Trade Secret Litigation in Federal Court

LexMachina has released a new report on Trade Secret litigation in Federal Court.

The basics: Federal Trade Secret litigation is up about 30% following enactment of the Defend Trade Secrets Act (DTSA) in 2016.  (1134 cases filed in 2017). The DTSA created a federal cause of action for trade secret litigation and resulting original jurisdiction in federal court for the federal claims. Prior to the DTSA, state-law trade secret claims found their way into federal court either via supplemental jurisdiction (typically linked to an a federal IP claim) or via diversity jurisdiction (parties from different states).

The vast majority of trade secret actions include additional causes of action — most often breach of contract or other commercial law claim.

[Report here – Registration Required]

Actual Use vs Inherent Disclosure: Endo v. Custopharm

Endo Pharms. Sols., Inc. v. Custopharm Inc., — F.3d —, 2018 U.S. App. LEXIS 19265 (Fed. Cir. 2018).

by Dennis Crouch

Endo’s injectable testosterone Aveed is listed in the Orange Book as being covered by Bayer’s U.S. Patent Nos. 7,718,640 and 8,338,395.  Endo and Bayer sued Custopharm after it submitted an Abbreviated New Drug Application (ANDA) to produce a generic version. (Under 35 U.S.C. 271(e), submission of the ANDA is an act of infringement).

On appeal, the Federal Circuit has sided with the patentee — affirming the district court judgment of validity.

The claimed invention here requires the use of testosterone undecanoate (TU) at a concentration of 250 mg/ml in a vehicle containing a mixture of about 40% castor oil and 60% benzyl benzoate. (Claim 1 of the ‘640 patent). Three key prior art references are all research articles that report using the same concentration of TU and also the castor oil.  The prior-art articles do not, however, actually report that benzyl benzoate was used — it turns out though that the researchers (including one overlapping listed inventor here) used the same 40/60 split of castor oil and benzyl benzoate.  The asserted claim 2 adds a limitation that 750 mg TU is injected — the articles describe the use of 1000 mg.

A primary question on appeal was whether the prior art articles inherently taught the benzyl benzoate concentration. “Custopharm contends that the Articles inherently describe the vehicle formulation (40% castor oil and 60% benzyl benzoate).”

The inherency doctrine has been quite limited by the Federal Circuit — Under the law, a prior art reference inherently discloses a claim limitation only when “the
limitation at issue necessarily must be present, or [is] the natural result of the combination of elements explicitly disclosed by the prior art.” Par Pharmaceutical, Inc. v. TWI Pharmaceutical, Inc., 773 F.3d 1186 (Fed. Cir. 2014).

In this case, we know that 60% benzyl benzoate concentration was actually present in the prior art experiments, but that knowledge was not expressly part of the prior art. Thus, the court focused on whether the existence of benzyl benzoate was necessary based upon the prior art itself. From that frame of reference, the elements were not inherently disclosed by the prior art.

The district court reasonably found that this was not enough “to establish [with clear and convincing evidence] that the Articles barred the possibility of an alternative vehicle being used in the prior art compositions” to meet the rigorous standard of inherency.

Prior Publications Compared with Prior Uses or Sales: I believe that this case could have come out differently if the challengers had been able to rely upon the uses in the experiments as prior sales or public uses. In those circumstances, the question would focus on what was actually in the injection rather than what was publicly known or disclosed about the injection. My conjecture here appears to be based upon alternative facts since the articles in-question stem from research studies and so were likely sufficiently protected by secrecy and experimental use limitations.

The other question here is what to do about the fact that Bayer (or its predecessor) was involved with the prior art articles.  Here, Doris Hübler is the first named inventor on the patents at issue and also one of the authors of the prior art article and that Bayer provided the TU ampules used for the testing.  I believe that the answer here is that Bayer only runs into trouble here if (1)the experiments count as commercialization under cases such as Metallizing Engineering or (2) Bayer somehow abandoned the invention. Neither of these appear appear to fit here.

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USPTO: Claim Construction in AIA Trials

Claim construction continues to hold focus as the centerpiece of contested patent cases — both in court and in administrative AIA trials (primarily, Inter Partes Review proceedings) before the Patent Trial and Appeal Board (PTAB).  One element of current practice is that the USPTO applies a different standard for construing claims than do courts or the USITC in infringement litigation. (Compare Broadest Reasonable Interpretation with Phillips / Ordinary Meaning standards).

One of PTO Director Iancu’s early initiatives has been to unify the standards.  That process began with a notice of proposed rulemaking with finalized rules coming later this fall.

The USPTO has posted comments submitted on the proposed change — with over 350 submissions.  Although the bulk of submissions favor the change, a substantial number also argue that the BRI standard is an important aspect of IPR effectiveness — with the beneficial result of lowering consumer costs and improving access to medicines. It will take some time to review these comments.

I was involved in two of the submissions:

  • Professors of Law: Supporting change as promoting uniformity and clarity. Although I provided some input on this document, the primary drafter was Prof. Vishnubhakat (Tex.A&M).
  • Prof. Crouch:  I also submitted my own memo highlighting the issue of estoppel and deference to claim construction by other tribunals.  The proposed rule do not address directly these issues, and I suggest that the USPTO should establish its rules and practices associated with PTAB Trial Proceeding claim construction in a way that best ensures that later tribunals will honor those constructions.

Other Law Prof Submissions:

  • Profs. Sarnoff and Ghosh: “We generally support the idea of a unitary post-grant interpretive standard in the PTO and the courts. However, we . . . encourage you to seek legislation to require the courts to adopt BRI for infringement litigation.” (Same from Prof. Dreyfuss).

Jazz Pharms: Federal Register; Public Notice; and Printed Publications

Jazz Pharms., Inc. v. Amneal Pharms., Inc., — F.3d —, 2018 U.S. App. LEXIS 19268 (Fed. Cir. 2018)

The patented invention at issue in Jazz Pharms is not a drug or drug treatment, but rather to a “drug distribution system for tracking prescriptions” for drugs with a risk of abuse[1]  The PTAB found claims from all six patents to be invalid as obvious.

The core issue on appeal was whether a pre-filing disclosure by Jazz counted as a prior art “printed publication.”

