May 2014

Fee Shifting in the Future

Attorney Fees, Ethics, Fee Shifting

Over on the main page Dennis has a nice announcement about an upcoming webinar on the future of fee shifting post-Octane.  Two thoughts.

One, in the op-ed I wrote many months before Octane with Chief Judge Rader and Professor Colleen Chien (who is now at a post at the White House, I believe), we wrote:

To make sure Section 285 is implemented with appropriate vigor, judges must look more closely for signs that a patent lawsuit was pursued primarily to take improper advantage of a defendant — that is, using the threat of litigation cost, rather than the merits of a claim, to bully a defendant into settling.

One sign of potential abuse is when a single patent holder sues hundreds or thousands of users of a technology (who know little about the patent) rather than those who make it — or when a patent holder sues a slew of companies with a demand for a quick settlement at a fraction of the cost of defense, or refuses to stop pursuing settlements from product users even after a court has ruled against the patentee.

Other indications of potential bullying include litigants who assert a patent claim when the rights to it have already been granted through license, or distort a patent claim far beyond its plain meaning and precedent for the apparent purpose of raising the legal costs of the defense.

Second, I wrote about NPEs and ethics a long, long, long time ago in an article here, which also talks about how defense counsel can get in cahoots, so to speak, with NPEs to drive up defense costs for their own benefit.  (All my articles are named after songs by Wesley Stace, f/k/a John Wesley Harding.  It’s a long fun story.)

Williams & Woelker on Fee Shifting | Hricik News

Attorney Fees, Fee Shifting, Patent

I am looking forward to the upcoming CLE-webinar by my former MBHB colleague Andrew Williams, Ph.D. along with Erin Woelker on the impact of the Supreme Court’s fee shifting cases.

On April 29, 2014, the Supreme Court ruled on two cases related to the Patent Act’s fee shifting provision under 35 U.S.C. §285. In Octane Fitness, LLC v. ICON Health & Fitness, Inc., the Court defined an “exceptional” case entitled to fee-shifting to be “simply one that stands out from others with respect to the substantive strength of a party’s litigating position (considering both the governing law and the facts of the case) or the unreasonable manner in which the case was litigated.” In Highmark Inc. v. Allcare Health Mgmt. Sys., Inc., the Court held that because such a determination is at the discretion of the trial court judge, it should be reviewed with an abuse-of-discretion standard. These cases have been watched closely because of their potential impact on so-called “patent trolls.”

This webinar will cover the potential implications of the Octane and Highmark decisions on fee-shifting in patent litigation, especially in cases involving these “patent trolls.”

There is no fee but you must pre-register here: http://tinyurl.com/ljw5odg. [Tuesday, June 10, 2014 10:00 am (Chicago Time)].

More dramatic Fee-Shifting legislation is still pending in the Senate. However, each day’s delay makes its passage less likely as we move into election season.

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I also wanted to highlight the fact that my co-author David Hricik has joined the Atlanta-based law firm of Taylor English Duma LLP in an of counsel position.  Hricik will continue on as a Mercer law professor and also as the Patently-O legal ethics expert.  – DC

 

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En Banc Federal Circuit to Review ITC’s Power over Induced Infringement

En Banc, Inducement, Patent, USITC, ,

By Dennis Crouch

Suprema, Inc. and Mentalix v. US International Trade Commission and Cross Match Tech (Fed. Cir. 2013/2014)

Although the USITC handles plenty of patent cases, it actually derives its power from the Tariff Act, 19 U.S.C. § 1337(a)(1)(B). That provision indicates that the government agency can prohibit the import or sale-after-import of “articles . . . that (i) infringe a valid and enforceable United States patent” The Tariff Act does not further define patent infringement and so the ITC has generally referred to Section 271 of the Patent Act for guidance.  As with district court patent litigation, ITC merits decisions are also appealed to the Court of Appeals for the Federal Circuit.

Here, Cross Match’s asserted patent covers a fingerprint-scan methodology that includes both hardware and software components. The hardware is manufactured abroad and imported by Suprema and then, once in the US, combined by Mentalix with the software to make a product used to infringe. Of importance, the imported hardware does not – by itself – directly infringe the patent. However, the USITC found that Suprema was liable for inducing infringement under 35 U.S.C. 271(b).

On appeal, the Federal Circuit reversed that judgment — holding instead that the USITC’s power only extends to block articles that are themselves infringing at the point of importation. The result for this case is that the inducement theory of infringement could not stand because it requires both additional steps to complete the infringement as well as a particular mens rea. Oddly, however, the majority did find that the USITC may still have power when the cause of action is contributory infringement rather than inducement. This distinction was based upon the notion that inducement is focused on the “conduct of the inducer” and “is untied to an article.” Judge O’Malley penned the Federal Circuit opinion and was joined by Judge Prost. Judge Reyna wrote in dissent.

The ITC and Patentee both filed petitions for re hearing en banc and the Federal Circuit has now granted those petitions. The questions presented are as follows

Cross Match asks:

Whether the United States International Trade Commission (“ITC”) has authority to find a Section 337 violation—and issue an exclusion or cease and desist order—where it finds that an importer actively induced infringement of a patented invention using its imported articles but the direct infringement occurred post-importation.

Cross Match argues that the question is largely answered by Young Eng’rs, Inc. v. ITC, 721 F.2d 1305 (Fed. Cir. 1983); Vizio, Inc. v. ITC, 605 F.3d 1330 (Fed. Cir. 2010); and Disabled Am. Veterans v. Sec’y of Veterans Affairs, 419 F.3d 1317 (Fed. Cir. 2005).

The USITC asks:

(1) Did the panel contradict Supreme Court precedent in Grokster and precedents of this Court when it held that infringement under 35 U.S.C. § 271(b) “is untied to an article”?

(2) Did the panel contradict Supreme Court precedent in Grokster and this Court’s precedent in Standard Oil when it held that there can be no liability for induced infringement under 35 U.S.C. § 271(b) at the time a product is imported because direct infringement does not occur until a later time?

(3) When the panel determined the phrase “articles that . . . infringe” in 19 U.S.C. § 1337(a)(1)(B)(i) does not extend to articles that infringe under 35 U.S.C. § 271(b), did the panel err by contradicting decades of precedent and by failing to give required deference to the U.S. International Trade Commission (“the Commission”) in its interpretation of its own statute?

(4) Did the panel misinterpret the Commission’s order as a “ban [on the] importation of articles which may or may not later give rise to direct infringement” when the order was issued to remedy inducement of infringement and when the order permits U.S. Customs and Border Protection to allow importation upon certification that the articles are not covered by the order?

The USITC argues that these questions are fully answered (in its favor) by Metro-Goldwyn-Mayer Studios Inc. v. Grokster, Ltd., 545 U.S. 913, 940 n.13 (2005); Standard Oil Co. v. Nippon Shokubai Kagaku Kogyo Co., 754 F.2d 345, 348 (Fed. Cir. 1985) (Rich, J.); Crystal Semiconductor Corp. v. TriTech Microelectronics Int’l, Inc., 246 F.3d 1336, 1351 (Fed. Cir. 2001); Vizio, Inc. v. Int’l Trade Comm’n, 605 F.3d 1330, 1343-44 (Fed. Cir. 2010); The Young Engineers, Inc. v. U.S. Int’l Trade Comm’n, 721 F.2d 1305, 1310, 1317 (Fed. Cir. 1983); Chevron U.S.A., Inc. v. Natural Resources Defense Council, 467 U.S. 837, 843 (1984); and Enercon GmbH v. Int’l Trade Comm’n, 151 F.3d 1376, 1381 (Fed. Cir. 1998).

