August 2012

Joint Infringement: Federal Circuit Changes the Law of Inducement

by Dennis Crouch

Akamai Tech. v. Limelight Networks (Fed. Cir. 2012) (En Banc)
Mckesson Tech. v. Epic Systems (Fed. Cir. 2012) (En Banc) 

In a 6–5 en banc decision, the Federal Circuit has loosened the rules for proving liability under the doctrine of inducing infringement.  In particular, the court here rejects the prior rule that inducement requires proof of a single actor directly infringing the patent.  Rather, the court now holds that the underlying direct “infringement” of a process claim can still lead to inducement liability so long as all of the steps of the method were actually performed. “[I]t is no longer necessary to prove that all the steps were committed by a single entity.”

Inducement is defined by 35 U.S.C. 271(b).  That one sentence provision states in its entirety that “whoever actively induces infringement of a patent shall be liable as an infringer.”  Before this case, the Federal Circuit had repeatedly held that inducement requires both (1) the act of knowing inducement to infringe (with knowledge of the patent) and (2) actual direct infringement of the patent as defined by Section 271(a).  The patentees in this case had a problem with this structure because the accused infringer had allegedly knowingly encouraged different parties to perform different steps of the patented method.  Since direct infringement under 271(a) traditionally requires proof that a single-actor performed all of the claimed steps, the patentee was unable to satisfy the second prong of the inducement test.  Now, under the new rule, inducement liability exists where the accused infringer (1) knew of the patent; (2) induced performance of the steps of the method; and (3) those steps were actually performed.  It follows also that the accused infringer will also be liable if it performs some of the steps of the method and then actively induces performance of the other steps. 

In my view, this decision is important because it closes a major loophole that has allowed some entities to knowingly and intentionally take advantage of a patented invention while avoiding the need to take a license. 

The decision is important, but fairly narrow because inducement still requires that the accused infringer have knowingly induced the infringement — that is with knowledge that the steps it is encouraging are covered by the patent.  The greatest fear of the case is that it might have created liability for parties who innocently performed one or more of the steps of the claimed invention.  That fear has not been realized.  Michael Barclay who assisted EFF with its brief noted as much in an e-mail this morning:

It’s not as bad as I thought when I saw that they overruled BMC v. Paymentech.  The majority merely holds that an active inducer will be held liable so long as one or more parties are induced to practice all the steps of a claimed method.  It appears that innocent actors who were “induced” by someone else will **not** be individually liable (unless, of course, they perform all the steps of the method claim themselves and thus are direct infringers).  That was one point of EFF’s amicus brief, so from that standpoint, the decision was not all bad.  Our brief urged that innocent third parties (those with no level of intent) not be held strictly liable for direct infringement.  It appears that is the law. 

Barclay has a good point here (in my view) and the decision does a fairly good job of balancing the competing themes of protecting patentees from intentional infringement and also protecting innocent parties who are only one cog in the machine.  One issue going forward will be the scope of knowledge required for inducement and how the changes in willful infringement standards will impact inducement.  Judge Newman’s dissent raises a host of additional complications. In her view, the decision opens a can of worms that will continue to squirm for years to come.

The majority opinion is limited to allegations of induced infringement under 35 U.S.C. 271(b) and the court expressly refuses in this case to decide the question joint direct infringement under 271(a). In my reading of the case, however, there are insufficient votes on the court to further expand the law of infringement to include joint direct infringement.  The majority also limited its opinion to infringement of method claims.

The majority opinion (36 pages) was filed PER CURIAM and signed by Chief Judge Rader and Judges Lourie, Bryson, Moore, Reyna, and Wallach.  Judge Linn’s dissent (29 pages) was joined by Judges Dyk, Prost, and O’Malley. Judge Newman separately dissented (38 pages).

Moving forward, this case obviously adds value to method claims. It also adds value to “bigger” methods that achieve value through the interaction of multiple individuals in perhaps asynchronous fashion.

Judge Linn writes a powerful dissent:

The majority opinion is rooted in its conception of what Congress ought to have done rather than what it did. It is also an abdication of this court’s obligation to interpret Congressional policy rather than alter it. When this court convenes en banc, it frees itself of the obligation to follow its own prior precedential decisions. But it is beyond our power to rewrite Congress’s laws. Similarly, we are obliged to follow the pronouncements of the Supreme Court concerning the proper interpretation of those acts.

The losing parties here will certainly take Judge Linn’s words to the Supreme Court in search of a new pronouncement.

Eight Points to Know about September 16, 2012: Post-Grant Transitions and Deadlines

by Dennis Crouch

September 16, 2012 is a big date for parties considering a post-grant challenge to someone else’s patent.  Eight things that your clients should know:

