With reference to my earlier post on international patent rights as a chip in international trade negotiations, consider recent discussion of Trump stepping back from the World Trade Organization (WTO) – the administrator of TRIPS and GATT.

• Axios Article
• The Hill Recap

Will US Trade Wars Create a Rocky Road for International Patent Rights

Patent owners and innovators continue to push for statutory reform of the doctrine of subject matter eligibility — with the primary goal of repudiating recent Supreme Court precedent of Mayo Collaborative Services v. Prometheus Laboratories, Inc., 566 U.S. 66 (2012) and Alice Corp. Pty. v. CLS Bank Int’l, 134 S. Ct. 2347 (2014).

Several bar associations and groups presented their proposed revisions. That approach, however, was something of a stumbling block for the initiatives. Although there was generalized unity, there has not been unity on the specifics. That is slowly changing with AIPLA, IPO, and NYIPLA all on-board with roughly the same proposal:

35 U.S.C. § 101—Inventions Patentable

(a) Eligible Subject Matter.—Whoever invents or discovers any useful process, machine, manufacture, composition of matter, or any useful improvement thereof, shall be entitled to a patent therefor, subject only to the conditions and requirements set forth in this title.

(b) Sole Exceptions to Subject Matter Eligibility.—A claimed invention is ineligible under subsection (a) only if the claimed invention as a whole exists in nature independent of and prior to any human activity, or can be performed solely in the human mind.

(c) Sole Eligibility Standard.—The eligibility of a claimed invention under subsections (a) and (b) shall be determined without regard to the requirements or conditions of sections 102, 103, and 112 of this title, the manner in which the claimed invention was made or discovered, or whether the claimed invention includes an inventive concept.

Here, the term “claimed invention” does not mean what might suggest — an invention that has been claimed in a patent or patent application. Rather, the term “claimed invention” is narrowly defined as “the subject matter defined by a claim in a patent or an application for a patent.” 35 U.S.C. 100(j).  In other words, the “claimed invention” is what is claimed to be the invention.

Of course, the next step will be much more difficult for proponents of the legislation – getting Congress to act.

Guest post by Professor Jorge L. Contreras of the University of Utah School of Law.  Note that the author was a partner at a law firm that was involved in Rambus v. FTC and Broadcom v. Qualcomm while those cases were litigated and decided.  The author had no direct involvement in either case.

During the dozen years demarcated by the FTC’s 1996 consent decree with Dell Computer (121 FTC 616 (1996)) and the DC Circuit’s 2008 decision in Rambus, Inc. v. FTC (522 F.3d 456 (D.C. Cir. 2008)), the U.S. saw a spate of cases in which participants in voluntary standards-development organizations (SDOs) were alleged to have violated an SDO’s rules by failing to disclose patents essential to the SDO’s standards.  In addition to Dell and Rambus, highly-publicized deception cases such as Broadcom v. Qualcomm (548 F.3d 1004 (Fed. Cir. 2008)) explored what SDO policies actually required of their participants and what penalties could be imposed for their breach, whether under contract, equity, patent or antitrust law.  These questions, and the large sums at stake, generated a cottage industry of legal and economics scholarship around the law and lore of standardization.  But by the early 2010s, the information and communications technology (ICT) sector seems to have learned the lessons of Dell, Rambus and Qualcomm: SDOs improved the clarity of their internal processes, SDO participants adopted a policy of “disclose, disclose, disclose” (on the theory that it can never hurt to disclose too many patents), and the cases turned to other pressing questions like the meaning of SDO commitments to license patents on terms that are “fair, reasonable and nondiscriminatory” (FRAND), which continues to bedevil courts today. I was thus intrigued to see a case that harkens back to the heyday of the old SDO deception cases in a pair of recent decisions in Momenta Pharmaceuticals, Inc. v. Amphastar Pharmaceuticals, Inc. (D. Mass., No. 11-cv-11681, Feb. 7, 2018 and No. 16-10112-NMG, Mar, 19, 2018).  Surprisingly, this non-ICT case may give courts an unexpected opportunity to revisit the DC Circuit’s controversial decision in Rambus v. FTC, which found no antitrust liability for an allegedly deceptive failure to disclose patents to an SDO.

The ‘886 Patent Dispute

The long-running dispute in Momenta is between two generic producers of the blockbuster anticoagulant drug enoxaparin, which Sanofi-Aventis first marketed in 1993 under the brand name Lovenox (2009 U.S. sales $2.7 billion).  In July 2010, Momenta Pharmaceuticals, in conjunction with Novartis’s Sandoz division, received FDA approval for a biosimilar version of enoxaparin.  Amphastar Pharmaceuticals, another generics manufacturer, received FDA approval for its own biosimilar version of enoxaparin on September 19, 2011.  Two days later, Momenta sued Amphastar for infringement of U.S. Patent 7,575,886 (the ‘886 Patent), which claims a quality control process used in the manufacture of enoxaparin.  Momenta applied for the ‘886 Patent in 2003; it was issued in 2009 listing five inventors including Dr. Zachary Shriver. After a lengthy set of proceedings, including two separate appeals to the Federal Circuit, a jury found in 2017 that Amphastar infringed the claims of the ’886 patent, but that the claims were invalid due to lack of enablement and inadequate written description.