The accused infringers here argued that the fingerprint scanning hardware they are importing are simple staple goods that cannot themselves infringe even if their intended use is infringing.

Documents:

In many ways, this is another divided infringement inducement case. The Supreme Court is currently deciding that issue in Akamai and a decision is expected within the next four weeks.  The Federal Circuit may do well to delay its briefing in this case until Akamai is decided.

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Parallel Process: Despite its “international” name, the USITC is actually a branch of the U.S. government charged with protecting U.S. industry and U.S. goals in international trade.  The USITC’s jurisdiction focuses solely on border-crossing issues and, in the patent context, investigates infringing imports.  It turns out that district courts can also block the importation of infringing goods.  There are some differences in remedy and process, but the basic patent policy question is whether the additional parallel procedure offered by the USITC fills an important gap in district court adjudication. And, if so, why does that gap exist?

Administrative Law: Moving from patent policy, the issues here also focus on a continued power struggle between the various branches of government. One question here is the level of deference that should be given to the USITC in carrying out its mandate.

– Dennis

Guest Post: Federal Circuit Blocks Trademark for Being Disparaging to Muslims

Patent, ,

Guest Post by Professor Mark Bartholomew (SUNY-Buffalo). I asked Professor Bartholomew to comment on this Geller after noting his recent article on Trademark Morality. DC

In re Geller (Fed. Cir. 2014)

Section 2 of the Lanham Act contains a variety of limitations on trademark registration. Some are widely used—for example, the prohibition on merely generic marks. Others rarely come into play, including a registration bar for any mark containing “matter which may disparage.” In its first ever interpretation of this statutory provision, the Federal Circuit affirmed a decision of the Trademark Trial and Appeal Board (TTAB) that denied federal registration to the mark STOP THE ISLAMISATION OF AMERICA. The Federal Circuit agreed with the TTAB that the mark would be disparaging to a substantial composite of the American Muslim community. The stakes are high here because the Federal Circuit is the typical route for appeals of TTAB decisions, and a highly anticipated decision from the TTAB on disparagement involving the WASHINGTON REDSKINS mark is due soon.

Pamela Geller and Robert Spencer tried to register their STOP THE ISLAMISATION OF AMERICA mark in connection with services of “understanding and preventing terrorism.” Geller and Spencer are known for their criticism of Islam, particularly their opposition to the construction of a mosque and Islamic Center near the former site of the World Trade Center. Organizations started by Geller and Spencer, including Stop the Islamisation of America, have been designated as hate groups in the United Kingdom and attracted widespread criticism in this country. This background appeared to influence the Federal Circuit’s view as to whether Geller and Spencer’s mark was disparaging.

The Federal Circuit began its analysis by endorsing the TTAB’s two-prong test for disparagement inquiries. Under the first prong of that test, a court must determine the likely meaning of the mark in question. Under the test’s second prong, the court examines whether the likely meaning refers to an identifiable group and, if so, whether that meaning is disparaging to a substantial composite of that group. The Federal Circuit spent most of its time on the first prong, examining the evidence for the TTAB’s finding that “Islamisation” has a public meaning referring to conversion or conformance to Islam. It endorsed the TTAB’s use of online dictionaries, but also ratified its consideration of essays posted by Geller and Spencer on their own website as well as anonymous reader comments posted on the same website. With regard to the essays, the Federal Circuit read them as advocating suppression of the entire Islamic faith, rather than merely critiquing particular political groups like the Muslim Brotherhood. The essays called for opposing mosque-building, which the Federal Circuit implied was tantamount to an attack on Islam itself. With regard to the website comments, the TTAB cited posts like “Islam is evil” and “There’s only one thing you can do and that’s say no to Islam and the Islamization of America.” Geller said that these were “cherry-picked anonymous comments” deserving of no evidentiary weight. Nevertheless, the Federal Circuit affirmed the use of such evidence in determining the likely meaning of the applicants’ mark. From there, it was not surprising that the court, in evaluating the test’s second prong, found that STOP THE ISLAMISATION OF AMERICA refers to American Muslims and that this group would be offended by a mark associating Islam with terrorism.

In many ways, the Federal Circuit’s opinion is not surprising. The reported decisions evaluating whether marks are disparaging or “scandalous” (another registration prohibition under Section 2) reveal longstanding concern over marks that can offend the sensibilities of particular religious or ethnic groups. For example, a 1938 case heard by the Federal Circuit’s predecessor, the Court of Customs and Patent Appeals, involved the mark MADONNA in connection with wine. Denying registration, the CCPA relied on its own intuition that intoxicating liquors like wine cause various “evils” while the Madonna in Christianity “stands as the highest example of the purity of womanhood, and the entire Christian world pays homage to her as such.” In re Riverbank Canning Co., 95 F.2d 327 (C.C.P.A. 1938).

What In re Geller suggests, however, is current judicial discomfort with the disparagement provision of the Lanham Act and an attempt to build a larger doctrinal edifice to justify its existence. The two-prong test endorsed by the Federal Circuit looks like scaffolding meant to make the disparagement analysis seem more rigorous than it really is. After all, once the court determined the likely definition of STOP THE ISLAMISATION OF AMERICA, it seems like the determination that the mark was disparaging to American Muslims was pretty obvious. The Geller decision also authorizes an expansion in the amount of evidence that should be brought to bear in determining whether a particular group is being disparaged. Do we really want examiners at the PTO building lengthy cases regarding the likely interpretation of a potentially disparaging term by doing things like sifting through anonymous reader comments? It might be better to simply rely on dictionary definitions, which in this case would have been enough to conclude that the applicant’s mark was meant to “stop” an entire religion.

In a recent article, I maintain that judges frame trademark decisions (and intellectual property law decisions in general) in the seemingly neutral language of efficiency and economic analysis but, beneath the surface, there are often hotly contested moral considerations that drive judicial outcomes. Today, it is not considered appropriate for judges to apply moral intuition to their decisions, particularly in the utilitarian-based world of intellectual property law. But this happens all the time in trademark law, from findings of infringement to mark validity to geographic restrictions. But it is usually done behind the scenes. Section 2(a)’s prohibition on disparagement, however, offers a seemingly blank check for judges to engage in just this sort of unfettered analysis of right and wrong. The legalistic approach adopted in Geller shows that the Federal Circuit is nervous about cashing this blank check. Disparagement issues will continue to appear, but it is likely that courts will decide these issues only reluctantly and with a preference for anchoring determinations in seemingly neutral doctrinal frameworks and comprehensive sources of “likely meaning.”

The Veil Over Camelot

Patent

New Jersey v. H.L.M. (Superior Court of NJ, May 13, 2014)

This case involves the defendant H.L.M., who was arrested for removing her children from New Jersey in violation of the custody agreement with her ex-husband. She was stopped at the Canadian border and charged with first degree kidnapping as well as interference with custody. In a plea-deal, the state dropped the kidnapping charge and agreed to probation, counseling, and no contact with her children. The defendant then began “blogging [on] facebook” with apocalyptic quotes and references to Jeffrey Dalmer, Satan, and Adolph Hitler as well as references to her ex-husband and children.

At that point the judge agreed to modify the probation rules prohibiting her from referencing her ex-husband or the children on the blog. “You can talk about what you want to talk about, but don’t reference [J.M.] or the children.” A few months later, she began blogging again about her ex-husband and the children – but used the word “Camelot” to refer to them. The judge found a violation of probation.

You may be asking: how is this related? Answer, somewhat tangentially. It turns out that H.L.M. is also a former patent attorney and electrical engineer. In her appeal, H.L.M. argues that the no-blogging-about-children condition of probation was void for vagueness under the 14th Amendment of the U.S. Constitution and is also an unconstitutional prior restraint on speech in violation of the First Amendment.