  1. End of Inter Partes Reexamination: September 15, 2012 is the last date to request inter partes reexamination under the old system.  That is to say, inter partes patent reexamination filings will no longer be accepted on September 16, 2012.  Parties who understand and find the current system valuable may want to accelerate their filing timeline accordingly. 
  2. Beginning of Inter Partes Review: The new inter partes review system begins on September 16, 2012 and applies to any issued patent that has been issued for at least 9–months.
  3. Inter Partes TRIAL: Despite the similar name, the procedures involved with an inter partes review will be quite different from inter partes reexamination.  In short, the review will be more like a trial and heard by a tribunal of administrative patent judges rather than being considered by an examiner.
  4. $$$ Inter Partes Expense $$$: The trial features will certainly make inter partes reviews significantly more expensive based on greater attorney fees. In addition, the fee for filing an inter partes review petition is $27,200 (plus $600.00 for each claim over 20). Current inter partes reexamination fee is $8,800.
  5. $$$ Ex Parte Reexamination $$$: The AIA barely changes the ex parte reexamination process.  Those reexaminations can still be requested by third parties.  The major change, however, is that the fee for ex parte reexamination will jump on September 16, 2012 from $2,520 to  $17,750.  What is $15k worth to your client?
  6. Post Grant Review: Except for “covered business methods,” the post grant review system (with its broad-base of potential challenges) is on hold until 2013.  In particular, PGR will only be available to challenge granted patents that are filed as applications after the March 16, 2013 first-to-file changeover
  7. Business Method Post Grant Review: The PGR system does open on September 16, 2012 to challenge “covered business methods.”  These challenges are limited by the statute to only patents that cover some sort of financial data processing and that do not involve a novel technological feature or solution.
  8. Supplemental Examination:  Although perhaps out of place on this list (b/c not a third party challenge), supplemental examination also becomes available on the 16th of September 2012. This process can cure inequitable conduct that committed during the original ex parte prosecution.  

Woodrow Woods v. DeAngelo: Make a Meaningful Supplementation of Your Contention Rog Responses

By Jason Rantanen

Woodrow Woods v. DeAngelo Marine Exhaust, Inc. (Fed. Cir. 2012) Download 10-1478
Panel: Linn (author), Dyk, Reyna

Woodrow Woods, the owner of two patents relating to water jacketed marine vessel exhaust systems, and Marine Exhaust Systems, his exclusive licensee, sued DeAngelo Marine Exhaust for infringement.  During the discovery phase of the case, MES propounded an interrogatory that read "“State with specificity all prior art that anticipates such claims of one or more of the patents at issue or renders them obvious. In doing so, specify the particular claim being referred to and identify why such prior art anticipates such claims or renders them obvious.”  (emphasis added by court).  DeAngelo responded with the following statement:

“[the] interrogatory seeks attorney work-product information, and is not discoverable. DeAngelo has not yet decided which prior art references it will use to challenge the validity of the patents in suit . . . [they] shall be disclosed as required by 35 U.S.C. § 282.”

On February 8, 2010, the day before the close of discovery, DeAngelo located several old engineering drawings, which it immediately forwarded to MES, accompanied by a letter stating that "[t]hese documents arguably may anticipate the Woods invention(s), or may be relied upon as showing the state of the art in the early 1990’s," and asked whether MES would object to their use should trial begin before March 10 because otherwise DeAngelos' disclosure would violate 35 U.S.C. § 282 (requiring the disclosure of certain information relating to an accused infringer's defenses at least 30 days before trial).  MES did not immediately respond, and trial began on April 5, 2010.

During trial, MES moved under FRCP 26 and 37 to strike the drawings DeAngelo had disclosed on February 8.  The district court granted the motion, finding the disclosure and supplementation of the interrogatory response (in the form of the letter) to be untimely.  After a jury found the patents valid and infringed, the district court denied DeAngelo's renewed motions for JMOL and DeAngelo appealed.

 On appeal, the Federal Circuit rejected DeAngelo's contention that the district court had abused its discretion. While the CAFC agreed with DeAngelo that the documents in question were timely produced (they were disclosed before the close of discovery and before the thirty-day outer limit set by § 282), it disagreed that the supplementation of the interrogatory response was inadequate.  DeAngelo's communication of February 8, 2010, stated that the documents "may anticipate the Woods inventions, or may be relied upon as showing the state of the art in the early 1990’s," but this did not suffice to comply with the portion of the contention interrogatory in italics prior to the discovery deadline.  Emphasizing the important role contention interrogatories play in "helping to discover facts supporting the theories of the parties" and that they "also serve to narrow and sharpen the issues thereby confining discovery and simplifying trial preparation," Slip Op. at 11, the CAFC concluded that the district court was well within its discretion in excluding the drawings as a discovery sanction.

Additional Rulings: The Federal Circuit also rejected each of DeAngelo's other arguments (claim construction, obviousness, noninfringement, and Rule 11 sanctions).  On obviousness, the court disagreed with DeAngelo that Woods' amendment in response to an examiner rejection for anticipation qualifies as an admission that all limitations in the initial claims, existed in the prior art.  "A patent applicant is not presumed to have conceded the presence in the prior art of every claim limitation he had no reason to dispute."  Slip Op. at 25. 

The CAFC also agreed with the district court that MES and Woods had conducted an adequate pre-suit investigation, as required by FRCP 11(b).  "Here, the record is replete with evidence supporting the district court’s conclusion that MES conducted a sufficient prefiling investigation including photographing and studying photographs of DeAngelo’s accused products," slip op. at 27.  The court distinguished the inadequate investigation in Judin v. United States, 110 F.3d 780 (Fed. Cir. 1997), on the ground that MES also sought access to the products by making a direct request to DeAngelo (DeAngelo did not provide the requested information prior to the lawsuit).   

Ten Years of Inter Partes Reexamination Data

Guest Post by Eric Rogers. Eric is a recent graduate of Chicago Kent's JD program and also holds a PhD in molecular genetics. Eric has conducted an extensive analysis of inter partes patent reexaminations that will soon be published in the Santa Clara Computer & High Technology Law. I asked Eric to provide an overview of his results from the study. Read the full article here:

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The Inter Partes patent reexamination (IP reexam) playing field is tilted in favor of rejecting patent claims, as shown by comparing third party requestor appeals to patent owner appeals. On appeal, third party requestors are more likely to have a proposed ground of rejection affirmed and/or to add a new ground of rejection than patent owners are likely to have an adopted ground of rejection reversed. In addition, the vast majority of examiner rejections in IP reexams are upheld upon appeal. Of course, readers should be aware of selection bias in bringing an appeal.

