Search Results for: Heartland

(Non)Precedent on Venue Transfer?

Patent

by Dennis Crouch

In TracFone, the Federal Circuit issued two strongly worded strongly worded mandamus opinion relating to venue.

  • In re TracFone Wireless, Inc., 2021-118, 2021 WL 865353 (Fed. Cir. Mar. 8, 2021) (remanding for a ruling on venue); and
  • In re TracFone Wireless, Inc., 2021-136, 2021 WL 1546036 (Fed. Cir. Apr. 20, 2021) (ordering transfer under 1404(a)).

The March 2021 decision orders W.D.Tex. Judge Albright to immediately decide TracFone’s venue motions (and write a reviewable opinion).  Judge Albright immediately complied by denying TracFone’s motion to dismiss or transfer the case. The Federal Circuit’s April 2021 decision concluded that Judge Albright had “abused [his] discretion.”  The appellate panel then ordered the case to be transferred to Florida.

Although the April 2021 decision provides finality, it is actually the March 2021 decision that is perhaps more interesting. The appellate panel ordered immediate action on the venue question and generally suggested that a district court should drop-everything to decide venue motions.  The judge’s familiarity with the facts/law of a particular case is typically seen as relevant the outcome of an inconvenient venue motion under 1404(a).  In its decision though, the court held that the district court should not consider any familiarity it has gained after the filing of the complaint:

[W]e remind the lower court that any familiarity that it has gained with the underlying litigation due to the progress of the case since the filing of the complaint is irrelevant when considering the transfer motion and should not color its decision.

Slip Op.

One problem with this decision is that it is non-precedential.  Thus, the clear language has limited value going forward. Now, a group of law professors have petitioned to reissue the decision as precedential.

This Court should reissue its TracFone order as precedential to definitively establish the law regarding improper delays in ruling on transfer motions and requests for stay pending the resolution of such motions. Absent clear precedential guidance, courts may continue to disregard this court’s nonprecedential instructions and make procedural errors that force parties to settle or to litigate in an inappropriate, inconvenient, and costly forum.

Motion to Reissue as Precedential. Federal Circuit Local Rule 32.1 provides the following procedure for this type of motion:

Within sixty (60) days after the court issues a nonprecedential opinion or order, any person may request through motion filed in the case that the opinion or order be reissued as precedential. The request will be considered by the panel that rendered the disposition. The motion must identify any case that person knows to be pending that would be determined or affected by reissuance as precedential. Parties to pending cases having a stake in the outcome of a decision on the motion must be given an opportunity to respond. If the request is granted, the opinion or order may be revised as appropriate.

Rules.  The motion was filed by Stanford’s IP Clinic (Philip Malone) on behalf of a group of law professors led by Mark Lemley.

I’ll note here as an aside that some of the language here could also be applied in the context of stays of litigation pending outcome of an AIA trial. Judge Albright has generally taken an approach of refusing stays in most cases.

= = = =

In re Western Digital (Fed. Cir. 2021). In a separate decision today, the Federal Circuit denied Western Digital’s petition for writ of mandamus to escape from W.D. Tex.  The appellate panel did find that Judge Albright had applied the wrong legal standard by stating Western-Digital faced a “heavy” and “significant” burden before a case would be moved for convenience.

To be sure, the district court incorrectly overstated the burden on WDT as “heavy” and “significant.” but see Volkswagen, 545 F.3d at 314–15 (explaining that Congress intended to grant transfer under section 1404(a) upon a lesser showing of inconvenience than the “heavy burden” traditionally required under the forum non conveniens doctrine).

Slip Op. Still, the court found no abuse of discretion in denying transfer:

Although we may have evaluated some of the factors differently, we are not prepared to say that the district court’s ultimate conclusion that the transferee venue was not clearly more convenient amounted to a clear abuse of discretion.

Id.

= = = = =

One issue with this exercise has to do with the Federal Circuit’s approach to non-patent issues that come before the court. Motions to transfer under 1404(a) (inconvenient forum) are not patent-specific and so the Federal Circuit applies the law of the regional circuit court of appeals rather than its own precedent. For these cases out of W.D.Tex., the court applies 5th Circuit law regarding transfer of venue rather than its own precedent.  Likewise, lower courts follow 5th circuit law rather than Federal Circuit law. Thus, we have a question of what role a precedential opinion on this point would actually serve.

Intentional Over-billing of Clients Leads to 2-year Suspension

Ethics, Patent

by David Hricik, Mercer Law School

A partner at a major firm had been suspended initially for six months for intentionally over-billing certain clients for 450 hours of work she and other lawyers had not performed.  (Apparently, one justice initially decides the penalty in a bar proceeding there.). Bar counsel then argued to the entire court that six months was insufficient, and the Massachusetts Supreme Court agreed.  In its opening paragraph, the court stated:

The single justice acknowledged the respondent’s “admittedly cavalier attitude toward client billing,” but concluded that “the large number of hours she reported in 2015 is not substantial evidence that all or even most of the 450 hours at issue in this case were fraudulently billed.” Our focus, however, is not on the quantum of excessive fees that were billed, but on the fundamental dishonesty inherent in the respondent’s client billings themselves. It is not the sheer number of unworked hours that establishes the misconduct but, rather, the dishonesty manifested by billing for them at all.

The case, In the Matter of Zankowski (Mass. March 25, 2021) is here.

Yes, it’s a state case. But, consistent with this, over the years I’ve heard various speeches by attorneys from the OED say that they’re forgiving of many things — mistakes happen, hindsight is often 20-20 — but intentional misconduct is not one of those things I’ve heard them mention. As the Massachusetts court wrote, billing for them at all is what indicates a serious violation. And, related to that, many state disciplinary rules, like the USPTO Rules, require certain members of firms to have in place policies to ensure compliance with the ethical rules, and so one lawyer’s misconduct could cause ripple effects.

Standing Naked before the TTAB

Patent

Australian Therapeutic Supplies Pty. v. Naked TM (Fed. Cir. 2020) (en banc)

NAKED TM holds the registration for the mark NAKED that it uses to sell its luxury condoms.  However, by the time NAKED TM started its business, Australian Therapy was already selling its NAKED condoms to US customers over the internet.  In the early 2000s, the companies reached some form of a tacit agreement — although without an express contract.  Since 2003, Australian has continued to sell NAKED condoms in the US, but the TTAB found that it was never more than 48 consumers per year.

The appeal here stems from Australian Therapy’s cancellation proceeding that ended when the TTAB found the petitioner lacked standing under 15 U.S.C. § 1064 (petition to cancel may be filed by “any person who believes that he is or will be damaged … by the registration of a mark …”).  The TTAB particularly found a binding contract between the parties where Australian Therapy gave-up its rights to use the mark in the US: 

The evidence shows that the parties reached an agreement. The mutuality of intent to contract is satisfied because the parties recognized their trademark issue and they communicated and exchanged offers to resolve it. The consideration for the contract is Petitioner’s agreement not to use or register the NAKED trademark for condoms in the United States and Respondent’s agreement not to use or register the NUDE trademark for condoms.

