November 2017

Where is that Anticipation Rejection? Isn’t it Obvious!

by Dennis Crouch

The USPTO released a new data set of office action rejections, including an action-by-action breakdown of the basis for each rejection and the prior art relied upon. The first chart below shows the frequency that obviousness and anticipation rejections are found in office actions.  The shift since 2009 is quite interesting — obviousness rejections are up significantly following KSR while anticipation rejections are way down.

NoveltyRejections79% of what: Note here that the data set only includes office actions that contain at least one rejection.  Thus, for 2017 we could say that, 79% of actions with a rejection include an obviousness rejection.  A second big caveat is that the data set only includes applications that have been laid-open; and they had OCR scanning or other data problems with about 10% of the rejections and those have been excluded from the data set.

[Dataset][USPTO Whitepaper]

Alice and TRIPS Compliance

I asked Prof. Daniel H. Brean for this guest post that stems from his new paper on international patent law issues titled Business Methods, Technology, and Discrimination.  Brean is an assistant professor at Akron School of Law and Of Counsel at The Webb Law Firm. – DC

by Daniel H. Brean

The United States is obligated under the Trade-Related Aspects of Intellectual Property Rights (TRIPS) treaty to make patent rights available and enjoyable without discrimination as to the “field of technology” of the invention.[i]  No specific areas of technology may be singled out for unjustified special treatment.

In a new paper (Business Methods, Technology, and Discrimination, 2018 Mich. St. L. Rev. __ (forthcoming), available at, I argue that the United States is doing just that with respect to computer-implemented business methods.  Doctrinally, such methods are subject to an especially high bar for patent eligibility.  Statutorily, patents on such methods may be challenged in invalidity proceedings that are exclusively available for so-called “covered business method patents.”  The law seems to reflect a skepticism that computer-implemented business methods should be broadly eligible for patenting, as well as a distaste for the aggressive enforcement of many such patents by patent assertion entities.  While these may be real problems and serious policy challenges, discrimination by technological field is not a TRIPS-compliant solution.

Discrimination can be de jure—where the law facially discriminates—or de facto.   De facto discrimination can be shown by evidence of the discriminatory effects of the law, as well as by showing that a discriminatory purpose can be inferred from the objective characteristics of the law.

From a doctrinal standpoint, Alice v. CLS Bank[ii] appears to have caused at least de facto discrimination against what the Court considered “mere” computerization of business methods. Though rooted in Mayo v. Prometheus’s[iii] field-neutral analysis, Alice fashioned a new rule against “generic computer implementation” of business practices.  The result is that the vast majority of challenged patents in the computer-implemented business method space have been rendered ineligible in district courts, in the Federal Circuit, and in the PTAB.  For applications still in prosecution, Alice rejections are disproportionately affecting the technology center that includes business method art units, with most rejections being applied in the e-commerce art units.

The upshot of the post-Alice landscape seems to be that improving computer technology per se is patent eligible, as is using computers to solve industrial or computer-centric problems, but using computer technology to facilitate a business process is not. When Alice purports to exclude generic computerization from patenting, it essentially draws a line between using technology and creating technology.  Alice calls the former non-technology when what it really means is non-inventive, which is beside the point. Many have criticized Alice for how the framework’s “search for an inventive concept” improperly blurs the line between § 101 and §§ 102-103, flying in the face of Diamond v. Diehr’s proclamation that the novelty of the components used or steps performed in a method should have “no relevance” to a § 101 determination.[iv]  TRIPS art. 27.1 itself expressly distinguishes the idea of being within a “field of technology” from the notion that patentable inventions must also be “new” and “involve an inventive step.” For Alice to exclude almost all computerized business methods from the patent system for these reasons, but on § 101 grounds, lacks coherence and appears at least de facto discriminatory.

By contrast, the Covered Business Method Review (“CBM”) program presents a fairly clear case of de jure discrimination. Alongside the creation of two other technology-neutral proceedings (inter partes review and post-grant reveiew), Congress created the CBM program, limited it to “covered business method patents,” and allowed for challenges on § 101 grounds to be made.[v]  Although Congress purported to exclude “technological inventions” from the program, the Federal Circuit and the USPTO have closely tied the reach of the CBM program to Alice, such that CBM patents are now largely coextensive with the computerized business methods that the courts, following Alice, deem ineligible.[vi]  As expected, patent claims that reach a final judgment in the CBM program are being invalidated at very high rates, especially on § 101 grounds. On top of that, the CBM program even includes two provisions that uniquely disadvantage the owners of CBM patents: (1) a narrow estoppel provision that gives petitioners broader abilities to challenge CBM patents in both the PTAB and district court;[vii] and (2) a rare right for interlocutory appeal of any decision denying a motion to stay parallel litigation—with even rarer de novo appellate review.[viii]

To be clear, not all differential treatment rises to the level of TRIPS-violating discrimination.  In the pharmaceutical context, for example, the inventions are subject to regulations and market restrictions that can justify some special accommodations.  A member country’s patent laws may properly extend the term of a drug patent to offset a lengthy regulatory review period, or may properly allow generic drug makers to begin seeking their own regulatory approval during the patent term.[ix]  But the United States’ handling of computer-implemented business methods seems to go beyond the kind of justifiable differential treatment that TRIPS tolerates. For computer-implemented business methods, the legal differences in treatment discussed above correspond to nothing unique about the subject matter, but arguably reflect broader problems in the United States patent system concerning patent examination quality and litigation abuse.

