February 2018

Trump’s Budget Proposal for USPTO Flat for FY 2019

The Trump proposed budget for FY2019 appears to be essentially flat as compared with FY2018.  The proposed budget would permit the USPTO to spend up to $3.459 billion in FY 2019 (year beginning October 1, 2018). We are approaching the 1/2 way mark for FY 2018.  In the most recent PPAC meeting, PTO Chief Financial Officer Tony Scardino reported expected FY2018 spending of $3.444 billion.

Trump Budget (PTO on p. 199): http://src.bna.com/wlO




Reversing vs. Vacating PTAB Decisions

By Dennis Crouch

In re Hodges (Fed. Cir. 2018)

In a split opinion, the Federal Circuit has rejected the PTAB’s anticipation and obviousness decisions – finding that the Board erred in holding that the key prior art reference inherently disclosed the an “inlet seat” defined by a “valve body” of the claimed drain assembly.

Anticipation arises from analysis of the “four corners” of a prior art reference. That one document must “describe every element of the claimed invention, either expressly or inherently, such that a person of ordinary skill in the art could practice the invention without undue experimentation.” Spansion, Inc. v. Int’l Trade Comm’n, 629 F.3d 1331 (Fed. Cir. 2010).  Although “inherent description” offers some leeway, the doctrine only applies if the supposed inherent characteristic necessarily follows from the express teachings of the reference.  Right-off-the-bat, we can note a problem here with the Examiner’s statement that “it is at least ‘arguable’ that [the prior art reference] does not disclose “a valve body which defines an inlet seat.”

Beyond that, in walking through the prior art, the Federal Circuit found a major problem with the PTO analysis — basically that the prior art’s “valve body” was disconnected from the inlet-valve (that inherently contained an inlet seat).  Thus, according to the court, the valve could not “define” the inlet seat as required by the claim.

Figure 7 avove from the prior art shows the issue:  The portion marked in yellow defines the claimed valve assembly and the top red valve is the location of the required inlet seat.  The claim though requires that the valve assembly “define” the valve seat.  I’ll note here a major problem with the analysis – why not just define the “valve assembly” of the prior art as including the upper valve (as I’ve done with my redrawing of Figure 7 below)?

I mentioned above the split opinion. Both the majority (Judges O’Malley and Lourie) and the Dissent-in-part (Judge Wallach) agreed that the PTO had failed to show anticipation.  The difference came with the result – the majority reversed while the dissent would have taken the lesser action of vacating the PTAB ruling.

Here, the appellate panel’s problem with the PTAB is that it found an erroneous factual finding.  However, because the lower tribunal is ordinarily seen as the finder-of-fact, the result of this type of disagreement is usually to vacate the PTAB’s decision and have the lower tribunal review the evidence once again.  Here, the Majority justified its reversal with a conclusion that the PTAB conclusions were “plainly contrary to the only permissible factual finding that can be drawn from [the prior art] itself.”

Writing in dissent, Judge Wallach argues:

When an agency fails to make requisite factual findings or to explain its reasoning, “the proper course, except in rare circumstances, is to remand to the agency for additional investigation or explanation. The reviewing court is not generally empowered to conduct a de novo inquiry into the matter being reviewed and to reach its own conclusions based on such an inquiry.” Fla. Power & Light Co. v. Lorion, 470 U.S. 729, 744 (1985). By reversing the PTAB’s determination [of anticipation] the majority engages in the very de novo inquiry against which the Supreme Court has cautioned.


Patent Pendency Snapshot

The charts below provide a pendency snapshot for utility patents issued in the past month. Each chart provides two curves – one counting pendency from filing date (or 371 Date for Nat’l Stage) to issuance and the other counting pendency from the earliest priority filing date to issuance.  (Each dot represents a three-month period). Median pendency is now down to about 25 months from filing and only about 10% of these newly issued patents were pending for > 4 years.

Federal Circuit: Walker Process Claims do not Arise Under US Patent Law

By Dennis Crouch

Xitronix Corp. v. KLA-Tencor Corp (Fed. Cir. 2018)

Acting sua sponte, the Federal Circuit has transferred this appeal to the Fifth Circuit – holding that the Walker Process monopolization case does not arise under the U.S. Patent Laws as required by the appellate court’s jurisdiction statute 28 U.S.C. § 1295(a)(1). This decision reverses the court’s position from In re Ciprofloxacin Hydrochloride (Cipro) Antitrust Litigation, 544 F.3d 1323 (Fed. Cir. 2008) based upon the intervening Supreme Court decision of Gunn v. Minton, 568 U.S. 251 (2013). The court (Judge Moore) was also clearly perturbed by both parties’ failure to cite or discuss Gunn in their requested supplemental briefs.