In its decision, the appellate court found the patent attorney aspect important – holding that fact lead to a conclusion that she “is clearly a person of more than ordinary intelligence capable of understanding whether her contemplated conduct is lawful.” The court also rejected the first amendment claim – finding that the condition is “narrowly tailored” to protect the victims without unduly limiting speech.

* Note, the image at the side is of the patented Chrysanthemum plant named Camelot. US PP5441.

Guest Post: Are APIs Patent or Copyright Subject Matter?

Patent, , , , ,

Guest Post by Pamela Samuelson, Richard M. Sherman Distinguished Professor of Law at Berkeley Law School. I asked Professor Samuelson to provide a discussion of the recent Federal Circuit decision in Oracle v. Google. DC.

Application programming interfaces (APIs) are informational equivalents of the familiar plug and socket design through which appliances, such as lamps, interoperate with the electrical grid. Just as a plug must conform precisely to the contours of the socket in order for electricity to flow to enable the appliance to operate, a computer program designed to be compatible with another program must conform precisely to the API of the first program which establishes rules about how other programs must send and receive information so that the two programs can work together to execute specific tasks.

No matter how much creativity might have gone into the design of the existing program’s interfaces and no matter how many choices the first programmer had when creating this design, once that the API exists, it becomes a constraint on the design of follow-on programs developed to interoperate with it. Anyone who develops an API is, in a very real sense, designing that aspect of the program for itself and for others.

One of the many errors in Judge O’Malley’s decision in the Oracle v. Google case was her insistence that the merger of idea and expression in computer program copyright cases can only be found when the developer of an API had no choice except to design the interface in a particular way. If there is any creativity in the design of the API and if its designer had choices among different ways to accomplish the objective, then copyright’s originality standard has been satisfied and not just the program code in which the API is embodied, but the SSO of the API, becomes copyrightable. Indeed, harkening back to an earlier era, Judge O’Malley repeated the unfortunate dicta from the Apple v. Franklin case about compatibility being a “commercial and competitive objective” which is irrelevant to whether program ideas and expressions have merged.

The Ninth Circuit in the Sega v. Accolade case, as well as the Second Circuit in Computer Associates v. Altai, have rejected this hostility toward achieving software compatibility and toward reuse of the APIs in subsequent programs.

Although purporting to follow Ninth Circuit caselaw, Judge O’Malley in Oracle v. Google ignored some key aspects of the holding in Sega. Accolade reverse-engineered Sega programs in order to discern the SSO of the Sega interface so that it could adapt its videogames to run on the Sega platform. The principal reason that the Ninth Circuit upheld Accolade’s fair use defense as to copies made in the reverse engineering process was because “[i]f disassembly of copyrighted object code is per se an unfair use, the owner of the copyright gains a de facto monopoly over the functional aspects of his work—aspects that were expressly denied copyright protection by Congress,” citing § 102(b). To get the kind of protection Sega was seeking, the Ninth Circuit said it “must satisfy the more stringent standards imposed by the patent laws.”

Judge O’Malley in Oracle also ignored the Ninth Circuit rejection of Sega’s claim that Accolade infringed based on the literal copying of some Sega code insofar as that code was essential to enabling the Accolade program to run on the Sega platform. That Sega code might have been original in the sense of being creative when first written in source code form, but by making that code essential to interoperability, the expression in that program merged with its function, and hence Accolade’s reproduction of it was not an infringement.

The SSO of the Sega interface was almost certainly creative initially as well. Yet, once that interface was developed, it was a constraint on the design choices that Accolade and other software developers faced when trying to make videogames to run on Sega platforms. The Second Circuit similarly rejected Computer Associates’ claim that Altai had infringed the SSO of its program interface and suggested that patents might be a more suitable form of legal protection for many innovations embodied in software.

Under Sega and Altai, the SSO of APIs are not within the scope of copyright protection for computer programs. Subsequent cases—at least until the Federal Circuit decision in Oracle v. Google—have overwhelmingly endorsed this approach to compatibility issues in software cases.

Perhaps Judge O’Malley was worried that if she did not extend copyright protection to the Java APIs in Oracle v. Google, there would be too little intellectual property protection available to computer programs. After all, she was one of the Federal Circuit judges who would have upheld all of the patent claims for computer-implemented inventions in the CLS Bank v. Alice Corp. case that is now pending before the U.S. Supreme Court. She joined an opinion that warned that if courts struck down the claims in CLS Bank, this mean that hundreds of thousands of software and business method patents would be invalidated. Given the Supreme Court’s skepticism about the Federal Circuit’s rulings on patentable subject matter, there is reason to think that at least some software patents may indeed fall when the Court issues its opinion in Alice. Would such invalidations affect the scope of copyright protection for software?

In the most expansive interpretation of software copyright law since Whelan v. Jaslow, Judge O’Malley in Oracle v. Google endorsed dual protection for APIs from both copyright and patent law. This ignored an important statement from that court’s earlier ruling in Atari Games v. Nintendo that “patent and copyright laws protect distinct aspects of a computer program.” The Oracle opinion instead invoked the dicta from Mazer v. Stein that “[n]either the Copyright Statute nor any other says that because a thing is patentable it may not be copyrighted.”

While it may have been true that the statuette of a Balinese dancer in Mazer was eligible for both copyright as a sculpture and a design patent for an ornamental design of an article of manufacture (as a lamp base), nothing in that decision or any other has upheld utility patent and copyright protection in the same aspect of the same creation, and it seems unlikely that the Supreme Court would abrogate the longstanding tradition tracing back to Baker v. Selden that copyrights protects expression in works of authorship and patents protect utilitarian designs.

In “The Strange Odyssey of Software Interfaces as Intellectual Property,” http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1323818, I traced the tortuous evolution of the law in relation to the protection of software interfaces. At first, they were not treated as intellectual property at all. Firms published APIs so that others would make programs to run on their computing systems. As firms recognized that they could license interface information to generate revenues, APIs were protected as trade secrets. In the mid- to late 1980s, some argued that the “structure, sequence, and organization” (SSO) of APIs should be protected by copyright law, but by the early 1990s, courts decided they were unprotectable elements of programs, more suited to patent than to copyright protection. And so firms began patenting interface designs, as well as continuing to license them as trade secrets.

If Judge O’Malley’s opinion in the Oracle v. Google case is to be believed, APIs have migrated back into copyright’s realm big time. Unless overturned by the Supreme Court or repudiated or distinguished in subsequent cases, the Oracle decision may well reignite the software copyright wars that so many of us thought had died out after the Sega, Altai, and their progeny.

Calculating Fee Awards

Patent

By Dennis Crouch

I reported earlier on a $6.6 million attorney fee award reinstated by the Supreme Court. To find out more about that decision, I pulled up the district court’s accounting opinion. Checkpoint Systems, Inc. v. All-Tag Security S.A., 2011 WL 5237573 (E.D. Pa 2011).

It turns out that the award provides $2.4 million to All-Tag Security and $4.2 million to Sensormatic.

All-Tag Sensormatic
Attorney’s Fees $1,607,507 $3,148,966
Expenses $191,127 $336,762
Pre-judgment Interest $633,570 $805,877

 

Under 35 U.S.C. § 285, a judge may only award “reasonable attorney fees.” That reasonableness was defined somewhat by the Federal Circuit in its Central Soya decision where it held that the purpose of the fee award is “to compensate the prevailing party for its monetary outlays in the prosecution or defense of the suit.” However, following Octane Fitness, that statement has likely lost power as a limitation on district court discretion. The basic approach known as the “lodestar” method calculates attorney fees based upon the number of hours worked times a reasonable hourly rate. That total is then reduced by excluding charges that are “excessive, redundant, unnecessary or otherwise not reasonably expended.”

