February 2013

Stacking Royalties: One Royalty for Three Patents

Stryker Corp v. Zimmer, Inc. (W.D. Michigan 2013) ( Download StrykerVerdict )

I was just looking at the jury verdict in this patent infringement case. Stryker sued on about twenty claims patents coming from three different patents. The jury found the patents infringed and not invalid.

The damages section of the verdict has three interesting elements.

Backup Award: The court asked the jury to decide both lost-profits and, as a backup, a reasonable royalty. That approach stems from the patent statute that sets reasonable royalty as a floor for compensatory damages. The jury found that Stryker had proven lost profits of $70 million and alternatively should be awarded 25% royalty on Zimmer's the $254 million in revenue from infringing sales. Assuming the verdict holds up, Stryker should receive $70 million lost profit award since it is greater than the $63 million reasonable royalty calculation. This is area where a more detailed verdict form actually helps the plaintiff.

Creating Its Own Form: Part of the power of jury verdicts is that they operate as a black-box decision making tool. Since the jury does not explain its decision, it is difficult to point out errors in that decision making process on appeal. The losing party often has to resort to the difficult task of proving that no reasonable jury could have reached the ultimate conclusion based upon the evidence. In this case, the jury may have given the defense a bit of a boost. In addition to setting the reasonable royalty at 25%, the jury added its own explanation – writing that the 25% is "double initial percentage of [a low comparable] license as we felt 32.2% [requested by the plaintiffs] was too high." We'll see whether the defense is able to use this added tidbit to challenge the verdict.

Three Patents, One Royalty: The theory for calculating damages when multiple patents is a bit dicey and ill defined. Here, three patents were at stake and the jury was asked "Do you find that the reasonable royalty rate would be any different if fewer than all three of the patents in suit are valid and infringed?" The jury answered "no." That response creates some hypothetical problems – most pointedly would be whether this result is the same if the patents were each held by a different entity.

COURT: Twelve Year Old USPTO Rules Cannot be Challenged Even if They Are Only Now Hurting You

Exela Pharma Sciences, LLC et al v. Kappos et al, 12-cv-0469 (E.D. Va. 2013).  Download Exela v Kappos Dkt 55- Opinion dismissing case

I previously wrote about Exela's lawsuit against the USPTO in an essay titled Suing the USPTO to Cancel Improperly Issued Patents. The patent at issue in this case is Cadence Pharma's U.S. Patent No. 6,992,218 that covers an injectable form of acetaminophen. During prosecution the patentee failed to timely file a US national-stage application before the 30-month PCT deadline. However, the USPTO allowed the patentee to subsequently revive the case and file the national-stage application based on a pleading that the delay was "unintentionally." Exela argues that the Patent Act only permits revival in this situation when the application was unavoidable abandoned – a much more difficult standard to meet. Unfortunately for Exela, improper revival is not a cognizable defense in patent litigation. See Aristocrat Gaming v. IGT and 35 U.S.C. §282. So, when Cadence sued Exela for infringement, Exela filed this collateral action against the PTO – asking the agency to cancel the improperly issued patent.

In his original decision in the case, Judge Grady sided with Exela against the PTO's motion to dismiss – finding that the Administrative Procedures Act (APA) contemplates that parties wronged by an agency action have a cause of action to right those wrongs and 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). The USPTO had argued that some of its decisions should simply not be challengeable. The court entirely rejected that untenable position. "The Court finds no support for the PTO's apparent proposition that certain agency actions should remain entirely unchecked." The district court also held that the case was not time-barred because Exela's standing only recently became ripe.

In a new decision, the district court has flipped its stance and dismissed the case as barred by the six-year statute of limitations defined by 28 U.S.C. § 2401(a) ("Except as [otherwise provided], every civil action commenced against the United States shall be barred unless the complaint is filed within six years after the right of action first accrues."). The basic rule applied by the court here is that the statute-of-limitations was triggered when the USPTO created its offensive rule, regardless of whether this particular plaintiff (Exela) would have had standing at that point. In 2000, the PTO finalized Rule 37 C.F.R. 1.137(b) to provide for revival of applications based on an applicant's unintentional abandonment of a PCT application. Case dismissed. Exela will almost certainly appeal with the argument that its right of action did not accrue. It will be interesting to see whether the Federal Circuit applies its own law or the law of the Fourth Circuit to this case – especially since the district court couched its decision as being required by the recent Fourth Circuit decision in Hire Order Ltd. V. Marianos, 698 F.3d 168 (4th Cir. 2012).

Challenging USPTO Rules: An important take-away from this decision is reminder of the six-year deadline for challenging USPTO rules.

SMU 10th Annual Symposium on Emerging Intellectual Property Issues

By Jason Rantanen

LogoSMU-DedmanShoolofLawRBSMU Dedman School of Law 10th Annual Symposium on Emerging Intellectual Property Issues

On Friday, March 22, the SMU Dedman School of Law will be hosting its 10th Annual Symposium on Emerging Intellectual Property Issues in Dallas, Texas.  This year’s Symposium focuses on the U.S. Court of Appeals for the Federal Circuit and its unique role in the development of the nation's patent law.  The folks at SMU have assembled a terrific program with a great lineup of speakers. 

Speakers at this year's Symposium include:

  •   Federal Circuit Judges Raymond C. Clevenger, III, Timothy B. Dyk, and Sharon Prost
  •   General Counsel of the U.S. Patent and Trademark Office, Bernard J. Knight, Jr.
  •   Distinguished professors and practitioners from around the United States

For more information on the Symposium or to register, click here: http://www.law.smu.edu/Events/Dean-Suite/Symposium-on-Emerging-Intellectual-Property-Issues.aspx?c=hpEvent_Symposium-on-Emerging-Intellectual-Property-Issues.

Symposium Location:
SMU Dedman School of Law
Hillcrest Classroom
3315 Daniel Avenue
Dallas, Texas

Download the symposium brochure: http://www.law.smu.edu/getmedia/250a6fee-b9f2-4095-b44d-d30a5173490f/IP-Symposium3.

For more information, e-mail SMU Dedman School of Law Professor David Taylor at dotaylor@smu.edu.

