In this case, the PTO refused to grant Charles Fote’s patent covering a Broker-Mediated Payment System after concluding that the claims lacked eligibility. On appeal, Fote argued otherwise — especially considering the PTO’s new (limited) approach to eligibility examination. The Federal Circuit though refused to bite and simply affirmed the PTO determination without issuing any opinion under its internal R. 36.
In a recent request for extension of time, Fote has indicated his plans to ask the Supreme Court to review the propriety of the Federal Circuit’s no-opinion judgments:
The petition for certiorari will contend that in cases like this one, where the administrative agency arguably erred in its analysis of the proposed patent claims and failed to properly apply the law, the use of one-word summary affirmances under Federal Circuit Rule 36, which effectively prevents review of the merits of the panel decision en banc or by this Court, is impermissible.
Representative claim 8 is directed to a “telecommunication system” that includes a brokerage server, a funding server, and also an electronic communications devices that are designed to provide certain authentication signalling to facilitate a payment. The claim itself is 1,200+ words 5x longer than a typical independent claim. In briefing, Fote explained that:
By dividing responsibilities for the payment and the information among multiple third parties, the payment system invented by Fote avoids the privacy and security vulnerabilities that would otherwise arise if a conventional third-party intermediary were employed in an electronic environment. . . .
[Although the] system involves conventional computer components[;]… [t]he system’s novelty and inventiveness, which have been acknowledged by the Patent Office, lie in the specific payment techniques it implements.
In its briefing, the PTO responded that the claims can be seen as parallel to the settlement risk mitigation system in Alice Corp. and that the Board’s decision was correct:
The Board properly concluded that the claimed invention is directed to patent ineligible subject matter. Claim 8 recites a system for transferring electronic payment from a payer to a payee that utilizes a third-party intermediary to prevent disclosure of the payer’s confidential information (i.e., the identity of the payer’s funding source and real account) to the payee.
Under step one of the Supreme Court’s two-step framework, the Board rightly determined that the claim is directed to a fundamental economic practice, which is an abstract idea. As the Board found, the use of a third-party intermediary to securely transfer funds between two parties is akin to the use of a third party to mitigate settlement risk, which was held to be abstract in Alice. . . .
At step two of the eligibility analysis, the Court rightly determined that the additional claim limitations do not transform the abstract idea into an inventive concept. Each of those limitations merely recite conventional computer components that perform generic computer functions. Although the Board did not cite to this Court’s decision in Berkheimer v. HP Inc., 881 F.3d 1360 (Fed. Cir. 2018), the Board did provide factual support in the specification to support its findings that the claim elements were well-known, routine, and conventional.
Gov’t Brief before the Federal Circuit. The actual merits are rough here for the petitioner, but these are the cases that often make good procedural law.
I have written a few posts about the design patent infringement case Columbia Sportswear North America, Inc. v. Seirus Innovative Accessories, Inc. In November, the Federal Circuit vacated the lower court’s summary judgment of infringement — holding that logo placement in this case might allow the defendant to avoid an infringement judgment. This holding is in tension with the court’s 1993 decision in L.A. Gear, Inc. v. Thom McAn Shoe Co., 988 F.2d 1117 (1993).
In the last post, I included an image of my Seirus glove liner. My first update is that the glove liner has completely fallen apart — apparently it is a liner and not intended simply as a biking glove.
Second update is that Columbia (the patentee) has petitioned the court for en banc rehearing to address issues of design patent infringement. Questions presented:
When conducting a design-patent infringement analysis under Gorham v. White, may a fact-finder consider the addition of brand names or other labeling on an otherwise infringing design?
When conducting a design-patent infringement analysis under Gorham v. White, should the fact-finder compare the overall appearance of the claimed design (i) to the overall appearance of the accused design, or (ii) to the overall appearance of the entire accused product, which may include aspects extraneous to the claimed design (e.g., logos, tradenames, color, size, etc.)?
[Columbia-petition]. The new petition added design patent expert Christopher Carani representing Columbia. The Court has requested a responsive brief from Seirus due January 30, 2020. Several amici are also planning to submit briefs, although there is some fight over whether the court will allow them an extension of time. Amici include a “Group of Interested Practitioners” including Tracy-Gene Durkin, Robert Katz, and Perry Saidman. The Industrial Designers Society of America, Inc. (represented by Damon Neagle) and Bison Designs / Golight (represented by Ian Walsworth) are also expected to support the petition. In opposing the extension, Seirus explained that “there is no reason a group comprised of at least seven design patent attorneys from at least six law firms cannot draft a 2,600 word brief in the time allotted.” In my contrary experience, a group of seven patent attorneys rarely accomplish anything within the time allotted.
This semester at Mizzou, I am teaching two first year (1L) law school classes — Property and Civil Procedure. These classes are intended as fundamental foundation courses applicable in some way to all areas of law — even patent law. I’m planning a series of posts titled “this week in property” and “this week in civil procedure” that will tie-in what we’re learning in class and relate it to patent law.
The first case that my students read in Property is Jacque v. Steenberg Homes, 209 Wis. 2d 605 (1997). The defendant in the case – Steenberg Homes – was delivering a mobile home to a third-party pursuant to a contract. The problem was that the road was under 7 feet of snow. Steenburg asked Harvey Jacque for permission to cross his field, which Jacque denied. Steenburg then went ahead and buldozed a path across the frozen field and satisfied its contract. The manager had instructed the movers as follows: “I don’t give [a F___] what he said, just get that home in there any way you can.” At trial, Jacque was thus easily able to prove willful trespass. The problem came with damages.
At trial, Jacque proved about $200 in damages to the land (extra plowing time in the spring), but those damages were suffered by his tenant (Jacque’s son) and thus not awarded to Jacque. Steenburg Homes argued that this is a case of efficient infringement. Although it was trespass, the company should only have to pay for the harm it caused. Recognize here that the company’s only other choices at the time were to (1) breach its delivery contract; or (2) deliver in a more unsafe (and costly) manner over the alternative route. Apart from the $200 in damage, everyone was better off (or at least not worse off) after the infringement.
Although it awarded only $1 in nominal damages, the jury also awarded $100,000 in punitive damages (no actual damages). On appeal, the Wisconsin Supreme Court upheld the verdict – overturning a prior rule that punitive damages are only available if actual damages are awarded.
The court explained its reasoning:
[The old rule] sends the wrong message to Steenberg Homes and any others who contemplate trespassing on the land of another. It implicitly tells them that they are free to go where they please, regardless of the landowner’s wishes. As long as they cause no compensable harm, the only deterrent intentional trespassers face is the nominal damage award of $1, the modern equivalent of Merest’s halfpenny, and the possibility of a Class B forfeiture under Wis. Stat. § 943.13. We conclude that both the private landowner and society have much more than a nominal interest in excluding others from private land. Intentional trespass to land causes actual harm to the individual, regardless of whether that harm can be measured in mere dollars.
Id. The court’s reference to Merest’s halfpenny comes from an 1814 English decision Merest v. Harvey, where a jury awarded 500£ in exemplary damages (~$50,000 today) against a banker (and Member of Parliament) who joined a hunting party on the plaintiff’s land after being told no.
GIBBS CJ: I wish to know in a case where a man disregards every principle which actuates the conduct of gentlemen what is to restrain him except large damages. … Suppose a gentleman has a paved walk in his paddock before his window, and that a man intrudes and walks up and down before the window of his house, and looks in while the owner is at dinner, is the trespasser to be permitted to say “here is a halfpenny for you which is the full extent of all the mischief I have done?” Would that be a compensation? I cannot say that it would be.
Heath J: I remember a case where a jury gave 500 damages for merely knocking a man’s hat off and the Court refused a new trial. . . . It goes to prevent the practice of duelling if juries are permitted to punish insult by exemplary damages.