An empirical analysis was performed of the first ten years of decisions by the Board Patent Appeals and Interferences (BPAI) regarding appeals of IP reexams. The analysis of 101 cases focused on answering three broad questions: 1) How accurate are the specialist patent examiners of the Central Reexamination Unit (CRU) of the USPTO? 2) Do patent owners or third party requestors fare better in appeals of decisions in IP reexam proceedings? 3) Which types of appeals are more or less likely to be successful?


The average IP reexam appeal involved 7.54 grounds of rejection, and the average completed IP reexam proceeding containing an appeal lasted 4 years and 10 months, as measured from filing the IP reexam request to the issuance of the reexam certificate. About half of all IP reexams were patent owner initiated appeals, and the remainder was divided equally among those initiated by the third party requestor and cross-appeals filed by both the patent owner and the third party.

Examiner Accuracy/Error Rate

The examiners' determinations were fully affirmed 76-78% of the time. This is slightly higher than the affirmed percentage for examiners in general, which over the same time period was around 61-76%. This suggests the CRU specialist examiners might be slightly less likely to be reversed by the BPAI.

Appealing Party Differences

Third party requestors tended to be more successful than patent owners at winning appeals. The reversal percentage observed differed from 14-27% for patent owners and 30-36% for third party requestors. Third party requestors' appeals received the most reversals at 30% to 33% while patent owner appeals received reversals in only 14% to 21% of their appeals. Similarly, third party requestors' appeals received the most reversals of grounds of rejection at 36% while patent owner appeals received reversals of grounds of rejection in only 22 to 27% of their appeals.

Regardless of third party participation, the IP reexam proceeding favors third party requestors. This is shown by third party requestors' statistically significant difference in successful appeals of about 14 percentage-points in maintaining patent claim rejections and adding new grounds of rejection as compared to patent owners' tendency to successfully have patent claim rejections reversed on appeal. Based on a comparison to the general ex parte appeal reversal rate, this bias is probably caused by disadvantages to patent owners rather than any special advantage conferred to third party requestors.

Type of Appeal Differences

Appeals solely by third party requestors of unadopted grounds of rejection were the most successful type of appeal, with a reversal rate of 33%. Appeals by patent owners of adopted grounds of rejection were the least successful, with a reversal rate of 14%.


These historical observations can be used to predict the success rates for appeals of Patent Trial and Appeal Board decisions in Inter Partes Review (IPR) proceedings, which will be implemented in September 2012. Appeals of IPR decisions by third party requestors are predicted to have a better success rate, by about 10-15 percentage points, at maintaining patent claim rejections and adding new grounds of rejection than appeals by patent owners will have at receiving reversal of patent claim rejections. Patent owners will probably have a reversal percentage closer to 15-20% while third party will probably have a reversal percentage closer to 30-35%.

USPTO Webinar on Implementation of the America Invents Act (AIA)

WHAT:          USPTO America Invents Act (AIA) Webinar

WHEN:          Sept. 7, 2012 at 12:30 p.m. EDT

WHO:            USPTO Director David Kappos, Deputy Director Terry Rea, Commissioner for Patents Peggy Focarino, General Counsel Bernie Knight, Chief Judge James Smith, and Lead Judge Michael Tierney. Chief Communications Officer Todd Elmer

WEBEX:        Event number: 990 842 706

Event password: 123456

Event address for attendees:

Teleconference (US/Canada): +1-408-600-3600
Access code: 990 842 706

Judge Richard Linn to take Senior Status

Judge Richard Linn has announced his intention to take “senior status” effective November 1, 2012. Judge Linn has been sitting as a circuit court judge on the Court of Appeals for the Federal Circuit since January 1, 2000. Judge Linn is a longtime patent attorney and began his patent law career as an examiner at the United States Patent & Trademark Office in 1965 – working while also attending Georgetown University Law Center. He holds a degree in electrical engineering from Rensselaer Polytechnic. In recent years, Judge Linn has been instrumental in developing an alliance of intellectual property focused inns of court known as the “Linn Inn Alliance.”

On the bench, Judge Linn has always been skeptical of novel legal theories. It is fair to place him on the “pro-patentee” side of the bench – especially based upon his notion of broad subject matter eligibility and a high bar for inequitable conduct findings. Judge Linn authored almost 300 patent decisions and his voice of reason will certainly be missed.

Judges on senior status continue to hear cases, but typically with a reduced docket. Those judges are also allowed under the law to move outside of the DC area. Of key importance, his senior status will open a seat on the 12-member bench for an additional nominee. The seat created by Chief Judge Michel’s 2010 retirement also remains open. Edward DuMont was originally nominated for the slot by President Obama, but that nomination rescinded after the Senate failed to even schedule a hearing. In November 2011, President Obama nominated Richard Taranto for the slot. The Senate is expected to eventually confirm the Taranto nomination, but that work might be delayed until after the November election.

Judges Newman, Lourie, Bryson, and Dyk are all eligible to take senior status.

Apple v. Samsung: An Expert but Pro-Patent Jury?

