by Dennis Crouch

The recent Federal Circuit decision in Caltech v. Broadcom includes an important discussion of extraterritorial damages further extending Carnegie Mellon (Fed. Cir. 2015) in finding that manufacture and delivery of a product in a foreign country can infringe a US patent if sufficient sales-activity occurred within the US.

California Institute of Technology v. Broadcom Ltd. and Apple Inc., ___ F.2d ___ (Fed. Cir. 2022).

The case involves wireless communication chip logic patented by CalTech.  Broadcom makes infringing chips and they are installed in Apple devices. The Broadcom chips and Apple phones are manufactured outside of the United States, although they are largely designed in the US, and the nerve centers of marketing and sales are also in the US.  Although many of these devices made their way to the US, the jury verdict apparently included damages for 1 billion chips that Broadcom manufactured abroad, and sold to Apple’s foreign suppliers outside of the US, and that were never imported into the US.

This setup raises some concern because US patents are territorial in nature, and liability under Section 271(a) requires action “within the United States” importing “into the United States.”

(a) Except as otherwise provided in this title, whoever without authority makes, uses, offers to sell, or sells any patented invention, within the United States or imports into the United States any patented invention during the term of the patent therefor, infringes the patent.

35 U.S.C. 271(a). Still, much of the sales activities occurred within the United States.  In Halo, the Federal Circuit addressed a similar situation regarding local sales activity leading to delivery and performance occurring entirely outside of the US.  The court explained that in that situation, “pricing and contracting negotiations in the United States alone do not constitute or transform those extraterritorial activities into a sale within the United States for purposes of §271(a).” Halo Elecs., Inc. v. Pulse Elecs., Inc.., 831 F.3d 1369 (Fed. Cir. 2016) on remand from 579 U.S. 93 (2016).

On appeal, the Federal Circuit cabined-in its prior Halo statements and concluded the sales activity can be considered “within the United States” when the US activity extends beyond “pricing and contracting negotiations . . . alone.”  A contrasting case here is Carnegie Mellon Univ. v. Marvell Tech. Grp., Ltd., 807 F.3d 1283 (Fed. Cir. 2015).  In CMU, the Federal Circuit explained that the location of a sale is often difficult to pinpoint, and might occur in multiple locations at once.

Places of seeming relevance include a place of inking the legal commitment to buy and sell and a place of delivery, and perhaps also a place where other substantial activities of the sales transactions.

CMU. The chip business is particularly crazy because they involve multi-year sales cycles and the chip-maker is looking for a “design win” where a particular chip is locked-in for mass production.  Here, apparently the patentee provided substantial evidence that the multi-year process of designs, simulations, test, reworking, sampling, pricing, etc., all occurred within the United States.  This evidence was presented to the jury, and the jury also received instructions that “sales may be found to have occurred in the United States where a substantial level of sales activity occurs here, even for products manufactured, delivered, and used entirely abroad. . . . ” (Instruction reprinted below)

On appeal, the defendants did not challenge the sufficiency of the evidence, but rather that the jury instruction was improper.  The Federal Circuit though sided with the patentee and confirmed that the instructions were proper. “This was a proper and sufficient jury instruction with respect to the applicable burdens on the territoriality of the sales at issue.”

The result here is continued flexibility on what counts as “US sales” for patent infringement purposes, and this case makes it marginally easier to capture foreign activity with a US patent.

In its appeal, Broadcom also argued that the jury should have receive instructions on the presumption against extraterritorial application of US law.  See WesternGeco LLC v. ION Geophysical Corp., 138 S.Ct. 2129 (2018).  The Federal Circuit rejected this appeal — holding that the presumption is applied when courts interpret the law or construe a statute. Once the law is defined, then it is time for the jury to weigh the evidence and draw its conclusions — and and that the presumption is inapplicable.  Here, the court told the jury that the sales must be “within the United States,” and the jury then was asked to simply weigh the evidence and determine “whether the relevant transactions … were domestic or extraterritorial in nature.”  On appeal, the Federal Circuit found that the district court’s approach was again sufficient and proper.