Dispute Over Method 207

The United States Pharmacopeial Convention (USP) is an SDO that develops standards for testing the quality and purity of foods and drugs.  In 2006, with the encouragement of Sanofi-Aventis, USP began to consider a standard for testing enoxaparin.  Beginning in 2008, Momenta’s employee Dr. Shriver participated in the USP advisory panel that developed what came to be known as USP Method 207 pertaining to enoxaparin manufacture, which USP eventually approved and adopted as a standard in 2009.  Amphastar alleges that the claims of the ‘886 patent cover key portions of Method 207.

USP has a number of written policies that are binding on individuals and firms participating in its standardization work.  Amphastar argues that USP’s written policies required Dr. Shriver to disclose the existence of Momenta’s application for the ‘886 patent to USP prior to approval of the standard, which he did not.  Due to this failure, Amphastar alleges that Momenta intentionally violated USP’s policies.  In consequence, Amphasrar argues that (1) Momenta has waived its right to enforce the ‘886 patent, (2) Momenta is estopped from enforcing the ‘886 patent, and (3) Momenta and Sandoz violated Section 2 of the Sherman Act, as well as various state antitrust and competition statutes by “wrongfully acquiring monopoly power by deceiving the USP into adopting a standard which they later claimed was covered by” the ‘886 Patent (Mar. 19, 2018, slip op. at 9).  These allegations reflect the classic SDO deception scenario, akin to those alleged in cases like Dell, Rambus and Qualcomm. In each of these cases the central issue is “the consequence of silence in the face of a duty to disclose patents in a standards-setting organization” (Qualcomm, 548 F.3d at 1008).

The USP Policies

In assessing Momenta’s obligation to disclose the ‘886 patent, Judge Nathaniel Gordon of the District Court for the District of Massachusetts considered three of USP’s written policies.  First, Section 2.05 of the Rules and Procedures of the USP Council of Experts (the “Expert Rules”) states that no advisory panel member with a “financial or other interest that may conflict, or may appear to conflict, with his or her duties and responsibilities with respect to a particular matter, shall vote on such matter.”  Dr. Shriver abstained from voting on the Method 207 standard (Feb. 7, 2018, slip op. at 10).

Second, Section 2.06(a) of the Expert Rules requires that each advisory panel member submit to USP a written statement disclosing his or her employer, sources of research funding, and “other professional or financial interests, including intellectual property rights, that may result in a conflict of interest or the appearance of a conflict of interest” (id. at 9, emphasis added).  Dr. Shriver submitted such a statement in which he identified Momenta as his employer.

Third, under a separate document known as the USP Guidelines, all “Sponsors” of USP technical proposals are requested to disclose “whether any portion of the methods or procedures submitted are subject to patent or other IP rights” (id. at 10). Momenta made no disclosure responsive to this provision.

Amphastar argued that these three provisions, individually and collectively, required Momenta, through Dr. Shriver, to disclose the existence of the ‘886 patent and its relevance to Method 207 while it was under consideration at USP.  Judge Gordon, however, disagreed.  With respect to Section 2.05 of the Expert Rules, Dr. Shriver’s abstention from the vote on Method 207 was in compliance with the Rules.  As for the Guidelines, Momenta was not formally a “Sponsor” of Method 207 (the only official Sponsor being Sanofi-Aventis), making the patent disclosure request inapplicable to Momenta.  Finally, Dr. Shriver’s conflict of interest form correctly identified Momenta as his employer.  At most, the catch-all provision requiring disclosure of “other professional or financial interests” was ambiguous in its requirements.  Accordingly, Judge Gordon found the USP policies to be ambiguous regarding Momenta’s obligation to disclose the ‘886 patent (id. at 11).

Participant Understanding of Disclosure Requirement

Notwithstanding the ambiguity of USP’s policies, Judge Gordon, citing Qualcomm (548 F.3d at 1012), went on to consider whether USP participants may have “understood the policies to include a duty to disclose” patents essential to USP standards (id. at 11-12).  A former USP employee testified that there was a “common understanding” among USP participants that patent disclosures were required (Feb. 7, 2018, slip op. at 15).  In addition, the witness described a 2008 advisory panel meeting at which USP noted that Sanofi-Aventis, the Sponsor of Method 207, had disclosed a relevant patent.  According to the witness, a representative from Momenta then requested that Sanofi-Aventis be requested to abandon the patent before the standard was approved, which it ultimately did (id. at 13).  These factors, taken together, the court reasoned, “indicate[d] that Momenta itself, a participant in the USP, acknowledged its own obligation to disclose and abandon like patents” (id.). Thus, as in both Qualcomm and Rambus, Inc. v. Infineon Techs. AG (318 F.3d 1081, 1098 (Fed. Cir. 2003)), the court found that, notwithstanding the absence of an express requirement that patents essential to an SDO’s standards be disclosed by SDO participants, such an obligation existed on the basis of unwritten participant expectations (a good example of private ordering influencing legal determinations).