Here, one challenge that the losing party brought to fee calculation is that the defendants included all of their attorney fees – including fees associated with losing arguments. However, the district court rejected that argument – finding that the plaintiff should even pay those fees since it brought the objectively unreasonable lawsuit.

When this case was appealed, the Federal Circuit reversed the fee decision – finding that the case was not exceptional because the lawsuit was not objectively unreasonable. The Supreme Court has changed that standard – now making it easier to award fees even if the lawsuit itself was not objectively unreasonable. The Federal Circuit will next look to re-judge whether the fee award was proper.

More on Claiming Clones: Products of Nature and Source Limitations

Guest Post, Patentable Subject Matter, , ,

Guest post by Dr. Jeffrey A. Lefstin, Professor of Law, University of California, Hastings College of Law

Jason’s excellent post on Roslin summarized the case and raised the question of whether the Federal Circuit paid insufficient attention to the inherent differences conveyed by the ‘clone’ limitation of the claims. In this post I address two other issues in Roslin:  the Federal Circuit’s interpretation of Ckakrabarty and Funk Brothers, and Roslin’s consistency with Federal Circuit precedent holding that structural or functional differences between natural and synthetic products must be defined in the claims.

Unaltered by the hand of man: Judge Dyk’s opinion in Roslin unfortunately perpetuates the view, now found in the PTO’s Myriad guidelines, that Chakrabarty requires a claimed invention to be “markedly different” from a natural product for patent-eligibility under § 101.  Myriad itself imposed no such requirement: the Court found BRCA cDNAs patent-eligible without determining that they were “markedly different” from natural sequences. And though Myriad reiterated the “markedly different” language from Chakrabarty, Chakrabarty’s discussion of ‘products of nature’ was entirely dictum. Only the question of whether living organisms were patent-eligible was before the Court in Chakrabarty; the ‘product of nature’ rejection in the case had not been sustained by the Patent Office Board of Appeals.

The Chakrabarty Court noted the claimed bacteria differed markedly from natural bacteria by way of distinguishing the case from Funk Brothers.[1] As Paul Cole’s recent post notes, the patentee had discovered that certain strains of bacteria could be mixed together without inhibiting their nitrogen-fixing capability.  Justice Douglas regarded this compatibility as the unpatentable discovery of a natural phenomenon;  the claims were unpatentable because the patentee’s application – a mixed inoculant – was “a simple step” once the underlying discovery was assumed away.

As I discuss in a recent article, Funk  was nonetheless very much a patent eligibility case. It reflects Douglas’s view – shared by Justice Stevens in Flook, and Justice Breyer in Mayo – that obvious applications of scientific discoveries or abstract ideas are not patent-eligible “inventions” within the meaning of the statute.

Whether or not we share that view, understanding it shows us that Funk was an ‘inventive application’ case, not a ‘product of nature’ case. Douglas made no reference to the ‘product of nature’ doctrine, nor to the recent cases embodying it.[2] Instead, Douglas emphasized the lack of change in the bacteria to establish that the mixed inoculant was obvious (once the patentee’s discovery was assumed away). Under the old doctrine of ‘aggregation,’ it was not invention to combine old elements where the elements were unchanged, and no new function arose from their combination. It was therefore not inventive for the patentee in Funk to combine old bacteria without changing their structure or function.

But just as many combinations of old elements become patentable when a new function emerges, the mixed inoculants of Funk would have been patentable — even if the bacteria remained unchanged — had the mixed inoculant acquired new functions not performed by its constituent bacteria. If Funk Brothers instead stood for the proposition that a combination is unpatentable if its constituents are ‘unaltered by the hand of man,’ then a very large number of inventions become patent-ineligible.  An artificial structure like an arch, formed by piling stones atop each other, would be ineligible unless the stones themselves were altered by the hand of man.  Even as ardent a skeptic of the patent system as Justice Douglas would not have gone that far.

Source limitations and expressly claimed distinctions: The second difficulty with Roslin is its demand that the ‘marked differences’ between the natural organism and the invention must be expressly claimed. As Jason discussed, the applicant in Roslin argued that cloned animals differ from their natural counterparts at least in having mitochondrial DNA derived from the egg donor, rather than the animal which donated the somatic nucleus. The Federal Circuit rejected such arguments because neither the difference in mitochondrial DNA, nor any functional consequence of that difference, was recited in the claims.

However, the same argument, albeit in the context of § 102, was before the Federal Circuit in the extensive litigation over Amgen’s recombinant erythropoietin (EPO) patents. Much like Roslin, Amgen had claims to a ‘copy’ of natural product: in that case EPO produced by mammalian cells in culture. While Amgen’s synthetic EPO differed in glycosylation from the natural product, several of the claims in the case recited only the non-natural source of the EPO, not the structural differences. The Federal Circuit recognized that the novelty of the synthetic EPO claims depended on whether synthetic EPO differed from natural EPO.  Yet the court found novelty based on the unclaimed structural and functional differences between natural and  synthetic EPO, which were demonstrated in part by the specification and prosecution history, and in part by testimony at trial. Amgen Inc. v. F. Hoffman-LaRoche Ltd, 580 F.3d 1340, 1370 (Fed. Cir. 2009). In effect, the court held that the structural and functional differences characterizing the synthetic product were inherent in the source limitations. (The court did not inquire whether all synthetic EPO molecules falling within the scope of the claims would display similar differences in glycosylation.)

Thus under Amgen, a source limitation alone (such as ‘non-naturally occurring’ or ‘purified from mammalian cells grown in culture’) may establish novelty of a product. Assuming the ‘clone’ limitation in Roslin to require derivation from nuclear transfer, then it serves as a source limitation as well. Since Roslin cannot overrule Amgen, we seem to be in a regime where differences between natural and synthetic products may be unclaimed yet confer novelty under § 102, but must be explicitly claimed to establish ‘marked difference’ under § 101. Of course, if Roslin is correct, that doctrinal inconsistency is less significant than the consequence that Amgen-type claims – and perhaps a wider category of product-by-process claims involving natural products – are now ineligible under § 101.


[1] In Chakrabarty, the Commissioner never suggested that the claimed bacteria were unpatentable under Funk, nor even raised the case.  Rather, Chakrabarty argued that if living organisms were not patent-eligible, the Court would have said so in Funk.

[2] In particular, the General Electric and Marden cases denying patentability to purified tungsten, uranium, and vanadium. The defendant had urged General Electric upon the Funk court in its brief.

Patent Rights are a Marital Asset and Non-Inventing Spouse is a Co-Owner

Patent

By Dennis Crouch

James Taylor v Taylor Made Plastics (Fed. Cir. 2014)

I should note here that this case is neither about the musician or the golf club company. Rather, it is about the now fractured Taylor family and their patented pipe plugs. I discussed the district court decision earlier here.

Several years ago James T. invented storm drain equipment and obtained a patent in his name only. U.S. Patent No. 5,806,566. When he and his wife Mary T. later divorced, the divorce court ordered “equitable distribution of marital property” with Mary T. receiving 60% of proceeds from the patent and James T. receiving 40%. The divorce court seemingly only dealt with equitable title in the form of rights-to-proceeds and not with legal title to the patent itself. And, in particular, the divorce court did not identify who held the exclusive rights associated with the patent.