Walker Process lawsuits get their name from the 1965 Supreme Court decision Walker Process Equipment, Inc. v. Food Machinery & Chemical Corp., 382 U.S. 172, 176–77 (1965). The case stands for the proposition that federal antitrust liability (Sherman Act) can stem from attempts to enforce a patent procured through fraud (inequitable conduct). Here, Xitronix allegation is that KLA-Tencor obtained United States Patent No. 8,817,260 by “intentional and willful misrepresentations and omissions” in a way that created “an artificial impediment to competition.” Complaint. The district court dismissed the case on summary judgment – holding that, “even assuming [he] misstated the state of the prior art,” the prosecuting attorney’s “remarks may fairly be viewed as attorney argument and not factual misrepresentations.” [XitronixSJ]

Pre Gunn: In its 2008 Cipro decision, the Federal Circuit explained that a Walker Process claim arose under U.S. patent law “because the determination of fraud before the PTO necessarily involves a substantial question of patent law.” In Nobelpharma, the Federal Circuit specifically held that the patent-specific issues lead the court to apply Federal Circuit law to Walker Process claims (rather than the default of regional circuit law). Nobelpharma AB v. Implant Innovations, Inc., 141 F.3d 1059 (Fed. Cir. 1998).

Impact of Gunn: In 2013, the Supreme Court altered course in Gunn – holding that that the Federal Circuit’s approach to arising-under jurisdiction had been too loose. In that case, the Court held that a legal malpractice case did not arise under U.S. patent law even though the claim necessarily required application of U.S. patent law. The court explained that, even though necessary, “the federal issue in this case is not substantial.” In Gunn and the prior decision Grable & Sons, the Supreme Court was clear that our system of Federalism requires a “balance of federal and state judicial responsibilities.”

For Xitronix, the state-federal balance is not an issue as it was in Gunn and Grable but rather a question of which Federal Appellate court has jurisdiction. However, the Federal Circuit followed the same approach that the Supreme Court did in Gunn – finding the one-off outcome here unlikely to impact or undermine the court’s “uniform body of patent law.”

Holding: Federal Circuit does not Have Jurisdiction. Case Transferred to 5th Circuit

Federal Circuit: “Injected Molded” limitation imparts structure (although we can’t define what structure)

By Dennis Crouch

In re Nordt Development Co., LLC. (Fed. Cir. 2018)

During the course of prosecution of its flexible knee brace patent, Nordt amended the claims to include a limitation that the struts and other components were “injection molded.” The idea here was that the prior art primarily used fabric or elastic bands and so the injection molding limitation would allow the applicant to slip through.

Claim 1 at issue here:

A support for an area of a body that includes a hinge joint, comprising:

(a) a hinge mechanism comprising an injection molded strut component and injection molded first and second arm components;

(b) an elastically stretchable framework injection molded about the strut and arm components of the hinge mechanism, the framework being configured to extend across the hinge joint of the area of the body, and the framework defining a flexible, elastically stretchable web of elastomeric interconnecting members; …

The examiner though gave essentially no weight to the new limitation. According to the examiner, the claims are apparatus claims and thus the included method of manufacturing is immaterial.

Injection molding is a method of manufacturing an apparatus and claim 1 is an apparatus claim. In order to anticipate the injection molded feature, the prior art must disclose the finished product and not the method of making the product. Therefore, although [the prior art] does not disclose the sleeve is injection molded, [it] does disclose the sleeve is a flexible, elastically stretchable web of elastomeric interconnecting members [as required by the claims]

On ex parte appeal to the PTAB, the Board affirmed the rejection and further implied that, although the “injection molded” limitation could potentially be limiting, Nordt had failed to “persuasively explain structural limitation is imparted by this manufacturing practice.” Thus, although the prior art knee brace was not injection molded, the Board found it to anticipate the resulting product since it included the same structural elements. The approach offered by the PTO classifies the claim as a product-by-process claim. For those claims, the Federal Circuit has ruled that patentability “does not depend upon its [claimed] method of production.” In re Thorpe, 777 F.2d 695 (Fed. Cir. 1985). Rather, the claim will be unpatentable if the resulting product is found in the prior art “even though the prior product was made by a different process.” Id.

