Emergency Motion Sheds some Light on the Litigation Funder – Law Firm Relationship

by Dennis Crouch

CTD Networks v. Microsoft (Fed. Cir. 2023)

This appeal was filed after CTD’s infringement case was dismissed on the pleadings with Judge Rodriguez (W.D.Tex.) finding the patentee failed to include plausible allegations of infringement of any claims from the patents-in-suit. U.S. Patent Nos. 8,327,442; 9,438,614; 9,503,470; and 11,171,974.  Rather, according to the court, CTD improperly mixed and matched elements across Microsoft’s various software tools in its pleadings and failed plead that Microsoft makes, uses, or sells the required hardware components.

William P. Ramey III represented CTD in the district court and filed the notice of appeal. However, Ramey this week filed a blistering emergency motion to withdraw from the case.  The motion levels a number of accusations against the funder of the litigation campaign (AiPi) and its cofounder Eric Morehouse.  The central issues are that that AiPi has failed to pay legal bills and “controls” CTD to Ramey’s detriment, and in ways that have prevented him from withdrawing smoothly.

According to Ramey, Eric Morehouse originally induced AiPi as both a “patent litigation funder and law firm” and looked for Ramey to support the litigation alongside AiPi.  But, Ramey asserts that AiPi have since reneged on paying for Ramey LLP’s work. “Morehouse personally guaranteed payment for all work performed,” Ramey avers, yet “no further payments have been made” despite Morehouse’s repeated assurances.

Ramey also claims he cannot continue representing CTD Networks because of an “direct conflict” with the party controlling that plaintiff – Morehouse and AiPi.  Here is where the argument breaks down a bit.  It seems that the direct conflict is basically (1) Non-payment of Ramey LLP’s legal fees by AiPi, Inc. (which purportedly controls the plaintiff CTD Networks LLC) and (2) Animosity between Ramey LLP and AiPi/Whitestone Law PLLC.  (Whitestone is Morehouse’s separate law firm).  But, at least at one level, the animosity appears to stem from the non-payment.  I’m pointing this out here because non-payment of fees is not typically seen as the same level of conflict of interest as, for instance, a conflict between current clients. This is especially true where the non-payment is coming from a non-client.

The motion further alleges that Morehouse is purposefully trying to prejudice CTD’s case against Microsoft out of animosity toward Ramey LLP. For instance, no Whitestone attorney appeared for CTD Networks to facilitate Ramey’s withdrawal. And neither CTD, AiPi nor Whitestone seem willing to file an appellant brief in the Federal Circuit appeal.

In light of these purported breaches by his former collaborators, Ramey insists his firm cannot continue representing CTD Networks absent an immediate exit. Ramey seeks emergency permission to withdraw so his firm can still file its own appeal brief defending its interests, while leaving CTD to obtain replacement counsel.

A key feature of Ramey’s claim is that Morehouse and AiPi control CDT. This is important for the story so that he can show that his conflict with the former invade his lawyer-client relationship with the latter.

In a subsequent briefing also filed this week (in district court) CTD disputed Ramey’s claim that the plaintiff CDT is controlled by an adverse third party. The brief argues AiPi is not a law firm, but rather a patent prosecution and litigation support company that had engaged Ramey as lead counsel to file various patent cases on behalf of clients like CTD.  “CTD Networks is not controlled by any other party.” According to the brief, AiPi “realized” in mid-2023 “that Mr. Ramey may not be able to properly represent the interests of clients sent to Mr. Ramey by AiPi.”

AiPi is not “adverse” to Mr. Ramey, AiPi is adverse to improper handling of litigation. In addition to Defendant’s pending Motion for Fees in this matter, Mr. Ramey is facing sanctions in a number of other matters in a number of other jurisdictions and has been sanctioned in a number of cases over the past few years.

The brief goes on to explain that over the summer AiPi brought in a different litigator (Joseph Zito from Morehouse’s Whitestone firm) who reviewed about 90 of Ramey’s cases and made appearances in 60 of them.  The odd thing about this statement is how CDT’s brief explains that AiPi brought in Mr. Zito to do the work and make appearances in pending cases.  It would have been a bit more comforting if the CDT brief had added a line stating that “CDT acting on its own accord engaged Zito.”

The CDT brief contends that by the time Zito was consulted on the CTD v. Microsoft case, the case was already at an advanced stage concerning Microsoft’s motion for fees. So no appearance was made.  On December 13, Zito did file his appearance in the district court case (that is still pending on attorney fees) and indicated that it does not object to Ramey withdrawing from the case.

The appeal itself is still pending with CDT’s opening brief due shortly.  Note here that Ramey filed a parallel motion in the pending appeal of CDT v. Google.

 

Federal Circuit Continues to Apply Strict Obviousness-Type Double Patenting Analysis

by Dennis Crouch

This post gets into some weeds about obviousness type double patenting stemming from the Federal Circuit’s new decision in Institut Pasteur.  Although non-precedential, the decision signals that the doctrine remains strong (and strict). The decision cements that for OTDP analysis, any comparison of unexpected results or long-felt need must be made to the applicant’s own earlier patent claims, not the closest “prior art.”  The court also endorsed reliance on inherency to satisfy claim limitations not found in earlier claims.

I’ll note here en banc petition briefing continues in the OTDP/PTA case of In re: Cellect, LLC.  Cellect’s petition has been supported by 10 amicus briefs. The PTO responsive brief is due December 14, 2023.

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The Federal Circuit recently affirmed a PTAB rejecting claims in a patent application filed by Institut Pasteur on the ground of obviousness-type double patenting. In re: Institut Pasteur, No. 2022-1896 (Fed. Cir. Dec. 13, 2023) (non-precedential). This case provides additional insight into the doctrine of obviousness-type double patenting and the ongoing high bar set by the Federal Circuit for overcoming such rejections.  Opinion by Judge Clevenger, joined by Judges Taranto and Stoll.

Obviousness-type double patenting is a judge-made doctrine designed to prevent applicants from extending patent rights first obtaining an earlier-expiring patent and then obtaining a later-expiring patent with claims that are obvious variants of those in the earlier patent. The policy goal is to prevent unjustified timewise extension of exclusive patent rights.  The doctrine was particularly relevant for patent applications filed prior to 1995 because patent term was calculated at 17 years after patent issuance. Today, patent term starts ticking as soon as the patent application — making it much more difficult to stagger patent rights in order to evergreen protection. (Note that one way to differentiate patent timing is through PTA — and that is being challenged in the Cellect case discussed above.) In addition, the doctrine is designed to protect potential defendants from unfairly facing multiple infringement lawsuits.

The Gap in 102 for Self-Harming Prior Art: Everyone knows that you cannot obtain a patent that merely claims an obvious variant of the prior art. 35 U.S.C. 103. Section 102 of the Patent Act defines prior art, and includes an important exception that is incredibly relevant to the OTDP situation. In particular, we know that the first-inventor-to-file provision found in 102(a)(2) spells out, as the name suggests, that a prior-filed patent application (once it becomes public) will serve as prior art against a later filed patent application. The important exception for OTDP purposes is that Congress limited the first-to-file provision of 102(a)(2) to applies only in cases where the two competing patent applications name different inventors and are owned by different entities. In other words, Congress carved out an exception such that your own earlier-filed patent application does not qualify as prior art that could invalidate your later-filed application under 102(a)(2), even after the earlier application publishes.  Although this analysis uses post-AIA statute, the limited protection for applicants against self-harming prior art also existed in the pre-AIA statute.

What we have here is a gap in the scope of prior art within the statute associated with the patentee’s own pre-filing activities. Courts have acknowledged that these filings by patent applicants are not prior art under the statute, but recognize policy concerns that justify limiting applicants’ rights anyway. Specifically, courts want to prevent applicants from unjustly extending patent protection with repetitive filings on obvious variants of their own inventions. Additionally, courts are concerned that separated patents (especially if ownership is separated) could put defendants at risk of facing multiple lawsuits asserting what is essentially the same invention.

The judge made solution then is to act in equity to bar an applicant from obtaining or enforcing to patents that are obvious variants to one another unless the patent applicant has filed what is known as a terminal disclaimer that disclaims any potential extra patent term in the later-issuing patent and that also promises to keep the two patents under the same ownership.  Applicants who fail to file such a disclaimer can find their applications refused by the PTO or found unenforceable by the courts.

Ordinarily, obviousness analysis compares a claim against prior disclosures.  OTDP is different.  In OTDP, the policy concern is focused on obtaining two patents whose claims are too close to one another.  Thus, the OTDP analysis compares the two sets of claims and asks whether one set is an obvious variant of the other.

In Institut Pasteur, the patent applicant filed a patent application in 2015 directed to methods of treating pain by administering opiorphin. The examiner rejected the pending claims as obvious over the claims of a different Pasteur patent directed to similar methods of pain treatment using the same peptides, and that had been filed the year before, in 2014.

Before the Board, Pasteur argued that OTDP should not apply — arguing that its 2015 applicant claimed claimed methods that were significantly different from those in the 2014 patent. In particular, the 2015 applicant required administration of the peptides for seven days without inducing drug dependence or tolerance, whereas the 2014 patent did not specify any particular duration of treatment or recite the lack of dependence/tolerance.  The PTAB rejected that distinction and instead affirmed the examiner’s rejection, finding that the 2014 patent embraced treatment of chronic pain, so it would have been obvious to administer the therapy for over seven days. The Board also found that avoiding dependence/tolerance would be an inherent result of carrying out the methods of Pasteur’s earlier 2014 patent.

On appeal, the Federal Circuit affirmed the Board’s decision strictly applying obviousness-type double patenting. The court reiterated that when unexpected results are used to rebut a prima facie case of obviousness, those results must be shown to be unexpected compared to the closest prior art (here, Pasteur’s 2014 patent).  In re Baxter Travenol Labs., 952 F.2d 388, 392 (Fed. Cir. 1991). Pasteur failed to make that comparison. The court also endorsed the Board’s use of inherency to fill in the missing claim limitation of dependence/tolerance as part of the obviousness analysis.  The trick here that the court played, is that this “closest prior art” precedent comes from ordinary obviousness cases, not OTDP cases.  See Baxter.   And, as you recall, Pasteur’s 2014 patent is not prior art. Here, the court made the leap that it should effectively be treated as prior art for all aspects of the OTDP obviousness analysis, including both evidence of unexpected results and secondary considerations of nonobviousness.