None of this discrimination is in violation of the treaty, of course, unless computer-implemented business methods are a “field of technology” under art. 27.1.  Congress and the USPTO have ostensibly assumed not, but there are several good reasons to interpret TRIPS as deeming such methods technological.  First, most definitions of “technology” encompass not only creation but also use of technological tools—a view that is consistent with Diehr’s proscription against novelty forming a part of the § 101 analysis.  Second, although business methods per se were not clearly patent eligible in the U.S. until 1998[x] (three years after TRIPS went into effect), many computerized processes had long been eligible for U.S. patent protection when TRIPS was negotiated.  Third, the U.S. has on ten separate occasions questioned, for TRIPS compliance purposes, whether the laws of other countries provided adequate protection for software and business methods.[xi]  Fourth, though the U.S. has been an outlier among TRIPS members in patenting non-computerized business methods, it is not alone.[xii]  Fifth, patenting computer-implemented business methods not only accords with the broad “useful arts” scope of patent systems historically,[xiii] but also reflects modern trends applying more scientific and technological rigor to business and financial practices.[xiv]

The fact that at least some computer-implemented business methods are patent eligible in the U.S. itself suggests that the field is technological, even if many methods in the field ultimately fall short on inventive merit.  Eligibility at the threshold is a long way from patentability, and what Alice would view as mere computerization of a well-known business process will rarely be inventive enough to be patented as a novel, nonobvious process.  But arranging and employing computers and software for practical business purposes is nonetheless a technological endeavor that brings such methods under TRIPS’ protections.

As the United States considers more changes to the availability and enjoyment of patent rights, it should end this discrimination in favor of technology-neutral practices or reforms.[xv] Otherwise, it sets a precedent of singling out disfavored technologies for disadvantageous treatment on a country-by-country basis, which could undermine the international patent law harmony that TRIPS is intended to facilitate.

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[i] TRIPS art. 27.1 (“[P]atents shall be available for any inventions, whether products or processes, in all fields of technology, provided that they are new, involve an inventive step and are capable of industrial application. … [P]atents shall be available and patent rights enjoyable without discrimination as to the place of invention, the field of technology and whether products are imported or locally produced.”).

[ii] Alice Corp. Pty. Ltd. v. CLS Bank Int’l, 134 S. Ct. 2347 (2014).

[iii] Mayo Collaborative Servs. v. Prometheus Labs., Inc., 132 S. Ct. 1289 (2012).

[iv] Diamond v. Diehr, 450 U.S. 175, 187-88 (1981) (“The ‘novelty’ of any element or steps in a process, or even of the process itself, is of no relevance in determining whether the subject matter of a claim falls within the § 101 categories of possibly patentable subject matter. … It is inappropriate to dissect the claims into old and new elements and then to ignore the presence of the old elements in the analysis. This is particularly true in a process claim because a new combination of steps in a process may be patentable even though all the constituents of the combination were well known and in common use before the combination was made.”); cf. KSR Int’l Co. v. Teleflex, Inc., 550 U.S. 398, 418-19 (2007) (“[I]nventions in most, if not all, instances rely upon building blocks long since uncovered, and claimed discoveries almost of necessity will be combinations of what, in some sense, is already known.”).

[v] AIA § 18(d)(1) (defining CBM patent generally as “a patent that claims a method or corresponding apparatus for performing data processing or other operations used in the practice, administration, or management of a financial product or service”).

[vi] See Versata Dev. Group, Inc. v. SAP Am., Inc., 793 F.3d 1306, 1327 (Fed. Cir. 2015) (“[E]ven if the invention required the use of a computer, the claim did not constitute a technological invention. As we are now instructed, the presence of a general purpose computer to facilitate operations through uninventive steps does not change the fundamental character of an invention.”) (citing Alice); Office Patent Trial Practice Guide, 77 Fed. Reg. 48756, 48763-64 (Aug. 14, 2012) (explaining that inventions are not shown to be “technological” by: (1) the “recitation of known technologies”; (2) “reciting the use of known prior art technology”; or (3) “combining prior art structures to achieve the normal, expected, or predictable result of that combination.”).

[vii] Compare AIA § 18(a)(1)(D) (applying estoppel only to arguments actually “raised” by the petitioner) with 35 U.S.C. §§ 315(e)(2), 325(e)(2) (applying estoppel to all arguments that the petitioner “raised or reasonably could have raised”).

[viii] AIA § 18(b)(2).

[ix] See Report of WTO Dispute Settlement Panel, Canada-Patent Protection of Pharmaceutical Products, WT/DS114/R (March 17, 2000), at 170-71 (“Article 27 does not prohibit bona fide exceptions to deal with problems that may exist only in certain product areas. … [Rather, Article 27 is concerned with] the unjustified imposition of differentially disadvantageous treatment.”); see also 35 U.S.C. § 156(c) (extending patent term to offset regulatory review); 35 U.S.C. § 271(e) (immunizing certain regulatory-approval activities from infringement liability).

[x] State Street Bank and Trust Company v. Signature Financial Group, Inc., 149 F.3d 1368 (Fed. Cir. 1998) (holding patent eligible a business process involving share price calculations because it “produces a useful, concrete and tangible result”).

[xi] Stefania Fusco, TRIPS Non-Discrimination Principle: Are Alice and Bilski Really the End of NPEs?, 24 Tex. Intell. Prop. L.J. 131, 147, 150 (2016) (concluding that “the U.S. has consistently interpreted of Article 27(1) TRIPS as requiring WTO countries to provide protection to both software and business methods”).

[xii] See John R. Allison & Emerson H. Tiller, The Business Method Patent Myth, 18 Berkeley Tech. L.J. 987, 1022 (2003) (“[M]ost other countries do not recognize patents on business methods.”); Rajnish Kumar Rai & Srinath Jagannathan, Do Business Method Patents Encourage Innovation?, 2012 B.C. Intell. Prop. & Tech. F. 1, 5-6 (2012) (“Japan, Australia, Singapore and possibly Korea generally appear to follow the U.S., whereas the European Union (‘EU’), the United Kingdom (‘UK’), Canada and India are more conservative on the issue and do not favor BMPs.”).