By Dennis Crouch

The Apple v. Samsung verdict has generated a significant amount of talk about the patent system. One set of comments focuses on the US System of lay juries and what this decision tells us about that approach for patent cases. As it turns out, the jury in the Apple case might be better classified as an expert jury. The reason for this shift is that the jury foreman – Velvin Hogan – is a patentee and current patent applicant. Hogan's granted patent covers a "method and apparatus for recording and storing video information." Now, Hogan is not simply an intelligent silicon-valley engineer who happens to be listed as a patentee. Rather, Hogen owns his patent and went through the six-year process of obtaining patent protection. I would suspect that Hogan understands patents and the patenting process at a level much deeper than 99% of the population – including most federal judges. Hogan was just one person on the nine-member jury, but I also suspect that his voice was the most influential as evidenced by his nomination as jury foreman.

The fact that Hogan is knowledgeable about the patent system does not lead to any conclusion about whether he has any natural pro or anti patent bias. Someone knowledgeable about the system will know that the USPTO often conducts low quality prior art searches and incorrectly issues many patents that it should not. This knowledgeable person will also know that, despite their mistakes, the USPTO does conduct a substantial review of every patent claim before issuing a patent. This knowledgeable person will also understand that the precise language of patent claims mean that many similar products will not actually infringe. My friend, Sir Robin Jacob is exceedingly knowledgeable about the patent system, but sees a patent as little more than a license that is required before suing someone for infringement. In his view, validity and infringement are then to be proven in court. Here in the US, we tend to give more credence to issued patents, but that credence is limited.

It turns out that Hogan is more than knowledgeable. He also has a vested interest in valuable patent rights and his patent experience (as far as I know) has focused primarily on using the patent system to protect his own inventions. This setup is one that could easily lead to some amount of pro-patentee feels. Although I'm very much still working on analyzing the data, my recent survey of about 900 self-designated patent law professionals give some credence to this idea. The survey asked readers to speculate on the percent of patents that the USPTO issues despite them having invalid claims. The survey also asked respondents to indicate whether they tend to spend more time thinking about their own (and their clients') inventions/patents or instead spend more time thinking about patents held by others. Results: Respondents who focus on patents held by their own clients were much more positive about PTO issued patents than their counterparts who focus on patents owned by others. In particular, when asked to speculate, the first group indicated that the percent of wrongly issued patents was significantly lower than did the second group. This result also correlates with the behavioral economics literature as an "ownership bias." Lots and lots of studies show that we tend to place more value on items that we own and less value on items that we don't own.

Back to the Apple case: Despite the suggestion of potential bias, I don't think we can say that there was any bias in this case. In particular, since both Apple and Samsung were asserting patent right a truly pro-patentee ruling would have enforced the patents of both parties. What is interesting is that Mr. Hogan appears ready to talk about his experiences – that means that this case will be an excellent case study for trial lawyers going forward.

Can a Third Party Challenge Section 101 Subject Matter Eligibility in the USPTO’s new Post-Grant Review Procedure?

By Dennis Crouch

In 2013, the USPTO will open its doors to a new form of administrative patent challenge – the post-grant review. Starting on September 16 of this year, however, the USPTO will begin hearing a limited form of post-grant review proceedings directed to finance related business method patents as part of the Transitional Program for Covered Business Method Patents. The enabling statute (the AIA) provides for a broad scope of challenge – any reason that could serve as an invalidity defense under 35 U.S.C. § 282(b)(2) or (b)(3) (as re-formatted in the AIA). The AIA re-formatted Section 282(b)(2)-(3) is written as follows:

282(b) The following shall be defenses in any action involving the validity or infringement of a patent and shall be pleaded:. . .

(2) Invalidity of the patent or any claim in suit on any ground specified in part II as a condition for patentability.

(3) Invalidity of the patent or any claim in suit for failure to comply with—

(A) any requirement of section 112, except that the failure to disclose the best mode shall not be a basis on which any claim of a patent may be canceled or held invalid or otherwise unenforceable; or

(B) any requirement of section 251.

In his recent essay, Professor David Hricik explained his position that Section 101 challenges likely do not qualify as defenses under 282[(b)]. The basic gist of his argument is that the requirements of Sections 102 (anticipation & statutory bars) & 103 (obviousness) of the Patent Act are clearly "specified … as condition[s] for patentability" and thus their embedded doctrines qualify as defenses under Section 282(b)(2). However, a fair reading the statute would not lead us to identify the of the subject matter eligibility doctrines housed in Section 101 as ones specified within the statute as conditions for patentability. Hricik writes:

[T]he important point, again, is that Congress deliberately thought about what should be invalidity defenses, and what should not, and left out 101 not just as a "condition of patentability," but also in [the third]paragraph, where it "caught" some strays. It left out 101. That says a lot.

In his post, Hricik focused solely on litigation issues. However, the scope of the new post grant review system also stems from Section 282 (as discussed above). Thus, if Professor Hricik is correct, then lack of subject matter eligibility (under Section 101) would also fail as a proper post-grant review challenge. Now, the USPTO disagrees with this analysis and has issued final rules indicating that Section 101 challenges will be permitted. Although these rules could be challenged (See Tafas v. Dudas) the AIA does not permit any appeal of the USPTO's decision or grant or deny a PGR request. The House Judiciary Committee report also suggests that it intended for the PGR proceeding to be open to Section 101 challenges as did statements of Senator Kyl. That said, the passage of the AIA is unlikely to be seen as expanding the scope of 282 – as such, current Congressional commentary on the meaning of the statute is unlikely to impact its meaning.