Merest v. Harvey, 128 Eng.Rep. 761 (C.P. 1814). The approach in Steenburg and Merest follows the “property rule” for protecting entitlements. The alternative approach – a liability rule – is seen in negligence and contract law. The patent system used to fit fairly squarely within the property rule schema as Blair & Cotter explained in a pre-ebay paper:
U.S. law protects patent entitlements by means of a property rule, which entitles the owner to enjoin infringing behavior, rather than by means of a liability rule, which would allow one to infringe and pay damages indefinitely.
Roger D. Blair & Thomas F. Cotter, Rethinking Patent Damages, 10 Tex. Intell. Prop. L.J. 1, 48 (2001). 20 years later, patent law has transformed into a liability rule that largely allows for an “efficient infringement” setup. Prof. Mossof explained this in his recent article:
The result of the weakening of the ability to obtain an injunction–the backstop for all market-based negotiations of conveyances of property rights– and the further limiting of damages awarded to patent owners below market-set rates has led to an increasingly common commercial practice referred to as “efficient infringement.” This occurs when a company decides that it “economically gains from deliberately infringing [on a] patent[]” because it knows the patent owner will not receive an injunction and thus it will pay less in legal fees and in court-ordered damages than it would have paid in a license obtained from the patent owner.
Adam Mossoff, Institutional Design in Patent Law: Private Property Rights or Regulatory Entitlements, 92 S. Cal. L. Rev. 921, 939 (2019) (quoting his own prior essay). But, efficiency is good — others have written that a liability rule is the best approach even if it reduces innovation incentives — because it raises incentives to commercialize and can avoid transaction costs in the marketplace. See Ian Ayres & Paul Klemperer, Limiting Patentees’ Market Power Without Reducing Innovation Incentives: The Perverse Benefits of Uncertainty and Non-Injunctive Remedies, 97 Mich. L. Rev. 985, 987 n.2 (1999); Julie Turner, Note, The Nonmanufacturing Patent Owner: Toward a Theory of Efficient Infringement, 86 Cal. L. Rev. 179 (1998).
In this debate, the courts have largely made their statements: Real property is protected with a property rule; Patent rights are protected with a liability rule. Any change this generation will come from the legislature.
When I first wrote about Amgen v. Amneal, I focused on the patent law issue regarding Markush groups in the patent claims. Here, I want to circle back to the question appellate jurisdiction. I’ll be teaching the 2nd semester of Civil Procedure at Mizzou this spring and appellate jurisdiction is the the first topic up for grabs.
Most patent infringement litigation reaches the Federal Circuit under the “final judgment rule” which creates appellate jurisdiction over cases “appealed from a final decision of a district court.” 28 U.S.C. 1295(a)(1). Final decisions “are decisions that end litigation on the merits and leave nothing for the court to do but execute the judgment.” Slip op.; Coopers & Lybrand v. Livesay, 437 U.S. 463, 467 (1978). Thus, in a patent case involving infringement claims and invalidity defenses, both must be resolved before appeal. (Note here, that there are some, albeit limited, options for interlocutory appeals prior to final judgment).
In Amgen, the district court issued an infringement decision (against Zydus) but did not resolve questions of whether the asserted patent is valid and enforceable — explaining that:
The Court has not yet held trial on Zydus’ bifurcated invalidity counterclaims and defenses. . . . An invalidity trial will be scheduled by this Court if necessary following disposition of appeal proceedings.
Amgen Inc. v. Amneal Pharm. LLC., No. 1:16-cv-00853-MSG (Oct. 9, 2018), ECF No. 405. Because the invalidity issues were still unresolved, the decision was not final. Still, Zydus appealed and included only a conclusory jurisdictional statement that jurisdiction is proper under 28 U.S.C. § 1295(a)(1) since the district court issued its final judgment:
The district court then issued a final judgment on October 9, 2018, in favor of Amgen against Zydus. . . . This Court has jurisdiction over the cross-appeal under 28 U.S.C. § 1295(a)(1).
Zydus brief. Amgen also did not challenge jurisdiction in its briefing. However, the appellate court is obligated to ensure itself of jurisdiction before moving forward.
At oral arguments, the appellate panel recognized the problem and questioned Zydus’s attorney during oral arguments who – after consulting with his client in the courtroom – agreed to “give up” its invalidity defense. [Oral arguments beginning at min 18]. In its decision, the Federal Circuit found that concession sufficient to cure jurisdiction. “Zydus’s representation effectively cures the jurisdictional defect in its notice of appeal because the contingency identified by the district court—Zydus’s potential invalidity defense and claim—is nullified.”
Too Short Analysis: The Federal Circuit did not cite any precedent or statute to support its conclusion that the oral-argument waiver can cure the lack of final judgment. The procedure principles here fall within the umbrella of “cumulative finality.” Most courts have accepted the notion that a premature appeal can be cured by a subsequent entry of final judgment by the district court. However, some courts have taken an alternative approach. Here is how Prof. Lammon explained the situation in his recent article:
[The cumulative finality] rule of appellate jurisdiction allows certain subsequent events to save a premature notice of appeal filed after certain district court decisions.
The general rule cannot be stated any more precisely, however, because the cumulative finality doctrine is currently a mess.
Bryan Lammon, Cumulative Finality, 52 Ga. L. Rev. 767 (2018). In his article, Lammon explains that the Eighth Circuit along with the Federal Circuit have traditionally held the narrowest views of cumulative jurisdiction and has previously required appellants to re-file their case after a proper final judgment rather than curing appellate jurisdiction on the fly. Lammon does not address whether the Federal Circuit should be following its own law on this issue or instead be applying the law of the regional circuit court of appeals. In a separate paper on finality, Lammon also explains that the meaning of “final decision” is not quite the simple definition that I used above.
The federal courts have given the term “final decision” a variety of meanings. Those meanings often deviate from–and are occasionally inconsistent with–the standard definition…
Bryan Lammon, Finality, Appealability, and the Scope of Interlocutory Review, 93 Wash. L. Rev. 1809 (2018).
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Let me note one failure of lawyering in the case: Although district court’s purported final judgment was not actually a final judgment as to Zydus, it did include a permanent injunction against Zydus as shown in the image below. The injunction is relevant because it fits within one of the exceptions to the final judgment rule. In particular, a district court’s decisions involving injunctive relief are directly appealable even if not part of a final judgment. “[T]he courts of appeals shall have jurisdiction of appeals from: (1) interloctutory orders of the district courts . . . granting, continuing, modifying, refusing or dissolving injunctions, or refusing to dissolve or modify injunctions…” 28 U.S.C. 1293(a).
Thus, it looks to me like Zydus’ attorney had a proper grounds for jurisdiction without giving-up its invalidity defense.
Molon Motor and Coil Corp. v. Nidec Motor Corp. (Fed. Cir. 2020)
In a divided opinion, the Federal Circuit affirmed the district court’s summary judgment against the patentee Molon — holding that a 2006 covenant-not-to-sue remained in force despite a subsequent 2007 settlement agreement stating that prior covenants “concerning the subject matter hereof” are “of no further force or effect.”
The Subject Matter of a Contract: The majority opinion penned by Judge Lourie and joined by Judge Hughes concludes “that the two agreements concern different subject matter” and and thus finds the merger and cancellation clause inapplicable. Writing in dissent, Judge Reyna came to the opposite conclusion since both the 2006 covenant and the 2007 settlement agreement focused on a license to practice the ‘915 patent.
In the 2006 Covenant, Molon granted Merkle-Korff [Nidec’s predecessor] a bare license to practice the ’915 patent in any market. In the 2007 Settlement, Molon granted Merkle-Korff an exclusive license to practice the ’915 patent in the Kinetek Exclusive Market only. Both licenses relate to the same subject matter—the right to practice the ’915 patent. Thus, the 2007 Settlement’s merger clause, which wiped away all prior covenants with the same subject matter, wiped away the 2006 Covenant.
