October 2017

Federal Circuit Review of the PTAB

By Jason Rantanen

I’m presenting some data from the Compendium of Federal Circuit Decisions later today at Chicago-Kent’s terrific conference on The Power of the PTAB.  Below are a few of the graphs I’ll be showing, along with a bonus graph involving Federal Circuit review of inter partes review proceedings.  All data is through October 17, 2017.

This first graph shows the distribution of dispute types in opinions and Rule 36 summary affirmances that arise from the USPTO.  Unsurprisingly, most of the growth in these decisions comes from appeals in IPRs.  More surprising to me was that a substantial chunk of the growth from 2014-16 came from appeals from inter partes reexamaminations.  Those will drop off as the last reexaminations work through the system.

Dispute Types

This second graph shows the affirmance rates in different dispute types for the period 2012-2016.  Note the difference between affirmance rates in ex parte-type proceedings versus the rates in inter partes-type proceedings.  For the CBMR and Interference rates, keep in mind that the number of these decisions is small for this time period (CBMR, n=15, Interference, n=25).

Federal CIrcuit Review 2012-2016

Here’s the bonus graph: the affirmance rates for inter partes reviews only.  Although the affirmance rate was above 85% for 2015 (n=44), it was lower in 2016 (n=107), and so far for 2017 has been even lower (n=100 through Oct. 17, 2017).

CAFC review of IPRs

This last graph shows the frequency of the Federal Circuit’s use of Rule 36 summary affirmances.  The “post-Crouch” drop may vindicate Dennis’s February 1, 2017 post on Rule 36 affirmances.  That bar reflects the frequency of Rule 36 affirmances in these appeals since that date.

Frequency of Rule 36

Thanks to my research assistants, Louis Constantinou, Sarah Jack and Brett Winborn for their hard work on the Compendium.  If you are a researcher on the Federal Circuit and would like access to the Compendium in its beta state, please drop me an email.




An Overview of the USPTO Count System

Dr. Naira Simmons has published a nice short article titled: Putting Yourself in the Shoes of a Patent Examiner: Overview of the United States Patent and Trademark Office (USPTO) Patent Examiner Production (Count) System, 17. J. Marshall Rev. Intell. Prop. L. 32 (2017).

The goal of this note is to provide an overview of the system in which Patent Examiners operate by summarizing important aspects of the system currently used to evaluate the performance of a Patent Examiner.

Many patent attorneys know this system, but the article does a nice job of summarizing how it all works.

Abstract Ideas: The Turnstile Keeps Spinning

by Dennis Crouch

Smart Sys. Innovations v. Chicago Transit Authority (Fed. Cir. 2017)

In a split opinion, the Federal Circuit has affirmed the district court’s judgment on the pleadings – R. 12(c) – that the asserted claims of SSI’s four patents are invalid under Section 101 for claiming an abstract idea.  U.S. Patent Nos. 7,566,003, 7,568,617, 8,505,816, and 8,662,390. (Claim 14 of the ‘003 patent – covering a method for validating entry to a city bus or train – is reproduced below).

The baseline for eligibility analysis is the two-step Alice test:

A patent claim falls outside § 101 where (1) it is “directed to” a patent-ineligible concept, i.e., a law of nature, natural phenomenon, or abstract idea, and (2) if so, the particular elements of the claim, considered “both individually and ‘as an ordered combination,’” do not add enough to “‘transform the nature of the claim’ into a patent-eligible application.”

Elec. Power Grp., LLC v. Alstom S.A., 830 F.3d 1350 (Fed. Cir. 2016) (quoting Alice).

The patents here are are directed to a method for collecting fares – without dedicated fare-cards, paper tickets, or tokens.  Instead, the system uses credit/debit cards.   After “stripping” the patent claims from their technical jargon and obtuse syntax, the District Court ruled that the patents “really only cover an abstract concept [of] paying for a subway or bus ride with a credit card.”

On appeal, the Federal Circuit affirmed – holding that these steps were – as a whole – directed toward an abstract idea:

The Asserted Claims are not directed to a new type of bankcard, turnstile, or database, nor do the claims provide a method for processing data that improves existing technological processes. Rather, the claims are directed to the collection, storage, and recognition of data. We have determined that claims directed to the collection, storage, and recognition of data are not [sic] directed to an abstract idea.

Note here the suggestion from the court that “a new type of bankcard, turnstile, or database” could be patent eligible.  Here, the limitation to the field of mass-transit did not help the patentee: “merely limiting the field of use . . . does not render the claims any less abstract.” Quoting Affinity Labs.  In thinking through the step one, the majority looked toward the Alice focus on whether the claims are “directed to” an abstract idea.  According to the court – that question is separate and distinct from the “thrust,” “heart,” or “focus” of the invention.

According to the majority, Alice Step 2 is also easily met – because the tech-focused aspects of the claims are simply directed to the use of a general purpose computer and thus “offer no inventive concept that transforms them into patent-eligible subject matter.”  In the process of reaching this result, the court distinguished both Diehr and DDR Holdings:

  • Diehr does not apply when, as here, the claims at issue use generic computer components “in which to carry out the abstract idea.”
  • DDR Holdings does not apply when, as here, the asserted claims do not “attempt to solve a challenge particular to the Internet.”

