Supreme Court Patent Cases: Post Sale Exhaustion

by Dennis Crouch

Substantive Patent Law: Newly filed petition in Merck & Cie v. Watson Labs raises a core substantive patent issue – does the on sale bar apply to secret sales? The defendant asks:

Whether the “on sale” bar found in § 102(b) applies only to sales or offers of sale made available to the public, as Congress, this Court, and the United States have all made clear, or whether it also applies to non-public sales or offers of sale, as the Federal Circuit has held.

The Merck petition is focused on pre-AIA patents.  The PTO (and patentees) are arguing more forcefully that the AIA certainly intended to exclude secret sales from the scope of prior art in cases now pending before the Federal Circuit.

The second new substantive patent law case is Google v. Arendi that challenge’s the Federal Circuit’s limitations on the use of common sense in the obviousness analysis.  In its decision, the Federal Circuit limited KSR to combination patents and held that “common sense” cannot be used to supply missing limitations.  Google argues that the Federal Circuit’s approach is contrary to the broad and flexible obviousness analysis required by KSR.  Patentees bristle term “common sense” – they see an overly flexible analysis as providing opportunities to invalidate patents without evidence.  The question: “Did the Federal Circuit err in restricting the Board’s ability to rely on the common sense and common knowledge of skilled artisans to establish the obviousness of patent claims?”

As these new petitions were being filed, the Supreme Court has also denied the pending obviousness, anticipation, and eligibility petitions.  In addition, Cooper v. Square has also been denied.

Civil Procedure: In J&J v. Rembrandt, the defendant J&J won at trial. However, Rembrandt later learned that J&J’s expert had testified falsely and the Federal Circuit ordered the case re-opened under R.60(b)(3) that empowers district courts to revisit final judgments after a showing of “fraud …, misrepresentation, or misconduct by the opposing party.”  The various circuits follow different standards and procedures for analyzing process and J&J has asked the Supreme Court to reconcile these (in its favor).  Another CivPro petition was also filed by Eon Corp that questions whether an appellee needed to file a R.50 JMOL motion to overturn a jury verdict that was based upon a faulty legal conclusion by the district court (here claim construction).  The Question Presented is:

Whether the Federal Circuit erred in ordering entry of judgment as a matter of law on a ground not presented in a Rule 50 motion in the district court, even though the ground presented a purely legal question.

Both J&J and Eon are only marginally patent cases, the core procedure case now pending is TC Heartland that would substantially upset the status quo of patent lawsuit concentration in E.D. Texas. Briefing continues in TC Heartland. In recent weeks a set of seven amici briefs were filed on the top side.

Next week Supreme Court conference includes review of the most likely-to-be-granted petition of Impression Products, Inc. v. Lexmark International, Inc. that focuses on important questions of post-sale exhaustion of patent rights.  The setup – If I buy a used product that was made and sold by the patentee, do I still need to worry that I might get sued for patent infringement?  The Federal Circuit says yes. The Supreme Court is likely to add some caveats to that.  The US Government (Obama Administration via DOJ) has argued that the case should be reviewed and that the Federal Circuit’s position should be rejected. Both parties then filed supplemental responsive briefs.  Lexmark’s best argument here is that these principles are well settled and that Congress can take on the role of tweaking them if needed.

Upcoming Supreme Court Oral Argument: Life Tech (export of components) set for December 6, 2016.

1. Petitions Granted:

  • Awaiting Decision: SCA Hygiene Products Aktiebolag v. First Quality Baby Products, LLC, No. 15-927 (laches in patent cases)
  • Awaiting Decision: Samsung Electronics Co. v. Apple Inc., No 15-777 (design patent damages calculation)
  • Upcoming Oral ArgumentsLife Technologies Corporation, et al. v. Promega Corporation, No. 14-1538 (Whether the Federal Circuit erred in holding that supplying a single, commodity component of a multi-component invention from the United States is an infringing act under 35 U.S.C. § 271(f)(1), exposing the manufacturer to liability for all worldwide sales.)

