Scope of IPR Estoppel Expands, but How Far?

Patent

by Dennis Crouch

On Feb 4, the Federal Circuit issued an important decision in California Institute of Technology v. Broadcom Ltd. and Apple Inc. (Fed. Cir. 2022).   Four of the big issues are listed below:

  • IPR Estoppel: The most important legal precedent in the case is a pro-patentee interpretation of the IPR estoppel provision found in 35 U.S.C. § 315(e)(2).  That prevision bars an IPR petitioner involved in patent litigation from asserting any invalidity grounds that the petitioner had “raised or reasonably could have raised during that inter partes review.” Id.  Here, the court makes clear that the scope estoppel is not tied to the grounds raised to in the IPR, but rather truly does extend to any ground “reasonably could have been included in the petition.”  Slip Op.  This decision expressly overrules Federal Circuit precedent to the contrary. Shaw Industries Group, Inc. v. Automated Creel Systems, Inc., 817 F.3d 1293 (Fed. Cir. 2016).
  • Big money: The jury had awarded a $1 billion+ damage award; the Federal Circuit vacated that award and ordered a new new trial on damages.  The court also vacated an infringement finding with regard to one of the patent claims because the district court did not instruct the jury on the construction of a particular term (“variable number of subsets”).
  • Eligibility: The inventive feature here is use of bit repetition to better ensure wireless signal transmission.  On appeal, Broadcom argued that the claim lacked eligibility because it employs a mathematical formula.  The Federal Circuit dismissed that argument out-of-hand with a direct quote from the Supreme Court. Diamond v. Diehr, 450 U.S. 175, 187 (1981) (“[A] claim drawn to subject matter otherwise statutory does not become  nonstatutory simply because it uses a mathematical formula, computer program, or digital computer.”).
  • Extraterritoriality: The infringing chips are made abroad and installed in Apple devices abroad.  U.S. patents only cover infringement within the  territorial bounds of the United States.  The jury found infringing sales in the U.S.  On appeal, the Federal Circuit found the jury instructions appropriate.  Notably, the court refused to require any jury instructions  on the presumption against extraterritorial application of U.S. patent laws.  Rather, the instructions properly walked through factors for determining whether a particular sale occurred in the United States.

= = = =

In this post, I am just going to focus on the estoppel issues: Argument estoppel is a big deal with inter partes review.  By design, patent challengers get one-bite at the Apple; one shot at invalidating the patent claims based upon obviousness or anticipation.  Of course, the devil is in the details with this sort of rule.

Rather than relying upon traditional judge-made principles of res judicata, Congress specified within the statute how estoppel works for IPR proceedings.  The basic rule is that, once a patent claim is subject to a final-written-decision in an IPR, the IPR petitioner is estopped from asserting “that claim is invalid on any ground that the petitioner raised or reasonably could have raised during that inter partes review.” 35 U.S.C. 315(e)(2) (applies also to real-party-in-interest and privies).  Timing here is important, but favors estoppel.  Namely, once the IPR reaches Final Written Decision, the challenger is prohibited from continuing to assert invalidity, even if the litigation was already filed and had been pending prior to IPR institution.

The scope of estoppel provided by 315(e) has been subject to substantial litigation. One key decision is Shaw Industries Group, Inc. v. Automated Creel
Systems, Inc., 817 F.3d 1293 (Fed. Cir. 2016).  In Shaw, the Federal Circuit substantially limited the scope of estoppel. Shaw was a partial institution case — the PTAB had instituted IPR on only some grounds.  The court particularly held that 315(e) did not estopp the petitioner from later raising the non-instituted challenges in district court litigation.  The court reasoned that those could not  have reasonably been raised in the IPR since the petitioner’s attempt had been denied by the PTAB.   But Shaw raised further questions about where to draw the line, and district courts across the country came-up with a variety of conclusions about the scope of estoppel.  The most pro-challenger readings focused on grounds that could have been raised after institution, and thus concluded that estoppel was fairly strictly limited only to the grounds actually instituted.  See, e.g., Koninklijke Philips N.V. v. Wangs All. Corp., 2018 WL 283893, at *4 (D. Mass. Jan. 2, 2018).

