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Judge Stoll Calls for En Banc Consideration of Assignor Estoppel

Patent

by Dennis Crouch

Hologic, Inc. v. Minerva Surgical, Inc. (Fed. Cir. 2020)

The assignor estoppel doctrine (a doctrine in equity) potentially becomes more important in times of economic upheaval. Through layoffs, mergers, and acquisition of underperforming companies, patents are more likely to end up in the hands of someone other than their original owner or assignee.  Conflicts then arise when that original inventor (or prior owner) reenters the market and begins to compete against the new patent owner. The doctrine of assignor estoppel operates to bar the original inventory from later challenging the validity of the patent. An oddity of Federal Circuit precedent though, is that assignor estoppel does not apply to USPTO IPR Actions.

In its decision here, the Federal Circuit reluctantly enforced the assignor estoppel doctrine noting that the court is “bound to follow” its prior precedent. Judge Stoll penned the opinion that was joined by both Judge Wallach and Judge Clevenger. Judge Stoll also filed a set of “additional views” suggesting that “it is time for this court to consider en banc the doctrine of assignor estoppel at it applies both in district court and in the Patent Office.”

We should seek to clarify this odd and seemingly illogical regime in which an assignor cannot present any invalidity defenses in district court but can present a limited set of invalidity grounds in an IPR proceeding.

Slip Op. Additional Views by Judge Judge Stoll.

Hologic v. Minerva centers on the work of inventor and entrepreneur Csaba Truckai and relates to a medical device for detecting uterine perforations.  The basic idea is that the device pumps gas into the uterus and then measures the pressure for a few minutes to see if gas has leaked-out. U.S. Patent Nos. 6,872,183 and 9,095,348.

This is a bit of a tale: Back in the 1990’s Truckai invented and assigned rights to his company NovaCept. NovaCept was later acquired by Cytec Corp. and then Hologic acquired Cytec. Truckai was still around for those buyouts and made a substantial amount of money.  Meanwhile, Truckai left the company in 2008 and founded a new company Minerva that now competes with Hologic.

When Hologic sued Minerva, the defendant responded with several invalidity defenses and also petitioned the PTAB for inter partes review of the two patents.  For its part, the Board granted review of the ‘183 patent and found the claims unpatentable as obvious. The Board denied review of the ‘348 patent.

Meanwhile, the district court case continued with the district court judge applying assignor estoppel to prevent Minerva from asserting invalidity defenses in district court — holding that “Truckai is in privity with Minerva.”  A jury then sided with the patentee and awarded $5 million in damages for the two patents. Although the ‘183 patent had been cancelled in the IPR, the District Court judge did not give the PTAB judgment any preclusive effect because that issue was then on appeal.  Subsequently, the Federal Circuit affirmed the PTAB’s cancellation of the ‘183 patent claims.

When the ‘183 patent was finally invalidated by the Federal Circuit, the district court looked back at the jury verdict, but decided to enforce the verdict — holding that “jury’s damages determination can be adequately supported by the finding of infringement of Claim 1 of the [still valid] ’348 patent.” The district court also held assignor estoppel prevented the Minerva from applying the PTAB cancellation to the district court decision. The district court wrote: “the final outcome of the IPR is irrelevant to the district court proceeding . . . [t]o hold otherwise would be to hold that the [AIA] abrogated the assignor estoppel doctrine in a district court infringement action.”

On appeal, the Federal Circuit first rejected the district court’s clearly erroneous decision giving no effect to the PTAB cancellation (affirmed by the Federal Circuit).  The court explained that the PTAB judgment renders the claims retroactively “void ab initio.”  In an unusual statement, the court stated that it was “mindful of the seeming unfairness to Hologic in this situation.”  The apparent unfairness is that the company will not be able to enforce a patent that has been invalidated.

For the remaining ‘348 patent, the defendant Minerva asked the court to “abandon the doctrine” entirely. Barring that, Minerva suggested that the doctrine should not apply to the ‘348 patent — which is a continuation of Truckai’s original patent filing with substantially broadened claims.  The court resisted — holding that “equities weigh in favor of its application in this case.”

With regard to the expanded scope during prosecution, the Federal Circuit added a further quirk to the analysis by reviving a squib from some older cases: Westinghouse Electric & Mfg. Co. v. Formica Insulation Co., 266 U.S. 342 (1924) & Diamond Sci. Co. v. Ambico, Inc., 848 F.2d 1220 (Fed. Cir. 1988).  In Diamond Sci., the Federal Circuit explained:

Westinghouse does allow for an accommodation in such circumstances. To the extent that Diamond may have broadened the claims in the patent applications (after the assignments) beyond what could be validly claimed in light of the prior art, Westinghouse may allow appellants to introduce evidence of prior art to narrow the scope of the claims of the patents, which may bring their accused devices outside the scope of the claims of the patents in suit.  exception to assignor estoppel also shows that estopping appellants from raising invalidity defenses does not necessarily prevent them from successfully defending against Diamond’s infringement claims.

