Pain and Suffering: Prof. Ronen Avraham was moved by the story of Robert Kearns (Flash of Genius) and asks Should Courts Award Pain and Suffering Damages in Patent Infringement Cases? His answer is YES, “courts should award damages to solo inventors for noneconomic harm resulting from patent infringement.”
Licensing Without Litigation: Mark A. Lemley has again teamed up with Kent Richardson and Erik Oliver to provide some data about the “Patent Enforcement Iceberg” — licenses of non-litigated patents. Their tentative conclusion is that the iceberg isn’t that deep. In a separate econ paper (Bereskin, et al) argues that plaintiffs bringing patent infringement lawsuits see increased stock-value.
All Elements (Limitations): Ted Field’s article on patent terminology probably doesn’t provide a lot for experienced patent attorneys – except for his discussion of “limitations” vs. “elements.” He writes:
Claims are made up of constituent parts, which are properly called “limitations.” It is improper to refer to the constituent parts of a claim as “elements.” Instead, “elements” properly refers only to a constituent part of an accused device or a prior-art reference, not to a constituent part of a claim.
Although Field cites authority for his proposition, I will note that the Federal Circuit regularly considers “claim elements.” Consider, the following two recent examples: Bosch Automotive Serv. Sols., LLC v. Matal, 2015-1928, 2017 WL 6543777 (Fed. Cir. Dec. 22, 2017) (“When no structure in the specification is linked to the function in a means-plus-function claim element, that claim is indefinite under 35 U.S.C. § 112, ¶ 2.”); Smart Sys. Innovations, LLC v. Chicago Transit Auth., 873 F.3d 1364, 1373–74 (Fed. Cir. 2017)(“The second step of the § 101 analysis requires us to determine whether the *1374 claim elements, when viewed individually and as an ordered combination, contain ‘an inventive concept sufficient to transform the claimed abstract idea into a patent-eligible application.'”)
Inherently Abstract vs Temporally Abstract: Alan Gocha’s new article focuses on patent eligibility and provides “an ontological model for determining section 101 patent eligibility under Alice.” I think the most important contribution that Gocha makes is to categorize abstract ideas into those that are “inherently abstract” (preexisting fundamental truths) from those that are only “temporally abstract” (longstanding practices). In his view, these two different types of abstract ideas should involve different jurisprudential approaches.
(Today’s guest post is by Professor Jorge L. Contreras of the University of Utah College of Law. Professor Contreras is known for his excellent work on remedies, particularly in the SEP and FRAND context. I’m especially excited about today’s guest post, as it dovetails nicely into a one-week course on Remedies in Patent Law at Iowa Law in early January, taught by another leading expert on remedies law, Prof. Tom Cotter of Minnesota. – Jason)
On December 21, 2017, the U.S. District Court for the Central District of California released its long-awaited Memorandum of Findings of Fact and Conclusions of Law in TCL Communications v. Ericsson (SACV 14-341 JVS(DFMx) and CV 15-2370 JVS (DFMx)). In a lengthy and carefully crafted decision, Judge James Selna sets forth some important new points regarding the calculation of fair, reasonable and non-discriminatory (FRAND) royalties for standards-essential patents (SEPs). Among other things, the decision offers a strong endorsement of “top down” methodologies for the calculation of SEP royalties, and makes significant use of the non-discrimination (ND) prong of the FRAND commitment in arriving at a FRAND royalty rate. Equally importantly, the case establishes that, for non-discrimination purposes, even low end vendors like TCL will be considered “similarly situated” to high end vendors like Apple, giving them the benefit of the rates that high end vendors can negotiate with SEP holders for far more expensive consumer products.
Background
The case involves the sale of cellular handsets by TCL, a Chinese firm reported to be the seventh largest global manufacturer of mobile phones. Ericsson is one of the largest holders of patents essential to the implementation of the 2G, 3G and 4G wireless telecommunications standards published by the European Telecommunications Standards Institute (ETSI) (standards-essential patents or SEPs). Under ETSI’s policies, ETSI participants are required to grant licenses under their SEPs to implementers of ETSI standards on terms that are fair, reasonable and non-discriminatory (FRAND).
In 2007, TCL obtained a 7-year license under Ericsson’s patents covering ETSI’s 2G standards. In 2011, the parties began to negotiate a license under Ericsson’s 3G SEPs, and in 2013, these negotiations expanded to include Ericsson’s 4G SEPs. Over the next several years, the parties were unable to reach agreement on the terms of this license, and during the course of negotiations, Ericsson sued TCL for infringement of its SEPs in six non-U.S. jurisdictions. In March 2014, prior to the expiration of TCL’s 2G license, TCL filed an action in the Central District of California seeking a judicial declaration that Ericsson breached its obligation to offer TCL a license on FRAND terms. TCL agreed to abide by the court’s determination of FRAND terms for a worldwide license under Ericsson’s 2G, 3G and 4G SEPs (slip op. at p.9). Partially based on this assurance, in June 2015 the court entered an “anti-suit injunction” against Ericsson, prohibiting it from pursuing further infringement litigation against TCL until the resolution of the FRAND issues (I discuss TCL’s anti-suit injunction here). The court ruled that the nature of TCL’s claims was equitable (p.8), making it suitable for judicial (rather than jury) determination, and a 10-day bench trial was held in early 2017. The court’s decision was rendered in November 2017, and a public version was released in December 2017 in which certain competitive information was redacted.
FRAND Royalties
Numerous U.S. cases have made clear that a FRAND royalty must be “premised on the value of the patented feature, not any value added by the standard’s adoption of the patented technology … [so that] the royalty award is based on the incremental value that the patented invention adds to the product, not any value added by the standardization of that technology” (p. 108, quoting Ericsson v. D-Link, 773 F.3d at 1232-33 (Fed. Cir. 2014)). Unlike the recent UK decision in Unwired Planet v. Huawei ([2017] EWHC 711 (Pat), 5 Apr. 2017] (which I discuss here and here), which held that there is but a single FRAND rate applicable to any given set of parties and SEPs ((¶804(4)), Judge Selna in TCL v. Ericsson holds that there is no single FRAND rate (p. 109).