Shaw was based upon a procedural posture that the Supreme Court eventually ruled improper.  Notably, Shaw presumed that partial IPR institution was proper. In SAS, the Supreme Court rejected that approach and instead held that IPR institution is an all-or-nothing decision by the USPTO. SAS Institute, Inc. v. Iancu, 138 S. Ct. 1348 (2018) (PTAB does not have partial institution authority; and that the IPR petition defines the scope of the IPR).

Ordinarily, each Federal Circuit panel is bound to follow precedent set-out by prior a Federal Circuit panel.  My colleague Tommy Bennett refers to this as the “Rule of Circuit Precedent.”  However, since Shaw‘s foundation had been undermined, the panel here in CalTech concluded that it was no longer binding precedent.

The panel here has the authority to overrule Shaw in light of SAS, without en banc action.

Although SAS did not expressly overrule Shaw, the court concluded that the Supreme Court had “undercut” Shaw‘s “theory [and] reasoning . . . in such a way that the cases are clearly irreconcilable.”  Quoting Henry J. Dickman, Conflicts of Precedent, 106 Va. L. Rev. 1345 (2020).

With this newfound freedom, the court rewrote the rule of estoppel — this time in a much broader sense:

Accordingly, we take this opportunity to overrule Shaw and clarify that estoppel applies not just to claims and grounds asserted in the petition and instituted for consideration by the Board, but to all claims and grounds not in the IPR but which reasonably could have been included in the petition.

Slip Op. In the litigation, Apple and Broadcom had hoped to rely upon several prior art references during litigation.  However, evidence showed that they were “aware” of those references by the time that they filed the IPR petition.  Even though they were not included within the IPR petition, they “reasonably could have” been used as the basis for an IPR challenge. Thus, the appellate panel affirmed the district court’s ruling barring the subsequent challenge in litigation.

The “aware of” requirement is quite broad, and the Federal Circuit did not delve further into defining the “reasonably could have” threshold. For its part, the district court in this case had gone a step further and expanded estoppel to also include any grounds relying upon prior art “a skilled searcher conducting a diligent search reasonably could have been expected to discover.” California Inst. of Tech. v. Broadcom Ltd., 2018 WL 7456042 (C.D. Cal. Dec. 28, 2018) (subsequent modifications omitted). This test is a based upon a statement made by Senator Kyl as the America Invents Act was being debated. 157 Cong. Rec. S1375 (daily ed. Mar. 8, 2011).  In his testimony, Sen. Kyl expressed that the estoppel provision had been “softened” by adding “reasonably.”  Without that term, the estoppel would have been

amenable to the interpretation that litigants are estopped from raising any issue that it would have been physically possible to raise in the inter partes reexamination, even if only a scorched-earth search around the world would have uncovered the prior art in question. Adding the modifier ‘‘reasonably’’ ensures that could-have-raised estoppel extends only to that prior art which a skilled searcher conducting a diligent search reasonably could have been expected to discover.

Statement of Sen. Kyl.

Although it is unclear how far reasonableness extends, it is clear that IPR estoppel is now based upon a use-it-or-lose-it principle.  Holding arguments back at the IPR petition stage is effectively a waiver of those arguments.

China’s Rise in U.S. Design Patent System

Patent,

by Dennis Crouch

WIPO administers the WIPO-administered Hague System for the International Registration of Industrial Designs.  In 2015, the US linked its design patent system with Hague — this gives U.S. designers easier access to global design rights; and non-U.S. applicants easier access to the U.S. market.  This week, China announced that it is also joining the system.  Even without being part of Hague, IP offices around the globe have received huge increases in Chinese -origin industrial design applications.  For instance, 55% of global design applications filed in 2020 were by Chinese residents.

The first chart below shows the impact in the U.S. design patent system. For the first time in 2021, most new U.S. design patents originated from outside of the U.S.; with Chinese-origin design patents taking the clear quantitative lead over all other nations.  The second chart shows the rise in design patents (and design patent applications) over the past several years.