Interestingly, Momenta argued that it should not be deemed to have an obligation to disclose the ‘886 patent because it opposed the approval of Method 207 at USP, principally because it used a different method for testing enoxaparin.  What’s more, Method 207 was not a compulsory standard, meaning that even if Momenta held a patent covering the standard, it could not hold the industry “hostage” (id. at 15).  The court did not find these arguments persuasive, noting in particular Amphastar’s claim that the FDA did require it to use Method 207 in order to secure approval of its biosimilar version of enoxaparin.

Waiver

Amphastar argued that Momenta’s breach of its obligation to disclose the ‘886 patent to USP should result in a waiver of Momenta’s right to enforce the patent.  The unenforceability remedy in patent law is a harsh one, usually extending not only to the infringer, but to the entire world (see Qualcomm, 548 F.3d at 1024, and this article, discussing unenforceability in earlier standards cases). In both Dell and Qualcomm, the unenforceability remedy was limited to implementations of the standards in question and, in theory, the patents could have been enforced against products that did not comply with those standards.  The court in this case likewise limited unenforceability of the ‘886 patent to Method 207.   Judge Gordon carefully analyzed the precise manufacturing processes used by Amphastar to determine which the processes the unenforceability remedy should apply to.  Momenta alleged that three different manufacturing processes used by Amphastar, referred to as the “15-25%” procedure (both original and revised) and the “DBB” procedure, infringed the ‘886 patent.  But the court concluded that the DBB procedure did not conform to Method 207.  Accordingly, the ‘886 patent was held to be unenforceable as to the 15-25% procedures, but not to DBB (Feb. 7, 2018, slip op. at 16-18).

Equitable Estoppel

Amphastar also argued that because it reasonably relied on Momenta’s misleading conduct (i.e., failing to disclose the existence of the ‘886 patent) and made investments in manufacturing capacity for enoxaparin on that basis, Momenta should be estopped from enforcing the patent against it.  Judge Gordon agreed, citing Hynix Semiconductor Inc. v. Rambus, Inc. (645 F.3d 1336, 1348 (Fed. Cir. 2011)).  But as with waiver, the remedy was applied only to the 15-25% process, and not to the DBB process.

Antitrust Claims

In addition to the waiver and estoppel defenses raised by Amphastar, Amphastar brought a separate action charging Momenta and Sandoz with violations of the Sherman Act and California antitrust and competition law based on Momenta’s failure to disclose the ‘886 patent to USP.  Amphastar argues that Momenta “wrongfully acquir[ed] monopoly power by deceiving the USP into adopting” the Method 207 standard.  This conduct, Amphastar alleges, both improperly excluded Amphastar from the market for generic enoxaparin and drove up the price of generic enoxaparin by billions of dollars over the years (Mar. 19, 2018, slip op. at 6).

In denying Momenta’s motion to dismiss, Judge Gordon looked to Broadcom Corp. v. Qualcomm, Inc., 501 F.3d 297, 314 (3^rd Cir. 2007), which explains that “[d]eception in a consensus-driven private standard-setting environment harms the competitive process by obscuring the costs of including proprietary technology in a standard and increasing the likelihood that patent rights will confer market power on the patent holder”.  Accordingly, he held that Amphastar had articulated a cognizable claim for monopolization under the Sherman Act.

A jury trial in the antitrust case is currently scheduled to begin in September 2019.  While there appears to be ample basis in the record supporting Amphastar’s claims regarding Momenta’s deceptive conduct toward USP, Amphastar’s greatest challenge at trial will likely be proving the existence of an antitrust injury, particularly in view of the FTC’s case against Rambus, which faltered on this very point. As the DC Circuit explained in Rambus, Inc. v. FTC, 522 F.3d at 466, “An otherwise lawful monopolist’s end-run around price constraints, even when deceptive or fraudulent, does not alone present a harm to competition in the monopolized market.”  Rather, antitrust injury – harm to competition, rather than to a competitor – cannot be said to exist if an SDO, “in the world that would have existed but for [the patent holder’s] deception, would have standardized the very same technologies” (id.).    Thus, will Amphastar be able to show that but for Momenta’s deceptive conduct, the Method 207 standard would not have been approved by USP?

