Senator Orrin Hatch has been a central figure in essentially all patent legislation over the past 40 years (he joined the Senate in 1977).  As he nears retirement (Jan 2019), Hatch has proposed one additional change — an amendment to provide pharma with some protection from Inter Partes Review challenges titled the Hatch-Waxman Integrity Act of 2018.

The basics of the amendment is that the results of an IPR/PRG proceeding cannot serve as its Paragraph IV certification that the patent is invalid.  A parallel provision is designed for biologics under the BCPIA.  In addition – as Dan Feigelson explains in the comments – The proposal would also require an ANDA applicant to certify that it will not (and has not) filed an IPR/PRG petition against Orange Book listed patents for the related drug.

In addition, the provision would modify the Securities Exchange Act to make it a manipulative or deceptive trade practice to an IPR petition and short-selling the patent owner’s stock within 90-days (before or after).

More info from the Senator.

By Dennis Crouch

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

When Xitronix sued KLA-Tencor, it raised only one cause of action – “a Walker Process monopolization claim under § 2 of the Sherman Act and §§ 4 and 6 of the Clayton Act based on the alleged fraudulent prosecution of a patent.” See Walker Process Equipment, Inc. v. Food Machinery & Chemical Corp., 382 U.S. 172 (1965). The basic allegation was that KLA fraudulently obtained its U.S. Patent No. 8,817,260 with claims identical-to or broader than claims of KLA’s previously invalidated U.S. Patent No. 7,362,441.

The district court rejected the case on summary judgment based upon a lack of evidence of fraud – reasoning that the PTO probably has power to override the court. The district observed wrote:

[T]he Court suspects the examiner was in fact aware of the Court’s [invalidity] holding but chose to ignore it. It would not be the first time the PTO, an administrative agency, overrode a final judgment of an Article III court, and it will likely not be the last. (Order).

The Patent Office can now come to a different conclusion than district court[s], the circuit court, [the] Supreme Court, for that matter, and until the Supreme Court or the Congress suggests that, there’s no stability in patent law. . . . It’s an egotistical war between the patent office and the circuit court for sure. But they’re not bound by a jury verdict. They’re not bound by a judge’s judgment. They made that clear, expressly in writing.

On appeal, the Federal Circuit did not address the merits of the holding – but rather ruled that Walker Process monopolization claims do not arise under the U.S. Patent Laws. As a result, the Federal Circuit has no appellate jurisdiction over the case and it was ordered transferred to the 5^th Circuit.

Xitronix then requested en banc rehearing on the issue – arguing that the questions here strike to the core of patent law doctrine and procedure. That request has now been denied.

Writing in dissent, Judge Newman explains that the decision here is fundamental “to the judicial structure of patent adjudication, and the future of a nationally consistent United States patent law.”

I write in concern for the conflicts and uncertainties created by this unprecedented change in jurisdiction of the Federal Circuit and of the regional courts of appeal. With the panel’s unsupported ruling that the Supreme Court now places patent appeals within the exclusive jurisdiction of the regional circuits when the pleading alleges that the patent issue may lead to a non-patent law violation, we should consider this change en banc.

In its 2013 decision in Gunn v. Minton, 568 U.S. 251 (2013), the Supreme Court ruled that a state-law attorney malpractice case did not trigger federal court patent jurisdiction. Newman distinguishes that case on several grounds: (1) that case involved a “long dead patent” and so the outcome would not change any other patent litigation cases; (2) Gunn involved a State interest in adjudging the state cause of action – while here there are only federal interests at stake. According to Judge Newman, the underlying dispute is about “the validity and enforceability of the patent” – questions that should be heard by the Federal Circuit.

The case is now pending in the 5th Circuit Court of Appeals with the Following Two Questions:

1. After an unappealed federal district court judgment declared claims in a parent patent invalid, can a patent-holder maintain a continuation patent before the PTO with claims “word for word” identical to, or broadened over, claims that had been invalidated by a jury verdict and a federal court judgment without committing fraud?
2. Did the summary judgment record present a factual basis from which a jury could find that KLA-Tencor made affirmative misrepresentations and material omissions in its prosecution of the ’260 patent but for which the ’260 patent would not have issued?