 

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Changing a No to a Yes in the Patent System

Patent

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.

 

Third Party Submissions

Patent

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.

 

US Utility Patent Applications Allowance Rate

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.

USPTO Allowance RateThe 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.

USPTO Third Party Submissions

Patent

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.

 

 

Federal Circuit rejects gTLD Trademark registration of .SUCKS

Patent

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.

Federal Circuit: Did you get their digits?

Patent

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: Assessing Responses to the PTO’s 2021 Patent Eligibility Study

Patent,

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.

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MBHB – Patently-O Exclusive Sponsor

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Special thanks to my friends at the MBHB law firm for being the exclusive sponsor for Patently-O.  Their contribution has kept Patently-O free to the public and virtually ad-free for almost two decades.  I started the blog with $0 investment, just my own time, but now I pay for the secure server, bandwidth, newsletter software, etc.  All that adds up pretty quickly.

I was happy to see that Jori Fuller and Jordan Pringle have been named equity partners at MBHB.   At the same time, Bryan Helwig, Ph.D., and Colin Wright were promoted from associate to partner.  Congratulations!

Split infinitives: Federal Circuit divides on Indefiniteness

Patent

by Dennis Crouch

Nature Simulation Systems v. Autodesk (Fed. Cir. 2022)

We have an interesting split decision focusing on the doctrine of indefiniteness in the context of an “examiner’s amendment.”  Judge Newman wrote for the majority and favored the patentee; Judge Dyk wrote in dissent and concluded that the patent claims were indefinite. The judges particularly differed on what level of deference should be given to USPTO examiners with the majority holding that “[a]ctions by PTO examiners are entitled to appropriate deference as official agency actions.”  The dissent argued instead that deference has no role in the definiteness inquiry:

The test …is whether the claims ‘inform those skilled in the art about the scope of the invention with reasonable certainty,’ Nautilus, not whether the claim language was added by a patent examiner or was not indefinite to the examiner.

Slip op. (Dyk, J. in dissent).

You likely know about Boolean logic operations such as AND, OR, and NOR.  In CAD software, Boolean operators are similarly used to recognize intersection of geometric objects, using alternative terminology such as INTERSECT, UNITE,  and SUBTRACT.  Mathematical methods for performing these operators have been known for decades–as developed by “Watson.” NSS created a new version that it calls the “modified Watson method.”

During prosecution, the examiner rejected the claims as indefinite, but then withdrew the rejection based upon his own examiner’s amendment.  The original claim required use of the “modified Watson method,” but the examiner suggested that was not definite enough, and suggested adding additional definitional requirements:

wherein the modified Watson method includes removing duplicate intersection points, identifying positions of end intersection points, and splitting portion of each triangle including an upper portion, a lower portion, and a middle portion;

Exr. Amendment found in Notice of Allowance.

Later, NSS sued Autodesk for infringement, and the defendant responded that the language added by the examiner was actually indefinite and created confusion as to what is actually included within modified Watson.  The parties consented to have the local Magistrate Judge (Sallie Kim) hear their case, and Kim sided with the defendant.  The Magistrate opinion is notable in that it does not cite to the leading precedent  on definiteness – Nautilus v. Biosig (2014). Rather, the court appeared to primarily rely upon Gen. Elec. Co. v. Wabash Appliance Corp., 304 U.S. 364 (1938) or no precedent at all.  The district court’s approach appears to be looking for “unanswered questions” of claim scope:

Thus, the question is thus: if the PTO issues a patent after amendment to clarify an indefinite term, but an expert later opines that a POSITA would not understand the term, how does the Court determine whether the term is indefinite? The only way to do so here is to look at each argument to see if Autodesk raises any unanswered questions.

[Nature_Simulation_Systems_Inc._62]. The Magistrate clearly missed the mark on its explanation and application of the law of definiteness.  (Although Judge Dyk calls the opinion detailed and thorough).