[xiii] See generally Sean M. O’Connor, Finding the Lost “Art” of the Patent System, 2015 U. Ill. L. Rev. 1397, 1476 (2015) (explaining that “useful arts,” in its proper historical context, would include “any and all arts that involve the use of natural materials or forces for practical ends” that can be objectively measured, as opposed to measured only by taste or sentiment).

[xiv] John F. Duffy, Why Business Method Patents?, 63 Stan. L. Rev. 1247, 1263 (2011) (explaining that “[a]s early as the mid-twentieth century, engineers and physical scientists were already migrating into the academic realms of business, economics, and management”).

[xv] For example, avoiding the § 101 question and resolving such issues on other patentability grounds. See Dennis Crouch & Robert Merges, Operating Efficiently Post-Bilski by Ordering Patent Doctrine Decision-Making, 25 Berk. Tech. L. J. 1673, 1686-87 (2010) (describing studies showing that 84-94% of claims rejected on Section 101 grounds in the USPTO are also rejected on other grounds, which “show[s] an exceptionally high rate of doctrinal overlap and lends credence to the idea that, by initially avoiding subject-matter-eligibility questions, many of those potential issues will be avoided”).

PPAC Annual Report

PPACReport2017The Patent Public Advisory Committee (PPAC) has released its 2017 annual report with a set of important recommendations for the Director:

  1. USPTO should remain independent of Department of Commerce, including control of HR and IT;
  2. USPTO should be given further fee-setting authority beyond the AIA’s 2018 sunset date;
  3. USPTO should continue to modernize its legacy IT systems
  4. Congressional legislation should support the Telework and Hoteling program at the PTO;
  5. PTAB should “remain vigilant in ensuring fair and transparent processes and proceedings in order to render wellgrounded decisions;”
  6. Current mid-level rank of USPTO IP Attachés should be increased by one level, which would give USPTO IP Attachés greater access to senior host government officials and Ambassadors.
  7. Regarding Section 101: the USPTO should (a) continue to update the stakeholder community and examiner corps on recent jurisprudence and where appropriate, continue to issue memoranda that describes the relevant court decision; (b) finalize the MPEP updates in Section 2106 directed to “Patent Eligible Subject Matter,” so the stakeholder community has one central repository on the USPTO’s website to receive the latest updates; and (c) should continue stakeholder outreach programs and workshops on Section 101 developments due to the critical nature of this area.

In addition to these recommendations, the PPAC also offered several Kudos to the PTO for:

  1. Reducing first-action pendency average from 28 months (2011) to 16 months (2017);
  2. Reducing overall total application pendency average from 34 months (2011) to 24 months (2017);
  3. Improvement in its quality initiatives, including the Quality Metrics Program, Clarity and Correctness Data Capture Program and the Clarity of the Record Pilot as well as in its on-going efforts to enhance patent quality.


Federal Circuit: Unquantified Infringement == No Infringement

Life Techs. Corp. v. Promega Corp. (Fed. Cir. 2017)

Normally, patent infringement liability stems from an infringer using all-elements of a claimed invention.  However, a quirky provision found in 35 U.S.C. 271(f)(1) creates liability for exporting some components of a patented invention.  Particularly, the statute requires export/supply of “a substantial portion of the components.”  In its 2017 Life Tech decision, the Supreme Court interpreted this provision — holding that: export of a single component of a multicomponent invention could not meet the “substantial portion” threshold requirement. Namely, one component cannot be a “substantial portion of the components.”

On remand, the Federal Circuit has issued a new opinion in the case — this time affirming the district court judgment that patentee (Promega) failed to prove infringement under 271(f)(1) as required by the Supreme Court decision.

One problem with this analysis though – according to Promega is that – for some of the infringing kits, “it was undisputed at trial that LifeTech supplied more than one component. . . Taq polymerase and primer pairs.”   In a footnote the Federal Circuit dismissed this argument – finding that Promega had not proven particular damages regarding these 2-component exports and thus had no right to collect any damages for the infringement.

US Sales: The decision similarly affirmed of the district court’s JNOV that “that Promega failed to prove its infringement case under 35 U.S.C. § 271(a).”  A major problem with this conclusion is – as the court explains: “that the record contains evidence of admitted infringement by Life under § 271(a).” In its original decision in the case, the Federal Circuit wrote explained:

At trial, LifeTech admitted that some of the sales of its accused genetic testing kits in the United States were “technically an infringement” of Promega’s patents.LifeTech also admitted that Promega was “entitled to be compensated for [LifeTech’s] infringement.” Promega presented evidence to the jury showing sales of LifeTech’s accused kits in the United States. Based on LifeTech’s own admissions, which are supported by evidence in the record, we conclude that LifeTech’s kits made, used, or sold in the United States infringe the Tautz patent under 35 U.S.C. § 271(a).

On remand here, the Federal Circuit has taken a different position — by noting that the exact quantity of US infringement is unknown: “some unquantified number of Life’s kits infringed under § 271(a).”

At trial, Promega had presented world-wide sales numbers – that included both infringing USA kits and the UK kits (component-export elements) in a way that both the district court and now the appellate panel argue waived its right to obtain particularized damages under 271(a) – and as such “any reinstatement of our prior decision on § 271(a) infringement would be moot.”

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Oil States: Engaging with History, Private Property, and the Privy Council

I invited Prof. Dmitry Karshtedt to provide this discussion of today’s oral arguments in Oil States. Note, Prof. Karshtedt  filed an amicus brief in the case supporting the petitioner.  Read the transcript here. – DC

By Prof. Dmitry Karshtedt

This morning’s argument in Oil States v. Greene’s Energy saw a highly engaged bench. The wide-ranging argument covered everything from the expected topics of the public-private right divide and the significance of the Privy Council’s adjudications of patent rights to perhaps more surprising angles involving government takings and even disputes between travelers and airlines over lost bags.