MCLE Credit
This course is pending approval by the State Bar of Texas for 5.5 CLE hours. Sign-in sheets and/or certificate of attendance will be available for ALL states

The Use of Legal Scholarship in Intellectual Property Decisions

 By Jason Rantanen

One of the ongoing debates involving the Federal Circuit revolves around its performance as a circuit court.  Professors Craig Nard and John Duffy, for example, have critiqued the court's basic jurisdictional structure, arguing that court's exclusive jurisdiction fosters an insularity that produces "an isolated and sterile jurisprudence that is increasingly disconnected from the technological communities affected by patent law," and that the solution is to rewrite the court's jurisdiction.  These and other arguments criticizing the Federal Circuit's performance are supported by the epithet that the Federal Circuit cites scholarship in its patent opinions at a far lower rate than other circuits do in their intellectual property opinions. 

In The End of an Epithet? An Exploration of the Use of Legal Scholarship in Intellectual Property Decisions, recently published in the Houston Law Review, Professors Lee Petherbridge and David L. Schwartz examine this empirical claim about the Federal Circuit's use of scholarship by exploring the U.S. Supreme Court's use of legal scholarship in its patent, trademark, and copyright jurisprudence.  They find a substantial difference in the use of scholarship across these areas, with the Court's use of legal scholarship in copyright and trademark decisions being among the highest observed and its use in patent decisions among the lowest.  It thus appears that the Supreme Court behaves similar to the Federal Circuit with respect to the use of legal scholarship in patent cases, undercutting the empirical support for the claim that the Federal Circuit is insular.  This finding adds to an earlier study by Schwartz and Petherbridge revealing that the Federal Circuit's overall rate of citation to scholarship is within the range of the regional circuits.

In addition to their empirical findings, Petherbridge and Schwartz address the question of why the use of legal scholarship in trademark and copyright jurisprudence is so high, and its use in patent jurisprudence so low.  Their answers range from the doctrinal (patent law is more developed, so less need to reference scholarship) to this historical (until recently, perhaps there has just been a lot less patent law scholarship and beyond).

Read the article here: http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2214025

This issue of the Houston Law Review is worth checking out generallyIt includes terrific articles by R. Anthony Reese, Greg Vetter, Colleen Chien, Kevin Collins, Paul Janicke, Mark Patterson, and Katherine Strandburg. 

Waiting for Federal Circuit Decisions

by Dennis Crouch

I am regularly asked how long it will take for the Court of Appeals for the Federal Circuit to issue its decision in a given patent case. The chart below helps to answer that question. The chart shows a set of boxplots for the timing of Federal Circuit patent decisions appealed from US District Courts.  At its most basic, the chart attempts to provide some guidance as to typical timelines from Federal Circuit oral argument until the resulting decision. The boxplot shows the range between the 25th and 75th percentile of that pendency and also the median pendency.

As is apparent, non-precedential opinions (including Rule 36 decisions) are much quicker than precedential decisions.  With a comparative median of 7 days to about 4 months respectively.  The group as a whole (precedential and non-precedential) has a median pendency of 70 days.


Although not shown here, one driver of even-longer precedential opinions is the appearance of a dissenting opinion — adding about two months to the typical timeline.  And, en banc decisions take approximately twice as long as ordinary precedential decisions.  The slowest authors are Judge Newman, Rader, and O'Malley; the quickest are Judges Lourie, Moore, and Dyk. 

10 Secrets to Locating Non-Patent Prior Art

Guest Post by Stuart Soffer, IPriori, Inc.

1. Finding prior art is a 'degrees of separation problem': you are separated from your art by some number of people and connections.

2. Build a timeline

Timelines aid visualizing the evolution of technology and locating the sweet spot of your prior art. Build multiple timelines in parallel (looking like a sheet of music) each line tracking a separate aspect. Possible lines to include are: the prosecution history of each patent; an industry timeline, i.e., the sequence of releases of Microsoft Windows operating systems; corporate history and accused product development; and prior art as you assemble it.

3. Get on the phone

Don't fear cold-calling. If the patent identifies people, or papers cited look promising, locate and contact the authors to see what materials they maintain, or if they can refer you to others. One search led me to the cell phone number of a CEO, was on a golf course when I called – he was very helpful pointing me to the right person.

4. Find the packrats and hoarders – those that build their own collections, either from their career, or interest. These folks exist, but they don't publicize their collections, it isn't indexed, and they may not appreciate visibility. Other sources are from estate sales and antique stores, but this is better for proactively building a collection for future use.

5. A by-product of the non-patent prior art search is identification of potential testifying experts. Sign 'em up.

6. Accused 'infringers' could have their own prior art

Long established companies, especially those with formal research groups and product evolution, will possibly have their own prior art to current products.

7. Days and weeks matter

Relevant prior art dated mere days or weeks after the effective filing date for a patent is frustrating. This is instructive for parties contemplating filing patent applications that the time you delay filing can come back to haunt later on with prior art dated a few days earlier. There are instances where the prior art is just a short time after the effective filing date. In one instance the relevant non-patent art was an article in a conference proceeding. Presumably publication date is the conference date. That date didn't predate the priority date, however I researched the date submittals were due for peer review. That date was before the priority date and, under the right circumstances, that can count as prior art. 

8. Establish a company historian

One search some years ago led me to the AT&T Corporate Historian. This was an actual position.

9. Multiple path searchers and searchers; don't rely on only one modality. Different searchers don't get identical results. They come to the problem with different personality, background, preferences in search sources and search techniques. An important search will use more than one searcher or company to get better coverage.

10.Always be on the lookout for prior art

Some searchers continue a search under the understanding the likelihood of similar requests in the future. Be opportunistic: visit museums or antique stores as you travel. Have a camera to take pictures of artifacts you encounter to aid in recall (easy to do with smartphones.)