The Board explained also that Australian must show a “proprietary rights in its unregistered mark” in order to have standing under the statute.

On appeal, the Federal Circuit reversed — holding a cancellation petition may be filed by any party who demonstrates “a real interest in the cancellation proceeding and a reasonable belief of damage regardless.” It does not require evidence of a “proprietary interest in an asserted unregistered mark.”  Here, the court found a real-interest based on the fact that Australian had filed to register its marks, and had demonstrated a belief of damage because the USPTO refused registration of both the ’237 and ’589 applications based on a likelihood of confusion with Naked’s registered mark, U.S. Registration No. 3,325,577.”

At that point, NAKED TM petitioned for en banc rehearing on two questions:

I. Whether a petitioner who has forfeited its rights in a mark pursuant to a valid settlement agreement has a real interest in the proceedings and a reasonable belief of harm for the registration of said mark so as to support a finding of statutory standing under 15 U.S.C. § 1064 to challenge the registration of the mark; and

II. Whether a petitioner in the TTAB is required to establish the pleaded basis for its standing at the commencement of an action, or whether this Court may rely on an argument that has been waived by a party in finding a basis for standing in the TTAB.

The Federal Circuit has now denied the rehearing, although the case includes an interesting dissent from Judge Wallach. Wallach argues that the decision in Australian Therapy:

  1. Conflicts with our case law requiring a “legitimate commercial interest” to have a valid cause of action under 15 U.S.C. § 1064, see Empresa Cubana Del Tabaco v. Gen. Cigar Co., 753 F.3d 1270, 1274 (Fed. Cir. 2014) (following Lexmark Int’l, Inc. v. Static Control Components, Inc., 572 U.S. 118 (2014)., noting that a petitioner must have a “legitimate commercial interest sufficient to confer standing”);
  2. Undermines our case law favoring the enforcement of settlement agreements, see Wells Cargo, Inc. v. Wells Cargo, Inc., 606 F.2d 961, 965 (C.C.P.A. 1979) (“If there [is] a policy favoring challenges to trademark validity, it too has been viewed as outweighed by the policy favoring settlements.”); and
  3. Raises questions as to the impact of Supreme Court precedent on our statutory standing jurisprudence, see Lexmark, 572 U.S. at 128 n.4 (noting that statutory standing does not implicate Article III subject matter jurisdiction), 134 (providing “a direct application of the zone-of-interests test and the proximate-cause requirement [to] suppl[y] the relevant limits on who may sue”).

AusTherapy v. Naked.

The Federal Circuit, Judge Shopping, and the Western District of Texas

Patent

Guest Post by Prof. Paul R. Gugliuzza (Temple U.)

A rare thing happened at the Federal Circuit today. The court heard oral argument on a petition for a writ of mandamus. The petition was filed by the tech behemoth, Apple, in a patent infringement case filed against it in the Western District of Texas. In the petition, Apple seeks an order sending the case to the Northern District of California under 28 U.S.C. § 1404, which permits transfer “[f]or the convenience of parties and witnesses, in the interest of justice.”

Though transfer petitions are relatively common in patent cases, the Federal Circuit almost always decides them on the briefs alone. That the court scheduled oral argument—in a case arising out of the Western District of Texas, no less—has been interpreted as reflecting concern by the Federal Circuit about the judge shopping occurring in the Western District.

As Jonas Anderson and I showed in a recent Patently-O post and discuss in more detail in a draft article, the Western District’s case assignment rules permit plaintiffs to predict, with absolute certainty, which judge will hear their case. And plaintiffs are overwhelmingly choosing Judge Alan Albright, whose procedural rules and substantive decisions they find quite favorable.

That said, the Federal Circuit’s decision to hold oral argument on Apple’s petition could also reflect the fact that, in the midst of the COVID pandemic, it’s a pretty easy thing to do. For the past six months—and for the foreseeable future—the Federal Circuit has been conducting oral argument entirely by telephone. Indeed, that’s how I was able to listen to today’s arguments, live.

Before getting to a summary of that argument, some background about the case. The plaintiff is, like many plaintiffs in the Western District, a prolific non-practicing entity, Uniloc 2017 LLC. In September 2019, Uniloc sued Apple for infringing a patent on a system for controlling software updates.

Like more than 800 other patent cases over the past two years, Uniloc filed its case in the Waco Division of the Western District of Texas and—like 100% of cases filed in the Waco Division—it was assigned to Judge Albright. Apple sought transfer to the Northern District of California, noting that, out of 24 prior cases Uniloc had filed against it in the Eastern and Western Districts of Texas, 21 had been transferred.

But Judge Albright denied Apple’s motion in an order from the bench in May 2020. As covered here on PatentlyO, it took Judge Albright more than a month to issue an order explaining why he was doing so. When that order eventually issued, it noted, among other things, that Apple has stronger connections to the Western District of Texas than to the Eastern District and that the cases previously transferred out of the Western District (by Judge Lee Yeakel) were distinguishable because Apple’s activities in the Western District had grown significantly over the past couple years.

The Federal Circuit argument, it’s worth noting, wasn’t part of the court’s normal calendar of arguments, which typically take place during the first week of the month. Rather, it was the only case heard by a panel consisting of Chief Judge Prost, Judge Moore, and Judge Hughes.

Mel Bostwick, from Orrick, Herrington & Sutcliffe’s Washington, D.C., office, presented argument for Apple. In her view, the district court made two critical errors in denying transfer: First, it relied too heavily on the progress it had already made in the case as well as its already-scheduled trial date (which, under Judge Albright’s extremely speedy default schedule, is less than 18 months after the initial case management conference).

Second, according to Apple, the district court erred in applying the “cost to willing witnesses” factor in the transfer analysis. Though both Apple and Uniloc identified witnesses in California, Judge Albright, according to Apple, inappropriately discounted the relevance of those witnesses because they were willing to travel. But, Apple contended, the relevant question is the cost of their travel, not their willingness to do so.

Apple faced skeptical questioning from Judge Moore, who was, in fact, the only judge to ask a question of Apple until rebuttal. Judge Moore focused initially on the standard of review. To receive the extraordinary writ of mandamus, a party must show a “clear abuse of discretion” by the district judge. The fact that this case has some factual connection to the Western District—namely, Apple has a campus in Austin and a third party makes accused products in the district—seemed to raise doubts in Judge Moore’s mind about whether any error by the district court met that high bar.

Christian Hurt of the Davis Firm in Longview, Texas argued on behalf of Uniloc. He began by emphasizing the concerns about parties and witnesses located in the Western District that were initially raised by Judge Moore. Apple didn’t dispute, Uniloc noted, that it has an 8,000 employee campus in Austin, technical witnesses work there, and a third-party contractor makes accused products in the district.