Following the divorce, James T. seems to have lost control of the Taylor Made Plastics company that sells the devices he invented and the company also stopped paying on the patent. Mary T., however, is on much better terms with the company that continues to be family run. So, when James T. filed his infringement lawsuit against Taylor Made Plastics, Mary T. sided with the company and the district court dismissed the case – finding that title to the patent was divided between the two former spouses and, as a consequence, any infringement lawsuit must be filed by both co-owners acting in concert.

On appeal, the Federal Circuit has affirmed – finding that Mary T. was properly considered a co-owner and therefor a necessary party for any infringement lawsuit to consider.

The appellate panel began by highlighting the rule that equitable title is not the type of ownership we are talking about. Thus, the fact that Mary T. is owed 60% of the distribution is irrelevant. Rather the correct question is whether Mary T. has at least partial power to wield the rights-of-exclusivity inherent to the patent.

The long-established rule is that a suit for patent infringement must join all co-owners of the patent as plaintiffs. Waterman v. Mackenzie, 138 U.S. 252 (1891). If any co-owner should refuse to join as a co-plaintiff, the suit must be dismissed for lack of standing. But a party is not co-owner of a patent for standing purposes merely because he or she holds an equitable interest in the patent. Arachnid, Inc. v. Merit Indus., Inc., 939 F.2d 1574 (Fed. Cir. 1991). Rather, a co-owner must hold legal title to the patent. Id. (citing Crown Die & Tool Co. v. Nye Tool & Mach. Works, 261 U.S. 24 (1923)). Legal title vests initially in the inventor, and passes to others only through assignment or other effective legal transfer.

As in most states, assets acquired by either spouse during a Florida marriage are presumed to be marital assets subject to equitable distribution on divorce. It is through that process that Mary T. became a co-owner. In the appeal, James T. represented himself pro se and seemingly did a poor job by offering number of arguments “only in a cursory fashion without any supporting facts.” At the Federal Circuit, James T. argued (but failed to provide any evidence) that Mary T. had signed a contractual agreement to enforce the patent against Taylor Made. If that contract exists and is enforceable then James T. should be able to re-file the lawsuit and force her to participate in the next go-round.

= = = = =

Professor Hricik provides his thoughts here: https://patentlyo.com/hricik/2014/05/spouses-inventors-owners.html

 

Federal Circuit Supports Dual Patent/Copyright Protection for Interface Software

Patent

Oracle v. Google (Fed. Cir. 2014)

More to come on this case, but the bottom line is that the Federal Circuit held that “API packages are entitled to copyright protection” despite their functionality. The court writes “we thus decline any invitation to declare that protection of software programs should be the domain of patent law, and only patent law.”

http://www.cafc.uscourts.gov/images/stories/opinions-orders/13-1021.Opinion.5-7-2014.1.PDF

Claiming Clones

Patent

 In re Roslin Institute (Edinburgh) (Fed. Cir. 2014) In re Roslin
Panel: Dyk (author), Moore, Wallach

Dolly cloneThis case relates to Dolly, probably the most famous baby sheep ever.1  As most folks know, Dolly was the first successful mammalian clone from an adult somatic cell.  This means that her nucleic genetic material is a copy of the adult from which she was cloned.  The basic process used to create Dolly is illustrated to the right.

In addition to claims on the cloning process (which were not at issue in this appeal), the University of Edinburgh also sought product claims.  Claims 155 and 164 are representative:

155. A live-born clone of a pre-existing, nonembryonic, donor mammal, wherein the mammal is selected from cattle, sheep, pigs, and goats.
164. The clone of any of claims 155-159, wherein the donor mammal is non-foetal.

The Patent Office rejected these claims on Section 101, 102, and 103 grounds and the University appealed.

The Federal Circuit agreed that the claims were not patent eligible under Section 101.  The court began by distinguishing Funk Bros. Seed Co. v. Kalo Inoculant Co., 333 U.S. 127 (1948) (which it treated as a subject matter eligibility case) from Diamond v.
Chakrabarty, 447 U.S. 303, 309 (1980), with the latter involving a patent eligible organism because “it was ‘new’ with “markedly different characteristics from any found in nature and one having the potential for significant utility.”  Slip Op. at 6, quoting Chakrabarty at 310 (emphasis added by court).  On the other hand, “any existing organism or newly discovered plant found in the wild is not patentable.”  Id. at 6-7.  Association for Molecular Pathology v. Myriad Genetics, Inc., reinforced this distinction. 133 S. Ct. 2107 (2013)

Here, the claims covered organisms (such as Dolly) that do not “possess ‘markedly different characteristics from any [farm animals] found in nature.'”  Slip Op. at 7, quoting Chakrabarty.    The emphasis of the court’s analysis was on genetic identity: “Dolly’s genetic identity to her donor parent renders her unpatentable.”  Id. The claims thus fell into the product of nature exception to the broad scope of patent eligible subject matter.

Underlying the court’s opinion was a policy thread relating to copying generally: that the copying of unpatentable articles is permitted so long as it does not infringe a patented method of copying.  In Sears Roebuck & Co. v. Stiffel Co., for example, the Supreme Court wrote that “[a]n unpatentable article, like an article on which the patent has expired, is in the public domain and may be made and sold by whoever chooses to do so.” 376 U.S. 225, 231 (1964).  Because the claimed clones are exact genetic copies of the of patent ineligible subject matter, they, too, are not eligible for patent protection.

What about the argument that these clones may be genetic copies of the donor organism, but they aren’t exactly the same?  For example, environmental factors will produce differences between the phenotypes of the donor and clones and their mitochondrial DNA will differ, since the mitochondrial DNA comes from a different source than the nucleic DNA.  The court rejected these arguments because such differences were not claimed: the claims are written in terms of genetic identity, not phenotypic or mitochondrial differences.

What the court appears to be implicitly doing here is to interpret the claims in a manner that is least favorable to the applicant.  There is at least a plausible argument that the claims do implicate genetic identity but phenotypic diversity by their reference to a “live-born clone of a … mammal.”  To be sure, the word “clone”  contemplate genetic identity.  But at the same time the very idea of a live-born mammalian clone suggests that the product will not be an exact duplicate of the donor.  In other words, while the claims don’t contain the words “phenotypic difference,” those differences are inherent in what a clone is: a clone will necessarily exhibit phenotypic differences because it will develop in different environmental circumstances than its donor.

However, even were the claims to expressly include such limitations, the court reasoned that it would not change the outcome.  As to phenotypic differences, they “do not confer eligibility on their claimed subject matter. Any phenotypic differences between Roslin’s donor mammals and its claimed clones are the result of ‘environmental factors,’ Appellant’s Br. 21, uninfluenced by Roslin’s efforts.”  Slip Op. at 10.  (I guess the fact that the whole process was set in motion by human activity doesn’t count).  As to mitochondrial differences, “There is nothing in the claims, or even in the specification, that suggests that the clones are distinct in any relevant way from the donor animals of which they are copies.”  Id. at 11.  As a result, the claims fail the “markedly different characteristics” language of Chakrabarty.

1. Except for possibly Mary’s little lamb.

Funk Brothers v Kalo – Eligibility or Unobviousness?

Obviousness, Patent, , ,

Guest post by Paul Cole, European Patent Attorney, Partner, Lucas & Co; Visiting Professor, Bournemouth University, UK.

New patent eligibility guidance issued by the USPTO (Andrew Hirshfeld, 4th March) will be the subject of a discussion forum this Friday 9th May.

Since the Kalo case, 333 U.S. 127 (1948) has been discussed in recent Supreme Court opinions including Chakrabarty, Myriad, and Mayo and is proposed to form the subject of an example forming part of that guidance, reflection on the true legal basis of the opinion is timely. Despite dicta in Chakrabarty and Myriad it is arguable that when viewed in its timeframe Funk concerned unobviousness not eligibility. If that view is correct, then the Kalo fact pattern should not be used as an eligibility example under current law.

