co-Sponsors include the following Democrats: Pat Leahy; Ken Salazar; Chuck Schumer; Sheldon Whitehouse.
    • The reform measures (already passed in the house) would make numerous changes to the patent laws, including:
    • Force a large number of patent infringement suits to be filed in the defendant’s home court;
    • Reduce damage awards for infringement and require specific proof of market value of invention as compared to the closest prior art;
    • Limit enhanced damages to a specifically enumerated subset of willfully infringing actions;
    • Create a new, expanded post-grant opposition procedure (specific rules to be created by the PTO);
    • Create expanded right to submit third-party prior art;
    • Change to a first-to-file system (creating a whole new set of prior art);
    • Provide enhanced regulatory authority to the PTO (So that it can enact the continuation changes). . .
  • Patent reform is an area quite friendly to horse trading and votes are much more easily changed than areas with a greater potential voter response. Few Senators will gain or lose votes based on their patent reform vote.

    • Patent Prosecutors: Don’t Wait for the Witching Hour

    Patent

    PatentLawPic099The head of a corporate IP department recently forwarded the following message to his troops:

    To take advantage of the “one more continuation,” we will be filing around XYZ applications between now and 1-Nov.

    Some of you have experienced the USPTO electronic filing system locking up as its workload increases just before the cutoff at midnight Eastern time. It is fair to say that the witching hour this Halloween will be particularly intense. 

    Thus either file a day or so early, or switch to a paper filing. I’d rather pay the extra $75 in fees for a paper filing than miss that date.

    If you decide to paper file between 2 and 4 PM on Halloween, then you have time to take the application to a normal post office before they close. If you are making late changes, you might want to simply plan on using the open-till-midnight post office at the airport. . . However at the witching hour, will its small parking lot fill up with patent practitioners spooked they cannot find a parking place?”

    As we’ve always done in Chicago — file early and often.