Printed Publication: As the language suggests, a “printed publication” must be both “printed” and also a “publication.”  These requirements though have been broadly construed.  “Printed” publications go well beyond physical hard-copies to allow for various media – including video and online forms.  To be a “publication,” the reference needs to be made sufficiently available to the public – publication.  In the leading case of In re Hall,[2] the Federal Circuit explained that accessibility to the relevant public is key – we ask “whether interested members of the relevant public could obtain the information if they wanted to.”  Although the court has developed a number of guide posts, the question of sufficient availability is seen as a factual inquiry handled on a case-by-case basis.

The prior art here was developed as part of an FDA drug safety review for one of Jazz’s drug products that was known as a potential date-rape drug.  In May 2001, the FDA announced in the Federal Register an upcoming public meeting – noting that the focus of the meeting would be on risk management for the drug.  The notice included a hyperlink to the pin-cite that eventually included meeting information, including background material, minutes, transcripts, and slides.

With these facts, Jazz Pharms appears an easy case – the materials were freely available online and relevant members of the public were directed to the material via the official public source.

A few caveats here:

  • The materials were not proven to be searchable or indexed at the time. In response, the court explained that these are not required elements of publication if sufficiently disseminated via other mechanisms.
  • Jazz argued that folks of skill would not have seen the notice in the Federal Register and therefore not have been pointed to the underlying documents. In response, the Federal Circuit explained that a Federal Register notice might not always be sufficient to place the relevant public on notice of a publication, but that it was sufficient in this case since it was indexed and directed toward members of the public interested in systems to protect the public from potentially dangerous drugs.  The court also endorsed the PTAB’s “sensible observation that the purpose of the Federal Register is to provide notice of government action such as the advisory committee meeting here.”

Note here that with publication, the touch stone is “accessibility” rather than “actual access.”  The court has repeatedly explained that “[i]f accessibility is proved, there is no requirement to show that particular members of the public actually received the information.”  Constant v. Advanced Micro-Devices, Inc., 848 F.2d 1560 (Fed. Cir. 1988).

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[1] U.S. Patents 7,668,730, 7,765,106, 7,765,107, 7,895,059, 8,589,182, 8,457,988.

[2] In re Hall, 781 F.2d 897 (Fed. Cir. 1986).

Practice before the PTAB: Recent Informative Decisions

The USPTO has recently designated five PTAB decisions as “informative.” (I have also included the recent Western Digital decision as well).


Covered Business Methods: Apple v. ContentGuard

On July 11, I wrote about the recent Federal Circuit decision in Apple v. ContentGuard. My post erroneously stated that the court found that the patent does not qualify as a “covered business method” patent.  The court did not take that bold of a step of a reversal. Rather, the court vacated the PTAB’s finding that was based upon an improper legal standard and remanded for a reconsideration.

 On remand, the Board must determine whether the ’280 patent qualifies as a CBM patent in the first instance without relying on the “incidental to” or “complementary to” standard.

Thanks to Patently-O reader and USPTO Examiner Scott Anderson for pointing me to this missed detail. – DC



Trade Battle Updates: Mechanisms to Avoid the Tariffs

by Dennis Crouch

The trade-battles are heating up – with President Trump imposing tens of billions of dollars of new tariffs on Chinese imports and China responding in-kind to US good imported into China. Additional tariffs have been announced on a more global basis on goods worth hundreds-of-billions of dollars.

The operational process here is that the office of the United States Trade Representative (USTR)* has gone through a political and deliberative process of determining which imports to tie to a 25% tariff (import tax).  The justification for the tariff is largely based upon Chinese non-tariff barriers to US goods. In particular, the USTR found in its “Section 301 report” that “the acts, policies, and practices of the Government of China related to technology transfer, intellectual property, and innovation covered in the investigation are unreasonable or discriminatory and burden or restrict U.S. commerce.”  The chosen tariffs primarily focus on products related to China’s “Made in China 2025” initiative to move up the industrial food-chain in terms of high technology and pharmaceutical product manufacture.  The allegations are that the initiative is being implemented by placing barriers to US imports and by using unlicensed US intellectual property rights.

In a new notice, the USTR has provided a particular pull-back process to allow US stakeholders to request particular products be excluded from the import tariff based upon “severe economic harm to a U.S. interest” that could result from the tariffs. [New Notice].  The requirements for the submission are fairly onerous for anyone who does not already have an intimate understanding of US Trade laws and practices.  Thus, I expect that the primary filers will be industry-focused trade organizations.  The notice also provides a limited opportunity to oppose any requested exclusions.


  • In the US, disputes over tariffs are heard by the US Court of International Trade with appeals going to the Federal Circuit.
  • The Office of the US Trade Representative is an administrative agency headed by the USTR (Robert Lighthizer), a cabinet level political appointee.

Covered Business Method: Licensing of Content is not (necessarily) a Financial Service

by Dennis Crouch [Updated on July 12 to correct an error]

Apple and Google v. ContentGuard v. Iancu (Fed. Cir. 2018)

Apple and Google both challenged ContentGuard’s U.S. Patent 7,774,280 under the Covered Business Method Post Grant Review proceedings.  The challenges raised eligibility, novelty, and obviousness challenges to several of the claims, but the Director (acting via the PTAB) only partially instituted: instituting only on novelty and obviousness, and only to three of the claims.  In the end, the PTAB found those claims obvious, but also allowed the patentee to add Claim 37 as a substitute for Claim 1 and found the new claim valid (not proven invalid).

On appeal, the Federal Circuit ruled the entire event a nullity — finding that the PTAB used the wrong standard for determining whether the patent qualifies as a covered business method. See Versata Dev. Grp., Inc. v. SAP Am., Inc., 793 F.3d 1306, 1323 (Fed. Cir. 2015) and Unwired Planet, LLC v. Google Inc., 841 F.3d 1376, 1379 (Fed. Cir. 2016).  A key case on point is also Secure Axcess, LLC v. PNC Bank National Ass’n, 848 F.3d 1370, 1381 (Fed. Cir. 2017). However, that case was vacated as moot by the Supreme Court in PNC Bank Nat. Ass’n v. Secure Axcess, LLC, 138 S. Ct. 1982 (2018).