Almost all the questions for Uniloc came from Chief Judge Prost. She asked about matters including: the exact location of the witnesses, whether it was clearly an abuse of discretion for the district court to rely on its progress and projected schedule in denying transfer, and whether Apple might have an alternative means of seeking relief, such as through a later mandamus petition or by seeking a stay pending related litigation elsewhere.

Toward the end of Uniloc’s argument, Judge Moore chimed in to ask whether, if the court found the district court had made errors in its transfer analysis, it would be appropriate for the Federal Circuit to vacate the decision and remand the case for further proceedings, rather than ordering transfer—a step the very same panel of Federal Circuit judges basically took in a  recent Western District case filed against the file storage company, Dropbox.

During Apple’s rebuttal argument, Judge Moore asked why transfer to California was warranted given the local interest in the case. Apple, Judge Moore observed, is one of the largest employers in the Western District—a far cry from the Eastern District, where Apple doesn’t even have stores anymore, for fear of aiding patent plaintiffs in establishing venue there. Judge Moore was unconvinced (to put it mildly) by Apple’s assertion that the local interest isn’t the interest of Western District of Texas and its residents, but the interest of “the people who created the accused technology,” in Cupertino.

*          *          *

So, what’s my take? The atmospherics are clearly troubling. There’s no doubt that Judge Albright is successfully courting patentees to file in his courtroom both by explicitly advertising to them and by adopting procedural rules and making substantive decisions that clearly favor them. But those larger dynamics, though they were discussed in Apple’s brief, weren’t even mentioned at oral argument. (Bostwick, Apple’s attorney, seemed to want to go there during rebuttal, but ran out of time.)

In this case, the Federal Circuit might struggle to find a legal justification for ordering transfer, particularly given high standard for mandamus. That said, the Federal Circuit rarely hesitated to transfer cases out of the Eastern District during its heyday as the nation’s patent litigation capital. In several cases, the Federal Circuit used the extraordinary writ of mandamus to engage in what seemed like pure error correction. It’s not out the question that the Federal Circuit would do something similar with the Western District, whether in this case or one of the other nearly 600 filed before Judge Albright this year alone.

Moreover, though the court competition and judge shopping that’s going on in the Western District is troubling, interlocutory appeals like the one Apple is pursuing can be costly and disruptive. That will be even more so if the Federal Circuit makes a habit of simply vacating orders denying transfer and remanding for further consideration, as Judge Moore suggested. The end result would be another round of briefing and argument—and possibly even discovery—on an issue entirely tangential to the merits of the case.

Whatever the outcome, this case between Apple and Uniloc shows how difficult it will be for the Federal Circuit, which can only hear the disputes that come before it, to change the systemic incentives that encourage judges to compete for patent cases and for plaintiffs to shop for those judges. As we suggest in our article, legislation or administrative rules mandating random case assignment and more particularly defining plaintiffs’ venue choices may be the only solution.

Paul Gugliuzza is Professor of Law at Temple University Beasley School of Law

Dismissals With Prejudice

Patent

by Dennis Crouch

This is a non-precedential pro-se case and so a bit quirky, but its support of dismissing a case for improper venue with prejudice is likely to be cited as an example in other cases. 

Nazir & Iftikhar Khan v. Hemosphere Inc. (Fed. Cir. 2020)

In their lawsuit, Khans (both MDs) sued Hemosphere as well as 300+ hospitals and individual physicians for infringing their U.S. Patent No. 8,747,344 (AV shunt). The case did not get far.  The district court dismissed the case – with prejudice – for want of prosecution, insufficient service, improper venue, and misjoinder. The Federal Circuit has now affirmed.

The Khans represented themselves pro se at both the district court and on appeal. Their complaint alleges infringement based upon Hemosphere’s HeRO Graft shunt.

The Khans had mailed out the summons & complaint to the defendants with a waiver request — but did not actually serve the defendants in the manner required by FRCP 4.

The district court found that the Khans had not attempted to personally serve any defendant. Instead, the Khans asserted that they completed service by mailing the summons and complaint to the defendants, despite contrary instruction from the district court. The district court explained that Rule 4(e) does not permit personal service via mail and the Khans had not identified any state laws that would otherwise allow service by mail. The district court further found that the Khans had failed to comply with the [90 day] timeliness requirement of Rule 4(m).

The district court also noted that dismissal was proper for failure to plausibly allege proper venue 28 U.S.C.  § 1400(b) and for improper joinder under 35 U.S.C. § 299.

When dismissing for lack of venue, improper joinder, or failure to prosecute, the usual approach is a dismissal without prejudice. That result would allow the plaintiffs to re-file the lawsuit at a later date (perhaps with the assistance of an attorney). For instance, R.4(m) states that the court “must dismiss the action without prejudice” based upon failure to serve. Here, however, the district court dismissed with prejudice.  I read through the district court order and it does not actually provide any fact finding or discussion of why dismissal with prejudice is appropriate in this case other than the following one-liner regarding failure to prosecute:

Such a dismissal may be with prejudice “if the plaintiff’s delay in obtaining service is so long that it signifies failure to prosecute.”  Williams v. Illinois, 737 F.3d 473 (7th Cir. 2013).

Khan v. Hemosphere Inc., No. 18-cv-05368, 2019 WL 2137378, at *1 (N.D. Ill. May 16, 2019) (dismissal and sanction order).

On appeal, the Federal Circuit affirmed the dismissal. Although the Khans had attempted to obtain waivers of service, the vast majority defendants refused to waive service. At that point, service is required under R.4(e).  And, without service or waiver of service, the district court must dismiss.

Regarding dismissal with prejudice, the Federal Circuit wrote explained that the 250 day delay in serving process for the vast majority of defendants was a form of “extreme delay” that sufficient to justify dismissal with prejudice. Note here that the court actually wrote: “nearly all of the over 300 defendants had not been properly served.”  My comment on that line — make sure your law clerks are great writers.

For the improper venue  dismissals, the appellate panel also concluded that that dismissal with prejudice was proper (rather than without prejudice), but did not provide any reasoning for that conclusion.

Khans have failed to convince us that the district court erred in determining that venue under that statute was improper. . . . Accordingly, we conclude that the district court did not abuse its discretion in dismissing the action with prejudice.

Slip Op. Here, the court should have done a better job of explaining why this case overcomes the presumption set forth in R.41(b) that an involuntary dismissal on venue / joinder grounds is not on the merits.

Sanctions:  Although the district court denied that the case was “exceptional” under 35 U.S.C. § 285, the court still awarded $95k in attorney fees to out-of-state defendants for violation of FRCP 11(b). On appeal, the Federal Circuit affirmed writing that the rules do not “preclude sanctions for frivolous venue
and service assertions.”

A Patent Emergency

Patent

by Dennis Crouch

The Chamberlain Group, Inc. v. Techtronic Indus. Co. (Supreme Court 2020)

Chamberlain Group’s asserted patent claims a garage-door-opener (claim 1, 5) and an associated method (claim 15). US7224275.