Top-Down vs. Bottom-Up Royalty Calculations
There are two general schools of thought regarding the calculation of SEP royalties subject to FRAND commitments: bottom-up and top-down. “Bottom-up” approaches attempt to assess the value of asserted SEPs in isolation, using comparable license agreements and other methodologies, but without significant reference to other patents covering the same standard (I critique bottom-up methodologies here and here). In contrast, top-down approaches first determine the aggregate royalty that should be paid for all SEPs covering a particular standard, and then allocate an appropriate portion of the total to the asserted SEPs (I discuss top-down royalty calculations at length here, as do Norman Siebrasse and Tom Cotter in this recent chapter).
Top-down approaches were used by the UK court in in Unwired Planet and by the Japanese IP High Court in Apple Japan v. Samsung (2014) (both discussed here). And in November 2017, the European Commission emphasized in its Communication on SEPs that “an individual SEP cannot be considered in isolation. Parties need to take into account a reasonable aggregate rate for the standard, assessing the overall added value of the technology” (p. 7). However, with the exception of In re. Innovatio IP Ventures (N.D. Ill. 2013), most U.S. courts making FRAND royalty determinations have used bottom-up methodologies heavily dependent on an analysis of comparable licenses (e.g., Microsoft v. Motorola (9th Cir. 2014), Ericsson v. D-Link (Fed. Cir. 2014)).
In TCL v. Ericsson, Judge Selna largely adopts the top-down methodology proposed by TCL (see below). He notes that the “appeal of a top down approach is that it prevents royalty stacking”, which occurs when individual SEP holders each demand a royalty that, when combined, can be excessive (p.15).
However, the court also notes that top-down methods cannot assess whether the licensor complied with the non-discrimination prong of the FRAND commitment. Accordingly, Judge Selna undertakes a separate non-discrimination analysis based principally on the review of comparable licenses (discussed below). He then combines the top-down and comparables approaches to determine the appropriate FRAND royalty rate.
The Aggregate Rate
A top-down royalty calculation methodology has two steps: determining the aggregate SEP royalty applicable to a standard, then allocating an appropriate portion of the total to the asserted SEPs. As I have discussed before, the UK and Japanese courts that applied top-down methodologies in FRAND cases based their aggregate rates on public statements made by SEP holders and other market participants. Judge Selna also adopts this approach, citing various public statements and press releases by Ericsson that support an aggregate royalty of 5% on the 2G and 3G standards and a rate between 6% and 10% on the 4G standard (pp.19-26). While the court acknowledges that this method “is not perfect” (p.25), one of its merits is its dependence on statements made by Ericsson itself to induce the market to adopt standards covered by its own SEPs (p.25) (for a discussion of “market reliance” on FRAND commitments, see this paper).
Allocation of Ericsson’s Proportional Share
Once an aggregate royalty rate for all SEPs covering a standard has been determined, the appropriate portion must be allocated to the SEPs asserted in the case. In TCL v. Ericsson, this determination involved two contentious steps: determining the total number of SEPs covering each standard (the denominator), then determining Ericsson’s share of those SEPs (the numerator). The percentage of SEPs held by the SEP holder is the quotient of the numerator divided by the denominator.
Essentiality. It is well known in the literature that many patents declared by their owners as “essential” to a particular standard are, upon closer inspection, not really essential at all (up to 80% in some cases). This is the problem of “over-declaration”, and it occurs because there is no verification by any third party of the essentiality of patents declared by their owners to be SEPs. As a result, courts considering total royalties attributable to SEPs covering a standard must also consider how many patents are actually essential to the standard.
Optional Portions. An initial question addressed by the court is whether patents covering optional portions of a standard should be considered “essential” to the standard. After analyzing the specific language of the ETSI policy, the court concludes that patents covering optional portions of an ETSI standard should not count as SEPs (p.27).
Essentiality Sampling. Instead of analyzing the essentiality of each patent declared essential to the 2G, 3G and 4G standards, TCL’s experts sampled one-third of the patents covering each standard for each of the fifteen largest patent holders. Thus, of 7,106 declared patent families covering user equipment, TCL analyzed the essentiality of approximately 2,600 patent families. After various forms of cross-checking, it determined that a total of 413 patent families were essential to the 2G standard, 1,076 to 3G and 1,673 to 4G (pp.28-29). Interestingly, it appears that TCL’s experts charged approximately $100 per patent for this analysis (p.30), which is significantly lower than the $10,000 per patent that is generally acknowledged as the cost of essentiality analyses for patent pools (some figures are collected here). One of the reasons for the low cost of TCL’s analysis was that TCL’s experts reviewed only the claims of the examined patents, not the full specifications. Given that a review of patent specifications could have resulted in additional patents being found non-essential (p.31), the court adjusts the totals downward to arrive at 365 SEPs covering 2G, 953 covering 3G and 1,481 covering 4G (p.32).
Ericsson’s Share. To compute Ericsson’s share of SEPs covering the relevant standards (the numerator), the parties’ experts determined which of the SEPs already identified would be owned by Ericsson during the term of a 5-year (60-month) license (p. 37). Under the holding of Brulotte v. Thys, 379 U.S. 29 (1964), which prohibits post-expiration patent royalties, the court eliminates from Ericsson’s total any patents that expired prior to the date of closing arguments (May 18, 2017) (p.36). Interestingly, the court did not require the elimination of expired SEPs from the total number of SEPs (the denominator). It explained that “[b]ecause the total aggregate royalty represents the value of all expired and unexpired inventions in the standard, … removing an expired SEP from the denominator treats the invention as no longer having value. The invention however still has value, that value has merely been transferred to the public domain. To remove expired patents from the denominator (without decreasing the total aggregate royalty) would result in transferring the value from expired inventions to the remaining patents in the standard instead of the public.” (p.36).
Interestingly, while the parties agreed that Ericsson held 12 2G SEPs, they disagreed with respect to the number of 3G and 4G SEPs SEPs held by Ericsson (TCL finding 19.65 3G SEPs and 69.88 4G SEPs, and Ericsson finding 24.65 3G SEPs and 111.51 4G SEPs) (p. 37). In any event, even using Ericsson’s estimate of approximately 150 SEPs, this is a relatively modest share of the 3,162 patent families essential to the 2G, 3G and 4G standards.