The “Transitional Program for Covered Business Method Patents” is not codified within the United States Code (35 U.S.C. ___) because it is only a temporary program that sunsets in September 2020.  Thus, the CBM program is generally cited as Section 18 of the Leahy-Smith America Invents Act.

Although the program allows for broad challenges of “covered business method” beyond the 102/103 published art restrictions of inter partes review, it also provides a particular narrow definition of what counts as a a covered business method patent:

[A] patent that claims a method or corresponding apparatus for performing data processing or other operations used in the practice, administration, or management of a financial product or service, except that the term does not include patents for technological inventions.

In Unwired Planet, the Federal Circuit held that the “financial product or service” cannot be merely “incidental to or “complementary to” a financial activity. Rather, the claims must have a “particular use” focused on financial activity.

Here, exemplary claim 1 is a method of “transferring rights” using “meta-rights”:

1. A computer-implemented method for transferring rights adapted to be associated with items from a rights supplier to a rights consumer, the method comprising:

obtaining a set of rights associated with an item, the set of rights including a meta-right specifying a right that can be created when the meta-right is exercised, wherein the meta-right
is provided in digital form and is enforceable by a repository;

determining, by a repository, whether the rights consumer is entitled to the right specified by the meta-right; and

exercising the meta-right to create the right specified by the meta-right if the rights consumer is entitled to the right specified by the meta-right, wherein the created right includes at least one state variable based on the set of rights and used for determining a state of the created right.

Google and Apple allegedly use this process to transfer access to third-party apps via their Play Stores.

In the appeal, the Federal Circuit explained that the system could be used in either financial services or non-financial services – and it “is not enough for the specification to describe how the invention could, in some instances, be used to facilitate financial transactions.”

CBM Decision Vacated: On remand, the PTAB will revisit the CBM question and will also need to follow the new rules against partial-grants.

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I’ll note here that the added claim 37 — that the PTAB found good-to-go adds a few limitations:

  1. The “item” – the subject of the rights being transferred is an “item of content;”
  2. The rights being transferred are “usage rights” or perhaps “another meta-right” (metameta); and
  3. The “meta-right is not itself a usage right because exercising the meta-right
    does not result in action to the content.”

It will be interesting to see whether the patentee goes about amending its claims through rexamination or reissue to add the new language.

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At the petition stage, Google argued that the claims were directed to the abstract idea of “providing consumers with rights to an item, such as a movie or book.” The Director (via the PTAB panel) disagreed – although providing what appears to be extremely weak analysis:

Google’s arguments that the challenged claims … are directed to a patent-ineligible abstract idea are predicated on the notion that they recite a fundamental economic or longstanding commercial practice.

Contrary to Google’s arguments, the challenged claims are not directed merely to “providing consumers with rights to an item, such as a movie or book,” nor can the features recited in the challenged claims be stripped away so that these claims simply are directed to a traditional approach or method of licensing or sub-licensing content. Indeed, the challenged claims require much more.

For instance, independent claims 1 and 12 require obtaining “rights associated with an item”—namely, a digital work—wherein the set of rights includes a “meta-right” specifying a “right” that may be created.  These claims further require providing the “meta-right in digital form” and indicate that the “meta-right” is enforceable by a “repository,” which, based on our claim construction above, constitutes “a trusted system” that enforces the “meta-rights” using very specific computer security and rights enforcement “integrities.”  In addition, these claims further require “at least one state variable” used to determine the state of the “right” created by the “meta-right.”


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Subsequent Public Availability of Misappropriated Information Cuts-Off Trade Secret Damages

by Dennis Crouch

Texas Advanced Optoelectronic v. Renesas Elecs. Am., 16-2121 (Fed. Cir. 2018)(Modified Panel Opinion Released July 9, 2018)

TAOS v. Renesas, focuses on the interplay between trade secret misappropriation (under Texas law), and patent law.  TAOS patented an ambient light sensor using a photodiode array.  See U.S. Patent No. 6,596,981. This type of sensor is widely used in smartphones to adjust the display brightness.  Following failed merger negotiations, Intersil developed a competing product — which the district court found relied upon confidential information received during the negotiations.  A jury found Intersil liable for patent infringement, trade secret misappropriation, breach of contract, and tortious interference with prospective business.

The damages verdict was as follows:

  • Patent Infringement: $74,000
  • Trade Secret Misappropriation – Disgorgment of D’s Profits: $48,000,000
  • Trade Secret Misappropriation – Punitive Damages: $10,000,000
  • Reasonable Royalty for Breach of Contract: $12,000,000
  • Retention of Documents Breach of Contract: $1
  • Tortious Interference – Lost Profits: $8,000,000
  • Tortious Interference – Punitive Damages: $10,000,000

The district court ruled that the Trade Secret award was duplicative of the Contract and Tortious Interference awards — and thus kept only the larger of those awards. All this was based upon the longstanding principle that “double recovery for the same injury is inappropriate.”  Aero Prods. Int’l, Inc. v. Intex Recreation Corp., 466 F.3d 1000, 1017 (Fed. Cir. 2006).  Still, the state law trade secret damages were more than 500 times greater than the federal patent law damages.

Patent and Trade Secret?:  One of the initial thought experiments for potential patentees is whether to (1) file for patent protection or instead (2) keep the invention as a trade secret.  It turns out though that one of the jedi tricks of in-house counsel the art of layering rights rather than choosing rights.   Counsel ask question: What must be disclosed in the patent application in order to obtain full rights?; What information may be kept secret without endangering the patent rights?; Can the product or process be divided into separate components so that some may be kept secret while others made public in patent documents? Is it possible to keep the patent documents secret for longer? Because early filing is so strongly encouraged in the patent system, it is regularly true that implementation details are developed after the filing date that are appropriately kept as trade secrets. Here, the alleged trade secretes included financial information on the costs as well as some technical information (the 1:1 interleaved array structure).

The combination is a trade secret: The asserted patent discloses, individually, a 1:1 array structure and also the interleaving of shielded and unshielded wells. However, the patent does not disclose the combination, of the array and interleaving wells (despite the fact that both disclosures are in the same patent application).  It was proper here – according to the court – for the jury to find that the combination remained a trade secret. Here, it appears that the trade-secret combination need only survive a novelty test. See Sikes v. McGraw-Edison Co., 665 F.2d 731, 736 (5th Cir. 1982) (concluding that, under Texas law, a trade secret may be “the application of known techniques and the assembly of available components”; “a trade secret can exist in a combination of characteristics and components, each of which, by itself, is in the public domain, but the unified process, design and operation of which in unique combination, affords a competitive advantage and is a protectible secret”).