Judge Reyna in dissent. Judge Reyna appears to have the better argument — although not good enough to convince Judges Lourie and Hughes. Further, Nidec’s counsel Rudy Telscher did an excellent job marshaling Illinois cases that supported his client’s position.
The difference in interpretation between these judges is a matter of contract interpretation under Illinois law. Unfortunately, the majority’s statement of Illinois law is not too helpful: “Illinois courts have cautioned against defining ‘subject matter’ too broadly or too narrowly.”
Some Background on the First Lawsuit: Molon sued Markle-Korff on family-member patent (US6054785), and the defendant responded with a declaratory judgment couinterclaim against Molon’s Patent (US6465915). At that time, Molon was not interested in litigating the ‘915 patent and issued the 2006 covenant-not-to-sue.
Molon hereby forever covenants not to sue Merkle-Korff for patent infringement … under …
the ’915 patent … with respect to any and all products previously or presently made,
used or sold by Merkle-Korff in the United States. …
2007 Covenant. The district court dismissed the ‘915 patent claims but that first lawsuit continued with Molon’s originally filed infringement claims regarding the ‘785 patent. In 2007 the parties settled the ‘785 lawsuit with an exclusive license agreement that extended beyond the original lawsuit itself to include more than a dozen Molon patents (including foreign patents and the ‘915 patent). A difference between the 2006 covenant and the 2007 settlement was the scope of license.
2006 covenant – non-exclusive license to “any and all products previously or presently made, used or sold by Merkle-Korff.”
2007 settlement – exclusive license restricted to the “Kinetek Exclusive Market.” (The briefing explains that the “Kinetek Exclusive Market” is a specific confidential customer list that the licensee is allowed to sell to.)
As mentioned above, the 2007 agreement also states that prior agreements “concerning the subject matter hereof” are “merged” and “of no further force or effect.” However, the 2007 agreement does not particularly and explicitly revoke the 2006 agreement.
Fast forward to 2016 — Molon filed a new lawsuit against Nidec — successor in interest to Merkle-Korff. The new suit alleges that Nidec is selling beyond the Kinetek market and the big question here is whether the original broad covenant is still in effect.
For the majority, the big difference between the two promises is exclusivity:
There are fundamental differences between an exclusive license and a nonexclusive license, particularly in the context of standing to assert a claim for patent infringement. In essence, an exclusive licensee has an interest in the patent sufficient to establish an injury when a third party infringes, akin to an ownership interest, while a nonexclusive licensee has no such interest in the patent and merely enjoys freedom from suit. Under this framework, it cannot be said that an exclusive license and a nonexclusive license necessarily concern the same subject matter, even though both licenses include the same patent.
Id. The holding here then is that the original covenant was not cancelled — and so the patentee has no case.
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One interesting additional issue not addressed here is the extent that a unilateral covenant-not-to-sue can be revoked, even by agreement. If we think of the covenant as a conveyance (of property rights), a revocation would ordinarily be insufficient to transfer rights back to the patentee. Rather, we would need an express conveyance or release. A covenant-not-to-sue could also be seen as an abandonment of rights — something like a ‘release.’ Historically courts have distinguished between a release and a covenant-not-to-sue, although that distinction appears to have lifted based as covenants now operate as a complete bar to a subsequent underlying action rather than their historical role of only creating a breach of contract action. See Skilstaf, Inc. v. CVS Caremark Corp., 669 F.3d 1005, 1017 (9th Cir. 2012).
Guest post by Professor Pamela Samuelson, Berkeley Law School
In the past week 28 amicus curiae briefs were filed in the Google v. Oracle case, including one written by me and Catherine Crump (of which more below). All but two support reversal of one or both of the Federal Circuit’s copyrightability and fair use rulings.[1]
Especially significant are IBM’s brief with Red Hat arguing against the copyrightability of computer interfaces and Microsoft’s brief criticizing the Federal Circuit’s unduly rigid fair use analysis and indifference to the need for flexible rules that promote interoperability in today’s highly connected world. The briefs are substantively excellent, and significant because these firms are such prominent developers of software.
For those interested in the case who are not computing professionals, I recommend the amicus briefs submitted by 83 computer scientists and by the Developers Alliance which explain the Java API technology and why reuse of Java declarations and interfaces generally is so important to enabling compatibility. Several other briefs, including one for the Center for Democracy and Technology et al., and another for R Street and Public Knowledge, offer numerous examples of compatible software systems that benefit consumers as well as software developers
By my count, more than half of the 28 amicus briefs focus only on the copyrightability issue and another 9 address both the copyrightability and fair use issues. Only 4—the Microsoft, Tushnet, Snow, and Rauschenberg Foundation briefs–address only fair use. This was a something of a surprise given that the fair use decision seems quite vulnerable to challenge. After all, a jury rendered a verdict in favor of Google’s fair use defense, and appellate courts are supposed to defer to jury verdicts. Several amicus briefs take the Federal Circuit to task for substituting its judgment on the merits for the jury’s as to issues about which there was conflicting evidence in the record. Also much criticized are the Federal Circuit’s analysis of the four fair use factors and the manner in which it weighed the factors together.
One very pragmatic reason why some amici would prefer that the Court rule on the copyrightability issue over the fair use issue is that fair use is a fact-intensive, complex, and much debated limitation on copyright. Google may be able to litigate software interface copyright cases for a decade or more, as it has done in this case, but startups and other small and medium-size companies as well as open source developers would prefer the certainty of a no-copyright-in-interfaces rule, as several amicus briefs pointed out. If the Court rules that interfaces are not protectable by copyright law, litigation over reuses of interfaces is much less likely. And if some developer does bring suit, chances are good that the case can be won on a motion to dismiss or for summary judgment
Software developer and industry association amici point to a longstanding consensus on the distinction between interfaces and implementations: interfaces should be free for reuse as long as developers reimplement the interfaces in independently created code. The Federal Circuit’s Oracle decisions have upset settled expectations in the industry, and if the Court upholds them, it would have, as Microsoft asserts, “potentially disastrous consequences for innovation.”
The American Antitrust Institute was among the amici that emphasized the potential for copyright in program interfaces to have anti-competitive effects by entrenching dominant firms and creating barriers for new entrants in the software business. This is particularly of concern in view of network effects which, even without interface copyright monopolies, make it difficult for users and developers to switch to new systems.
The Computer & Communications Industry Association and the Internet Association amicus brief provides a historical review of the evolution of software copyright caselaw. Although a few early decisions construed copyright as providing broad protection to program structures such as interfaces, landmark decisions by the Second and Ninth Circuits recognized that interfaces which constitute the functional requirements for achieving compatibility among programs should not be protectable by copyright law. Other courts followed these rulings. The Oracle decision deviates from this body of caselaw. Some amici regard interfaces as patent, not copyright, subject matter.
The amicus brief Catherine Crump and I co-authored and submitted on behalf of 72 intellectual property scholars positioned the pro-compatibility decisions within the framework of the Supreme Court’s 19th-century rulings in Perris v. Hexamer and Baker v. Selden, which originated the exclusion of methods and systems and their constituent elements from the scope of copyright; dozens of decisions applying these exclusions; their codification in 17 U.S.C. § 102(b); and caselaw applying these exclusions to software interfaces that enable compatibility. Our brief also explains why the District Court’s alternative ruling in favor of Google’s merger defense was consistent with Baker and its progeny and that merger provides a sound basis for finding that program interfaces that enable compatibility, such as the Java SE declarations, are unprotectable by copyright law.
Oracle will obviously have a different take on these issues when it files its brief due February 12. Amici in support of its position must submit their briefs within the following week.
Google will have an opportunity to file a reply brief in mid-March. Oral argument before the Court may be scheduled in late March.