As high level drama proceeds between our trading partners, the heads of the IP5 (US, China, Japan, EPO, and South Korea) recently met in New Orleans.  Together, these five offices “handle approximately 80 percent of the world’s patent applications.” The focus of the meeting was further harmonization, reducing costs, and reducing the burden on inventors filing in multiple jurisdictions.

More information on the IP5 cooperation can be found at www.fiveipoffices.org

In Medtronic Inc. v. Mark Barry, the PTAB confirmed the patentability of some of Barry’s patented back-straightening claims found in U.S. Patent Nos. 7,670,358 and 7,776,072.  The saving-grace for Barry was a PTAB ruling that a set of Videos and Slides distributed by Medtronic did not count as prior art “printed publications” because they were not sufficiently publicly accessible prior to Barry’s application filing. On appeal, however, the Federal Circuit has vacated the lower tribunal opinion — holding that the Board did not consider all the relevant factors in its determination.

Section 102 of the patent act establishes “printed publications” as a form of prior art.

Printed: Whether a publication is “printed” has been broadly applied to allow widely for fixed expressions – including recorded video and powerpoint slides. MPEP 2128 (R-08.2017).

Publication: At issue in this case is the “publication” requirement — which has been interpreted as a public circulation requirement.  That said, there is no requirement that the document be circulated to the public at large.  Rather, courts have held that circulation at a relevant scientific conference can be sufficient so long as there is no confidentiality requirement. Deep Welding, Inc. v. Sciaky Bros. Inc., 417 F.2d 1227, 1235, 163 USPQ 144 (7th Cir. 1969). In the leading case of In re Hall, the Federal Circuit ruled that ‘a single cataloged thesis in one university library’ was sufficient circulation – even without proof that anyone actually read the work. In re Hall, 781 F.2d 897 (Fed. Cir. 1986). In that instance, accessibility to the work was the key – “whether interested members of the relevant public could obtain the information if they wanted to.” Constant v. Advanced Micro-Devices, Inc., 848 F.2d 1560, 1569 (Fed. Cir. 1988).

In this case, a CD containing the video was distributed at three spinal deformity research symposia and printed versions of the slides were distributed at two of the three events.

A number of court decisions have walked through this type of conference distribution applying what the court terms a “case-by-case inquiry into the facts and circumstances surrounding the reference’s disclosure to members of the public.” In re Klopfenstein, 380 F.3d 1345, 1350 (Fed. Cir. 2004).  Still, in all of these inquiries, the primary question is whether the reference has been sufficiently made accessible to interested members of the public.

Consider:

• MIT v. AB Fortia, 774 F.2d 1104, 1109 (Fed. Cir. 1985): Paper that was orally presented at a conference was a printed publication even though only about 50 people were told of the paper and document itself was only distributed to six people.
• Cordis Corp. v. Boston Scientific Corp., 561 F.3d 1319 (Fed. Cir. 2009): Distributed research papers were not printed publications based upon “academic norms” that created an “expectation” of confidentiality. In Cordis, the court expressly ruled that a norm or expectation of confidentiality is sufficient to defeat public accessibility — even if there was no legal requirement of confidentiality.
• In re Klopfenstein, 380 F.3d 1345 (Fed. Cir. 2004): Printed slide presentation displayed on a poster at a conference and without any stated expectation against copying counted as a printed publication.

In Klopfenstein, the court walked through a set of factors:

The factors relevant to the facts of this case are: the length of time the display was exhibited, the expertise of the target audience, the existence (or lack thereof) of reasonable expectations that the material displayed would not be copied, and the simplicity or ease with which the material displayed could have been copied.

Bringing these cases together, the Federal Circuit here explained in Medtronic that the PTAB should have considered a set of factors regarding the distribution of the video and slides:

As relevant to this case, the size and nature of the meetings and whether they are open to people interested in the subject matter of the material disclosed are important considerations. Another factor is whether there is an expectation of confidentiality [either formal or informal] between the distributor and the recipients of the materials.

On remand, the PTAB will refresh its analysis.