The Kalo appeal was from a lengthy and careful opinion by Judge Walter C. Lindley in the Court of Appeals for the 7th circuit, 161 F.2d 981 (1947). At first instance the claimed subject matter which related to a composite culture of mutually non-inhibitive bacteria for inoculation of leguminous plants was held to be a product of nature and hence not patent-eligible. Judge Lindley reversed this finding in the following terms:

The mistake of the District Court, we think, lay in its conclusion that this did not amount to patentable invention within the meaning of the statute. Though the court recognized the value of Bond’s work, it thought that he had merely discovered a law of nature, whereas in fact the evidence is clear that what he discovered was that certain existing bacteria do not possess the mutually inhibitive characteristics which had previously prevented a successful commercial composite inoculant and that those uninhibitive species may be successfully combined. It was this contribution of noninhibitive strains which successfully combine that brought about a new patentable composition. This was application of scientific knowledge to things existing in nature and the utilization of them in a desirable composite product which had not been previously achieved but which he did achieve and of which the public now has the benefit.

We think this is clearly within the decisive definitions of patentable invention… Bond taught the method by which the composite is to be made and claims the product composed by that method, namely, a composite inoculant, comprised of different species of bacteria in sufficient numbers of each species. The noninhibitive property of bacteria was not previously known and when Bond discovered it and taught a successful composition of noninhibitive strains in combination of elements in one inoculant operating successfully on several different groups of legumes, he did much more than discover a law of nature. He made a new and different composition, one contributing utility and economy to the manufacture and distribution of commercial inoculants.”

A reader of Lindley is bound to wonder why such a conventional and straightforward opinion should have been selected for certiorari. An explanation of the significance of new effect in established patent law can be found as long ago as 1822 in Evans v Eaton 20 U.S. 356 (1822) and its evidential nature was explained by Justice Bradley in Webster Loom v Higgins
105 US 580 (1881), subsequently approved e.g. by Justice Brown in Carnegie Steel v Cambria Iron Co 185 US 402 (1902):

It may be laid down as a general rule, though perhaps not an invariable one, that if a new combination and arrangement of known elements produce a new and beneficial result, never attained before, it is evidence of invention.

The majority opinion of the Supreme Court Kalo decision was authored by Justice William O. Douglas.

His starting position was that a law of nature cannot be monopolised and he recognised the existence of the relevant non-inhibitory bacterial strains as an example of such a law. He went on to hold that invention must come from the application of the law of nature to a new and useful end and that the aggregation of select strains of the several species into one product was an application of the newly discovered natural principle. He acknowledged that there was advantage in the combination because the farmer need not buy six different packages for six different crops. He could buy one package and use it for any or all of his crops. The packages of mixed inoculants held advantages for dealers and manufacturers by reducing inventory problems, and the claimed subject-matter provided an important commercial advance.

Against this strong evidential background what was the basis for his reversal? A key to his reasoning may be found in his earlier opinion in Cuno Engineering Corp. v. Automatic Devices Corp., 314 U.S. 84 (1941) that (as the law then stood) novelty and utility were necessary but not sufficient requirements for patentability. In addition the claimed subject-matter had to reach the level of inventive genius that the Constitution authorized Congress to reward.

Several reasons supported the conclusion that the Kalo invention did not meet the standard of inventive genius. Each of the species of root nodule bacteria contained in the package infected the same group of leguminous plants that it always infected. No species acquired a different use. The combination of species produced no new bacteria, no change in the six species of bacteria, and no enlargement of the range of their utility. Each species had the same effect it always had. The bacteria performed in their natural way. Their use in combination did not improve in any way their natural function. They served the ends nature originally provided, and acted quite independently of any effort of the patentee. The claimed inoculant was not the product of invention unless invention borrowed from the discovery of the natural principle itself. It was hardly more than an advance in the packaging of the inoculants. Packaging was a simple step once the discovery had been made and all that remained were the advantages of the mixed inoculants themselves which were not enough.

The Funk opinion, amongst others, was relied on in Chakrabarty for the proposition that laws of nature, physical phenomena, and abstract ideas are not patent-eligible. As to the patentability of the Chakrabarty microorganism it was distinguished on the facts.

In Myriad Justice Thomas treated Funk as a patent-eligibility case, observing that the Bond composition fell squarely within the law of nature exception because the patent holder did not alter the bacteria in any way. Arguably such a position is inconsistent with the finding of Justice Douglas that the claimed product was an application of the principle discovered by Bond and hence implicitly patent-eligible. Classification of Funk as an unobviousness opinion accords with the reasoning of Justice Douglas whereas classification as an eligibility opinion is difficult to reconcile with his reasoning, especially against the background of his explicit reference to Cuno.

The USPTO example takes the position that the bacteria in Funk were not changed in any way, but that position is factually untrue. The naturally occurring bacteria have been the subject of a selection process to identify those strains that do not interfere, and the non-interfering strains have been cultivated and mixed. The claimed composition does not occur in nature, is produced by human intervention and has new utility. It is far from clear that the decision that was reached in 1948 would have been reached under the law as it exists post-1952 since the “flash of genius” test was rejected by Congress in favour of § 103.

For the above reasons it is submitted that the wiser course would be to delete Example D from the USPTO guidance.

The Price Elasticity of Demand for Patents

Patent

By Dennis Crouch

In March 2013 the USPTO significantly raised the maintenance fee charges. Most pointedly, the 11 ½ year renewal fee has jumped 65% from $4,810 to $7,400. The 11 ½ year renewal is last of three fees due and also the most expensive. Market theory for ordinary goods suggests that an increase in the price of goods will result in a reduction of the quantity demanded. The relative proportionality of the reaction depends on a number of factors, including the price elasticity of demand. In the past, I have suggested that the price elasticities of many of the patent office fees are relatively inelastic at their current price point, but I wanted to see how patent owners are responding to the increased fees.

Initial Conclusion: The price elasticity of demand for the 11 ½ year renewal fee is quite inelastic.

Data: I created two groups of patents: One where the 11 ½ year renewal fee was due prior to the March 2013 fee-change and a second group where the 11 ½ renewal fee was due after that date. To simplify the analysis, the pre-fee-change group only included the patents whose 12-year date was prior to the fee change in order to also capture late payments. Similarly, the post-fee-change group only includes patents whose 11 ½ year date was more than 6-months after the fee date to avoid cases where the lower-fee was pre-paid. For each group, I pulled up data for 11-weeks of patents to see what percentage of 11 ½ renewal fees were paid (of those eligible). Those results are shown in the table and charts below.

Fee Due     Paid Second Fee Paid Third Fee Percentage
Pre-Fee-Change 4,810 23,686 17,709

75%
Post-Fee-Change 7,400 23,014 16,592

72%

050514_1628_ThePriceEla2.jpg

This change was relatively constant for both large and small entities. [Small entities are less likely to pay renewal fees, but the relative drop at the time of the fee change was proportional.]

What does this mean?: First, the USPTO fee raise is a boon to USPTO revenue – at least tens of millions of additional dollars per year for the agency. The USPTO has monopoly power over patent rights in the US and, in that situation, the high inelasticity generally indicates 050514_1628_ThePriceEla1.gifthat raising prices will raise revenues. To even further maximize this profit, the PTO could hold an auction for each patent at the 11 ½ year mark – giving the patent to the highest bidder. Of course, this money must come from somewhere and many corporate patent budgets are relatively fixed – leading to a choice between new filings and maintenance fee payments. The USPTO is likely wise to avoid more substantial increases in fees – over the long run markets find ways to avoid monopoly power that is abused.