In Diamond Sci., the Federal Circuit was a little cagey on this right-to-narrow-claim-scope (“Westinghouse may allow . . . [the doctrine] does not necessarily prevent …”).  Here, the court is more explicit: “[T]his court’s precedents allow Minerva to introduce evidence of prior art to narrow the scope of claim 1 so as to bring its accused product outside the scope of claim 1.” (internal quotes removed). The basic idea here is that an estopped party can avoid infringement by showing “that the accused devices are within the prior art and therefore cannot infringe.”  Mentor Graphics Corp. v. Quickturn Design Sys., Inc., 150 F.3d 1374 (Fed. Cir. 1998) citing Scott Paper Co. v. Marcalus Mfg. Co., 326 U.S. 249 (1945). In his article on the topic, Prof. Mark Lemley suggests this narrowing-the-claim a “promise is likely illusory in modern patent jurisprudence, which has all but eliminated the ability to argue that claims should be narrowed to avoid invalidating prior art.”

= = = =

On damages, the jury was asked for the damages associated with infringing the two patents without requiring any patent-by-patent apportionment.  Since one of the patents is invalid, you would think this would require a new trial on damages.  However, the Federal Circuit has a big exception that allows the damages award to stand “if, despite the fact that some of the asserted claims were held invalid or not infringed subsequent to the award, undisputed evidence’ demonstrated that the sustained patent claim was necessarily infringed by all of the accused activity on which the damages award was based.” (citing Western Geco).

Here, the damages verdict is supported by the jury’s finding that the accused products all infringed Claim 1 of the still-valid ‘348 patent.  This was further supported by the patentee’s damages expert who testified that the damages should be the same regardless of whether the jury finds infringement of one patent or both patents. Since “Minerva did not present any contrary evidence,” any error in jury instruction is deemed harmless.

 

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PTAB Reconstruing Claims: Estoppel?

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Knowles Electronics v. Cirrus Logic (Fed. Cir. 2018) [Knowles Case]

Construing Claims: In a 2011 decision, the Federal Circuit construed the claims of Knowles Electronics’ U.S. Patent No. 6,781,231, including the claim term “package” as used in the claimed microelectromechanical system to mean a “self-contained unit that has two levels of connection, to the device and to a circuit (or other system).” MEMS Tech. v. Int’l Trade Comm’n, 447 F. App’x 142 (Fed. Cir. 2011). When passing judgment on the same patent five years later, the PTAB offered a slightly different construction during an inter partes reexamination. In Judge Newman’s view, that difference allowed for the PTAB to find the claims anticipated while the 2011 Federal Circuit decision found the patents valid. She writes:

The difference between [the two] constructions may not appear to be large, but the PTAB’s construction sufficed to hold claims 1–4 invalid on the ground of anticipation whereas the Federal Circuit’s construction sustained validity on the ground of anticipation

The problem, for Judge Newman, is that a decision from the PTAB’s controlling court should control the actions of the PTAB and limit its power. For its part, the PTAB generally refuses to be bound by prior claim construction decisions by District Courts, but this is the first case where the PTAB has disregarded a prior interpretation by the Federal Circuit.

Although I began with Judge Newman’s opinion. Her opinion was in dissent, the Majority (Judges Wallach and Chen) avoided the question of whether the PTAB’s must follow Federal Circuit claim construction decisions. Rather, the majority held that the PTAB construction is in “accord with the definitions adopted in Mems Tech.” Based upon this claim construction, the majority agreed that the claims were anticipated by the proffered prior art.

Written Description: The patentee also added several claims during the reexamination. However, those were rejected for lack of written description. On appeal here, the Federal Circuit affirmed – holding that the newly added limitation that “solder pads are ‘configured to mechanically attach … the package to a surface of an external printed circuit board using a solder reflow process'” was not supported by the original specification. In particular, the specification did not identify the “solder reflow process” as the connection mechanism. Here, the PTAB held that such a process was not so well known in the art that the disclosure shows possession of that process. This factual conclusion by the PTAB was easy to defend on appeal since it need only be supported by substantial evidence. Judge Newman did not offer any dissenting opinion on this aspect of the judgment.

PTAB Request Amicus Support for its Decision on Immunity

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In what appears to be a first, the Patent Trial & Appeal Board (PTAB) has requested briefing from Amacus Curie on the question of whether Tribal Ownership of a patent immunizes the patent from Inter Partes Review (IPR) challenge. The case is Mylan v. Saint Regis Mohawk Tribe, IPR2016-01127 et al.

The panel writes:

[W]e authorize briefing from any other amici curiae, which shall also be no more than 15 pages by December 1, 2017. To the extent possible, to avoid redundancy and in the interests of efficiency, we direct any interested amici who wish to present similar arguments to the Board to coordinate in their filing of a joint amicus brief. Arguments redundant to those already presented by the parties or other amici may not be considered.

[98 – Order granting Amicus briefs].  Interesting approach to what is essentially a backdoor administrative rule-making.

Oil States Briefing: Linking AIA Trials to Reexaminations

Patent

Amici briefs supporting AIA Trials and Inter Partes Review are beginning to be filed.   The first brief in is filed by John Vandenberg’s team at Klarquist representing SAP, Gilead, Nautilus, and others.  The Brief presents a reexamination linkage and slippery-slope argument in two forms: (1) killing inter partes review will also kill reexaminations; and (2) pre-AIA patentees ‘consented’ to reexamination and that should be seen as consent to inter partes review.