Some of the main themes of the argument:

  • Does the PTAB in the IPR exercise judicial power at all?
  • How, if at all, are IPRs are different from reexams?
  • What about the patentees’ settled expectations? Do they justify some form of heightened judicial review before an issued patent in existence for some time can be taken away?
  • Are Due Process issues fundamentally tied to the Article III question raised in this case, or should “power” and “process” be distinguished?
  • Can the PTAB adjudicate infringement?
  • Do Federal Circuit appeals represent constitutionally adequate Article III supervision of the PTAB?

Allyson Ho, Oil States’ counsel, lead with the argument that Inter Partes Reviews (IPRs) embody an unconstitutional transfer of judicial power to decide claims of private right between private parties without party consent or adequate Article III supervision. Justice Ginsburg asked almost immediately whether IPRs merely allow for correction of the PTO’s own errors. Ms. Ho then made an important strategic decision in conceding that, while ex parte and inter partes reexams (though a closer case) present permissible, examination-like error-correcting proceedings, IPRs differ from those earlier mechanisms because they more closely resemble an adjudication of a private-party dispute in which the PTO acts as an arbiter. Justice Kagan and Chief Justice Roberts questioned whether there is really a salient difference between IPRs and reexaminations, as the latter too allow for a process by which a third party informs the PTO that particular prior art may render an issued patent unpatentable after all. Ms. Ho, in response, stressed the high degree of third party involvement and the trial-like nature of the proceedings. In addition, she argued that in case of settlement, the PTAB generally does not complete the IPR.

The argument then moved toward the role of Congress in creating the patent right. Surely, suggested Justice Kennedy, Congress can validly limit the patent term and perhaps even shorten the patent term after issuance, so why not IPR? The response appeared to be that a grant of a patent cannot be conditioned on giving up structural rights, harkening to the discussion of the unconstitutional conditions doctrine in the petitioner’s reply brief. Even though Congress can create rights, there is a constitutional limits on how those rights can be restricted. The Chief Justice then mentioned the law of takings, suggesting that the government can take actions that devalue the right, with the Fifth Amendment sometimes entitling the aggrieved rights-holder to compensation.

The discussion then moved on to topics that have been particularly well-aired in party and amicus briefs. First, Justice Ginsburg continued to press the error correction point, pointing out that IPRs are relatively narrow in scope in that only issues of novelty and non-obviousness with specific types of prior art can be resolved in those proceedings. Ms. Ho responded that, be that as it may, 80% of IPRs also involve concurrent district court litigation, with infringement actions getting dismissed when PTAB invalidates the patent at issue. Second, Justice Gorsuch brought up the McCormick Harvesting case and its possible constitutional basis, a point which Ms. Ho embraced, but Justice Kagan then suggested that McCormick, rather, was resolved on statutory grounds. There was no further discussion of McCormick.

Ms. Ho then returned to the line between IPRs and reexams, and the earlier point that the former are really about deciding a cause between parties in a trial-like proceeding. Justice Breyer, at this point, suggested that, even if this were so, non-Article III tribunals do this all the time anyhow, as when resolving disputes between travelers and airlines over lost luggage. In addition, Justice Breyer suggested, doesn’t the Patent Act’s phrase “subject to the provisions of this title” puts patentees on notice that post-issuance non-Article III patentability determinations are possible? A point was repeated that IPRs are about an agency figuring out whether it made a mistake, with third party-input, as frequently happens in many administrative proceeding.  Moreover, Ms. Ho was questioned as to how much third-party participation is needed to make a process unconstitutional. She returned to the idea of significant third party-control.

Justice Gorsuch then brought up the point that, if patents are private rights, no non-Article III adjudication of any sort is permissible. A question then arose whether analysis would change if the IPRs existed since 1790, the year that the first Patent Act was passed, and the discussion then moved to the Privy Council. Justice Kagan observed that the role of the Privy Council in adjudging patentability over time waned but was not eliminated. Before reserving time for rebuttal, Ms. Ho made the point that the patent laws were closely intertwined with the common law from the time of the Statute of Monopolies.

Mr. Christopher Kise, arguing for Greene’s Energy, argued that IPRs simply reexamine the propriety of the original patent grant, which is not a judicial function. The action is not to extinguish the patent but simply to decide that it should not issue. In addition, argued Mr. Kise, even if the Court had to get to the public-private right distinction, it should readily conclude that patents are public rights that can be adjudicated outside Article III tribunals. At this point, an interesting question came from Justice Breyer – what about settled expectations of the patentee after some time from issuance goes by? What about investments and reliance interests? The implication seemed to be that, while of course patents can always be invalidated by courts, perhaps heightened judicial review is needed to take patents away after some time in their existence.

The Chief Justice then raised the point of Due Process and PTAB panel-stacking, and whether Congress’ power to take away patents can allow patent validity to become a pure policy tool of the executive branch. Mr. Kise contended that Due Process problems, if any, should be considered on a case-by-case basis. Justice Sotomayor brought up the point of judicial review of PTAB determinations at the Federal Circuit, to which Justice Gorsuch responded that the PTAB is not an adjunct of the district courts and can issue self-executing judgments. He also brought up the issue of vested rights in land grands. To that, Mr. Kise responded that land is core property interest in the way that patents are not, because the latter depend on the federal statute and exist for an instrumental purpose of promoting the progress of useful arts. He also contended that process issues should be separated from power issues.