11.(Bonus) Be aware domain taxonomies, such as Library of Congress Subject Headings, Medical Subject Headings (MeSH), ACM Computing Reviews Categories. Build a vocabulary of synonyms with which to vary search queries. Here are some samples:

  • Memory, storage, disk, array, RAM, DRAM, flash
  • Signal, indicator, message, bit, semaphore, indicia, flag
  • Display, window, CRT, VT100, terminal emulator
  • Connected, attached, communicates with    
  • Module, program, server, layer, client, abstraction, applet, application

Guest Post by Dr. Jeffrey Lefstin on Myriad’s Pre-History

Guest Post by Jeffrey Lefstin, Ph.D., Professor of Law at the University of California Hastings College of the Law

After the Supreme Court decided Mayo v. Prometheus, the Court vacated and remanded the Federal Circuit’s initial AMP v. Myriad opinion for reconsideration in light of Mayo.  Despite the Supreme Court’s hint, the Federal Circuit’s opinion on remand begins by dismissing Mayo as irrelevant – at least to those claims drawn to isolated and purified BRCA DNA. Composition of matter claims, according to Judge Lourie, are governed not by Mayo, but primarily by Chakrabarty, which suggests that a composition of matter is patent eligible if it is “markedly different” than a natural product, or if the transformation of the natural product yields “a distinctive name, character, and use.”

There are a number of problems with Judge Lourie’s premise. The subject matter eligibility question in Myriad turns on whether the DNA claims are drawn to “products of nature.” But Chakrabarty is about the patentability of living things, not products of nature.  In fact, Chakrabarty’s discussion of  the “product of nature” doctrine is entirely dictum. Although Chakrabarty’s claims to genetically engineered bacteria were originally rejected as “products of nature,” that rejection was not sustained by the Board of Appeals.  And while the CCPA considered the issue in connection with the related Bergy appeal, in Chakrabarty the Solicitor expressly disowned the “product of nature” rejection in his argument before the Court.

So why did the Chakrabarty court discuss the “product of nature” doctrine at all? The “product of nature” discussion seems to have arisen because Chakrabarty’s brief mentioned Funk Brothers, the Court’s 1948 case denying patentability to a mixture of nitrogen-fixing bacteria.  Chakrabarty suggested that if living things were not patent-eligible, the Court would have said so in Funk. The Solicitor’s reply denied that the claims in Funk were drawn to living things, but neither Chakrabarty nor the government argued the “product of nature” issue in their briefs.

Even if the Court’s discussion were more than dictum, Chakrabarty hardly establishes “markedly different” or “distinctive name, character, and use” as definitive standards.  “Markedly different” is an offhand comment by the Court, and “distinctive name, character, and use” derives from the Court’s 1931 opinion in American Fruit Growers – which looked to Customs law for the meaning of  “manufacture” in the patent statute.  (The acquisition of a distinctive name, character, and use is now known as the “substantial transformation” test, and is used to establish the country of origin for imported products).

But most significantly, while the Federal Circuit’s opinion makes passing reference to Funk Brothers, it overlooks the point that Mayo’s analytical framework – asking whether the patentee’s application of a law of nature goes beyond the conventional and obvious – is nothing more than Funk Brothers redux.  In Mayo, the Court’s requirement that a claim must embody an “inventive concept” beyond the natural law was drawn from Parker v. Flook.  In turn, Flook’s approach was expressly grounded in Funk.  And a reading of Funk makes clear that Mayo’s requirement of “natural law plus more than conventional activity” is simply the analysis employed in Funk:

Discovery of the fact that certain strains of each species of these bacteria can be mixed without harmful effect to the properties of either is a discovery of their qualities of non-inhibition. It is no more than the discovery of some of the handiwork of nature and hence is not patentable. The aggregation of select strains of the several species into one product is an application of that newly-discovered natural principle. But however ingenious the discovery of that natural principle may have been, the application of it is hardly more than an advance in the packaging of the inoculants.

If the Mayo Court truly revived the Funk analysis, the implications for Myriad (and subsequent cases) are substantial. Funk dealt with a composition of matter: bacteria. So if Mayo’s framework draws from Funk, that framework is clearly applicable to a composition of matter such as DNA. And under the reasoning of Funk, it seems not to matter whether the process of arriving at the claimed subject matter is inventive;  the Funk court conceded that the discovery leading to the claimed invention might have been “ingenious.” What matters is whether there is “something else” in the claims, other than conventional or obvious activity routine in the art.

Even more so than in Mayo, of the Myriad composition claims seem to lack “something else” beyond the natural phenomenon: the natural sequence of the BRCA genes. For the Federal Circuit, the structural differences between the natural genes and the isolated products were the key to patent-eligibility. But under Mayo and Funk, the question is whether those transformations of the natural sequence represent something more than conventional or obvious activity.

Taking the identification of the natural sequence as a given – as Mayo and Funk appear to demand – the patent-eligibility of Myriad’s composition claims is in serious doubt. The “something else” in Myriad’s claims is the separation of that natural sequence from the genomic context, or the embodiment of that sequence in a cDNA.  However ingenious the discovery of the BRCA loci may have been, the embodiment of the BRCA sequences in isolated DNA molecules was either conventional in the art, or, in the case of the removal of non-coding information from the mRNA transcripts that gave rise to the cDNAs, performed automatically by the cell.

Patent Law Jobs

On request, here are a couple more charts relating to job postings on Patently-O Jobs. The first chart shows the typical locations for jobs posted on the site. Please note, there is some overlap. Thus, NYC jobs are usually also classified as Northeast Jobs. Washington DC is the focal point of the MidAtlantic jobs, although there have also been a number of post from Atlanta and the Research Triangle area.

The USA map shown below represents Patently-O readership intensity. About half of the readers come from the top-six metro areas of Washington DC, NYC, San Francisco / San Jose, Chicago, Los Angeles, and Boston. Of course, you'll note that you can find readers multiple readers in almost every metro area in the country.

Words in patent claims.

By Dennis Crouch

I have no idea what to make of the meaning behind the trends in this chart but I created it while working on another project. The chart shows a time series of the word count of each independent claim in issued patents averaged over all utility patents issued for a given week.

Claims in Issued Patents


The chart above shows the average and median number of claims in issued patents, grouped by issue week. The median count is a 20-week moving average.  As you can see, over the past seven years, the number of claims-per-patent has dropped significantly. The average is almost always above the median and that difference is largely driven by outlier applications with large claim counts. However, that gap has shrunk in recent years and I expect that trend to continue as the PTO further increases the costs associated with "jumbo" patents.  These days, many applicants will choose two patents over one large patent. 

I am teaching civil procedure this semester here at the University of Missouri School of Law. Here is what we learned this week. FRCP R. 26(b).

Doctrine of Equivalents: On the Rise Again?