Garage doors and opening mechanisms have been the subject of patents for 150 years. Back in 1919 Lee Hynes filed an early patent on electric-controller for a car door operating mechanism. Despite this long history, the Federal Circuit found Chamberlain’s patent ineligible under 35 U.S.C. 101 as directed to an abstract idea.

Chamberlain’s opener consists of three key elements:

  • A device controller — This is an electronic component that receives and processes control signals and sends out the orders to open/close.
  • A movable barrier interface coupled to the controller — This is the actual drive or clutch mechanism that powers the door movement.
  • A wireless data transmitter coupled to the controller.

By the time this patent application was filed, all three of these elements were all “generally well understood in the art.” The innovative feature of the claims is that the system is designed to transmit the door’s “present operational status” — i.e., is it moving up; moving down; reversing; blocked; etc.  The signal also includes a “relatively unique” identifier for folks with multiple garage doors so that the unclaimed receiver can tell which door is up/down. Note here that there is nothing new about these various status points — the only difference is that it that the signals are being sent, and being sent wirelessly.

So, although the patent claims a garage-door-opener including various physical components, the point-of-novelty is that a particular signal is being sent wirelessly. In its decision, the Federal Circuit found the wireless transmission of status to be an abstract idea: “the broad concept of communicating information wirelessly, without more, is
an abstract idea.”  One Alice Step 2, the court held that the claims did not include any inventive concept beyond the excluded abstract idea:

In other words, beyond the idea of wirelessly communicating status information about a movable barrier operator, what elements in the claim may be regarded as the “inventive concept”?

[W]ireless transmission is the only aspect of the claims that CGI points to as allegedly inventive over the prior art. . . . Wireless communication cannot be an inventive concept here, because it is the abstract idea that the claims are directed to. Because CGI does not point to any inventive concept present in the ordered combination of elements beyond the act of wireless communication, we find that no inventive concept exists in the asserted claims sufficient to transform the abstract idea of communicating status information about a system into a patent-eligible application of that idea.

Fed. Cir. Opinion.

The new petition has two focal points (1) whether eligibility should be seen as a “narrow exception;” and (2) whether the Federal Circuit errs in its approach of separating the claim into various components and excluding the abstract idea portion from the claim when considering Alice Step 2.

Question presented:

Whether the Federal Circuit improperly expanded § 101’s narrow implicit exceptions by failing to properly assess Chamberlain’s claims “as a whole,” where the claims recite an improvement to a machine and leave ample room for other inventors to apply any underlying abstract principles in different ways.

Chamberlain Petition.  The petition also repeats the refrain of unsettling uncertainty:

The root cause of all this ire and uncertainty is the Federal Circuit’s insistence once again on crafting an elaborate test that strays from—and here, contradicts—the plain text of the Act.

Id.

The petition ends with a call for immediate action — calling out the current situation as “a patent emergency.” The breadth of eligibility challenges are shifting innovator behavior:

[T]here is no time. Innovators are adapting their behavior right now to the Federal Circuit’s new patent-hostile regime. Investors are deciding now to withhold investments they would have made before the Federal Circuit changed the law. Waiting any longer to intervene could inflict irreparable harm on U.S. industry.

Techtronic has already waived its right to respond to the petition — meaning that the Supreme Court may act on the petition before the close of its current session in June.

USPTO Director Andrei Iancu on Patent Policy

Patent

USPTO Director Andrei Iancu gave the keynote address at the April 11, 2018 Patent Policy Conference hosted by the U.S. Chamber of Commerce. The following is an excerpt:

… Dr. Eli Harari … risked everything: his career, his finances, and his family. That first company actually did not work out well, but a few years later, Harari risked it all again and co-founded a new company, which he ultimately called SanDisk. At SanDisk, Harari built upon his EEPROM technology, added critically important new inventions, and perfected flash memory data storage. And he obtained patents, including on how to turn memory chips into reliable systems. Harari’s flash technology came to be used almost universally in devices like digital cameras and cell phones. In 2016, Western Digital acquired SanDisk for $19 billion. But think about it: Without patents, how could someone like Dr. Harari risk everything, put aside his secure career at an established company, and strike it on his own?

As Dr. Harari told me: “The only asset you have is your idea.  If you have no way to protect your idea, you are at the mercy of the next bad guy.  The U.S. patent system is genius, really the bedrock foundation of capitalism.” Harari’s sentiment was echoed by President Ronald Reagan, who said in 1982: “Throughout our Nation’s history, the patent system has played a critically important role in stimulating technological advances.”

How true that is.

Yet today, our patent system is at a crossroads. For more than just a few years, our system has been pushed and pulled, poked and prodded. The cumulative result is a system in which the patent grant is less reliable today than it should be. This onslaught has come from all directions: There has been major reform legislation, and proposed legislation. There have been massive changes brought about by major court cases. And the USPTO itself has taken a variety of actions in an effort to implement these changes. Plus, importantly, the rhetoric surrounding the patent system has focused relentlessly on certain faults in, or abuses of, the system—instead of the incredible benefits the system brings to our nation. …

Still, we are at an inflection point with respect to the patent system. As a nation, we cannot continue down the same path if we want to maintain our global economic leadership. And we will not continue down the same path. This administration has a mission to create sustained economic growth, and innovation and IP protection are key goals in support of that mission.  So, how do we reverse the trend? The good news is that reclaiming our patent leadership status is within reach.

For today, let me focus on two principal points:

(1) Creating a new pro-innovation, pro-IP dialogue, and
(2) Increasing the reliability of the patent grant.

First, we must change the dialogue surrounding patents. … [A] successful system must be defined by its goals, aspirations, and successes. Obviously, errors in the system should be corrected. And no abuse should be tolerated. Errors and abuse should be identified and swiftly eliminated. However, the focus for discussion, and the focus for IP policy, must be on the positive.  We must create a new narrative that defines the patent system by the brilliance of inventors, the excitement of invention, and the incredible benefits they bring to society. And it is these benefits that must drive our patent policies. …

But, how exactly do we translate this into a better patent system? Here’s a start: when we write, interpret, and administer patent laws, we must consistently ask ourselves: Are we helping these inventors? Whether it’s an individual tinkering in her garage, or a team at a large corporation, or a laboratory on a university campus—we must ask ourselves: are we helping them? Are we incentivizing innovation?

And that brings me to my second principal point for today: increasing the reliability of the patent grant. Because that is key to incentivizing innovation. Without reliable patents, inventors like Dr. Eli Harari are less likely to risk it all in order to bring their new concepts to the market. As I said at my Senate confirmation hearing: “When patent owners and the public have confidence in the patent grant, inventors are encouraged to invent, investments are made, companies grow, jobs are created, science and technology advance.” … [The Chamber] report identifies two principal reasons for the increased uncertainty (or lower reliability) of our patents:

(1) Patentability Standards, or more specifically, patent subject matter eligibility pursuant to 35 USC Section 101; and
(2) Opposition procedures, namely, the post-grant procedures, such as IPR, that were established by the America Invents Act.

Let me address each of these in turn.