Since indefiniteness is seen as a question of law, the court also took the second step of determining whether the erroneous application of law also led to an erroneous outcome.  Yes it did.  On this point, Judge Newman pointed to the specification’s offering of two algorithmic charts showing the modified Watson method and also the patent examiner’s specific determination on this very point.

The district court gave no weight to the prosecution history showing the resolution of indefiniteness by adding the designated technologic limitations to the claims. . . .

Actions by PTO examiners are entitled to appropriate deference as official agency actions, for the examiners are deemed to be experienced in the relevant technology as well as the statutory requirements for patentability.

Slip Op (majority).  The court has written on this very point in some prior cases — perhaps most pointedly in Tinnus Enters., LLC v. Telebrands Corp., 733 F. App’x 1011, 1020 (Fed. Cir. 2018) (“We presume that an examiner would not introduce an indefinite term into a claim” with an examiner’s amendment).  Judge Newman cited Tinnus, but did not mention that the case was non-precedential.

For his part, Judge Dyk argues that the test for indefiniteness is an objective test based upon the understanding of those skilled in the art “not whether the claim
language was added by a patent examiner or was not indefinite to the examiner.”  The majority responded to this criticism by noting that an examiner is presumptively a person of skill in the art.

Does Prior Publication Extinguish a Trade Secret?

Patent

by Dennis Crouch

Masimo Corp. v. True Wearables, Inc. (Fed. Cir. 2022) (nonprecedential)

This trade-secrecy decision includes a few interesting holdings:

  1. Published and Widely Distributed, but Still a Trade Secret: The fact that information was found in a prior publication “that has been cited over 1,200 times . . . does not necessarily compel a finding that the information cannot maintain its status as a trade secret for a party in an entirely different field.”
  2. Serious Questions: A preliminary injunction in trade secrecy cases require only a “fair chance of success on the merits or questions serious enough to require litigation.”  Here, the plaintiff raised “a serious question” and that was enough.
  3. Order to Keep the Patent Filings Secret: The defendant has several patent applications pending at the USPTO which apparently include the trade secret algorithm within its specification.  The district court ordered the defendant to “take all necessary steps to prevent publication” of those applications or resulting patents. On appeal, the Federal Circuit affirmed that preliminary injunction as warranted based upon California state trade secrecy law.

The companies here compete in the market for creating specialized finger-LED equipment and accompanying data analysis services.  This case focuses on calculating total hemoglobin (“SpHb”) based upon light absorption readings from the finger-LED.

How does it work: The LED emitter sends out a pulse of light through the fingertip; a sensor on the other side then measures how much light passed through at various wavelengths. Hemoglobin has a particular light adsorption pattern, and so those results can be used to calculate a relative amount of Hemoglobin.  They do this with a simple linear aggregation: “SpHb = Ax + By + Cz . . .,” where x, y, and
z are various absorption measurements from the monitoring device (such as different wavelength readouts) and A, B, and C are coefficients that reflect the relative importance of the different measurements.

Each product line will have a different equation because it will likely have a different LED configuration; have different sensors; and have a different physical form.  So, a product developer needs to run a clinical trial of its product in order to estimate the most accurate coefficients. For each person in the trial, you do a blood test for SpHB level (the gold standard) and then also take measurements with the finger LED.

What is the Trade Secret: The trade secret at issue here is the optimization algorithm for determining all the equation coefficients.  How do you take data from the clinical trials and turn that into an operational equation for measuring SpHB?

Answer, if you have studied linear algebra this is all straightforward and largely developed in the 1960s.  Math and engineering students across the country take classes on linear programming and linear optimization and have done so for decades. These same models are a basis for most of the system we call “AI.”

The defendants pointed to a particular 2008 IEEE article that spells out the particular approach claimed to be a trade secret here — – the parties refer to this algorithm as “TSS.”  We don’t know the title of this article (it is redacted), but we do know that this is a very well known article with 1,200+ citations.  The description below comes from the appellate briefing:

The footnote explains: “[T]he complete citation for this publication is not reproduced in this brief as Masimo has asserted that the identity of the publication is  confidential.”