Relative Strength. TCL argued that Ericsson’s proportionate share should be adjusted based on the relative importance of Ericsson’s SEPs compared to other SEPs covering the standards at issue (pp. 38-40) (this concept was introduced by Judge Robart in Microsoft v. Motorola, in which the court evaluated both the importance of the asserted patents to the standard and the importance of the standard to the overall product). Though Judge Selna did not accept TCL’s methodology for gauging the importance of Ericsson’s SEPs, it did concede that “Ericsson’s patent portfolio is certainly not as strong or essential as it has claimed” (p. 43).
Geographical Variance
The court recognized that Ericsson’s patent strength was greatest in the U.S. and therefor determined that a discount rate should be applied to Ericsson’s FRAND royalty outside of the U.S. It reasoned that “a global patent rate that does not account for differences in national patent strength provides the SEP owner a royalty based on features that are unpatented in many jurisdictions” (p. 44). For the sake of simplicity, the court divided the world into three regions: U.S., Europe and Rest of World (ROW) and established precise discounts for non-U.S. regions for each standard (e.g., for ROW, Ericsson’s 2G value share is 54.9% of the U.S. value) (p. 45). This approach is significantly more fine-grained than that taken by the UK court in Unwired Planet, which divided the world into just two categories: Major Markets (U.S., Japan, Korea, India and several European countries) and all other countries, including China. The FRAND rate for non-Major Market countries was simply 50% of the Major Market rate.
Violation of “Fair and Reasonable” Prong of FRAND
Even though the court does not accept each of TCL’s methodological steps in its top-down royalty analysis, the court finds, on the basis of those portions of the analysis that it accepts, that Ericsson’s offers to TCL are not “fair and reasonable” under its ETSI FRAND commitment.
Non-Discrimination
The court next analyzes whether Ericsson’s offers to TCL complied with the non-discrimination prong of its FRAND commitment.
Similarly Situated. As noted above, a FRAND license must be non-discriminatory. This means that the licensor must not discriminate against similarly-situated licensees (p. 54). In TCL v. Ericsson, the court undertakes the most detailed analysis to-date to identify which firms are similarly situated with the potential licensee. First, it concludes that the basis for comparison must be “all firms reasonably well-established in the world market” [for telecommunications products] (p. 56). The court expressly excludes from this group “local kings” – firms that sell most of their products in a single country (e.g., India’s Karbonn and China’s Coolpad) (p. 59). The firms that the court finds to be similarly situated to TCL are Apple, Samsung, Huawei, LG, HTC and ZTE (p. 58). Ericsson argued that Apple and Samsung are not similar to TCL given their greater market shares and brand recognition, but the court rejects that argument, reasoning that “the prohibition on discrimination would mean very little if the largest, most profitable firms could always be a category unto themselves simply because they were the largest and most profitable firms” (p. 61).
The court found Ericsson’s licenses to Apple and Huawei to be suitable benchmarks for comparison to its offers to TCL (p. 91). This conclusion is critical, because it establishes that low end vendors like TCL will be compared with high end vendors like Apple as to FRAND rates, giving low end vendors the benefit of favorable rate packages that high end vendors have been able to negotiate with respect to far more expensive products.
Competitive Harm. Ericsson argued that in order for an instance of discrimination to violate Ericsson’s FRAND commitment, it must have the effect of “impairing the development of standards” (p. 91). A similar systemic approach was taken in Unwired Planet, in which the UK court held that a violation of FRAND would not arise unless discriminatory treatment of licensees would “distort competition” (¶501). Judge Selna in TCL v. Ericsson takes a different view, holding instead that discrimination in violation of a FRAND commitment can be found so long as an individual firm is harmed. He expressly rejects the application of an antitrust-based standard, which requires harm to competition rather than harm to a competitor, to the analysis of a FRAND commitment (p. 91).
Comparison to Ericsson’s Offers. Though the options offered by Ericsson were complex and involved both lump sum payments and royalty floors within certain ranges (making them difficult to compare to other licenses), the court estimated that under one option, Ericsson’s offer to TCL translated to a running royalty on handsets of approximately 1% for 2G, 3G and 4G, and under another option 0.8% – 1.0% for 2G, 1.2% for 3G and 1.5% for 4G with a $2.00 per unit floor and a $4.50 per unit cap (p. 90). The royalty floor proposed by Ericsson was apparently intended to address TCL’s low selling price for handsets, so that Ericsson would receive an assured royalty stream no matter how cheaply TCL priced its handsets. Slightly different royalty schedules were proposed for external modems (p.90).
Discrimination. Based on this analysis, the court holds that Ericsson’s offers to TCL “are radically divergent from the rates which Ericsson agreed to accept from licensees similarly situated to TCL” and that Ericsson’s offers to TCL were therefore discriminatory and noncompliant with its FRAND obligations (p. 94). In particular, the court holds that Ericsson’s proposed “floor” on royalties payable by TCL was discriminatory (p. 113). This being said, the court also finds that Ericsson negotiated in good faith and that its conduct during the negotiations did not violate its FRAND obligations (p. 3).
Having concluded that Ericsson’s offers to TCL were not FRAND, the court proceeds to determine a FRAND rate for TCL’s desired license. It does so using a combination of the top-down rates derived above, as well as the comparable licenses reviewed in its non-discrimination analysis. Below is a table containing the court’s final determination of FRAND rates for the different standards and geographic regions at issue (p. 104):
Royalty Base and SSPPU? It is notable that the court’s decision in TCL v. Ericsson does not discuss the often contentious issue of the appropriate royalty “base” for TCL’s products – the figure against which the percentage royalty is applied. As explained in cases such as Ericsson v. D-Link, parties often disagree whether the SEP holder’s royalty should be applied against a component (e.g., a chip) embodying the standardized technology or against an end user product such as a smart phone. If the percentage royalty rate is not adjusted, the choice of the royalty base could result in radically different payments to the SEP holder. This concern has led to debates over the appropriateness of using constructs such as the “smallest salable patent practicing unit” (SSPPU) as the royalty base. I understand that this debate was largely avoided in this case because TCL conceded that the royalty would be charged against the selling price of its handset units.
Holding and Conclusions
On the basis of these findings, the court prescribes that the parties enter into a 5-year license agreement reflecting the FRAND rates described above (p. 115). In addition, TCL must pay Ericsson approximately $16.5 million for past unlicensed sales.