On appeal here, the Federal Circuit has vacated that finding – holding that the “injection molded” limitation is a structural limitation and thus should be seen as limiting. In its holding, the court followed the precedent of In re Garnero, 412 F.2d 276 (CCPA 1969) (holding that “interbonded one to another by interfusion” connotes structure to a claimed composite and should therefore be considered in the determination of patentability) as well as Hazani v. U.S. Int’l Trade Comm’n, 126 F.3d 1473, 1479 (Fed. Cir. 1997) (“chemically engraved” was a structural limitation); Vanguard Prods. Corp. v. Parker Hannifin Corp., 234 F.3d 1370 (Fed. Cir. 2000) (term “integral” was a structural requirement even though described as a manufacturing process in the specification); 3M Innovative Props. Co., 350 F.3d 1371 (finding “superimposed” to describe a structural relationship and not a process); SmithKline Beecham Corp. v. Apotex Corp., 439 F.3d 1312 (Fed. Cir. 2006) (Newman, J., dissenting) (listing “a molded plastic” as an example of a process limitation that connotes structure).  See MPEP 2113.

Thus, the general precedent of Thorpe is good law: Board should typically not accord patentable weight to a process limitation in a product-by-process claim. However, patentable weight should be given to the limitation when it connotes a required structure. Here, the Federal Circuit found that this case fits the second category:

[W]e find that “injection molded” connotes structure. Although the application describes “injection molded” as a process of manufacture, neither the Board nor the examiner dispute Nordt’s assertion that “there are clear structural differences” between a knee brace made with fabric components and a knee brace made with injection-molded components.

Here, the court concluded that it surely connotes structure, but was unable to particularly define what that structure means. Rather, on remand the Board will need to determine what particular structures are being claimed by the “injection molded” limitation.

= = = = =

Note here that the court did not discuss how broadest reasonable interpretation impacts the decision here. A different panel might have held that the “best” interpretation of the claims is that the limitation provides structure, but a reasonable interpretation is that it merely indicates the process of manufacturing.

= = = = =

Could the applicant have drawn the same line by claiming that the strut is “configured to exhibit the properties of an injection molded material” rather than claiming an “injection molded” strut?

Is it Patent Eligible?


1. A method for implementing a blackjack game in a physical casino, the method comprising:

providing the physical casino with a physical gaming table with a felt layout on top of the gaming table, the felt layout including a plurality of betting circles imprinted into the felt layout;

providing one or more physical decks of cards;

receiving a wager from the player in the form of one or more physical chips in a player’s betting circle of the plurality of betting circles;

dealing, using the one or more physical decks of cards, cards for a player’s hand and cards for a dealer’s hand;

enabling the player to play out the player’s hand;

resolving the dealer’s hand, comprising, upon meeting a bum condition of a number of the cards for the dealer’s hand exceeding two and a point total of the cards for the dealer’s hand exceeding a predetermined amount and equaling a preset total,

burning a card in the cards for the dealer’s hand and dealing an additional card for the dealer’s hand; and

resolving the wager according to predetermined blackjack rules.

PTAB says not eligible. Ex Parte Hall, APPEAL 2017-002594, 2018 WL 460997 (PTAB Jan. 12, 2018). The Board’s two step analysis is as follows: (a) the claims are directed to the abstract idea of “rules for conducting a wagering game;” (b) although the claims is tied to physicality, it does not provide “something significantly more than a claim on the abstract idea itself.”

PatentlyO Bits and Bytes by Anthony McCain

Get a Job doing Patent Law                  

Welcome new USPTO Director Andrei Iancu

Andrei Iancu has now been sworn-in as the new USPTO director.  He begins today with his mission to ensure that the American IP system remains “the crown jewel that provides both the incentives and the protections necessary to enable that innovation and resulting growth.”

For the past nine months, the Agency has been led to Joe Matal who was given the difficult title of “person performing the functions and duties of the Under Secretary of Commerce for Intellectual Property and Director of the United States Patent and Trademark Office.”  Congratulations to Matal for his successes in shepherding the agency during this time.

I wrote earlier this week that the Chinese patent system is at a crossroads as it reaches middle-age.  I believe that the US patent system is also at a crossroads – ready to be refreshed and renewed, but tentative about what that will mean for established interests.  I look forward to hearing Iancu’s vision for the future and his ideas for implementation.


Patent Eligibility: Underlying Questions of Fact

by Dennis Crouch

Important statement from the Federal Circuit today on the factual underpinnings of the eligibility analysis:

While patent eligibility is ultimately a question of law, the district court erred in concluding there are no underlying factual questions to the § 101 inquiry. Whether something is well-understood, routine, and conventional to a skilled artisan at the time of the patent is a factual determination.

Berkheimer v. HP, Inc. (Fed. Cir. 2018) [Berkheimer].  The decision penned by Judge Moore partially vacates the lower court’s summary judgment of ineligibility.  In particular, the court affirmed ineligibility of claims 1-3 and 9 of Steven Berkheimer’s U.S. Patent No. 7,447,713, but found that dependent claims 4-7 were not proven ineligible.