As Malcolm Stewart began arguing for the government, the Chief Justice framed the point of “bitter versus the sweet” – whether the government can condition the grant of a patent on anything it likes, including stacking of the deck in PTAB proceedings. Mr. Stewart responded that, even if there were a Due Process problem, Due Process does not require Article III, as public employee tenure protection cases show. He also mentioned that expanded panels are not unlike en banc panels in the federal circuit courts, and exist principally to correct panels that diverged from precedents. Justice Breyer then brought up the issue that the IPR statute is applied retroactively to the patent at issue in this case. Mr. Stewart’s response was that patents could be reexamined since 1980 and could be invalidated in certain proceedings before then, and they could always be invalidated by courts.

Returning to the public-private rights debate, Chief Justice Roberts discussed the Schor test and whether the multi-factor analysis of Schor is conducive to investment backed-expectations. Mr. Stewart contended that, whatever the test, PTAB adjudicates private rights because liability for past money damages are not involved. The question then came up whether the PTAB can adjudicate infringement, to which Mr. Stewart responded that probably not because money damages are involved. Justice Gorsuch then asked whether the PTAB can perhaps declare non-infringement, to which Mr. Stewart responded that there is no tradition of the PTO’s making that determination. Justice Gorsuch asked about the PTO’s tradition of cancelling patents, and Mr. Stewart’s response was that the issue is really about deciding patentability, which the PTO has been doing since 1836.

In rebuttal, Ms. Ho reiterated her point that Congress cannot condition a grant of a patent on taking away litigants’ structural rights and reinforced the point that appeals are not a sufficient form of Article III supervision. She ended with the point that, again, IPRs resolve disputes between two private parties.

Oil States Transcript

Oil States Transcript.  Commentary to follow.

Interesting quotes:

Justice Sotomayor: If I own something, which is what your basic position, I understand, is, that this is a personal right, how can a government agency take that right away without due process of law at all? Isn’t that the whole idea of Article III, that only a court can adjudicate that issue?

JUSTICE GORSUCH: [W]e have a number of cases that have arguably addressed this issue already, like McCormick, for example, in which this Court said the only authority competent to set a patent aside or to annul it or to correct it for any reason whatever is vested in the courts of the United States.

Cert Denied in Amdocs

The Supreme Court has denied Openet’s petition for writ of certiorari in Openet v. Amdocs.  The petition asked “whether the Federal Circuit erred by looking beyond the claims to the patent specification to assess patent eligibility?”  The court also denied certiorari in the pro se case of Poniatowski v. Matal.

Three Supreme Court Petitions: Teaching Away, Eligibility, Affirmed Without Opinion

Nidec Motor Corp. v. Zhongshan Broad Ocean Motor Co., Ltd., Supreme Court Docket No. No. 17-751.

  1. Whether the Federal Circuit has erred in holding that, for the purposes of an obviousness determination under 35 U.S.C. § 103(a), a reference “teaches away” from a proposed combination only if it expressly “criticize[s], discredit [s], or otherwise discourage[s]” the proposed combination.
  2. Whether inter partes review …  violates the Constitution by extinguishing private party rights through a non-Article III forum without a jury. (Copy of Oil States Question)

Nidec Petition.


CyberMonday: Patent Law at the Supreme Court

The Supreme Court will hear oral arguments on Cyber-Monday 11/27 in two important patent cases:

  • Oil States Energy Services, LLC v. Greene’s Energy Group, LLC, No. 16-712. Asking whether inter partes review (IPR) operates unconstitutionally “by extinguishing private property rights through a non-Article III forum without a jury.”
  • SAS Institute Inc. v. Matal, No. 16-969. Asking whether, in an IPR, the PTAB must issue a “final written decision as to every claim challenged by the petitioner, or whether it allows that Board to issue a final written decision with respect to the patentability of only some of the patent claims challenged by the petitioner.” See 35 U.S.C. § 318(a).

Since Justice Scalia will not be there, I’ll include a punch-line quote that comes from Oil State’s Reply Brief:

But it is odd to argue that the agency makes so many mistakes in issuing patents that its special expertise is needed to resolve disputes over those errors.

My expectation is that the AIA and PTO’s approach will be upheld in both cases.  At oral arguments look for any signals that conservatives will break away from Justice Thomas notion that patent rights are not “core private property” but instead are properly considered lesser franchise rights.  In addition, look for consideration of whether the justices are thinking outside-of-patent-law at a bigger picture review of public rights doctrine.


For last minute reading, consider the Oil States Reply Brief [OilStatesReply].  The following is an important portion:

This Court has recognized only narrow exceptions to the rule that Congress may not authorize non-Article III tribunals to exercise the Judicial power by adjudicating disputes between individuals. One of those narrow exceptions involves disputes over public rights. But “ ‘even with respect to matters that arguably fall within the scope of the “public rights” doctrine, the presumption is in favor of Art. III courts.’ ” Stern. Respondents cannot overcome the presumption in favor of Article III, and their attempts to wedge IPR into the narrow public-rights exception only confirms that it does not fit.

a. Claims By Or Against The Government. Respondents liberally cite these paradigmatic public rights cases, e.g., Murray’s Lessee v. Hoboken Land & Improvement Co., 18 How. 272, 274-75 (1855), but in every case – like most modern-day agency enforcement adjudications – the government was a party. IPR adjudicates disputes between private parties and does not at all implicate the government’s sovereign immunity – the origin of the exception. Id. at 274-75. Indeed, the AIA does not authorize the PTO to bring an IPR. 35 U.S.C. § 311(a).

b. Claims Historically Resolved Exclusively By Another Branch. The government concedes, as it must, that “challenges to the validity of issued patents were often brought injudicial forums.” Gov’t Br. 46; see also 3 William Blackstone, Commentaries 260-61; Br. of Legal Historians 5-37; Addendum 23-31. That concession is fatal because the exception applies only to claims “historically *** determined exclusively by” another branch. Stern, 564 U.S. at 485 (emphasis added).