Finally, the majority considered several ‘other arguments’ regarding eligibility:

  • No preemption: Although one purpose of the abstract-idea exception is to limit preemption, the test itself does not actually consider preemption.  Thus, once the abstract idea analysis is completed “preemption concerns are … moot” Ariosa.
  • Transformation:  Although the machine-or-transformation test “can provide a useful clue to the second step of the Alice framework” it does not overwhelm the primary search for an ‘inventive concept.’ Quoting Ultramercial.

Thus, the claims were all affirmed to be invalid and thus not enforceable.

The majority opinion was penned by Judge Wallach and joined by Judge Reyna.  Judge Linn filed an opinion dissenting in part. Judge Linn argues that the “gist” analysis by the Federal Circuit is improper:

The majority commits the same error as the district court in engaging in a reductionist exercise of ignoring the limitations of the claims in question and, at least with respect to the ’003 and ’617 patents, in failing to appreciate that the abstract idea exception—if it is to be applied at all—must be applied narrowly, consistent with its genesis. . . . All three nonstatutory exceptions are intended to foreclose only those claims that preempt and thereby preclude or inhibit human ingenuity with regard to basic building blocks of scientific or technological activity. They are intended to be read narrowly.

As the Supreme Court has done in its 101 analysis, Judge Linn linked his work back to cases such as Le Roy, Mackay, and Funk Bros. The language of those cases focus on “fundamental truths” and “hitherto unknown phenomenon of nature.”  In Benson and Alice, the court also explained “Phenomena of nature, though just discovered, mental processes, and abstract intellectual concepts are not patentable, as they are the basic tools of scientific and technological work.”

For Judge Linn, a method of charging a bank-card at a bus-turnstile does not fit into those expansive definitions.

Judge Linn’s opinion recognizes that his concern directly stems from the Supreme Court’s approach in Alice and Mayo.  He writes: “The problem with this test, however, is that it is indeterminate and often leads to arbitrary results.”  His solution is that the two part test should not be “applied in a legal vacuum divorced from its genesis” and the three exceptions should be treated consistently. Patents should not be struck down simply because they “seemingly fail the Supreme Court’s test.” Rather, the focus should be on whether the patents “attempt to appropriate a basic building block of scientific or technological work.”

The solution for Judge Linn: Focus on the language of the claims and each limitation when determining whether a claim is directed to an abstract idea – “a basic building block of scientific or technological activity” or instead to a “tangible application” that serves a “new and useful end.”

= = = = =

Here is Claim 14 of the ‘003 patent:

A method for validating entry into a first transit system using a bankcard terminal, the method comprising:

downloading, from a processing system associated with a set of transit systems including the first transit system, a set of bankcard records comprising, for each bankcard record in the set, an identifier of a bankcard previously registered with the processing system, and wherein the set of bankcard records identifies bankcards from a plurality of issuers;

receiving, from a bankcard reader, bankcard data comprising data from a bankcard currently presented by a holder of the bankcard, wherein the bankcard comprises one of a credit card and a debit card;

determining an identifier based on at least part of the bankcard data from the currently presented bankcard;

determining whether the currently presented bankcard is contained in the set of bankcard records;

verifying the currently presented bankcard with a bankcard verification system, if the bankcard was not contained in the set of bankcard records; and

denying access, if the act of verifying the currently presented bankcard with the bankcard verification system results in a determination of an invalid bankcard.

Are Patents Monopolies? It Depends on the Relevant Century

Guest Post by Charles Duan of Public Knowledge

The question of whether patents are monopolies is one of ongoing debate. But an important aspect of that debate is the correct meaning of the word “monopoly.” A change in the word’s meaning over the last few centuries can explain at least some of the differing opinions on the question.

Today, the word “monopoly” refers to a concentration of economic market power in a single firm or entity. But up through the early 19th century, that was not the accepted definition. In that time period, a monopoly was a government grant of an exclusive right, more akin to a franchise or government contract.

COkeThe leading definition comes from the English jurist Sir Edward Coke. (The commonly used style “Lord Coke” is incorrect for reasons given in note 3 of this brief.) Coke was the author of the English Statute of Monopolies and expounded upon the law in his 1644 Institutes on the Laws of England as follows:

A monopoly is an Institution, or allowance by the King by his Grant, Commission, or otherwise to any person or persons, bodies politique, or corporate, of or for the sole buying, selling, making, working, or using of any thing, whereby any person or persons, bodies politique, or corporate, are sought to be restrained of any freedome, or liberty that they had before, or hindered in their lawfull trade.

This definition carried over to America. George Mason, for example, objected to the proposed federal Constitution on the grounds that “the congress may grant monopolies in trade and commerce”—an objection that makes sense only if a monopoly is something that “the congress may grant.”