While the outcome of this case will likely make it easier for firms such as TCL to compete in the U.S. and other major markets, it also establishes several important guideposts for future FRAND license negotiations. First, the case establishes that, for non-discrimination purposes, even low end vendors like TCL will be considered “similarly situated” to high end vendors like Apple, giving them the benefit of the rates that high end vendors negotiate with SEP holders for much more expensive products. Equally importantly, it highlights the growing predominance of top-down royalty calculation methodologies for FRAND licenses.
After a couple of years of stagnant growth, the USPTO has issued record numbers of both utility and design patents in 2017. (Charts below). The number of new utility applications is down over the past couple of years (excluding continuations and CIPs). Rather than being due to more inflow, the rise in issuance can be explained primarily by an increased issuance rate as well as efforts to reduce “rework.”
Question in my mind: Are applicants filing measurably better patent applications now than they were 10 years ago?
Here’s my addition to Dennis’s holiday patent post, based off materials I used for my Patent Law exam this year. The technology involves recent interest of mine: making clear ice cubes. Thanks to the cocktail renaissance of the 2000’s, there’s been a new interest among home bartenders in upping their game. And what better way to show off than with a crystal-clear sphere of ice?
A day before to the exam, students were given a packet of documents that included a copy of a 2009 weblog post by Camper English, reprinted with permission. English’s blog post talks about using “directional freezing” (described as freezing water from the top-down) in order to produce clear ice. Students were asked to assume the following:
Camper English was the first person to discover that clear ice could be produced in a home freezer by freezing the ice in a directional manner. English published these findings on a weblog on December 28, 2009, a copy of which you were provided in Appendix A. English immediately filed a patent application that contained the following claim.
I claim:
A method of producing ice comprising freezing water in a directional manner in a home freezer.
Analyze the patentability of the claim under current patent eligible subject matter law.
***
The remainder of this series of questions revolved around an actual patent for producing clear ice spheres, Patent No 9,784,492, and a hypothetical infringement suit. I found the concept embodied in the ‘492 patent quite clever: create an insulated two-part mold with a small hole in the bottom leading to a reservoir. This setup produces clear, shaped ice. The ‘492 patent is assigned to Wintersmith (commercial embodiment). Claim 1 reads:
1. A device for producing a piece of ice when the device is placed in a freezing environment, wherein the piece of ice has a shape, the device comprising:
an insulating vessel designed and configured to be placed into the freezing environment, the insulating vessel having an interior, an upper portion, and a lower portion and including an opening in the upper portion;
a mold designed and configured to be removably installed into the insulating vessel via the opening each time the device is used to make the piece of ice, the mold:
having an upper end and a lower end spaced from the upper end;
defining a hollow void between the lower end of the mold and the interior of the insulating vessel when mold is installed in the insulating vessel during use of the device;
defining a cavity between the upper and lower ends and having the shape of the piece of ice, the cavity designed and configured to receive a liquid to be frozen into the piece of ice during use of the device;
including an exit hole at the lower end, the exit hole designed and configured to place the cavity of the mold into communication with the hollow void so as to allow the liquid to flow into the hollow void from the cavity of the mold during use of the device; and
including a fill opening in the upper end, the fill opening designed and configured to allow the liquid to flow into the cavity of the mold, wherein the fill opening is used to fill the hollow void and the cavity with the liquid during use of the device to make the piece of ice; and
a cup designed and configured to:
receive the mold so as to laterally constrain the mold during use of the device;
be inserted into the insulating vessel during use of the device; and
include an opening in registration with the exit hole of the mold so as to allow the exit hole to fluidly communicate with the hollow void;
wherein the cup has a substantially cylindrical interior and the mold has a like-shaped exterior designed and configured to confront the cylindrical interior when the mold is fully engaged with the cup.
Tax plan: No patent box this year. Instead, all corporations get a tax break regardless of whether they are engaged in innovative or beneficial activities.
Tax plan: For 2018, law firm associations may want to push hard for ownership to take advantage of the new pass-through tax cuts.
Government Funding: On the brink, Congress has passed a short-term spending bill till Jan 19. This means no USPTO or Court shutdown.
USPTO Director: The Senate took no action on Andrei Iancu’s nomination before their long Christmas break.
The Federal Circuit has denied David Jang’s petition for en banc rehearing in Jang v. Boston Scientific. The basic issue surrounds Boston Scientific’s “ensnarement defense” and whether it had been waived.
The ensnarement doctrine limits the scope of the doctrine of equivalents – barring the patentee from asserting a scope of equivalency that will encompass or “ensnare” the prior art. DePuy Spine, Inc. v. Medtronic Sofamor Danek, Inc., 567 F.3d 1314 (Fed. Cir. 2009). This approach is closely akin to the ordinary claim construction canon of construing terms in order to preserve validity. However, the ensnarement doctrine is actually applied while the construe-to-preserve-validity approach is generally a limited afterthought if even considered.
The doctrine makes perfect sense at this high level – patents should not cover what is found in the prior art. The difficulty comes in the doctrinal and procedural details.
Who should decide (CAFC: the judge);
What is the standard (CAFC: it is question of law);
The particular issue in the en banc setup was whether Boston Scientific’s belated raising of the ensnarement doctrine constituted waiver of the doctrine – BSC did not raise the defense in the pretrial order. In its decision, the Federal Circuit ruled that it was not necessary to raise the defense at that point since the District Court had already indicated that the issue would be decided post-trial.
Professor Paul M. Janicke returns to the Patently-O Patent Law Journal with a look back at his predictions about venue prior to the Supreme Court’s decision in TC Heartland LLC v. Kraft Foods Group Brands LLC, 137 S.Ct. 1514 (2017)(limiting patent venue). The new article is aptly titled Paul M. Janicke, Patent Venue: Half Christmas Pie, And Half Crow, 2017 Patently-O Patent Law Journal 13.
In American Innotek v. US, the patent at issue covers a urine containment bag and the patentee alleges that the “Piddle Pak with powder” bought and used by the US government infringes United States Patent No. 5,116,139.