By Dennis Crouch

Brilliant Instruments v. GuideTech (Fed. Cir. 2013), Majority Opinion by Judges Moore and Reyna with Judge Dyk dissenting in part.

 Shalom Kattan was a prolific inventor while an employee at GuideTech. When he left to form his own company, Brilliant Instruments, GuideTech threatened Kattan with charges of patent infringement. In 2009, Brilliant sued GuideTech for declaratory judgment of non-infringement. Patent Nos. 6,226,231, 6,091,671, and 6,181,649. In the litigation, district court judge Wilken sided with Brilliant and issued a summary judgment order of non-infringement. In a split decision, the Federal Circuit has reversed-in-part — holding that GuideTech still has an infringement argument under the doctrine of equivalents.

The patent statute defines direct infringement liability for someone who “makes, uses, offers to sell, or sells any patented invention” without authority of the patent holder. For more than 150 years courts have seen the “patented invention” as being roughly defined by the patent’s claims and infringement occurs when someone’s unauthorized activities include each element of a patent claim. Using its common law power, the Supreme Court long ago expanded the scope of infringement beyond the literal confines of claim elements in order to also capture “equivalents.” Thus, even if outside of the literal scope of a written claim, an accused infringer may still be liable if its activity is deemed equivalent to the claimed invention. In Warner-Jenkinson Company, Inc. v. Hilton Davis Chemical Co., 520 U.S. 17 (1997), the Supreme Court severely limited power of the doctrine of equivalents by ruling that the equivalents test must be done on an element-by-element basis rather than by focusing on the claim as a whole. In that case, the Supreme Court wrote:

In our view, the particular linguistic framework used [for the Doctrine of Equivalents] is less important than whether the test is probative of the essential inquiry: Does the accused product or process contain elements identical or equivalent to each claimed element of the patented invention? Different linguistic frameworks may be more suitable to different cases, depending on their particular facts. A focus on individual elements and a special vigilance against allowing the concept of equivalence to eliminate completely any such elements should reduce considerably the imprecision of whatever language is used. An analysis of the role played by each element in the context of the specific patent claim will thus inform the inquiry as to whether a substitute element matches the function, way, and result of the claimed element, or whether the substitute element plays a role substantially different from the claimed element. With these limiting principles as a backdrop, we see no purpose in going further and micromanaging the Federal Circuit’s particular word choice for analyzing equivalence. We expect that the Federal Circuit will refine the formulation of the test for equivalence in the orderly course of case-by-case determinations, and we leave such refinement to that court’s sound judgment in this area of its special expertise.

In this case, the claim at issue requires a shunt and a capacitor that is “operatively disposed in parallel” to a “first current circuit.” The accused product also includes a capacitor but it is actually within the first circuit rather than parallel to the first circuit. Thus, there was no literal infringement. However, the patentee’s technical expert analysis (available for the summary judgment) walked through the function-way-result test approved by Warner-Jenkinson and explained his opinion of infringement. The expert had explained:

[D]isposition of the shunt and the capacitor with respect to the [accused] first current circuit … is equivalent to the electrical disposition of the shunt and the capacitor with respect to the [claimed] first current circuit … because it performs substantially the same function (allowing the shunt to control the path of current flow to or from the first current circuit) in substantially the same way (wherein an electrical path from the first current circuit can be traced to either the capacitor or the shunt) to achieve substantially the same result (providing an electrical relationship wherein, e.g., the shunt can direct current to flow from the first current circuit to the second current circuit or from the first current circuit to the capacitor).

On appeal, the Federal Circuit found that that this “detailed application of the function-way-result test to the claim element and the allegedly equivalent feature of the accused product is sufficient to create a genuine issue of material fact for the jury to resolve.” (Like direct infringement, infringement under the doctrine of equivalents is a question of fact typically decided by a jury.)

One aspect of the doctrine of equivalents is the vitiation rule — stating that the DOE may not be used in a way that renders a claim term meaningless. However, almost since its introduction, the Federal Circuit has been rolling-back the doctrine. In the recent case of Deere & Co. v. Bush Hog, LLC, _ F.3d _ (Fed. Cir. 2012), the court wrote that

“Vitiation” is not an exception to the doctrine of equivalents, but instead a legal determination that “the evidence is such that no reasonable jury could determine two elements to be equivalent.” The proper inquiry for the court is to apply the doctrine of equivalents, asking whether an asserted equivalent represents an “insubstantial difference” from the claimed element, or “whether the substitute element matches the function, way, and result of the claimed element.” If no reasonable jury could find equivalence, then the court must grant summary judgment of no infringement under the doctrine of equivalents.

[T]he vitiation test cannot be satisfied by simply noting that an element is missing from the claimed structure or process because the doctrine of equivalents, by definition, recognizes that an element is missing that must be supplied by the equivalent substitute.

Vitiation is generally used when the claim element is the “polar opposite” of the accused equivalent. However, even there vitiation is simply a shorthand mechanism for saying that the two elements are “not insubstantially different.” Here, Judge Moore adds to the explanation from Deere:

The vitiation test cannot be satisfied merely by noting that the equivalent substitute is outside the claimed limitation’s literal scope. Rather, vitiation applies when one of skill in the art would understand that the literal and substitute limitations are not interchangeable, not insubstantially different, and when they do not perform substantially the same function in substantially the same way, to accomplish substantially the same result. In short, saying that a claim element would be vitiated is akin to saying that there is no equivalent to the claim element in the accused device based on the well-established “function-way-result” or “insubstantial differences” tests.

Judge Moore goes on to open the door for even polar opposites to be equivalents — noting that proving equivalents “will be more difficult when the accused structure has an element that is the opposite of the claimed element, especially where the specification or prosecution history highlights the differences.”

Applying these concepts to the facts of this case, we conclude that summary judgment must be reversed. The element at issue is: “wherein said shunt and said capacitor are operatively disposed in parallel with respect to said first current circuit.” … Everyone agrees that the capacitor in the accused device is not located in exactly the same place as the claimed capacitor, but is the change in location an insubstantial difference? We conclude that, viewing all factual inferences in favor of GuideTech, it has created a genuine issue of material fact which precludes summary judgment.

On remand, the equivalents question should then go to the jury.

In dissent, Judge Dyk argued that the expert report did not actually consider equivalents on a limitation-by-limitation basis as required by Warner-Jenkinson.


