2020

Federal Circuit: Amended Claims in IPR Should be Subject to Full Examination (Including 101)

Patent

by Dennis Crouch

Uniloc 2017 LLC v. Hulu, LLC & Netflic, Inc. (Fed. Cir. 2020)

A divided Federal Circuit has authorized the PTAB to consider patent-eligibility challenges during inter partes review (IPR) proceedings in the context of a patentee’s motion to amend the claims.   Uniloc had moved to amend with substitute claims and Hulu opposed. The PTAB then denied the motion to amend — concluding that the proposed claims were not subject matter eligible under Section 101.  The PTAB’s subsequent rehearing denial was designated as precedential — holding that any ground of unpatentability can be considered in the context of a motion to amend.

The PTAB holding is controversial because inter partes review proceedings are strictly limited to cancellation of claims “on a ground that could be raised under section 102 or 103 and only on the basis of prior art consisting of patents or printed publications.” 35 U.S.C. 311(b).

On appeal, the Judge Wallach wrote the majority opinion joined by Judge Taranto.  Judge O’Malley dissented.

In his opinion, Judge Wallach looks to the statute and concludes that the limitations on the “grounds” for challenging a patent via IPR do not apply to whether the PTAB allows amendments to the claims.

The PTAB correctly concluded that it is not limited by § 311(b) in its review of proposed substitute claims in an IPR, and that it may consider § 101 eligibility. The determination is supported by the text, structure, and history of the IPR Statutes, which indicate Congress’s unambiguous intent to permit the PTAB to review proposed substitute claims more broadly than those bases provided in § 311(b).

Slip Op.  Rather, under Section 318, the PTO appears to be required to determine whether any new claim is patentable before issuing a certificate saying as much.

Any proposed amended or new claim determined to be patentable and incorporated into a patent following an [IPR] shall have the same effect as that specified in section 252 for reissued patents. . . 35 U.S.C. 318(c).

[E]very reissued patent shall have the same effect and operation in law, on the trial of actions for causes thereafter arising, as if the same had been originally granted in such amended form. . . 35 U.S.C. 252.

The implication here is that any new or amended claim must be fully reviewed for patentability–under all of the patentability doctrines–before being allowed. This is different from the limitations of Section 311 that are directed toward cancellation of already existing claims. The majority did not reach the issue of whether the PTO determination should be given deference — since the “text, structure, and history of the IPR Statutes are unambiguous.”

Note here that this outcome is in sharp tension with the language of Aqua Products Inc. v. Matal, 872 F.3d 1290 (Fed. Cir. 2017) (en banc).  In that case, the plurality opinion explained that challenges to amended claims should be limited since the PTO requires that substitute claims be narrower than the original claims. Here, the majority rejected this portion of Aqua Products–explaining that the en banc case did not have a majority opinion and that aspect of the case was thus merely dicta of a handful of judges.

No opinion in Aqua Products garnered a majority, leaving the only holding as a burden of proof determination, concluding that the USPTO had improperly adopted regulations assigning the burden of proof with respect to proposed substitute claims.

Slip Op.

Writing in dissent, Judge O’Malley would have dismissed this appeal as moot. In particular by the time the PTAB issued its rehearing denial, the Federal Circuit had already held these claims invalid in the parallel infringement proceeding.

After our affirmance of the district court’s ineligibility determination, and once the time expired for Uniloc to seek Supreme Court review of that affirmance, it did not possess any patent rights that it could give up in exchange for a substitute claim. It owned nothing and could not, therefore, substitute its old claims for new ones. If Uniloc were to prevail in this appeal and return to the Board, the Board would be without power to effectuate a substitution. . . .

To analogize to ownership of real property, if a
court finally determines that a deed to property is defective such that the property belongs to someone else, the former “owner” cannot “substitute” that property for a new parcel—even if the owner is in the middle of closing a sale. The former “owner” has nothing to give up and, indeed, never had anything to bargain with in the first place.

Dissent. Judge O’Malley then explains that the majority kept this case alive in order to enact misguided policy:

Here, rather than follow that usual procedure, the majority breathes life into a dead patent and uses the zombie it has created as a means to dramatically expand the scope of inter partes review (“IPR”) proceedings. . . .