On appeal, the Federal Circuit affirmed that this technical information could be the enforceable trade secret.  However, the court ruled that it was improper for TAOS to recover on both patent and trade secret claim

Here, Intersil’s use of TAOS’s photodiode array structure is the basis of Intersil’s liability for both trade secret misappropriation and patent infringement. . . . The patent award represents an impermissible double recovery [since] ‘all of the damages awarded to [plaintiff] flowed from the same operative facts: sales of the [same] infringing [products].’ (Quoting Aero Prods. Int’l, Inc. v. Intex Recreation Corp., 466 F.3d 1000, 1017 (Fed. Cir. 2006)).

In Aero Prods., the Federal Circuit explained that “in determining whether there has been an impermissible double recovery of damages, the inquiry focuses on whether the damages issue arose from the same set of operative facts.”

Later-Acquired by Proper Means: An important question for damages: How long does the trade secret last.  Here, in particular, prior to the real harm (Intersil’s contract with Apple), TAOS had already released its product and Intersil had reverse-engineered that product.


  • Summer 2003: TAOS ‘981 patent issues with 1:1 array and interleaving disclosed (but not the combination);
  • Summer 2004: Intersil received technical information from TAOS regarding 1:1 interleaving as part of merger negotiations;
  • August 2004: After ending negotiations, Intersil began developing its own 1:1 interleaved product;
  • January 2005: TAOS won contract from Apple to supply the sensors;
  • February 2005: TAOS releases its product that include the 1:1 interleaving;
  • January 2006: Intersil reverse-engineered TAOS product that included the 1:1 interleaving;
  • September 2006: Intersil won contract from Apple to supply the sensors;
  • November 2008: Lawsuit began.

Here, the Intersil contract was not inked until after Intersil had reverse-engineered the TAOS product.  Under Texas trade secrecy law, information is no longer a protectable trade secret once accessible by “proper means.” The court explained:

Such accessibility existed no later than January 2006, when Intersil successfully reverse-engineered the TSL2560, and perhaps as early as February 2005, when TAOS “released” the TSL2560.

Under the law then, “secrecy protection terminated at the end of the period of time it would have taken Intersil, after Intersil’s permissible discovery of the photodiode structure, to recreate that structure in its own products.”

Financial Information: In addition to limiting the damages for the technical-information misappropriation, the court ruled that the financial information was not protectable:

  • Cost information: Not protectable because Intersil already had its own cost information by the time of the alleged misappropriation.
  • Build-vs-Buy Analysis: Not protectable because the confidentiality agreement between the parties allowed for its use.

One additional problem with the trade secret damage award: Disgorgement: The jury had awarded damages in the form of disgorging profits of the defendant.  On appeal, the Federal Circuit ruled that disgorgment is not available for trade secret misappropriation (without proving that disgorgment was the proper form of compensatory damages).  The result here offers an interesting historical analysis of trade secret damages.

The Federal Circuit originally issued the decision in May 2017, the court has now denied a petition for rehearing en banc, but has rewritten a portion of the opinion relating to the patent damages — TAOS had asked for worldwide damages, but those continue to be denied.

Intersil submitted evidence that, except for 1.2% of the accused units, all of its accused products were manufactured, packaged, and tested abroad, and those units were shipped to manufacturers and distributors abroad. . . .  But even the additional evidence . . . of domestic negotiations and Intersil’s testing of some of Intersil’s products—does not demonstrate “substantial activities regarding sales” sufficient to raise a material dispute of fact as to sales or offers to sell in the United States. . . . Intersil presented evidence of extraterritorial manufacturing, packaging, and shipping, and TAOS failed to present any evidence establishing the required domestic activity.  On this record, TAOS has not produced evidence sufficient to raise a material dispute of fact as to the 98.8% of units that were the subject of the district court’s grant of summary judgment.

International damages for patent infringement denied.

Phonetic Symbol System Not Patent Eligible

In re Wang (Fed. Cir. 2018) (nonprecedential)

In a non-precedential decision, the Federal Circuit has rejected George Wang’s pro se appeal — affirming the PTAB judgment that Wang’s claimed phonetic symbol system lacks eligibility under Section 101.

The baseline here is that the written english language is only quasi-phonetic.  Every rule of spelling or pronunciation has layers of exceptions.  Linguists have developed a phonetic pronunciation guides, but those use quirky non-english letters.  Wang’s invention here offers a one-to-one system tying each vowel and consonant sound to a single phonetic symbol, and uses only English letters for the phonetic symbols. Table 1 below comes from Wang’s patent application and offers an example embodiment of his system:

The claim (slightly edited for clarity):

A phonetic symbol system comprising:

a plurality of phonetic symbols,

wherein each of said phonetic symbols is defined by one (or more than one) letter of English alphabet, the case or the style of said letter does not affect the sounds of said phonetic symbols,

[said phonetic symbols include] vowel phonetic symbols and consonant phonetic symbols . . . ,

each vowel [sound] is distinctively represented by one of said vowel phonetic symbols, and each consonant [sound] is distinctively represented by one of said consonant phonetic symbols.

Rather than reaching the more controversial aspects of eligibility, the court here first focused on the statutory requirement that a patent must be directed to a “process, machine, manufacture, or composition of matter.” 35 U.S.C. 101.  Since the claim is not directed to any concrete physical form, it cannot be a machine, manufacture, or composition of matter.  Further, because the claim does not actually require performance of any steps, then it cannot be defined as a process.

Without analysis, the court also agreed with the PTO that “defining phonetic symbols in language, using strings of English letters, is an unpatentable abstract idea” and  that the claims offer nothing beyond the abstract idea:

[W]here, as here, claims of a patent application recite an abstract idea, the question becomes whether they contain “additional features” that embody an “inventive concept,” so as to nevertheless make them patenteligible. Alice Corp. Pty. Ltd v. CLS Bank Int’l, 134 S. Ct.
2347 (2014). The application claims on appeal, however, contain no “additional features” of any kind embodying an inventive concept. The claims merely encompass strings of English letters representing sounds. In short, there is no inventive concept that rescues them from patent ineligibility.