Regarding secondary considerations, the Federal Circuit affirmed the Board’s dismissal of Pasteur’s long-felt need evidence. Pasteur had argued there was a long-felt need for pain medication that avoids issues of drug tolerance and dependence. However, the court endorsed the Board’s finding that any such need was already satisfied by Pasteur’s 2014 patent claims. In other words, in obviousness-type double patenting, where reference claims satisfy a long-felt need, that need does not constitute objective evidence for a later patent’s claims of non-obviousness over the reference claims.

During oral arguments, Salvatore Arrigo argued on behalf of Institut Pasteur before the panel of Judges Taranto, Clevenger, and Stoll.  Arrigo emphasized that unexpected results are an “integral part” of determining obviousness under Graham v. John Deere. He argued that the unexpected lack of tolerance and dependence when administering the claimed peptide for 7 days should be considered in the prima facie obviousness analysis, before reaching a conclusion on obviousness:

You have to look at the unexpected results first to figure out if it’s obvious. If you don’t, it’s always an expected results are always going to be inherent 100 percent of the time because you’ve already reached obviousness before considering. It’s part of the obvious analysis to get there.

The judges questioned whether the proper comparison should be to morphine or to the closest prior art, the claims of the ‘871 patent. Mr. Arrigo maintained morphine was the appropriate comparison “because the prior art is just this giant genus and no one within that genus ever did anything that would have shown this unexpected result.”  In its decision, however, the Federal Circuit rejected this analysis — holding that for OTDP analysis, any unexpected results must be in comparison to the company’s other patent being analyzed.

More Than Just “Inventory”: Some Professional Responsibility Implications of Third Party Patent Assertion Entity Funding

Guest Post by Jordan Duenckel. Jordan is a third-year law student at the University of Missouri and a registered patent agent. He has an extensive background in chemistry, food science, and economics. 

Law is a noble profession destined to be marred by the activities of attorneys behaving badly. On November 27th, Chief Judge Colm Connolly of Delaware released a blistering opinion reprimanding counsel for inexcusable and willful lapses in professional responsibility, misrepresentations to the USPTO, and potential unauthorized practice of law all associated with the patent assertion entity IP Edge LLC (IP Edge) and its affiliate Mavexar LLC (Mavexar). Disciplinary, administrative, and potential criminal referrals result for the counsels of record for plaintiffs for this conduct. For other practitioners, this is a cautionary tale about third-party litigation and candor to the Court.  

Even when clients are viewed as mere “inventory”, they are still owed the renowned “punctilio of an honor the most sensitive.” Huber v. Taylor, 469 F.3d 67, 81 (3d Cir. 2006) (quoting Meinhard v. Salmon, 249 N.Y. 458, 464 (N.Y. 1928) (Cardozo, J.))

Judge Connolly’s 102-page opinion is thorough and supplies extensive examples of attorney (and non-attorney) coercive misbehavior through a pattern of activity spanning three plaintiffs that display shocking disregard for professional responsibility stemming from third party litigation funding. An in-depth look at Mellaconic IP is representative of Nimitz and Lamplight’s comparable situation. Mellaconic IP is a sole member LLC organized under the laws of Texas. That sole member is Hau Bui, a food truck and restaurant operator by day. At the hearing, Mr. Bui told how Linh Deitz, the office manager for Mavexar, formed Mellaconic in August 2020 with the limited assets of seven patents. Mr. Bui’s testimony about his ownership of the patents begins to supply insight:

Q: Okay. How much did you pay for the patents?                                                                 A: I didn’t pay for the patents.                                                                                                   Q: So how do you come to own patents if you don’t pay for them?                                   A: I was- came up–someone pushed me with the opportunity, selling the patents.     Q: Who was that? Mellaconic?                                                                             A:Mellaconic-no, Mavexar. Sorry.

When asked about the actual business of Mellaconic, Bui stated:

Q: Did you have to take on any responsibilities to assume ownership of the patents? A: As far as, just like, viewing the litigations and everything that come through.         Q: Oh, so you do review the litigations?                                                                                 A: Yeah.                                                                                                                                           Q: Tell me about what you do in that regard?                                                                       A: So Mavexar will send me the litigations of what’s going on or the, you know, attorney engagements. And then I, essentially, if l sign-I approve of them or disapprove of them.                                                                                                                     Q: How do you know whether to approve or disapprove of an attorney?                       A: I mean, I chose Mavexar and they’re-they’re-what is it? -they’re good. Like, you know, they haven’t done me wrong.                                                                                       Q: Well, so do you get a share, then, of lawsuits or settlements that are brought using these six patents? Is that how you make money, passive income, as you call it?  A: Yeah.

Mellaconic “acquired” the patent via a patent assignment from another company, Empire, and subsequently filed an assignment at the PTO and entered a “Consulting Services” agreement with Mavexar on August 11, 2020. At the time Mellaconic filed with the PTO an assignment that stated that Mellaconic’s “right, title, and interest” in the seven assets listed in the assignment “includ[ed] all income, royalties, damages and payments now or hereafter due or payable with respect thereto,”* Mavexar was contractually entitled to 95% of the profits generated from licensing or litigating those assets. Mellaconic subsequently filed 44 different patent infringement cases nationwide asserting a single patent, 9,986,435 (the #435 patent).  Maxevar located and contacted attorney Jimmy Chong to be counsel for Mellaconic in these lawsuits and filed the suits as well as voluntary dismissals with cocounsel’s firm Sand and Sebolt.  

A slight issue arose when it became clear that Bui was unaware that Chong’s firm was Mellaconic’s counsel, even failing to identify Mr. Chong in person from 20 feet away, with the first direct contact via email on November 30th, weeks after the hearing. Bui replied, “Yes, you can continue to communicate to Mavexar team directly.” At the hearing, it became clear that Mr. Bui did not review any complaints before being filed or even that he was apprised of settlement offers in the litigation. Up to thirteen complaints had been filed and voluntarily dismissed before Mr. Bui even communicated with his counsel of record. Chong and Sebolt’s attorneys would often communicate with Maxevar to confirm settlement offers without asking for Bui’s consent.

Rules of Professional Conduct for Lawyers | Clio

Omnipresent in any attorney-client representation are the requirements of the rules of professional responsibility that are codified by the Model Rules. Rule 1.2 (allocation of authority), Rule 1.4 (Communications), Rule 1.7(Loyalty), and Rule 1.8f (Third Party Funding) were all implicated in Connolly’s opinion. Rules 1.2 and 1.4 are important but self-evident in this context. The more pernicious, and less visible, problem is the implications of third-party funding creating a conflict of interests that results in a de facto denial of independent representation. The potential for a conflict of interest is clear when profits (or a substantial portion of them) are assigned to one party and the risk is assigned to another. Third-party litigation in general carries increased risks of conflicts of interest and non-practicing patent assertion entities (PAEs) enhance the risks even more. 

The structure that Mavexar created assures that the only risk Mavexar assumes when an attorney files at Mavexar’s direction an infringement case in Mellaconic’s name is the potential that Mellaconic will not follow its contractual obligation to reimburse Mavexar for the fees and costs Mavexar advances to that attorney that exceed any gross recovery. In other words, Mavexar has virtually nothing to lose and everything to gain (i.e., 95% of everything) from asserting the patent in infringement suits. Mellaconic, by contrast, receives a tiny fraction of the litigation gains but it, and potentially Mr. Bui, personally have lots to lose if the litigation results in an adverse decision, sanctions, or fees and costs that exceed the gross recovery. PAEs, like Mavexar, represent rent-seeking behavior (extraction of wealth without any reciprocal contribution of productivity), and the related Tullock Paradox, at work: increased marginal utility at a fraction of the marginal cost.  

Considering these vastly different profit and risk profiles, Mavexar’s and Mellaconic’s interests were significantly different when it came to deciding to file or to settle the lawsuits Mr. Chong and co-counsel brought in Mellaconic’s name. Repeatedly, Chong and others insisted that they do not represent Mavexar as counsel but rather that Mavexar acts as a consultant to Mellaconic. However, Mavexar is the guiding force behind the entirety of the assertion of patent infringement claims despite explicitly requesting to keep their name out of any of the litigation that was filed despite being the real party in interest. Mavexar was actively involved in the creation of shell companies, finding “targets” to assert patents against, hiring attorneys to represent Mellaconic, and actively managing settlement discussions.** 

Much ink can and has been spilled discussing the economic and societal merits of third-party litigation funding. Regardless of the future direction, a bedrock legal principle must remain: truly independent representation of all parties is core to informed decisions and fair dealing. Mr. Bui, and many others like him nationwide, are deprived of that fundamental principle when conflicts of interest are disguised and perpetrated by PAEs at the expense of clients. This is beyond an academic review of best practices: real clients suffered real economic and emotional distress as a result of these attorney’s disregard. The de facto client was Mavexar and the actual client, Mellaconic, was simply “inventory,” left without some of the most basic tenants of legal representation. 

 

*This assignment either does not disclose or actively hides the real party in interest because it falsely states who is entitled to the income from the patents. This false statement forms the basis for the criminal referral under 18 U.S.C. 1001. There is also some uncertainty around whether federal law was broken concerning failing to disclose a French sovereign investment fund that was the original assignor of at least one of the patents.

**While Mavexar vigorously denies being a law firm, the work they were doing in the litigation is legal in nature and forms the basis of the unauthorized practice of law referral. 

 

Federal Circuit Decision Causes Confusion on Trademark Cancellation

by Dennis Crouch

I previously wrote about the trademark case of Great Concepts v. Chutter that involves two restaurants both using the same phonetic name: DANTANNA’S and DAN TANA’S.  In the underlying trademark cancellation proceeding, the TTAB found that one party had committed fraud within its declaration of incontestability; and that fraud justified cancellation of the registration.  On appeal the Federal Circuit reversed — concluding that the statute was very specific that fraud in obtaining the registration can justify cancellation, but says nothing about fraud in establishing incontestability.  The court distinguished with some squirrely precedent finding that renewal counted as “obtaining” for the fraud-cancellation doctrine. Torres v. Cantine Torresella S.r.l., 808 F.2d 46 (Fed. Cir. 1986).

In a recent petition for panel rehearing, the USPTO has asked for the Federal Circuit to tighten up its language.  GreatConceptsRehearingPetition.

The agency particularly focuses on one sentence from the opinion that it foresees might create trouble:

Section 14 lists numerous bases on which a third party may seek Board cancellation of a registered mark, including likelihood of confusion, abandonment, dilution, deceptiveness, and if the mark is merely descriptive or has become generic or functional. See 15 U.S.C. § 1064. Notably absent from this list is fraud committed in connection with an incontestability declaration.