First, our current law surrounding patentable subject matter has created a more unpredictable patent landscape that is hurting innovation and, consequently, investment and job creation. Recent cases from the Supreme Court – Mayo, Myriad, and Alice – have inserted standards into our interpretation of the statute that are difficult to follow. Lower courts applying these cases are struggling to issue consistent results. Patent lawyers trying to advise their clients are, in turn, struggling to predict the outcome with respect to certain patents. And examiners at the USPTO must spend increased amounts of time addressing this challenging issue. The current standards are difficult for all: stakeholders, courts, examiners, practitioners, and investors alike. System-wide, a significant amount of time is being spent trying to figure out where the lines should be drawn, and what’s in and what’s out. And multiple people looking at the same patent claims often have trouble agreeing on, and predicting, the outcome. Something must be done. To be sure, we must and will apply Supreme Court law faithfully. This does not mean, however, that more cannot be done to increase clarity and predictability. Of course, given our statutory mandate, there is only so much that the USPTO can do. But within that mandate, we will do everything we can. Currently, we’re actively looking for ways to simplify the eligibility determination for our examiners through forward-looking guidance. Through our administration of the patent laws, which we are charged to execute, the USPTO can lead, not just react to every new case the courts issue.

Second, your report also mentions our “patent opposition procedures” as a reason for the increased uncertainty of our patents. This refers primarily to our Inter Partes Review, or the IPR system. This was a creation of the America Invents Act, and since its introduction five and a half years ago, we have now conducted more than 8,000 such proceedings. It’s been a very popular proceeding. Opinions on this new system diverge widely. Yet each opinion is passionately held by its supporters. Pointing to the high invalidation rates in IPR proceedings, some hate the new system with vigor, arguing that it’s an unfair process that tilts too much in favor of the petitioner. Others love the system, and think it’s the best tool we have to correct errors, eliminate “bad patents,” and improve patent quality. Who is right? Well, both arguments have legitimate elements. But I encourage people to reduce the hyperbole and look at the process with fresh eyes, in order to understand its true benefits and true challenges. This is what we are now doing at the USPTO.  Indeed, it’s one of our highest priorities. We need to carefully balance rights-holder’s and rights challenger’s interests. On the one hand, for example, this proceeding can come years after issuance, when the patent owners and the public may both have relied on those rights and made investments accordingly. On the other hand, we do want to execute the statutory mandate and help maintain the quality of patent rights. And – assuming the Supreme Court does not declare it unconstitutional – we do want the IPR system to effectively address invalid claims, but at the same time, we don’t want to throw out the baby with the bathwater. The filters need to be appropriately set.  And so, among various other things, we are now examining: how and when we institute proceedings, the standards we employ during the proceedings, and  how we conduct the overall proceedings.The goal, with whatever action we take, is to increase predictability of appropriately-scoped claims….

We have a remarkable patent system, born from our Constitution and steeped in our history. It is a crown jewel; a gold standard. We have a unique opportunity to ensure it meets its full Constitutional mandate to promote innovation and grow our economy.

I look forward to working with all of you in support of that great endeavor. Thank you again for the invitation to participate in this important discussion.

When Natural Laws are Wrong

Patent

by Dennis Crouch

René Descartes may have been the first expressly identify the physical operation of our universe as “laws of nature” (although published in French) – spelling out specifically his three immutable laws of nature (later serving as Newton’s foundation):

  1. Each thing, as far as is in its power, always remains in the same state; and that consequently, when it is once moved, it always continues to move” (Pr II 37);
  2. All movement is, of itself, along straight lines (Pr II 39); and
  3. A body, upon coming in contact with a stronger one, loses none of its motion; but that, upon coming in contact with a weaker one, it loses as much as it transfers to that weaker body” (Pr II 40).

As the study of these natural laws developed, so did the recognition that they are not immutable laws, but rather fail to actually describe the working of our universe.  The third law was the first to fail as the “laws” of conservation of energy and momentum were further developed.  The other two laws dropped away with the theory of relativity and quantum mechanics.  Although still used today, we recognize that they are only a rough approximation.

In Mayo, the Supreme Court held the following to be a “law of nature”: If the blood-level of 6-TG exceeds exceed about 400 pmol per 8×108 red blood cells, then the administration of the standard dose of thiopurine is likely to produce toxic side effects, whereas a blood level of about 230 pmol per 8×108 red blood cells indicates that the standard dose should be increased.  I am betting that this supposed “law” turns out to be incorrect as well.

The question I’m pondering over the next couple of weeks is how the law of patents should treat these incorrect or unproven laws of nature.

Oil States: Engaging with History, Private Property, and the Privy Council

Patent

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

By Prof. Dmitry Karshtedt

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

Some of the main themes of the argument:

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

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

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

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

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

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

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

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

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

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

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

Secrecy in Court; Takings; and A Proposal for Redaction with Replacement

Patent

by Dennis Crouch

In-court secrecy continues to thrive – at least in regards to protecting business interests.  Almost all patent infringement lawsuits include secrecy orders negotiated by the parties without much court participation.  Courts often view themselves as arbiters of disputes between the parties – and if the parties agree on a particular issue then there is no dispute.

The right to secrecy in federal courts was upped a bit further with the Defend Trade Secrets Act of 2016 in situations where the parties don’t agree.  The DTSA includes a requirement that a court “may not authorize or direct the disclosure of any information the owner asserts to be a trade secret” without first allowing an under-seal submission of a description of the confidential interest.  18 U.S.C. 1835.  Although not stated, the implication is that the court must then review the submission before requiring disclosure.

The Federal Circuit allows submission of confidential appellate briefs, but requires non-confidential versions to also be submitted with the filings – basically blacking-out the particular confidential information.  Further, Federal Circuit Rule 28(d)(1)(A) requires that a party seeking to mark confidential more than 15 words in its brief must petition the court.  That petition was filed and granted in the case of Georgetown Rail Equipment v. Holland L.P. In granting the motion, the court wrote that:

Georgetown Rail Equipment is seeking additional words to mark portions of its response brief describing confidential pricing information, confidential internal financial information, contractual terms relating to confidential agreements with customers, and confidential information of two non-parties. Those details were designated as confidential in the underlying proceedings. In light of the limited and focused nature of the proposed markings, the court will grant the motion.

[OrderGrantingMotionForExpandedConfidentialBrief]  The

When it comes to issuing an actual opinion, an important question is whether the Federal Circuit (or lower court) is bound by the confidentiality of a submission under seal containing trade secret information.  I.e., may the court publicly disclose a trade secret – and thus destroy the property right; if disclosing a trade secret submitted under seal, must the court first weigh the public interest in open courts against the harm of disclosure; and would an improper disclosure by the court be seen as a taking?