Rejection affirmed.

As the old saying goes, part of Mr. Wang’s problem is that he “has a fool for a client.”  Patent law and procedure is at such a high level of complexity that it very rarely makes sense for an inventor to represent himself — especially at the appellate level.

My question for the patent attorneys and agents here: Is there a way for Wang to turn this case around by amending the claims so that they recite a particular method.  [Read the application here:]  Is this the type of idea that patent law should cover?  Consider U.S. Patent No. 7,004,758.

United States Declaration of Independence

Excerpt: July 4,1776

We hold these truths to be self-evident, that all men are created equal, that they are endowed by their Creator with certain unalienable Rights, that among these are Life, Liberty and the pursuit of Happiness. — That to secure these rights, Governments are instituted among Men, deriving their just powers from the consent of the governed, — That whenever any Form of Government becomes destructive of these ends, it is the Right of the People to alter or to abolish it, and to institute new Government, laying its foundation on such principles and organizing its powers in such form, as to them shall seem most likely to effect their Safety and Happiness. Prudence, indeed, will dictate that Governments long established should not be changed for light and transient causes; and accordingly all experience hath shewn that mankind are more disposed to suffer, while evils are sufferable than to right themselves by abolishing the forms to which they are accustomed. But when a long train of abuses and usurpations, pursuing invariably the same Object evinces a design to reduce them under absolute Despotism, it is their right, it is their duty, to throw off such Government, and to provide new Guards for their future security.

Under SAS, the PTO must Institute as to All Separate Challenge Grounds Against All Claims

Back in 2016, Adidas petitioned the USPTO Director to institute inter partes review (IPR) proceedings against two of Nike’s patents. U.S. Patent Nos. 7,814,598 and 8,266,749. Acting on behalf of the Director, the PTAB instituted review of all challenged claims. The caveat – Although Adidas had raised two different grounds for challenging the claims, the USPTO instituted only on ground 1.

Here, the invention basically has three steps: (1) knitting fabric in a cylindrical form and then (2) cutting out a shoe-upper pattern from the fabric; and (3) incorporating the cut-out into a shoe. Grounds 1 and 2 were obviousness challenges with overlapping prior art citations: Ground 1 (Reed and Nishida) and Ground 2 (Castello, Fujiwara, and Nishida). In its final determination – focused just on Ground 1 – the PTAB sided with the patentee Nike and held that Adidas had not met its burden of proving obviousness.

On appeal, Adidas argued that the case should be remanded under SAS Institute Inc. v. Iancu, 138 S. Ct. 1348 (2018). Although SAS focused on institution of all challenged claims – Adidas argues here that the case stands for the proposition that an IPR petition may only be granted/denied as a whole – if is granted, it must be granted as a whole, including all grounds for challenging all claims. Further, Adidas argues for remand because the PTAB has changed its own rules and now institutes review on all challenges raised in a petition. See Guidance on the Impact of SAS on AIA Trial Proceedings (Apr. 26, 2018).

The Federal Circuit has now sided with Adidas – ordering remand to consider all grounds raised by the petition as required by SAS. [Read the Decision: AdidasNike]

The appellate court writes:

The [Supreme] Court explained in SAS that in establishing inter partes review, Congress set forth “a process in which it’s the petitioner, not the Director, who gets to define the contours of the proceeding.” The Court held that if the Director institutes review proceedings, the review must proceed “in accordance with or in conformance to the petition,” a “petition describing ‘each claim challenged’ and ‘the grounds on which the challenge to each claim is based,'” (quoting 35 U.S.C. § 312(a)(3)). “Nothing suggests the Director enjoys a license to depart from the petition and institute a different inter partes review of his own design.” The [Supreme] Court found that “the petitioner’s petition, not the Director’s discretion, is supposed to guide the life of the litigation,” and “that the petitioner’s contentions, not the Director’s discretion, define the scope of the litigation all the way from institution through to conclusion.”

Nike argued that Adidas had also waived its right to present the alternative grounds by failing to raise the issue before the Board. On appeal, the Federal Circuit found “waiver inapplicable” in this case because the request on appeal was filed as “a prompt remand request due to the significant change in the law.”

= = = =

Looking back at the institution decision and reasons for denial on Ground 2, the PTAB explained that the petition “fail[ed] to identify ‘with particularity’ the grounds and evidence that form the underlying basis for Petitioner’s patentability challenge. For instance, with respect to claim 1, the claim chart offered to point out where the features of the claim are present in the prior art spans four pages and constitutes bulk citation to portions of Castello, Fujiwara, and Nishida. See Pet. 34–37. Such an approach does not provide meaningful “particularity” sufficient for the panel to ascertain where, specifically, Petitioner identifies the limitations of the claim in the prior art.”

Legislation: Restoring America’s Leadership in Innovation

by Dennis Crouch

A new legislative proposal (H.R. 6264) from Rep. Thomas Massie (R-Ky) is designed to largely roll-back the America Invents Act.  [FinalPatentBill][SectionBySection]. Massie is an MIT Engineer, Inventor, and largely Libertarian in his approach to legislation.

Although libertarians are somewhat divided on the role of intellectual property rights, Massie is firmly in the camp of treating them as strong property rights. Thus, the proposal begins with several findings of Congress:

  • The [AIA] and several decisions of the Supreme Court have harmed the progress of Science and the useful Arts by eroding the strength and value of the patent system.
  • The United States Government exists to protect life, liberty, and property, which includes intellectual property.
  • A United States patent secures a private property right to an inventor.
  • This Act restores the patent system as envisioned by the Constitution of the United States.