Gunn v. Minton: Supreme Court Narrows Arising Under Jurisdiction for Patent Cases

By Dennis Crouch

Gunn v. Minton, 568 U. S. ____ (Supreme Court 2013)

In a 9-0 decision, the Supreme Court has limited the scope of "arising under" jurisdiction for patent cases and held that the Minton's patent litigation malpractice case does not arise under the patent laws and therefore is not amenable to exclusive federal jurisdiction. This decision collaterally overrules the Federal Circuit's prior case law in Air Measurement Technologies, Inc. v. Akin Gump Strauss Hauer & Feld, L. L. P., 504 F. 3d 1262 (2007) and Immunocept, LLC v. Fulbright & Jaworski, LLP, 504 F. 3d 1281 (2007)). As I discuss at the end of this essay, the America Invents Act of 2011 expanded the scope of federal court jurisdiction and thus counteracts some of the impact of this decision.

28 U. S. C. §1338(a) indicates that federal "district courts shall have original jurisdiction of any civil action arising under any Act of Congress relating to patents" and that the jurisdiction "shall be exclusive of the courts of the states." (Note, this language has now been somewhat amended by the AIA).

Gunn used to be Minton's attorney and represented Minton in prior patent infringement litigation. However, in that prior litigation, the district court declared Minton's patent invalid because he had placed it "on sale" more than one year prior to filing his application. Minton later found that he may have won under the "experimental use" exception to the on-sale bar, but Gunn had allegedly failed to advise him on that front. Minton then sued Gunn for attorney malpractice in Texas state court. However, after losing in State court, Minton changed heart and asked that the case be sent to Federal Court based upon Section 1338(a)'s provision for exclusive federal jurisdiction over any case "arising under any Act of Congress relating to patents." The Texas Supreme Court agreed with Minton and found that the exclusivity prong of the federal law denied jurisdiction to the state. Gunn then petitioned the Supreme Court to decide the scope of federal arising under jurisdiction in this case.

The "arising under" language used in Section 1338(a) has its foundation in the U.S. Constitution. Article III states that "[t]he judicial Power shall extend to all Cases, in Law and Equity, arising under this Constitution." §1338(a) language is also parallel to §1331's general principle of federal court jurisdiction over "all civil actions arising under the Constitution, laws, or treaties of the United States." §1338(a) is particularly limited to "any civil action arising under any Act of Congress relating to patents." However, the statute is also particularly strong because, unlike most causes of action, the statute provides for exclusive federal jurisdiction if the arising under condition is met. §1338(a).

In most patent cases the arising under analysis is simple because the complaint asserts a cause of action that is based on federal patent law, such as patent infringement or declaratory judgment of invalidity. Supreme Court has additionally held that arising under jurisdiction may exist in cases where the cause of action is not based upon federal law, but where there is an underlying federal issue arising from the well pled complaint. Most importantly, see Grable & Sons Metal Products, Inc. v. Darue Engineering & Mfg., 545 U. S. 308 (2005). In Grable, the Supreme Court indicated that this secondary form of arising under jurisdiction only exists when the claim made in the complaint "[1] necessarily raise[s] a stated federal issue, [2] actually disputed and [3] substantial, [4] which a federal forum may entertain without disturbing any congressionally approved balance of federal and state judicial responsibilities." Grable was an interpretation of §1331 arising under jurisdiction, but the court previously held in Christianson v. Colt Indus. that §1331 arising under analysis applies to §1338(a) analysis as well. Christianson v. Colt Industries Operating Corp., 486 U. S. 800, 808–809 (1988).

Regarding the present case, we know that malpractice is ordinarily a state law claim and thus we need to consider whether the case qualifies under Grable. On that point, the Supreme Court agreed that [1] Minton's "experimental use" theory was a federal patent question necessary for his case and that [2] the issue was actually disputed. However, the Court found Minton's case failed [3] to raise a "substantial" federal issue with [4] the appropriate balance of state and federal interests.

Here, the substantiality requirement is focused on the impact that the case may have on the federal system as a whole. The court writes:

[T]he federal issue in this case is not substantial in the relevant sense…. I]t is not enough that the federal issue be significant to the particular parties in the immediate suit; that will always be true when the state claim "necessarily raise[s]" a disputed federal issue, as Grable separately requires. The substantiality inquiry under Grable looks instead to the importance of the issue to the federal system as a whole.

This case, the court found carries no significance with regard to the federal system:

Because of the backward-looking nature of a legal malpractice claim, the question is posed in a merely hypothetical sense: If Minton's lawyers had raised a timely experimental-use argument, would the result in the patent infringement proceeding have been different? No matter how the state courts resolve that hypothetical "case within a case," it will not change the real-world result of the prior federal patent litigation. Minton's patent will remain invalid.

At the creation of the Federal Circuit, patent law was given a somewhat special status based upon the congressional sense for national uniformity of the patent law. The Supreme Court confirmed that notion in Bonito Boats, Inc. v. Thunder Craft Boats, Inc., 489 U. S. 141 (1989). Here, the Supreme Court found that the sense of national uniformity is not disturbed by state law decisions since (1) the federal courts are of course not bound by state court decisions; and these particular malpractice proceedings only ask hypothetical patent questions of "what would have happened."

One point that Minton raised in the case is that the Texas state court applied patent law doctrine in a way that varies from Federal Circuit precedent. On that point, the Supreme Court merely stated that "state courts can be expected to hew closely to the pertinent federal precedents" and that issues not already covered by federal precedent will eventually be "decided by a federal court in the context of an actual patent case, with review in the Federal Circuit. If the question arises frequently, it will soon be resolved within the federal system, laying to rest any contrary state court precedent." This is the one point where the Supreme Court decision is somewhat disingenuous since state courts are not obligated to follow precedent set by either district courts or the Federal Circuit. Thus, the reality is that it is well within a state court's power to unsettle issues seemingly well-settled by Federal Circuit precedent.

Although not so holding, the Supreme Court also suggested that state court decisions on patent issues should not have preclusive effect on other courts. Thus, a state court decision involving a licensing dispute that results in invalidation of a patent would have no preclusive effect on either the USPTO or other Federal Courts. Rather, "the result would be limited to the parties and patents that had been before the state court."