The short decision by Judge Moore and joined by Judges Taranto and Stoll is in substantial tension with prior treatment of eligibility analysis that has generally permitted resolution of the issue on the pleadings as a pure question of law.  The decision’s unsatisfying distinguishing point is that the court’s prior practice “demonstrate [that] not every Section 101 determination contains genuine diputes over the underlying facts material to the Section 101 inquiry.”  The court needs an en banc powwow to clarify the issues here.

= = = = =

Claims at issue (1-3 and 9 are ineligible; Underlying facts required to determine whether 4-7 are ineligible).

1. A method of archiving an item in a computer processing system comprising:

presenting the item to a parser;

parsing the item into a plurality of multi-part object structures wherein portions of the structures have searchable information tags associated therewith;

evaluating the object structures in accordance with object structures previously stored in an archive;

presenting an evaluated object structure for manual reconciliation at least where there is a predetermined variance between the object and at least one of a predetermined standard and a user defined rule.

2. The method as in claim 1 wherein the respective structure can be manually edited after being presented for reconciliation.

3. The method as in claim 1 which includes, before the parsing step, converting an input item to a standardized format for input to the parser.

4. The method as in claim 1 which includes storing a reconciled object structure in the archive without substantial redundancy.

5. The method as in claim 4 which includes selectively editing an object structure, linked to other structures to thereby effect a one-to-many change in a plurality of archived items.

6. The method as in clam 5 which includes compiling an item to be output from the archive, wherein at least one object-type structure of the item has been edited during the one-to-many change and wherein the compiled item includes a plurality of linked object-type structures converted into a predetermined output file formal.

7. The method as in claim 6 which includes compiling a plurality of items wherein the at least one object-type structure had been linked in the archive to members of the plurality.

9. The method as in claim 1 which includes forming object oriented data structures from the parsed items wherein the data structures include at least some of item properties, item property values, element properties and element property values.

Patent Term Adjustments at PTO and in Court

by Dennis Crouch

A patent’s legally effective term is calculated based upon its filing date.  Delays in issuance would seemingly lead to a reduction of patent term.  However, through a series of legislative initiatives, Congress created a system of Patent Term Adjustment to compensate patentees for delays in patent issuance.  Most PTA is added based upon PTO failure to timely issue office actions (A Delays) or to issue the patent within three years of the filing date (B Delays).  However, patents with the longest PTA are generally those associated with interference proceedings, secrecy orders or successful appeals (C Delays).

Today, most patents are awarded some patent term adjustment, but the numbers continue to drop as shown by the two charts below. The first chart shows the percentage of US utility patents issued with at least some PTA being awarded. The second chart shows the average PTA award of those patents with PTA.  In the second chart the discrete jump followed Wyeth v. Kappos (Fed. Cir. Jan. 7, 2010). In that case, the Federal Circuit held that the PTO had been misreading the statute and thus undercounting PTA.

In Actelion Pharm., Ltd. v. Matal (Fed. Cir. Feb. 6, 2018), the Federal circuit sided with the PTO in a patent term adjustment challenge holding that the PTA calculations beginning with a national-stage application were not triggered by the patentee’s statement that it “earnestly solicits early examination and allowance of these claims.”  The problem was that “casual” request was buried within the remarks while the applicant failed to check the box on the form to expressly request.

In a separate recently decided PTA case, a district court has agreed with Ariad that its original RCE filing should only cut-off PTA accumulation since the PTO negligently failed to process the filing (instead sending a notice of abandonment) and then took three months to withdraw the abandonment.  ARIAD Pharm., Inc. v. Matal, 1:17-CV-733, 2018 WL 339141, at *1 (E.D. Va. Jan. 5, 2018)


Legal Conclusion of Obviousness is Based upon a Structure of Factual Findings whose Foundation Must be Evidentiary

Elbit Systems v. Thales Visionix (Fed. Cir. 2018)

In its IPR final decision, the PTAB sided with the patentee – holding that Elbit had failed to prove that the challenged claims of Thales patent were obvious. On appeal, the Federal Circuit has affirmed – holding that “substantial evidence” supported the finding.

The challenged (U.S. Patent No. 6,474,159) is directed to a method for tracking motion relative to a moving platform. The claims basically require two inertial motion sensors and a processor “configured to determine an orientation of the object relative to the moving reference frame based on the signals received from the first and second inertial sensors.” The particular claims here are limited to include “angular” measurements.