Vandenberg writes:

Since 1980, the Patent Office has issued more than 10,000 reexamination certificates canceling, amending, adding, or confirming claims of issued patents. Inter partes review is substantively identical to reexamination, enforcing the same patentability conditions and issuing the same certificates canceling, amending, adding or confirming claims. Like reexamination, inter partes review is a rational condition the Legislature has imposed to maintain a patent, pursuant to its Constitutional authority to grant patents “for limited Times” to promote the useful Arts.

Since 1980, every patent applicant has consented to the substance of this reexamination as a maintenance condition for each granted patent. . . . Petitioner obtained its patent before 2011. But, like every other patent applicant since December 12, 1980, Petitioner consented to reexamination as a condition for maintaining its patent. Petitioner knew that the patent it sought would be subject to a reexamination request by anyone in the world at any time, including the Commissioner (now Director) of Patents, potentially leading to early cancellation of the patent. And, as noted, the substance of that reexamination to which it consented, is identical to inter partes review.

[16-712 bsac SAP America, Inc., et al.]

I am sympathetic to the arguments here – especially if narrowed to focus solely on inter partes reexamination.  A key caveat though is that the Supreme Court has never ruled that inter partes reexaminations are a proper exercise of administrative power.

Dismantling Inter Partes Review

Patent

by Dennis Crouch

The America Invents Act of 2011 brought about sweeping changes to the US Patent System — most dramatic of these was the creation of the administrative trials: especially Inter Parties Review (IPR) and Covered Business Method Review (CBM).

But if initiation of the AIA Trial system has been dramatic, the potential outcome of Oil States Energy Servs., LLC v. Greene’s Energy Group, LLC (Supreme Court 2017) is even more so.  Oil States is asking the Supreme Court to find the IPR system unconstitutional and thus order the system dismantled.

Earlier in 2017, the Supreme Court agreed to hear the Oil States case on the following 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.

Oil States has now filed its very well written opening merits brief.  Briefing will continue over the next few months, and I expect substantial amicus filing on both sides of the case, as well as input from President Trump’s Department of Justice.

The patent at issue in the case is U.S. Patent No. 6,179,053 that covers a lockdown mechanism for well tools. After being sued for infringement, Green filed the IPR petition with the USPTO and the agency eventually found the challenged claims unpatentable on a broad claim construction (after first rejecting the district court’s claim construction).   The Federal Circuit then affirmed the case without opinion (R.36).  The implication here: Oil States believes its patent is valid when properly construed.

The argument in this case begins with a focuses on history — for centuries, patent infringement and validity disputes have been decided in courts. “Article III promises a court to these litigants, and the Seventh Amendment promises a jury.”  The America Invents Act (AIA) shifts the approach – to having an administrative agency handle the “trial proceedings.”

With this background, Oil States argument is straightforward:

As this Court has long held, “Congress may not ‘withdraw from judicial cognizance any matter which, from its nature, is the subject of a suit at the common law, or in equity, or admiralty.’ ” Stern v. Marshall, 564 U.S. 462 (2011) (quoting Murray’s Lessee v. Hoboken Land & Improvement Co., 18 How. 272 (1855)). That is just what Congress has done with inter partes review, which wrests patent-validity cases from federal courts and entrusts them to administrative-agency employees, who decide questions of law that Article III reserves to judges and questions of fact that the Seventh Amendment reserves to juries. Neither Article III nor the Seventh Amendment tolerates this circumvention. . . . “When a suit is made of ‘the stuff of the traditional actions at common law tried by the courts at Westminster in 1789,’ * * * the responsibility for deciding that suit rests with Article III judges in Article III courts.”  Stern (quoting N. Pipeline Constr. Co. v. Marathon Pipe Line Co., 458 U.S. 50, 90 (1982)).

The brief does an excellent job of demarcating a justiciable line for the Court.  According to the briefs, the problem with IPR isn’t really that the PTO is invalidating patents, but instead that the IPR regime is set-up as a full-on adversarial judicial proceeding to invalidate patents that is designed to promote a different outcome and without the Article III protections of district courts.  That wholesale replacement of the Article III court and Jury rights is simply not allowed.

One way that the court could rule against Oil States is by ruling that the IPR cancellation process involves “public rights” rather than private property rights.  To do so, however, would come in fairly directly conflict with the court’s recent statements in Stern.

More to come on this interseting ! Top-side amici briefs are due in 7-days.

Read the Brief: Oil States Energy Services 082417 AS FILED

The Federal Circuit rejected many of these arguments in MCM. Read the court’s decision here.

 

 

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President Trump and the Patent Office

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The question on everyone’s mind is how the patent office and patent system will be restructured once Donald Trump becomes president.   Trump has substantial personal experience protecting and enforcing his own trademarks, including attempts to protect more controversial marks such as ‘you’re fired.’   However his businesses have few if any patent rights and have relied on the perception of luxury rather than innovation for their successes.  An element of Trumps campaign was the recognition that he personally understands how to find an exploit loopholes in government regulation and that his experience make him uniquely qualified to fix the holes.  Question for the patent system is whether president Trump will see patent trolls, pharmaceutical pricing, and the Eastern  District  of Texas as exploitations needing to be fixed. It is unclear at this point who will manage the transition team but hope for a smooth transition from Outgoing Director Michelle Lee to the next USPTO leader. Democracy!