= = =

Note – the Federal Circuit affirmed on the extraterritorial questions, but vacated the billion dollar judgment on other grounds. Thus, there will be a new trial on damages, and the new jury might reach a different result.

by Dennis Crouch

Larry Junker v. Medical Components, Inc. (Fed. Cir. 2022)

Junker’s U.S. Design Patent No. D450,839 looks like a set of clown feet (image below), but, in actuality it covers “the ornamental design for a handle for introducer sheath” and is used as part of a medical catheter kit.  Junker designed the handle with “large, rounded Mickey-Mouse-shaped ears” to make it easier to handle.

The appeal focuses on whether the design patent should be found invalid based upon Junker’s pre-filing sales. Here is the timeline:

• 1998: Junker entered into an NDA with Eddings and disclosed the invention in some general form.  The collaborative idea was that Eddings would manufacture the sheaths because Junker did not have that capability.
• January 1999: Eddings made a prototype of the product and provided it to Junker, the prototype included all the features found in the design patent.
• January 1999: Eddings sent Boston Scientific a letter with pricing information for its Peelable Sheath Set.  The parties agree that the products described in the letter embody the design that was later patented.
• February 2000: Junker filed his patent application that led to the D’839 patent.

Later Junker sued MedComp for infringement, and the question here is whether the January 1999 letter from Eddings constituted an offer to sell the invention that triggered the on sale bar of 35 U.S.C. 102(b) (pre-AIA).

A person shall be entitled to a patent unless … (b) the invention was … on sale in this country, more than one year prior to the date of the application for patent in the United States

Section 102(b). The district court says sided with the patentee and a jury awarded $1.2 million.  On appeal, however, the Federal Circuit has reversed–holding that the Eddings letter constituted a “commercial offer for sale of the claimed design” and therefore created a bar to patentability under the statute.

The “on sale” bar is triggered both by pre-filing sales and pre-filing offers-to-sell.  The Federal Circuit relies upon traditional contract law principles to determine whether a particular communication constitutes such an offer.  Remember the contract foundational trio: Offer, Acceptance, Consideration.  We’re talking about the same offer, and a communication only constitutes an offer if the other party could create a binding contract “by simple acceptance.”  Of course, not just any offer works — it needs to be an offer to sell.  Thus, the court has held that an offer-to-manufacture doesn’t count.

In reviewing the letter, the court noted that the terms appeared quite complete.  It included specific pricing (excerpt above), including quantity discounts, and information on shipping (bulk; non-sterile; FOB Athens, TX) and payment (due in 30 days).  Sometimes an unsolicited letter such as this may be seen as merely an advertisement.  This letter, however, was a response to a “request for quotation” from Boston Scientific, and addressed particularly to that company. Both of these facts balance toward a finding that the letter constitutes an offer.  [Read the Letter – Offer]

That said, the letter also included a statement requesting further discussions.  “I appreciate the opportunity to provide this quotation and look forward to discussing your requirements in person.”  Although the appellate court acknowledged that statement, it concluded that the completeness of the terms weighed in favor of finding an offer sufficient to bind the parties.

Junker also notes that “simple acceptance” is not enough here. Rather, the buyer must specify both the catheter size and quantity.  On appeal, the Federal Circuit found that those various options should be seen as “multiple offers.”

[T]he letter comprises multiple different offers that Boston Scientific could have accepted by simply stating, for example, “We’ll take 5,000 sets of the 4F-6F Medi-Tech Peelable Sheath” or “10,000 sets of the 11F Medi-Tech Peelable Sheath.”

Slip Op.  Since its an offer prior to the critical date (1-year before filing), the patent claim is invalid and $1 million verdict is gone.

= = =

 Section 102 was rewritten as part of the America Invents Act. The revised statute continues to include the same “on sale” language and so a repeat of the same facts today would likewise lead to the invention being unpatentable.

= = =

Although not discussed in the appellate court decision, it turns out that Junker had originally filed a utility patent application back in 1998 that issued as U.S. Patent No. 6,645,178.  The drawings appear similar enough to me that the 1998 utility application could have (but did not) served as a priority document for the later design application. (Image below).  In 2003, Junker filed a reissue application seeking to claim that benefit.  Junker’s attorney withdrew from that representation following a really simple rejection, and the reissue application was abandoned. Around the same time, the corresponding utility patent was also allowed to expire for failure to pay the maintenance fees due.