Under Coke’s definition, patents for inventions are almost certainly monopolies, albeit not “odious” monopolies. Colonial statutes of Massachusetts and Connecticut provided that “No monopolies shall be granted or allowed amongst us, but of such new Inventions”; the exception for inventions suggests that invention patents would otherwise have been proscribed monopolies. English and American cases also treated patents as monopolies, under this older meaning. See, e.g.Turner v. Winter, 99 Eng. Rep. 1274, 1276 (K.B. 1787) (“[E]very patent is calculated to give a monopoly to the patentee . . . .”); Wilson v. Rousseau, 45 U.S. (4 How.) 646, 678, 681–83 (1846). And of particular importance, the Framers agreed: As Walterscheid explains in detail, both Madison and Jefferson referred to invention patents as monopolies, but disagreed on how problematic the monopolies would be in practice.

To be sure, there were some who argued that patents for inventions were not monopolies, on the grounds that, being directed to new inventions that did not exist previously, those patents do not “restrain[] of any freedome, or liberty that [the people] had before.” This view, reviewed by Giles Rich in 1942, is perhaps subject to debate on the merits, but does not appear to take serious hold until the later 19th century—about the time that antitrust law and the modern definition of “monopoly” would have arisen.

And, more importantly, this older ground of debate has little to do with the modern question of whether patents are antitrust-style monopolies, which deals in considerations of market power or economic concentration. The modern question is interesting and important as well, but the authorities discussing the historical definition shed little light on the modern question, and vice versa.

This change in the meaning of “monopoly” from government decree to economic condition is likely familiar to many, but I had not seen it so far in my reading. The most recognition of the distinction that I can find is a footnote to a Federal Circuit opinion (by Judge Rich) noting “that ‘monopoly’ is used in different senses in patent and antitrust law,” but he gives no further explanation. And relevant today, none of the briefs in the Oil States case so far explicitly note the historical definition of “monopoly,” and at least one brief cites the modern definition in a historical context.

Allowing Amendments in AIA Trials

Prolitec v. Scentair Tech (Fed. Cir. 2017) [ProlitecDecision]

In a one paragraph en banc order, the Federal Circuit has vacated the panel’s decision here and remanded to allow claim amendments. The court writes:

In light of this court’s en banc decision in Aqua Products, Inc. v. Matal, No. 2015-1177, 2017 WL 4399000 (Fed. Cir. Oct. 4, 2017) (en banc), the portions of the panel’s and Patent Trial and Appeal Board’s decisions in this case concerning Prolitec’s motion to amend are vacated, see Prolitec, Inc. v. ScentAir Techs., Inc., 807 F.3d 1353, 1362- 65 (Fed. Cir. 2015) (Majority Op. Part III); ScentAir Techs., Inc. v. Prolitec, Inc., IPR2013-00179, Paper No. 60, 2014 WL 2965704, at *15-17 (P.T.A.B. June 26, 2014) (Final Written Decision Part III), and this case is remanded to the Board for further proceedings consistent with Aqua.

Since this case raised the same issues as Aqua, the Federal Circuit had been sitting on the en banc petition for the past year awaiting outcome of that case.

I’ll note here that the decision by the Federal Circuit was unanimous.  Although many of the judges disagreed with the Aqua decision, they all now regard it as the law and binding precedent of the court.

IPR: Proving Patentability before Amendment

Do you get the Gist: Tracking Mail is an Abstract Idea

Secured Mail v. Universal Wilde (Fed. Cir. 2017)

The district court dismissed this case for failure to state a claim upon which relief can be granted – R.12(b)(6) – after finding that the claims of all seven asserted patents were ineligible under 35 U.S.C. 101.  On appeal, the Federal Circuit has affirmed.  U.S. Patent Nos. 7,814,032, 7,818,268, and 8,073,787 (“Intelligent Mail Barcode”); Nos. 8,260,629 and 8,429,093 (“QR Code”); and Nos. 8,910,860 and 9,105,002 (“Personalized URL”).

The patents all involve an mailer (i.e. package or envelope) with an identifier on the outside such as a barcode, QR code, or URL.  Once delivered, information is communicated (via computers) to the recipient about the contents and the sender.

As Patently-O readers understand, abstract ideas themselves are not patentable. Likewise a patent directed to an abstract idea is also unpatentable, unless the claims include an additional inventive concept that goes beyond the unpatentable idea to “transform the nature of the claim into a patent-eligible invention.” Alice.

The Alice two-step inquiry first asks whether the claims are directed to an abstract idea.  Here, the courts agreed that the claims “are directed to the abstract idea of communicating information about a [mailer] by use of a marking.”  Under Step Two, the appellate panel found that the claims merely recited “well known and conventional ways to allow generic communication between a sender and recipient using generic computer technology.”  Invalid.

I have included claim 1 of the ‘002 patent below (issued post-Alice):


1. A method for providing electronic data to a recipient of a mail object, comprising:

using an output device to affix a single set of mail ID data to said mail object, said single set of mail ID data including at least recipient data, said recipient data comprising a personalized network address associated with said recipient of said mail object;

submitting said mail object to a mail carrier for delivery to said recipient of said mail object;

receiving said recipient data from a reception device of said recipient via a network; and

providing by at least one processor said electronic data to said reception device via said network in response to receiving said recipient data, said electronic data comprising a sender’s web page that identifies said recipient of said mail object and includes data corresponding to a content of said mail object;

wherein said electronic data is configured to be displayed to said recipient via a web browser on a display of said reception device.