Professor Mark Lemley suggested the potential that a 101 eligibility issues are essentially threshold jurisdictional questions – rather than Section 282 defenses. This fits with the thinking of some current Federal Circuit Judges (such as Judge Mayer and Dyk) who have no problem raising eligibility questions sua sponte on appeal. However, under this explanation, a Section 101 challenge would still be excluded from post-grant review precisely because it is not a Section 282 defense.

UNH Endowed Professor of Patent Law

I spent a summer at the University of New Hampshire School of Law (at the time Franklin Pierce Law Center) before arriving at Mizzou law.  It was a great experience. Concord feels rural but is only an hour from Boston and, because of the law school's long focus on patent law, the area is riddled with patent attorneys.  But for my local family connections here in Missouri, I would have been very happy to stay on-board as a member of the patent law powerhouse.

Professor Tom Field retired this year from the faculty after 45 years in the patent law business.  His shoes will be difficult to fill. However, the law school is creating a newly endowed chair in patent law and is looking to hire an established scholar and excellent teacher to fill that role for the 2013–2014 school year. Interested individuals should send their application materials to



Upcoming Patent Law Conferences at Indiana-Bloomington

By Jason Rantanen

The Center for Intellectual Property Research at Indiana University Maurer School of Law is sponsoring three conferences this fall on the state of patent law.  At the first conference, coming up in just two weeks, I'll be speaking about inequitable conduct in the wake of Therasense v. Becton Dickinson and the way the new supplemental examination rules are likely to impact patent law.  That conference features a panel discussion about what the AIA accomplished involving heavyweights in both academia (Mark Janis, John Duffy & Rochelle Dreyfuss) and industry (Mark Chandler, Gary Griswold, Doug Norman, and John Vaughn). 

Full details on each conference are available by following the links.

September 13-14:
The America Invents Act: One Year Later
Keynote Speakers:
David Kappos, Director, USPTO
Robert Armitage, General Counsel, Eli Lilly and Company
September 24: 
The State of Patent Litigation: A Conversation with the Federal Circuit
Keynote Speakers:
Hon. Randall Rader, Chief Judge, U.S. Court of Appeals, Federal Circuit
Hon. S. Jay Plager, Circuit Judge, U.S. Court of Appeals, Federal Circuit
(In cooperation with the Federal Circuit Bar Association)
November 2-3: 
The Future of Design Protection Law
Mark D. Janis, Robert A. Lucas Chair of Law, IU Maurer School of Law
Graeme Dinwoodie, Professor of Intellectual Property and
Information Technology Law, Oxford University
(Held at Oxford University)

Suing the USPTO to Cancel Improperly Issued Patents

by Dennis Crouch

Although issued patents can be challenged in court, they come with a presumption of validity that can only be overcome with clear and convincing evidence.  i4i.  Section 282 of the Patent Act also limits the defenses available to avoid charges of infringement.  On Patently-O, we have had some recent discussion on whether Section 101 patentable subject matter questions qualify as defenses.   In the groundbreaking case of Aristocrat Gaming v. IGT, the Federal Circuit held that improper revival of an abandoned patent application was not a proper defense under Section 282.  Thus, in that case, the accused infringer was unable to challenge the asserted patent even though the USPTO had seemingly made a legal error in issuing the patent.

In 2011, Cadence Pharma sued Exela Pharma in Northfor infringing its patents relating to injectable acetaminophen (OFIRMEV).  Exela believes that one of the patents in question should never have issued because it was abandoned and then improperly revived.  See U.S. Patent No. 6,992,218.  As in the Aristocrat case, the patentee here failed to timely file a US national-stage application before the abandonment date of its PCT application.  The USPTO allowed the patentee to subsequently file the national-stage application based on a pleading that it had been unintentionally abandoned.  Exela argues here that the Patent Act only permits revival in this situation when the application was unavoidable abandoned –  a much more difficult standard. 

Exela Pharma Sciences, LLC et al v. Kappos et al, 12-cv-0469 (E.D. Va. 2012).

Seeing no defense available in the infringement action, Exela filed its own lawsuit against the USPTO to force the agency to rescind the revival decision.  The lawsuit was filed under the Administrative Procedures Act (APA). As a general matter, there is a presumption that the APA provides a federal cause of action to individuals adversely affected by a federal agency action. Here, the court found no statute barring the lawsuit and noted that this type of lawsuit is currently the only way that an adversely affected party can take action on this issue (because it is excluded as a defense).

In his first written decision in the case, District Court Judge Liam O’Grady has rejected the USPTO’s motion to dismiss — holding that: (1) the case is not time-barred because it did not become ripe until the 2011 lawsuit; (2) Exela has standing to sue the USPTO because the allegedly improper patent grant is “a substantial factor” that motivated the harm Exela is feeling now; and (3) the APA presumption of judicial reviewability of the USPTO’s action has not been overcome.

The USPTO had argued that some of its decisions should simply not be challengeable. The court entirely rejected that position. “The Court finds no support for the PTO’s apparent proposition that certain agency actions should remain entirely unchecked.”

In the end, the court rejected the USPTO’s motion to dismiss.  Because the district court case is ongoing, the USPTO has no right to immediately appeal.  However, the executive agency may seek a writ of mandamus from the Court of Appeals for the Federal Circuit — asking that court to end this case at an early stage.  In the Myriad case, the district court held that the plaintiffs could sue the USPTO for improperly issuing the gene patents. (Myriad and the University of Utah were also sued).  However, those claims were based on an allegation of constitutional violations rather than merely capricious actions as here.  The district court subsequently dismissed the claims against the USPTO (without prejudice) based upon the doctrine of constitutional avoidance.