After concluding that an invalid patent can serve as a vehicle to reach the merits of this appeal, the majority announces that, when it comes to substitute claims, the Board can engage in a full-blown examination. This revelation runs contrary to the plain language of the statute and the policy of efficiency that underlies the IPR system.

Id.

Reconsidering DESCRIPTIVE.COM trademark registrations after BOOKING.COM

Patent

by Dennis Crouch

In re: GJ & AM, LLC, Docket No. 19-01214 (CA Fed 2020) (CookinPelletsCOM)

In this case GJ&AM is seeking to register a trademark on the mark “COOKINPELLETS.COM.”  The company sells grilling pellets on its website as well as via Amazon and local dealers.

The USPTO refused to register the mark — finding “cookinpellets.com” would be “understood by consumers as referring to a company that sells cooking pellets online.”  The Board (TTAB) also used the (former) shortcut almost-per-se rule of the patent office that adding “.com” would not transform a generic word into a registrable mark. See Booking.com B.V. v. Pat. & Trademark, 18-1309, 2020 WL 3578671 (U.S. July 2, 2020).  After the BOOKING.COM decision, the Federal Circuit received supplemental briefing.  However, rather than deciding the case the court remanded to the TTAB. “The impact of the Supreme Court’s decision in Booking.com is best determined by the Board in the first instance.”

In its supplemental briefing, the USPTO had suggested that the court could go ahead and decide the case — revealing its approach to narrowly applying Booking.com. The PTO’s brief begins with its statement of the decision:

In Booking.com, the Supreme Court was presented solely with the legal question whether a generic term combined with the top level domain “.com” results in a combination that is necessarily generic. The Supreme Court rejected a rule that a “generic.com” term is always generic and also rejected a rule that such a term is automatically non-generic.

[Supplemental Briefing PTOSupplementalBriefPelletCookin].

The TTAB had rejected the mark as both rejected the mark as both generic and merely descriptive without proof of acquired distinctiveness.  On appeal, the PTO argued that Booking.com‘s holding did not disturb the distinctiveness holding:

The Supreme Court’s decision in Booking.com implicates only the genericness refusal ground …. If the Court determines substantial evidence supports the merely descriptive and lacks acquired distinctiveness refusal ground, the Court should affirm the Board’s decision on that basis alone without reaching the genericness refusal.

The problem with the PTO’s argument here is that the Board did not give any weight to the “.com” portion of the mark when determining distinctiveness or acquired distinctiveness.  Rather the Board applied the now-rejected PTO almost-per-se rule that “.com” adds nothing and therefore could not “expand the meaning of the mark” beyond that of “cookinpellets” itself.  The PTO briefing on this point does not appear to fully consider the holding of Booking.com — it will be interesting to see how the TTAB responds.

Flash-of-Genius as Evidence of Eligibility

Patent

Steve Morsa v. USPTO (Supreme Court 2020)

Patent holder and occasional Patently-O commentor Steve Morsa has filed his petition for writ of certiorari to the US Supreme Court on his pending Patent App. No. 13/694,192.  [Petition].

Morsa’s approach is interesting — using the Supreme Court’s “flash of genius” decision in a positive light and arguing that his own flash of creative genius is proof of eligibility.

[T]he new device, however useful it may be, must reveal the flash of creative genius, not merely the skill of the calling.

Cuno Engineering Corp. v. Automatic Devices Corp., 314 U.S. 84 (1941).  Morsa explains that the 1952 Patent Act eliminated “invention” and “flash of genius” as requirements of patent eligibility.  At the same time, Congress did not eliminate those elements as one basis for proving patent eligibility.

[M]y invention’s 2004 genesis – Bid on Demographics! – was an out-of-the-blue light bulb moment; an epiphany; what’s often referred to as a “flash of creative genius” (though I’m no genius). It did not result from thinking up / inventing a way to computerize or move to the Internet or computer networks something currently in existence or from the past. . . .

[I]nventions which are, like here, the result of a flash of creative genius are, under Cuno, patent eligible. This is eligibility dispositive. The eligibility analysis should have ended there.

Petition. Thus, Morsa asks:

  • May the Federal Circuit and Patent Office ignore this Court’s seminal Cuno decision?