Note – the patentee has at least one additional patent issued in the family (US 9,390,394). However, that new patent does not appear to include any new inventive elements that go beyond the prior family members.

Read it and weep: [Federal Circuit Opinion]

I’ll note here that I believe the force behind the patentee is patent attorney Todd Fitzsimmons who also runs his own LA County patent firm.


Percent of US-Originated Patents That Claim Priority to a Provisional Application


For the chart above shows the percentage of US-originated utility patents that claim priority to one or more provisional filings, grouped by year of issuance.   You’ll note the steady upward trend – each year more US utility patents rely upon provisional applications for that effective filing date.

Note – to find US-originated utility patents I simply excluded utility patents that included a priority claim to a foreign application filing.

Oil States and SAS arguments set for November 27

Oral arguments for both Oil States Energy Services, LLC v. Greene’s Energy Group, LLC, No. 16-712 and SAS Institute Inc. v. Matal, No. 16-969, have been set for November 27, 2017.

Oil States challenges the AIA trial system at its most fundamental level — arguing that the Constitutional principles prohibits an administrative agency such as the USPTO from cancelling established property rights, such as those embodied by issued patents.

In SAS, the focus is on a narrow but important element of IPRs – whether the Board is “required to issue a final written decision as to every claim challenged by the petitioner.”  SAS is the IPR petitioner who challenged the claims of U.S. Patent No. 7,110,936 owned by ComplementSoft.  USPTO is also a respondent in the case (Matal) and is being represented by the US Solicitor General.

Both cases involve two private parties (patentee and challenger) as well as the government (USPTO) who intervened on appeal to support the PTAB’s decision-making.  In SAS, the PTO denied patentee ComplementSoft’s motion for divided arguments and at this point it is unclear to which Respondent will get to argue before the court.


Application Pendency


The chart below shows the pendency timing for issued US patents — looking particularly at the time from priority filing (including foreign priority claims) until issuance of the US patent.  To smooth the chart a bit, I excluded the 0.2% of patents with the longest patent term — these were all > 20 year terms and had the tendency of substantially skewing the picture. The chart below shows the long tail skew for patents issued thus far in 2017.


Impact of the 15-year Design Patent Term

If I were preparing to file a design patent around early May 2015, I might have held-off a bit on the filing to pass the May 13, 2015 threshold.  Design patents stemming from applications filed on or after that date have a 15-year patent term (calculated from patent issuance) as opposed to a 14-year term for those filed prior to the threshold date.

When I looked at the numbers, I was surprised to find that the extra year did not capture the hearts of design patent filers as I might have expected. (See Chart below.) Yes, filings on the 13th of May were above average and the preceding two days were below average, but the first look here that few filers acted to game that extra year.





Regeneron v. Merus: En Banc Chances Rise

by Dennis Crouch

Prof. Hricik and I have both previously written about the Regeneron inequitable conduct decision.  The following short summary comes from Hricik:

[The] district court … held that people substantively involved in prosecution of the ‘018 Patent knew of but-for material references, which were not disclosed.  Although the district court had intended to hold a separate trial on intent to deceive, instead it held that the patentee’s discovery abuses (and other apparent misconduct) warranted an adverse inference of intent to deceive.  The discovery abuses were related to the inequitable conduct issue.  Accordingly, it held the patent unenforceable for inequitable conduct.

The panel split (Judge Newman dissenting), but affirmed 2-1, holding that the withheld art was in fact but-for material and that the district court had not abused its discretion by, under regional circuit law, imposing an adverse inference (more on that, the key and troublesome issue, below).

In my prior essay, I wrote that “[t]he case may be a wake-up-call for some litigators who will read through the list of misconduct and see it as only business-as-usual.”

Inequitable Conduct and Regeneron Pharmaceuticals, Inc. v. Merus N.V.: Trouble Waiting to Happen

Important Inequitable Conduct Case: Hybrid Prosecution/Litigation Misconduct

En Banc Petition: The patentee has petitioned for en banc rehearing — directly challenging the holding:

Questions Presented: (1) whether a district court may find that the patentee had specific intent to deceive the Patent and Trademark Office (PTO) based on misconduct by trial counsel, without relying on any actual evidence of intent to deceive the PTO; and (2) whether a district court has authority to eliminate the patent right as a sanction for litigation misconduct.

The petitioner’s primary argument is based upon prior Federal Circuit precedent that expressly bar courts from holding a patent unenforceable due to litigation misconduct. Aptix Corp. v. Quickturn Design Sys., Inc., 269 F.3d 1369, 1375 (Fed. Cir. 2001).  Note here that the majority attempted to distinguish Aptix by explaining that the court’s remedy for litigation misconduct was simply to infer a particular factual finding (intent to deceive), which turned out to be critical since materiality was also proven.  The question is whether this thin distinguishing point should be allowed to undermine the bulwark against inequitable conduct findings created by Therasense.

In a procedural order today, the Federal Circuit has given the patent-challenger a few extra weeks to draft its responsive brief (Now Due Nov. 2).