Opinion at 13.   As you can see, the Federal Circuit opinion provides several bases for cancelling a mark, indicating that they are listed within the statute.  Although these are all grounds for cancellation, they are not expressly found within Section 14 of the Lanham Act.  As the PTO writes: “The sentence is incorrect as a matter of law because Section 14 of the Trademark Act does not explicitly reference ‘likelihood of confusion,’ ‘merely descriptive,’ or other bases for cancelling a registration that is less than five years old, which include any ground that would have prevented registration in the first place.”  Rather, the courts have interpreted Section 14 to allow a mark <5 years old to be challenged based upon any ground that would have prevented registration in the first place qualifies.

In its brief, the Federal Circuit argues that the Federal Circuit’s incomplete list could be used in the future to limit the bases for cancellation to only those listed.  “The USPTO is concerned that the opinion text quoted above will result in confusion in later cases about what grounds are available to cancel a registration.”  The court has invited a response from the two parties, and I expect that neither will complain about the slight correction.

Fraudulent Incontestability Declarations: Textual Fidelity vs. Fraud Deterrence

The FTC’s Misguided Comments on Copyright Office Generative AI Questions

Guest Post from Professors Pamela Samuelson, Christopher Jon Sprigman, and Matthew Sag

The U.S. Copyright Office published a Notice of inquiry (“NOI”) and request for comments, Artificial Intelligence and Copyright, Docket No. 2023-6 on August 30, 2023, calling for comments from interested parties addressing dozens of questions. The Office’s questions focused on a wide range of issues including the copyright implications of the use of in-copyright works as training data, on the feasibility of licensing such uses, the impact on competition and innovation in AI industries depending on how courts resolved training data copyright issues, the copyrightability of AI outputs, whether new laws regulating generative AI were needed, whether AI developers should be obliged to disclose the sources of their training data, and whether AI outputs should be labeled as such.

The Office received roughly 10,000 comments on October 30, 2023. We, who have been writing and teaching about copyright law and how it has responded to challenges posed by new technologies for decades, were among those who submitted comments, see https://www.regulations.gov/comment/COLC-2023-0006-8854.

After reading and reflecting on comments filed by Federal Trade Commission (FTC), see https://www.regulations.gov/comment/COLC-2023-0006-8630, we decided to file a reply to the FTC’s comments, see https://www.regulations.gov/comment/COLC-2023-0006-10299. Below is the substance of our reply comments explaining why we believe the agency’s comments were ill-informed, misguided, and highly ambiguous.

Substance of the Samuelson, Sprigman, Sag Reply Comments:

We should begin by noting our appreciation for the FTC’s work enforcing both federal antitrust and consumer protection laws and helping to lead policy development in both areas. In our view, the FTC plays a vital role in keeping markets open and honest, and we have long been admirers of the intelligence and energy that the agency brings to that task. More specifically, we recognize the usefulness of examining intellectual property issues through the lenses of competition and consumer protection.

However, in the case of its response to the Copyright Office’s NOI on Artificial Intelligence and Copyright, the FTC has submitted Comments that are unclear and thus open to a variety of interpretations—and possibly to misinterpretations as well. The FTC’s Comments also raise questions about the scope of agency’s authority under Section 5 of the Federal Trade Commission Act, 15 U.S.C. 45, to bring enforcement actions aimed at activities, including those involving the training and use of AI, that might involve copyright infringement—although we would note that the copyright consequences of AI are, as yet, undefined.

We have three principal criticisms of the FTC’s comments:

First, the FTC’s submission is not a model of clarity: indeed, later in these Comments we will focus on a particular sentence from the FTC Comments that is worrisome both for its opacity and for the ways in which it may be interpreted (or misinterpreted) to chill innovation and restrict competition in the markets for AI technologies.

Second, the FTC Comments do not appear to be based on a balanced evidentiary record; rather, the Comments appear largely to reflect views articulated by participants in an Oct. 4, 2023, FTC Roundtable event[1] that featured testimony largely from artists and writers critical of generative AI: 11 of the 12 witnesses appeared to be or to represent individual creators, and one represented open-source software developers who objected to AI training on their code. Not a single witness provided perspectives from technologists who have developed and work with AI agents. Perhaps not surprisingly given the imbalance in the record, the FTC comments do not seem to appreciate the variety of use cases for AI technologies or the broader implications of those technologies for competition policy.

Third, and finally, certain of the FTC’s Comments could, if misunderstood, upset the careful balance that the copyright laws create between private rights to control copyrighted works and public access and use of those works. Upsetting that balance could chill development not only of useful AI technologies, but of a range of new technologies and services that augment consumers’ opportunities to access and use copyrighted works and increase the value of those works to consumers.

In the remainder of these Comments we will focus on a specific sentence from the FTC Comments that illustrates all of these problems. (more…)

When is the use of a product a “substantial noninfringing use” for purposes of Section 271(c)?

By Chris Holman

Sections 271(b) and 271(c) of the Patent Act form the statutory basis for the two forms of indirect patent infringement, induced and contributory, respectively. Section 271(c) explicitly provides that sale of a material that is “suitable for substantial noninfringing use” is not contributory infringement (note that this proviso does not apply to induced infringement under 271(b)). In a recent post, Dennis pointed out that in H. Lundbeck A/S v. Lupin Ltd. the Federal Circuit “somewhat controversially” states that:

[S]ubstantial noninfringing use in section 271(c) refers to uses that do not infringe the patent in question, not other patents. The text is clear: to support liability, the accused infringer must sell a material part of an invention or an article for use in practicing a patented process “knowing the same to be especially made or especially adapted for use in an infringement of such patent.” 35 U.S.C. § 271(c) (emphasis added). “Such patent” is in the singular and refers to a specific patent—the asserted patent.

Taken on its face, the statement seems overbroad and potentially problematic for the reason set forth by another Federal Circuit panel in Lucent Techs., Inc. v. Gateway, Inc., 580 F.3d 1301, 1320 (Fed. Cir. 2009):

One example illustrates the problem with Microsoft’s approach. Consider a software program comprising five—and only five—features. Each of the five features is separately and distinctly patented using a method claim. That is, the first feature infringes a method claim in a first patent, the second feature infringes a method claim in a second patent, and so forth. Assume also that the company selling the software doesn’t provide specific instructions on how to use the five features, thus taking potential liability outside the realm of § 271(b). In this scenario, under Microsoft’s position, the software seller can never be liable for contributory infringement of any one of the method patents because the entire software program is capable of substantial noninfringing use. This seems both untenable as a practical outcome and inconsistent with both the statute and governing precedent.

The dicta from Lucent seems to support the proposition that in determining whether there has been contributory infringement with respect to a first patent, a use of the product should not be deemed a “substantial noninfringing use” negating a finding of contributory infringement if that use would infringe a second patent, at least under some circumstances. But under what circumstances should this be permitted. For example, would it be proper for a court to assume that the second patent would be infringed by an alleged “substantial noninfringing use” without allowing the alleged infringer an opportunity to challenge the validity of the second patent and participate in a formal construction of the relevant claims?

This issue arose in the context of calculating lost profit damages in a 1995 decision of the en banc Federal Circuit, Rite-Hite Corp. v. Kelley Co., 56 F.3d 1538 (Fed. Cir. 1995). In that case, the district court identified essentially the same concern expressed by the Federal Circuit in Intel, stating that its decision to award lost profit damages for lost sales of a product not covered by the infringed patent “avoid[ed] the ‘whip-saw’ problem, whereby an infringer could avoid paying lost profits damages altogether by developing a device using a first patented technology to compete with a device that uses a second patented technology and developing a device using the second patented technology to compete with a device that uses the first patented technology.” In a split decision, the Federal Circuit affirmed, explaining that:

the only Panduit factor that arguably was not met in the present fact situation is the second one, absence of acceptable non-infringing substitutes. Establishment of this factor tends to prove that the patentee would not have lost the sales to a non-infringing third party rather than to the infringer[.]  Here, the only substitute for the patented device was the ADL–100, another of the patentee’s devices. Such a substitute was not an “acceptable, non-infringing substitute” within the meaning of Panduit because, being patented by Rite–Hite, it was not available to customers except from Rite–Hite. Rite–Hite therefore would not have lost the sales to a third party. The second Panduit factor thus has been met. If, on the other hand, the ADL–100 had not been patented and was found to be an acceptable substitute, that would have been a different story, and Rite–Hite would have had to prove that its customers would not have obtained the ADL–100 from a third party in order to prove the second factor of Panduit.

Writing in dissent, Judge Nies pointed out the potential problem with the majority’s approach:

[T]he one or more patents on technology used in the ADL–100 were never asserted against Kelley, and the validity of those patents is untested. If those patents are invalid, the majority’s analysis collapses.… Given that Kelley has had no legal basis for bringing a declaratory judgment action challenging the unlitigated patents (never having been charged with their infringement), the majority imposes liability and overlooks the unfairness in its theory. If the unlitigated patents are significant to damages, Kelley deserves an opportunity to defend against them. A clearer denial of due process is rarely seen.

On a related note, in Eli Lilly & Co. v. Actavis Elizabeth LLC, 435 F. App’x 917 (Fed. Cir. 2011), the Federal Circuit held that the use of a drug that has not been approved by the FDA does not constitute a “substantial noninfringing use” for purposes of 271(c). The accused infringer in this Hatch-Waxman case argued that up to 29% of the total use of the drug in question was off-label and noninfringing, and the patent owner conceded that this noninfringing off-label use was possibly as high as 8%. But the Federal Circuit found this used to be irrelevant for purposes of 271(c), holding that “unauthorized activity does not avoid infringement by a product that is authorized to be sold solely for the infringing use.” See also Grunenthal GMBH v. Alkem Lab’ys Ltd., 919 F.3d 1333, 1340 (Fed. Cir. 2019)(“In a pharmaceutical case, the noninfringing use must be in accordance with the use for which the product is indicated.” citing Eli Lilly and Co. v. Actavis Elizabeth LLC).