The decision focuses primarily on the standard of review of PTAB factual findings – substantial evidence. Substantial evidence is a very low standard – simply requiring “more than a mere scintilla of evidence.” In re NuVasive, Inc., 842 F.3d 1376, 1379–80 (Fed. Cir. 2016). Although obviousness is a question of law, that legal conclusion must begin with evidence that serve as the foundation for factual conclusions. The ultimate legal conclusion of obviousness then is based upon the structure built by those factual conclusions.

Here, the PTAB made the factual finding that the prior art reference (McFarlane) did not teach the claimed “relative angular rate signal.” That finding was based upon presented evidence: both the prior art document and expert testimony regarding what was taught by the document. The patentee’s expert explained that the prior art calculated relative angular orientation using a different approach than that claimed by Thales (i.e., did not separately create an intermediary “angular rate signal”). Although the competing expert testified to the opposite (that the prior art approach is mathematically equivalent without any practical difference), the Board chose to believe the patentee’s expert based upon its conclusion that the competing expert did not provide credible citations to support those conclusion.

On appeal, the Federal Circuit held that the PTAB was the best position to determine expert credibility and thus declined to disturb those credibility determinations. Trs. of Columbia Univ. v. Illumina, Inc., 620 F. App’x 916, 922 (Fed. Cir. 2015) (“The PTAB [i]s entitled to weigh the credibility of the witnesses.”) The challenger’s attorneys attempted to support their case with an explanation that PHOSITA would understand the meaning the prior art – That argument was rejected on appeal, however, as attorney argument rather than evidence based. Rather, to make the argument, the party should have actually presented evidence on the level of understanding of a person of skill in the art.

= = = = =

Note, I’m not sure, but this may be the first precedential decision holding that PTAB has power to weigh credibility of expert testimony in IPR proceedings. The concept was previously stated in Trs. of Columbia Univ. v. Illumina, Inc., 620 F. App’x 916, 922 (Fed. Cir. 2015) (“The PTAB [i]s entitled to weigh the credibility of the witnesses.”) VirnetX Inc. v. Apple Inc., 665 Fed. Appx. 880, 884 (Fed. Cir. 2016).

= = = = =

Challenged Claim 3 is listed below:

1. A system for tracking the motion of an object relative to a moving reference frame, comprising:

a first inertial sensor mounted on the tracked object;

a second inertial sensor mounted on the moving reference frame; and

an element adapted to receive signals from said first and second inertial sensors and configured to determine an orientation of the object relative to the moving reference frame based on the signals received from the first and second inertial sensors.

2. The system of claim 1 in which the first and second inertial sensors each comprises three angular inertial sensors selected from the set of angular accelerometers, angular rate sensors, and angular position gyroscopes.

3. The system of claim 2, in which the angular inertial sensors comprise angular rate sensors, and the orientation of the object relative to the moving reference frame is determined by integrating a relative angular rate signal determined from the angular rate signals measured by the first and second inertial sensors.

Consider whether this is patent eligible.

China’s Patent System Entering Middle Age

by Dennis Crouch

Following up on Renjun Bian’s recent Patently-O post, I wanted to highlight Texas A&M Professor Peter Yu’s new article on Chinese Intellectual Property Scholarship titled “A Half-Century of Scholarship on the Chinese Intellectual Property System.”  The Chinese patent system is now over 30 years old — with explosive growth and transformation each year.  Yu explains in the article that China is now reaching a new stage that calls for the country to move beyond Western constructs of IP (“legal transplants”) and instead “devise its own intellectual property strategy.”  Because the Chinese legal marketplace continues to develop, Yu’s work here offers excellent guidance by focusing more on flow and transition rather than a snapshot. Great work Prof. Yu.

Read it here: https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3107401

How Foreign Patentees Fared in Patent Litigation in China

Patenting From China

*** The map above showing regional patent litigation comes from the Chinese Firm Jiaquan IP. http://www.jiaquanip.com.


In Third Round: MedCo’s Angiomax Patents Invalid Again (On Sale Pre Patenting)

The Medicines Co (MedCo) v. Hospira, Inc. (Fed. Cir. 2018)

In its 2016 en banc opinion in this case, the Federal Circuit limited the scope of the on sale bar of 35 U.S.C. § 102 (pre-AIA) – holding that “a contract manufacturer’s sale to the inventor of manufacturing services where neither title to the embodiments nor the right to market the same passes to the supplier does not constitute an invalidating sale under § 102(b).”

In the litigation, Hospira argued both (1) that the MedCo patents were invalid and (1) that Hospira’s proposed generic Angiomax drug would not infringe. The district court sided with MedCo on the first point (patents not invalid) but with Hospira on the second (patents not infringed). On appeal, the Federal Circuit has affirmed the non-infringement ruling but reversed on the on sale issue. The interesting portion is the on sale question.