Since Minton failed to prove a substantial Federal interest in deciding the state cause of action., it also follows that Minton fails the fourth prong of Grable that involves the balancing of State and Federal interests.

In its conclusion, the Court makes a clear statement of its decision:

As we recognized a century ago, "[t]he Federal courts have exclusive jurisdiction of all cases arising under the patent laws, but not of all questions in which a patent may be the subject-matter of the controversy." New Marshall Engine Co. v. Marshall Engine Co., 223 U. S. 473 (1912). In this case, although the state courts must answer a question of patent law to resolve Minton's legal malpractice claim, their answer will have no broader effects. It will not stand as binding precedent for any future patent claim; it will not even affect the validity of Minton's patent. Accordingly, there is no "serious federal interest in claiming the advantages thought to be inherent in a federal forum," Grable. Section 1338(a) does not deprive the state courts of subject matter jurisdiction.

The judgment of the Supreme Court of Texas is reversed, and the case is remanded for further proceedings not inconsistent with this opinion.

 On remand, the Texas Supreme Court will now be asked to decide the merits of Minton's appeal rather than merely the jurisdictional question.

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In many ways, this decision is the echo of EBay and MedImmne where the court basically said: patent litigation is not special, it is just litigation. Patent cases are not untouchable by state courts and Congressional statements regarding the uniformity principle are not statements also declaring that patent law is especially unique.

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Impact: This case will have some immediate impact in that patent law malpractice suits currently being litigated in federal court, absent special circumstances or diversity, should be dismissed for lack of subject matter jurisdiction. And, malpractice cases will likely be almost uniformly heard in state court going forward.

Role of the AIA: For licensing dispute, the decision here means that few breach-of-contract allegations will be seen as arising under the patent law. However, the impact of this case on licensing disputes is likely wholly overwhelmed by the changes to §1338(a) and the new removal statue 28 U.S.C. §1454. The new law does not apply to the Gunn case because the complaint was filed before the law was enacted. However, under the new law, the question is not whether the "civil action" arises under the patent laws, but instead whether the lawsuit involves "any claim for relief arising under any Act of Congress relating to patents." Section 1454 makes clear that the federal court will have jurisdiction whenever "any party" asserts a claim arising under the patent laws. Thus, in a breach-of-patent-license dispute it is almost always the case that the accused breaching party can assert a counterclaim of patent invalidity. When that occurs, the new law expressly eliminates state court jurisdiction and offers an option for removal to Federal Court rather than straight dismissal. This change in the law essentially overrules the Supreme Court's decision in Holmes Group, Inc. v. Vornado Aircirculation Systems, Inc., 535 U.S. 826 (2002). In Holmes Group, the Supreme Court held that patent claims that arise only in a counterclaim did not trigger Federal jurisdiction under §1338(a).

Gunn v. Minton: issue of patent law does not deprive state court of jurisdiction over malpractice claim

By Jason Rantanen

Read the opinion here: Gunn v. Minton

This morning the Supreme Court released its opinion in Gunn v. Minton The Court held that the presence of a substantive issue of patent law did not deprive the state court of jurisdiction over the malpractice claim. Notably, the Court did not feel that allowing these claims to proceed in state court would substantially affect federal patent law.

From the syllabus:

(3) Minton’s argument founders, however, on Grable’s substantiality requirement. The substantiality inquiry looks to the importance of the issue to the federal system as a whole. Here, the federal issue does not carry the necessary significance. No matter how the state courts resolve the hypothetical “case within a case,” the real-world result of the prior federal patent litigation will not change. Nor will allowing state courts to resolve these cases undermine “the develop- ment of a uniform body of [patent] law.” Bonito Boats, Inc. v. Thunder Craft Boats, Inc., 489 U. S. 141, 162. The federal courts have exclusive jurisdiction over actual patent cases, and in resolving the nonhypothetical patent questions those cases present they are of course not bound by state precedents. Minton suggests that state courts’ answers to hypothetical patent questions can sometimes have real-world effect on other patents through issue preclusion, but even assuming that is true, such “fact-bound and situation-specific” effects are not sufficient to establish arising under jurisdiction, Empire HealthChoice Assurance, Inc. v. McVeigh, 547 U. S. 677, 701. Finally, the federal courts’ greater familiarity with patent law is not enough, by itself, to trigger the federal courts’ exclusive patent jurisdiction.

Oral Arguments in Bowman v. Monsanto

By Dennis Crouch

Bowman v. Monsanto Company (SCOTUS 2013) Transcript

The Supreme Court heard oral arguments today in the patent exhaustion case involving Monsanto's glyphosate-resistant soybeans.  Acting in a pro bono basis, Mark Walters represented Mr. Bowman, the Indiana farmer accused of patent infringement.  Decidedly not pro bono, Seth Waxman represented Monsanto, and Melissa Arbus Sherry spoke on behalf of the US Government. 

My expectation here is that the court will side with Monsanto and find that a sale of patents seeds does not exhaust the patent rights as to progeny seeds that are grown. I will not be surprised if that result is 9-0. I suspect that there will also be a concurring opinion arguing that the Federal Circuit's conditional sale doctrine is bad law and that restrictions on the use of personal property do not normally bind subsequent purchasers who are not privy to that restriction agreement – regardless of whether the personal property is covered by a patent right.

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There are two major questions at stake: (1) what is the scope of patent exhaustion for goods that are naturally self-reproducing; and (2) to what extent do use restrictions placed on a licensed grower (or manufacturer) persist as servitudes that create potential liability for downstream purchasers.

Everyone agrees that the first authorized and unrestricted sale of a patented article exhausts the patent rights in that particular article and allows the purchaser to use and sell the article without fear of patent liability.  Bowman argues that, for seeds, this right to use includes the right to sow the seeds and use the harvest.  Under Bowman's construct, once a seed is sold without restriction, the patent rights are exhausted to that seed and to its generations of progeny. Bowman's argument also relies upon the disputed assumption that the patent rights covering the initial seeds he purchased were actually exhausted. Monsanto has kept tight control over its product throughout the years and always requires farmers who want to plant its seeds to sign a technology licensing agreement. That agreement includes a promise not to save and replant seeds. Monsanto has argued that use restriction (or license limitation) is binding on subsequent purchasers – even those who purchase the seeds in a fungible commodity market without agreeing to any restriction. Thus, for Bowman to win, the court needs to find (1) that the rights in the original seeds were exhausted by the time Bowman purchased them from the commodity market and (2) that the exhaustion applies to all future progeny of the seeds. So far, the courts have sided with Monsanto.