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[1] Although the American Intellectual Property Law Association is one of the briefs in support of neither party, the substance of its arguments on both the copyrightability and fair use arguments are quite close to the positions of Google and pro-interoperability amici. The other “neutral” amici were the Robert Rauschenberg and Andy Warhol Foundations which expressed concern about a possible interpretation of fair use that would undermine artistic freedom to engage in creative reuses by artists.
Biodelivery Sciences Int’l. v. Aquestive Therapuetics, Inc. (Fed. Cir. 2020)
The Federal Circuit has denied en banc rehearing in this case that focuses primarily on the ability of the appellate court to keep the PTAB in-line. In this particular case, the PTAB did not follow a prior remand order from the Federal Circuit. In particular, in a prior SAS appeal, the Federal Circuit indicated that the PTAB should hold trial on “each claim challenged.” Instead, the PTAB decided to dismiss the whole case — finding it it be “inefficient and expensive” to include the additional grounds. Judge Newman argues that such disobedience should be treated swiftly. She writes:
I write because of the significance of the balance of agency and judicial authority, and the rules of procedural law in the administrative state.
Instead of complying with the Remand Order, the PTAB withdrew all of its past actions as to these proceedings, although past actions were not the subject of the remand. . . . Nonetheless, my colleagues hold that the PTAB is not required to comply with the court’s Remand Order, and further hold that this non-compliance is not reviewable. This action raises critical issues of agency authority, judicial responsibility, and the constitutional plan.
Eko Brands v. Adrian Rivera Maynez Enterprises (Fed. Cir. 2020)
ARM’s US Patent 8,720,320 covers a Keurig coffee-machine adapter. Typical cartridges are single-use — rendered ineffective after being pierced by the brewer during operation. ARM’s device isn’t pierced and so retains its effectiveness over multiple uses.
ARM filed an ITC complaint against Eko and others. Although the ITC ruled that several claims were invalid for lacking written description (e.g., claim 5), Eko defaulted with respect to claims 8 and 19 and the ITC issued an exclusion order with respect to those claims.
Subsequently, Eko filed a district court declaratory judgment action to collaterally attack the ITC ruling as to claims 8 and 19. The district court complied and found the claims not-infringed (summary judgment) and invalid as obvious (jury verdict). The district court also awarded attorney fees to Eko as the prevailing party in what it found to be an exceptional case.
5. A beverage brewer, comprising:
a brewing chamber;
a container, disposed within the brewing chamber and adapted to hold brewing material while brewed by a beverage brewer, the container comprising:
a receptacle configured to receive the brewing material; and
a cover;
wherein the receptacle includes a base, having an interior surface and an exterior surface, wherein at least a portion of the base is disposed a predetermined distance above a bottom surface of the brewing chamber, and at least one sidewall extending upwardly from the interior surface of the base,
wherein the receptacle has at least one passageway that provides fluid flow from an interior of the receptacle to an exterior of the receptacle;
wherein the cover is adapted to sealingly engage with a top edge of the at least one sidewall, the cover including an opening, and
wherein the container is adapted to accept input fluid through the opening and to provide a corresponding outflow of fluid through the passageway;
an inlet port, adapted to provide the input fluid to the container; and
a needle-like structure, disposed below the base;
wherein the predetermined distance is selected such that a tip of the needle-like structure does not penetrate the exterior surface of the base.
8. The beverage brewer of claim 5, wherein the container is reusable.
Note here that claim 8 adds a quite minor limitation that is probably already implied within the scope of claim 5.
On appeal, the Federal Circuit has affirming the claim construction and thus the resulting non-infringement and obviousness decisions. In the process, the appellate panel reiterated the lower court’s statement that “ARM’s insistence on trying [the case] was largely a charade used for the purpose of extending the life of the earlier ITC . . . order.”
Normal preclusion rules do not apply to interactions between the ITC and District Court. See, Tandon Corp. v. U.S. Int’l Trade Comm’n, 831 F.2d 1017, 1018 (Fed. Cir. 1987) (even appellate treatment of an ITC decision “does not estop fresh consideration by other tribunals”); S.Rep. No. 1298, 93d Cong., 2d Sess. 196 (“it seems clear that any disposition of a Commission action by a Federal Court should not have a res judicata or collateral estoppel effect in [infringement] cases before such [district] courts.”).
An invalidity decision in district court does not automatically cancel an ITC exclusion order. Rather, the ITC can rescind its decision based upon evidence that “the conditions which led to such exclusion from entry or order no longer exist.” Section 337(k)(1). Following the district court decision, the ITC issued a temporary rescission order that will likely be made permanent now — allowing Eko to keep importing.
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Note here that Judge Reyna dissented from Judge Dyk’s majority decision on claim construction of claimed “passageway that provides fluid flow from an interior of the receptacle to an exterior of the receptacle.”
The district court erred in its construction of “passageway” by rewriting the claims, including adding a negative limitation that is unsupported by the specification. . . .
The district court construed the term “passageway” as “a narrow space of some depth or length connecting one place to another.” This construction is not supported by the specification. The district court also interpreted “passageway” to exclude a receptacle “that utilized a broad, thin mesh.” This exclusion was raised sua sponte by the court and not argued by either party.
The majority suggested that the district court might have erred a bit in its construction but that Eko didn’t infringe either way.
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In a turn of events, Eko also sued ARM for infringement and the jury sided with Eko. U.S. Patent No. 8,707,855. Although Eko won on infringement, the jury found no willful infringement. On appeal, Eko asked for a retrial of willfulness based upon improper jury instructions.
The jury instructions:
Eko argues that ARM willfully infringed the Eko
855 patent. . . . Willfulness requires you to determine whether Eko proved that it is more likely than not that the infringement was especially worthy of punishment. You may not determine that the infringement was willful just
because ARM knew of the Eko 855 patent and infringed it. Instead, willful infringement is reserved for egregious behavior, such as where the infringement is malicious, deliberate, consciously wrongful, or done in bad faith.
On appeal, the Federal Circuit found some fault with the jury instructions here — concluding that the instructions improperly intermix enhanced damages issues that are left for the judge. Rather, the jury’s role here is to address willfulness.
[T]he inclusion of the phrases “especially worthy of punishment” and “reserved for egregious behavior” in Jury Instruction 40 was erroneous.
However, on appeal, the Federal Circuit refused to order a new trial — holding that jury instructions must be considered as a whole – “we think that the instruction taken as a whole provides reasonable clarity as to the correct test for willful infringement.” In particular, the instructions allow for a finding of infringement that is simply “deliberate.” Later, the instructions also focus jury attention on intentional copying and belief of non-infringement. Those elements of the instructions were sufficient to cure the problematic language since “[t]he jury was reasonably informed that it could make a finding of willful infringement if it found that ARM deliberately or
intentionally infringed the ’855 patent.”
While most commentators are focusing on year-in-reviews, I thought it would be fun to do a decade-in-review using data from the Compendium of Federal Circuit Decisions, the publicly-accessible dataset that we’ve developed at Iowa Law containing information about all decisions by the Federal Circuit since 2008. You can access the Compendium via empirical.law.uiowa.edu/.
1. Decisions by origin
Recently, we updated the Compendium to include all decisions arising from origins other than the District Courts and USPTO. This lets us compare decisions across all origins along a variety of dimensions.
Figure 1 shows the distribution of Federal Circuit decisions by major source. A “decision” in the Compendium is defined as an opinion or Rule 36 affirmance. I’ve grouped origins with small numbers of appeals, including the Board of Contract Appeals, Department of Justice, and Department of Veterans’ Affairs, into the “other” category. (The figures link to larger versions.)
Figure 1
Or if strata are more your thing:
Figure 2
These graphs show the well-known increase in decisions arising from the USPTO (mostly from inter partes review proceedings), but also a decline in decisions arising from the MSPB. (These outputs match the inputs: the Federal Circuit’s statistics page indicates a decline in the number of docketed appeals arising from the MSPB.) While decisions arising from the district courts and the USPTO have crossed paths over the past few years, the number of decisions originating from the district courts is about where it began the decade. Overall, the court’s total output has risen by about 100 decisions/year during this time.