The US already has a fairly complex system for challenging patents.  Accused infringers can challenge validity and enforceability under Section 282 in both federal courts and the International Trade Commission (USITC).  Third parties can request reexamination at the USPTO.  Soon, third parties will also be able to participate in post-grant review trials at the USPTO.  Although the new post grant review system will have a substantially expanded scope as compared with reexamination practice, it will not offer the opportunity to challenge improperly revived patents.

Noted attorney Ed Polk is leading Exela’s litigation team. The USPTO’s position is being represented by AUSA Stephen Obermeier.

How the AIA violates TRIPS

by Dennis Crouch

While in UK this summer, UK patent attorney Jim Boff and I had an interesting discussion regarding the special treatment of US Universities in the America Invents Act (AIA) constitute a violation of the international agreement on Trade-Related Aspects of Intellectual Property (TRIPS). In the mid 1990's the US successfully pushed TRIPS as a required element of membership in the World Trade Organization (WTO). As such the vast majority of countries around the world are member nations. TRIPS sets down certain minimum standards for national intellectual property systems and also incorporates the national treatment requirements exemplified in the Paris Convention of 1883. TRIPS also includes a dispute resolution system allowing member nations to take action against a fellow members that is violating the agreement. The typical penalty is a trade-restriction such as a quota or tariff applied against goods from the guilty country.

National Treatment: non-US inventors are allowed to obtain and enforce US patents. In fact, most US patent applications come from foreign applicants. At least in the short-run, US consumers (voters) may well enjoy the potential lower prices associated with having those patents wholly rejected. However, the US has long agreed to allow foreign-owned patents as part of a quid-pro-quo that guarantees that US-owned inventions can be patented in nations around the word. The "national treatment" system worked out in the 1883 Paris Convention and continued in TRIPS essentially requires that each member-nation treat patent applicants from other member-nations at least as well as it treats its own citizens.

On two particular points, the America Invents Act provides benefits to US Universities that are not provided to foreign applicants.

  1. Not Subject to Prior User Rights: AIA-patents are subject to a prior commercial user defense that – as its name suggests – allows a prior commercial user of an invention to avoid infringement liability even if that prior commercial user cannot identify any prior art that sufficient to invalidate the patent. This is a defense to infringement and thus weakens the power of an individual patent. The AIA has a special provision for US universities stating that the defense does not apply to patents covering inventions that were owned by the US university (or subject to contractual obligation to assign to the university) at the time of the invention. The provision defines universities by reference to the US Higher Education Act of 1965 (20 U.S.C. 1001(a)). That provision includes only universities located within the United States.
  2. 75% reduction in Fees: The AIA also includes a micro-entity provision that allows qualified applicants to receive a 75% reduction in most patent office fees. US universities qualify for the fee reduction while foreign universities do not. (Foreign individuals (natural persons) can qualify for micro-entity status if they meet the requirements.)

It is pretty clear that these are two benefits given to US universities that are not enjoyed by their counterparts in other countries. Now, the fee reduction could still pass muster – especially if seen as a subsidy rather than merely a fee discount. See National Federation of Independent Business v. Sebelius, 567 U.S. ___ (2012) (a fine is a tax).

The greater problem stems from the prior user right that is clearly a legal benefit given to a particular US group and not extended to foreign applicants.

Resolving the Problem: Although the US as a country is bound by the TRIPS agreement, US courts do not treat the agreement as controlling. Thus, violations of TRIPS cannot normally be addressed by filing a lawsuit in US court. Rather, the resolution is conducted at the national level through the rather ineffective WTO dispute resolution procedures and other diplomatic channels.

Amkor v. ITC

By Jason Rantanen

Amkor Technology, Inc. v. International Trade Commission (Fed. Cir. 2012) Download 10-1550
Panel: Newman, Plager, and Linn (author)

Although soon to be eliminated as prior art for new patents, 35 U.S.C. § 102(g) will continue to be a potentially important category of prior art for the near future as pre-AIA patents will remain the prevailing type of patent in infringement suits for at least the next decade.  In Amkor, the Federal Circuit answered an important question about 102(g): whether an oral disclosure of an invention to the United States is sufficient to constitute prior art.  It answered in the affirmative, with a key caveat.

The version of 102(g) involved in this appeal states that:

A person shall be entitled to a patent unless:

(g)(1) during the course of an interference conducted under section 135 or section 291, another inventor involved therein establishes . . . that before such person’s invention thereof the invention was made by such other inventor and not abandoned, suppressed, or concealed, or (2) before such person’s invention thereof, the invention was made in this country by another inventor who had not abandoned, suppressed, or concealed it. . . .

35 U.S.C. § 102(g) (2006) (emphasis added). The appeal turned on the interpretation of "made in this country": specifically, whether it encompassed an oral disclosure to a person in the United States of an invention conceived of abroad.

In concluding that an oral communication was sufficient, the CAFC issued several notable holdings.  First, it extended the holding in Scott v. Koyama, 281 F.3d 1243 (Fed. Cir. 2001), that interpreted a previous version of 102(g) to allow the inventor of an invention of foreign origin to "rely on the date that the invention was disclosed in the United States as a conception date for priority purposes" to apply to the current version of 102(g)(2).

Second, the CAFC held that an oral communication could be a sufficient disclosure for 102(g) purposes.  "While this court’s limited precedent on this issue establishes that writings can satisfy the full domestic disclosure requirement, the cases do not establish any per se requirement that such disclosure must be in writing."  Slip Op. at 12.  However, the "content of the domestic disclosure must be specific enough to encompass the "complete and operative invention…and an inventor's oral testimony to this extent is a question of proof."  Slip Op. at 13 (emphasis in original). Thus, corroboration of the testimony is necessary. 