Under California law, information that is “generally known” cannot be a trade secret.  Here, however, the Federal Circuit affirmed the lower court ruling that the publication did not render the information “generally known” to folks in the particular field in question.

Under some circumstances, the publication of an alleged trade secret will clearly be sufficient to indicate that the information is generally known. However, the fact that the trade secret has been revealed in some publication somewhere [even if highly cited] does not necessarily compel a finding that the information cannot maintain its status as a trade secret for a party in an entirely different field from the one to which the publication was addressed.

Slip Op.  The Federal Circuit previously wrote that disclosure in a patent renders information “generally known” for trade secrecy purposes, but endeavored to distinguish that conclusion here. Ultimax Cement Manufacturing Corp. v. CTS Cement Manufacturing Corp., 587 F.3d 1339, 1355–56 (Fed. Cir. 2009).

I’ll note here that there are some other factors at play – namely, the founder of True Wearables (Dr. Lamego) is a former Masimo employee. He is the one that  mathematically derived implemented the TSS algorithm at Masimo. And, while there, labeled it a “trade secret.”  These actions of the parties tend to make it look like a trade secret.

I have a Serious Question: On appeal, the Federal Circuit did conclude that the trade secret issue was questionable, but still found that the plaintiff had raised a “serious question as to the validity of the trade secret” which is apparently sufficient for a preliminary injunction.  That appears to be a lower standard than the more traditional “likelihood of success.”

The Preliminary Injunction: Lamego has several patent applications pending, and the preliminary injunction orders Lamego to make sure that those applications do not become public.  Here, the court found the remedy appropriate since “Once the information is in the public domain and the element of secrecy is gone, the trade secret is extinguished.” (Quoting Ultimax).  In this portion of the opinion the court did not contend with its statement a few paragraphs before that publication does not necessarily extinguish a trade secret.

 

Guest Post: Community Ties in Patent Litigation

Patent

Guest post by Professors J. Jonas Anderson and Paul Gugliuzza.  Their article Federal Judge Seeks Patent Cases was recently published in the Duke Law Review, and I’m currently working on a project with them on writs of mandamus at the Federal Circuit. – Jason

Following tradition, on the last day of 2021, Chief Justice Roberts provided his annual year-end report on the federal judiciary. In the report, he addressed three issues that have “been flagged by Congress and the press” over the last year. Among them was “the arcane but important matter” of judicial assignment and venue for patent cases.

Let the arcana commence! Let’s talk about judicial assignment of patent cases.

For those unfamiliar with how cases are assigned in district courts, let’s use the Western District of Texas as an example. The Western District of Texas is a vast district, stretching more than 600 miles across from El Paso (on the western limits of the state) to Waco (which is much nearer to Louisiana than New Mexico). When a plaintiff files a suit in the Western District, the suit is assigned to the judges within one of seven divisions that make up the district: Austin, Del Rio (Alpine), El Paso, Midland/Odessa, Pecos, San Antonio, and Waco. But the case is not assigned randomly to one of the divisions; rather, the plaintiff selects (from a drop-down menu) to which of the divisions the case will be assigned. Only after a division is selected by the plaintiff does random assignment occur, with each judge within the division receiving a certain percentage of the cases filed, per a standing order filed (and updated in 2021) by the Chief Judge of the Western District of Texas.

But for certain divisions within the district, individual judges receive 100% of the cases filed, meaning plaintiffs can pick their judge. In the Western District of Texas, this 100% assignment occurs in the Midland-Odessa division (assigned to Judge David Counts), the Pecos Division (also Judge Counts), the Del Rio Division (Judge Alia Moses), and—most importantly for patent law—the Waco Division (Judge Alan Albright). That means that Western District of Texas plaintiffs can “judge shop” for the judge they prefer, at least in those four divisions. Judge shopping is, shockingly, possible in a large portion of district courts across the land, not just in Texas.