2. Precedential opinions by origin
Another way to assess a court’s output is in terms of its precedential opinions, as these constitute law on which future courts and parties rely. Below is a chart showing the Federal Circuit’s annual number of precedential opinions by major source of origin. The “other” group here includes the “other” category from the above graphs plus the Court of Appeals for Veterans’ Claims, Court of International Trade, and International Trade Commission.
Figure 3
Figure 3 shows precedential opinions in appeals arising from the district courts peaking at about 100 in 2014 and 2015, before falling to about 75 for the last few years. At the same time, the number of precedential opinions in appeals arising from the USPTO has risen substantially, from under 20 in 2013 to about 50-60 for the last few years.
3. Types of Decision by Origin
The below pie charts show the distribution of precedential opinions, nonprecedential opinions and summary affirmances under Rule 36. by source of origin for the entire period 2010-2019. About 30% of the Federal Circuit’s decisions consist of Rule 36 affirmances.
Figure 4
The lion’s share of precedential opinions and Rule 36 affirmances come from appeals from the District Courts and USPTO, nearly all of which involve patent issues. For nonprecedential opinions, it’s the opposite: about half of these of these are written in appeals from the MSPB and CAVC.
One other way of looking at the data on decision types by court of origin for the entire decade:
Figure 5
District court and PATO opinions: precedential, Rule 36 and nonprecedential
The final set of graphs for today are annual decisions from the USPTO and District Court by decision type.
Figure 6
Figure 7
If there are particular graphs of Federal Circuit decisions from the last decade that you’d like to see, send me an email and if we have the data I’ll try to generate them.
You’re welcome to play around with the data on your own. If you do use it for something that you publish, please include a citation to the Compendium. There’s a convenient cite form on the landing page for the database. You’re also welcome to use the above graphs in presentations, provided that you give credit to PatentlyO and the Compendium of Federal Circuit Decisions (https://empirical.law.uiowa.edu/compendium-federal-circuit-decisions).
More reading on the Compendium of Federal Circuit Decisions and methodology & cautions for case count data generally:
Thanks to my research assistants for their work on the Compendium, especially Will O’Brien, Lindsay Kriz, Madison Murhammer-Colon, John Miscevich and Joseph Bauer.
The Supreme Court has denied certiorari in the three leading patent eligibility petitions:
HP Inc. v. Berkheimer (18-415)
Hikma Pharmas v. Vanda Pharmas (18-817)
Athena Diagnostics, Inc. v. Mayo Collaborative (19-430)
Although there are several other pending eligibility petitions, I gave these three the highest potential for certiorari. The result here is that the Supreme Court is now highly unlikely to take up eligibility anew this term. The one exception is the copyright case of Google v. Oracle where the court will likely discuss a dividing line between patentable and copyrightable subject matter.
Additional cases denied certiorari on Jan 13, 2020:
Power Analytics Corporation v. Operation Technology, Inc., et al., No. 19-43 (eligibility)
Regents of the University of Minnesota v. LSI Corporation, et al., No. 19-337 (sovereign immunity)
Garmin USA, Inc., et al. v. Cellspin Soft, Inc., No. 19-400 (eligibility)
Medtronic, Inc. v. Barry, No. 19-414 (meaning “ready for patenting” for on sale bar)
Chestnut Hill Sound Inc. v. Apple Inc., et al., No. 19-591 (due process and R.36 affirmances)
Nuvo Pharmaceuticals, et al. v. Dr. Reddy’s Laboratories, et al., No. 19-584 (written description need for experimental data proving claimed effectiveness)
Mushkin, Inc. v. Anza Technology, Inc., No. 19-610 (relation back to the original complaint)
There are several petitions that remain viable for this term:
ChargePoint, Inc. v. SemaConnect, Inc., No. 19-521 (eligibility)
Trading Technologies International, Inc. v. IBG LLC, et al., No. 19-522; Trading Technologies International, Inc. v. IBG LLC, et al., No. 19-353 (eligibility)
Apple Inc. v. VirnetX Inc., et al., No. 19-832 (apportionment and preclusion)
Maxell, Ltd. v. Fandango Media, LLC, No. 19-852 (eligibility)
Collabo Innovations, Inc. v. Sony Corporation, No. 19-601 (due process and takings for IPR proceedings against Pre-AIA patents)
Cisco Systems, Inc. v. SRI International, Inc., No. 19-619 (eligibility)
Chrimar Systems, Inc. v. Juniper Networks, Inc., et al., No. 19-829 (role of evidence beyond that raised in the IPR petition)
Morris Reese v. Sprint Nextel Corporation, et al., No. 19-597 (eligibility)
Although several of these petitions raise important points, none of them have received the attention or support of the ones denied today.
Maxell, Ltd., v. Fandango Media, LLC (Supreme Court 2020)
Maxell was originally a battery company (MAXimum capacity dry cELL). The $80b company has expanded into all sorts of digital media.
Its patents at issue in this case all relate to managing access to content sent over networks, such as videos provided through online rental and streaming services. U.S. Patents 8,311,389; 9,088,942, and 9,733,522 (all with 2000 priority date). [Update – These are the three patents listed in the petition, but that appears to be an error. I believe that Maxell intended to list 9,083,942 and 9,773,522 but switched a couple of digits.]
Maxell sued Fandango for infringement — alleging that the “FandangoNow” service infringed. The lawsuit was cut-short by the district court’s dismissal on the pleadings – finding the asserted claims ineligible as directed to the abstract idea of “restricting access to data” using “rules based upon time.” On appeal, the Federal Circuit affirmed without opinion following its internal R.36 procedure. Now, Maxell has petitioned the Supreme Court with a simple question:
Whether the claims at issue in Maxell’s patents are patent-eligible under 35 U.S.C. 101, as interpreted in Alice Corp. v. CLS Bank Int’l, 573 U.S. 208 (2014).
[Petition]. This petition is part of the pile of eligibility petitions, including Athena, Hikma, Berkheimer, and Trading Technologies.
The argument in Maxell focuses primarily on Alice Step 1 — whether the claim is directed to a patent ineligible concept. Maxell explains its position that the lower court went too-far in generalizing the concepts of the invention:
The court fundamentally erred at step one by describing the claims at too high a level of generality and failing to consider the digital context.
Id. The Supreme Court particularly warned against undue generalization in Alice — writing that at some level of generalization, all inventions involve an abstract concept. Alice.
Although Maxell’s innovations could be generally classified as a way of “restricting access to data” using “rules based upon time,” the company argues that this abstraction is not what was actually claimed:
[T]he patents do not claim the general concept of restricting access to data using rules; they claim particular solutions for restricting access
to digital audio/visual content using control information and rules sent to the user with the audio/visual file. Those solutions use two time controls to restrict access to copyright-protected content – a retention period and a playback permission period – according to specific rules set out in the claims. They protect copyright owners’ rights by restricting access to the audio/visual file to a limited period. And they optimize the user experience by allowing the user to choose when to use the audio/visual file, including when the user is offline.
Regarding Alice Step 2, Maxell suggests that the innovative concept is easier to identify once you recognize that the patent applications were filed back in the year 2000. However, the district court refused to consider evidence of inventiveness in its eligibility analysis.
In some ways, this case is simply asking the Supreme Court to recognize the USPTO’s eligibility examination guidelines as the law — a claim is only directed at an abstract idea if it recites an abstract idea.