= = = = =

The court also provided the following footnote:

The Supreme Court recently held in SAS Institute Inc. v. Iancu, 584 U.S. __ (2018), that the statute does not permit a partial institution leading to a partial final written decision. Because the final written decisions relating to this appeal do not address every ground raised in the petitions, we understand from the Board’s recent guidance document, Guidance on the impact of SAS on AIA trial proceedings (April 26, 2018), that it will consider the previously non-considered grounds on remand.

The footnote here is not an order, and should be read along with the holding in PGS Geophysical v. Iancu (reopening partially instituted IPR not necessary).

= = = = =

In 2016, a Texas Jury awarded Barry $20 million for the infringement. That case is on appeal with Medtronic arguing prior use, on sale bar, prior invention (102(g)), inequitable conduct, and improper damage calculation.

Guest post by Michael Gulliford.  Mr. Gulliford is an advisor to the Saint Regis Mohawk Tribe and the Founder of Soryn IP Group, a patent advisory and finance firm headquartered in New York City.

Native Americans and patents don’t make headlines. That changed when the Saint Regis Mohawk Tribe, located in upstate New York, conceived a lucrative transaction that saw Allergan transfer patents covering the dry eye drug Restasis® to the Tribe. In return, the Tribe agreed to use its sovereign status to protect the patents from a controversial administrative proceeding coined the patent “death squad”, and to license the patents to Allergan. Allergan paid the Tribe $13.75 million upfront, with continuing royalty payments of $3.75 million per quarter.

Although the story is far from over, so much remains unsaid. As an advisor to the Tribe on patent issues, allow me to explain.

#1 – Tribes Are Vilified For Following The Status Quo

Tribes, like States, are sovereigns and cannot be hauled into federal administrative proceedings that resemble lawsuits without consenting.  Here, the Tribe used its sovereign status to shield the patents from attack in a new administrative proceeding called Inter Partes Review (IPR), held at the Patent Trial & Appeals Board (PTAB). Generic companies remain free to challenge patent validity in district court.

From the hysteria, you’d think the Tribe is the first to invoke sovereign immunity with IPRs. It is not. State universities are, and began successfully doing so before the Allergan deal.

At least five major state universities have asserted their immunity as arms of their sovereign states with respect to IPRs. Some invoked sovereign immunity with corporate partners. Yet, only the Tribe faced Congressional hearings and proposed legislation. And in its recent decision, the PTAB, which hears IPRs, took the remarkable step of concluding that the Tribe’s immunity did not apply to an IPR because it was lesser than the immunity held by States.

In doing so, the Board overlooked the guidance of our nation’s most prominent Constitutional law scholars on the exact issue at hand. But as the leaders of numerous Indian tribes have told me, this treatment is par for the course. Once Native Americans engage in economic activities that were previously considered the status quo, the claws come out.

#2 – No One Gives Native Americans Credit

The most recited narrative of the deal is that Allergan “rented” the Saint Regis Mohawk Tribe’s sovereign immunity. This point of view is based on racism at worse and paternalism at best. Most can’t fathom that an Indian tribe, itself no stranger to devastating property loss, could be sophisticated enough to appreciate how recent changes to the U.S. patent system have failed innovators, or to have done a deal to right such wrongs.

But as I’m sure Allergan quickly appreciated when it visited the Tribe’s reservation, the Saint Regis Mohawk Tribe challenges convention. Its leadership is highly sophisticated and entrepreneurial. With limited powers of taxation, and the enormous burden of providing healthcare, addiction treatment, housing and education to its people, the Saint Regis Mohawk Tribe innovates to create revenue.

The Tribe’s broadband company “Mohawk Networks,” is solving the “last mile” problem in regions of Northern New York by building and expanding its high-speed fiber network. While local auto and aluminum factories have shut down, costing local jobs, the Tribe invested heavily in a new soy bean processing plant located close to the Tribe’s reservation. The plant will support farms that supply the State’s Greek yogurt industry, and create needed jobs.

The Tribe’s Office of Technology, Research and Patents, founded well before the Allergan deal, is pursuing a host of patent and commercialization initiatives. All are examples of the Tribe’s desire to steer away from casino gaming as its sole revenue source. And there is more to come.