On Sale Bar: The 2016 en banc decision affirmed the district court’s holding that a set of transactions between Ben Venue and MedCo “did not trigger the on-sale bar.” On remand, the district court stuck to that ruling – holding that the patent was not invalid. On appeal here, however, the panel analyzed a separate agreement – this time a Distribution Agreement between MedCo and ICS. The agreement specifically included a commercial price list, an order mechanism, and statement that title to the drugs transferred “upon receipt of product.” The Court explains:

Under the standards established by Medicines I
(en banc), the terms of the Distribution Agreement make clear that the Medicines Company and ICS entered into an agreement to sell and purchase the product. Those relevant terms include: a statement that The Medicines Company “now desire[d] to sell the Product” to ICS and ICS “desire[d] to purchase and distribute the Product,” the price of the product, the purchase schedule, and the passage of title from The Medicines Company to ICS.

The on-sale bar generally requires both (1) that a product covered by the patent is subject of a commercial offer for sale; and (2) that the invention is ready for patenting (both before the patent critical date). The paragraph above explains the commercial offer for sale. The court went on to explain that a “master batch agreement” available at the time explained how to use the claimed process.

Infringement: The claims require “efficient mixing” of the raw ingredients to form the drug solution – and that approach is defined by an example provided in the patent specifications. On appeal, the court affirmed that Hospira’s process cannot infringe since it does not perform all of the steps of the example.

Jurisdiction: The court does not explain why it has jurisdiction to decide the on sale bar question after finding no infringement (moot point?).

How Foreign Patentees Fared in Patent Litigation in China

Guest post by Renjun Bian.  Ms. Bian is a J.S.D. candidate at UC Berkeley School of Law, where she conducts research on Chinese patent law and policies. Her dissertation focuses on patent litigation and valuation. Before coming to Berkeley, Ms. Bian studied Chinese law at Peking University, where she earned an LL.B.  Ms. Bian also holds an LLM from Berkeley and interned at King & Wood Mallesons’ Silicon Valley office.  The opinions expressed are her own.  Below, she describes findings from her forthcoming article in the Berkeley Technology Law Journal.

As the Chinese government continues to stimulate domestic innovation and patent activities via a variety of policies, China has become a world leader in both patent applications and litigation. These major developments have made China an integral venue of international patent protection for inventors and entrepreneurs worldwide.

However, due to the lack of judicial transparency before 2014, we had virtually no access to Chinese patent litigation data and knew little about how Chinese courts adjudicated patent cases. Instead, we were left with a variety of impressions and guesses based on the text of Chinese law and the limited number of cases released by the press; for example, that Chinese courts have a strong bias toward domestic companies over foreign ones, to protect the local economy; that injunctions, either preliminary or permanent, are difficult to obtain under Chinese law; that monetary damages granted by Chinese courts are extremely low, and insufficient to compensate patent holders; etc.

Taking advantage of ongoing judicial reform in China, including mandated public access to all judgments made since January 1, 2014 via a database called China Judgements Online (CJO), I wrote a paper called “Many Things You Know about Patent Infringement Litigation in China are Wrong” in 2016 (available at SSRN: https://ssrn.com/abstract=3063566). It analyzes 1,663 patent infringement judgments – all publicly available final patent infringement cases decided by local people’s courts in 2014, and surprisingly finds out that most of the long-standing beliefs about patent enforcement in China cannot be supported by empirical data.

One prominent example is that foreign patent holders were as likely to litigate as domestic patent holders, as shown below:

Not surprisingly, the overwhelming majority of patent infringement cases in China (93.08%, or 1,548) were litigated by Chinese patent owners or licensees. Foreign plaintiffs accounted for only 6.92% (115) of 1,663 decisions included in the population. This percentage – although it seemed intuitively low – represented the ratio of patents granted by SIPO to international patent applicants. According to statistics released by SIPO, 93,285 patents were issued to foreign individuals and entities in 2014, making up approximately 7.16% of all 1,302,687 patents granted by SIPO that year.

Why did foreign patentees not fear enforcing their patent rights in China as the conventional wisdom suggested? The answer may be surprising: plaintiffs fared better than domestic Chinese patent holders. They had a higher win rate, injunction rate, and average damages:

Foreign plaintiffs were more likely to win and receive injunctions than their Chinese counterparts in patent infringement cases brought in China. Moreover, damages awarded to foreign patent owners (¥201,620.45, or US$32,837.21) were almost three times higher than those awarded to Chinese patent owners (¥66,217.93, or US$10,784.68). The important implication here is that Chinese courts, while not preferring foreign parties to domestic ones, certainly did not protect the local economy at the expense of foreign companies in practice.