2. Petitions with Invited Views of SG (CVSG): 

  • Exhaustion: Impression Products, Inc. v. Lexmark International, Inc., No. 15-1189 (unreasonable restraints on downstream uses)
  • BPCIA – Notice of Commercial Marketing: Sandoz Inc. v. Amgen Inc., et al., No. 15-1039 (Does the notice requirement of the BPCIA create an effective six-month exclusivity post-FDA approval?) (cross-petition asks for recourse on failure to dance)
  • Antitrust Reverse Payments: GlaxoSmithKline, et al. v. King Drug Company of Florence, Inc., et al., No. 15-1055 (antitrust reverse payment – appeal from the 3rd Cir.)

3. Petitions for Writ of Certiorari Pending:

  • Anticipation/ObviousnessMerck & Cie, et al. v. Watson Laboratories, Inc., No. 16-493 (pre-AIA, do secret sales count as prior art?)
  • Anticipation/Obviousness: Google Inc., et al. v. Arendi S A.R.L., et al., No. 16-626 (can “common sense” invalidate a patent claim that includes novel elements?)
  • Civil Procedure – VenueTC Heartland LLC v. Kraft Food Brands Group LLC, No 16-341 (Does the general and broad definition of “residence” found in 28 U.S.C. 1391(c) apply to the patent venue statute 1400(b))
  • Civil Procedure – Personal Jurisdiction: Mylan Pharmaceuticals, et al. v. Acorda Therapeutics, et al., No. 16-360 (does an ANDA filing create nationwide specific jurisdiction?)
  • Civil Procdedure – Final Judgment: Johnson & Johnson Vision Care, Inc. v. Rembrandt Vision Technologies, L.P., No. 16-489 (Reopening final decision under R.60).
  • Civil Procedure – Preserving Appeal: EON Corp. IP Holdings LLC v. Silver Spring Networks, Inc., No. 16-551 (Appeal of question of law without Fed. R. Civ. Pro. R. 50 JMOL motion)
  • BPCIA – Notice of Commercial Marketing: Apotex Inc., et al. v. Amgen Inc., et al., No. 16-332 (effectively extending exclusivity to 12 1/2 years; complement to the Sandoz petition)
  • Licensing: DataTreasury Corp. v. JP Morgan, No. 16-359 (appeal from 5th Circuit) (Whether a most-favored licensee (“MFL”) clauses in an intellectual property license agreement applies retrospectively to require refund if better terms are later given to another licensee?) [DataTreasuryPetition]
  • Extraterritoriality – Trade Secrecy: Sino Legend (Zhangjiagang) Chemical Co. Ltd. et al. v. International Trade Commission, et al., No. 16-428 (Whether Section 337(a)(1)(A) permits the ITC to adjudicate claims regarding trade secret misappropriation alleged to have occurred outside the United States.)
  • LachesMedinol Ltd. v. Cordis Corporation, et al., No. 15-998 (follow-on to SCA); Endotach LLC v. Cook Medical LLC, No. 16-127 (SCA Redux); Romag Fasteners, Inc. v. Fossil, Inc., et al, No. 16-202 (SCA Redux plus TM issue)
  • Post Grant AdminEthicon Endo-Surgery, Inc. v. Covidien LP, et al., No. 16-366 (separation-of-function – can the PTO Director delegate IPR institution decisions to PTAB); Same question presented in LifeScan Scotland, Ltd. v. Pharmatech Solutions, Inc., No. 16-377
  • Design Patents: Systems, Inc. v. Nordock, Inc., No. 15-978 (design patent damage calculations – similar issues as Samsung v. Apple)
  • ITC Jurisdiction: DBN Holding, Inc. v. International Trade Commission, No. 16-63 (Does the USITC have jurisdiction over articles imported in order to infringe, but that do not themselves practice the invention at import).
  • Claim Construction: Google, Inc. v. Alfonso Cioffi, No. 16-200 (holding prosecution history against the patentee)