Thus, it is great to hear that Chief Justice Roberts is investigating the problem of judge shopping. The practice of “judge shopping” has long been frowned upon by courts; unlike forum shopping, in which the plaintiff chooses the court that appears to be favorable, judge shopping refers to the practice of the plaintiff choosing the specific judge who tries the case. The due process and fairness concerns inherent with a plaintiff choosing who judges their case has recently been of interest to members of the Senate Judiciary Committee as well.

Yet despite the Chief Justice’s approval of random case assignment, he noted in his year-end report that there is an “important and sometimes competing” value at issue with mandating random assignment of patent cases: Congress has shaped the federal courts into districts and divisions “so that litigants are served by federal judges tied to their communities.” Thus, according to Chief Justice Roberts, randomization that severs litigants from federal judges in their communities presents a conflict of values that the judiciary must resolve.

This is largely irrelevant for patent cases.  There is generally little to no local community that would be inconvenienced by random assignment of cases. For proof, just take a look at Judge Albright’s docket. The overwhelming majority of patent plaintiffs in Waco are not from Waco, the Western District, or even Texas; they are filing in Waco because they know that they will get Judge Albright, not because Waco is their “community.” In fact, in reviewing the over 800 Waco patent plaintiffs in 2020, we could only find two plaintiffs with corporate headquarters in Waco (more on that later). To be sure, there are quite a few Waco plaintiffs with headquarters in Austin (within the Western District of Texas) or Dallas (in the Northern District of Texas). But, if one is truly concerned about judges being tied to local communities, the Austin division of the Western District of Texas or the Dallas division of the Northern District of Texas would be better venues in which to litigate for those companies.  If anything, current practice draws litigants away from local communities and into far-flung districts based on the perceived strategic and procedural peculiarities of particular judges.

The two exceptions to the no-Waco-connection rule actually prove that patent plaintiffs do not have special local ties to Waco. The two exceptions are WSOU Investments and Voip-pal.com. These companies filed 181 patent suits in Waco in 2020, 169 of which were filed by WSOU. WSOU opened an office in Waco, but apparently uses the office just to avoid having its cases transferred away from Waco.  WSOU is a litigation-funded assertion vehicle run by Craig Etchegoyen, who himself has run or controlled non-practicing entities like Uniloc and has filed hundreds of lawsuits in Texas, but who himself lives in California.  As the Federal Circuit explained in In re: Juniper Networks:

[WSOU]’s presence in Waco appears to be both recent and relatively insubstantial. The office was established only a few months before the [2020] complaints against Juniper were filed, and the activities of the office are largely tied to bringing lawsuits in that court. [WSOU] has only two employees who work from Waco, one of whom is its in-house attorney responsible for litigation. The principal officers of [WSOU] are located in California.

This is an example of a local office established simply for the purpose of judge-shopping. Certainly, these cannot be the sorts of community interests that Chief Justice Roberts is worried about undermining with randomization of case assignment.

In fact, the proliferation of intra-division transfers of patent cases from Waco to Austin demonstrates that Waco is not generally the location in which plaintiffs want to litigate; it is the place in which the judge they prefer is located. For roughly his first two years on the bench, Judge Albright had a practice of granting transfer from Waco and Austin, yet remaining the judge on the case. This practice appears to have resulted in other judges stepping in to end the practice, but the fact that plaintiffs were selecting Waco (and thus Judge Albright) and then turning around and requesting that the case be transferred to Austin—a division they could have selected in the first place—demonstrates that there is often not much convenience, or local interest, gained by having the case tried in Waco. The only thing many of these plaintiffs want with Waco is Judge Albright; as long as he is on the case, the plaintiffs would prefer to be in Austin.

We have recently written an article in which we proposed a two-prong solution to the judge shopping problem. We propose fixing the judicial assignment process by ensuring that patent cases are assigned randomly among multiple judges and by altering the patent venue statute to require that a plaintiff demonstrate that venue exists within the division (not merely the district) in which the case is assigned. These two changes are simple to implement and would make it harder for plaintiffs to shop for individual judges—a practice that is flatly inconsistent with notions of judicial fairness and impartiality.