Title: Restoring America’s Leadership in Innovation Act of 2018

The basic provisions here are as follows (although this is only a high-level review):

  • Section 3: Repeal the first-to-file system and replace it with the old first-to-file system, the one-year grace period and a statement that “a person shall be entitled to a patent where the inventor is first to conceive of the invention and diligently reduces the invention to practice.”
  • Section 4 and 5: Abolish the AIA Trials and revert the PTAB to the BPAI — noting that AIA Trials have “harmed the progress” by “invalidat[ing] patents and an unreasonably high rate.”  Note, that the provision would not re-start Inter Partes Reexaminations.
  • Section 6: Allow PTO to keep and use all of its fees collected even if not spent that fiscal year.
  • Section 7: Amend eligibility to essentially adopt the IPO/AIPLA proposals.
  • Section 8: Limit certain prior art if derived from the applicant.
  • Section 9: Add the following statement: “A patent right is a private property right secured to an inventor upon issuance of the patent that shall only be revoked by a court ruling in a judicial proceeding, unless the patent owner consents to an administrative or other procedure. . . . patents shall be recognized as private property rights.”  The provision is also designed to allow for full freedom-of-contract, including licensing without exhaustion.
  • Section 10: abolishes publication of patents except upon request by the patent applicant with the explanation that “automatic publication of patent applications . . . has harmed the progress of science and the useful arts by creating ‘‘prior art’’ by operation of law that prevents a patent owner from applying for a patent on the same invention if a patent does not issue.”
  • Section 11: Establish strong presumption of validity to be applied whenever a patent is challenged (including administrative proceedings); Toll the patent term during any patent challenge.
  • Section 12: Overrules eBay v. MercExchange by creating a presumption that any infringement creates irreparable harm.
  • Section 13: Allowing best mode failure as a defense once again.

Note here that this proposal has a 0% likelihood of passing this Congress, but it has been introduced and offers an interesting discussion point.


Who Judges the Spark of Invention?

by Dennis Crouch

The light bulb represents the patent system in many ways – both for the invention itself and for the symbolic spark of creativity and determined perseverance that it represents.  Thus, it may be appropriate that a new Supreme Court petition stems from a light-bulb case (white LEDs). Nichia Corporation v. Everlight Electronics Co., Ltd., Supreme Court Docket No. 17-1707 (2018).

Professor Mark Lemley (acting in his role as an advocate) has filed a new petition for writ of certiorari focused on the question of obviousness — asking why the Federal Circuit is effectively treating obviousness as a question of fact:

1. This Court has repeatedly held that whether a patent is invalid as obvious is a question of law, though it may depend on subsidiary factual findings. . . . Should an appellate court review the ultimate legal question of obviousness de novo, as the Seventh and Ninth Circuits have held and as the Federal Circuit held before 2012, or must the appellate court defer to a jury’s conclusion even on the ultimate legal question, as the Federal Circuit has repeatedly held in patent cases since 2012?

2. Alternatively, if this Court were to conclude that obviousness presents a “mixed” question of law and fact, as the Federal Circuit now treats it, should this Court grant certiorari, vacate, and remand this case to determine whether appellate review of that “mixed” question should be de novo or deferential in light of U.S. Bank National Association ex rel. CWCapital Asset Management LLC v. Village at Lakeridge, LLC, 138 S. Ct. 960, 967 (2018), a case decided after the Federal Circuit decision here?

Nichia Corporation v. Everlight Electronics Co., Ltd., Supreme Court Docket No. 17-1707 (2018).

The brief explains that in 2012, the Federal Circuit abandoned its historic treatment of obviousness as a question of law (and de novo review) and began instead “deferring to jury verdicts even on ultimate questions of law.”

Although this particular case is focused at the appellate level, a statement from the Supreme Court could also shift how district courts decide — particularly requiring that district court judges rule on the ultimate question of obviousness (doing so would require a reasoned opinion as well).  The brief explains that this designation as a question of law is not a mere happenstance in this situation – but rather:

[R]eflects the long-standing recognition that patents are public rights and that the public has an interest in the proper determination of their validity. . . Judges, not juries, are expected to set the proper balance between the interests of patentees and the public, and to do so on the record.

I previously wrote about the Federal Circuit’s jumping-off point in the case of Kinetic Conceps v. Smith & Nephew:

Who Decides Obviousness: Judge or Jury?

In this case, Prof. Lemley is representing the patentee Nichia who’s asserted claims were found invalid by a jury. The patent, U.S. Patent No. 5,998,925, covers an improved white-light LED.

Patently-O Bits and Bytes by Juvan Bonni

Recent Headlines in the IP World:

Commentary and Journal Articles:

New Job Postings on Patently-O:

Sole Exceptions to Subject Matter Eligibility

Patent owners and innovators continue to push for statutory reform of the doctrine of subject matter eligibility — with the primary goal of repudiating recent Supreme Court precedent of Mayo Collaborative Services v. Prometheus Laboratories, Inc., 566 U.S. 66 (2012) and Alice Corp. Pty. v. CLS Bank Int’l, 134 S. Ct. 2347 (2014).

Several bar associations and groups presented their proposed revisions. That approach, however, was something of a stumbling block for the initiatives. Although there was generalized unity, there has not been unity on the specifics. That is slowly changing with AIPLA, IPO, and NYIPLA all on-board with roughly the same proposal:

35 U.S.C. § 101—Inventions Patentable

(a) Eligible Subject Matter.—Whoever invents or discovers any useful process, machine, manufacture, composition of matter, or any useful improvement thereof, shall be entitled to a patent therefor, subject only to the conditions and requirements set forth in this title.

(b) Sole Exceptions to Subject Matter Eligibility.—A claimed invention is ineligible under subsection (a) only if the claimed invention as a whole exists in nature independent of and prior to any human activity, or can be performed solely in the human mind.

(c) Sole Eligibility Standard.—The eligibility of a claimed invention under subsections (a) and (b) shall be determined without regard to the requirements or conditions of sections 102, 103, and 112 of this title, the manner in which the claimed invention was made or discovered, or whether the claimed invention includes an inventive concept.

Here, the term “claimed invention” does not mean what might suggest — an invention that has been claimed in a patent or patent application. Rather, the term “claimed invention” is narrowly defined as “the subject matter defined by a claim in a patent or an application for a patent.” 35 U.S.C. 100(j).  In other words, the “claimed invention” is what is claimed to be the invention.

Of course, the next step will be much more difficult for proponents of the legislation – getting Congress to act.


Guest Post by Prof. Contreras: Rambus Redux? – Standards, Patents and Non-Disclosure in the Pharmaceutical Sector (Momenta v. Amphastar)

Guest post by Professor Jorge L. Contreras of the University of Utah School of Law.  Note that the author was a partner at a law firm that was involved in Rambus v. FTC and Broadcom v. Qualcomm while those cases were litigated and decided.  The author had no direct involvement in either case.