The government nonetheless argues (at 46) that the “authority of the Crown and Privy Council to cancel patents” renders them public rights. Not so. First, this Court has repudiated that theory’s most significant implication, instead holding that an Executive patent revocation “would be in fact an invasion of the judicial branch of the government by the executive.” McCormick Harvesting Mach. Co. v. Aultman & Co., 169 U.S. 606, 612 (1898). Second, the Privy Council ceased revoking invention patents in ordinary cases – such as those involving a patent’s novelty – in 1746. . . .

c. Claims Whose Adjudication Is Essential To An Expert Agency’s Resolution Of A Limited Regulatory Objective, Tied To A “Particular Government Action.”… [R]espondents misapprehend this narrow exception at each step. … [A]dministering the patent laws is not [a limited regulatory objective]…. IPR is not “essential” to that objective…

It will be interesting.

In SAS, the court’s response may depend upon how far the Justices have gone down the road of releasing judicial intuition in favor of a strict-grammar approach to statutory interpretation. The statutory question at issue is found within 35 U.S.C. 318, which focuses on the “decision of the board” in cases where the director has already instituted the IPR:

If an inter partes review is instituted … [the PTAB] shall issue a final written decision with respect to the patentability of any patent claim challenged by the petitioner ….

The suggestion by petitioners is that the “any patent claim challenged” requires a written decision even as to claims that were challenged in the petition but not instituted for PTAB review.  Here, though I see a credible grammar argument that the claims challenged claims referred to in Section 318(a) are limited only to those instituted.

The SAS challenge can also be seen as pushing against the Director’s authority under Section 314 to partially-institute an IPR (institute as to only some of the challenged claims or for only some of the reasons challenged).  Of course, that issue is not appealable directly (institution decision is not ordinarily appealable) although the implementing rules could be challenged.  And, SAS did not push this button.

What is a Condition of Patentability

RPost v. GoDaddy (Supreme Court 2017)

A new amicus brief supports RPost petition for writ of certiorari – arguing that lack-of-eligibility is not a proper defense to patentability. The brief has an interesting quote from P.J. Federico (co-author of the 1952 Patent Act) suggesting (by omission) that eligibility is not a litigation defense.

I’ll add a different quote from the same work where Federico explains that the old statutory provision was split into two sections: 101 (subject matter) and 102 (conditions of patentability):

One of the basic and most important sections of the old statute was R.S. 4886, which specified the subject matter for which a patent could be obtained and recited conditions for patentability. In the new code, this section has been divided into two sections, section 101 relating to the subject matter for which a patent may be obtained, and section 102 which defines statutory novelty and states other conditions for patentability.

The distinction here is important because Section 282 makes “conditions of patentability” defenses.

I will note that Federico’s commentary might not be the best source of evidence. The same passage as that quoted indicates that “lack of invention” remains a defense under the new law.  Elsewhere, Federico indicates that “the requirements for patentability of an invention are stated in sections 101, 102 and 103” and that utility, under 101 is a “condition.”

What are the Defenses to Patent Infringement?

Owens, Shared Services, and an Independent USPTO

USPTO’s chief information officer – John B. Owens – has left the agency to join the government contractor CGI Federal.  Owens departure coincides with the governmental shift where the Department of Commerce is increasingly taking-over the “enterprise services” within the USPTO as part of the “shared services initiative.”  As part of this plan, USPTO user fees are being directed to the commerce department to handle IT and information services activities.  Several members of congress have questioned this approach.  And, an interesting feature of the 2018 Republican House Proposed Budget is shrink the Department of Commerce – currently “rife with waste, abuse, and duplication,” and “Establish the U.S. Patent and Trademark Office as an independent agency.”


En Banc: No-Opinion Judgments and Changing Course mid-IPR

SNF Holding Co. v. BASF Corp. (Federal Circuit 2017)

Important petition for en banc rehearing filed by the Duffy-Dabney team (Hughes Hubbard) with three questions presented:

  1. Whether 35 U.S.C. § 144 requires this Court to issue an opinion when exercising original jurisdiction under 35 U.S.C. §§ 141–144.
  2. Whether 35 U.S.C. § 316 authorizes the USPTO to change an instituted ground of inter partes review (“IPR”), post-institution, in a manner that conflicts with the ground as stated in the petition on which IPR was instituted.
  3. Whether a patentee, in an instituted IPR, can impeach its own admissions in the specification of a challenged patent.

Read the petition: 2017-11-16 Petition.  The case revolves around BASF’s US Patent No. 5,633,329.  The PTAB instituted review, but ultimately affirmed patentability of the claims – although with a changed claim construction in the final decision.


Did the Federal Circuit Revive Halliburton (1946)?

by Dennis Crouch

BASF v. Johnson Matthey (Fed. Cir. 2017)

BASF’s catalytic conversion system patent claims includes the functional limitations that the system is “effective for catalyzing”/”effective to catalyze” NH3 oxidation.

In the infringement litigation, the district court sided with the accused infringer – holding that the functional language was unduly indefinite – rendering the claim invalid under 35 U.S.C. 112 as interpreted by Nautilus. On appeal, the Federal Circuit has reversed — finding that the record  lacks “evidence that would support” the indefiniteness finding.