Peter Sgromo v. Leonard Scott (Fed. Cir. 2022)

Sgromo owned two patents that he transferred to Scott’s company Eureka Inventions.  The two had what the courts call a “personal” relationship, and the transfer of rights was apparently done to “repay Scott for money he had given or loaned to [Sgromo] over the course of their relationship.”  Bestway (USA), Inc. v. Sgromo, 2018 WL 3219403 (N.D. Cal. July 2, 2018).  Sgromo then negotiated a license deal from a third-party, but that income was designated as coming to Eureka.

3D Pool Vision Pat. US7046440B1

When the two broke-off their relationship Sgromo wanted the patents back and sued.  An arbitrator sided with Scott, concluding that Sgromo did not own the patents.  A district court then confirmed the award, and Sgromo appealed.

On appeal now, the Federal Circuit has refused to hear the case — finding that  a patent ownership dispute does not “arise under” the patent laws. As such, the Federal Circuit does not have appellate jurisdiction. See, Gunn v. Minton, 568 U.S. 251 (2013) (patent attorney malpractice does not arise under the patent laws).

The court transferred the appeal to the Ninth Circuit.

by Dennis Crouch

Patent attorneys expect an initial office rejection, but clients often want to know: how long must this go on before we get our patent?  The chart below provides some data on how many office-action rejections you might expect before a patent issues.

To collect the data, I wrote a short bit of code to parse through the file histories of all the issued patents from the past several years and count the number of non-final and final rejections.  The histogram above is based upon the total number of rejections in each patent history.  You can see that most issued patents issue with either 0 or 1 rejection, but there are a sizeable number that require 3+ (this also typically involves an RCE and/or appeal brief).  Note that the applications that fly-through without any rejections may have also received some sort of notice, objection, or requirement that slows down the process.  Note also that the chart here does not consider patent families. In the past, I have seen that continuation applications following an issued patent tend to issue fairly quickly.  In those cases, the applicant and examiner have already agreed on an aspect of the invention that is novel, and the new claims often simply re-form those key components.

The process of going from No to Yes can vary.  By definition, the technology at issue should be new, and so the first office action response is often about educating the examiner and how it is different from the prior state-of-the-art. But, in most cases, the applicant also ends up amending claims either for clarity or in order to add limitations to avoid prior art identified by the patent examiner.  This is all part of the process, and perhaps exactly how it should work.

How many rejections does it take to get a patent?

About 15% of cases go straight through without any rejection, but some cases require more work. pic.twitter.com/s51wntcoKb

— Dennis Crouch (@patentlyo) February 5, 2022

In a prior post, I wrote about third party prior art submissions, but that post was only looking at issued patents. I have gone back and pulled-in data from all publicly-available applications, including those that have been abandoned or are still pending.  The results: third parties have submitted prior art in about 7,000 applications over the past decade.  This is about 0.2% of all the applications in my dataset.

I have uploaded the listing of all the applications with third-party submissions (and current status of each application) at the link below.  Dennis Crouch, Third Party Submissions, Harvard Dataverse (Feb. 4, 2022), https://doi.org/10.7910/DVN/M5JK3Y.

I pulled up a recent case. U.S. App. No. 16/824,815 focusing on a vehicle heads-up display owned by Visteon.  A third party (James D. Busch) submitted his own published patent application (US Pub. No. 20180217429) as prior art and included a 30-page “concise description of relevance.”   At that point, the examiner issued an anticipation rejection and the patentee abandoned.  Note here that Busch is both a prolific inventor and a patent attorney.  He has an interesting article suggesting that patentees may want to use 3rd party submissions in order to seed forward citations of your patent.

by Dennis Crouch

The chart below shows the USPTO utility patent allowance rate broken up on a quarterly basis (using calendar year quarters).  The rate is based upon two numbers: The number of patents issued each quarter, and the number of applications abandoned each quarter.   Allowance Rate = Patents / (Patents + Abandonments).  Because I only have detailed abandonment data on published applications, I limited all the data to only published applications.   I generally expect that the grant rate for unpublished applications to be a bit lower.

Note the drop in allowance rate during the Bush years while Jon Dudas was USPTO Director. David Kappos quickly reset expectations. And, since then we have seen a steady rise in allowance rate.  Kappos also brought the steady handed Drew Hirshfeld into a leadership role where he has remained through three presidencies.