 

 

Guest post: 2016 U.S. Patent Practitioner Trends Part 2 – Removal and Retirement of Patent Practitioners

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By Zachary Kinnaird, Patent Attorney with International IP Law Group, PLLC

Based on my analysis of the USPTO roster data:

  • There were 44,295 registered patent practitioners in the U.S. as of April 2016.
  • After 20 years on the USPTO roster, at least 15%  of practitioners originally registered between 1988 and 1996 are no longer registered as of April 2016.
  • Going back from April 2016, every subsequent year before 1986 shows an additional 2% of patent practitioners are no longer registered.
  • The USPTO either skipped or removed a large number of registration numbers originally to be assigned in 1964, 1966, and 2001 for currently unclear reasons.

Retirement trends based on removals from the USPTO roster

The number of practitioners removed from the USPTO database reveals a practitioner percentage removal trend that can be seen as a retirement estimate for patent practitioners. This trend shows that the longer a practitioner has had a registration number, the more likely they are to have retired, or otherwise been removed, from the roster.

The chart below shows the percentage of patent practitioners who still remain registered on the USPTO roster as a function of each practitioner’s year of registration. The further to the right, the more recently the practitioner earned their registration number.

Graph 1

*Gaps years 1964, 1966 removed as likely outliers as discussed more below

** Value for 2001 shown in red as data for 2001 came from the USPTO Official Gazette rather than from a calculation from the USPTO database. Data for 2001 from USPTO database calculations was an outlier as discussed more below

From the graph above, there appears to be an initial sudden dip at 1996 that suggests that about 15% of practitioners leave the practice after 20 years of being registered agents and attorneys. These numbers stay fairly level for another 10 years on the roster, or back until 1986 before another large dip in the percentage of practitioners still registered. The trend after this first 30 years on the roster is a nearly linearly removal at a rate of approximately 2% a year. This retirement pattern continues until 55 years after initial registration, or 1960 in the above chart.

At the time this data was collected, there were 44,295 individuals in the USPTO database, however there are likely far fewer than this actively filing or prosecuting patents with the USPTO. The percentages of practitioners still on the roster are very likely to be higher than in actual practicing attorneys and agents. Remaining on the roster is relatively costless for a practitioner due to the lack of dues and continuation education requirements. It is likely that many practitioners have effectively retired without yet being removed from the roster. Accordingly, the percentages shown on the above graph are a ceiling of the actual figures of practitioners who are actually still practicing.

Tracking removal rates of registered attorneys from the USPTO roster

The above retirement graph was generated from percentages of practitioners removed from the USPTO database. Finding the percentage of those removed can be a challenge, however, as the USPTO only maintains the current state of the patent bar in its public database and does not publicly provide a list of all practitioners ever registered at the USPTO.

Instead, the Office of Enrollment and Discipline periodically conducts a mandatory survey of active registered practitioners pursuant to 37 C.F.R. § 11.11. This survey, in part, determines if the practitioner is still active and wants to remain on the USPTO roster. As noted above, there is essentially no cost to remain on the roster as there are currently no annual dues or continuing education requirements. However, if a practitioner is no longer practicing and either indicates the end of their practice in the survey or does not respond to the survey, the USPTO removes that practitioner from the roster.

The below graph is constructed with the knowledge that practitioners can be removed through this survey system and by assuming that the USPTO assigns numbers in a sequential order. This visualization shows the number of registration numbers removed each year compared to the number of registration numbers initially assigned in that given year. For instance, while the USPTO roster may include 1,210 practitioners who first gained registration numbers in 2015, the first registration number assigned in 2015 (i.e. 73,303) compared to the last registration number assigned in 2015 (i.e. 74,530) suggests that 1,227 registration numbers were actually assigned in 2015 and that some of these 2015 practitioners have already been removed from the database. Carrying out this calculation for each year going back to 1950 yields the graph below.

Graph 2

As noted above, there are unusual red spikes in 1964, 1966, and 2001. The red spikes corresponding to 1964 and 1966 are far out of place and I believe they are likely outliers. The red spike in 2001 IS an outlier. This can be said with confidence based on comparison to number of practitioners found in the USPTO Gazette for the year of 2001. Potential practitioners in the PTO Gazette are listed provisionally to allow time for the public to report any additional information about the practitioners before they formally receive a registration number. 1,853 potential practitioners were listed for 2001 in the USTPO Official Gazette compared to the calculated value difference of 2,697 between the first registration number assigned in 2001 and the last. The corrected graph below reflects the modified value for 2001 based on the Official Gazette listings. Unfortunately, the listing of potential practitioners in the online resources of the Official USPTO Gazette currently only goes back as far as 1995 and can’t be used to find values for 1964 and 1966.