A set of amicus briefs support the petition:

  • Chicago IPLAC: “Finding inequitable conduct by the patent prosecution lawyer as a penalty for the tactics of subsequent litigation counsel is a departure from past jurisprudence of such gravity that this Court should consider this issue en banc.”
  • Seven Chicago Attorneys: A group led by Kevin Noonan argue that the district court “violated procedural due process” by failing to provide an opportunity to be heard on the question of specific intent to deceive the USPTO — noting that due process concerns are raised when dealing with lawyer misconduct accusations.
  • Hrick & Mccabe: The two leading Patent-Law Professional Responsibility gurus argue, inter alia, that the decision particularly harms the reputation of the prosecuting attorneys and inventors and the irrebuttable conclusions prevents any defense by those individuals.
  • NYIPLA: This group points out a deficiency in the opinion – although the majority agreed with the inference-of-intent penalty, the court did not particularly spell out that the inference was “the single most reasonable inference able to be drawn from the evidence” as required by Therasense.
  • Washington Legal Foundation: “Inequitable conduct claims are likely to proliferate as a result of the panel decision.”
  • BIO: If the holding stands, court should make clear that there must be a strong nexus between the litigation-misconduct and the misconduct during patent prosecution.


Teaching Away: Only Counts if the Reference Teaches Away from All Embodiments of the Claim

Owens Corning v. Fast Felt Corp (Fed. Cir. 2017)

After being sued for infringing Fast Felt’s U.S. Patent No. 8,137,757, Owens Corning retaliated with a petition for inter partes review.  Although the PTO instituted the IPR, the PTAB eventually determined that the claims were not obvious — i.e., that “Owens Corning had failed to show obviousness of any of the challenged claims.”  On appeal, the Federal Circuit has reversed — holding that under a proper BRI claim construction, that the claims are obvious. (more…)

Are you Pat-Informed?  A new joint initiative of the research-based biopharmaceutical industry and WIPO wants you to be.

Guest post by Corey Salsberg, Vice President, Global Head IP Affairs, Novartis

The patent system depends on information to achieve its goal of promoting progress.  Published information defines the prior art.  Patents must disclose sufficient information to describe an invention and enable others to practice it.  And applications containing this information are published after 18 months, even if no patent issues.  Comparing patents to other intellectual property rights that also promote innovation—trade secrets, most notably—the system’s role in disseminating information is one of its most distinguishing features.

But “information is not knowledge,” as Einstein (and Frank Zappa) said.  Information isn’t anything if it isn’t accessible.  And it isn’t much use if those who can access it lack the ability or means to organize, process, and apply it to their work.

In the field of biopharmaceuticals, patent information is important to a wide variety of stakeholders.  Innovators use it to assess the state of the art, to secure freedom-to-operate, to seek out opportunities for in- or out-licensing, to identify partners for collaboration, or to learn from, improve, or advance the field of medicine.  Generics use it to plan product development, to design-around patents, craft strategies for patent challenges, and to help inform when and where they can proceed with generic product launches.  Both of these groups generally have access to patent lawyers and other professionals, and to private services that can “landscape” patents better than Bierstadt or Frederic Church.  But when it comes to something as important as patented medicines, there are other stakeholders that lack these resources, but who nevertheless would benefit from effective access to basic patent information.  These include health authorities, multilaterals, and a variety of NGOs engaged in the procurement of medicines, who need access to patent information to inform their decisions about how, when, where and from whom to obtain life-saving products for their constituents.  To be sure, granted patents, pending applications (at 18 months), and the information they contain are all public materials that are widely available through national patent offices, international organizations, and public search engines like Google Patents.  But accessing this information and processing it in a way that connects it to medicines can be challenging, burdensome, or for some even daunting.

To help take up this challenge, over the last couple of years the research-based pharmaceutical industry has been hard at work developing an industry-based platform that aims to make it easier for global drug procurement agencies to access a basic body of patent information that connects issued patents to marketed medicines.  Now under the joint sponsorship of the World Intellectual Property Organization (WIPO) and the International Federation of Pharmaceutical Manufacturers and Associations (IFPMA), the platform, known as the Patent Information Initiative for Medicines, or “Pat-INFORMED,” is a voluntary endeavor comprised of a public database of patent information, and a platform for facilitating communication between procurement agencies and patent owners.  The database portion of Pat-INFORMED, hosted by WIPO, is modelled on the US “Orange Book,” and will provide the public with a searchable online gateway that, on a global basis, correlates granted patents to a company’s marketed medicines.  Information for the database will be supplied directly by participating companies like Novartis, and will be updated on a periodic basis.  Meanwhile, the communication platform will provide a channel for follow-on inquiries, to make it easier for procurement agencies to seek more detailed public patent information about a particular medicine.

To date, twenty leading global research-based biopharmaceutical companies, including founders Novartis, GSK, Pfizer and Merck KGaA, have committed to participate, and we anticipate more.  The initiative was formally announced last week at the WIPO General Assembly in Geneva, and is expected to be operational by mid-2018, with an initial wave of data for all small molecule medicines in the areas of oncology; hepatitis C, cardiovascular, HIV, diabetes, and respiratory disease, as well as any other products on the World Health Organization’s Essential Medicines List.  In a second phase, Pat-INFORMED will expand to all therapeutic areas and explore the inclusion of complex therapeutics.