Based on my review of reported decisions, contributory infringement has not played a significant role in pharmaceutical patent litigation, and is redundant in view of the availability of an action for induced infringement. There are many decisions in which an alleged infringer is found liable for both induced infringement and contributory infringement, and also a significant number of decisions in which the alleged infringer has been found liable for inducing infringement but not contributory infringement. See, e.g., Vanda Pharms. Inc. v. W.-Ward Pharms. Int’l Ltd., 887 F.3d 1117 (Fed. Cir. 2018) and In re Depomed Pat. Litig., 2016 WL 7163647 (D.N.J. Sept. 0, 2016).  However, I have searched of case law and failed to find a reported decision involving and FDA-authorized pharmaceutical in which the court found contributory infringement but held that there was not induced infringement. I found a single district court decision in which the court found that contributory infringement had been proven and did not make a finding with respect to induced infringement, declaring the issue moot in view of its finding of contributory infringement.  Alcon Rsch., Ltd. v. Apotex Inc., 790 F. Supp. 2d 868 (S.D. Ind. 2011).

Drafting Functional Claims Still Risky Post-Alice

by Dennis Crouch

Western Digital Techs., Inc. v. Viasat, Inc., No. 22-CV-04376-HSG, 2023 WL 7739816 (N.D. Cal. Nov. 15, 2023) Docket No. 4_22-cv-04376

Western Digital sued Viasat for infringing claims from several patents, including US8,504,834, which covers “media streaming systems and software.” In a recent decision, Judge Haywood (N.D.Cal.) granted a motion to dismiss — finding the claims of the ‘834 patent directed to ineligible subject matter.  The background section of the patent explains explains that prior art systems decrypted locally stored content using a decryption key obtained from a digital rights management (DRM) server. This had drawbacks related to efficiency and cost. The patent describes an improved system where the decryption key is derived from a stream of data received over a network, rather than needing to contact a DRM server.

Claim 14, treated by the court as representative, recites:

A method for activation of local content, the method comprising:

performing the following in a host device in communication with a storage device storing encrypted content:

receiving a stream of data from a network;

deriving a key from the received stream of data; and

decrypting the encrypted content using the key derived from the received stream of data.

The claim covers a method for decrypting locally stored encrypted content. A host device receives a stream of data over a network, derives an encryption key from that stream, and uses that derived key to decrypt encrypted content stored on a connected storage device.

Alice Step One – Is the Claim Directed to an Abstract Idea?

At Alice step one, the court asks whether the claim is “directed to” a patent ineligible  abstract idea. Here, the court found claim 14 is directed to the abstract idea of “delivering and deriving a decryption key from a stream of data.” The court provided several bases for deriving this idea as gist of the claim and for concluding that it constitutes an abstract idea.

First, the court analyzed the focus of the claimed advance over prior art systems as described in the patent background and specification. The court found the focus was on using a stream of data to deliver and derive a decryption key, rather than contacting a DRM server.

The court then noted that the claims are functional in nature — claiming the result itself.  On this point, the court found that claim 14 does not recite any practical method of implementation, but rather uses only generic computer components like a “host device” and “network” along with conventional processes like “receiving,” “deriving,” and “decrypting” to achieve the result. This demonstrated the claim was drafted in a result-oriented or functional manner focused on the principle itself.

The court also found that the key steps of claim 14 could be performed by a human mind or with pen and paper by deriving a decryption key from a received communication and using it to decrypt content. This indicated abstraction under Federal Circuit precedent.

Finally, the court analogized the claim to those found abstract in several other cases, where claims merely collected, organized, transmitted data without a specific new process for doing so, including Electric Power Group, LLC v. Alstom S.A., 830 F.3d 1350 (Fed. Cir. 2016) (collection, analysis, and display of data are abstract), and Two-Way Media Ltd. v. Comcast Cable Commc’ns, LLC, 874 F.3d 1329 (Fed. Cir. 2017) (broad functional steps that lacked technical details were abstract).

Alice Step Two – Does the Claim Recite an Inventive Concept beyond the  Abstract Idea itself?

At step two of Alice, the court searches for an inventive concept to ensure the claim amounts to significantly more than the abstract idea. Here, the court found no inventive concept in claim 14, when considered either element-by-element or as an ordered combination.

The court found that the claim elements recite only generic computer components like a “host device” performing conventional computer functions like “receiving” and “deriving.” Plaintiffs apparently did not dispute this.

For the ordered combination, Plaintiffs argued that using streaming data to provide decryption keys in the claimed manner was unconventional and advantageous over prior systems. But the court rejected this, finding that any such unconventional use or improvement described in the specification was untethered from the broad claim language.  The court held that even assuming the specification discloses specific steps rendering use of streams unconventional, those details are missing from claim 14.

Conclusion

Because this was at the motion to dismiss stage, the Court permitted Plaintiffs leave to amend their infringement allegations related — perhaps to include factual allegations that show eligibility.  However, the patentee subsequently provided the court with notice that it will not be filing an amended complaint.

While Plaintiffs respectfully disagree with the Court’s determination under 35 U.S.C. § 101 for all of the reasons set forth in its briefing on the issue (see, e.g., Dkt. No. 53), Plaintiffs are not filing an amended complaint and instead reserve the right to appeal the Court’s decision when final judgment is entered in this case.

P’s Response to the Court’s Order. The case is ongoing with two additional Western Digital patents — each which contain claims with more technological detail imbedded into the claims.  The outcome here recognizes that patentees are finding ways to overcome the eligibility issues, both at the PTO and in court, but there are still lots of traps. Though workarounds now often exist, Alice/Mayo still present ample opportunities to find claims abstract – particularly for computer-implemented inventions. The path forward for Plaintiffs remains challenging despite their arguments on appealability.

Sonos v. Google: Late Claiming Estoppel

by Dennis Crouch

Sonos has filed its notice appealing Judge Alsup’s recent decision in Sonos v. Google that rendered two Sonos patents unenforceable due to prosecution laches. After being awarded $32 million by a jury, Sonos saw its verdict flipped by Judge Alsup in a harsh ruling accusing the company of “wringing fresh claims to read on a competitor’s products from an ancient application.” To mount its appeal, Sonos has enlisted Supreme Court heavyweight Josh Rosenkranz, head of Orrick’s Supreme Court and Appellate practice alongside the trial team led by George Lee.  Dan Bagatell, Perkins Coie’s head of Federal Circuit Patent Appeals Practice has filed an appearance in the case for Google.

The appeal will likely focus on several key issues from Judge Alsup’s ruling:

Priority Date: A core finding by Judge Alsup was that new claim language added by Sonos in 2019 constituted improper “new matter” that undermined the priority date for the asserted claims. However, the addition of new language does not necessarily destroy an earlier priority date. Sonos will argue on appeal that the claims were still adequately supported under enablement and written description standards.

Prosecution Laches: While agreeing Sonos diligently prosecuted its patents over 13 years, Judge Alsup still found unreasonable delay and prejudice to Google. Sonos will contend that prosecution laches should not apply given its diligence and the lack of improper motive or negligence. Sonos will also argue that changes to patent term limits have effectively codified a statute of limitations, preempting the common law doctrine of prosecution laches.

Prejudice: Judge Alsup concluded Google was prejudiced because Sonos crafted new claims covering Google’s wireless speaker innovations. But Sonos will counter that there was no evidence showing Google actually relied on Sonos’ inaction or that claims covering Google’s products were foreseeable at the time. Any benefit to Sonos was merely incidental and not the kind of economic prejudice required for prosecution laches.

Sonos clearly faces an uphill battle given the Federal Circuit’s precedent allowing prosecution laches and Judge Alsup’s adamant tone. However, several aspects of the decision appear vulnerable in my view.

Judge Alsup expressed palpable frustration at feeling he was not given the full story about the claims and priority date earlier in the case. This likely colored his view of Sonos’s conduct. The Federal Circuit will review his legal conclusions without any similar sense of personal betrayal. And, the Federal Circuit has historically been much less likely to speak in terms of moral judgment. Instead, the court tends to follow a technocratic approach that centers on following the statute and advancing patent law objectives.

Note here that I have not reviewed the entire docket or trial transcript, and so I am confident that there are also many other issues that Sonos could could potentially appeal. The appellate team will need to pick the top 3-4 that share the Venn sweet-spot of having a good chance of both (1) winning on appeal; and (2) dramatically changing the outcome.

With briefing not due until February 2024, the Federal Circuit likely will not hear oral arguments until early summer. This means Judge Alsup’s aggressive application of prosecution laches and continuation practice will hang over patent prosecutors for months to come, perhaps chilling use of continuation applications.

Skinny Label Avoids Infringement

by Dennis Crouch

H. Lundbeck A/S v. Lupin Ltd., Nos. 2022-1194, 2022-1208, 2022-1246 (Fed. Cir. Dec. 7, 2023) (Opinion by Judge Dyk, joined by Judges Prost and Hughes).

The Federal Circuit recently affirmed a district court judgment finding that Abbreviated New Drug Applications (“ANDAs”) submitted by generic drug manufacturers did not infringe patents rights held by H. Lundbeck A/S and its licensee Takeda relating to the antidepressant drug Trintellix (vortioxetine). The court also affirmed the lower court’s finding that one of the generic manufacturer’s processes for making the drug would infringe a Lundbeck patent directed to methods of manufacture.

Lundbeck’s patents on vortioxetine as well as methods of using the drug to treat major depressive disorder (“MDD”) have expired. However, Lundbeck holds newer patents claiming additional methods of use, including U.S. Patent No. 9,278,096 (“the ‘096 patent”), which claims using Trintellix to treat patients who previously took other antidepressants but ceased use due to sexual side effects, and U.S. Patent No. 9,125,910 (“the ‘910 patent”), which claims treating MDD patients’ cognitive impairment with Trintellix.

When the generic manufacturers filed ANDAs seeking approval for only the initial approved use of Trintellix to treat MDD, Lundbeck sued for infringement, arguing that approval should be blocked because Trintellix would likely later be prescribed for the uses claimed in the ‘096 and ‘910 patents. The Federal Circuit largely rejected this argument — holding that filing the ANDA in this situation cannot constitute infringement under Hatch-Waxman.

The Patent Act does define a form of patent infringement that consists of filing an ANDA with the FDA seeking to manufacture a drug covered by someone else’s patent. But, as relevant for this case, 35 U.S.C. § 271(e)(2)(A) limits the infringement to circumstances where “the use . . . claimed in a patent” be the use for which FDA approval is sought, not merely any use for which the drug may eventually be prescribed.   Thus, the court reaffirmed that ANDA applicants may use section viii statements to carve out patented methods of use and obtain FDA approval for only non-patented uses.

Inducement: The patent holder also alleged that the skinny-label serves as an inducement to doctors to prescribe the drug off-label in a way that infringes the new patents.