= = = = =
The district court used the following claim as representative in its analysis:
13. A method, comprising:
transmitting audio/video information;
receiving the audio/video information;
storing the audio/video information on a storage medium; and
reproducing the audio/video information from the storage medium according to control information related to the audio/video information,
wherein the control information includes:
a first period for retaining the audio/video information on the storage medium, and
a second period, that begins at the start of an initial reproduction of the audio/video information, for enabling a start of a reproduction of the audio/video information stored on the storage medium, and
wherein,
in a case where an elapsed time from a retaining of the audio/video information is within the first period and an elapsed time from an initial reproduction of the audio/video information is within the second period, enabling a reproduction of the audio/video information, and,
in a case where a reproduction is started before the end of the first period and the reproduction is continuing at the end of the first period, enabling the reproduction to an end of the audio/video information beyond the end of the first period, and thereafter disabling a start of another reproduction of the audio/video information even if an elapsed time from the initial reproduction of the audio/video information is within the second period.
Note that the claim has interesting parallels to the claims invalidated in Mayo v. Prometheus.
Amgen’s patent at issue covers a drug formulation for treatment of hyperparathyroidism in particular situations sold under the trade name Sensipar with about $1b annual sales. U.S. Patent 9,375,405. Note here, that Amgen’s primary patent on the blockbuster drug expired in 2018, but this secondary formulation patent has been effective at keeping generics off the market.
Amgen sued Amneal, Piramal, and Zydus for infringement based upon their ANDA filings with the FDA. The district court ruled that the Zydus proposal would infringe, but that the proposed formulations by Amneal and Piramal would not infringe. On appeal, the Federal Circuit has vacated the verdict for Amneal on claim construction, but affirmed no-infringement by Piramal and infringement by Zydus. Thus, Piramal has something of a green-light to move ahead.
A major portion of the appeal focused on proper construction of a Markush group that required a “binder”:
A pharmaceutical composition comprising: . . .
from about 1% to about 5% by weight of at least one binder selected from the group consisting of povidone, [HPMC], … , and mixtures thereof.
‘405 patent claim 1.
The Markush Group claim form stems from a 1923 decision by the Commissioner of Patents that allowed a patent applicant to effectively define and claim a genus by enumeration of species within the genus. Ex parte Markush, 1925 CD 126 (Com. Pat. 1924). In Markush, the patent applicant attempted to claim a diazotized compound for making dyes that includes
material selected from the group consisting of aniline, homologues of aniline and halogen substitutes of aniline.
The applicant (Markush) had considered a broader descriptive genus such as “mono-amines” but concluded that to be too broad since it including too many non-working embodiments. The examiner though refused to examine the “alternative” claim form.
In his decision, the Commissioner in Markush concluded that there are “many instances in which a generic term covering a number of substances cannot properly be employed” and that a listing of alternatives may be the only way the applicant “may cover his real invention without filing a number of applications.”
Note here that Amgen’s Markush group is remarkably similar to that presented by Markush’s patent attorney Victor Borst back in 1925. The claim format has remained remarkably “stuck” as a limited mechanism for avoiding claim-in-the-alternative objections.
Amneal’s binder includes HPMC as recited in the claims, but also includes polyethylene glycol (PEG). The major question in the case here is whether Amgen’s Markush Group is “open” or “closed.” In other words, does the presence of the additional compound in the binder (PEG) avoid infringement. The district court found the claim closed to additional binding agents and thus that Amneal does not infringe. On appeal, however, the Federal Circuit rejected the claim construction:
There is no language in Amgen’s claim indicating that every binder … in the claimed formulation must be within the Markush group[]. Instead, the claim recites “at least one” binder … “selected from the group consisting of” various excipients. And the limitations merely require that those particular binders or disintegrants meet the specified weight-percentage requirements, which is not inconsistent with the overall composition containing other binders or disintegrants. The plain language of this claim requires “at least one” of the Markush members and certainly does not indicate that the only binders and disintegrants in the claimed formulation are those listed in the groups. And we do not see a sufficient basis for a different conclusion in the specification or in the prosecution history we have recited. . . .
[The claim] is satisfied when an accused product contains a component that is from the Markush group and that meets the limitation’s requirements for the component. It does not forbid infringement of the claim if an additional component is present functionally similar to the component identified in the Markush group limitation, unless there is a further basis in the claim language or other intrinsic evidence for precluding the presence of such additional components. There is no such basis here.
Slip Op. Thus, while the markush group itself may be closed (based upon its “consisting of” language), the claim as a whole is open (based upon its “comprising” transition in the claim’s introduction). With this broader claim interpretation, it looks like Amneal will be found to infringe.
Piramal’s proposed product is different in that its binder is a starch not listed in the Markush group. Thus, no literal infringement. Amgen unsuccessfully argued for infringement under the Doctrine of Equivalents. The problem was that the Markush group was added as part of a narrowing Examiner’s amendment that led to an allowance. (The group was already in a dependent claim — added to claim 1). Although the examiner asked for the amendment, Amgen argued on appeal that it wasn’t necessary to overcome the prior art because a separate amendment was sufficient. However, Amgen failed to provide an alternative purpose behind why the examiner asked for such an amendment. The Federal Circuit faulted that failure of alibi.
[I]f Amgen is correct … the Examiner proposed the Examiner’s Amendment for no purpose at all. Such a reading of the prosecution history is at best unpersuasive.
Slip Op. I’ll note here that the Federal Circuit appears shocked that an examiner would propose an amendment for no legitimate purpose. As a counterpoint, consider that a large portion of examiner rejections are later withdrawn by the examiner upon further consideration.
In any event, a narrowing amendment made for the purposes of securing the patent triggers a presumption of prosecution history estoppel that would prohibit a claim of equivalents to re-claim the narrowed subject matter. One way to get around this presumption is to show that the narrowing amendment is tangential to the equivalent in question. Here, however, the starch used by Piramal is the same starch disclosed in the prior art overcome by the amendment. As the Federal Circuit has previously written: “an amendment made to avoid prior art that contains the equivalent in question is not tangential.” Intervet Inc. v. Merial Ltd., 617 F.3d 1282 (Fed. Cir. 2010).
Thus, the non-infringement holding of Piramal stands.
The Federal Circuit has issued an en banc decision in Supreme v. US, a case involving Customs & Border Protection (CBP) and antidumping / countervailing duty orders. The particular question presented was as follows:
When merchandise enters the United States, whether CBP may preliminarily apply an antidumping or countervailing duty order and implement certain measures to protect the public revenue, regardless of the clarity of the order.
Here, the particular duty order comes from two Dep’t of Commerce regulations that cover crystalline silicon photovoltaic cells but expressly exclude “thin film photovoltaic products produced from amorphous silicon (a-Si).” Products that fall within the order are subject to additional tariffs.
Sunpreme claims its products fall within the exclusion (and thus outside the Order), but CBP disagreed. Eventually the case went before the Court of International Trade (CIT) who characterized the DOC Orders as “ambiguous” with respect to Sunpreme’s modules. In its initial decision, the Federal Circuit agreed with regard to ambiguity:
This is not a close case. The Orders in this case cover certain solar modules and expressly exclude others, without providing a definition of the class expressly excluded. Sunpreme’s solar modules are hybrid products, mixing characteristics of the included and excluded solar cells.
Fed. Cir. Vacated Opinion (2019).
The ambiguity was important because CBP enforcement is seen as a ministerial action — CBP is not authorized to interpret or fill gaps in ambiguous orders. The court explained in its original opinion: “Ambiguity is the line that separates lawful ministerial acts from unlawful ultra vires acts by Customs.”
In its new en banc decision, the Federal Circuit has changed course — now holding that CBP has “authority to preliminarily suspend liquidation of goods based on an ambiguous antidumping or countervailing duty order, such that the suspension may be continued following a scope inquiry by Commerce.” In its decision, the full court found confirmed that CBP’s role is “ministerial” but found that its authorized ministerial acts include interpreting ambiguous orders from the CBP. In particular, CBP can make “individual product-by-product application decisions.”