Out of the gate, a plurality of justices appeared concerned about the policy implications of a decision in favor of Bowman.

Chief Justice Roberts: Why in the world would anybody spend any money to try to improve the seed if as soon as they sold the first one anybody could grow more and have as many of those seeds as they want?

There are several ways to answer this question: (1) an innovator could use contract law to ensure a better market structure; (2) patent rights are rarely sufficient alone to ensure profit; and (3) that soybeans are not really fungible in the way that you might think. The Court already knew the first two answers wanted to explore the third.

Mr. Walters: [S}eed that's available at a grain elevator is not a very good source of seed and farmers are not going to be able to eliminate the need to go to Monsanto or the other seed companies every year by going to the grain elevator. . . . Taking our example here where — where Petitioner bought commodity seeds, it's an undifferentiated mixture, it can't be overemphasized how different every single seed is, you don't know a Monsanto from a Pioneer from an Asgrow. You don't know the maturity rate. If I am a farmer, I need a particular maturity bean for my field because I don't want it to mature before it gets high enough for the combine to come around and cut it.

So you want to be able to have — you have all these things dialed in, these different variabilities. So if you go to the grain elevator and you don't know what exactly it is that you want and you just get a mixture, that's not going to be real -competitive at all to Monsanto's first generation seed. Now, the possibility of somebody selecting one and saying, ah, that's the exact one that I need for my field, I'm going to cultivate that and let it grow into enough seeds so I can plant my first crop, that would take a number of years to grow a 1,000-acre farm, and it's not — and by that time, farmers — the nature would have changed and evolved where you would want the latest disease resistance by that point….

Justice Scalia: Some of them would — would grow at different rates than others.

Mr. Walters: Absolutely. . . .

Justice Scalia: The original batch that he buys from Monsanto, in addition to being resistant to the chemical that kills the weeds, in addition to that, they all mature at the same rate.

Mr. Walters: Exactly. They're a uniform variety. They are exactly what a farmer needs …

Justice Scalia: So all the Monsanto seeds are not — are not fungible.

In addition to these elements, both Ms. Arbus Sherry and Mr. Waxman explained that the seed lines are additionally protected by PVPA certificates and that grain elevators are sales are prohibited by state and federal law from labeling its commodity goods as seed.

On the actual law of exhaustion Mr. Walters did not appear to fare so well.

Justice Sotomayor: I'm sorry. The Exhaustion Doctrine permits you to use the good that you buy. It never permits you to make another item from that item you bought. So that's what I think Justice Breyer is saying, which is you can use the seed, you can plant it, but what you can't do is use its progeny unless you are licensed to, because its progeny is a new item.

Mr. Walters: This is obviously a brand-new case where we're dealing with the — the doctrine of patent exhaustion in the context of self-replicating technologies.

It was around this point that Justice Breyer gave his best one-liner of the day, declaring that "three generations of seeds is enough." (see Buck v. Bell).

The government's Ms. Arbus Sherry began her discussion with a somewhat disingenuous parade of horribles that was quickly countered by Justice Scalia his is well known for his parades.

Ms. Arbus Sherry: If the concept is the sale of a parent plant exhausts the patentholder's rights not only with respect to that seed but with respect to all the progeny seed, we would have to go all the way back to the very first Roundup Ready plant that was created as part of the transformation event. Every single Roundup Ready seed in existence today is the progeny of that one parent plant and, as Your Honor pointed out, that would eviscerate patent protections. There would be no incentive to invest, not just in Roundup Ready soybeans or not even agricultural technology, but it's quite a bit broader than that.

In order to encourage investment, the Patent Act provides 20 years of exclusivity. This would be reducing the 20-year term to essentially one and only sale. It would be near impossible to recoup your investments with that first sale and so the more likely consequence is that research dollars would be put elsewhere.

Justice Scalia: That's a pretty horrible result, but let me give you another horrible result, and that is if — if we agree with you, farmers will not be able to do a second planting by simply getting the undifferentiated seeds from a grain elevator, because at least a few of those seeds will always be patented seeds, and no farmer could ever plant anything from a grain elevator, which means — I gather they use it for second plantings where the risks are so high that it doesn't pay to buy expensive seed. Now they can't do that any more because there's practically no grain elevator that doesn't have at least one patented seed in it.

Ms. Arbus Sherry: And the answer to that is this is actually not a traditional farming practice. Despite what Petitioner says, farmers do not generally go to grain elevators, buy commingled grain, plant it in the ground as seed.

Mr. Waxman's performance appears to be a tour-de-force, although he did not push for affirmance of the Federal Circuit's conditional sale doctrine. The one area where the court focused attention was on innocent infringement.

Justice Kagan: Mr. Waxman, there is a worrisome thing on the other side, though, too. And that is the Bureau position has the — has the capacity to make infringers out of everybody. And that is highlighted actually in this case by how successful this product is and how large a percentage of the market it has had.

So that — you know, seeds can be blown onto a farmer's farm by wind, and all of a sudden you have RoundUp seeds there and the farmer is infringing, or there's a 10-year-old who wants to do a science project of creating a soybean plant, and he goes to the supermarket and gets an edamame, and it turns out that it's Roundup seeds.

And, you know, these Roundup seeds are everywhere, it seems to me. There's, what, 90 percent of all the seeds that are around? So it seems as though — like pretty much everybody is an infringer at this point, aren't they?

Mr. Waxman: …Your point about the ubiquity of Roundup Ready's use is a fair one. I mean, this is probably the most rapidly adopted technological advance in history. The very first Roundup Ready soybean seed was only made in 1996. And it now is grown by more than 90 percent of the 275,000 soybean farms in the United States.

But size — that is, success — has never been thought and can't be thought to affect the contour of patent rights. You may very — with soybeans, the problem of blowing seed is not an issue for soybeans. Soybeans don't — I mean, it would take Hurricane Sandy to blow a soybean into some other farmer's field. And soybeans, in any event, are — you know, have perfect flowers; that is, they contain both the pollen and the stamen, so that they — which is the reason that they breed free and true, unlike, for example, corn.