The CAFC did not reach the issue of corroboration of the specificity of the disclosure, instead rejecting the accused infringer's argument based on the burden of persuasion and evidence necessary to invalidate an issued patent.  The accused infringer could only show a range of dates of possible U.S. disclosure that overlapped with the patent holder's possible conception dates.  "Such a showing, at best, establishes that the ASAT inventor might have conceived of the invention first. Evidence establishing that there might have been a prior conception is not sufficient to meet the clear and convincing burden needed to invalidate a patent."  Slip Op. at 16 (emphasis in original).

Obviousness: The court also affirmed the Commission's claim constructions and rejected anticipation and obviousness arguments based on another prior art reference.  In reaching this conclusion, the court pointed to a lack of any evidence of a motivation to combine or reason to modify the prior art:

Because the fused lead attached to the die pad in JP-456 prevents the lip from extending “fully around the circumference of a die pad” or “fully around the die pad” as required by the claims, Carsem was required to present evidence that one of ordinary skill in the art at the time of the invention would have been motivated or found reason to remove the fused lead from the JP-456 reference, or that common sense would have led one of skill in the art to remove the fused lead based on a known problem, design need, or market pressure. KSR Int’l v. Teleflex, 550 U.S. 398, 418-20 (2007).

Slip Op. at 21.  While this language could be interpreted as limiting "common sense" to the three specific scenarios identified in KSR v. Teleflex, a better interpretation in my view is that Carsem simply failed to provide any explanation as to why a person of ordinary skill in the art would have modified the prior art, including the three specified examples.  Anything more rigid would be inconsistent with the flexible approach to obviousness mandated by KSR.

Constitutional Challenge to the First-to-Invent Rule

By Dennis Crouch

[Update –  Read the Complaint Here]

MadStad & Mark Stadnyk v. USPTO, 12-cv-1589 (M.D. Florida 2012)

The small motorcycle engineering company MadStad recently filed suit against the US Government asking a federal court to reject the Leahy-Smith America Invents Act of 2011 (AIA) as an unconstitutional degradation of inventor rights. Steve Lohr (NYTimes) covers several aspects of the story and includes quotes from both Professor Mark Lemley and Professor Arti Rai that identify the challenge as Quixotic. I agree with Lemley and Rai on this point – especially after the Supreme Court’s Golan decision last year. Of course, I also thought that Myriad case would go nowhere.

Stadnyk’s basic argument is that when the US Constitution speaks of exclusive rights for “inventors” it should be interpreted to mean “first and true inventor.” The AIA fails because it purposefully rewards the first-to-file a patent application rather than the first-to-invent. The complaint argues:

A second ‘inventor’ is an oxymoron; that person merely rediscovers that which was already discovered by the first inventor. Thomas Jefferson, James Madison, and John Marshall all shared this understanding. . . . Congress is not authorized to award patents to the winners of races to file to the PTO. . . . Under the AIA, there is no effective statutory requirement that the applicant be an ‘inventor’ for a patent to be valid.

MadStat has also requested a preliminary injunction blocking implementation of the first-to-file provisions of the Act.

In his recent law review article, Senate Counsel Joe Matal played down the merits of the Constitutional question. Joe Matal, A Guide to the Legislative History of the America Invents Act: Part I of II, 21 Fed. Circuit B.J. 435 (2011). In his article, Matal points to the 1850 case of Gayler v. Wilder. Gayler is interesting because the Supreme Court created a subjective test for the requirement of inventorship – asking whether the patentee believed himself to be the original inventor. In that case, the actual first inventor had failed to pursue patent rights and the Supreme Court agreed that the second inventor (who originally believed himself to be the first inventor) was then properly awarded rights.

Are the Courts Correct in Their Assumption that a Patent Issued on Non-patentable Subject Matter is Invalid?

By David Hricik, Mercer University School of Law. (Note – this is an update of the essay posted last week on the Patent Ethics site.)

I forget when I first thought about this, but it’s been a while. With all the discussion of Prometheus (sadly, the case, not the film, which was great), I figured this was a good time to raise it. At minimum, there’s a litigable question here, and assumptions that a patent issued on non-patentable subject matter is invalid need examination. I’d love to be wrong about this, but I don’t think I am.

Some History.

I have not scorched the earth, but from what I can tell no court has squarely addressed the question of whether the Patent Act allows a court to deny enforcement (on any ground) of a patent granted on subject matter that is not within Section 101. Instead, what the cases showed me was that law developed in the context of challenges to the USPTO’s denial of a patent have been used to invalidate issued patents – without analyzing the statutory authority to do so.

Let’s take a look at what most people assume is the law and see if we can get there: does the Patent Act allow a court to invalidate a patent that does not claim patentable subject matter?

Section 282

The starting point is 35 USC 282. It provides in pertinent part:

The following shall be defenses in any action involving the validity or infringement of a patent and shall be pleaded:

(1) Noninfringement, absence of liability for infringement, or unenforceability,

(2) Invalidity of the patent or any claim in suit on any ground specified in part II of this title as a condition for patentability,

(3) Invalidity of the patent or any claim in suit for failure to comply with any requirement of sections 112 or 251 of this title,

(4) Any other fact or act made a defense by this title.