I want to note here that the facts in this case are different from prior carve-out cases such as GlaxoSmithKline LLC v. Teva Pharmaceuticals USA, Inc., 7 F.4th 1320, 1333 (Fed. Cir. 2021). In GSK, the patentee provided additional evidence beyond the skinny label, such as communications to the doctors in the form of advertising or promotional materials, etc.  Here, “plaintiffs’ inducement case relied solely on defendants’ proposed ANDA labels as the inducing conduct.”

Still, the patentee argued that the generics would be inducing infringement because physicians would naturally ignore the label carve-outs and prescribe the drug in ways that infringe.  Lundbeck argued that even though the generic labels carved out references to this patient population and patented method of treatment, other information remaining in the labels, particularly data on rates of treatment-emergent sexual dysfunction (TESD), would still encourage doctors to prescribe the generics for the patented use.  The district court (Judge Stark) found no inducement, holding that the proposed labels have carved out all references to treatment based on prior medications and sexual side effects, as well as data from Lundbeck’s clinical studies related to TESD rates. On appeal, the Federal Circuit agreed that a generic cannot be liable for inducement if it has carved out all sections of the label relating to the patented method of treatment, even if doctors may  use their background knowledge to prescribe the drug off-label for that use.  Allowing inducement in that situation would indefinitely generics after compound patents expire, undermining the Hatch-Waxman scheme.

The court also held that for contributory infringement under § 271(c), substantial noninfringing uses refer to uses not covered by the asserted patents. Somewhat controversially, uses potentially infringing other unasserted patents qualify as noninfringing uses in the analysis. “[S]ubstantial noninfringing use in section 271(c) refers to uses that do not infringe the patent in question, not other patents.”  To reach this determination, the court looked to the statutory text of 271(c) and concluded that the non-infringing use requirement was tied only to the asserted patents.  Arguing for the accused infringers, David Abramowitz (Locke Lord) explained at oral arguments: “There is no statute or case law that a substantial amount of infringing use can’t be covered by some other patent. The statute’s patent specific.”

Overall, the court ruling places a hard stop against a potential form of evergreening that brand drug companies could have used to prevent generic entry through method-of-use patents obtained later in a drug’s lifecycle.  At the same time, this ruling may significantly hamper innovators ability to effectuate their exclusive rights in their newer method of use patents that can be infringed by off-label prescriptions.

= = =

One note here is that the courts sided with the patentee on one patent, a method of manufacture of the drug. The appeal focused on claim construction of the term “reacting” – that the district court had properly broadly construed.  Although it is not entirely clear to me, this might be enough to forestall generic entry.

USPTO again Asks for Remand in Xencor to reconsider its Decisions.

by Dennis Crouch

Since I have been writing about the pending appeal in In re Xencor, I thought I would keep readers updated on the briefing.  I am interested in the case because of its focus on the written description requirements for Jepson and means-plus-function claims. As covered in previous posts (here and here), the patent applicant has appealed PTAB rulings that its biotech antibody claims lack sufficient written description support.  The patent applicant and amici have filed merits briefs, but most recently the USPTO asked for remand so that it could reconsider its approach just days before its merits brief deadline. The basic issues:

  1. The Patent Act requires means-plus-function claims to be interpreted to cover corresponding structure disclosed in the specification and “equivalents thereof.”  In its decision, the PTAB held that any equivalents must have written description support in the specification — or at least that the specification must provide guidance on what counts as an equivalent.  Specifically, the PTAB stated “the inquiry for compliance with section 112(a) does not end” at one disclosed structure, and that equivalents under §112(f) require adequate written description support.  Compliance “with the written description requirement of section 112(a) are not coincident nor fully satisfied by complying with section 112(f) for a claim in means-plus-function format.”
  2. Although the preamble of a Jepson claim is normally not given patentable weight for novelty/obviousness grounds, the PTAB held that the preamble still must be supported by sufficient written description in the original specification. “Thus, when the inventors claim their invention as ‘a method of treating a patient by administering an anti-05 antibody with an Fc domain,’ they have the statutory burden under the written description requirement of section 112(a) to describe such a method, including the treating aspect of the claim recited in the claim preamble.”

The patent applicant appealed both of these written description rejections to the Federal Circuit. And, rather than filing a brief in opposition, the USPTO has requested a remand to reconsider its position.

In its newly filed reply brief on the remand issue, the agency more clearly states that the newly created “Appeals Review Panel” will hear the case on remand in an attempt to set USPTO policy. The ARP was established earlier in 2023 as a replacement of the Precedential Opinion Panel process and designed to work alongside the Director Review process for IPRs.  Although the Director can decide the constitution of each panel, the default panel will include the Director, the Commissioner for Patents, and the Chief Judge of the Patent Trial and Appeal Board.  The newly filed reply brief indicate that the USPTO plans to use the ARP to “clarify the USPTO’s position on the proper analysis of Jepson-format and means-plus-function claims in the field of biotechnology and particularly in the antibody art.

The brief also provides a number of example cases where the Federal Circuit has remanded cases in somewhat similar situations — recognizing essentially that it is at the discretion of the court.

An interesting note here is that the USPTO admits that it currently does not know what its position should be on the issues being litigated:

The Director has not predetermined the outcome of [the potential ARP] review and thus is not presently in a position to state the decision of that panel, and the views of the USPTO, in its brief before the Court. The Director has only determined that convening the ARP is the best path forward to ensure careful review of the issues, and clear articulation of the USPTO’s views, in this significant area of the law.

Xencore USPTO Reply Brief on Remand.  From Xencor’s position, this looks like the PTO wants an opportunity to reiterate its rejections in better form.

Although the USPTO does not currently know its position on the issues, I would recommend doing some planning since their merits brief is due December 8 and the Federal Circuit has not yet granted the remand.

One important issue raised by Xencor regarding remand of the appeal has to do with Patent Term Adjustment — and a suggestion that Xencor may suffer prejudice from the remand.

If this case were remanded, Xencor could lose 653 days and counting of patent term adjustment due to “C-delay” under 35 U.S.C. § 154(b)(1)(C)(iii), which seeks to compensate a patent applicant for time that an application has been in appellate review by the PTAB or a federal court. This potential loss of patent term would irreparably harm Xencor, an innovative company that, after great investment, has commercialized the claimed technology to the benefit of thousands of patients.

Xencor’s brief explains that PTA delay from appellate review requires a decision “reversing an adverse determination of patentability.” Chudik v. Hirshfeld, 987 F.3d 1033 (Fed. Cir. 2021) (citing 35 U.S.C. § 154(b)(1)(C)(iii)).  In Chudik, the court held that the patentee receives no time for situations where no decision is issued (such as a remand).

In its response, the USPTO argued that these PTA expectations are too speculative to serve as considerations. In particular, even if Xencor wins the appeal, the USPTO has the power to reopen prosecution and raise other patentability issues.  And, of course, Xencor might not win the appeal.

Motion for remand in Xencor

Jepson Formats and Means Limitations Under More Fire

Inferring Secondary Meaning from Product Design Copying

by Dennis Crouch

In patent law, product copying can serve as indirect evidence of non-obviousness.  A pending petition before the Supreme Court asks a similar question in the trademark realm – to what extent does copying of a product serve as evidence of secondary meaning of the product associated trade dress.  Trendily Furniture, LLC v. Jason Scott Collection, Inc., 21-16978 (Supreme Court 2023).  This is particularly important in the product design arena because evidence of secondary meaning must be proven before it is protectable as trade dress.

JSC designs and manufactures high-end furniture, primarily large, heavy-set pieces made of reclaimed teak and embellished with detailed wood carvings and metal designs.  JSC sued Trendily Furniture for copying three of its furniture designs that featured this style. The trade dress dispute here is over the is over the overall look and design of these three ornate furniture pieces from JSC.

All of the circuit courts agree that copying can serve as evidence of secondary meaning. The circuits are split, however, on whether the copying must be accompanied by some intent to free-ride on customer goodwill or otherwise confuse customers via passing-off.

The petition for certiorari outlines 5 distinct approaches to the copying-intent issue taken by the various circuit courts of appeal:

  • The 7th, 1st and 10th Circuits hold copying alone is legally irrelevant, unless the defendant also specifically “intended to confuse consumers and pass off its product as the plaintiff’s.” Mere intentional copying alone has no bearing.
  • The 8th, 3rd and 11th Circuits hold copying may support an inference of secondary meaning, but no inference arises if there was some “neutral,” non-source-confusion reason for the copying.
  • The 5th Circuit treats intentional copying as relevant but simply weighs it along with other factors.
  • The 9th and 6th Circuits hold intentional copying alone, even absent proof of intent to create customer confusion, “strongly supports an inference of secondary meaning,” based on the logic that “‘[t]here is no logical reason for the precise copying save an attempt to realize upon a secondary meaning.’”
  • The 4th Circuit goes even further to apply a “presumption of secondary meaning” from intentional copying regardless of proof of intent-to-confuse.

In Trendily, the 9th Circuit applied its rule to affirm judgment for the trade dress holder. The defendant admitted asking its Indian factory to manufacture exact copies of the plaintiff’s furniture based on photos, which it then sold under its own brand to some of the plaintiff’s own retailers. App., infra, 3a. The district court and 9th Circuit relied predominantly on this intentional copying to find secondary meaning acquired. On appeal, the 9th Circuit affirmed this holding that “[p]roof of copying strongly supports an inference of secondary meaning” because “[t]here is no logical reason for the precise copying save an attempt to realize upon a secondary meaning.”

In its petition, Trendily Furniture argues the intentional copying rationale is “flawed” and inconsistent with precedent recognizing that “product design almost invariably serves purposes other than source identification” – such that copying will often aim to “exploit” desirable features rather than create confusion.

I want to be clear here for a moment and point out a weak aspect of Trendily’s case.  The arguments here focus on the question of whether or not the plaintiff has any protectable trade dress.  Even if the answer is ‘yes,’ the plaintiff will still have to prove a likelihood of confusion between its product and the knock-off.  Still, there are important competing interests — how much do we want to want the scale to weigh in favor of competition or against free-riding.  My understanding is that all of the circuits permit an accused infringer to show evidence pro-competitive reasons for copying that are distinct deceiving consumers or free-riding off the sources acquired significance. The difference then is that some circuits create a presumption of that the copying is pro competitive absent proof otherwise, while others more readily infer bad faith.

The mark holder originally waived its right to respond, but a response was requested by the Justices.  That responsive brief is due December 13, 2023.

Brushed Aside? Dafni Tries to Keep its PTAB Win against Ontel

by Dennis Crouch

Ontel Products Corp. v. Guy A. Shaked Investments Ltd., No. 22-1938 (Fed. Cir.)