Big Caveats: I looked at this particular fee change because it was so large and so I suspected that a response would be fairly easy to measure. These fees are typically due at a point about 15-years after the invention date. Many folks would suggest that – by that point – the patentees should have a fairly good handle on the value of the underlying innovation and the patents covering that innovation. Further, at that point patent valuation will likely have a strong bi-modal distribution with a substantial number of patents having essentially no value because technology has moved-on (and is never coming back) and then a substantial number with value because the innovation (or its kin) is being used in products on the market. If an innovation covered by a patent is being used in the marketplace then the patent is likely worth significantly more than $10,000. The leading theory is that, by this 15-year-mark, there are not many patents in no-mans-land that are still not on the market but that have a good chance of being on the market within the next few years. Of course, this is a theory with little empirical basis except that it does help to explain the low elasticity shown above.

In other realms, I have shown more price elasticity due to USPTO fee changes. These are most likely where the patentee is not choosing between patenting and abandonment but instead is choosing whether or not to add a feature, such as additional patent claims or an extremely long disclosure. When the USPTO significantly raised the costs for both of those, patentees reacted by substantially reducing demand for those services.

Microsoft v. DataTern: Judge Rader’s Dissent Withdrawn

Patent

Last month I wrote about Microsoft Corporation v. DataTern, Inc., in which the Federal Circuit addressed the issue of subject matter jurisdiction over a declaratory judgment action brought by manufacturers where the patent holder had filed infringement suits only against the manufacturers’ customers, and had not directly threatened the manufacturers themselves.  (I.e.: the reverse of a typical contributory infringement or inducement claim).

In that opinion, the Federal Circuit affirmed the district judge’s ruling that there was jurisdiction in three out of four scenarios on the basis that these sets of facts raised the issue of inducement of infringement and contributory infringement by Microsoft and SAP.  However, the majority (Judges Moore and Prost) reversed as to the fourth scenario, in which DataTern’s infringement charts referenced only third-party documentation for key claim limitations.   Judge Rader dissented as to this final category, expressing concern that the majority’s holding provides “a roadmap to allow DataTern and its successors to keep Microsoft on the sidelines while running up wins against customers, who are often smaller and less-equipped to defend themselves.”

Yesterday, the Federal Circuit vacated the original opinion in Microsoft v. DataTern and issued a new opinion that contains only the majority’s opinion.  Judge Rader is now recused.  The order vacating the original opinion is here: Microsoft Order and the new opinion is here: New Opinion.  A comparison of the two opinions reveals that there are no other substantive differences.  No reason for the recusal is given, and neither party appears to have requested that Judge Rader be recused.  While recusals are not unheard of, this one is unusual because it occurred after the opinion issued and involved the vacation of a dissent.

One issue that this raises is whether there is a violation of Federal Circuit Rule 47.2, which states that “(a) Panels. Cases and controversies will be heard and determined by a panel consisting of an odd number of at least three judges, two of whom may be senior judges of the court.”  Prof. Tim Holbrook thinks not, pointing to Fed. Cir. Rule 47.11, which contemplates recusals after argument:

A quorum is a simple majority of a panel of the court or of the court en banc. In determining whether a quorum exists for en banc purposes, more than half of all circuit judges in regular active service, including recused or disqualified judges, must be eligible to participate in the en banc process. If a judge of a panel that has heard oral argument or taken under sub-mission any appeal, petition, or motion is unable to continue with consideration of the matter because of death, illness, resignation, incapacity, or recusal, the remaining judges will determine the matter if they are in agreement and no remaining judge requests the designation of another judge.

Note: Thanks to Dennis and Tim for contributions to this post.

Federal Circuit Implements Low Standard for Prima Facie Indefiniteness Rejection

Indefinite, Patent

In re Packard (Fed. Cir. 2014)

In a long-awaited decision, the Federal Circuit has affirmed the USPTO’s indefiniteness rejection of Thomas Packard’s claims under 35 U.S.C. § 112(b). However, the court refused to determine whether the “insolubly ambiguous” test is the proper standard for judging the indefiniteness of pre-issuance claims. Rather, the court merely held that a proper rejection by the USPTO (prima facie case) need not follow that standard:

We conclude that, when the USPTO has initially issued a well-grounded rejection that identifies ways in which language in a claim is ambiguous, vague, incoherent, opaque, or otherwise unclear in describing and defining the claimed invention, and thereafter the applicant fails to provide a satisfactory response, the USPTO can properly reject the claim as failing to meet the statutory requirements of § 112(b). The satisfactory response by the applicant can take the form of a modification of the language identified as unclear, a separate definition of the unclear language, or, in an appropriate case, a persuasive explanation for the record of why the language at issue is not actually unclear. On the facts before us, this holding suffices to uphold the rejection that occurred here.

The short per curiam decision is interesting in the way that it looks like an administrative law decision – finding that the USPTO has been tasked with the job of examining patent applications and must be given leeway to “make the congressionally created examination process work.”

The USPTO must be able to make the congressionally created examination process work so that it fulfills its purpose of producing patents whose claims meet the statutory standards. We earlier approved a procedural mechanism for the USPTO to use in doing this, which we refer to as the “prima facie case.” See In re Piasecki, 745 F.2d 1468 (Fed. Cir. 1984). “In the prosecution of a patent, the initial burden falls on the PTO [examiner] to set forth the basis for any rejection.” Hyatt v. Dudas, 492 F.3d 1365 (Fed. Cir. 2007). The USPTO thus meets its obligation to explain adequately the shortcomings it perceives so that the applicant is properly notified and able to respond. “Once the applicant is so notified, the burden shifts to the applicant to rebut the prima facie case with evidence and/or argument.” Id. . . .

The same approach to making the examination process work is an appropriate one for addressing the question of indefiniteness.

Here, the court does identify important differences between indefiniteness issues during prosecution (pre-issuance) as compared with post-issuance indefiniteness. In particular, because pre-issuance claims can be easily amended, it makes sense to have a system that encourages fixing claims before it is too late. Here, rather than addressing that issue through the indefiniteness standard, the court focuses on using process to provide flexibility.

We have elsewhere noted that indefiniteness rejections by the USPTO arise in a different posture from that of indefiniteness challenges to an issued patent. See Exxon Research v. US, 265 F.3d 1370 (Fed. Cir. 2001). It makes good sense, for definiteness and clarity as for other validity requirements, for the USPTO initially to reject claims based on a well-founded prima facie case of lack of clarity (in its several forms) based on the perspective of one of ordinary skill in the art in view of the entire written description and developing prosecution history. Then, if the applicant does not adequately respond to that prima facie case, to confirm that rejection on the substantive basis of having failed to meet the requirements of § 112(b).

Of course, the legal standard of indefiniteness is currently being challenged in the Nautilus case now pending before the U.S. Supreme Court. Nautilus, Inc. v. Biosig Instruments, Inc., 715 F.3d 891 (Fed. Cir. 2013), cert. granted, 82 U.S.L.W. 3195 (U.S. Jan. 10, 2014) (No. 13-369). A decision in Nautilus is expected in June 2014.

Looking at the particular facts here, Packard ignored a number of indefiniteness rejections and thus, the examiner’s rejections will stand:

The opinion included Judges O’Malley, Plager, and Taranto.

Judge Plager also filed a masterful concurring opinion that provides a more full explanation of the law of indefiniteness, the problematic shorthand of “insolubly ambiguous”, and a direct analysis of Packard’s claim terms. More on Judge Plager’s opinion in a later post.