Federico’s commentary, often relied on to indicate Congressional intent, doesn’t help at all, but here it is:

The defenses which may be raised in an action involving the validity or infringement of a patent are specified in general terms, by the second paragraph of section 282, in five numbered items. Item 1 specifies “Noninfringement, absence of liability for infringement, or unenforceability” (the last word was added by amendment in the Senate for greater clarity); this would include the defenses such as that the patented invention has not been made, used or sold by the defendant; license; and equitable defenses such as laches, estoppel and unclean hands. The second item specifies “Invalidity of the patent or any claim in suit on any ground specified in Part II of this title as a condition for patentability”; this would include most of the usual defenses such as lack of novelty, prior publication, prior public use, lack of invention. The third item specifies “Invalidity of the patent or any claim in suit for failure to comply with any requirement of section 112 or 251 of this title”; the first section mentioned would include the defense of insufficient disclosure, and the second sentence mentioned would include reissue defenses. The fourth item merely specifies “Any other fact or act made a defense by this title.” All the defenses usually listed in textbooks on patent law may be placed in one or another of the enumerated categories, except a few which are no longer applicable in view of changes in the new statute.

Section 101.

Section 101 is relied upon as the basis for invalidating patents. It states: “Whoever invents or discovers any new and useful process, machine, manufacture, or composition of matter, or any new and useful improvement thereof, may obtain a patent therefor, subject to the conditions and requirements of this title.”

While clearly granting power to the USPTO to issue patents on “new and useful” processes, it obviously also limits the USPTO’s power to do so.

The question here is not patentability, but validity. Simply, suppose the USPTO makes a mistake, and issues a patent on non-patentable subject matter. Is this a defense to infringement?

In my view, the answer is “no.”


Let’s start with the two specific subsections, because they make us focus on the text and show some very deliberate choices by Congress that easily could have gone the other way had Congress intended 101 to be a defense.

The second subsection of 282 is probably the most important: “Invalidity of the patent or any claim in suit on any ground specified in part II of this title as a condition for patentability.”

Section 102 and 103 are “conditions of patentability.” They say so in their titles, and they are substantive legal conditions (technically, I’d call them “conditions of unpatentability” given the burdens of proof, but this works). The fact that 101 is not a condition of patentability is to me is very important: Congress chose in 282(2) to specify that only those things denominated as “conditions of patentability” are bases for invalidity. It then chose to label 102 and 103 as conditions, but not 101. Those are deliberate choices. In my view, a patent issued on non-patentable subject matter is not “invalid” under the second provision.

Subsection 3 of Section 282 is easy to apply to this question, but it is important because it also adds to the evidence that 101 is not a defense. Patentable subject matter is in 101, not 251 or 112. So that part’s easy: 282(3) doesn’t list 101.

But the important point, again, is that Congress deliberately thought about what should be invalidity defenses, and what should not, and left out 101 not just as a “condition of patentability,” but also in this specific paragraph, where it “caught” some strays. It left out 101. That says a lot.

Two down, two to go.

Now we’re left with arguing that, although it thought about what should be invalidity defenses in two different places, nonetheless we should imply that Congress meant to include it in some amorphous language in the other two subsections. We’re fighting uphill.

Let’s go to the first catch-all type subsection: “Noninfringement, absence of liability for infringement, or unenforceability.” Logically, I can’t make patentable subject matter fit, at all. Before explaining why, let’s be clear on the consequences of saying that Section 101 is within this section: it would be that the patent is valid but there would be no infringement.

“Unenforceability” is the easy one. The cases and legislative history I’ve read show this was designed to capture equitable doctrines like patent misuse and, arguably, inequitable conduct (long diversionary story there). We’d be straining to put 101 there.

Federico’s statements that the defendant hadn’t made the product, or had a license to do so, show that “infringement” means what we think it means. A licensed patent is valid, but “not infringed.” A patent that the defendant never violated is valid, but not infringed. So, I can’t make “noninfringement” logically work or work without giving words a very unnatural meaning.

Now the only arguable catch-all, subsection 4: “Any other fact or act made a defense by this title.” Here we are, trying to read it into the catch-all that, even Federico says, “merely” specifies things in the statute that are made defenses. But, section 101 is not made a defense by this title. Instead, it specifically points to other requirements and conditions. Again, if this were easy and clear, Congress would have put in 101 “it shall be a defense to patent infringement that…” or put 101 in Section 282.

So, tell me why I am wrong.

Let me get rid of some easy ones: no court I’ve found has ever addressed this issue. I think it’s pretty simple, but there you go. Second, don’t conflate patentability with infringement defenses. There are lots of things that can affect patentability that aren’t in 282. Third, 282 is exclusive: if you want so suggest that it’s not, you (a) have to say “Congress enacted a specific statute laying out defenses, but it’s just a guide” which is not in my view defensible; and (b) it says “shall be defenses,” not “may include” or some-such. Third, this is a relatively new “defense.” I can’t say I’ve scorched the earth, but in looking at CAFC cases it has only been raised a few times.

Patently-O Bits and Bytes by Dennis Crouch

  • Apple v. Samsung
  • India: SpicyIP writes that Thompson/Westlaw has been ordered by an Indian to stop distributing copies of Indian Supreme Court Cases that it allegedly copied from the Eastern Book Company reporter.
  • Internet Safe Harbor: The EFF (with Craig Newmark) have created an interesting infographic of the importance of Section 230 of the Communications Decency Act.  That provision offers a broad safe harbor to internet service providers (including website distributors) against liability created by third-party activity (such as blog comments).  Facebook would not exist without this provision (or something similar).