I have talked through some of these issues with Federal Circuit judges who indicated their usual pathway  is to attempt to avoid disclosing the secret information in the opinion – if possible. In Georgetown Rail Equipment v. Holland L.P., however, the court apparently found that approach untenable and instead issued decision on August 1 under seal: Sealed Judgement and Opinion.  At the same time, the court issued an Order to Show Cause as to “why the opinion should not be unsealed.” The court writes:

Because the record in this case contains extensive material marked as confidential, the court has issued its opinion dated August 1, 2017 under seal. The court does not believe, however, that the opinion contains confidential material. The parties are hereby ordered to show cause, by means of a single joint response coordinated among the parties, why the opinion should not be unsealed. The response to this order must specify which words, if any, are proposed to be redacted, and must specifically state the cause for each such requested redaction. If the parties propose redactions, the response to this order must also propose specific words to replace each of the proposed redactions in an unsealed opinion. The joint response shall be filed no later than August 15, 2017.

[Order to Show Cause] [Aside: It will be interesting to see the redacted version of the submission.]

The court is on the right track with this order. However, it is also problematic because it focuses parties on the question of whether “the opinion contains confidential material” as if that is the sole question.    The parties are hereby ordered to show cause, by means of a single joint response coordinated among the parties, why the opinion should not be unsealed.  A proper analysis of the issues will take the next step of explaining why the parties’ private interest in confidentiality in the court proceeding outweighs the storied tradition of open and public courts.

= = = = =

Redaction with Replacement: The court here also provides an innovative suggestion that could transform the redaction process.  Rather than simply blacking-out information from its opinion, the court here asks the parties to “propose specific words to replace each of the proposed redactions in an unsealed opinion.”  Redaction with replacement is likely the gold-standard approach for judicial opinions and appellate briefs, but we’ll see how it works in this case.

= = = = =

The patent at issue here is U.S. Patent No. 7,616,329 covering a method for inspecting railroad.  Most of the redactions in the briefs fit in the following pattern:

He testified that, but for Holland’s infringement, Georgetown would have inspected XXXXX miles of track for UP over a XXXXXXX period at a rate of $XXXXX, thereby realizing $XXXXX in revenues.

 

 

Cert petition granted in Oil States

Patent

Question: Whether inter partes review, an adversarial process used by the Patent and Trademark Office (PTO) to analyze the validity of existing patents, violates the Constitution by extinguishing private property rights through a non-Article III forum without a jury.

The deciSion here is very big news for the IPR system because it has the potential of bringing down the entire AIA trial regime.  The conventional wisdom with Supreme Court cases is that they usually reverse the path set by the Federal Circuit. Here, that results may well be a holding that PTO cancellation of issued patents is a constitutional violation.

Justice Neil Gorsuch

Patent

Neil Gorsuch has now been confirmed by the Senate and will swear-in next week as one of the nine justices of the United States Supreme Court.  I expect Justice Gorsuch to support strong patent rights, but primarily focus on statutory language and historic precedent. I.e., do not expect Gorsuch to see patents as a fundamental right, but rather a policy tool that can be fully regulated by Congress.

Neil_Gorsuch_and_Donald_Trump

 

Eligibility: Get Technical or Get Denied

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Dennis Crouch

The principle that patent prosecutors are following today is in the headline: Get Technical or Get Denied.  The following is a case-in-point.

Nonprecedential decision today in Clarilogic v. FormFree Holdings affirming that the claims of FormFree’s U.S. Patent No. 8,762,243 are ineligible under 35 U.S.C. § 101 as directed to an abstract idea.   [Decision: clarilogic] The patent is directed toward a credit reporting scheme.  The gist – according to the court:

In brief, the … system seeks a potential borrower’s financial information from a third party, applies an “algorithm engine” to the data, and outputs a report. . . . the logic rules applied by the engine are received “from government entities or particular users.”

Claim 1 is drafted as a seven step method as follows :

1. A computer-implemented method for providing certified financial data indicating financial risk about an individual, comprising:

(a) receiving a request for the certified financial data;
(b) electronically collecting financial account data about the individual from at least one financial source,
(c) transforming the financial account data into a desired format;
(d) validating the financial account data by applying an algorithm engine to the financial account data to identify exceptions, wherein the exceptions indicate incorrect data or financial risk;
(e) confirming the exceptions by collecting additional data and applying the algorithm engine to the additional data,
(f) marking the exceptions as valid exceptions when output of the algorithm engine validates the exceptions; and
(g) generating, using a computer, a report from the financial account data and the valid exceptions,
wherein the financial account data comprises at least one of real-time transaction data, real time balance data, historical transaction data, or historical balance data; and the algorithm engine identifies a pattern of financial risk; the method is computer implemented, and steps (c), (e), and (f) are executed via the computer or a series of computers.

The Supreme Court’s atextual reading of 35 U.S.C. 101 has created a set of subject matter excluded from patentability – including abstract ideas.  The two step eligibility framework under Alice/Mayo first asks whether the claims are “directed to” an abstract idea and then, if so, asks whether the claims include “something more” beyond the abstract idea such as an “inventive concept” that is “sufficient to transform the nature of the claim into a patent eligible application.”  Quoting Alice.  These issues have generally been treated as questions of law amenable to judgment by a court even at the pleading stage of a lawsuit.

Step 1: The claims are directed to an abstract idea because their focus is “on collecting information, analyzing it, and displaying certain results of the collection and analysis.” (quoting Elec. Power Grp., LLC v. Alstom S.A., 830 F.3d 1350 (Fed. Cir. 2016).   Here, the court suggests the claims might have passed the test if the “algorithm engine” had been further identified or explained, but simply “claiming an algorithm does not alone render subject matter patent eligible.”

Step 2: The requisite ‘something more,’ does not include recitation of the use of a generic computer.  Here, FreeForm argues that its invention uses algorithms to transform data in parallel fashion to the way that Diehr used an algorithm to transform rubber.  On appeal, however, the Federal Circuit disagreed:

In contrast to Diehr, claim 1 recites a method that changes the way electronic information is displayed via an unknown and unclaimed process. Absent any limitation to how the data are changed, there is little, if any, transformative effect. Data are still data.

The problem, according to the court, is that the patent simply does not reach any inventive “technical manner” in which the “data is gathered, analyzed, or output.”

 

Patentlyo Bits and Bytes by Anthony McCain

Patent

Get a Job doing Patent Law                  

Prof. Radin’s Patent Notice and the Trouble with Plain Meaning

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By Jason Rantanen

Professor Margaret Radin, who recently retired from the University of Michigan Law School, is a leading scholar known for her work in property theory, contracts law, intellectual property, and internet commerce.  She’s best known to my students  for her articulation of a modern personhood theory of property in Property and Personhood, 34 Stan. L. Rev. 957 (1982).