Graph 3

The outlier variation in 2001 is likely due to a conscious choice by the USPTO to jump to a higher registration number for assignment rather than adhere to a generally sequential and quantum assignment of registration numbers. This is likely true for 1966 and 1964 as well. For example, at the end of 1966 the last registration number assigned was 23,099 which is followed by a jump to 24,002 on the very next day numbers were assigned. These gaps suggest that there may have been a USPTO policy at the time to skip blocks of numbers and perhaps start at the next round number in the sequence (e.g. 24,000 in 1967) at the start of a next year.

Data Retrieval Methodology

The USPTO provides both a database for practitioner information as well as a zip file of this data in spreadsheet form that is updated daily. However, the spreadsheet provided by the USPTO does not include the dates of registration as an attorney or agent. Accordingly, the process of retrieving the registration date information from the USPTO online database was automated with web macros to yield the data that is analyzed in this post. As many practitioners have been registered as both patent agents and as patent attorneys, only the date an individual first received a registration number was used for this analysis. For access to the data set being used, or if any errors are noticed, please feel free to reach out by email.

This article is a continuation and extension of my previous analysis on the USPTO database graphing the USPTO attorney and agent database as well as my update to that story as of April 30, 2016.

Editor’s note: Comment moderation policy is in effect.  Excessive or uncivil posts will be deleted without further notice. 

 

Obviousness for Pharma/BIO

Patent,

The new petition for writ of certiorari in MacDermid v. DuPont focuses on the central question of U.S. patent law – obviousness. In the case, the patent challenger asks that the Supreme Court reinvigorate the doctrine with flexibility – especially with regard to the ‘unpredictable arts.’  The question presented:

Whether the Federal Circuit has erred in holding that there “must” be a proven “reasonable expectation of success” in a claimed combination invention in order for it to be held “obvious” under 35 U.S.C. § 103(a).

It is a well known secret that both the USPTO and the Federal Circuit treat pharmaceutical and biotechnology obviousness cases differently than they do electronics, software, and mechanical inventions.  This has to be kept a secret though, because both are applying the same law and the same Supreme Court precedent.  The case here looks to rejoin the two — in a way that makes it easier to invalidate the pharma/bio patents.

Read the petition: MacDermid

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.

Supreme Court Sides with Patentees–Providing Flexibility for Proving Enhanced Damages

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by Dennis Crouch

The Supreme Court today issued an important unanimous decision in Halo v. Pulse – vacating the Federal Circuit’s rigid limits to enhanced damages in patent cases.  The decision rejects the dual objective/subjective test of Seagate as “inconsistent” with the statutory language of 35 U.S.C. §284.  Rather, the court indicated that district courts have discretion to award enhanced damages where appropriate “as a sanction for egregious infringement behavior” and that those awards will be reviewed with deference on appeal.  Although the district courts are given discretion, the opinion here makes clear that enhanced damages should not be awarded in “garden-variety cases.”

Section 284 gives district courts the discretion to award enhanced damages against those guilty of patent infringement. In applying this discretion, district courts are “to be guided by [the] sound legal principles” developed over nearly two centuries of application and interpretation of the Patent Act.[1] Those principles channel the exercise of discretion, limiting the award of enhanced damages to egregious cases of misconduct beyond typical infringement.

The Roberts opinion linked this case to that of Octane Fitness in which the court had earlier rejected a rigid Federal Circuit test for attorney-fee awards in favor of  flexible discretion at the district court level.[2]  In its decision, the Supreme Court also repeatedly cited its 19th century decisions as guidance.[3] However, rather than wholehearted acceptance of those old cases, the nuanced opinion walks through their reasoning and explains which continue to hold force today.

In thinking about enhanced damages, I find it useful to keep in mind that this issue only arises after a patent has been found enforceable and the accused found liable for infringement.  Thus, any ‘excuse’ offered for the infringement at that point is insufficient to avoid liability but may still be sufficient to avoid an enhanced damage award.  An important element of the decision is that of timing for the excuse.  The opinion notes that an ex post defense generated for litigation is does not remove culpability.  Rather, culpability will be measured according to the infringer’s knowledge at the time of the accused unlawful conduct.

Although the burden for proving egregious infringement behavior rests entirely upon the patentee, the court here held that clear-and-convincing evidence is not required to support an enhanced damages award.  Rather, a preponderance of the evidence (more likely than not) is sufficient to support that award.

Missing from the opinion is an express holding as to whether willful infringement is a prerequisite to an enhanced damages award.  The statute, of course, is silent on this point – indicating only that “the court may increase the damages up to three times the amount found or assessed.”  Going forward, it may make sense to refer to the topic as ‘egregious’ infringement rather than ‘willful’ infringement.

The opinion vacates the decisions in both Halo and Stryker. Read the Decision: HaloPulseStrykerZimmerDecision

= = = = = =

Although the court’s opinion was unanimous, Justice Breyer also provided a concurring opinion joined by Justices Alito and Kennedy.  The concurrence suggests a more limited discretion for the district court – namely: (1) that mere knowledge of the patent is insufficient to prove willfulness; (2) failure to obtain advice of counsel cannot be used to prove recklessness (see Section 298); and (3) enhanced damages are not to be used to compensate the patentee for either the infringement or the hassle/cost of litigation.