Morsa’s petition presents two additional questions:

  • May the Federal Circuit and Patent Office ignore Patent Office proof of no undue preemption?
  • May the Federal Circuit and Patent Office establish their own Section §101 Law?

The preemption argument is interesting and important. The Supreme Court has noted that preemption-of-ideas is a fundamental basis for the restriction on eligibility.  At the same time, the Federal Circuit & USPTO have refused to consider any actual evidence of whether a particular claim would be preemptive.  Instead, the tribunals look to the two-step Alice/Mayo process as the proxy for determining preemption.

= = = =

OK – now lets looks at Morsa’s claim 2 (claim 1 is cancelled) directed to a “technical field improving technological process.”  This is not starting off well.  The claim goes on to detail a process of collecting a user’s demographic information; receiving an advertising bid associated with the demographic; then showing the ad to the user if it is a ‘match.’

A technical field improving technological process comprising:

transmitting by a computer system over a network for display to a user a request for demographic and/or psychographic user information;

receiving at the computer system over the network from the user the user information;

saving by the computer system the user information;

receiving at the computer system over the network from a first advertiser an association between (i) one or more first criteria comprising demographic and/or psychographic criteria and a first ad and (ii) a first bid, the bid being the highest amount the advertiser is willing to, but may not have to, pay, and the first ad;

receiving at the computer system over the network from a second advertiser an association between (i) one or more second criteria comprising demographic and/or psychographic criteria and a second ad and (ii) a second bid, the bid being the highest amount the advertiser is willing, but may not have, to pay, and the second ad;

determining by the computer system that a first match exists between the first criteria and the user information;

determining by the computer system that a second match exists between the second criteria and the user information;

in the event of both a first match and a second match, determining by the computer system placement of at least one of the first and second ads based on one or more ad placement factors comprising the first and second bids;

transmitting by the computer system at least one of the first and second ads over the network to the user.

 

Arthrex Remands: Treat or Trick?

Patent

Guest post by Professor Andrew C. Michaels (University of Houston Law Center)

With Arthrex certiorari petitions hitting the Supreme Court over the past weeks, one issue that seems to be underappreciated is the judicial retroactivity question raised by Judge Dyk in his Bedgear concurrence, which was joined by Judge Newman.  It is fair to say that these two venerable judges don’t always agree, so on the rare occasion when they team up for a concurrence one might reasonably expect that they have a serious point.  They do, for the dozens of remands now stayed before the USPTO pending the petitions were unnecessary and at least mostly imprudent under the law of retroactivity as properly understood.  If the Supreme Court were to take up this issue, it would have an opportunity to eliminate this wasteful multiplication of administrative hearings, as well as to clarify retroactivity law.

The Supreme Court has stated: “The principle that statutes operate only prospectively, while judicial decisions operate retrospectively, is familiar to every law student.”  Rivers v. Roadway Express, Inc., 511 U.S. 298, 311-12 (1994).  But this fundamental principle was overlooked by the Federal Circuit in its Arthrex decision, where the court ruled that the relevant Administrative Patent Judges were “not constitutionally appointed at the time” they had previously issued final appealable decisions, despite the fact that the court at least purportedly cured the unconstitutionality with its as-applied severance of removal restrictions.  See Arthrex, Inc. v. Smith & Nephew, Inc., 941 F.3d 1320, 1338-39 (Fed. Cir. Oct. 31 2019).

The Arthrex opinion’s notion that the APJs were not constitutional prior to the decision’s Halloween day release, but then spookily became constitutional as of that day, flies in the face of the Court’s basic retroactivity doctrine, under which the as-applied severance fix should have been considered retroactive.  The court’s decision to treat Halloween 2019 as the “effective date” of its as-applied severance was inappropriately more legislative than judicial in character.  See Paul J. Mishkin, Forward: The High Court, The Great Writ, and the Due Process of Time and Law, 79 Harv. L. Rev. 56, 65-66 (1965) (“the question of an effective date . . . smacks of the legislative process; for it is ordinarily taken for granted . . . that judicial decisions operate with inevitable retroactive effect”).