In her essay Patent Notice and the Trouble with Plain Meaning forthcoming in the Boston University Law Review, Professor Radin offers her thoughts on a topic at the heart of contemporary debates in patent law: the extent to which the words of claims can operate as boundaries that provide the same degree of notice that we expect in the real property context. The abstract reads:

In their book, Patent Failure, James Bessen and Michael Meurer took the position that notice of the scope of a patentee’s property right is usefully analogous to notice conveyed by real property boundaries. In this essay I argue to the contrary that the idea that patent claim language could be rendered determinate enough to justify an analogy with physical fences or metes and bounds is illusory. Patent claims raise the question, in a way that fences do not, of how words “read on” objects in, or states of, or events in the world. I take a small detour through the language theory of Quine as backdrop to my argument that there is no such thing as plain meaning, at least not in situations involving innovative products and processes where there is money at stake. I draw on three landmark patent cases — Markman, Phillips, and Festo — to illustrate this basic point. In my concluding Postscript I bring the big picture into play. The costs of providing better notice, even if that were possible, might outweigh the gains. Plus, even if the analogy with physical boundaries and the commitment to plain meaning were not illusory, such rigidity in interpreting claims would undermine a significant feature of the patent system: the flexibility to reward breakthrough inventions proportionately to their importance.

Professor Radin’s discussion is worth a read for the eloquent way that she captures and synthesizes the raw strands floating around in current discussions about patent claims.

Viewed through the lens of my current projects, though, her essay raises deeper questions about the meaning of claim construction itself.  Over the last two decades, patent law has experienced the emergence of the perception that claim construction is simply the process of interpreting the meaning of the words in the claims.  From Markman to Cybor to Phillips, claim construction grew into a search for linguistic meaning.  Even Teva reinforces this perception, with its focus on the role of evidence in determining the meaning of key claim terms.

But patent law’s dirty secret is that claim construction isn’t just about divining the linguistic sense of words and phrases in the claims.  That’s a seemingly fine inquiry when analyzing questions such as infringement, or anticipation or even, perhaps, nonobviousness.  Yet when it comes to other issues in patent law–enablement, written description and especially § 101–defining the meaning of words is less central to the analysis.   To be sure, sometimes the formalized procedure of Phillips does matter in enablement.  Liebel-Flarsheim and Automotive Technologies offer two examples.  But for the most part, the formalized claim construction that we’re used to is absent from the Federal Circuit’s enablement, written description and § 101 determinations.

Nevertheless, claim construction of a sort is present.  The court articulates something that it uses in its analysis.  In the enablement and written description contexts, I’ve come to call this something a target that must be enabled or adequately described.  What it really is, though, is claim construction–just not in the sense that we’ve become comfortable with.

The Federal Circuit’s opinion on Monday in Bascom v. AT&T Mobility [Download Opinion] illustrates this point.  That case involved a motion to dismiss granted by the district court on the ground that the claims were invalid on § 101 grounds.  (I’ll summarize the facts and holding in more detail in a subsequent post.)  After assuming that the claims were directed to an abstract idea under Enfish‘s statement about “close calls” at step one of the Alice/Mayo framework, the court turned to step two: the search for an “inventive concept.”  Here, the court concluded that the “inventive concept described and claimed in the []patent is the installation of a filtering tool at a specific location, remote from the end-users, with customizable filtering features specific to each end user,” a concept that the court concluded was not (on the record before it) conventional or generic.  Slip Op. at 15-16.  This determination–of identifying an “inventive concept”–is as much claim construction as the linguistic machinations of Phillips.  Indeed, the court even refered to what it is doing as construing the claims: “Thus, construed in favor of the nonmovant–BASCOM–the claims are “more than a drafting effort designed to monopolize the [abstract idea].”  Slip Op. at 17.

Almost Cut My Hair

Patent

by Dennis Crouch

Michael Kwun‘s new Greenbag article titled Alice Tells a Joke offers the following:

A patent lawyer walks into a barber shop. The barber takes a look at the lawyer for a bit, and then says, “Ok, that’ll be $20.” The lawyer responds, “But you didn’t cut my hair!” The barber replies, “That’s ‘insignificant post-solution activity.’”

Kwun’s short analysis considers In re Brown, No. 2015-1852 (Fed. Cir. Apr. 22, 2016) (nonprecedential opinion), where the Federal Circuit ruled that the claimed “method of cutting hair” lacks subject matter eligibility.

The rejected claim:

1. A method of cutting hair comprising;

a) defining a head shape as one of balanced, horizontal oblong or vertical oblong by determining the greater distance between a first distance between a fringe point and a low point of the head and a second distance between the low point of the head and the occipital bone;

b) designating the head into at least three partial zones;

c) identifying at least three hair patterns;

d) assigning at least one of said at least three hair patterns to each of the said partial zones to either build weight or remove weight in at least two of said partial zones; and

e) using scissors to cut hair according to said assigned hair pattern in each of the said partial zones.

My 2011 video is somewhat on point: HairCut

ANDA filing creates Nationwide Personal Jurisdiction

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Acorda Therapeutics v. Mylan Pharma (Fed. Cir. 2016)

In this personal jurisdiction case, the Federal Circuit has affirmed the Delaware Court’s ruling that the court has specific jurisdiction over Mylan in two parallel cases.  In a super-broad holding, the court here finds that when a generic company files a new drug application (ANDA) with the FDA, that the filing opens the door to personal jurisdiction in any state where the Generic Company will market the drug if approved. This effectively means that the generic company could be sued in any state in the Union.

In Federal Courts, personal jurisdiction usually looks to underlying state law and asks whether the defendant would be “subject to the jurisdiction of a court of general jurisdiction in the state where the district court is located.”  Fed. R. Civ. P. 4(k)(1)(A). Delaware’s long-arm statute allows for personal jurisdiction so long as it does not violate the Constitutional due process protections.  On that issue, however, the Federal Circuit has repeatedly held that personal jurisdiction in patent cases is a patent-specific question that must be determined under Federal Circuit law rather than following the law of the regional circuit court of appeal. See Merial Ltd. v. Cipla Ltd., 681 F.3d 1283, 1292 (Fed. Cir. 2012); Akro Corp. v. Luker, 45 F.3d 1541, 1543 (Fed. Cir. 1995).

The facts here involve Mylan seeking FDA approval to market its generic drugs that will eventually be sold in Delaware (as well as every other state in the Union).  In considering that action, the court found it sufficient for personal jurisdiction for cases steming from the ANDA approval application. The court writes:

Mylan’s ANDA filings constitute formal acts that reliably indicate plans to engage in marketing of the proposed generic drugs. Delaware is undisputedly a State where Mylan will engage in that marketing if the ANDAs are approved. And the marketing in Delaware that Mylan plans is suit-related: the suits over patent validity and coverage will directly affect when the ANDA can be approved to allow Mylan’s Delaware marketing and when such marketing can lawfully take place.

The majority opinion in this case was penned by Judge Taranto and joined by Judge Newman.

Judge O’Malley wrote a concurring opinion arguing that the case would have been more easily (and less dramatically) decided on general jurisdiction grounds since Mylan was registered to operate in Delaware and had provided local agent for service of process in the State.

I tend to agree with O’Malley in this case — especially with the conclusion that the Majority opinion is likely overreaching.  The holding that Mylan is amenable to suit in Delaware is not problematic to me, but this case obviously opens the door to these pharma cases in the E.D. of Texas.