Customs is tasked with determining, for every imported product, whether the product falls within the scope of an antidumping or countervailing duty order. 19 U.S.C. § 1500(c). That necessarily entails evaluating both the product and the order. In each instance, Customs is statutorily tasked with answering a yes-or-no question as to whether the order applies, in order to fix the duty owed. When the order is ambiguous, Customs is nonetheless called upon to answer the question. . . . Answering that question does not transform Customs’s yes-or-no question into an interpretive act that would “modify Commerce’s determinations” or otherwise impinge upon Commerce’s authority to issue and set the scope of duty orders.
En Banc Decision. The policy behind antidumping or countervailing duty orders is to protect US industry — and the Gov’t argued that the original opinion frustrated that policy by creating a likely procedural delay.
= = = = =
The issues in this case remind me of what happens with claim construction and infringement analysis in district court litigation. The Judge decides claim construction while the jury decides whether the product infringes those claims (as interpreted). When a judge fully construes a claim, a jury is left with almost nothing to do except the ministerial act of finding infringement. For tough infringement questions, there is always a tendency to argue that the claims should have been more fully construed. However, I believe that approach drains too much power from the finder of fact – the Jury.
Here, we have a similar situation in the Commerce case where the Orders are not ambiguous on their face, but do not fully define all potential situations. You might conclude that a new situation reveals ambiguity inherent in the order; Alternatively, you might instead conclude that the ambiguity is in how the situation applies to the order.
So far there are still no precedential opinions issued in 2020, and this is the first non-precedential patent related decision.
Philips’ patent RE44,913 (“text entry method”) claims a 2001 filing date. At that time, a key focus of mobile-device development was on how to facilitate typing on these small devices with relatively imprecise touchpads. The basic idea behind the invention can be seen in the two figures below. On the left is a “default” keypad with showing “primary characters.”; holding down the “5” key will then switch the display to the keypad on the rights that has more available options (“secondary characters”). After selecting one of those options, they keypad returns to the default state.
Philips sued Acer and others for infringement based upon their use of the Chrome and Android OS — that led Google to petition for inter partes review (IPR).
In its final decision, the PTAB sided with the patentee in holding that Google failed to prove that the claims were obvious. On appeal, the Federal Circuit has reversed.
On appeal here, the Federal circuit has reversed the PTAB’s final decision siding with the patentee and holding that Google failed to prove that the claims were obvious. The basic issue here is that there is only a minimal difference between Philips’ claimed invention and the key prior art reference. The court explains:
The parties do not dispute that the [Philips’] ’913 patent claim differs from that Sakata II method in only one respect. In the ’913 patent claim, after a secondary character is selected, the relevant key “return[s] . . . to the default state” rather than, as in the described Sakata II method, changing to the selected secondary character.
It was also clear that the “return-to-default” option was available and familiar to someone skilled in the art (e.g. shift key). Philips argued that particular step would not have been obvious-to-try since it one of many potential keypad techniques available. On appeal, the Federal Circuit rejected the “wide-scope inquiry” as a red herring in this case — finding language from KSR directly on point:
[W]hen a patent claims a structure already known in the prior art that is altered by the mere substitution of one element for another known in the field, the combination must do more than yield a predictable result.”
KSR International Co. v. Teleflex Inc. (KSR), 550 U.S. 398 (2007). The Fed. Cir. explained somewhat obliquely that:
[T]he obvious-to-try inquiry at least sometimes must focus on known options at what is undisputedly the sole point of novelty in the claim at issue.
See Perfect Web Techs., Inc. v. InfoUSA, Inc., 587 F.3d 1324 (Fed. Cir. 2009). The practical point here is that inventions with a sole-point-of-novelty set themselves up as a target for an obviousness finding because the court will ask “if the sole contested step of the claim at issue was obvious to try, taking the remaining steps as a given.”
In this case, the Court found additional reasons for obviousness — notably the primary prior art reference was actually an improvement over prior return-to-default techniques.
Sakata II itself asserts that the character substitution at the last step provides an efficiency benefit over the evident alternative of requiring that the secondary-character menu be summoned each time one of those characters was to be re-used. . . . This efficiency assertion is on its face a comparative one, and what is plainly being compared to the Sakata II choice is the no-substitution option—where the primary character returns to the key upon disappearance of the secondary-character menu. That is Philips’s returnto-default claim element.
Slip Op. In the end, the appellate panel did not appear to directly fault the Board’s factual conclusions but rather Board’s legal analysis — in particular the meaning of “obvious-to-try” and its impact on the ultimate (legal) conclusion of obviousness.
We hold that claims 1 and 3–16 of the ’913 patent are unpatentable for obviousness. The Board’s decision is reversed.
By Sarah Burstein, Professor of Law at the University of Oklahoma College of Law
As previously covered here on Patently-O, a new design patent bill has been introduced in Congress. The so-called “Counterfeit Goods Seizure Act of 2019” would allow Customs and Border Patrol (CBP) to seize goods accused of design patent infringement.
This is a bad idea.
This bill is not reasonably tailored to address its purported goal of “stem[ming] the flow of counterfeit goods.” Instead, it will allow design patent owners to foist their private enforcement costs onto taxpayers, under circumstances that are unlikely to result in accurate determinations of infringement. Moreover, this type of ex parte, non-public system of adjudication is ripe for abuse.
I have three major groups of concerns about this bill: substantive, procedural, and rhetorical. This post will address them in turn.
Substantive concerns
First, CBP will not be in a position to make accurate determinations of design patent infringement.
The test for design patent infringement, as set forth by the en banc Federal Circuit in Egyptian Goddess v. Swisa, involves two steps. (For more on the Egyptian Goddess test, see this short essay.)
The first step requires a comparison of the claimed design (i.e., what’s illustrated in the patent) and the accused product. If those designs look plainly dissimilar, the test is over; there is no infringement. If the designs look like they might be the same, then the factfinder must consider the designs in light of the closest prior art.
This second step is important. Often, two designs that look similar in the abstract look much less so when considered in light of the prior art. Consider this recently-litigated example. The patented design is shown below on the left; the accused design is below on the right:
These two designs might not look plainly dissimilar in the abstract. But when viewed in light of the prior art, a number of visual differences become apparent:
Ultimately, the judge correctly concluded that the patent owner was not likely to prove infringement (though the path to that decision was a bit more circuitous).
How would this have turned out under the design-seizure bill? Who would have collected the closest prior art? There are many things to like about the Egyptian Goddess test, but one downside is that step two requires an informed and motivated defendant to work well. In an ex parte CBP proceeding, there is no one to play that role. CPB officials are not trained (and one assumes, lack the resources) to conduct their own prior art searches. And patent owners have zero incentives to provide any—let alone the closest—prior art when they record their patents or when they give CBP information about “suspect inbound shipments.” See generally 5 McCarthy on Trademarks § 29:37 (“Trademark owners that see a higher success rate in Customs seizures are typically the ones that continuously and vigilantly provide Customs with information to use in identifying suspect inbound shipments. Such information could include the names of known foreign counterfeiters, countries of origin, suspect importers, and the like.”)
If CBP skips (or lacks sufficient information to properly conduct) Egyptian Goddess step two, competing products could seized even when they don’t infringe. CBP could seize products that merely practice the prior art or that resemble the claimed design solely in functional aspects (for all but the most pioneering products, one would expect to find any truly functional elements in the prior art).
Thus, ex parte assessments of design patent infringement are likely to lead to significant over-enforcement. At least one other commentator has voiced similar concerns. Over-enforcement would chill legitimate competition and ultimately raise prices for consumers—the very consumers who would be footing the bill through their tax dollars.
In any case, it is simply not correct—as some proponents of this bill have asserted—that all CBP would have to do is look at the design patent and the accused product and see if they look the same.