During the dozen years demarcated by the FTC’s 1996 consent decree with Dell Computer (121 FTC 616 (1996)) and the DC Circuit’s 2008 decision in Rambus, Inc. v. FTC (522 F.3d 456 (D.C. Cir. 2008)), the U.S. saw a spate of cases in which participants in voluntary standards-development organizations (SDOs) were alleged to have violated an SDO’s rules by failing to disclose patents essential to the SDO’s standards.  In addition to Dell and Rambus, highly-publicized deception cases such as Broadcom v. Qualcomm (548 F.3d 1004 (Fed. Cir. 2008)) explored what SDO policies actually required of their participants and what penalties could be imposed for their breach, whether under contract, equity, patent or antitrust law.  These questions, and the large sums at stake, generated a cottage industry of legal and economics scholarship around the law and lore of standardization.  But by the early 2010s, the information and communications technology (ICT) sector seems to have learned the lessons of Dell, Rambus and Qualcomm: SDOs improved the clarity of their internal processes, SDO participants adopted a policy of “disclose, disclose, disclose” (on the theory that it can never hurt to disclose too many patents), and the cases turned to other pressing questions like the meaning of SDO commitments to license patents on terms that are “fair, reasonable and nondiscriminatory” (FRAND), which continues to bedevil courts today. I was thus intrigued to see a case that harkens back to the heyday of the old SDO deception cases in a pair of recent decisions in Momenta Pharmaceuticals, Inc. v. Amphastar Pharmaceuticals, Inc. (D. Mass., No. 11-cv-11681, Feb. 7, 2018 and No. 16-10112-NMG, Mar, 19, 2018).  Surprisingly, this non-ICT case may give courts an unexpected opportunity to revisit the DC Circuit’s controversial decision in Rambus v. FTC, which found no antitrust liability for an allegedly deceptive failure to disclose patents to an SDO.

The ‘886 Patent Dispute

The long-running dispute in Momenta is between two generic producers of the blockbuster anticoagulant drug enoxaparin, which Sanofi-Aventis first marketed in 1993 under the brand name Lovenox (2009 U.S. sales $2.7 billion).  In July 2010, Momenta Pharmaceuticals, in conjunction with Novartis’s Sandoz division, received FDA approval for a biosimilar version of enoxaparin.  Amphastar Pharmaceuticals, another generics manufacturer, received FDA approval for its own biosimilar version of enoxaparin on September 19, 2011.  Two days later, Momenta sued Amphastar for infringement of U.S. Patent 7,575,886 (the ‘886 Patent), which claims a quality control process used in the manufacture of enoxaparin.  Momenta applied for the ‘886 Patent in 2003; it was issued in 2009 listing five inventors including Dr. Zachary Shriver. After a lengthy set of proceedings, including two separate appeals to the Federal Circuit, a jury found in 2017 that Amphastar infringed the claims of the ’886 patent, but that the claims were invalid due to lack of enablement and inadequate written description.

Dispute Over Method 207

The United States Pharmacopeial Convention (USP) is an SDO that develops standards for testing the quality and purity of foods and drugs.  In 2006, with the encouragement of Sanofi-Aventis, USP began to consider a standard for testing enoxaparin.  Beginning in 2008, Momenta’s employee Dr. Shriver participated in the USP advisory panel that developed what came to be known as USP Method 207 pertaining to enoxaparin manufacture, which USP eventually approved and adopted as a standard in 2009.  Amphastar alleges that the claims of the ‘886 patent cover key portions of Method 207.

USP has a number of written policies that are binding on individuals and firms participating in its standardization work.  Amphastar argues that USP’s written policies required Dr. Shriver to disclose the existence of Momenta’s application for the ‘886 patent to USP prior to approval of the standard, which he did not.  Due to this failure, Amphastar alleges that Momenta intentionally violated USP’s policies.  In consequence, Amphasrar argues that (1) Momenta has waived its right to enforce the ‘886 patent, (2) Momenta is estopped from enforcing the ‘886 patent, and (3) Momenta and Sandoz violated Section 2 of the Sherman Act, as well as various state antitrust and competition statutes by “wrongfully acquiring monopoly power by deceiving the USP into adopting a standard which they later claimed was covered by” the ‘886 Patent (Mar. 19, 2018, slip op. at 9).  These allegations reflect the classic SDO deception scenario, akin to those alleged in cases like Dell, Rambus and Qualcomm. In each of these cases the central issue is “the consequence of silence in the face of a duty to disclose patents in a standards-setting organization” (Qualcomm, 548 F.3d at 1008).

The USP Policies

In assessing Momenta’s obligation to disclose the ‘886 patent, Judge Nathaniel Gordon of the District Court for the District of Massachusetts considered three of USP’s written policies.  First, Section 2.05 of the Rules and Procedures of the USP Council of Experts (the “Expert Rules”) states that no advisory panel member with a “financial or other interest that may conflict, or may appear to conflict, with his or her duties and responsibilities with respect to a particular matter, shall vote on such matter.”  Dr. Shriver abstained from voting on the Method 207 standard (Feb. 7, 2018, slip op. at 10).

Second, Section 2.06(a) of the Expert Rules requires that each advisory panel member submit to USP a written statement disclosing his or her employer, sources of research funding, and “other professional or financial interests, including intellectual property rights, that may result in a conflict of interest or the appearance of a conflict of interest” (id. at 9, emphasis added).  Dr. Shriver submitted such a statement in which he identified Momenta as his employer.

Third, under a separate document known as the USP Guidelines, all “Sponsors” of USP technical proposals are requested to disclose “whether any portion of the methods or procedures submitted are subject to patent or other IP rights” (id. at 10). Momenta made no disclosure responsive to this provision.

Amphastar argued that these three provisions, individually and collectively, required Momenta, through Dr. Shriver, to disclose the existence of the ‘886 patent and its relevance to Method 207 while it was under consideration at USP.  Judge Gordon, however, disagreed.  With respect to Section 2.05 of the Expert Rules, Dr. Shriver’s abstention from the vote on Method 207 was in compliance with the Rules.  As for the Guidelines, Momenta was not formally a “Sponsor” of Method 207 (the only official Sponsor being Sanofi-Aventis), making the patent disclosure request inapplicable to Momenta.  Finally, Dr. Shriver’s conflict of interest form correctly identified Momenta as his employer.  At most, the catch-all provision requiring disclosure of “other professional or financial interests” was ambiguous in its requirements.  Accordingly, Judge Gordon found the USP policies to be ambiguous regarding Momenta’s obligation to disclose the ‘886 patent (id. at 11).