The Patent Act (section 112) requires “one or more claims particularly pointing out and distinctly claiming” the invention.  This provision serves as the basis for doctrine of (in)definiteness.  In Nautilus (2014), the Supreme Court held that the claims as drafted must define the scope of the invention (from the perspective of PHOSITA) with “reasonable certainty.”   Reasonable certainty is a traditional high evidentiary burden used in several areas of practice — including lost-profit calculations — and is thought to be parallel with the “clear and convincing” evidence standard (i.e., just below “beyond a reasonable doubt.”).  Despite the seeming high standard placed on patentees by Nautilus, the Federal Circuit has continued to give patentees the benefit of the doubt in indefiniteness cases (with the one exception being 112(f) cases).  This case is no exception.

Effective To: The claims here are not limited to particular materials or level of effectiveness, but rather only those that fit within the broad “effective to catalyze” language.  The district court identified this as problematic:

Each claim fails to limit the “material composition A” … to any specific materials. Rather than explicitly defining the material compositions, the claims utilize functional language, specifically “effective,” to purportedly define them.  In other words, the claims recite a performance property the composition must display, rather than its actual composition. Moreover, none of the claims recite a minimum level of function needed to meet this “effective” limitation nor a particular measurement method to determine whether a composition is “effective” enough to fall within the claims.

[FN: The court additionally notes that “a practically limitless number of materials” exist that would “catalyze SCR of NOx, even within the normal operating conditions of an exhaust after treatment system,” indicating that the claims, as written, fail to sufficiently identify the material compositions.]

Without such information, a person of ordinary skill in the art could not determine which materials are within the “material composition A” or “material composition B” limitation, and which are not.

On appeal, the Federal Circuit rejected the lower court’s analysis – first repeating again that functional claim limitations are perfectly legitimate.  According to the appellate court, the basic problem with the district court’s analysis was that it identified the broad claims but then failed to actually consider whether the claims provide “reasonable certainty” to PHOSITA as to the claim scope.

What is needed is a context-specific inquiry into whether particular functional language actually provides the required reasonable certainty. . . . [T]he inference of indefiniteness simply from the scope finding is legally incorrect: “breadth is not indefiniteness.” (Quoting SKB v. Apotex (Fed. Cir. 2005)).

After rejecting the district court’s analysis, the appellate panel went-on to hold that – as a matter of law – the claim is definite. Drawing its own conclusions as to what PHOSITA would think of these claims.

At the point of Novelty: An interesting bit of the opinion harkens back to the Supreme Court’s 1946 Halliburton decision – holding that functional claim language is particularly problematic when done at the point of novelty. Here, the court does not cite Halliburton but does note that the “asserted advance over the prior art” is the particular layered arrangement of the device, not “the choices of materials to perform each of the required catalytic processes.”  Rather, those materials were expected to be ones already well known in the industry.

Here, of course, the Federal Circuit is not suggesting that Halliburton is good law, but the court does implicitly conclude that there are important distinctions in the indefiniteness analysis when considering terms directed to well-known versus novel features.

Intervening Rights and Lost Profits

by Dennis Crouch

Presidio Components v. American Technical Ceramics (Fed. Cir. 2017)

Intervening Rights: When issued claims are substantially amended — whether during reissue, reexamination, or AIA-Trial — an accused defendant will have “intervening rights.”   In particular, the defendant will not pay back-damages for any infringement prior to completion of the post-issuance action.  Section 252 explains that the question is whether the amended claim is “substantially identical” to the original.

Here, the patentee added limitations to its capacitor claims in a way that changed the claim scope — and thus entitled the defendant to “absolute intervening rights.”

The patentee argued that it had no intent to change the claim patent scope. On appeal, however, the patentee ruled that intent is not relevant. Rather, the inquiry is simply whether the scope of original claims is identical to the scope of the amended claims (based upon a “normal” Phillips claim construction analysis.)  Under that approach, the court found a difference in scope and thus intervening rights kicked-in.

Presidio argues that the scope of its claims did not change during reexamination because its stated goal in amending the claims was to adopt the district court’s construction in Presidio I.

Equitable Interlude: Note here that the focus is on the statutory intervening rights.  The Federal Circuit has also adopted a second-level equitable intervening rights.  Following SCA Hygiene, I expect that there is a good chance that this doctrine may be eliminated.

Lost Profits:  Like definiteness, lost profit award also requires “reasonable certainty.”  In the lost profit context, the rule is applied in a more-standard approach. Namely, reasonable certainty is traditionally thought of as a standard of evidentiary proof needed for factual conclusions. This makes sense in the fact-heavy damages context but not so much in the indefiniteness arena that is very often seen as wholly a question of law.

Here, the appellate court held that lost profits due to the infringement were not proven because the district court did not consider whether a non-infringing alternative would have been an acceptable/available substitute to the patentee’s product. A new trial is necessary now to calculate the reasonable royalty damages that will presumably be less than the $2 million lost profit verdict overturned on appeal.

USTR IP Objectives in NAFTA Renegotiation

[USTR NAFTA Objectives]