The result will be interesting, both at trial and, if appealed, at the First Circuit, which is not strictly bound to follow the DC Circuit’s precedent in Rambus v. FTC.  There are certainly many, including Commissioners at the FTC, who felt the DC Circuit’s decision in Rambus was excessively forgiving of deceptive conduct within SDOs.  Momenta, which unexpectedly raises a fact pattern that has all but disappeared from the ICT litigation landscape, may give courts an opportunity to revisit this controversial decision in a new context.

By Jason Rantanen

In Cuozzo v. Lee (2015), the Supreme Court affirmed the USPTO’s use of the Broadest Reasonable Interpretation (BRI) approach to claim construction in inter partes review.  As Dennis wrote in May, the PTO is now considering changing the standard it uses to that of “a civil action to invalidate a patent under 35 U.S.C. 282(b), including construing the claim in accordance with the ordinary and customary meaning of such claim as understood by one of ordinary skill in the art and the prosecution history pertaining to the patent.”  Changes to the Claim Construction Standard for Interpreting Claims in Trial Proceedings Before the Patent Trial and Appeal Board, 83 Fed. Reg. 21221, 21226 (proposed May 9, 2018).  Here’s the Notice of Proposed Rulemaking.

The period for comments closes on July 9, 2018, so if you’d like to submit a comment on the proposed change, you should do so soon.  According to the Regulations.gov page for the proposed rulemaking, only 8 comments have been submitted so far.   Note that the proposed standard would apply to IPR, post grant review, and covered business method review proceedings.

• Bilski v. Kappos, 561 U.S. 593 (2010) (machine-or-transformation test is not the sole test for determining patent eligibility)
• KSR Intern. Co. v. Teleflex Inc., 550 U.S. 398 (2007) (common sense allows PHOSITA to combine references in considering an invention’s obviousness)
• Festo Corp. v. Shoketsu Kinzoku Kogyo Kabushiki Co., Ltd., 535 U.S. 722 (2002) (narrowing amendment presumptively creates prosecution history estoppel)
• Commil USA, LLC v. Cisco Sys., Inc., 135 S. Ct. 1920 (2015) (an infringer’s belief that a patent is invalid is not a defense to a claim of induced infringement)
• TrafFix Devices, Inc. v. Mktg. Displays, Inc., 532 U.S. 23 (2001) (utility patent creates strong inference of a design’s functionality)

by Dennis Crouch

Vanda Pharms. Inc. v. West-Ward Pharms. Int’l Ltd., 887 F.3d 1117 (Fed. Cir. 2018) offers an example of a claim on the cusp of eligibility.  In a 2-1 decision, Vanda’s schizophrenia treatment claim was found eligible with Judge Lourie penning the majority and Chief Judge Prost in dissent. Judge Hughes was the swing vote here.

I have several thoughts on the patents at issue here, but they boil down to the following (1) Vanda’s claims should be patent eligible; (2) but the claims are not patent eligible under Mayo Collaborative Services v. Prometheus Laboratories, Inc., 566 U.S. 66 (2012) and Alice Corp. Pty. v. CLS Bank Int’l, 134 S. Ct. 2347 (2014).

Now, West-Ward has filed its petition for rehearing en banc on the following question*:

1. Whether adjusting a dose of an old drug based on a patient’s genetic risk of poorly metabolizing it is eligible for patenting under 35 U.S.C. § 101.

A brief in support has been filed by Inventia and Mylan.

I previously wrote that “the majority’s approach appears to latch onto simple patent drafting tricks as the basis for distinguishing Mayo — an approach directly rejected by the Supreme Court in Mayo.”

The claim in Vanda is directed toward a method of treating a patient suffering from schizophrenia with the drug iloperidone. The drug was already known as a schizophrenia treatment prior to the invention here, but some individuals did not tolerate the drug well (risk of “QTc prolongation”). The major discovery of the inventors here was that a genetic difference (the “CYP2D6 genotype”) led to those folks likely being poor metabolizers of iloperiodon.  The patent then has two basic steps:

1. Determining whether the patient is genetically a poor metabolizer of the drug (i.e., has the CYP2D6 genotype)
2. Administering iloperidone to the patient (<12 mg per day if express CYP2D6 genotype; otherwise 12-24 mg per day) in order to reduce the risk of “QTc prolongation” for poor metabolizers.

The basics here is that the inventors discovered the relationship between the genetic expression, a potential risk, and a safe drug level. That discovery itself is clearly not patentable and so the patentee added

The Supreme Court’s Mayo decision also involved a personalized treatment approach  (this time for IBD) based upon metabolization rate with the following two steps:

1. Administering the drug (6-thioguanine) to treat the GI disorder; and
2. Measure (“determine”) the level of the drug (6-thioguanine) in the blood — with low levels (<230 pmol per 8×10⁸ red blood cells) indicating a need to increase the next drug dosage and high levels (>400 pmol per 8×10⁸ red blood cells) indicating a need to decrease the next drug dosage.