Regarding the standard for review, Justice Breyer also offers an interesting statement supporting the Federal Circuit’s role as an ‘expert court’:

[I]n applying that standard [of deference], the Federal Circuit may take advantage of its own experience and expertise in patent law. Whether, for example, an infringer truly had ‘no doubts about [the] validity’ of a patent may require an assessment of the reasonableness of a defense that may be apparent from the face of that patent.  And any error on such a question would be an abuse of discretion.

Despite this ‘experience and expertise’, I won’t look for the Supreme Court to begin giving deference to the Federal Circuit anytime soon.

= = = = = =

[1] Martin v. Franklin Capital Corp., 546 U. S. 132, 136 (2005) (quoting Fogerty v. Fantasy, Inc., 510 U. S. 517, 533 (1994)).

[2] Octane Fitness, LLC v. ICON Health & Fitness, Inc., 572 U. S. ___ (2014).

[3] See, for example, Seymour v. McCormick, 16 How. 480, 488 (1854); Dean v. Mason, 20 How. 198, 203 (1858); Hogg v. Emerson, 11 How. 587, 607 (1850); Livingston v. Woodworth, 15 How. 546, 560 (1854); Tilghman v. Proctor, 125 U. S. 136, 143–144 (1888); Topliff v. Topliff, 145 U. S. 156, 174 (1892); Cincinnati SiemensLungren Gas Illuminating Co. v. Western SiemensLungren Co., 152 U. S. 200, 204 (1894); Clark v. Wooster, 119 U. S. 322, 326 (1886); Day v. Woodworth, 13 How. 363, 372 (1852); and Teese v. Huntingdon, 23 How. 2, 8–9 (1860).

Right Sized Patents

Patent

Dennis Crouch

Many progressive policies focus on reducing disparities (income, wealth, education, and opportunities) that reflect some social injustice between those at the top and those at the bottom of our social spectrum. Conservatives often recognize the gaps but disagree about whether the result qualifies as injustice as well as about government’s role in redistribution.

Patent policy is often easier to implement than social policy (especially compared with other property law changes) because a new generation of patents emerges every twenty years and the old generation does not hang-around protecting and directing wealth but instead melds into the Soylent of the public domain.

In some ways though, patents are bucking the social trend and becoming more standardized and less diverse – at least by some outward measurements such as document size, claims per patent, and prosecution pendency.

Standard deviation is the most common measure of spread or dispersion of a statistic across a population. A population with a wider spread and more outliers will have a greater standard deviation.  For patent claims, this measure of spread has been dropping steadily for the past decade.  The first chart below shows the standard deviation of patent claim count for issued US utility patents grouped by year of issuance.

StdevClaimCountPatentlyo

The reduction in variance has been accompanied by a drop in the average number of claims per utility patent as shown in the next chart (note the axis break).

AvgClaimsPerPatent

My working hypothesis is that there are three primary drivers for the drop in claims-per-patent and all three also serve to (partially) explain the drop in spread.  These drivers: (1) a substantial increase in fees for filing more than 20 claims-per-patent that was put into place in 2004 and has continued to rise; (2) a suggested (but not confirmed) rise in restriction requirements for patents with more than 20 claims; and (3) a decrease in patent valuation leaving patentees less willing to support the higher cost of a large number of claims.  (As an aside, reasons (1) and (2) may also helping to dive the continued rise in re-filing.)

At the same time, however, another interesting trend is reducing the spread: there are fewer “small” patents with only 1-5 claims. Thus, the trend is a reduction of both small and mega patents (as measured by claim count) with a proportional increase in the middle with ‘average sized patents’.   The final chart below provides some further context to these statements.

PatentClaimCounts

The time series chart groups each year’s patents into a set of bands according to the number of issued claims.  As a savvy chart reader could surmise, the percentage of patents with 1-5 claims has dropped since 2002 as has the percentage of patents with >30 claims.  Those reductions were accompanied by a proportional rise in patents with 16-20 claims.  Time will tell whether this shift also leads to a more just society.

Federal Circuit Operating Procedure: Affirm PTO Decisions Without Opinion

Patent

The Federal Circuit released two more “Rule 36” from the Federal Circuit: Hill-Rom Services, Inc. v. Stryker Corporation; and First Quality Baby Products v. Kimberly-Clark Worldwide, Inc. Both of these cases involved the patentee appealing PTAB obviousness determinations during reexamination proceedings.

The Federal Circuit’s local Rule No. 36 provides:

Rule 36. Entry of Judgment – Judgment of Affirmance Without Opinion

The court may enter a judgment of affirmance without opinion, citing this rule, when it determines that any of the following conditions exist and an opinion would have no precedential value:

(a) the judgment, decision, or order of the trial court appealed from is based on findings that are not clearly erroneous;

(b) the evidence supporting the jury’s verdict is sufficient;

(c) the record supports summary judgment, directed verdict, or judgment on the pleadings;

(d) the decision of an administrative agency warrants affirmance under the standard of review in the statute authorizing the petition for review; or

(e) a judgment or decision has been entered without an error of law.

Since January 2015 (10 1/2 months), the court has issued 101 precedential opinions.