  1. Obtain commitments to ratify or accede to international treaties reflecting best practices in intellectual property protection and enforcement.
  2. Provide a framework for effective cooperation between Parties on matters related to the adequate and effective protection and enforcement of intellectual property rights.
  3. Promote transparency and efficiency in the procedures and systems that establish protection of intellectual property rights, including making more relevant information available online.
  4. Seek provisions governing intellectual property rights that reflect a standard of protection similar to that found in U.S. law, including, but not limited to protections related to trademarks, patents, copyright and related rights (including, as appropriate, exceptions and limitations), undisclosed test or other data, and trade secrets.
  5. Provide strong protection and enforcement for new and emerging technologies and new methods of transmitting and distributing products embodying intellectual property, including in a manner that facilitates legitimate digital trade, including, but not limited to, technological protection measures.
  6. Ensure standards of protection and enforcement that keep pace with technological developments, and in particular ensure that rights holders have the legal and technological means to control the use of their works through the Internet and other global communication media, and to prevent the unauthorized use of their works.
  7. Prevent or eliminate government involvement in the violation of intellectual property rights, including cyber theft and piracy.
  8. Secure fair, equitable, and nondiscriminatory market access opportunities for United States persons that rely upon intellectual property protection.
  9. Prevent or eliminate discrimination with respect to matters affecting the availability, acquisition, scope, maintenance, use, and enforcement of intellectual property rights.
  10. Respect the Declaration on the TRIPS Agreement and Public Health, adopted by the World Trade Organization at the Fourth Ministerial Conference at Doha, Qatar on November 14, 2001, and to ensure that trade agreements foster innovation and promote access to medicines.
  11. Prevent the undermining of market access for U.S. products through the improper use of a country’s system for protecting or recognizing geographical indications, including such systems that fail to ensure transparency and procedural fairness, or adequately protecting generic terms for common use.
  12. Provide the means for adequate and effective enforcement of intellectual property rights, including by requiring accessible, expeditious, and effective civil, administrative, and criminal enforcement mechanisms. Such mechanisms include, but are not limited to, strong protections against counterfeit and pirated goods.

1877 Supreme Court Thought’s on Oil States?

Cochrane v. Deener, 94 U.S. 780 (1877)

It would, perhaps, be desirable if all cases of this sort [i.e., patent cases] could be referred to a commission of intelligent experts and practical men to report their opinion thereon, with their reasons, for the final action of the court. … Neither courts nor ordinary juries are perfectly adapted to the investigation of mechanical and scientific questions. .

Court Issues TRO: Enjoining Infringer from Filing a Reexamination Petition

by Dennis Crouch

Columbia Sportswear v. Serius Innovative (S.D.Cal. 2017)

I previously wrote about Columbia Sportswear design patent verdict and damages award against Serius.  The patent – D657,093 – covers a wavy-pattern as part of a heat reflective material.  Post trial, the court has now issued an emergency Temporary Restraining Order (TRO) enjoining Serious from initiating a reexamination of the design patent — finding that the reexamination could improperly “avoid the jury’s verdict in this case.”


The key fact: We already have a jury verdict of infringement and, according to the court (and patentee’s motion for TRO), during the lawsuit, the defendant stipulated to the patent’s validity.

On irreparable harm (and element of TRO), the court writes:

Allowing Seirus to collaterally attack the Design Patent at this very late juncture in litigation would undoubtedly cause Columbia undue hardship. A reexamination of the Design Patent could potentially result in its invalidation, which would moot Columbia’s fully-litigated infringement claims.

Finally, the court finds, that the public interest is served by restraining order – since “The public interest is served by enforcing the parties’ stipulation and protecting the validity of the Court’s judgment.”

The TRO was issued the same-day as requested and, although Seirus was apparently same-day notice notice, it did not have the opportunity to respond.

A few notes here: First, I expect that most TRO’s include legal and factual errors that stem from the fact that they are issued in an emergency, usually in an ex parte fashion.  The court typically relies upon the statements of counsel requesting TRO — perhaps in a way that should raise additional duties to the court.

Stipulation of Validity?: Normally judges rule that patents are “not proven invalid” rather than actually holding them “valid.”  Here, however, the TRO motion refers the judge to the prior “stipulated judgment of validity” and the judge consequently held that Seirus will not be harmed by “complying with its own stipulation of validity.”

Looking back at the docket appears to tell a different story.  As I suspected, the prior judgment states that the patent “has not been proved invalid.”  However, the jointly-agreed-upon document is titled “JUDGMENT OF VALIDITY OF U.S. PATENT NO. D657,093.”  So, the document has some ambiguity, but the distinction here is potentially critical: A not-able-to-prove-invalidity would seemingly not prohibit a reexamination filing since the varying standards of proof logically allow for a patent to be cancelled during reexamination even if it could not have been invalidated in court.  Of course, under a slight extension of MedImmune and Lear, it might not even make a difference.  (Note here, that MedImmune and Lear both permitted a licensee to challenge).

Here, the patentee argued to the court that the “consent judgment … precludes [Seirus] from initiating a reexamination proceeding on the D’093 Patent.”  Unfortunately, the patentee does not cite any authority toward its conclusion other than Flex-Foot, Inc. v. CRP, Inc., 238 F.3d 1362 (Fed. Cir. 2001), but that decision does not reach the reexamination question here and was pre-MedImmune.

The key case I would cite here is In re Baxter Intern., Inc., 678 F.3d 1357 (Fed. Cir. 2012).  In that split decision, the Federal Circuit found no problem with an adjudged infringer taking same prior from the district court case (that lost there) and re-using it in a reexamination (and cancelling the claims).

Finally (for this post), the court appears to have inadequately considered the equities and the public interest associated with cancelling an improperly issued patent.  As the Supreme Court wrote in MedImmune: “the equities of the licensor do not weigh very heavily when they are balanced against the important public interest in permitting full and free competition in the use of ideas which are in reality a part of the public domain.”

I’m confident that Seirus will challenge the TRO, which (I believe) is subject to immediate appeal to the Federal Circuit under 28 U.S.C. § 1292(a)(1).

Update: I noted above my belief that the TRO decision (enjoining the defendant from filing a reexam petition) was immediately appealable based upon 28 U.S.C. § 1292(a)(1)’s statement that orders “granting, continuing, modifying, refusing or dissolving injunctions” create direct appellate jurisdiction.  A friend emailed me the non-precedential decision in Hallmark Cards, Inc. v. Grp. One Ltd., 110 F. App’x 99, 100 (Fed. Cir. 2004), holding otherwise.  One way to read Hallmark is that a TRO is not appealable if the district court is planning to quickly hold a preliminary injunction hearing – as is the case here.