In distinguishing these claims the majority explained that

Mayo was a diagnostic method while Vanda is a treatment method.  The reality is though that both are diagnostic and treatment oriented.  What the majority suggests, but does not say, is that Mayo’s claims would be patent eligible if they added one more step of injecting the new dosage. To me added injection sounds like the type of non-inventive post-solution activity that cannot transform an ineligible law of nature into a patent eligible invention.

Stepping back a little bit — One way to think about this case is as the flip side of Sequenom. In that case, the Federal Circuit followed Mayo, but expressly called for the Supreme Court to revisit its eligibility doctrine.  In his en banc denial concurring opinion, Judge Lourie wrote: “I find no principled basis to distinguish this case from Mayo, by which we are bound.”  However, the Supreme Court did not grant certiorari in Sequenom.  Rather than following that same approach — asking for help from the Supreme Court — The court in Vanda decided to make it happen themselves.  In my view, an en banc denial here will be a high flaunting of Supreme Court precedent — the question then will be what – if anything – will the Supreme Court do about it?

• Vanda Petition
• Vanda Amicus
• Vanda Decision
• Vanda Patent

Eligibility: Preamble Does the Trick for Federal Circuit

by Dennis Crouch

The Supreme Court has granted Helsinn’s petition for writ of certiori in the first case focusing on the 2011 rewriting of the prior art and novelty statute 35 U.S.C. 102.

Issue: Whether, under the Leahy-Smith America Invents Act, an inventor’s sale of an invention to a third party that is obligated to keep the invention confidential qualifies as prior art for purposes of determining the patentability of the invention.

Helsinn Healthcare S.A. v. Teva Pharmaceuticals USA Inc., Docket No. 17-1229.  Expect a hearing this fall and a decision early 2019.

A major focus of discussions surrounding the AIA first-to-file provisions was to limit prior art to objective and publicly available references.  However, Congress did not expressly alter the “on sale” bar language that has been used as a source for the rule that an inventor’s pre-filing secret sales activities (or other commercializing uses) will bar later patenting.

My initial expectation is that the Federal Circuit decision will be affirmed — with a holding that Congress did not intend to overrule 190 year old Supreme Court precedent.  But, the conventional wisdom in patent cases is that the Supreme Court does not ordinarily grant certiorari in order to affirm the Federal Circuit.

A key underlying aspect of the focus here is that differential treatment of secret commercialization between the inventor and some random third party has never been express within the statute.  The Court need not wait for a new congressional statement to revisit that non-statutory approach.

In my mind, the biggest question in this area is how sales, offers, or other commercialization should be treated in an obviousness analysis.

Guest post by Timothy Holbrook, Asa Griggs Candler Professor of Law at Emory University School of Law.  Professor Holbrook authored an amicus brief in WesternGeco v. Ion.

When the Supreme Court agreed to review WesternGeco LLC v. ION Geophysical Corp., it was unclear how sweeping the decision would be. The case had clear implications for patent law. It would be the first time the Supreme Court had addressed patent infringement damages under 35 U.S.C. § 284 since its 1984 decision General Motors Corp. v. Devex Corp. The briefing and oral argument suggested the Court had some interest in assessing proximate cause in patent damages, an issue that has not been addressed by the Supreme Court or revisited by the Federal Circuit since its seminal en banc decision in Rite Hite Corp. v. Kelly Company Inc. Finally, beyond patent law, this case had implications for the Court’s jurisprudence on the presumption against extraterritoriality, particularly as to whether the presumption applies to remedial provisions.

Ultimately, the Supreme Court wrote a narrow decision, expressly avoiding many of these broader issues. The opinion, however, does demonstrate a methodology for addressing these issues in the future. It also leaves open the question of the viability of the Federal Circuit’s decisions in two other cases, Power Integrations, Inc. v. Fairchild Semiconductor International, Inc. and Carnegie Mellon University v. Marvell Technology Group, Ltd., although those cases appear to have used flawed methodologies.

WesternGeco involved infringement under 35 U.S.C. § 271(f)(2), a unique provision that defines infringement as the supplying from the United States of a component or components that have no substantial non-infringing uses, so long as the infringer knows that there are no other uses and intends to assemble the complete device overseas. The only issue in this case was one of damages: could the patentee receive lost profits for foregone sales of services using the patented invention on the high seas, outside of the United States.

The Federal Circuit had concluded the damages were not available by using the strict territorial limit on patent infringement damages it had embraced in Power Integrations and Carnegie Mellon. In all three cases, the Federal Circuit rejected damages awards for foreign activities, even though there was a predicate act of infringement.