Participant Understanding of Disclosure Requirement

Notwithstanding the ambiguity of USP’s policies, Judge Gordon, citing Qualcomm (548 F.3d at 1012), went on to consider whether USP participants may have “understood the policies to include a duty to disclose” patents essential to USP standards (id. at 11-12).  A former USP employee testified that there was a “common understanding” among USP participants that patent disclosures were required (Feb. 7, 2018, slip op. at 15).  In addition, the witness described a 2008 advisory panel meeting at which USP noted that Sanofi-Aventis, the Sponsor of Method 207, had disclosed a relevant patent.  According to the witness, a representative from Momenta then requested that Sanofi-Aventis be requested to abandon the patent before the standard was approved, which it ultimately did (id. at 13).  These factors, taken together, the court reasoned, “indicate[d] that Momenta itself, a participant in the USP, acknowledged its own obligation to disclose and abandon like patents” (id.). Thus, as in both Qualcomm and Rambus, Inc. v. Infineon Techs. AG (318 F.3d 1081, 1098 (Fed. Cir. 2003)), the court found that, notwithstanding the absence of an express requirement that patents essential to an SDO’s standards be disclosed by SDO participants, such an obligation existed on the basis of unwritten participant expectations (a good example of private ordering influencing legal determinations).

Interestingly, Momenta argued that it should not be deemed to have an obligation to disclose the ‘886 patent because it opposed the approval of Method 207 at USP, principally because it used a different method for testing enoxaparin.  What’s more, Method 207 was not a compulsory standard, meaning that even if Momenta held a patent covering the standard, it could not hold the industry “hostage” (id. at 15).  The court did not find these arguments persuasive, noting in particular Amphastar’s claim that the FDA did require it to use Method 207 in order to secure approval of its biosimilar version of enoxaparin.


Amphastar argued that Momenta’s breach of its obligation to disclose the ‘886 patent to USP should result in a waiver of Momenta’s right to enforce the patent.  The unenforceability remedy in patent law is a harsh one, usually extending not only to the infringer, but to the entire world (see Qualcomm, 548 F.3d at 1024, and this article, discussing unenforceability in earlier standards cases). In both Dell and Qualcomm, the unenforceability remedy was limited to implementations of the standards in question and, in theory, the patents could have been enforced against products that did not comply with those standards.  The court in this case likewise limited unenforceability of the ‘886 patent to Method 207.   Judge Gordon carefully analyzed the precise manufacturing processes used by Amphastar to determine which the processes the unenforceability remedy should apply to.  Momenta alleged that three different manufacturing processes used by Amphastar, referred to as the “15-25%” procedure (both original and revised) and the “DBB” procedure, infringed the ‘886 patent.  But the court concluded that the DBB procedure did not conform to Method 207.  Accordingly, the ‘886 patent was held to be unenforceable as to the 15-25% procedures, but not to DBB (Feb. 7, 2018, slip op. at 16-18).

Equitable Estoppel

Amphastar also argued that because it reasonably relied on Momenta’s misleading conduct (i.e., failing to disclose the existence of the ‘886 patent) and made investments in manufacturing capacity for enoxaparin on that basis, Momenta should be estopped from enforcing the patent against it.  Judge Gordon agreed, citing Hynix Semiconductor Inc. v. Rambus, Inc. (645 F.3d 1336, 1348 (Fed. Cir. 2011)).  But as with waiver, the remedy was applied only to the 15-25% process, and not to the DBB process.

Antitrust Claims

In addition to the waiver and estoppel defenses raised by Amphastar, Amphastar brought a separate action charging Momenta and Sandoz with violations of the Sherman Act and California antitrust and competition law based on Momenta’s failure to disclose the ‘886 patent to USP.  Amphastar argues that Momenta “wrongfully acquir[ed] monopoly power by deceiving the USP into adopting” the Method 207 standard.  This conduct, Amphastar alleges, both improperly excluded Amphastar from the market for generic enoxaparin and drove up the price of generic enoxaparin by billions of dollars over the years (Mar. 19, 2018, slip op. at 6).

In denying Momenta’s motion to dismiss, Judge Gordon looked to Broadcom Corp. v. Qualcomm, Inc., 501 F.3d 297, 314 (3rd Cir. 2007), which explains that “[d]eception in a consensus-driven private standard-setting environment harms the competitive process by obscuring the costs of including proprietary technology in a standard and increasing the likelihood that patent rights will confer market power on the patent holder”.  Accordingly, he held that Amphastar had articulated a cognizable claim for monopolization under the Sherman Act.

A jury trial in the antitrust case is currently scheduled to begin in September 2019.  While there appears to be ample basis in the record supporting Amphastar’s claims regarding Momenta’s deceptive conduct toward USP, Amphastar’s greatest challenge at trial will likely be proving the existence of an antitrust injury, particularly in view of the FTC’s case against Rambus, which faltered on this very point. As the DC Circuit explained in Rambus, Inc. v. FTC, 522 F.3d at 466, “An otherwise lawful monopolist’s end-run around price constraints, even when deceptive or fraudulent, does not alone present a harm to competition in the monopolized market.”  Rather, antitrust injury – harm to competition, rather than to a competitor – cannot be said to exist if an SDO, “in the world that would have existed but for [the patent holder’s] deception, would have standardized the very same technologies” (id.).    Thus, will Amphastar be able to show that but for Momenta’s deceptive conduct, the Method 207 standard would not have been approved by USP?

The result will be interesting, both at trial and, if appealed, at the First Circuit, which is not strictly bound to follow the DC Circuit’s precedent in Rambus v. FTC.  There are certainly many, including Commissioners at the FTC, who felt the DC Circuit’s decision in Rambus was excessively forgiving of deceptive conduct within SDOs.  Momenta, which unexpectedly raises a fact pattern that has all but disappeared from the ICT litigation landscape, may give courts an opportunity to revisit this controversial decision in a new context.