The second chart breaks this down by entity type. You’ll notice the spike in 2nd Qtr 2020 at the beginning of COVID. We had a dip in abandonment during that time.  The CARES Act and action by Dir. Iancu allowed some applicants to delay abandonment.  Some of the waivers were directly applicable only to small/micro entity applicants, and that may be the explanation for the impact.

UPDATED TO FIX MY MATH ERROR:

I posted some statistics on references cited in recently issued patents. That raised some discussion in the comments regarding third-party prior art submissions. The chart below puts some numbers on the result that everyone likely expected–third party submissions are quite rare.  Out of every 10,000 issued patents, only about 14 include prior art submissions from third parties.

One aspect to consider about this data is that it may be skewed because it only includes issued patents — We can expect that there are a percentage of cases where the third-party submission led the applicant to eventually abandon the patent application.

Although third-party submissions were permitted prior to the AIA, the AIA expanded the process substantially – although only with regard to applications filed after Sept 2012. Today, third parties can submit prior art to the PTO so long as it is both (1) within six months of publication and (2) before an office action rejecting a claim or a NOA.  The submissions also require a fee of $180 for every 10 documents submitted ($90 for small entity).

The following are some recently issued patents that include third party submissions if you want to look through the file histories: 11,228,023; 11,225,200; 11,224,546; 11,224,456; 11,228,055; 11,221,486; 11,220,614; 11,219,722; 11,219,166.

IN re Vox Populi Registry Ltd. (Fed. Cir. 2021).

A few years ago, ICANN opened the door to all sorts of top-level domains.  Vox jumped on-board with the “.SUCKS” domain, and is the TLD’s domain registry operator.  The setup appears to be a bit of a scam.

Vox is attempting to register a both the standard character service mark .SUCKS and also the stylized version shown in the figure above.  Both were rejected based upon a finding that the mark is merely descriptive and lacks distinctiveness. And, on appeal, the Federal Circuit has also affirmed. (Vox only appealed the for the stylized form).

In particular, the court found substantial evidence supporting the following:

• Consumers would view .SUCKS as only a non-source identifying part of a domain name.
• The party is using .SUCKS as a product — i.e., domain name ending in .SUCKS.
• The stylized version of .SUCKS fails to create a separate commercial impression from the word itself.

This case is related both to TAM, BRUNETTI and also BOOKING.COM, but none of those save-the-day for Vox.  The court does note that the mark may become registrable if Vox is later able to show acquired distinctiveness.  In each of those recent Supreme Court cases, the Trademark Office had attempted to use some shortcut/exception to reject the trademark registration.  Vox is totally different from those cases because the TTAB and Federal Circuit relied upon the core trademark principle of distinctiveness to deny registration.

by Dennis Crouch

[Survey Results at the bottom]

Astrazeneca AB v. Mylan Pharmaceuticals Inc., Docket No. 21-01729 (Fed. Cir. 2022)

In December 2021, the Federal Circuit sided with the accused-infringer Mylan on claim construction of the term “0.001%” — vacating the judgment of infringement.  See Crouch, Rounding Errors in Patent Law, Patently-O (Dec 8, 2021).  Now Astrazeneca has petitioned for en banc reconsideration–seeking “consistent precedent regarding significant digits.”

The panel majority overlooked and misapprehended, by failing to cite or apply, the controlling decisions of Iwasaki and Viskase, in holding that the ordinary meaning of a numerical claim term based on significant digits may be displaced, in the absence of lexicography or disclaimer, because it may encompass more than the most preferred embodiment.

AZ En Banc Petition on Rounding Errors., citing U.S. Philips Corp. v. Iwasaki Elec. Co., 505 F.3d 1371, 1377-78 (Fed. Cir. 2007) and Viskase Corp. v. Am. Nat’l Can Co., 261 F.3d 1316, 1320 (Fed. Cir. 2001).

AZ’s patent claim is directed to formulation that includes “0.001%” PVP K25.  The case does not tell us the accused concentration, but Mylan admitted that it was within the standard rounding error, i.e., between 0.0005% and 0.0014.  The patent document does not say anything directly about how this sort of rounding should be done, and so the district court used this standard rounding error approach for a decimal with 1 significant digit. Result was a finding of infringement.  On appeal, however, the appellate majority found that the term should be given a much narrower construction.  The court’s reasoning came from its reading of the specification — in particular, the patent document provides examples comparing a concentration of 0.001% against 0.0005%. The problem is that, for rounding purposes, 0.001% is not distinct from 0.0005%.  The conclusion here is that the patent document is a bit sloppy with its use of significant digits and that led the court to its unusual decision that 0.001%  should be construed as “that precise number, with only minor variations, i.e., 0.00095% to 0.00104%.”