As a founding member, we at Novartis view Pat-INFORMED as a great illustration of what can be accomplished when the private sector and multilateral organizations work together to improve the status quo and craft solutions to society’s challenges.

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PatentlyO Bits and Bytes by Anthony McCain

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The Power Of The PTAB: The New Authority In Patent Law

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The Need for Legislative Reform: The Berkeley Section 101 Workshop

Assessing the Need for Legislative Reform of Patent Eligibility in the Mayo/Alice Era: Final Report of the Berkeley Center for Law & Technology Section 101 Workshop [Read the Full Report]

By Jeffrey A. Lefstin, Peter S. Menell, and David O. Taylor

CurrentStateOver the past five years, the Supreme Court has embarked upon a drastic and far-reaching experiment in patent eligibility standards. Since the founding era, the nation’s patent statutes have afforded patent protection to technological innovations and practical applications of scientific discoveries. However, the Supreme Court’s 2012 decision in Mayo Collaborative Services v. Prometheus Laboratories imposed a new limitation on the scope of the patent system: that a useful application of a scientific discovery is ineligible for patent protection unless the inventor also claims an “inventive” application of the discovery. The following year, the Court ruled that discoveries of the location and sequence of DNA compositions that are useful in diagnosing diseases are ineligible for patent protection. And in its 2014 Alice Corp. v. CLS Bank International decision, the Court ruled that software-related claims are ineligible for patent protection unless the abstract ideas or mathematical formulas disclosed are inventively applied.

These decisions sent shock waves through the research, technology, business, and patent communities. Medical diagnostics companies experienced a dramatic narrowing of eligibility for core scientific discoveries. Reactions within the information technology community have been mixed, with some applauding the tightening of patent eligibility standards on software claims and the opportunity to seek early dismissal of lawsuits, particularly those filed by non-practicing entities, and others criticizing the shift in patent eligibility. Several members of the Federal Circuit bluntly criticized the Supreme Court’s shift in patent eligibility standards on jurisprudential and policy grounds. Additionally, the Patent Office has struggled to apply the Supreme Court’s new and rapidly evolving standards.

As this sea change unfolded, many patent practitioners, scholars, PTO officials, and jurists hoped that the Supreme Court would provide fuller and clearer guidance on patent eligibility standards. In the aftermath of the Supreme Court’s rejection of the certiorari petition in Sequenom, Inc. v. Ariosa Diagnostics, Inc.—a case that many Federal Circuit jurists, scholars, and practitioners thought to be an ideal vehicle for clarifying patent eligibility standards, or for reexamining Mayo—we began planning a roundtable discussion among leading industry representatives, practitioners, scholars, policymakers, and retired jurists to explore the patent eligibility landscape and possible legislative solutions to the problems that have emerged.

We sought participants with significant knowledge and experience in the key industries affected by the shift in patent eligibility standards—principally the bioscience and software/information technology fields. To promote candid discussion among these participants, we established the following ground rules: (1) Participants would be free to use the information received, but neither the identity nor the affiliation of the speaker(s) could be revealed; (2) We would prepare a report describing the results of the workshop—and that report would not attribute statements or views to individuals (other than the co-convenors); and (3) The report would list the participants and be made available to the public through BCLT.

Our Report summarizes the presentations and discussions exploring the legal background and effects bearing on legislative action. Part I contains a lightly edited version of the background document circulated to participants prior to the workshop. Part II summarizes the four workshop sessions leading up to the discussion of legislative proposals: (A) legal background; (B) effects on research and development (R&D); (C) effects on patent prosecution; and (D) effects on patent assertion, litigation, and case management. Part III summarizes the discussion of legislative proposals and sets forth a framework for seeking compromise on reform legislation.

As explicated in the Report, a consensus emerged that the current state of patent eligibility jurisprudence is indefensible as a matter of legal principle and is seriously undercutting incentives in sectors of the biotechnology industry. The workshop revealed broad agreement that the Supreme Court’s patent eligibility jurisprudence has diverged from the Patent Act’s text and legislative history, as well as long-standing jurisprudential standards. The participants also agreed that the Supreme Court’s ostensible rationale for its § 101 jurisprudence lacks a sound foundation, and that its formulation of the inventive application standard is grounded on a profound misapprehension of key historical precedents.

Furthermore, the workshop revealed a consensus that it is unlikely that the Supreme Court will reconsider the patent-eligibility issue in the foreseeable future. Conferees also doubted that the Federal Circuit will confront the core concerns surrounding patent eligibility. The USPTO has tended to be reactive only, or has adopted what some conferees viewed as unduly rigid interpretations of the case law.

Thus, legislative reform will be necessary to effect significant change in patent eligibility standards. Participants largely agreed that legislation would be necessary to address the problems that have emerged for bioscience researchers. Nonetheless, there was disagreement on the need for legislative reform of patentable subject matter relating to software and information technology. Moreover, there was a lack of agreement on the best solution to problems, and none of the current legislative proposals garnered consensus.