The Federal Circuit in WesternGeco did not utilize the two-step framework for assessing the extraterritorial application of U.S. laws adopted by the Supreme Court in RJR Nabisco, Inc. European Community. Under RJR, a court at step one should determine whether the presumption against extraterritoriality has been rebutted, which occurs when “the statute gives a clear, affirmative indication that it applies extraterritorially.” If the presumption is not rebutted at step one, a court then goes to step two to assess if the focus of the statute to determine if, under the facts of the case, the statute is regulating domestic conduct, even if there may be some conduct that occurred abroad. Necessarily, an analysis of the focus of the statute is contingent on the particular facts of the case.

In WesternGeco, the Supreme Court utilized this framework, although it skipped step one and jumped straight to step two. The Court concluded that damages arising from foreign activity is permitted in this case. Noting that § 284 depends on the definition of infringement at issue, the Court turned to § 271(f)(2) to perform its focus analysis, concluding that § 271(f)(2)’s focus is exportation of components from the United States. These domestic acts thus resulted in the consequences for which damages are sought, so those damages should be available, contrary to the Federal Circuit’s holding.

What are some of the key implications and open questions after this decision?

The Court technically did not answer the question of whether the presumption against extraterritoriality applies to remedial provisions. The petitioner in this case argued that the presumption against extraterritoriality does not apply to remedial provisions at all. By skipping step one of the RJR analysis, the Court avoided answering this question. The Court was concerned that “resolving that question could implicate many other statutes besides the Patent Act.”

Interestingly, this move confirms that the presumption against extraterritoriality is really only found in step one of the RJR analysis. Step two is a distinct inquiry. Moreover, it is important that the Court did utilize the RJR framework at all, lending support for the view that this methodology is one of general application, even to remedial provisions. Future cases will have to determine the applicability of step one.

The analysis of remedies under step two depends on the nature of the provision defining liability. The Court also made clear that an analysis of the remedy provision of a statute will depend on the liability-creating portion of the statute at issue. Here, the Court turned to § 271(f)(2) to assess the focus of the statute; it did not simply focus on § 284 alone, which of course contains no territorial limits.

The Court thus rejected the approach urged by the petitioner and the Solicitor General that would have ignored the infringement provision at issue. Instead, they urged that only the compensatory nature of damages should be considered.

A proper step two analysis of § 284, therefore, depends on the relevant infringement provision. As acknowledged by Professor Stephen Yelderman of Notre Dame Law School, the Court “vindicated” the methodology I suggested both in an amici brief on behalf intellectual property law professors and in Boundaries, Extraterritoriality, and Patent Damages in the Notre Dame Law Review.

Moreover, the Court declined to overrule Power Integrations and Carnegie Mellon, notwithstanding the petitioner’s and Solicitor General’s arguments that these decisions were also wrong. Instead Court focused exclusively on § 271(f)(2), which means that the continued viability of Power Integrations and Carnegie Mellon remains an open question.

Issues of proximate cause may be coming down the pipeline, and maybe in this case. Some of the amicus briefs at the Court looked at the damages issue from the perspective of proximate cause. Professor Yelderman submitted an amicus brief that drew specific reference at oral argument, focusing extensively on proximate cause as it relates to damages. Similarly, the amici brief I submitted also raised issues of proximate cause, particularly in this case where the lost profits were for foregone services and not for lost sales of the invention.

Surprisingly, given the amount of discussion at oral argument on the subject, the Court relegated proximate cause to a footnote, noting “we do not address the extent to which other doctrines, such as proximate cause, could limit or preclude damages in particular cases.” Aside from punting on the issue, this footnote does implicitly suggest that proximate cause and extraterritoriality concerns are properly viewed as distinct concerns.

Moreover, it is unclear whether the Court is signaling to the Federal Circuit that proximate cause could still be an issue in this case. The Court rejected the bright-line rule against these damages offered by the Federal Circuit, but one could read that footnote to say it is an open issue in this case itself. Of course, given the Federal Circuit’s capacious views of proximate cause, it seems unlikely the Federal Circuit would use the doctrine to limit the damages here.

Do Power Integrations and Carnegie Mellon survive WesternGeco? The Court did not address extraterritorial damages under § 271(a), leaving these cases untouched. But what are the implications of WesternGeco for such worldwide damages theories? Professor Tom Cotter of the University of Minnesota School of Law believes those cases are no longer good law and that such damages would be available.

I disagree, however. I specifically analyzed those two cases using the RJR framework in Boundaries, Extraterritoriality, and Patent Damages. In my view, the focus of § 271(a) is more dramatically circumscribed territorially. Although any analysis of a statute’s focus depends on the particular facts of a given case, § 271(a)’s expressly is limited to infringement within the United States. While some transnational acts could be ensnared in such a focus, such as uses of transnational systems as in NTP Inc. v. Research in Motion, Ltd. or transnational deals to sell inventions in the United States as in Transocean Offshore Deepwater Drilling, Inc. v. Maersk Contractors USA, Inc., damages for wholly domestic acts of infringement would seem to be limited to acts within the United States. Thus, while the reasoning is wrong, the outcomes in Power Integrations and Carnegie Mellon may actually be correct. The focus of the § 271(a) is infringement only within the United States and not focused on exportation, as was the case in WesternGeco. Nevertheless, this issue remains open after WesternGeco, though we now know a court should approach the issue through the RJR framework.