#3 – PR Is Obfuscating A Conversation That Needs To Happen

Created in 2011 in response to “patent troll” problems, IPRs were supposed to give companies a cheaper way to challenge the validity of patents they are accused of infringing. But by implementing rules that strongly promote patent invalidity findings, IPRs inflicted significant pain for companies heavily reliant on patents.

It isn’t even controversial that IPRs have clouded the validity of most U.S. patents. The U.S. Chamber of Commerce recently demoted the U.S. patent system to #12 in the world because of IPRs.  Numerous Supreme Court and appellate judges have railed against IPRs. The Wall Street Journal Editorial Board highlighted the harm that IPRs cause to American innovation.

Given these truths, one could make a compelling argument that the Board of any company reliant on patents should do whatever is necessary to avoid IPRs. Why shouldn’t companies fight back and do deals to avoid having their crown jewels invalidated?

The answer is PR and political pressure to not do such deals. Big tech likes IPRs because killing patents increases the bottom line. It is cheaper to invalidate patents than to compensate innovators for the use of their technology. Generic drug companies like IPRs because the lax IPR standards that were set up to make “patent troll” patents easier to kill can be used to more easily wipe out pharma patents. Although Congress carefully sculpted legislation to govern pharmaceutical patent challenges — called the Hatch-Waxman Act — IPRs have undone the delicate balance that Hatch-Waxman strikes.

But conversations about these issues are not happening because huge sums of money have been spent vilifying Allergan and the Tribe.

So let’s start asking new questions. Why are tribal sovereigns being treated so much differently than States? And why is way more attention being paid to the Tribe’s transaction than to fixing the flawed IPR process that forces innovators to need the Tribe’s assistance?

In the end, my bet is that history will thank the Saint Regis Mohawks for enabling changes that bring the United States patent system back to #1 in the world.

–

Michael Gulliford is the Founder and a Managing Principal of Soryn IP Group, a patent advisory and finance firm headquartered in New York City that closed almost $140 million in patent deals in 2017. In addition, Soryn Capital, manages one of the largest funds in the U.S. dedicated to patent litigation finance. Prior to founding Soryn, Michael was a partner in the Intellectual Property group at Kirkland & Ellis LLP.

by Dennis Crouch

Huang v. Huawei (Fed. Cir. 2018)

This is a fairly ridiculous case. Acting pro se Mr. Huang sued Huawei for infringing three of his patents: U.S. Patent Nos. 6,744,653, 6,999,331, and RE45259 (high speed memory chips).

At the start of discovery, Huang agreed to a protective order, including a designation for “attorney’s eyes only.” Huawei then used that “attorneys eyes only” designation when it disclosed the technical information for its accused chips.  Since he had no attorney, Huang was unable to look at the disclosures.  When Huawei later motioned for summary judgment of non-infringement, Huang responded with a number of previously undisclosed reverse-engineering figures and declarations from undisclosed witnesses. The court granted a motion to strike that purported evidence as well as the summary judgment motion and awarded attorney fees to Huawei (but only $600,000) after finding his litigation behavior “constituted bad faith and an abuse of the judicial process.”

On appeal, the Federal Circuit has affirmed — holding that the district court did not abuse its discretion.

Lessons learned here:

Guest Post by Stephen C. Glazier, Partner at Akerman LLP

On April 26, 2018 the U.S. Patent Commissioner, Andrew Hirshfeld, spoke at our webinar regarding current developments at the U.S. Patent Office. [Link Below]

A major theme of Commissioner Hirshfeld’s remarks was the PTO’s revived focus on increasing reliability, certainty, and enforceability of issued patents and the application process.  The underlying goal here is to further increase the value of patents and their beneficial impact on innovative products and businesses.

The Commissioner stated that a first step toward this policy goal will be pursued by new PTO guidance to Examiners and the applicants regarding the application of the Alice-Mayo test for patent subject matter eligibility under Section 101.  Other possible PTO guidance is also being considered on various current issues.