Figure 3 from the patent (above) provides an example of the confusion regarding significant figures.  The single chart shows effectiveness of various concentrations of PVP K25–each one at a different level of significance.  The chart particularly appears to distinguish between a concentration of 0.001% and a concentration of 0.0005%.  However, the patentee in the petition argues that 0.001% encompasses a reading of 0.0005%.

Judge Taranto dissented from the original judgment. He argued that the significant-figure convention is so well established within the scientific community that to should take much more than a stray example to shift from that basis.

I noted that the patentee-petitioner here relies heavily upon Viskase Corp. v. Am. Nat’l Can Co., 261 F.3d 1316 (Fed. Cir. 2001).  One big problem though is that the court in Viskase decided that statements from the prosecution file led the court away from the traditional rounding principles, just as the majority did in Astrazeneca.  In Viskase, the patent claimed “below about 0.91 g/cm³“, but the court interpreted the claim as “below  0.910 g/cm³” based primarily upon a prosecution history statement during patent prosecution.  The petition apparently cites Viskase as a backstop, and then suggests that its situation is totally different since it “never expressed 0.001% PVP K25 with an additional significant digit, either in the specification or prosecution history.”

= = = =

I asked Patently-O readers what range of concentrations would they see as literally infringing a hypothetical patent claiming a concentration of “0.1%” PVP K25.

Guest Post by Victoria T. Carrington and Professor Jorge L. Contreras.

Background 

It should be no surprise to readers of Patently-O that many are unhappy with the Supreme Court’s jurisprudence regarding patent eligibility under Section 101 of the Patent Act. In response to various calls for “reform” of patent eligibility jurisprudence, on March 5, 2021, Senators Thom Tillis (R-NC), Mazie Hirono (D-HI), Tom Cotton (R-AR), and Christopher Coons (D-DE) requested that the US Patent and Trademark Office (PTO) conduct a study regarding public views on “how the current jurisprudence has adversely impacted investment and innovation in critical technologies like quantum computing, artificial intelligence, precision medicine, diagnostic methods, and pharmaceutical treatments.” The Senators also asked the PTO to evaluate the responses and provide a detailed summary of its findings by March 5, 2022. The PTO released its public request for information (RFI) on July 9, 2021. The original deadline for response was September 7, 2021, which the PTO extended until October 15, 2021. A total of 145 comments were submitted before the deadline. In advance of the official assessment, we have reviewed and tallied these public comments for those who are eager for the results in advance of the official release.  

Methodology 

We reviewed each submission that was made in response to the PTO’s 2021 Patent Eligibility RFI, as posted by the USPTO on Regulations.gov. Information that we noted and tracked included submitter name, submitter industry/specialty, date submission received, submitter location (if listed), and the general tenor of the submitter’s comments. 

Findings 

Demographics 

There was a total of 145 submissions. Some individuals submitted two comments, and one individual submitted four identical comments. Fifteen submissions were anonymous. We combined multiple submissions from the same commenter, yielding a total of 137 unique comments. 

Figure 1 below shows the breakdown of industry affiliation of submitters. The largest group of submitters (28%) were patent attorneys and/or law firms that did not have a clear industry affiliation. Companies and trade associations were broadly classified as “High Tech” (18%) or “Life Sciences” (14%). Submissions classified as “Business” (11%) identify those made by venture capitalists and submitters focused on finance or entrepreneurship like the Market Institute. “Other” (8%) industries represented included cross-industry trade associations such as the Association of University Technology Managers (AUTM) as well as individuals, organizations, and companies that otherwise did not readily fit into the other specified classifications such as the mining conglomerate Rio Tinto, and Acushnet, a which makes golf equipment and apparel. 

Sixty-three submitters specified a location. California had the highest number of submissions (11). Six submissions came from outside of the U.S.: Canada, Japan, Macedonia, Switzerland, and two from the United Kingdom. 