For a short decision, the Court does offer some important insights relevant to its broader efforts in addressing the presumption against extraterritoriality. Nevertheless, the narrowness of the decision leaves to future cases a variety of important issues. The opinion likely will work as a roadmap for future litigants to raise them.

The specification of U.S. Patent No. 10,000,000 is short – only about three pages long.  However, the patentee made room for the following boilerplate:

• Although specific advantages have been enumerated above, various embodiments may include some, none, or all of the enumerated advantages.  
• [O]ther technical advantages may become readily apparent to one of ordinary skill in the art after review of the following figures and description.
• It should be understood at the outset that, although exemplary embodiments are illustrated in the figures and described below, the principles of the present disclosure may be implemented using any number of techniques, whether currently known or not. The present disclosure should in no way be limited to the exemplary implementations and techniques illustrated in the drawings and described below.
• Unless otherwise specifically noted, articles depicted in the drawings are not necessarily drawn to scale.
• Modifications, additions, or omissions may be made to the systems, apparatuses, and methods described herein without departing from the scope of the disclosure. For example, the components of the systems and apparatuses may be integrated or separated. Moreover, the operations of the systems and apparatuses disclosed herein may be performed by more, fewer, or other components and the methods described may include more, fewer, or other steps. Additionally, steps may be performed in any suitable order. As used in this document, “each” refers to each member of a set or each member of a subset of a set.
• To aid the Patent Office and any readers of any patent issued on this application in interpreting the claims appended hereto, applicants wish to note that they do not intend any of the appended claims or claim elements to invoke 35 U.S.C. 112(f) unless the words “means for” or “step for” are explicitly used in the particular claim.

By Jason Rantanen

WesternGeco LLC v. Ion Geophysical Corp. (2018), 2018 U.S. LEXIS 3842   Download Opinion
Majority: Thomas (author), Roberts, Kennedy, Ginsburg, Alito, Sotomayor, and Kagan. Dissent: Gorsuch, joined by Breyer.

In its final patent-related opinion of this term, the Supreme Court held that 35 U.S.C. § 284 permits the award of lost foreign profits.  In reaching its conclusion, the Court rejected the position of the Federal Circuit that the presumption against extraterritoriality precluded the award.  Full disclosure: I joined an amicus brief written by Emory Professor Timothy Holbrook that argued that the presumption against extraterritoriality applied here.

From pages 7-8 of the majority opinion:

In sum, the focus of §284, in a case involving infringement under §271(f)(2), is on the act of exporting components from the United States. In other words, the domestic infringement is “the objec[t] of the statute’s solicitude” in this context. Morrison, 561 U. S., at 267. The conduct in this case that is relevant to that focus clearly occurred in the United States, as it was ION’s domestic act of supplying the components that infringed WesternGeco’s patents. Thus, the lost-profits damages that were awarded to WesternGeco were a domestic application of §284.

The Court expressly declined to address the issue of proximate causality, which as Tom Cotter points out, would seem to provide an important limitation on the abilities of patent owners to obtain lost profits for § 271(f)(2) infringement. Slip Op. at 9, n. 3 (“In reaching this holding, we do not address the extent to which other doctrines, such as proximate cause, could limit or preclude damages in particular cases.”).  Given all this, I expect that parties will now focus heavily on proximate cause issues when arguing about remedies for § 271(f)(2) liability.

Tom Cotter has a detailed post about the decision on his Comparative Patent Remedies blog.

by Dennis Crouch

In recent remarks at the 10M patent ceremony, Rep. D. Issa discussed a White House trade meeting focusing on problems caused by weak enforcement of patents in Canada. For Issa, this is emblematic of a global problem with the U.S. patent system.

Just today we had a number of people at the White House [discussing trade disputes] . . . They went over in detail what the courts, for example, for years in Canada did to us. They decided that if you didn’t tell people how important your patent was, with specificity, they would just invalidate your patent. [FB Live Link]

The statement is interesting on many levels — including the ongoing role of intellectual property as an aspect of any trade dispute.  In the same way that countries can raise tariffs on foreign goods, they can also shift the treatment of foreign patent applicants by raising costs or by setting quotas.  While the US has long been a champion of lowering international barriers to patenting, it has also long been a champion of free trade.  For a trade battle, these tools are likely all on the table and so we may see rocky times ahead for the international patent system.

by Dennis Crouch

Important non-patent Supreme Court case for businesses operating online:

South Dakota v. Wayfair, Inc (Supreme Court June 21, 2018)

Holding: The “physical presence” rule of Quill Corp. v. North Dakota, 504 U. S. 298 is overruled. While states may not impose undue burdens on interstate commerce, the constitution does not prohibit taxation of activities having “substantial nexus with the taxing State” that are non-discriminatory, fairly apportioned, and related to services provided by the state.

https://www.supremecourt.gov/opinions/17pdf/17-494_j4el.pdf

by Dennis Crouch

Patent attorney Aaron Feigelson named his occasional blog 12:01 Tuesday.  The inside-reference is directed to the USPTO’s standard practice for the past several decades “like clockwork, every Tuesday after midnight” the USPTO issues a new set of patents.  These are released to the USPTO web servers and rapidly distributed through various other mechanisms — automatically being incorporated into various public and private databases.