= = = = =

I’ll note that the parties here hired some of the top Supreme Court lawyers in the country for this case. To name a few, Ted Olson represented Acorda; Paul Clement represented Mylan; Kannon Shanmugam for AZ; Andy Pincus and Carter Phillips both filed amicus briefs.  This means that they are planning to take the case up to the Supreme Court if allowed.

Federal Circuit: No New Card Game Patents Unless you Also Invent a New Deck

Patent,

In re Smith (Fed. Cir. 2016)

Ray and Amanda Smith’s patent applications claims a new method of playing Blackjack. The new approach offers ability to bet on the occurrence of “natural 0” hands as well as other potential side bets.  Claim 1 in particular requires a deck of ‘physical playing cards” that are shuffled and then dealt according to a defined pattern.  Bets are then taken with the potential of more dealing and eventually all wagers are resolved.

In reviewing the application, the Examiner Layno (Games art unit 3711) rejected these card games patents as ineligible under Section 101 – noting that the claim is “an attempt to claim a new set of rules for playing a card game [and thus] qualifies as an abstract idea.” The Patent Trial & Appeal Board affirmed that ruling – holding that “independent claim 1 is directed to a set of rules for conducting a wagering game which . . . constitutes a patent-ineligible abstract idea.”  The particular physical steps such as shuffling and dealing are conventional elements of card-gambling and therefore (according to the Board) insufficient to transform the claimed abstract idea into a patent eligible invention.[1]

On appeal, the Federal Circuit has affirmed – agreeing that the method of playing cards is an unpatentable abstract idea. The court held that a wagering game is roughly identical to fundamental economic practices that the Supreme Court held to be abstract ideas in Alice and Bilski. “Here, Applicants’ claimed ‘method of conducting a wagering game’ is drawn to an abstract idea much like Alice’s method of exchanging financial obligations and Bilski’s method of hedging risk.”[2]  Following the Board’s lead, the appellate court then found that the “purely conventional steps” associated with the physical act of playing cards do not “supply a sufficiently inventive concept.”  “Just as the recitation of computer implementation fell short in Alice, shuffling and dealing a standard deck of cards are ‘purely conventional’ activities.

In dicta, the court wrote that some card games will still be patent eligible – perhaps those claiming “a new or original deck of cards”

The applicant also asked the Federal Circuit to review the USPTO’s Interim Guidance on Patent Subject Matter Eligibility.  The court, however, refused to pass any judgment on those guidelines because they were not directly binding rules upon either the examiner or the Board.  The court’s conclusion makes sense here, but glosses over the fact that an examiner’s performance is judged according to whether that examiner follows the eligibility guidelines. This transforms the guidelines into de facto rules. Update: As “6” commented below and I have now confirmed, examiners are not required to follow the “eligibility guidelines” and are not formally reviewed using those guidelines as a measuring stick.

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[1] The examiner did allow Smiths’ claim 21, that was directed to the same method with the exception that instead of being a ‘physical’ card game, it required a ‘video gaming system’ that used a processor (rather than real cards and a dealer) to accomplish the methodological approach.

[2] See also OIP Techs., Inc. v. Amazon.com, Inc., 788 F.3d 1359, 1362 (Fed. Cir. 2015) (finding offer-based price optimization abstract), cert. denied, 136 S. Ct. 701 (2015); Planet Bingo, LLC v. VKGS LLC, 576 F. App’x 1005, 1007–08 (Fed. Cir. 2014) (determining that methods of managing a game of bingo were abstract ideas).

VS Tech v. Twitter: Patentable Subject Matter

Patent, Patent Cases 2011, Patentable Subject Matter, , ,

VS Tech v. Twitter, 11–cv-0043 (E.D. Virginia 2011)

Trial is set for this week in the patent infringement lawsuit between VS Tech and Twitter.  VS’s asserted U.S. Patent No. 6,408,309 claims a “method of creating an interactive virtual community of people in a field of endeavor” and has a February 2000 filing date.  The inventor is Dinesh Agarwal who has also been a patent attorney since 1985.  VS Tech was formed to pursue the lawsuit and is headquartered in Mr. Agarwal’s law office address. The first two claims of the patent are reproduced below:

What is claimed is:

1. A method of creating an interactive virtual community of people in a field of endeavor, comprising the steps of:
a) selecting a field of endeavor;
b) compiling a list of members in the selected field;
c) selecting a member from the compiled list of members based on a preselected factor;
d) obtaining biographical information about the selected member;
e) processing the biographical information in a preselected format to create a personal profile of the selected member;
f) publishing the profile of the selected member on a machine readable media; and
g) allowing the selected member to interact with the profile.

2. The method of claim 1, wherein the step (f) comprises publishing the profile of the selected member on a network of computers.

In his most recent judgment in the case, Judge Morgan denied Twitter’s motion for summary judgment of invalidity under 35 U.S.C. 101, 102 & 103 and non-infringement.

The section 101 decision is interesting in that the judge treated the machine-or-transformation test as a question of fact to be determined by the jury.  “In light of all of the foregoing considerations, the Court finds that the evidence is sufficient for a reasonable juror to conclude that the ‘309 patent is linked to a particular machine or apparatus.”  Like claim construction and obviousness, patentable subject matter is treated by the courts as a question of law. However, unlike claim construction, the appellate courts have never held that it must be the judge who decides section 101 issues.

When the case was filed in January, Patent Law reporter Joe Mullin wrote “The central role of patent lawyers in suits like this raises questions about the health of the U.S. patent system. Patent lawyers are insiders in this system, and an increasing number of them aren’t satisfied just with being very-expensive service providers to patent owners. They’re seeing the millions made by so-called patent trolls and are eager to get into the game themselves. The patent office simply isn’t set up to say no to a persistent applicant, and the patent lawyers know that as well as anybody.  Mike Masnick filed his story under the “bang-head-slowly dept.”

The following is the text of Twitter’s proposed jury instructions on what it terms “unpatentable subject matter”:

Even if an invention is both new and not obvious, a patent claim may be invalid if its subject matter is not patentable. The law establishes three categories that are not eligible for patents: laws of nature, physical phenomena, and abstract ideas.

Twitter contends that the asserted claims of the ‘309 patent claim an unpatentable abstract idea. Methods which can be performed mentally, or which are the equivalent of human mental work, are abstract ideas which cannot be patented. An abstract idea is unpatentable even if the patent claim limits the idea’s use to a particular technological environment, or adds insignificant post-solution activity. Systems that depend for their operation on human intelligence alone cannot be patented.

A useful and important clue for determining whether a patent claims unpatentable subject matter is whether the claim is tied to a particular machine or apparatus, or transforms a particular article into a different state or thing. This is called the “machine or transformation test.” To satisfy the machine prong of this test, the use of the machine must also impose meaningful limits on the claim’s scope. If the claim does not satisfy the machine-or-transformation test, this indicates that the claim may be invalid because it claims unpatentable subject matter.