The Commissioner pointed out that a first result in this effort was the very recently published PTO guidance, the “Berkheimer Memorandum“, which can be viewed at this link: https://www.uspto.gov/sites/default/files/documents/memo-berkheimer-20180419.PDF. This memo addresses the question of whether an additional element, or combination of elements, represents “well-understood, routine and conventional” activity in a claim directed to an abstract idea, for example, and hence constitute “something more” under the Alice-Mayo test (i.e., patent eligible subject matter).  The memo requires examiners to expressly support their positions with a citation to show an element is well-understood, routine or conventional.  This should mitigate the volume of Alice rejections.  The Commissioner indicated that this memo can currently be used as guidance, despite the fact that it is in the period for public comment until Aug. 20, 2018.

Many commentators feel that this will benefit software and medical diagnostic patents, since Alice rejections are concentrated in these technologies.

The Commissioner commented on volume and other metrics at the PTO.  The number of new patent applications has increased every year since 2009, with about 450,000 new cases filed last year (or about 600,000 if RCE’s are counted).  However, the percentage of RCE’s is declining.  The average time to first action is now about 15 months, and the final time to conclusion of prosecution is about 24 months.   Average pendency of Track One applications until issuance is only about 12 month from filing; although, the allowance rate for Track One is about the same as for regular applications.  The annual number of new Track One applications is down slightly, but remains near the historical maximum of about 10,000 annually.  There are currently about 8,200 patent examiners, of which about 4,700 are primaries.  There are approximately 500 art units.

Related issues and other questions were addressed by the Commissioner in the webinar.  Some of these issues include:  (1) recent Supreme Court patent decisions, (2)  material differences in the allowance rates of various examiners, art units and technology centers, and (3) the process for assigning applications to examiners, art units and technology centers.

A video recording of the Commissioner’s opening remarks, and the subsequent Q&A session with the Commissioner, may be reviewed in their entirety at this link: https://www.youtube.com/watch?v=svxQH7a3SwM&feature=youtu.be

I don’t know what the Supreme Court thinks of alternative statements of the question presented — but it has become a regular practice of parties opposing certiorari to restate the question in an attempt to shift attention of the court.

The pending petition in Helsinn is on point.  Compare the question presented in the petition with its complete restatement by the opposition:

Petition: 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.

Opposition: Whether this Court should review the Federal Circuit’s factual conclusion that Helsinn’s sale agreement with a third party publicly disclosed its claimed invention “in detail” (Pet. 33a) more than a year before it filed  its patent application, thus triggering the “on sale” bar on patentability set forth in 35 U.S.C. §102(a).

[Docket with Briefs] The difference between the two is typical — with the petition asking the court to focus on an important question of law and the opposition focusing on already-decided factual minutia.

Later this month, the Supreme Court is holding conference in the case and I would expect a call for the views of the Solicitor General.

I really enjoy this video on reverse-engineering one of my childhood favorites – skittles. My view is that in most situations reverse engineering and other experimentation should be a permissible fair use despite the existence of patents.

Query: Now that patent applications are being filed by “applicants” rather than the inventors themselves, will those applicants (i.e., corporate owners) now be bound by the duty of disclosure?

37 C.F.R. 1.56:

(a) . . . Each individual associated with the filing and prosecution of a patent application has a duty of candor and good faith in dealing with the Office, which includes a duty to disclose to the Office all information known to that individual to be material to patentability as defined in this section. . . .

(c) Individuals associated with the filing or prosecution of a patent application within the meaning of this section are:
(1) Each inventor named in the application;
(2) Each attorney or agent who prepares or prosecutes the application; and
(3) Every other person who is substantively involved in the preparation or prosecution of the application and who is associated with the inventor, the applicant, an assignee, or anyone to whom there is an obligation to assign the application.

If we are strictly following the rule, the basic question is whether a corporate owner counts as a “person” under (c)(3).

Guest Post by Benjamin C. Stasa, Shareholder, Brooks Kushman PC, Southfield, Michigan and David C. Berry, Director, Patent Procurement Clinic, Wayne State University Law School, Detroit, Michigan

The U.S. Supreme Court decisions in Alice[1] and Mayo[2], and subsequent attempts to apply those decisions, continue to create some uncertainty in the availability of patent protection for certain technical fields. Although recent guidance has somewhat clarified the issue, eligibility questions continue to vex practitioners, and reflect an all-or-nothing approach to patentability. As a result, commentators and national intellectual property law associations have proposed amending 35 U.S.C. §101. These proposals range from eliminating § 101[3] to amending the Patent Act to codify a broader definition of eligible subject matter.[4]

We offer an alternative approach for amending § 101 to allow some range of patentability for inventions directed to judicially-recognized eligibility exceptions. Rather than attempting to redefine the line between eligible and ineligible subject matter (a revision that preserves the current all-or-nothing approach), we propose amending §101 to implement disclosure-based limits on the scope of claims directed to judicially-recognized exceptions (abstract ideas, laws of nature, and natural phenomena).