4. Petitions for Writ of Certiorari Denied or Dismissed:

  • Anticipation: Grunenthal GmbH v. Teva Pharmaceuticals USA, Inc., et al., No. 16-296 (OxyContin patent – when is an element ‘inherently’ disclosed by the prior art for anticipation purposes)
  • Obviousness: Purdue Pharma L.P. v. Epic Pharma, LLC, 16-289 (whether the circumstances of invention can help prove non-obviousness) (The Purdue and Grunenthal cases stem from the same Federal Circuit decision but involve separate patents owned by the respective petitioners)
  • Claim Construction: CSP Technologies, Inc. v. Sud-Chemie AG, No. 16-238 (unduly narrow claim construction)
  • Eligibility: Trading Technologies International, Inc. v. Michelle K. Lee, No. 16-446 (Eligibility of new use of old manufacture – blackjack game)
  • Post Grant Admin: Automated Creel Systems, Inc. v. Shaw Industries Group, Inc., et al., No. 16-108 (Achates redux – review of statute-of-limitations for filing IPR requests)
  • Safe Harbor: Amphastar Pharmaceuticals, Inc., et al. v. Momenta Pharmaceuticals, Inc., et al., No. 15-1402 (scope of 271(e) safe harbor)
  • Post Grant Admin: MCM v. HP, No 15-1330 (separation of powers and right to jury trial)
  • Post Grant AdminCooper v. Lee, No. 15-955 (whether IPRs violate Separation of Powers; two amici now filed in support); same question presented by Cooper in Cooper v. Square, No. 16-76.
  • Post Grant Admin: Cooper v. Square, No. 16-76 (whether IPRs violate Separation of Powers; two amici now filed in support); same question presented by Cooper in Cooper v. Lee (denied)
  • Post Grant AdminTrading Technologies International, Inc. v. Lee, No. 15-1516 (mandamus challenging CBM initiation)
  • Post Grant AdminGEA Process Engineering, Inc. v. Steuben Foods, Inc., No. 15-1075 (Flip-side of Cuozzo: Can there be no appeal when the PTAB exceeds its authority by terminating an instituted IPR proceeding?)
  • Post Grant Admin: Merck & Cie, et al. v. Gnosis S.p.A., et al., No. 16-125 (standard of appellate review of PTAB fact-finding in IPR proceedings)
  • Eligibility: Genetic Technologies Limited v. Merial L.L.C., et al., No. 16-188 (Sequenom redux; also question whether ineligibility is a proper subject of a motion to dismiss on the pleadings)
  • Arbitration: Neev v. Alcon Lensx, Inc., No. 16-48 (limits on arbitrator autonomy in patent cases)
  • Interference: Edward Tobinick v. Kjell Olmarker, et al., No. 15-1544 (question of procedure in interference case involving allegations of fraud)
  • Post Grant Admin: Pactiv LLC v. Lee, No. 16-205 (Does the “substantial new question of patentability” identified in a reexamination order limit the scope of the ex parte reexamination)
  • Eligibility: Essociate, Inc. v. Clickbooth.com, LLC, et al., No. 16-195 (please clarify the meaning of ‘abstract idea’ and ‘inventive process’)
  • Obviousness: MacDermid Printing Solutions, LLC v. E.I. DuPont de Nemours & Company, No. 15-1499 (is proof of a “reasonable expectation of success” necessary to combine references in an obviousness case against a claimed combination invention)
  • Jurisdiction: GeoTag, Inc. v. Google Inc., No. 16-268 (Whether a compulsory counterclaim can satisfy the case or controversy requirement under Article III of the Constitution if there was no case or controversy at the time the complaint was filed?)
  • Post Grant AdminJames L. Driessen, et ux. v. Sony Music Entertainment, et al., No. 15-1518 (Claim construction in IPRs – pro se case)
  • Appellate Review: Commil USA, LLC v. Cisco Systems, Inc., No. 15-1446 (appellate disregard of factual evidence)
  • Eligibility: Jericho Systems Corporation v. Axiomatics, Inc., et al., No. 15-1502 (Eligibility of Patent No. 8,560,836 under Section 101 – Abstract Idea)[Jericho]
  • Patent Attorney Malpractice: Encyclopaedia Britannica v. Dickstein Shapiro, No. 16-305 (Does the fact that the search-system is no longer patentable under Alice Corp excuse patent prosecutors from alleged prosecution errors made well prior to that decision – the patent).

5. Prior versions of this report:

15 thoughts on “Supreme Court Patent Cases: Post Sale Exhaustion

  1. I think there could be a lot clearer fact case in which to decide “secret sales” issues either before or after the AIA [two different questions] than Merck & Cie v. Watson Labs.

  2. I predicted this long ago. Why? Because if the IPR was found to be unconstitutional, then all that IPR work would go back to the district courts.

    Basically, the question before the justices was whether they wanted more patent work.