Although the two cases here do seemingly turn on factual questions, they also deal with obviousness – which is the key issue in the vast majority of Patent Office decisions.

Over the past year, the Federal Circuit has decided a large number of Patent Office appeals with R.36 judgments or non-precedential opinions.  Looking at Federal Circuit decisions since January 1, 2015 that stem from Patent Office appeals: approximately 20% are precedential opinions; 20% are non-precedential opinions; and 60% are Rule 36 affirmances without any opinion at all.

The Sky’s the Limit: How Chestek Frees the USPTO

Patent

by Dennis Crouch

Earlier this month, the Federal Circuit issued a decision in the case of In re Chestek that, on its face, simply upheld the USPTO’s requirement that trademark applicants provide their domicile address. But contained within the court’s ruling is language that could have some major implications — essentially giving the USPTO carte blanche ability to sidestep administrative rulemaking procedures for any new requirements it imposes, as long as they are deemed “procedural” in nature.  And on this point the Federal Circuit appears to establish a wide permissive definition that the rulemaking is procedural so long as does not affect the substantive patent or trademark standards.  Of course, the USPTO generally does not have substantive rulemaking authority regarding the patent standards, and so everything is procedure.

Chestek centered around amendments made to trademark regulations in 2019 requiring that applicants provide their domicile address, defined as their permanent legal residence or principal place of business — mailing address is insufficient. The USPTO argued that this new address requirement was needed to help enforce its parallel new rule mandating that foreign applicants retain U.S. licensed counsel. Chestek PLLC, a law firm run by Pamela Chestek and specializing in trademark law, challenged the domicile address rule itself, saying its imposition failed to comply with the notice and comment requirements of the Administrative Procedure Act (APA).

In what appears to be largely a test case, Chestek applied to register the mark CHESTEK LEGAL, but refused to include her personal home address.  She argued that for privacy reasons her personal home address is not generally known and that its submission risks major breaches in privacy. But, the USPTO refused to register her mark based upon her failure to comply with the domicile rule. After losing at the USPTO, Chestek appealed to the Federal Circuit.

On the core issue, the Federal Circuit sided resoundingly with the USPTO. The court held that the domicile address rule was clearly procedural in nature rather than substantive, and thus was exempted from APA notice and comment strictures. The key passage from the court reads:

[T]he new rule requires additional information about applicants, i.e., their domicile address. Requiring different or additional information from applicants regarding their addresses merely ‘alter[s] the manner in which the [applicants] present themselves…to the agency.’ It does not alter the substantive standards by which the USPTO evaluates trademark applications.

Chestek at 8 (Quoting JEM Broadcasting Co. v. F.C.C., 22 F.3d 320 (D.C. Cir. 1994).   In other words, because the domicile address rule does not itself change the substantive legal criteria for granting or denying trademarks, the court sees it as merely a procedural step in the application process. And crucially, procedural rules are exempt from notice and comment requirements under APA section 553(b)(A).

Under the statute, an agency must publish notice of proposed rules prior to them becoming law. BUT the requirement does not apply “(A) to interpretative rules, general statements of policy, or rules of agency organization, procedure, or practice; or (B) [when] impracticable, unnecessary, or contrary to the public interest.” 5 U.S.C. § 553(b).  I.e., the notice-and-comment requirements don’t apply to changes of agency procedure or practice.  Although the rule was deemed procedural, it still has substantial impact — i.e., Chestek loses her rights.  Of course any lawyer will agree failing to follow procedures can result in major consequences.

In finding the address rule procedural, the court asked the simple question: Does the rule “affect the substantive trademark standards by which the Office examines a party’s application.”  Here, the answer is clearly “no” and therefore, according to the Federal Circuit, the rule is procedural and thus exempt from notice-and-comment rulemaking.

Having found the challenged rules within the procedural exception to notice-and-comment rulemaking, we need not address Chestek’s argument that the proposed rule failed to provide sufficient notice of the domicile address requirement.

I am not worried about trademark applicants providing a residential address (although Chestek’s privacy argument seems to have some merit).  But, the Federal Circuit’s decision here appears quite sweeping and may provide the USPTO with enough authority avoid almost any future notice-and-comment in its rulemaking.

The notice and comment requirements serve a vital purpose, even when an agency does not incorporate public feedback into the final rule. The process provides transparency by allowing the public to understand what changes an agency is considering and why. It also fosters deliberation – the agency must provide a reasoned explanation if it rejects commenters’ concerns and proceeds to adopt the rule as originally proposed. Additionally, notice and comment creates a record for judicial review. If a party challenges the rule, the court can examine whether the agency fully considered and responded to material critiques raised during the process. An agency does not have free rein just because it technically “considered” comments before rejecting them. The record must substantiate that it took serious public input under advisement and had adequate grounds for sticking with the original course. Simply going through the motions of notice and comment without meaningfully wrestling with opposing views raised by stakeholders risks reversal upon legal challenge – and is bad policy for a nation that sees itself as promoting popular sovereignty. Even if not determinative, airing criticism, gathering diverse perspectives, and requiring a reasoned response uphold good governance norms and the model of administrative law. Allowing agencies to bypass this process denies public participation that bolsters legitimacy.