The point that there may be many farmers with respect to other crops like alfalfa that may have some inadvertent Roundup Ready alfalfa in their fields may be true, although it's — it is not well documented. There would be inadvertent infringement if the farmer was cultivating a patented crop, but there would be no enforcement of that.

The farmer wouldn't know, Monsanto wouldn't know, and in any event, the damages would be zero because you would ask what the reasonable royalty would be, and if the farmer doesn't want Roundup Ready technology and isn't using Roundup Ready technology to save costs and increase productivity, the — the royalty value would be zero. …

Justice Breyer: And some of the self-replicating items, which are infringing items, end up inadvertently all over the place. Is there anything — is there precautions that you take? I mean, is there anything in patent law that helps?

Mr. Waxman: So infringement is — unlike contributory infringement or induced infringement, the act of infringement, that is a violation of Section 271 is a strict liability tort, but it requires affirmative volitional contact -conduct. That is, it's not that — a thing doesn't infringe; a person infringes. …

Justice Breyer: But you're just saying that would need a modification in patent law.

Mr. Waxman: Of course.

We can expect a decision by June.

Figures in Design Patents

By Dennis Crouch

The chart above shows a histogram of the number of figures included in a set of 90,000 US design patents issued over the past several years. The median number of figures is 7 and the average is 7.3 figures. The typical seven views are typically six orthogonal views and one perspective view. Designs with only one figure are typically surface treatments or screen icons. Microsoft’s recent GUI Design Patent No. D675,221 is shown to the right and appears to show an mapping interface for zooming in and out. In utility patents, the figures are used to flesh-out the disclosure and ensure that the requirements of written description and enablement are met. In design patents, the figures have the additional importance of defining the scope of the patent claim. In that vein, each additional figure may add additional limitations to the scope of coverage.

When a Functional Claim Limitation is the “Essence of the Invention”

by Dennis Crouch

In re Jasinski (Fed. Cir. 2013)

Jasinski’s patent application is owned by IBM and directed to a method of testing computer memory devices. Application No. 10/906,508.  The USPTO examiner rejected the claims as anticipated and that rejected was affirmed by the USPTO’s internal review board.  On appeal here, the Federal Circuit reversed based upon a claim construction issue.

I have reproduced claim 1 below:

A method for verifying the accuracy of logical-to-physical mapping software designed for testing memory devices, said method comprising:

[a] providing a built-in self test (BIST) fail control function to generate multiple simulated memory fails at various predetermined locations within a
memory array of a memory device;

[b] testing said memory array via a memory tester;

[c] generating a bit fail map by said logical-to physical mapping software based on all memory fails indicated by said memory tester, wherein
said bit fail map indicates physical locations of all fail memory locations derived by said logical-to-physical mapping software; and

[d] comparing said fail memory locations derived by said logical-to-physical mapping software to said various predetermined memory locations to verify the accuracy of said logical-to-physical mapping software.

The USPTO refused to give patentable weight to either the preamble statement of purpose “verifying the accuracy” or the final functional clause indicating that the purpose of the final comparing step is “to verify the accuracy.”  Rather, the USPTO argued that those statements of intended purpose of a step rather than placing any actual limitation on the step itself. According to the USPTO, if the patentee wanted to include a verifying step then it could have done so by positively reciting that step. See Minton v. Nat’l Ass’n of Securities Dealers, Inc., 336 F.3d 1373 (Fed. Cir. 2003) (a whereby “clause in a method claim is not given weight when it simply expresses the intended result of a process step positively recited.”)

On appeal, the Federal Circuit agreed with the notion that a clause that merely indicate the purpose of a limitation does not add patentable weight.  However, the court disagreed the USPTO’s conclusion that the “to verify the accuracy” clause merely indicated the purpose of the step.  Rather, the court found that the “to verify the accuracy” clause refers to the “essence of the invention” and “provides the criteria by which the previously-recited comparing limitation is analyzed.” For this point, the court cited Vizio, Inc. v. Int’l Trade Comm’n, 605 F.3d 1330 (Fed. Cir. 2010) (“[T]he ‘for decoding’ language . . . is properly construed as a limitation, and not merely a statement of purpose or intended use for the invention, because ‘decoding’ is the essence or a fundamental characteristic of the claimed invention.”).

The decision by Judge Moore is important on several fronts:

1) Judge Moore is may well be the most claim-focused member of the Federal Circuit.  Yet, the opinion relies upon the “essence of the invention” to lead to its result rather than merely focusing on the claim language. At least on the academic side we continue to have a broad debate over whether the “cult of the claim” is appropriate.

2) From a practical perspective, this decision places additional power in the hands of patent applicants who reject the USPTO’s broadest reasonable interpretation of its patent claims.  Here, the PTO’s motivation was really that the applicant amend its claims to avoid ambiguity, but its approach was blocked by the court. Moving forward we will likely see continued growth in the use of functional claim language.

3) Functional claim language has been under attack since the Supreme Court rejected Samuel Morse’s broad Claim 8.  The patent act particularly allows for functional claim limitations under 35 U.S.C. 112(f), but that provision includes strict limits on the scope given to such limitations.  More recently, we have seen increased calls to take steps to limit the use of functional claim language.  As Prof Rantanen discussed yesterday, Mark Lemley has proposed that the court should begin interpreting functionally claimed elements as also being bound by 112(f). 


IP Hall of Fame Call for Nominees

Each year the Intellectual Property Hall of Fame goes through an extensive nomination and selection process. Nominations are open to the public and must be submitted by February 25, 2013.  Members of the IP Hall of Fame Academy will then vote on the inductees.  The idea behind the hall of fame is to honor individuals “who have made an outstanding contribution to the development of IP law and practice.”

2012 inductees included Todd Dickinson (former USPTO director); Beatrix de Russe (licensing wizard); Alan Drewsen (INTA); David Kappos (former USPTO director); Tom McCarthy (Professor and author); and Marybeth Peters (former US Register of Copyrights).

The 2013 induction ceremony will be held at the IP Business Congress in Boston in June.  Although a separate entity, the IP Hall of Fame was created by Intellectual Asset Management (IAM) Magazine that is run by Joff Wild.

Submit your nominations here: http://www.iphalloffame.com/nominate/Nominate.aspx.



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