The lawsuit here is against the U.S. government – as such, it was filed in the U.S. Court of Federal Claims without right to jury trial, punitive damages or injunction. At the CFC, the court held the patent invalid – finding it obvious even as of its 1989 priority date. On appeal, the Federal Circuit has affirmed, although only after rejecting the lower court’s misapplication of obviousness law. [Decision]
Role of Objective Indicia of Nonobviousness: The districtlower court suggested that the combination of prior art references was so compelling that it was theoretically impossible for secondary indicia of nonobviousness to flip the ruling. On appeal, the Federal Circuit rejected that conclusion and approach to obviousness – holding that it “goes to far.” Rather, “[o]bjective indicia of nonobviousness must be considered in every case where present.” (quoting Apple Inc. v. Samsung Elecs. Co., Ltd., 839 F.3d 1034 (Fed. Cir. 2016) (en banc)). The implication here is that not-only must the secondary indicia be considered, but also that there is the potential in every obviousness case that the objective indicia will be sufficient to render the claims non-obvious.
Despite the lower court’s misstatement of the law, the Federal Circuit agreed with the ultimate conclusion that – in this case – the claim are obvious. Rather than walking through the analysis, the Federal Circuit simply agreed with the conclusion:
Certainly, this court has often determined that particular objective indicia were not decisive in the face of strong other evidence of obviousness, but those results reflect case-specific assessments. In the present case, taking the evidence supported facts found as a given, we weigh the objective indicia with the other facts and agree with the conclusion of obviousness drawn by the Court of Federal Claims.
Affirmed.
= = = = =
Asserted claim 1 is below:
A containment bag for a fluid comprising water or a waterbased liquid such as bodily fluids which comprises:
a bag having a hollow interior defined by two sides meeting at opposite edges, a bottom and a top, with said edges and bottom sealed and said top at least partially open to receive said fluid;
a gellable hydrophilic material within said bag, said material becoming fully gelled within thirty seconds of said contact with said fluid when said fluid is deposited in said bag, said gelation serving to essentially completely sequester said fluid and prevent said fluid from thereafter being expelled from said bag;
funnel means within said interior and having an open top, said funnel means being secured to said bag at said top of said bag, and extending downwardly within said interior to a narrower open bottom for conduction of fluid entering said open top through said funnel means and into said bag, with the open bottom of said funnel being disposed between the top and the bottom of said bag, said open bottom being free from attachment to said sides of said bag such that flow of any unsequestered fluid within said bag back toward said funnel means acts to close said funnel means to prevent escape of unsequestered fluid from said bag; and
closure means for closing the top of said bag after introduction of said fluid into said bag.
Today’s opinion is the Federal Circuit’s third in this dispute between Travel Sentry and David Tropp over Tropp’s patented luggage inspection system. The basic idea is that the luggage has a lock and TSA has a master-key. This allows the government to search the bag and then re-lock the baggage before throwing it onto the plane.
The problem with Tropp’s method claims is that they require both (1) supplying the special lock (done by Travel Sentry) and also (2) the TSA (“luggage screening entity”) using the provided master key. This is a problem because infringement ordinarily requires a single-entity who practices (or controls the practice) of every step of a method claim. Here, Travel Sentry performs step-1, but not step-2.
The district court did find that that Travel Sentry facilitates TSA’s activity by supplying master locks and instructions for their use. However, that facilitation was not sufficient to satisfy the”control” or “joint enterprise” requirement under Akamai (en banc 2015). In particular, the district court held that “there is simply no evidence that Travel Sentry had any influence whatsoever on the third and fourth steps of the method carried out by the TSA, let alone ‘masterminded’ the entire patented process.”
On appeal, the Federal Circuit has vacated this judgment – holding that the district court had too-narrowly considered the new “joint enterprise” prong of Akamai – and its factual basis. Here, according to the appellate court, the patentee had presented sufficient evidence that the cooperation between TSA and Travel Sentry (including a Memorandum of Understanding) for a jury to attribute TSA’s activities to the accused infringer Travel Sentry.
Although the partnership-like relationship between Travel Sentry and TSA differs in several respects from the service provider-customer and physician-patient relationships in Akamai V and Eli Lilly, a common thread connects all three cases: evidence that a third party hoping to obtain access to certain benefits can only do so if it performs certain steps identified by the defendant, and does so under the terms prescribed by the defendant.
On remand, the jury may finally get its chance to decide the case.
My former bosses Paul Berghoff and Alison Baldwin (at MBHB) won an interesting case today on behalf of Genzyme and its corporate parent Sanofi-Aventis.
Genzyme’s patent No. 7,897,590 is an important part of modern stem-cell practice in the treatment of non-Hodgkin’s lymphoma and multiple myeloma. The patented process stimulates mobilization of a donor’s bone marrow by administering both a “granulocyte-colony stimulating factor” and also plerixafor (See Claim 19). The plerixafor drug (sold under the brand name Mozobil) is no longer patented, but the treatment protocol is patented.
In the ANDA lawsuit, the generic defendants argued that the asserted claim was obvious. Following a bench trial (no right to jury trial in ANDA cases), the district court sided with the patentee — finding insufficient evidence of obviousness. On appeal, the Federal Circuit has also affirmed.
For obviousness analysis, the first consideration is typically the scope-and-content of the prior art. Any reference used must qualify as prior art under Section 102 and must also be considered analogous or pertinent. The key prior art reference – Hendrix discussed the pharmacokinetics and use of plerixafor – but was focused on use of the drug in HIV treatment. The district court excluded Hendrix – finding that it was not analogous art since one of skill in the art would not have been looking for this type of drug in researching stem cell mobilization. On appeal, the Federal Circuit did not review that particular holding – instead finding that even if considered pertinent to an obviousness analysis, it still would not be sufficient to render the claim invalid.
For the Federal Circuit, the basic dispute comes down to whether a person of skill would have a “reasonable expectation of success” – i.e., a reasonable expectation that combining Hendrix with the other references would lead to a treatment that mobilizes stem cells as claimed.
Here, the district court found that a skilled artisan would not have had a reasonable expectation of success that plerixafor would mobilize stem cells. DRL has not shown that this determination was clearly erroneous.
The basic difficulty is that the prior art stem-cell mobilization research focused on a “completely different family of receptors” than those triggered by plerixafor; and that stem cells exhibit “around one hundred different types of receptors.” Thus, according to the court, it would have been a major leap to use plexifora as described in Hendrix for stem cell mobilization.
The one difficulty with the Federal Circuit and District Court analysis is that this key prior art reference “Hendrix” actually states that the drug may cause stem-cell mobilization.
These combined observations suggest that binding of [plexifora] to CXCR4 may inhibit the chemotactic effects of SDF-1α, causing release of WBCs from the endothelium and/or stem cells from bone marrow.