Court to Employer: No Paper, No Assignment

Patent, , ,

By Dennis Crouch

Peregrine Semiconductor v. RF Micro Devices (S.D. Cal. 2014) (peregrine decision)

Interesting decision here involving patent ownership. Peregrine sued RFMD for infringement of several of its patents. However, during the course of the lawsuit the parties figures out that a former Peregrine worker – Robert Benton – should have been a named inventor on the asserted patents. Rather than siding with his former bosses, Benton instead assigned his rights to the defendant RFMD. The question in the case then is whether that assignment is proper or did the patentee already hold equitable title due to Benton’s employment.

Ownership of patent rights generally begin with the notion that the inventor begins establishing patent rights at the moment of conception. “The general rule is that an individual owns the patent rights to the subject matter of which he is an inventor, even though he conceived it or reduced it to practice in the course of his employment.” Banks v. Unisys Corp., 228 F.3d 1357 (Fed.Cir.2000). At the point of conception, the right is inchoate since no patent application has been filed or patent issued. However, courts typically allow assignment of that inchoate right through a written document. That rule could be seen in contrast to the traditional rule regarding other inchoate rights, such as a possibility-of-reverter, that could not be transferred inter vivos. In the 2011 Stanford v. Roche decision, the Supreme Court reiterated the basic law of inventor’s rights and the proposition that – absent an express assignment – an employer might not own its employees inventions even if those were accomplished during the course of the employment. “In most circumstances, an inventor must expressly grant his rights in an invention to his employer if the employer is to obtain those rights.” Bd. of Trustees of Leland Stanford Junior Univ. v. Roche Molecular Sys., Inc., 131 S.Ct. 2188 (2011) (citing United States v. Dubilier Condenser Corp., 289 U.S. 178 (1933)).

Peregrine made two arguments as to why such a transfer occurred and that it held at least equitable title to Benton’s patent rights: (1) a contractual promise to assign; and (2) the hired to invent doctrine.

No Paper à No Express Assignment: Courts have long specifically enforced contracts to assign patent rights – requiring a contracting inventor to follow through with that promise as opposed to requiring only the ordinary contract remedy of expectation damages. Peregrine’s problem is that it has no written evidence of such a contract formation. Peregrine’s business practice is to require all employees to sign an “Employment and Assignment agreement,” but Benton testified that he had no recollection of executing any such written employment agreement or assignment during his time working at Peregrine. Here, the court seemed to be swayed as well by the Patent Act’s statute of frauds that require any assignment of patent rights to be in writing.

A patent owner who seeks to assign his interest in the patent must do so in writing. 35 U.S.C. § 261; Sky Techs. LLC v. SAP AG, 576 F.3d 1374 (Fed.Cir.2009) (citing Akazawa v. Link New Tech. Int’l, Inc., 520 F.3d 1354 (Fed.Cir.2008)). Peregrine admits that it does not have any documentation of an Employment and Assignment agreement or Policy Manual signed by Benton.

Although I suspect that the court made the right decision here, the statute-of-frauds theory has some failings. First, the statute requires that assignments be in writing, but does not expressly require that contracts-promising-assignment be in writing. Further, courts can still enforce a “lost grant” despite the statute of frauds so long as there is sufficient evidence to prove that the grant existed. Here, however, that evidence appeared to be lacking.

What Exactly Was he Hired to Invent?: Peregrine also argued that Benton had a duty to assign his patent rights based upon the (Federal?) common law “hired to invent” doctrine as well as the California Labor Code § 2860. In California, the statutory provisions of § 2860 are seen as coextensive with the common law doctrine and applies when an employee is “hired to invent something or solve a particular problem.” The doctrine focuses on the specificity of the task assigned to the employee. As Don Chisum writes, “[t]he primary factor in finding an employment-to-invent is the specificity of the task assigned to the employee.” Here, the court cited a 1960s California decision distinguishing between work “narrowly directed by the employer towards the resolution of a specific problem” and work that is “generalized within a field.” With only the former creating an obligation to assign. See Banner Metals, Inc. v. Lockwood, 178 Cal.App.2d 643 (Cal.Ct.App.1960).

In this case the court found that Benton’s work appeared to be wholly within the field of semiconductor development, but generalized within that field. Importantly, the court noted that Benton worked on a variety of products during his employment and also spent time on non-inventing activities such as marketing and customer support. As such, the court ruled that Benton is unlikely to be bound by the hired-to-invent doctrine.

Hired-to-invent cases will always be somewhat squirrely since they are ordinarily raised only as a backstop when the employer’s written agreement failed and, as such, there is not likely to be written evidence particularly defining the reason why an individual was hired. This case fits that description.

Preliminary Injunction: Now, this case is only at the preliminary injunction stage. Peregrine had motioned for a preliminary injunction and that injunction was denied based upon the likelihood that Peregrine will not be able to prove its ownership. The denial also offers Peregrine the opportunity to immediately appeal this case to the Federal Circuit.

Akamai

Patent,

Professor Mann provides insightful comments on the Akamai oral arguments here: http://www.scotusblog.com/2014/05/argument-review-justices-frustrated-with-posture-of-case-on-joint-infringement/. I will note that there was a good chance that the Supreme Court would significantly alter that case today by either granting the cross-petition to determine joint infringement issues under 271(a) or dismiss the case with instructions for the Federal Circuit to determine the case under Section 271(a). Neither of those happened, although they still may.

Supreme Court Reinstates $6.6 Million Attorney Fee Award

Patent, Supreme Court

Kobe Properties v. Checkpoint Systems (Supreme Court 2014)

Today the Supreme Court issued a GVR decision in this case:

The petition for a writ of certiorari is granted. The judgment is vacated, and the case is remanded to the United States Court of Appeals for the Federal Circuit for further consideration in light of Octane Fitness, LLC v. ICON Health & Fitness, Inc., 572 U. S. ___ (2014) and Highmark Inc. v. Allcare Health Management System, Inc., 572 U. S. ___ (2014).

In that case, a jury found the asserted patent infringed, invalid, and unenforceable and the district court judge had awarded $6.6 million in attorney fees to the defendants. On appeal, however, the Federal Circuit reversed based upon a finding that “the requirements of § 285 were not met” because the patentee’s lawsuit was not ‘objectively baseless.’ [See Rantanen, Failing the Objectively Baseless Standard]. In Octane Fitness, however, the Supreme Court recently held that the objectively baseless standard is improper and too strict.

Following the Supreme Court GVR, the fee award is now reinstated. On remand, the panel will likely be asked now to determine whether the district court’s findings were an abuse of discretion – which they likely were not.

PSM

Patent

I’ll return to actual blogging once I’m finished grading exams, but for now, here’s a fun one:

Question 10: [Limit: 150 words]

Explain why the following claim from a patent entitled “Systems, Methods and Computer Program Products for Guiding the Selection of Therapeutic Treatment Regimens” does NOT constitute patent eligible subject matter:

  1. A method for guiding the selection of a therapeutic treatment regimen for a patient with a known disease or medical condition, said method comprising:

 (a) providing patient information to a computing device comprising:

 a first knowledge base comprising a plurality of different therapeutic treatment regimens for said disease or medical condition;

a second knowledge base comprising a plurality of expert rules for evaluating and selecting a therapeutic treatment regimen for said disease or medical condition;

 a third knowledge base comprising advisory information useful for the treatment of a patient with different constituents of said different therapeutic treatment regimens; and

 (b) generating in said computing device a ranked listing of available therapeutic treatment regimens for said patient; and

 (c) generating in said computing device advisory information for one or more therapeutic treatment regimens in said ranked listing based on said patient information and said expert rules.