This pending case raises key issues of (1) mootness in the IPR/Court interplay and (2) the role of secondary indicia in obviousness determinations.

Gary Shaked (Dafni) holds several patents on hair straightening brushes, and the business took off as a video of the time-saving tool went viral. Dafni sued Ontel and others for patent infringement based upon several utility and design patents.  Dafni responded with an IPR of one of the patents. U.S. Patent No. 9,877,562.  Although the IPR was instituted, the patentee eventually won a judgment confirming that the claims were not proven invalid.  The PTAB’s non-obviousness decision was largely based upon a indirect indicia of non-obviousness, including evidence of industry praise and industry adoption.

Meanwhile, back in the district court, the patentee wanted to move forward with the litigation and offered to dismiss the ‘562 patent from the litigation (with prejudice) in order to lift the stay.  The defendant agreed and the parties jointly filed a stipulated dismissal of that claim.

Of course, the IPR was not automatically dismissed just because the litigation over the patent was dismissed. When the patentee eventually won the IPR, petitioner appealed.

In the appeal, there are two main questions:

  1. Whether the appeal should be dismissed as moot and the IPR vacated under Munsingwear because of a lack of ongoing actual controversy between the parties regarding the patent.
  2. On the merits, were the indirect indicia of non-obviousness properly considered.

The petitioner here is not going to be sued on the patent for any of its current activities. But, petitioner still argued that the PTAB decision could be used by the district court to help prove the secondary considerations of non-obviousness with regard to the other asserted patents.

On the standing/mootness questions, the court really has three options:

  1. Find that it has proper standing and that the case is not moot — then move forward with the appeal.
  2. Find that the case is moot and vacate the PTAB decisions upholding the patent under cases such as United States v. Munsingwear, Inc., 340 U.S. 36, 39–41 (1950).
  3. Find that the case is moot and/or lacks standing, but refuse to vacate the PTAB decision based upon the “voluntary cessation doctrine” discussed in ABS Global, Inc. v. Cytonome/ST, LLC, 984 F.3d 1017 (Fed. Cir. 2021).

The voluntary cessation doctrine – indicates that a party who wins a judgment below  but who might lose on appeal cannot keep that judgment in place by taking affirmative steps to moot the appeal.  Rather, in Munsingwear, the Supreme Court indicated that the appropriate appellate action in that situation where appellant is constitutionally prohibited from appealing under Article III is to also vacate the lower court judgment.  During oral arguments before Judges Taranto, Chen and Cunningham, the parties debated whether the patentee had unilaterally created the mootness by dismissing its infringement assertion.  The petitioner (accused infringer) argued it was effectively unilateral, and that the joint-stipulation of dismissal was a mere formality.  The patentee argued that the accused infringer had a hand in the dismissal and so cannot now use that act to collaterally attack a PTAB decision that it does not like.  I believe that the patentee here has the better argument, the defendant was clearly a participant in the dismissal of the claims as part of a negotiated process and so it cannot be seen as unilateral.  We’ll have to wait to see what the Federal Circuit says.

In general though, I hope that the court reaches the merits because I am working a paper involving objective indicia of non-obviousness and would like another decision to study.

A key issue on appeal is whether the patent owner properly established a nexus between the evidence of industry praise and industry acceptance for its DAFNI hair straightening brush and the claimed features of the ‘562 patent.

As the Federal Circuit has made clear, “Evidence of objective indicia of nonobviousness must have a nexus to the claims, i.e., there must be a legally and factually sufficient connection between the evidence and the patented invention.” Fox Factory, Inc. v. SRAM, LLC, 944 F.3d 1366, 1373–74 (Fed. Cir. 2019).  Lack of proven nexus has been repeatedly used to deny the relevance of key objective evidence that would otherwise tend to show nonobviousness.

Ontel argues that Dafni failed to meet the Fox Factory test. Specifically, Ontel contends that:

  • None of the industry praise evidence shows that the praise directly resulted from the unique characteristics of the invention as identified by the Board, such as the elongate heating elements, insulating spacers, and peripheral spacers.
  • Much of the evidence relates to unclaimed features or features found in other Dafni patents, which rebuts a finding of nexus.

In addition to lack of nexus, a patentee’s arguments for secondary considerations are often denied if the evidence provided is not significant enough or compelling. This has two levels of impact. First, a tribunal may make a factual finding that the evidence is insufficient to establish, for instance, industry praise or industry acceptance.  Second, the tribunal may also use the low level of evidence when answering the ultimate legal question of obviousness — finding that the secondary considerations are insufficient to outweigh the direct evidence presented.

Here, the patent challenger argued that Dafni’s evidence of industry praise and acceptance was not significant or compelling enough to support the Board’s finding. Specifically, Ontel contended that the evidence relied upon by Dafni and the Board was “neither significant nor compelling” because (1) it consisted merely of a handful of internet articles by individual users rather than industry praise; (2) Dafni made no showing that any of the articles constituted industry praise; and (3) much of the evidence suffered from numerous weaknesses like being promotional in nature or failing to technically analyze the product.  Thus, Ontel argued the evidence was inadequate to establish the “significant industry praise and acceptance” found by the Board both as a factual matter and when weighing it against the strong showing of prima facie obviousness in the ultimate legal obviousness analysis.

In response, Dafni argues that substantial evidence supported the Board’s finding that a nexus existed to the claimed invention based on:
  • Crediting of Dafni’s expert testimony linking the claimed features to the capabilities for which the DAFNI brush was praised, such as the ability to quickly and effectively straighten hair.
  • Establishing that a nexus can rely on a unique combination of known individual elements.
  • Ontel failing to rebut Dafni’s prima facie showing of nexus with evidence that the praise related to unclaimed or prior art features.

Oral arguments got stuck on the standing/mootness issues and so the parties did not further advance their arguments on the merits of the obviousness case. The Federal Circuit will thus have to weigh the arguments as briefed if it permits the case to move forward.

Join Me for the Ski CLE in Snowmass!

by Dennis Crouch

I’m excited that my next patent-law event will be the IP CLE Conference, January 7-10, 2024 at the Viewline in Snowmass, Colorado. This is one of my favorite events of the year because it mixes intellectual property law discussion with three days of skiing. Program co-chairs Scott Alter (Michael Best) and David Bernstein (Debevoise) have once again assembled an impressive roster of speakers including prominent attorneys, government officials, judges, and in-house counsel. Some highlights of the agenda include:

  • Roundtable discussions with Federal Circuit Judges Kara Stoll and Leonard Stark along with D.Del Judge Maryellen Noreika, former SG Seth Waxman (Wilmer), and Deanne Maynard (MoFo). Judge Stoll will separately join Erika Arner (Finnegan) for what looks to be an interesting discussion on IPR/Infringement litigation interplay.
  • Featured talks from both David Gooder, Commissioner for Trademarks and Mollybeth Kocialski, Director of the Rocky Mountain USPTO.
  • Several talks that delve into AI issues, including mine and one from Megan Bannigan (Debevoise).
  • As I prepare to teach patent prosecution in the spring, I’m looking forward to  hearing prosecution hot topics from George Lewis (Merchant & Gould).

Lots more here – check out the agenda.

In between the educational sessions, we’ll have ample time to enjoy ski breaks in the relaxed mountain setting. I have found that a day of skiing is a great way to make a new lifelong friend. The Viewline is right on the slopes with easy ski-in/ski-out access.

Hope to see you there!

VLSI’s $2.2b Infringement Verdict Rejected by Federal Circuit

by Dennis Crouch

VLSI Technology LLC v. Intel Corporation, No. 2022-1906 (Fed. Cir. Dec. 4, 2023)

In its decision here, the Federal Circuit took VLSI’s $2.2 billion judgment down to zero — but it will allow a new trial on damages.  The court particularly affirmed a finding that Intel infringed claims of U.S. Patent No. 7,523,373, but found the associated $1.5 billion damage award flawed.  With regard to the second patent at issue, U.S. Patent No. 7,725,759, the appellate panel found that insufficient particularized evidence had been presented to show infringement under the Doctrine of Equivalents. This took away the $700 million damage for infringement of that second patent.  Opinion by Judge Taranto and joined by Judges Lourie and Dyk.

VLSI originally sued Intel in the Western District of Texas in 2019, asserting the two patents relating to semiconductor chip technology. The ‘373 and ‘759 respectively cover “Minimum Memory Operating Voltage Technique” for integrated circuits and a “Method of Managing Clock Speed in an Electronic Device.”  And, Intel’s Haswell and Broadwell microprocessors were accused of practicing the claims.  A jury issued its verdict in early 2021 favoring the patentee and, the district court entered judgment that Intel literally infringed the ‘373 patent and infringed the ‘759 patent under the doctrine of equivalents with $2.2 billion in total damages.

Infringement under the Doctrine of Equivalents: The most interesting part of the infringement decision focused on the doctrine of equivalents — with the Federal Circuit continuing its efforts to tightly cabin-in the doctrine.

Although the jury sided with the patent holder, the Federal Circuit found VLSI’s evidence legally insufficient to support the verdict. The court explained that “[t]he doctrine of equivalents provides a limited exception to the principle that claim meaning defines the scope of the exclusivity right in our patent system” and is “an ‘exceptional’ basis for liability that must be carefully limited.”  The court then highlighted three limiting principles of DoE:

  1. All Elements Rule: First, proof of equivalents must be limitation specific, not focused only on the claim as a whole, though the limitation-specific inquiry of equivalence may be informed by the “role played by each element in the context of the specific patent claim.”
  2. Function-Way-Result All Substantially the Same: Second, for the determination of whether a substitute element is only insubstantially different from a claimed element and hence an equivalent, a traditional formulation—appropriate for this case, as VLSI’s use of it indicates—asks “whether a substitute element matches the function, way, and result of the claimed element.” Such matching requires that each of function, way, and result be “substantially the same,” with the “way” requirement of particular importance, as a practical matter, in keeping the doctrine properly limited.
  3. Particularized Expert Testimony: Third, the patentee must provide “particularized testimony and linking argument as to the insubstantiality of the differences between the claimed invention and the accused device.”

Of course, the court could have also added a fourth and fifth substantial limiter: prosecution history estoppel, and vitiation (which some folks argue is simply a feature of the function-way-result rule).  As you read these requirements, you’ll begin to see that the path to winning a case by equivalents is quite narrow — each particular limitation in the claim must be practiced in the accused device, either literally or by equivalents.  And, although an equivalent will, by definition, have a different structure than what is claimed, the doctrine expounded by the court here requires that it be “substantially the same” in both its function and structure.   And, as noted by the outcome of the case, those substantial similarities are treated as elements of proving equivalents and thus cannot be simply inferred by the jury.