Hendrix. The Federal Circuit recognizes what’s happening here and does an interesting word dance – attempting to explain-away the statement:
Although Hendrix hypothesized in an isolated sentence, without explanation, that plerixafor may cause stem cell mobilization, the rest of the seven-page article focused on the elevation of WBC counts. . . . A skilled artisan would have recognized that Hendrix never tested for the presence of stem cells. The primary speculation in Hendrix for the phenomenon associated with elevated WBC counts was “demargination,” which refers to the release of WBCs from the endothelium. This emphasis on demargination is consistent with how an independent group of contemporary researchers perceived Hendrix.
The district court’s finding that stem cell mobilization was highly unpredictable at the time of the invention also runs counter to an expectation of success. In particular, there was great uncertainty about the role of SDF-1 or CXCR-4, if any, in the process of stem cell mobilization. …
Holding of non-obviousness affirmed since there was no reasonable expectation of success.
Note here – Although MBHB does not exert any editorial control over Patently-O, they are the primary advertiser for the site, and my former employer. DC.
My patent law class at Mizzou focuses on practical aspects of drafting claims, forming rejections, and arguing motions. However, the students also take a short final exam that counts for about 30% of their grade. The following is this year’s exam – DC.
Introduction: On her drive from Florida to Mizzou in June 2017, Dean Lidsky struggled to find food to match her true Texan tastes. That adversity sparked an idea: A mobile device APP that suggests nearby restaurants based upon a person’s home-state. Lidsky has not yet built a working model, but has designed the system to use look-up-tables that match various home-states with food preferences and then links those food preferences to various restaurants.
The two tables below show examples of how the home state can be used to correlate with food type affinities and then matched to restaurants. A phone’s location information also be used to help automatically generate the list of nearby restaurants with high affinity.
Lidsky filed a non-provisional patent application on December 5, 2017 with the following claim 1 (drafted by her Florida-based patent attorney).
I claim: 1. A preference matching system comprising:
a mobile device having a screen, a processor, and a memory; and
software code stored in said memory, wherein said software code is configured provide a user of the mobile device with ranked list of restaurants,
wherein said ranked list is based at least upon an affinity metric and a proximity metric, and wherein said affinity metric is based upon a predetermined correlation between a food-type and an aspect of said user.
Question 2. (60 words) Provide a concise argument that claim 1 fails for lack of definiteness.
Question 3. (100 words) On November 30, 2017, Gely filed a U.S. patent application that disclosed all-but-one of the elements of Lidsky’s invention. Namely, Gely did not incorporate the phone’s location information. Rather, Gely would require users to enter location information. Note, it appears that Gely independently created his invention, but he was actually inspired by Lidsky’s comment when she arrived about her difficulty in finding food that matched her Texan tastes. Although filed in 2017, Gely’s application was kept secret by the USPTO until it was published (under Section 122) in May 2019.
Would Gely’s application count as prior art against Lidsky’s patent application if used for an obviousness rejection?
Question 4. (80 words) Assume here that Gely’s patent application is prior art against Lidsky’s patent application, make the argument that Gely anticipates Liskdy’s claim.
Question 5. (12 words) During patent prosecution, Lidsky added a limitation to claim 1 explaining that the “proximity metric” uses a phone’s GPS and Cell-Site location. The examiner accepted this amendment even though neither GPS nor Cell-Site location information were particularly disclosed in the originally filed application. The examiner reasoned (correctly) that these additions were very well known in the art and so a person of ordinary skill in the art would know how to add them without any further disclosure.
Would this amendment invalidate the issued claim under either the Written Description or Enablement requirements (or both)?
Question 6. (40 words) Assuming Lidsky’s patent issues and is valid. Would a competing app producer be liable for freely distributing their version of the APP via an APP Store? (Assume that the competitor’s app while in-use on a device would practice each limitation of the claimed invention.)
The Federal Circuit has ruled that trademark law’s bar against registering immoral or scandalous marks is an unconstitutional restriction of free speech. Thus, on appeal the court has reversed the TTAB’s holding that Bruneti’s mark FUCT is unregistrable. (FUCT Clothing Store).
This decision follows the Supreme Court’s recent decision in Matal v. Tam, 137 S. Ct. 1744 (2017). In that case, the court held that § 2(a)’s bar on the registration of disparaging marks involved a governmental viewpoint discrimination in violation of Free Speech principles.
Here, the Federal based its decision on content-based discrimination (rather than viewpoint based) which is also reviewed for strict scrutiny. In reaching its decision, the Federal Circuit rejected two particular arguments, holding:
Trademark Registration is Not a Government Subsidy Program: If it were a subsidy, then the government could place conditions on the program without violating free speech principles (so long as those are not unconditional conditions)
Trademark Registration is more than commercial speech because it does “more than propose a commercial transaction” and often involve expressive conduct. If it were pure commercial speech, then restrictions would be reviewed under a looser standard. However, here the court holds that the immoral or scandalous mark provision “is unconstitutional even if treated as a regulation of purely commercial speech.”
The majority opinion here was written by Judge Moore and joined by Judge Stoll. Judge Dyk wrote a concurring opinion — arguing that some aspects of Section 2(a) could be saved by a narrow definition:
One such fairly possible reading is available to us here by limiting the clause’s reach to obscene marks, which are not protected by the First Amendment.
Dyk proposes that the PTO should follow the approach of criminal law that – by statute criminalizes the mailing of “obscene, lewd, lascivious, indecent, filthy or vile” material. Rather than finding the entire statute invalid, courts have limited the statute to only apply to obscene material. That same approach could be used here.
The majority responded the Dyk’s suggestion by arguing that such a re-write of the statute here would be an improper exercise of legislative powers – reserved for Congress. “It is not reasonable to construe the words immoral and scandalous as confined to obscene material.”
The Senate Judiciary Committee has approved President Trump’s nomination of Andrei Iancu as USPTO Director and Under Secretary of Commerce (unanimous consent). The nomination now moves to the Senate Floor where no roadblocks are expected other than the difficulty in having the Senate focus on any particular item.