The logic of this case sweeps broadly and sets up the USPTO to potentially make more “procedural changes” without meaningful external input or following the traditional notice-and-comment approach.

Carl Oppedahl has been writing about the impact of the new .DOCX standard associated with a $400 fee for non-compliance as a typical procedural rule with substantive impact created without notice-and-comment because it merely involves procedural aspects of the patent application process — despite the large penalty for noncompliance. Other potential examples:

  • Requiring that every application include a signed statement from the inventor explaining their contribution in detail, or face immediate abandonment.
  • Mandating that the background section of specifications provide explicit citations to the closest statement of the problem as found in the prior art
  • Imposing a $1000 processing fee for any application that the USPTO deems improperly formatted

None of these hypothetical new rules have any direct bearing on the substantive bases on which the USPTO evaluates patentability. But forcing applicants to jump through more procedural hoops and face steeper penalties would clearly make pursuing and maintaining protection more onerous. Without formal notice and comment, however, aggrieved parties would have little recourse to contest such impositions or to help guide the potential policy decisions.

One potential catch, alluded to in passing in Chestek, is the stipulation that procedural rules cannot “affect individual rights and obligations.” And indeed, one could argue that layered procedural requirements that make the patenting process drastically more expensive or convoluted would impinge on inventors’ substantive rights. Moving forward we will have to see which of these threads of thought the court and the PTO will follow.

To be clear, I believe the Federal Circuit followed administrative law precedent here, and I raise the issue just to recognize the power of the USPTO.  We can also recognize that, for the most part, USPTO leadership is generally open to hearing direct feedback and suggestions from constituents.  The notice-and-comment approach is not so necessary because the Patent Bar remains much like a small town. where many of us know each other at a personal level.  In Chestek, for instance, the USPTO has heard the privacy complaints regarding requiring home address, but ultimately weighed that against the ongoing problems facing the agency from faulty foreign applications.  That is effectively the same approach as notice-and-comment. The key difference though, is that USPTO official availability is a choice that might not be made by every administration, whereas notice-and-comment are required by law.

Promoting and Respecting Economically Vital American Innovation Leadership (PREVAIL) Act

Patent

The second major new Senate patent bill focuses on reconstructing AIA trials — particularly by reducing availability and power of inter partes review and post grant proceedings.  The bipartisan Promoting and Respecting Economically Vital American Innovation Leadership (PREVAIL) Act was introduced by Senators Chris Coons (D-Del.),Thom Tillis (R-N.C.), Dick Durbin (D-Ill.), and Mazie Hirono (D-Hawaii).

  1. Limiting Standing: Parties could only file IPR petitions if they would have standing to bring a declaratory judgment action in Federal Court.
  2. Clear and Convincing Evidence: Invalidating a patent before the PTAB would require proving unpatentability of a previously issued claim by clear and convincing evidence.  This is a substantially higher standard than the current requirement of preponderance of the evidence.
  3. Separating Institution from Trial: Judges who participate in the institution will would be forbidden from then serving on the trial team.  The idea here is to avoid holdover bias against the patent that may have been established during the institution stage.
  4. Drop Invalidity Defenses: If an IPR is established, the petitioner must drop any invalidity defenses from pending litigation that could have been raised in an IPR.
  5. No Interference: Although the Director still has power of Director Review, the law would forbid the Director from interfering or influencing PTAB IPR decision-making.

The press release also notes the following provisions:

  • Require standing for PTAB challengers and limit repeated petitions challenging the same patent;
  • Harmonize PTAB claim construction and burden of proof with federal district court;
  • End duplicative patent challenges by requiring a party to choose between making its validity challenges before the PTAB or in district court; and
  • Increase transparency by prohibiting the USPTO director from influencing PTAB panel decisions.

IPRs would remain valuable if this bill became law, but their scope would be substantially limited.

Read the bill here.

 

Patently-O Bits and Bytes by Juvan Bonni

Bits and Bytes, Patent

Recent Headlines in the IP World:

Commentary and Journal Articles:

New Job Postings on Patently-O:

Chief Judge Kimberly Moore

Patent

We have a new Chief Judge at the Federal Circuit: Chief Judge Kimberly Moore. Prior to law school, Judge Moore worked as an electrical engineer for the Navy’s Naval Surface Warfare Center. Her BSEE and MS are both from MIT. Judge Moore then attended Georgetown Law Center; clerked for Judge Archer at the Federal Circuit; and also worked for a short time at Kirkland & Ellis.  She was a law professor  from 1997-2006 (Chicago-Kent; Maryland, and then George Mason) before being appointed to the Federal Circuit by  President George W Bush with unanimous consent from the Senate.  Throughout the past 30 years, Chief Judge Moore has primarily focused her attention on patent law issues.   

From all appearances, Judge Moore strongly believes in the patent system and its potential to encourage innovation and progress. Still, Judge Moore has little forgiveness for parties that game the system or who fail to come fully prepared to her courtroom.

USPTO Fees

Patent

USPTO Fees are changing at the end of the month. PCT Fees are changing on October 1, 2020; US National fees are changing on October 2, 2020. In general, the fees are going up, not down.  Beat the fees – file by September 30, 2020.