While nearly all of the conferees recognized that this state of the law poses serious concerns for bioscience research and development, there existed substantial reluctance on the part of some software industry representatives about pursuing legislative reform that could increase patent assertion activity and raise defense risks and costs in the software field. Some participants also thought that the courts should be given time to develop an appropriate screen for the eligibility of software patents and saw some progress in the developing case law.

This suggests to the workshop convenors and authors of the report (the three of us) that the most fruitful approach to reform legislation would restore the traditional patent eligibility standard at least for bioscience advances—that is, establishing that conventional applications of scientific discoveries are eligible for patent protection—while addressing concerns about cumulative creativity and abusive patent assertion. Such additional provisions could include the following: (1) an expanded experimental use exception at least for doctors and medical researchers; (2) exclusion of non-technological subject matter, notably pure business methods (a technological arts test); (3) a mechanism to encourage courts to consider 12(b)(6) motions directed to § 112 issues (as opposed to § 101 issues) early in patent case management; (4) fee-shifting aimed at discouraging nuisance value patent lawsuits; (5) higher thresholds for enhanced damages in the software field; and/or (6) shorter duration for algorithm-based inventions—i.e., where the point of non-obviousness is a computer-implemented algorithm. We further note that compromise legislation might also address distinctive issues relating to affected industries that lie outside of the patent field, such as reimbursement policies relating to medical diagnostics.

Jeffrey A. Lefstin is Professor of Law and Associate Academic Dean at the University of California Hastings College of Law. Peter S. Menell is Koret Professor of Law and Co-director of the Berkeley Center for Law & Technology at the University of California at Berkeley School of Law. David O. Taylor is Associate Professor of Law and Co-Director of the Tsai Center for Law, Science and Innovation at the SMU Dedman School of Law. The full report is available at: https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3050093

Patent Attorney DIY: ModustrialMaker

I really enjoy Patent Attorney Mike Clifford’s high quality YouTube channel modustrialmaker – highlighting his “modern industrial DIY projects.” The channel now has more than 30,000 subscribers and 1 million views.

The video below shows his latest work – a white concrete table with a live-edge maple inlay.  After watching the video, I do feel enabled to make and use the same without undue experimentation.

Great work!


Patent Jobs and the Myth of the Employment Hypothesis

Prof. Ken Port along with Lucas Hjelle and Molly Rose Littman have an interesting new draft article titled: Patent Jobs and the Myth of the Employment Hypothesis. Although it is not as easy as it used to be, the article explains that:

[F]or one easily identifiable group, the legal job market is strong and growing: job prospects for Mechanical, Electrical, Chemical, and Computer Engineers (hereinafter, “MECC Engineers”) are quite positive. However, despite these positive job prospects, the number of MECC Engineers coming to law school is at near-record lows. The decrease in the number of MECC Engineers enrolled in law schools far exceeds the decrease in non-patent-bar-eligible law students.

The article argues that “this fact will have a deleterious effect on the United States economy.”


No Vaccines Before the Next Zika Outbreak?: A Case for IP Preparedness

The following is a guest post from Ana Santos Rutschman, the Jaharis Faculty Fellow in Health Law and IP at DePaul.  I invited Prof Santos Rutschman to write about her work on Vaccine Preparedness and IP. Her new article titled IP Preparedness for Outbreak Diseases is forthcoming in UCLA Law Review. – DC.

In September 2017, the development of the US Army’s Zika vaccine—once a leading candidate in the Zika vaccine race—came to a halt after almost all federal funding for Zika R&D was cut short. This happened less than a year from the end of the global public health emergency. Funding will now resume only if the Zika epidemic re-emerges.

That R&D on diseases like Zika is not attractive to pharmaceutical companies is a well-known phenomenon. It usually takes a major public health crisis to shake up the playing field. With Ebola, for instance, funding for R&D increased 258% in 2015. The Zika outbreak had the same effect, and so will future outbreaks of similar diseases.

But funding spikes triggered by outbreaks are short-lived. They fuel an accelerated R&D race, with multiple pharmaceutical companies and research institutions jumping in. As soon as the fear factor begins to decline, so does the support for R&D. The looming possibility of another outbreak guarantees that some drug development will still occur, but only at a residual level.

The relationship between outbreaks and R&D funding has long been a feature of our vaccine development cycles—from diphtheria and polio in the 1920s and 1950s to Ebola and Zika more recently. But Zika is teaching us something new about the role of IP in the development of vaccines through outbreak-spiked funding: we need to look at IP well beyond the realm of patents operating as incentives to prospective R&D players. Transfers of IP rights between R&D entities, if poorly designed, can hinder the development and the availability of new vaccines (and of drugs in general).

We are seeing the consequences of such a bad licensing deal right now. The Army’s Zika vaccine was once considered a top candidate in the Zika vaccine race. Its initial development was supported during the early stages of the outbreak by the National Institute of Allergy and Infectious Diseases (NIAID) and the Biomedical Advanced Research and Development Authority (BARDA), an office under the umbrella of the Department of Health and Human Services. In 2016, the Army brought in a private-sector company, Sanofi, to help with the clinical development of the vaccine. Shortly thereafter BARDA awarded the company $43.2 million for phase II clinical trials. Then, in late 2016, the Army announced that it intended to license the vaccine to Sanofi on an exclusive basis.