Analysis of Positions 

We analyzed the content of each submission to determine whether the submitter generally viewed current jurisprudence regarding patent eligibility in a positive or a negative light or adopted a neutral stance. Figure 2 below illustrates the breakdown of submissions among these categories, excluding 19 submissions that did not actually address the question of patent eligibility. 

Figure 3 shows the comparison of the general tenor of submissions made by industry classification. 

Below we discuss these findings in more detail. 

Neutral Comments 

Four submissions adopted a neutral standpoint, neither praising nor criticizing current patent eligibility jurisprudence. One such comment was submitted by Professors Maya M. Durvasula, Lisa Larrimore Ouellette, and Heidi L. Williams. It effectively critiques the empirical validity of the PTO study itself: “Many have argued—largely based on anecdotes or descriptive data—that recent changes in patent eligibility caselaw have either increased or decreased innovation. Here . . . we argue that neither view is supported by the available empirical evidence.” “It is unclear whether limits on patent eligibility increase or decrease innovation.” “Current evidence does not demonstrate whether the Alice/Mayo framework is good or bad for social welfare in contested fields [specifically the biomedical and software markets].” 

Positive Comments 

Forty submissions (27.6%) describe current patent eligibility jurisprudence in a positive light, noting general satisfaction with the Supreme Court’s eligibility case law and its application within the market. Notable commenters in this camp include the American Civil Liberties Union (ACLU), Google, and the Association of American Medical Colleges (AAMC). 

The ACLU also criticized the framing of the PTO study, observing that “[t]roublingly, the RFI seems to adopt the same framing as the Senators’ request, presupposing that patent-eligibility jurisprudence lacks clarity and consistent application and that this lack of clarity is causing harms. Neither the Senators’ letter nor the RFI provides any basis for the allegation that the law is inconsistent or unclear . . . .” The ACLU points to the fact that there is a high affirmance rate of subject matter eligibility decisions made by district courts and the PTAB to argue that current patent eligibility jurisprudence is relatively clear. It also points to statements in Federal Circuit Opinions showing that judges are able to apply 101 in a clear and consistent manner. 

Google commented that “robust data supports that the balance in our IP system has allowed patenting in emerging technologies to flourish. . . . We urge the PTO to reject the premise set forth in the RFI that ‘the current jurisprudence has adversely impacted investment and innovation in critical technologies like quantum computing and artificial intelligence.’” 

From the life and health sciences perspective, the AAMC drew on public health and access considerations, noting “that law and policy must protect and balance the public good, including access to timely patient care, with proprietary rights in support of science and technology, particularly in the fields of medicine and public health. We believe that these principles are reflected in current jurisprudence.” 

Negative Comments  

Eighty-two submissions (56.6%) expressed at least one major concern with the state of current patent eligibility jurisprudence. The two primary concerns were that (1) eligibility requirements are too unclear and/or uncertain and (2) too many useful inventions are currently ineligible for patent protection based on current eligibility requirements. 

International Business Machines (IBM) specifically critiqued the judicially created ‘abstract idea’ exclusion from patent eligibility, noting that it “continue[s] to unnecessarily generate wide uncertainty about the validity of information technology patents and to undermine the patent incentive. It is a significant concern to innovators and patentees, who rely on the patent system to protect their investment in computer-related innovations. This uncertainty reduces public confidence in issued patents, making it harder for inventors to benefit from those patents.” 

The “too-many-inventions-are-ineligible” camp includes the IP Law Section of the State Bar of Nevada. It specifically highlights that there has been an “[o]verly broad application of” In re Smith to reject electronic gaming machine inventions under Section 101. 

Novartis’s submission sums up both reasons most submitters are unsatisfied with patent eligibility: the uncertainty and the ineligibility of specific important inventions. 

Figure 4 illustrates the relative frequency of these different negative arguments made regarding patent eligibility. 

Conclusion 

This preliminary assessment shows a range of views expressed by public commenters in response to the PTO’s Section 101 Patent Eligibility Study. There is clearly no majority or consensus view, meaning that any legislative response to the dissatisfaction voiced by some over current judicial eligibility decisions should be taken with care and provide further opportunities for public input and debate. 

The data for this post is archived at Victoria Carrington, 2022, “Public Comments on PTO’s 2021 Patent Eligibility Study”, https://doi.org/10.7910/DVN/DQWHHO, Harvard Dataverse, V1.