Some readers will notice that no patents issued yet today, Tuesday June 19, 2018.  Do not worry though, the PTO has delayed the issuance until 9:00 am EST so that the release of U.S. Patent No. 10,000,000 can be done while the masses are awake.

One question though, for patentees seeking infringement damages going back to the patent’s issuance — will the day’s earnings be prorated?

by Dennis Crouch

In the pending case of Helsinn Healthcare S.A. v. Teva Pharmaceuticals USA, Inc., et al., No. 17-1229 (Supreme Court 2018), the petitioner has asked the Supreme Court to offer its statement on whether Congress altered the “on sale bar” to now apply only to non-confidential sales or offers.

Question Presented: Whether, under the Leahy-Smith America Invents Act, an inventor’s sale of an invention to a third party that is obligated to keep the invention confidential qualifies as prior art for purposes of determining the patentability of the invention.

In its decision, the Federal Circuit held that the on sale bar attaches even if the details of the invention are kept secret.  In this particular case, the sale was partially public – i.e., although the details of the invention were kept secret, the existence of the sale was publicly known.

The Supreme Court held its first conference regarding Helsinn on June 14, 2018 and took no action in the case — likely relisting it for a later conference.  Most petitions for writ of certiorari are denied immediately following the first conference — and so this is an important step toward certiorari in this case.  I expect that the next step in the case would be CVSG — seeking views of the Trump Administration.

The On Sale Bar has its origin in Justice Story’s decision in Pennock v. Dialogue, 27 U.S. 1 (1829). There, Story wrote:

If an inventor should be permitted to hold back from the knowledge of the public the secrets of his invention; if he should for a long period of years retain the monopoly, and make, and sell his invention publicly, and thus gather the whole profits of it * * * and then, and then only, when the danger of competition should force him to secure the exclusive right, he should be allowed to take out a patent * * * it would materially retard the progress of science and the useful arts, and give a premium to those who should be least prompt to communicate their discoveries.

IN 1836, the rule was expressly stated in the revision of the patent laws:

Sec. 6. That any person or persons having discovered or invented any new and useful art, machine, manufacture, or composition of matter . . . not known or used by others before his or their discovery or invention thereof, and not, at the time of his application for a patent, in public use or on sale, with his consent or allowance, as the inventor or discoverer; . . . may make application in writing  . . . and the Commissioner, on due proceedings had, may grant a patent therefor.

Since then, and even before, secret sales were seen as a bar to patenting (except when within the grace period).  In Metallizing Engineering, Judge Learned Hand expanded the doctrine to encompass any commercial exploitation by the inventor:

[H]e shall not exploit his discovery competitively after it is ready for patenting; he must content himself with either secrecy, or legal monopoly. It is true that for the limited period of two years he was allowed to do so, possibly in order to give him time to prepare an application; and even that has been recently cut down by half. But if he goes beyond that period of probation, he forfeits his right regardless of how little the public may have learned about the invention; just as he can forfeit it by too long concealment, even without exploiting the invention at all.

Metallizing Engineering Co. v. Kenyon Bearing & Auto Parts Co., 153 F.2d 516 (2d Cir. 1946).

Third Party Sales: In an interesting question – not at issue directly in Helsinn — involves secret sales by third parties. 1985 footnote, the Federal Circuit explained its position that the on sale bar is only directed at activities by the inventor:

The “on sale” provision of 35 U.S.C. § 102(b) is directed at precluding an inventor from commercializing his invention for over a year before he files his application. Sales or offers made by others and disclosing the claimed invention implicate the “public use” provision of 35 U.S.C. § 102(b).

In re Caveney, 761 F.2d 671, 676 (Fed. Cir. 1985); explanation restated in ResQNet.com, Inc. v. Lansa, Inc., 594 F.3d 860 (Fed. Cir. 2010).  On the other hand, other cases have applied the on-sale bar to activities by third parties. See In re Epstein, 32 F.3d 1559 (Fed. Cir. 1994).   Professor Carl Moy aptly explained the situation in his treatise: “The current authorities plainly evidence a difference of opinion about the underlying purpose of the on-sale bar.” 2 Moy’s Walker on Patents § 8:227 (4th ed.).