Section 112(f) as a Model

Preemption is a common concern raised in eligibility cases. For example, claims directed to a law of nature should not be so broad as to preempt subsequent attempts by other researchers to develop other applications exploiting the law of nature. But preemption concerns may be addressed adequately by disclosure-based limits on claim scope, rather than by precluding patentability in toto. Furthermore, the Patent Act already contains a workable model for disclosure-based limits on claim scope: 35 U.S.C. §112(f).

Currently, if an applicant opts to rely on functional claim language, the claims are limited by the content of the applicant’s disclosure under § 112(f). Borrowing the same approach to limit claims directed to abstract ideas, laws of nature, or natural phenomena, § 101 could be adapted to prevent an applicant from claiming a judicially-recognized exception per se, while permitting claims essentially limited to specific embodiments disclosed in the specification.

Proposed Amendment to Section 101

101. Inventions patentable

(a) Whoever invents or discovers any new and useful process, machine, manufacture, or composition of matter, or any new and useful improvement thereof, may obtain a patent therefor, subject to subsection (b) and the conditions and requirements of this title.

(b) A claim directed to a judicially-recognized exception to subsection (a) hereof shall be construed to cover the structures, materials, or acts described in the specification and equivalents thereof.

Application

Under § 101 as amended, an examiner that considers a claim to be directed to a judicially-recognized exception would identify it as being subject to § 101(b) and point out the corresponding specific structures or processes disclosed in the specification to be covered by the claims, if any. The applicant could then attempt to refute the § 101(b) characterization through amendment or argument, or both, as is common practice under the current § 101 scheme. Alternatively, the applicant could acquiesce to the examiner’s characterization and possibly identify additional specific structures or processes disclosed in the specification to be covered by the claims. So limited, the claim would be eligible under § 101(b), and the disclosure would delimit claim scope for patentability and infringement.

Advantages

This proposed amendment would not affect an application for a process, machine, manufacture, or composition of matter that is not directed to a judicially-recognized exception to eligibility. On the other hand, claims directed to a law of nature or other judicially-recognized exception per se (claims without a corresponding disclosure of a specific working embodiment) would be indefinite under § 112(b) and thus not be patentable. The proposal improves predictability during patent prosecution, since most eligibility concerns will result in narrower claim scope, rather than the prospect of across-the-board ineligibility. Additionally, this proposed amendment preserves the central role of § 101 in governing eligibility, applies consistently across all fields of invention, and can be efficiently managed by the examining corps since they are already familiar with the operation of § 112(f).

Conclusion

The evolving nature of technology makes eligible/ineligible line-drawing difficult. Rather than just focusing on that boundary, attention can be directed to the consequences of stepping over that line. The proposed amendment of § 101 would clarify the scope of claims directed to a judicially-recognized exception, rather than simply rejecting those claims as wholly unpatentable.

– – – – –

[1] Alice Corp. v. CLS Bank International, 573 U.S. __, 134 S. Ct. 2347 (2014).

[2] Mayo Collaborative Services v. Prometheus Laboratories, Inc., 566 U.S. ___, 132 S. Ct. 1289 (2012).

[3] See https://www.law360.com/articles/783604/kappos-calls-for-abolition-of-section-101-of-patent-act.

[4] See http://admin.aipla.org/resources2/reports/2017AIPLADirect/Documents/AIPLA%20Report%20on%20101%20Reform-5-12-17.pdf (AIPLA proposal); https://www.americanbar.org/content/dam/aba/administrative/intellectual_property_law/advocacy/advocacy-20170328-comments.authcheckdam.pdf (ABA IPL Section proposal).