Applying these principles, the court held that VLSI failed to adequately explain why the different way Intel’s processors operated was only an insubstantial difference from what was claimed.  During oral arguments, the judges pressed the parties to identify “particularized testimony and linking argument” to support a finding of equivalence — apparently there was not enough.  Here, the VLSI claim requires a “first master device” and a distinct “programmable clock controller.”  But, in the accused intel products these were overlapping on the same power control unit.  VLSI’s expert Dr. Conte testified that “It’s just a difference of where an engineer draws this data line. It’s a design choice.”  But, the appellate panel found that this testimony was legally insufficient to provide a basis for the jury to find that spitting functions as Intel did was “substantially the same way” as recited in the claims.  Merely labeling it a “design choice” was not enough.

The determination of equivalence under the doctrine of equivalents is a question of fact protected by the 7th Amendment right to a jury verdict. So why was the Federal Circuit reversing the jury’s finding of equivalence in this case?  The key guiding principle here is the legal sufficiency of the evidence. Even though infringement under the doctrine of equivalents is a factual issue, the patentee still bears the burden of providing particularized evidence to support its theory of equivalence. As the court stated:

“We have long demanded specificity and completeness of proof as crucial to enforcing the limits on the doctrine: The patentee must provide particularized testimony and linking argument as to the insubstantiality of the differences between the claimed invention and the accused device.”

Essentially, while the ultimate determination is a question for the jury, there is still a minimum legal threshold of providing substantive, thorough evidence explaining why any differences are insubstantial. The Federal Circuit found VLSI failed to meet that threshold with conclusory, unsupported testimony.

This decision continues the court’s strict policing of the doctrine of equivalents — here by overturning a jury verdict and rejecting the district court’s JMOL denial.  In a complete reversal from its historic origins, I now see DoE as a highly technical strategy full of almost unavoidable pitfalls.

Damages Award Vacated: Although the Federal Circuit affirmed the literal infringement judgment as to the ‘373 patent, it vacated the $1.5 billion damages award after finding that VLSI’s damages expert made a clear error in calculating the power savings attributable to the patented technology. Specifically, according to the Federal Circuit, the expert used data from processor states that did not practice the patented functionality in order to create a model. Although this issue was presented to the jury, the Federal Circuit found the “readily identifiable” methodology problem required vacating the award. The court remanded for a new trial on damages, allowing VLSI the opportunity to correct this issue. Note here that the patentee strongly disagreed that there was any error, much a “readily identifiable” one sufficient to overturn the jury verdict.

License Defense Permitted

Finally, in a procedural ruling, the Federal Circuit held that the district court improperly denied Intel’s request to amend its answer to add a license defense. Intel alleged that its recent acquisition of Finjan gave it a license to VLSI’s patents under Intel’s earlier agreement with Finjan. The district court found the defense futile and thus refused to permit the amendment, but the Federal Circuit disagreed. While not concluding Intel would ultimately succeed in proving it held a license, the court explained there were open questions under Delaware law that required further litigation. “We hold only that it was error to deny the motion to add the license defense to the case.”

Permissible Repair versus Impermissible Reconstruction

by Dennis Crouch

I was looking forward to the oral arguments in the interesting case of Karl Storz Endoscopy v. STERIS Instrument Management  Services (IMS) focusing the threshold between permissible repair and impermissible reconstruction.  Oral arguments were scheduled for December 4, 2023, but the parties filed a joint dismissal on December 3.

Storz is a medical device manufacturer and sells its patented endoscopes throughout the united States that included a specialized optical system covered by two patents. US7530945 and RE47044.  The patents claim an endoscope with an optical relay components surrounded by transparent shrink wrap, which allows the components to be pre-assembled and optically tested before insertion in the endoscope body.  Hospitals hire IMS to repair its medical devices, including the Storz endoscopes — a process that could involve breaking open the endoscope, removing the optical relay, replacing damaged lenses/spacers with new or recycled ones, inserting the rebuilt optical relay back into the endoscope body, and resealing the device.

A manufacturer’s patents covering its product are “exhausted” as soon as the company places product in the chain of commerce.  Those particular authorized products can be resold, used, and repaired by third parties without creating any patent infringement liability.  But, the buyers do not have permission to create new copies of the patented work, and that includes wholly reconstructing the product after it has been “spent.” The seminal Supreme Court case addressing  the distinction between permissible repair and impermissible reconstruction is Aro Manufacturing Co. v. Convertible Top Replacement Co., 365 U.S. 336 (1961), which held that “replacement of unpatented parts, one at a time, whether of the same part repeatedly or different parts successively, is no more than the lawful right of the owner to repair his property.” In Wilbur-Ellis Co. v. Kuther, 377 U.S. 422 (1964), the Court found extensive refurbishing and resizing of multiple unpatented components was repair because it extended the useful life of the original patented article. The Federal Circuit expanded on the scope of repair in Dana Corp. v. American Precision Co., 827 F.2d 755 (Fed. Cir. 1987), permitting rebuilding of worn unpatented parts, and in Jazz Photo Corp. v. ITC, 264 F.3d 1094 (Fed. Cir. 2001), allowing invasive modifications so long as there was no complete reconstruction. However, in Sandvik Aktiebolag v. E.J. Co., 121 F.3d 669 (Fed. Cir. 1997), the court found impermissible reconstruction where a patented drill bit was recreated with a new cutting tip after the drill was spent.

Before the district court, IMS moved for summary judgment that its activities constitute permissible repair and not infringing reconstruction. The district court agreed, holding that IMS was exercising its customers’ right to repair the devices they had purchased and therefore did not infringe.  The district court particularly found that IMS’s repairs preserve the useful lifespan of the endoscope and do not “reconstruct” or make a wholly new article.  On appeal, Karl Storz raised three main grounds for reversing the district court’s decision:

  1. Readily Replaceable Parts: Karl Storz argued that replacing “readily replaceable” parts can be repair, but replacing parts that are not readily replaceable constitutes impermissible reconstruction. From the briefing it appears undisputed that the optical relay in its endoscopes and covered by its patents is not a readily replaceable part.
  2. Novel/Inventive Aspect: The district court found the optical relay assembly was the “novel and distinguishing” part of Karl Storz’s patents. Karl Storz contended that by fully replacing this inventive aspect, IMS has impermissibly reconstructed the device, even though the patent does not have a claim directed solely to the optical relay assembly.
  3. New Article: Case law says repair does not allow a party to construct an essentially new article. Karl Storz argues that IMS’s replacement of nearly all the patented components results in an endoscope that is so different from the original that IMS has created a new device.

The would have been an important one in the evolving area of patented medical device repair and third-party servicing rights.

No Mandamus Relief in Privilege Ruling

by Dennis Crouch

In a recent decision, the U.S. Court of Appeals for the Federal Circuit denied a petition for a writ of mandamus filed by Cozy, Inc. seeking to set aside a district court discovery order piercing attorney-client privilege. In re: Cozy, Inc., No. 2023-145 (Fed. Cir. Dec. 4, 2023). The discovery dispute arose out of Cozy’s patent infringement lawsuit against Dorel Juvenile Group, Inc. (“Dorel”) and Dorel’s inequitable conduct counterclaims alleging that Cozy made fraudulent misrepresentations to the PTO. 21-cv-10134-JGD.

After reviewing documents in camera, the district court granted in part Dorel’s motion to compel production of certain Cozy documents listed as privileged on the basis that the crime-fraud exception to attorney-client privilege applied. The court found that Dorel had established a prima facie case that Cozy’s founder, Dr. Arjuna Rajasingham, “manipulated the PTO into recognizing priority dates to which he was not entitled” and “relied on the advice of his counsel to perpetrate a fraud on the PTO.”

The crime-fraud exception provides that attorney-client privilege does not apply to communications between a client and attorney that are made for the purpose of furthering criminal or fraudulent activity. Specifically, the ordinarily strong privilege may be pierced if the party seeking disclosure can show that (1) the client was engaged in or planning criminal or fraudulent activity when the attorney-client communications were made, and (2) the communications were intended in some way to facilitate or conceal the criminal or fraudulent activity. The policy rationale is that the usual protections afforded by attorney-client privilege should not extend to communications made to enable or aid the commission of a crime, fraud, or other misconduct.  Because attorney-client privilege is typically so strongly protected by the legal system, the exception is typically narrowly construed.

On mandamus here, Cozy challenged the privilege ruling, arguing that the exception requires a stronger showing of inequitable conduct, which requires both materiality and intent.  In particular, the patentee argued that the defendant must provide “a clear showing [of materiality,] that the patent would not have issued but for [the] misrepresentations.”  The Federal Circuit, however, denied mandamus relief, finding no “clear and indisputable” right to relief nor a lack of other adequate means to challenge the decision. The court cited Supreme Court precedent stating that “post-judgment appeals generally suffice to protect the rights of litigants and ensure the vitality of the attorney-client privilege.” quoting Mohawk Indus., Inc. v. Carpenter, 558 U.S. 100 (2009).

The Federal Circuit further held that attorney-client communications used to commit fraud on the PTO after a patent has already issued could potentially still fall within the crime-fraud exception.

[I]t is far from clear why “[a] client who consults an attorney for advice that will serve him in the commission of a fraud” on the PTO following patent issuance should get “help from the law” by shielding communications used in commission of that fraud.

Quoting Clark v. United States, 289 U.S. 1 (1933).  The court also cited federal statutes associated with fraud against the US: 18 U.S.C. §§ 371 (Conspiracy to commit offense or to defraud United States), 1001 (false statement to US).

The outcome here is that the Federal Circuit denied mandamus, but it left open the possibility that it reconsider the privilege issue after final judgment — assuming that it makes a difference in the actual outcome.  In that vein, the appellate panel provided an expectation and a suggestion to the district court: (1) Expectation: “that the communications and related documents will be kept under seal to mitigate the potential harmful effects caused by disclosure.” and (2) Suggestion: “it would be helpful if the district court could indicate separately what findings it would make with and without the documents used as a result of piercing the privilege at issue here.”

While I understand the Federal Circuit’s cautious suggesting to keep the communications secret from the public – just in case the privilege issue was decided wrongly. If this turns out to be a fraud on the PTO, I expect that it will be very useful for the patent bar to see the details of the communication.   To be clear, at this point I can’t tell you the particularly details of the communications other than the notion that they involve discussion of issues related to priority dates, patent term, certificates of correction, and prosecution strategy.