Two provisional patents covered the Army’s vaccine—one encompassing methods of production, and another encompassing methods of preparation. Having been developed through government funding, the vaccine is subject to §207-§209 of the Patent Act, which regulate the transfer of federally owned inventions. §207 allows an agency to grant both exclusive and non-exclusive licenses. §209, however, establishes that an agency can only grant an exclusive license if exclusivity is “a reasonable and necessary incentive” to bring the innovation to the public. The fact that Sanofi had already received a substantial amount of government money to develop the vaccine makes it doubtful that exclusivity was needed in this case.

Even more troubling was the fact that, when prompted to disclose the main terms of the license, the Army indicated that no pricing provisions had been agreed upon with Sanofi. Exclusive licenses, per §209, must “promote the invention’s utilization by the public.” The lack of an affordable pricing clause, or of tiered pricing categories, seems to be at odds with this goal. Sanofi, incidentally, has a record of drug overcharging, having recently paid $19.8 million to resolve claims brought by the Department of Veterans Affairs with regard to two different contracts.

Now that federal funding for Zika R&D is over, the problems posed by the existence of a sole licensee become more acute. Even with last year’s $43.2 million boost in federal funding, Sanofi has chosen to stop all work on the vaccine. Meanwhile, several competitors across the globe keep developing other candidates. But the damage is done. All the outbreak-induced R&D at the Army is put to simmer and won’t likely be rekindled until there is a new outbreak (at which point, for all we know, the Zika virus might have mutated and the Army’s vaccine technology rendered ineffective). All the money poured into this project—including the portion of federal funding that subsidized Sanofi’s R&D—will yield no vaccine to help prevent the next outbreak.

Over the past few years, I have been studying IP inefficiencies in the context of outbreaks and outbreak-spiked vaccine R&D. The case of the Zika vaccine is not unique, but rather emblematic of the current lack of IP preparedness to support the development of drugs for outbreak diseases. Much in the same way that health systems struggle to cope with outbreaks, our IP regime works poorly when it comes to making the most out of the R&D funding brought about by an outbreak. As a consequence, we will miss out on vaccines and life-saving drugs before other public health crises arise.

Now that we are seemingly in an inter-outbreak period, it would be timely to address these problems. Here are a few simple solutions to the licensing problem: we can create a limited list of diseases that are ineligible for §207 exclusivity (with neglected tropical diseases coming immediately to mind); we should amend the disclosure requirements in §209 and have agencies disclose all terms of proposed licenses involving federally funded vaccines; and we should make the incorporation of pricing provisions mandatory in §209 exclusive licenses (at least for outbreak-related technologies).

International Commercial Arbitration of Patent Cases

One of the more powerful new petitions for writ of certiorari is the case of Dow AgroSciences, LLC v. Bayer CropScience AG, Docket No. 17-372.  Although the question presented – focusing on arbitration of patent cases – does not strike to the core of patent law doctrine, it is one of the more likely to be granted certiorari.

The petition begins: International arbitration of federal statutory claims poses a threat to U.S. public policy that can be mitigated only by independent judicial review. [DowBayerPetition].

The case here involves a set of crops genetically modified to be resistant to the herbicide glufosinate.  Some of the crops include additional genetically modified resistance in a “molecular stack” with additional herbicide resistant genes such as aad-12 (2,4-D herbicide tolerance) and dmmg.

Bayer sued Dow for infringement, but a prior agreement forced to the case to arbitration and a $455 arbitration award for Bayer that was affirmed by the Federal Circuit.

Affirming Arbitration Award

Now, Dow has petitioned the Supreme Court with the following question presented:

The United Nations Convention on the Recognition and Enforcement of Foreign Arbitral Awards (the “New York Convention”), as incorporated into Chapter 2 of the Federal Arbitration Act (“FAA”), 9 U.S.C. 201 et seq., authorizes a U.S. court to decline recognition and enforcement of an arbitral award that “would be contrary to the public policy” of the United States.

Here, recognition and enforcement of a $455 million arbitral award based on duplicative and expired patents is contrary to the U.S. public policy that patents are granted only for “limited Times.” But the Federal Circuit held that award enforceable, ruling that a court may not entertain a public-policy challenge in the absence of a prior judicial decision on nearly identical facts.

The question presented is:

Whether a federal court must independently determine whether recognition and enforcement of an arbitral award under the New York Convention would be contrary to the public policy of the United States.

Dow AgroSciences, LLC v. Bayer CropScience AG, 2017 WL 4022790.

Unlike many areas of law, the Patent Act includes a particular provision recognizing voluntary arbitration of patent dispute. 35 U.S.C. 294. The provision indicates that the Federal Arbitration Act (Title 9) should be followed “to the extent such title is not inconsistent with this section.”  The statute particularly provides that the ordinary defenses to patent infringement “shall be considered by the arbitrator if raised.”