I have also looked into many other legal and extra-legal factors in that paper and tested how the outcome of patent infringement cases – the finding of infringement, the granting of injunctions, and the awarding of damages – in China can be explained on the basis of these factors. Some of my key findings are summarized below:

(1) Plaintiffs won in 80.16% of all patent infringement cases included in the population. Such a win rate was higher than its counterparts in many major countries – Germany (approximately 66%) and the United States (approximately 60%), for example.

(2) In China, permanent injunctions were automatically granted in most cases (93.76%), based on a finding of infringement.

(3) Damages awarded by Chinese courts are frustratingly low (US$4,885.99 in median).

(4) Design patents were overrepresented in infringement litigations in China, indicating that design patent owners are more likely to enforce their patents after issuance than owners of invention patents and utility models.

(5) The overwhelming majority of patent infringement lawsuits in China involved mechanical patents (84.64%). Electrical (13.79%) and chemical (1.57%) patents made up only a rather small portion of all decisions.

(6) On average, patent owners had waited for approximately half of the protection term of their patents (48.15% for invention patents, 65.60% for utility models, and 45.50% for design patents) before enforcement.

(7) Patent infringement cases were highly concentrated in the East Coast region – the most economically developed part of China. The nine provinces in the East Coast region heard more than three quarters of all patent infringement lawsuits in 2014.

Welcome Andrei Iancu, USPTO Director

Without dissent (94-0), the U.S. Senate has confirmed Mr. Andrei Iancu as Director of the U.S. Patent and Trademark Office and Undersecretary of Commerce for Intellectual Property.  In addition to administering the 10,000 person and $2 billion Federal Agency, Iancu will also serve as a primary adviser for the White House on Intellectual Property law issues — both domestic and foreign.

Iancu takes over from Joseph Matal who was instrumental in development and passage of the America Invents Act in his role as General Counsel of the Judiciary Committee under Republican Jeff Sessions.

As a longtime patent attorney and patent litigator, Iancu brings both a wealth of experience and understanding of the system.  I am looking forward to his leadership of the agency! Congratulations and Welcome.


Mapping the Patent Office Intervenor Power

Guest post by Saurabh Vishnubhakat, Associate Professor at the Texas A&M University School of Law and the Texas A&M College of Engineering.  Although Prof. Vishnubhakat was an advisor at the USPTO until June, 2015, his arguments here should not be imputed to the USPTO or to any other organization. This post is based on a new paper forthcoming in the N.Y.U. Annual Survey of American Law.  Read the draft at https://ssrn.com/abstract=3113844.


Since the AIA, the Patent Office has had a relatively little-known power in post-issuance proceedings. Once a PTAB decision is appealed to the Federal Circuit, the Patent Office can intervene in the appeal as a matter of statutory right under 35 U.S.C. § 143:

With respect to an appeal described in section 142, the Director shall transmit to the United States Court of Appeals for the Federal Circuit a certified list of the documents comprising the record in the Patent and Trademark Office. The court may request that the Director forward the original or certified copies of such documents during pendency of the appeal. In an ex parte case, the Director shall submit to the court in writing the grounds for the decision of the Patent and Trademark Office, addressing all of the issues raised in the appeal. The Director shall have the right to intervene in an appeal from a decision entered by the Patent Trial and Appeal Board in a derivation proceeding under section 135 or in an inter partes or post-grant review under chapter 31 or 32. The court shall, before hearing an appeal, give notice of the time and place of the hearing to the Director and the parties in the appeal.

In the past few years, the Patent Office has exercised this intervenor authority frequently and with specific apparent policy objectives. In Knowles Electronics v. Matal, the Federal Circuit is now considering the extent to which the agency must establish Article III standing in order to exercise its intervenor authority—specifically in cases where the prevailing party below is absent from the appeal. Also in question, assuming agency standing, is whether the Director must defend the PTAB’s decision below or is free to take other positions on appeal.

Patent Office Interventions: An Empirical Summary

New data on Federal Circuit intervenors shows that the Patent Office’s pattern of strategic intervention intersects in important ways with constitutional limits on the agency’s power.

  • Among 96 observed disputes (across 145 docketed appeals) in which the agency intervened, every intervenor brief that the Patent Office has filed has been in full or partial defense of the PTAB’s position or of some larger structural value associated with administrative adjudication, never in opposition to the PTAB’s stance.
  • Where the Patent Office did choose to intervene on appeal, the outcomes below were usually defeats for the patent owner (about 80%), and the agency’s position was to affirm the defeat.
  • Where the Patent Office intervened specifically to stand in for a litigant who was absent on appeal, the absent litigant was always a prevailing patent challenger—never a prevailing patent owner.