Motion for remand in Xencor

In the pending Federal Circuit appeal In re Xencor, the USPTO Director recently filed an opposed motion asking the Court to remand the case back to the PTAB.  The motion comes long after briefing has commenced and just days before the Director’s response brief was due, after already receiving an extension of time. Xencor has opposed the request, citing prejudice and lack of justification. This post examines the parties’ arguments.

As background, Xencor’s biotech patent application contains both Jepson and means-plus-function claims that were rejected by the PTAB on questionable written description grounds.  The examiner had initially issued written description rejections, but withdrew the rejections during the PTAB appeal briefing. The PTAB then reinstated the rejections based upon its authority to find new grounds for rejection, and then reaffirmed its position on request for rehearing.  Xencor then appealed to the Federal Circuit.

In its request for remand, the USPTO noted that it plans to “to issue a revised decision that clearly and thoroughly expresses the Agency’s view on the application of the case law to this important area of technology.”  On point, the Agency has not admitted any errors it made during the process, it has not conceded any point of law or fact, or identified anything that was not sufficiently briefed — and so Xencor has opposed the motion for remand.

An odd feature of agency appeals is that the agency (here, the USPTO) is both the appellee and the tribunal itself. This dual role creates an inherent tension – the agency is defending its own decision while also being responsible for carrying out further review. In this case, the USPTO’s request for a remand seems likely to be an attempt to avoid an adverse appellate ruling by bolstering the agency’s position with a better reasoned opinion. But the ordinary approach here is to recognize that the agency already had its chance to issue a final decision, and that the USPTO should deal with the consequences on appeal rather than get a second (third) bite at the apple. The Federal Circuit will now need to assess whether remand is appropriate so late in the process, or whether the case is ripe for a decision on the current record.

But the Director can fully express the Agency’s view in her response brief on appeal. Remand is unnecessary for that purpose. _See id._ (“so the board can reevaluate the bases of its decision” is an insufficient justification).

Federal Circuit Rule 27(f) provides guidance on motions for remand:

A motion to . . . remand should be made as soon as the grounds for the motion are known. After the appellant . . . has filed its principal brief, the argument supporting . . . remand should be made in the response brief of the appellee.

Fed. Cir. R. 27(f).  This provision does not provide much guidance, but there are some prior cases where the Federal circuit has appeared to generously grant remand if the USPTO requested an opportunity to reconsider its prior decision.

Remand “is usually appropriate” to allow an agency to reconsider its previous position.

Marin Partners v. Heaven Hill Distilleries, Inc., No. 2023-1624, 2023 WL 5286458, at *1 (Fed. Cir. Aug. 17, 2023) quoting dicta from SKF USA Inc. v. United States, 254 F.3d 1022, 1029 (Fed. Cir. 2001) (attempting to spell out a taxonomy of agency remand situations).

A key early case from the Federal Circuit on point is In re Hester, 838 F.2d 1193, 1194 (Fed. Cir. 1988).  In that case the Federal Circuit denied the Patent Office motion for remand that was filed a few days before the merits brief was due and the appellant had already expended the time, money, and effort to file his brief. In addition to  early filing, the court provided some examples of when remand is appropriate:

It is not the intent of the court to discourage the filing of any and all motions to remand. Parties may agree that remand is desirable, intervening law may warrant a remand, the Board may wish to concede to some or all of appellant’s demands, or other circumstances may be present that would indicate that remand is appropriate. However, none of those circumstances is present here.

Id.

The USPTO’s responsive brief is due on Friday, and so I expect the Federal Circuit to decide this motion quickly.

Jepson Claims

by Dennis Crouch

The chart above presents the powerful trend in the use of Jepson claim language in US patents over the years. It shows a clear decline in the percentage of patents that include Jepson claim language from 1980 to the present. In the early 1980s, around 8% of patents included at least one claim in Jepson format.  That figure has steadily decreased over the decades, falling to near 0% in recent years.

The Jepson format is a way of writing patent claims where the preamble states the known prior art, and the body specifies the improvements made over this prior art. Typically, the transition phrase will be in the form “wherein the improvement comprises” or “the improvement comprising.”  100+ years ago, patentees were looking for ways to claim an improved device without being directly bound to all the old elements in the device that they hadn’t changed.  They so began putting the known elements into the (substantially) non-limiting preamble and kept the new portions in the body.  The patent office liked this form because to allowed claims that fully embodied the product, not just the disembodied improvement.  In addition, the form facilitated examination because it particularly points out the inventive portions. Ex parte Jepson, 1917 C.D. 62, 243 O.G. 526.

The PTO liked this approach so much that it eventually determined that Jepson claims are the preferred approach.  The patent regulations indicate that any “improvement” invention should be drafted in Jepson format.

Where the nature of the case admits, as in the case of an improvement, any independent claim should contain in the following order: (1) A preamble comprising a general description of all the elements or steps of the claimed combination which are conventional or known, (2) A phrase such as “wherein the improvement comprises,” and (3) Those elements, steps and/or relationships which constitute that portion of the claimed combination which the applicant considers as the new or improved portion.

37 CFR § 1.75.

As the chart above shows, this “should” requirement is obviously not being enforced or followed.  “Should” is a middle ground between “shall” and “may” and indicates to me an obligation on the attorney’s part to actually consider whether “the nature of the case admits” such a claim form.  I expect that many U.S. practitioners have pushed the other way and rewritten similar styled claims from European practice when filing the US case.

I previously wrote:

Jespon claims are so nice to read because they actually spell out what has been improved by the invention.  Unfortunately, they also are seen as increasing the chance that the patent will be both narrowly interpreted and found invalid – and that the statement regarding the prior art will be seen as an admission.  For much these same reasons, most patents no longer particularly identify their “invention” beyond stating that it is embodied by each claim taken as a whole.  Prof. Kayton, who trained generations of patent attorneys in his PRG classes was particularly adamant about avoiding Jepson claims.

Gene Quinn on his blog writes “No patent attorney in their right mind would follow this suggestion.” (referring to Rule 1.75(e)).

Crouch, Jepson Claims (Part II), Patently-O (September 2017). Janice Mueller has written that “A long Jepson-format preamble only furthers the impression [to judges and juries] that the claimed subject matter is merely a minor addition to old technology rather than a pioneering advance entitled to broad protection.” The MPEP further explains that “drafting a claim in Jepson format is taken as an implied admission that the subject matter of the preamble is the prior art work of another.” MPEP 2129. Although the text goes on to explain that the admission does not hold if applicant explains that it is not making an admission or if some other justification is provided.

Back in 2017 when I last wrote about Jepson claims, patent attorneys were still coming to grips with the new law of eligibility and the notion that particularly pointing out the technical improvement over the prior art can be a useful strategy in patent drafting and prosecution.  Judge Lourie though seems to have already recognized this.  He explained in his opinion denying en banc review in the Ariosa case that

The claim to this invention, then, might have been better drafted as a so-called Jepson claim, which recites what is in the prior art and what is the improvement. Such a claim might read, perhaps with more details added: “In a method of performing a prenatal diagnosis using techniques of fractionation and amplification, the improvement consisting of using the non-cellular fraction of a maternal blood sample.

Ariosa Diagnostics, Inc. v. Sequenom, Inc., 809 F.3d 1282, 1286 (Fed. Cir. 2015) (concurring opinion by Judge Lourie); See also Ex parte Jepson, 1917 C.D. 62, 243 O.G. 526.

Jepson Formats and Means Limitations Under More Fire

The MPF Resurrection: Still Waiting for a Miracle?

 

Jepson Formats and Means Limitations Under More Fire

by Dennis Crouch

I have been following the pending Federal Circuit case of In re Xencor.  It is a quirky case involving both a Means-Plus-Function Claim and a Jepson claim.  In its decision, the PTAB went off the rails with its means-plus-function analysis.  In particular, the Board held that the MPF claim was invalid for lack of written description because the specification did not describe equivalents to the disclosed structure.

There is some logic to the decision. Let me try to explain: First, we know that written description doctrine requires a showing of possession of the full scope of the claims.   With MPF claims, we know that the statute requires a particular construction that includes both the structure described in the specification and “equivalents thereof.” 35 U.S.C. 112(f).  What we see here is that equivalents of the disclosed specification are within the literal scope of the claims — ergo, the written description must show possessions of those equivalents.

If you recall, a Jepson claim begins with a recitation something that is known or conventional, and then particularly claims the improvement — typically using a phrase such as “wherein the improvement comprises.”  The Jepson claim issue on appeal is the extent that the preamble portion of the claim must have been sufficiently supported by the original specification — even if the preamble carries no patentable weight for novelty or obviousness.

The patent applicant appealed both of these written description holdings by the PTAB, and briefing has been ongoing for the past few months.

In an opposed motion, the USPTO Solicitor has recently asked the Federal Circuit to remand the case back to the USPTO in order to reconsider the questions presented and issue a revised decision.  Although the motion does not clearly state this, it implies that the case will be heard by the USPTO’s Appeals Review Panel (ARP) that includes the Director (Vidal), the Commissioner of Patents (Udupa), and the PTAB Chief Judge (Boalick).

The request states that Xencor’s claims “present novel questions involving the applicability of the Supreme Court’s and this [Federal Circuit’s] precedent for both Jepson-format and means-plus-function claims in the field of biotechnology, and in particular the antibody art.  The use of Jepson format and means-plus-function claiming in the life sciences is exceedingly rare.

USPTO Request for Remand. Although I agree about the current rarity of Jepsom claims, Means Plus Function claims are not exceedingly rare, even in biotech.

= = = =

Claim 8 is written in the Jepson format:

8. In a method of treating a patient by administering an anti-C5 antibody with an Fc domain, the improvement comprising

said Fc domain comprising amino acid substitutions M428L/N434S as compared to a human Fc polypeptide,

wherein numbering is according to the EU index of Kabat,

wherein said anti-C5 antibody with said amino acid substitutions has increased in vivo half-life as compared to said antibody without said substitutions.

Claim 9 is a method claim that includes a means-plus-function limitation:

9. A method of treating a patient by administering an anti-C5 antibody comprising:

a) means for binding human C5 protein; and

b) an Fc domain comprising amino acid substitutions M428L/N434S as compared to a human Fe polypeptide,

wherein numbering is according to the EU index of Kabat,

wherein said anti-C5 antibody with said amino acid substitutions has increased in vivo half-life as compared to said antibody without said substitutions.