Iancu was born in 1968 in Romania Bucharest Hungary, and immigrated to the U.S. with his family as a youth. At his confirmation hearing, he spoke of his father’s love for and faith in America as their new homeland. Iancu is a patent attorney and Managing Partner of Irell & Manella LLP in LA. He holds three UCLA Degrees: J.D., M.S. in mechanical engineering, and B.S. in aerospace engineering.
The BPCIA (Biologics Price Competition and Innovation Act of 2009) is designed to promote innovation in biologic drug treatments while also facilitating a strong follow-on biosimilar (generic) market. At a very high level, BPCIA runs parallel to the provisions of the Hatch-Waxman innovator-generic rules, but the details are quite different and substantially more complicated.
In its first foray into the BPCIA law, the Supreme Court dove into the details, holding that:
Providing Information and Data: Although the BPCIA statute indicates that the biosimilar applicant “shall provide” certain information and data to the innovator company (the reference product sponsor or RPS), the Supreme Court held that no injunction should issue to enforce that requirement. 42 U.S.C. § 262(l)(2)(A)
Notice of Marketing: The BPCIA requires 180 days of notice to the RPS prior to biosimilar product marketing. The Supreme Court held that notice can be given prior to FDA approval — this eliminates what the patentee hoped would be an automatic six-month delay after FDA approval of a biosimilar.
On remand, the Supreme Court directed the Federal Circuit to determine whether the failure to provide the information and data [under § 262(l)(2)(A)] is a violation of California law of unfair competition and conversion.
In its decision here, the Federal Circuit holds that the BPCIA preempts any state laws that would create liability for failure to comply with the requirement for providing information and data.
Federal preemption is initially based upon the Supremacy Clause of the U.S. constitution — federal law “shall be the supreme Law of the Land; and the Judges in every State shall be bound thereby, any Thing in the Constitution or Laws of any State to the Contrary notwithstanding.” U.S. Const. art. VI, cl. 2. The U.S. Supreme Court has developed several strands of preemption doctrine – here the court focused on implicit field preemption .
Under field preemption, “state law is pre-empted where it regulates conduct in a field that Congress intended the Federal Government to occupy exclusively.” Quoting English v. Gen. Elec. Co., 496 U.S. 72 (1990). We may infer such a congressional intent from a “scheme of federal regulation . . . so pervasive as to make reasonable the inference that Congress left no room for the States to supplement it,” or where an Act of Congress “touch[es] a field in which the federal interest is so dominant that the federal system will be assumed to preclude enforcement of state laws on the same subject.” Rice v. Santa Fe Elevator Corp., 331 U.S. 218, 230 (1947). “Where Congress occupies an entire field . . . even complementary state regulation is impermissible.” Arizona v. United States, 567 U.S. 387, 401 (2012).
Implicit preemption is less likely in traditional state law areas (creating a presumption against preemption), and more likely in areas where states have not traditionally regulated.
The basic framing issue for the court is whether the state law should be seen as regulating unfair competition (a traditional state law area) or instead regulating biologic competition (a previously unoccupied field) and patents (a traditional federal area). Here, the court focused on the latter two.
As an initial matter, no presumption against preemption applies in this case because biosimilar patent litigation is hardly ‘a field which the States have traditionally occupied. Indeed, patents are inherently federal in character. (internal quotations and citations removed).
Here, the complexity of the BPCIA lent itself toward preemption – as a “carefully crafted and detailed enforcement scheme” it is “reasonable” to infer “that Congress left no room for the States to supplement it.”
In addition, the court found some amount of direct conflict with Federal Law under the theory of “conflict in technique” since the various tort regimes of the 50 states could radically shift the incentives and actions of the biologic dance participants.
Thus, the Federal Circuit here affirmed the district court’s dismissal of Amgen’s state law claims as “preempted on both field and conflict grounds.”
It is not clear from ,u reading the AIA revisions that “secret prior art” (102(b)(2) prior art) continues to qualify as prior art for the obviousness analysis. The obviousness provision (Section 103) refers to prior art in the context of what would be known “before the effective filing date of the claimed invention to a person of ordinary skill in the art.” And, almost by definition, information only available in a secret patent filing at the PTO would not be known to this mythic POSITA. In addition, the AIA indicates that one purpose of the amendments is to bring US law in line with that of other nations [who do not rely upon secret prior art for the obviousness analysis.] Despite these argument, I suspect that the Federal Circuit will continue to push to maintain the old rule since there is not clear textual or congressional indications of an intent to change the tradition.
Post-AIA patent applications are now trickling up to the PTAB in ex parte appeals from examiner rejections. In the recent decision Ex Parte Kirk, APPEAL 2017-003486, (Patent Tr. & App. Bd. Oct. 26, 2017), the Board affirmed an examiner’s obviousness rejection based upon the combination of a 102(a)(1) reference (an application published prior to Kirk’s effective filing date) and a 102(a)(2) reference (an application published subsequent to Kirk´s effective filing date, but filed prior to that date). In the appeal, the Board did not expressly consider the propriety of applying 102(a)(2) references to the obviousness analysis. See also, Ex Parte Linkedin Corp., APPEAL 2017-005043 (Patent Tr. & App. Bd. Sept. 25, 2017).
The use of secret prior art (patents that were unpublished as of the critical date) goes back to the Supreme Court decision in Hazeltine Research, Inc. v. Brenner, 382 U.S. 252 (1965). In that decision, the court held that it was proper for the PTO to consider a pending patent application as prior art to bar a later-filed application. There the court wrote:
Petitioners’ primary contention is that the term ‘prior art,’ as used in s 103, really means only art previously publicly known. In support of this position they refer to a statement in the legislative history which indicates that prior art means ‘what was known before as described in section 102.’ . . .
When Wallace filed his application [the prior art application], he had done what he could to add his disclosures to the prior art. The rest was up to the Patent Office. Had the Patent Office acted faster, had it issued Wallace’s patent two months earlier, there would have been no question here. As Justice Holmes said in Milburn, ‘The delays of the patent office ought not to cut down the effect of what has been done.’
To adopt the result contended for by petitioners would create an area where patents are awarded for unpatentable advances in the art. We see no reason to read into s 103 a restricted definition of ‘prior art’ which would lower standards of patentability to such an extent that there might exist two patents where the Congress has plainly directed that there should be only one.