Some might argue that CBP could review the prior art cited on a particular design patent. But that’s by no means guaranteed to be the closest prior art. Some of it may not even be available at the time of enforcement; USPTO examiners often cite web pages using basic URLs and link rot is a very real concern.
One proponent of this bill has asserted that “Customs officers have already effectively demonstrated the ability to determine whether imported goods infringe a design patent, through its ongoing enforcement of design-patent exclusion orders.” But how do we know that is true? What kinds of orders are being issued by the ITC? How broad (or narrow) are they? How can we know whether CBP is enforcing them well? While we can assume CBP does the best it can in the restraints under which it operates, any assertion about what that actually looks like in practice requires something more that ipse dixit before it can have any persuasive weight.
Procedural concerns
This bill raises also raises serious due process concerns. What recourse is there for competitors whose goods are improperly seized? What accountability is there for design patent owners who direct CBP officials to competing products that don’t actually infringe? Based on my experience reviewing design patent complaints, it appears that many attorneys are under the mistaken impression that design patents cover design concepts, when they really only cover the specifically-claimed designs. I call this “the concept fallacy.” It’s remarkably common in federal court filings. If members of the bar feel comfortable making such allegations in federal court, where they are subject to both judicial sanctions and public scrutiny, what allegations will they feel comfortable making to the CBP?
The non-public nature of these seizures is also a concern. How can we know how well the system is (or is not) working? Based on the information Professor Rebecca Tushnet has been able to gather about trademark seizures, it appears that the agency does not keep good records and its substantive determinations are guided by materials provided by trademark owners. One would assume that if the design-seizure bill were passed, groups like INTA, AIPLA, and/or IPO would be happy to provide their own guidelines for CBP. If that happens, any such materials should be made public, to ensure accuracy. (Hopefully, it won’t take a FOIA lawsuit like the one Professor Tushnet had to file.)
Rhetorical concerns
Finally, the entire framing of this bill is based on conflating design patent infringement with “counterfeiting.” Those two things are not the same.
“Counterfeiting” is a term of art in U.S. IP law. The Lanham Act defines a “counterfeit” as “a spurious mark which is identical with, or substantially indistinguishable from, a registered mark.” 15 U.S.C. § 1127.
Actual counterfeiting (i.e., as that term is defined in the Lanham Act) is arguably the worst type of IP infringement. But it’s already illegal. Indeed, it’s subject to criminal penalties. If Congress thinks those remedies are not severe enough, it is free to increase them. But Congress should narrowly tailor any such efforts to acts that actually constitute counterfeiting. That’s not what’s going on here.
Proponents of this bill like to talk about “counterfeits without labels” (a strange concept in light of the relevant statutory definitions, but that’s an issue for another day) but the bill goes beyond anything that would seem to fall into that category.
Most design patents can be infringed by products that don’t replicate the entire appearance of the patent owner’s own product—if any. (Design patent owners, like other patent owners, aren’t required to produce products embodying their designs.) Even in the rare case where a design patent claims the entire shape and surface design of a product, that patent will still be infringed by a competitor who makes a product in that shape even if the color or material or some other non-shape attribute is so different that no one would mistake it for the original item.
Many (perhaps most) design patents claim just a small part of a larger design; the whole point of such patents is to capture competing products that don’t look the same overall. When an applicant claims a small part of a design, there is no requirement that it be an important or valuable part—let alone a part that would lead to serious consumer deception. (If you’re interested, I wrote more about these claiming techniques here and here.)
Over the years, I’ve heard many design patent attorneys say they want border enforcement. But it’s not because they’re worried about counterfeiting. They want it because it will make design patents more valuable—or at least seem more valuable—to their clients, which in turn makes it easier to sell their design patent prosecution services. (It’s perhaps not surprising that the push for CBP enforcement became more organized after the Supreme Court’s decision in Samsung v. Apple which, in the eyes of many, made design patents less valuable. The ultimate impact of that case, however, remains to be seen. For more on that case, see here; for more on the developments since then, see here.) While some proponents of this bill may truly, in their hearts of hearts, be worried about actual counterfeiting, the fact remains that many design patent attorneys want border enforcement for these other reasons.
We’ve seen this rhetorical technique before—in the past, proponents of broader copyright laws have used the word “counterfeiting” to conjure the specter of medicines laced with poisons and other horrors to scare legislators into enriching private rights holders. I hope Congress doesn’t fall for it.
The USPTO has identified three recent PTAB decisions as “INFORMATIVE.” All three will be helpful to patent prosecutors and so should be considered:
Obviousness:Hulu, LLC v. Sound View Innovations, LLC, Case IPR2018-00582, Paper 34 (Aug. 5, 2019) (designated informative on Dec. 11, 2019) (finding insufficient justification to combine references);
Obviousness: Johns Manville Corp. v. Knauf Insulation, Inc., Case IPR2018-00827, Paper 9 (Oct. 16, 2018) (designated informative on Dec. 11, 2019) (denying institution based upon insufficient justification to combine references); and
Eligibility:Ex parte Linden, 2018-003323 (Apr. 1, 2019) (designated informative on Dec. 11, 2019) (reversing examiner rejection based upon 2019 Examination Guidelines for eligibility).
This post will focus on Linden, which is a patent application owned by BAIDU spun out of Prof. Andrew Ng’s lab at Stanford.
In Linden, the BAIDU patent application claims a method using a trained neural network to transcribing speech. The claimed method involves several data processing steps: normalizing the input (to the training data); generating a “jitter set” of audio files (time-distorted versions of the original); generating a spectrogram for each time-jiggered audio file; predicting character probabilities with the neural network; and transcribing the audio based upon character probabilities and a language model.
The examiner rejected the claims as directed to an abstract idea of manipulating data; creating information sets (based upon prior information sets); and decoding data. On appeal, the PTAB reversed — finding that the claim should not be classified as directed to an abstract idea under the 2019 Examination Guidelines. Under the Guidelines, abstract ideas must be classified as either:
Mathematical concepts;
Certain methods of organizing human activities; or
Mental processes.
* The guidelines note claims outside the enumerated groupings can be treated as abstract ideas, but only in “rare circumstance.” *
Here, the Board found that the transcription claims are not directed at these categories. Focusing first on mental processes and human activities, although transcription is a human/mental activity, the Board found that the specific process here (jiggering/spectrogram sets/etc.) cannot be “practically performed mentally” nor do they recite “organizing human activity” — which is defined as activities such as using fundamental economic principles, commercial and legal interactions, and managing relationships.
Regarding mathematical concepts. The claims here require several mathematical operations to be performed: jiggering; creating spectrogram; predicting character probabilities; etc. However, the Board found that none of these operations actually “recite” a mathematical algorithm or formula.
[T]he Examiner identifies that the Specification discloses an algorithm to obtain the predicted character probabilities. The mathematical algorithm or formula, however, is not recited in the claims. As such, under the recent Memorandum, the claims do not recite a mathematical concept.
Linden. In case you didn’t see it – this is bonkers. The Board here is saying that the claim would be problematic only if it actually and expressly recited the algorithm that it uses. Since the claim is drafted more broadly (i.e., at a higher level of abstraction), it cannot be seen as abstract.
The PTAB went on to explain that even if the claims did recite a mathematical concept — they are still not problematic because the claims as a whole are not “directed to an abstract idea” but rather any abstractions are “integrated into a practical application.”
Regarding Alice Step 2, the Board also faulted the examiner for failing to provide evidence that the claims do not include an inventive concept:
[T]he examiner concludes the claims do not include “any additional elements that amounts to significantly more than a judicial exception” but fails to provide sufficient factual support. Berkheimer.
Linden.
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Typo by the PTO?. The Board identifies the case as “Ex PARTE LEE LINDEN, BENJAMIN LEWIS, AND ABHEEK ANAND.” This is confusing to me because none of these individuals are listed as inventors on the patent (Awni Hannum is the first named inventor).