  3. Hey, let’s hear it for the poor, poor “small inventors” like Adrian Pelkus who weeps and moans that “patents are a liability” over at the Professional Entitled Whiner’s Club:

    link to wsj.com

    Adrian Pelkus, a San Marcos, Calif., business owner used home-equity loans to fund at least six start-up businesses in the past 15 years. He started his flagship company, A Squared Technologies Inc., which makes circuit boards for electronics manufacturers, with a $10,000 loan against his home in 1985.

    But Mr. Pelkus has been thwarted by the housing bust. In 2008, he says, he hit on his best idea yet—to generate power from ocean waves. He patented the idea and produced a prototype for the product, and planned to borrow against his home to do lab tests and market the idea to investors.

    But by 2009, Southern California prices had declined so far that Mr. Pelkus was underwater by more than $100,000 on the three houses he owns near San Diego.

    Oh, poor, poor Mr. “Small Inventor” Pelkus! He “only” owned three houses near San Diego! At least he could remember the number, unlike poor persecuted John “Every Sunday” McCain (R) …

    Life is so, so brutally tough for the “small” innovators. *sniffle*

  4. CERT DENIED

    COOPER, J. CARL V. SQUARE, INC.

    Truly excellent news! Cooper v. Lee still pending?

    Upcoming Supreme Court Oral Argument: Life Tech (export of components) set for December 6, 2016.

    This is going to be a very b0ring argument but at least the CAFC’s ridiculous decision will be quickly reversed. It’ll probably be a three page opinion by the Supremes.

      1. As I pointed out previously on this blog, the Cooper et al. arguments challenging the constitutionality of the IPR were likely to fail. The cert. petitioners erroneous emphasize and focus in their challenge on a violation of the separation of power doctrine is not the route to go challenging the IPR .This is because the SC has held (several times) that Congress has plenary power related to the patents. According to the SC a patent is primary created by a federal statue (albeit with property rights elements). The only way to successfully challenge the constitutionality of the IPR is to look to the non-delegation doctrine and to argue that the IPR does not meet the “intelligible principle” test.

          1. Anon, The two principles (I suggested above) would likely lead to a cert. petition grant (at least) whereas the separation of powers argument is a dead horse from the get-go. Maybe the next constitutional challenge of the IPR will be more successful. The Court is interested in these type of questions, but not in the further development of the separation of powers doctrine; remember the Justices are evenly divided on the separation of powers issue, thus a cert. grant is less likely until we have a Ninth Justice.

            1. Does not explain the post-election third “strike” (presuming that with Republican control across the board, that ninth Justice would be joining this term).

    1. A disappointing result for an important and provocative question.

      Nonetheless, excellent advocacy by the DOJ, HP, MCM, Cooper, the various amici, etc.

      1. A disappointing result for an important and provocative question.

        Everyone should feel free to continue to ask and answer the “provocative questions” to their heart’s content. They never seemed very provocative to me. They seemed like desperate Hail Mary’s tossed by entitled people who wanted their junky patents to remain as valuable as possible for as long as possible.

        The result is awesome for those up looking for an efficient way to clean up the worst messes in our messed up patent system.

        Even better (and more efficient) would be some clarity from the Supreme as to whether logic and information can be protected by patents merely by salting the claim with references to conventional computer hardware. We already know that logic and information by themselves are ineligible for patent protection. Nobody’s seriously questioning that. Maybe someone should ask Trump what he thinks.

        Onwards!

        1. This issue – no matter how mundane it may be to you Malcolm – simply must wait for another case in another term (with perhaps a more capable champion, as neither party this term showed that they understood the takings issue well enough).

          1. Anon, I had predicted that you would say that again. But it is not taking into consideration all the various arguments made in professional amicus briefs that were variously filed in the three failed cert petitions challenging post-grant proceeding statutes, Including the NYC association.
            Furthermore, everyone had ample opportunity to contact parties or amici to proffer unconstitutionality arguments even if they were not already fully aware of them from numerous blog comments.
            “Not understanding the takings issue well enough” can hardly be said of the genuine constitutional law experts retained by these parties or participating in the amicus briefs.

            1. Your attempt here to kick dust by “not taking into consideration all the various arguments made in the professional amicus briefs” is noted.

              My post stands correct.

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