In RecogniCorp, LLC v. Nintendo Co., Ltd., petitioner-patentee RecogniCorp has asked the Supreme Court to take a fresh look at its eligibility doctrines with the following two questions presented:
Whether computer-implemented inventions that provide specific improvements to existing technological processes for encoding or decoding data are patent-eligible under the first step of the Alice test, even if those inventions involve or make use of abstract ideas.
Whether the use of new mathematical algorithms to improve existing technological processes by reducing bandwidth and memory usage can constitute “inventive concepts” under the second step of the Alice test.
Although I previously panned the petition as unlikely to be granted, a set of amicus briefs supporting certiorari substantially raise the odds.
Brief amici curiae of Adam Mossoff and David Lund (“The lower courts and the PTO have misunderstood the Mayo-Alice test and have created indeterminate and overly restrictive patent eligibility doctrine under Section 101.”)
Brief amici curiae of Twenty-Five Inventor Organizations (a “fundamental problem with the Federal Circuit’s Decision is that it capriciously declares that any process that starts with data, adds an algorithm, and ends with a new form of data must be abstract.”)
The court battle here began when RecogniCorp sued Nintendo for infringing its U.S. Patent No. 8,005,303. Without any claim construction or considering any evidence, the district court dismissed the case on the pleadings (R.12(c))– finding that the claims lacked subject matter eligiblity. On appeal, the Federal Circuit affirmed (applying Alice):
Step 1: The claims are directed to the abstract idea of encoding and decoding image data long utilized to transmit information (“one if by land, two if by sea”).
Step 2: No further inventive concept.
Representative claim 1 is listed here:
1. A method for creating a composite image, comprising:
displaying facial feature images on a first area of a first display via a first device associated with the first display, wherein the facial feature images are associated with facial feature element codes;
selecting a facial feature image from the first area of the first display via a user interface associated with the first device, wherein the first device incorporates the selected facial feature image into a composite image on a second area of the first display, wherein the composite image is associated with a composite facial image code having at least a facial feature element code; and
reproducing the composite image on a second display based on the composite facial image code.
Interesting decision here on two different fronts: Reviewability of Ex Parte Reexamination Termination Decision; and Priority Prior Art Date for Patent Applications.
The dispute focuses on Illumina’s U.S. Patent No. 7,955,794 and arose after the inventors left Ariosa to form competitor Illumina.
Ex parte Reexamination Termination and Appeal: While the inter partes review (IPR) was ongoing Ariosa/Roche filed a set of three ex parte reexamination requests and the PTO determined that they collectively raised 18 substantial new questions of patentability. However, after siding with the patentee in the IPR, the PTAB also terminated the three pending reexaminations – finding that Ariosa had delayed unreasonably in filing the reexam requests and that the petitions were duplicative of the IPR. This was apparently the first time that the PTAB had ever collaterally terminated an ex parte reexamination. (Remember here, that reexaminations are handled by examiners not by the Board).
On appeal, the Federal Circuit refused to engage on the merits of the dismissal – rather writing a one-sentence disclaimer of jurisdiction:
Because we lack jurisdiction to review the termination of the ex parte reexamination proceedings, we dismiss the appeal of the termination of those proceedings.
Wow. PTAB has the right decision here (I think), but I continue to struggle with the no-appeal result. The argument for no right to appeal here is two-fold: (1) in an IPR only the final written decision can be appealable, and the decision here was separate from that paper; (2) A third-party has no right to appeal dismissal of an ex parte reexamination. What we don’t know is which of these (if either), the Federal Circuit would adopt.
Priority Prior Art Date for Patent Applications: As mentioned above, the PTAB sided with the patentee – holding that the primary reference “Fan” was not actually prior art. Again, rather than explaining its decision, the court simply wrote ¨Fan was not prior art.” This is better than a R.36 affirmance without opinion, but not by much.
Ariosa’s ‘794 patent is based upon an application filed in June 2002, but claims priority back to a September 2000 provisional patent application. The reference at issue – Fan – is not a patent but instead U.S. Patent Publication No. 2002/0172946. That application was published in November 2002, with a February 2001 filing date, and claims back to a provisional application filed February 2000.
Under PRE-AIA 102(e), a published US patent application counts as prior art as of its filing date. The question in the case, though was figuring out whether it is proper to stretch the date back to the provisional filing. The problem with the provisional: although it arguably teaches the Ariosa invention, it apparently does not fully support any of the claims pending in the Fan application as published.
For its holding, the PTAB relied upon a couple of major decisions:
In re Wertheim, 646 F.2d 527 (Cust. & Pat. App. 1981) (in a CIP situation, a child patent is given the prior art date of the parent filing only if the child’s claims were fully supported by the parent application).
Dynamic Drinkware, LLC. v. National Graphics, Inc., 800 F.3d 1375 (Fed. Cir. 2015) (extending Wertheim to provisional application situations – “A provisional application’s effectiveness as prior art depends on its written description support for the claims of the issued patent of which it was a provisional.”).
Extending these cases, the PTAB here held that Fan did not count as prior art as of its provisional filing date since “the claims of the [published] application are [not] supported by the provisional.” The PTAB goes well beyond the already problematic Dynamic Drinkware by placing such heavy legal merit on the claims in a published provisional application. On appeal, however, rather than grappling with these issues, the Federal Circuit affirmed – holding simply that ¨Fan was not prior art.”
In the AIA, Section 102(e) was replaced with Section 102(a)(2). We still lack judicial guidance on what will count as the prior art date under 102(a)(2) when the purported prior art claims priority to a larger family of applications. ¿Notably, are Wertheim and Dynamic Drinkware still good law?
Under the post-AIA provision, a US published application is prior art to a claimed invention if it “names another inventor and was effectively filed before the effective filing date of the claimed invention.” 35 USC 102(a)(2). When considering when the purported prior art was “effectively filed,” Section 102(d) explains that a court should focus on the subject-matter for-which the prior art is being used and any parent applications where the application is “entitled” to claim a right of priority or benefit. The prior art date will be “the filing date of the earliest such application that describes the subject matter.”
In my mind, this statutory scheme rejects Wertheim, Dynamic Drinkware and also the PTAB analysis here — which collectively further require that the claims in the application being used as prior art be sufficiently supported by the priority document.
The major caveat to this analysis is that the 102(d)(2) specifically notes that the application must be “entitled” to the priority. That entitlement requirement could be used as a hook for a holding that an application is only entitled to a priority claim if at least one claim is fully supported by the priority filing.