This is constitutionally important because the agency’s ability to intervene often will rest on its ability to show Article III standing. The Patent Office as intervenor may be able avoid having to show its own standing—but only if (1) the agency has entered the case on the side of a party that does establish standing, and so long as (2) the agency does not seek relief that is different from what that friendly party seeks.

Patent Office Intervention and Article III Standing

The Supreme Court explained in Arizonans for Official English v. Arizona, that standing “must be met by persons seeking appellate review, just as it must be met by persons appearing in courts of first instance.” 520 U.S. 43, 64 (1997). Where the friendly party with proven standing declines to appear, the intervenor “cannot step into the shoes of the original party unless the intervenor independently fulfills the requirements of Article III”—even where the intervenor takes the same position as that of the absent party. Id. at 64–65.

Importantly, adverse parties must also have standing independently of each other. It is a common shorthand to say that a plaintiff’s duty to show standing means that standing is required only from plaintiffs. But in fact, standing to defend is necessary as well. It is true that any given defendant probably can establish standing, as a defendant’s potential injury from an adverse judgment is generally enough to satisfy Article III. Still, the case-or-controversy requirement does not merely demand standing to sue. As the Court explained in Arizonans for Official English, what is needed is standing “to sue or defend.” Id. at 64.

This view also calls into question the Federal Circuit’s recent panel decision in Personal Audio, LLC v. Electronic Frontier Found. (Fed. Cir. 2017). It also calls into question the Patent Office position in Knowles. In its briefing on the Article III standing questions, the agency has adopted an expansive view of its own authority and a very limited view of its constitutional limits. In its first supplemental brief, the Patent Office argued that it need not show its own Article III standing because it can piggyback on the standing of Knowles Electronics, the patent owner mounting the appeal—even though the Patent Office as intervenor is adverse to Knowles. The agency also argued, apparently quite broadly, that “the Director may take any substantive position he likes” on appeal. The agency’s second supplemental brief clarified, however—in light of the Chenery doctrine—that this freedom to choose “any substantive position” pertained only to “an issue [actually] decided by the Board.”

But while piggybacking on a friendly party’s standing is one thing, piggybacking on an adverse party’s standing—especially where the friendly party is absent—is quite another. Indeed, though Knowles Electronics’s supplemental brief led with this point, the agency’s briefing contained no responsive discussion of Arizonans for Official English.

Implications for Patent Office Policy and Participation in the Patent System

Choosing to intervene only in certain cases, to support only certain positions, and to stand in only for certain absent appellate parties are plainly acts of policy. The plain language of § 143 suggests that it is a policy instrument that Congress intended for the Patent Office. But the constitutional limitations of Article III, as elaborated by the Court, remain a meaningful constraint on how the agency can exercise its statutory powers. This is especially true given the agency’s observed preferences as intervenor, preferences that require standing to sue or defend and that limit the ability to piggyback on adverse or absent parties.

Apart from their inherent importance, these constitutional imitations also matter for broader participation in the patent system. Since the Patent Office began intervening in Federal Circuit appeals, the relative share of interventions by private parties has declined. The remainder has shifted to a pattern of more concentrated, multi-party interventions. Data on non-governmental intervenors during the same period (Dec. 2013–Sept. 2017) as Patent Office interventions shows that 142 private parties intervened in only 43 docketed Federal Circuit cases. By contrast, in an equivalent period of time before the Patent Office began using its intervenor power (Feb. 2010–Nov. 2013), 63 private parties had intervened in 30 docketed cases while the Patent Office apparently did not intervene in any. In other words, there has been a net offloading onto the Patent Office of the responsibility to intervene.

As I argue in my paper, this is significant precisely because private-party intervenors can often show, more than the Patent Office could, enough of a stake to intervene in a given case. However, Congress chose not to entrust the protection of larger social interests diffusely to private-party intervenors. Instead, it recognized the coordinating and policymaking function that agency intervention can properly serve—within constitutional limits. When understood this way, private parties’ interventions are a useful adjunct to the agency’s. This is especially true where parties may be dissatisfied by the agency’s priorities, which may change considerably from one administration to another. If the decline in private-party intervention has reached some equilibrium with agency intervention—or will soon do so—then that outcome seems preferable to a complete abdication by private parties of the effort to intervene. The Patent Office can do much, but it should not be required to do all that intervenors can do.