The Federal Circuit viewed remands as required by the Supreme Court decision in Lucia, despite the fact that in Lucia there was no judicial fix to make retroactive.  If there was a fix in Lucia it came from the agency after the relevant ALJ had heard the case, and was thus properly considered prospective only because the other branches presumptively act prospectively whereas the judiciary at least presumptively acts retroactively.  See Lucia v. SEC, 138 S. Ct. 2044, 2055 n.6 (2018); 783 Fed. Appx. 1029 (Fed. Cir. Nov. 7, 2019) (Dyk, J., concurring in the judgment, joined by Newman, J.).

The judicial retroactivity principal holds for statutory alterations and invalidations.  When a court invalidates a statute, courts generally should treat the invalid statute as though it never existed in the first place.  See Reynoldsville Casket Co. v. Hyde, 514 U.S. 749, 759-60 (1995) (Scalia, J., concurring) (“In fact, what a court does with regard to unconstitutional law is simply to ignore it.  It decides the case ‘disregarding the unconstitutional law,’ . . . because a law repugnant to the Constitution ‘is void, and is as no law.’”) (quoting Marbury v. Madison, 5 U.S. 137 (1803), and Ex parte Siebold, 100 U.S. 371, 376 (1880)).

Similarly, when a court interprets a statute, the newly announced statutory construction is properly considered to have been the law all along.  See, e.g., DIRECTV, Inc. v. Imburgia, 136 S. Ct. 463, 469 (2015) (“judicial construction of a statute ordinarily applies retroactively”); Rivers, 511 U.S. at 312-13 (“A judicial construction of a statute is an authoritative statement of what the statute meant before as well as after the decision of the case giving rise to that construction.”).

Concurring in the court’s denial of rehearing en banc, Judge O’Malley appeared to suggest that judicial severance is an exception to these general retroactivity principals, claiming that the Court’s decision in Booker makes clear that judicial severance is “necessarily a prospective act.”  See Arthrex, 953 F.3d at 768 (citing United States v. Booker, 543 U.S. 220, 268 (2005)).    This assertion is contrary not only to retroactivity doctrine in general but also even to Booker itself, which in fact held that its judicial severance did have to be considered retroactive.  See Booker, 543 U.S. at 268 (“we must apply . . . our remedial interpretation of the Sentencing Act – to all cases on direct review”) (citing Reynoldsville, 514 U.S. at 752; Harper v. Virginia Dep’t of Taxation, 509 U.S. 86 (1993)).  Nothing in Booker carves out a judicial severance exception to foundational principles of judicial retroactivity.

The reason that a remand for rehearing was appropriate in Booker (despite the retroactivity of the severance) was that the prior statutory misrepresentation of law clearly made a difference, in that it led to Mr. Booker receiving a longer criminal sentence than he properly could have under the corrected statute.  See Booker, 543 U.S. at 227, 245-46.  Similarly in Harper, taxes had been collected under an invalid tax statute, so the Court remanded for state courts to consider refunding the taxes.  See Harper, 509 U.S. at 102.  In both of these cases, governmental action had been taken that adversely affected a party and could not have been taken under the law as correctly understood.  Retroactivity doctrine provides for discretion to remedy these situations when equities so dictate.  See, e.g., James B. Beam Distilling Co. v. Georgia, 501 U.S. 529, 543-44 (1992) (“nothing we say here precludes consideration of individual equities when deciding remedial issues in particular cases”).

The key difference though is that in Arthrex, the prior misrepresentation of law had no such effect.  There is no apparent reason to think that any of the remanded cases would have been decided differently if the relevant APJs had known that they were in fact removable at will, and any argument that actual harm is present would seem to be a tenuous.  Absent actual harm, a discretionary remand was at most prudent in the Arthrex case itself as an incentive creating reward for first winning the Appointments Clause challenge (and even that is questionable), but not in the dozens of other remanded matters.

Concurring in the denial of rehearing en banc, both Judge O’Malley and Judge Moore pointed to a government brief as having “rejected” Judge Dyk’s retroactivity argument.  See Arthrex, 953 F.3d at 764 and n.3, 767 (citing Supp. Br. of United States, Polaris v. Kingston, Nos. 2018-1768, -1831, at 13-14).  That brief asserts that the court’s as-applied severance was not “sufficient to eliminate the impact of the asserted constitutional violation on the original agency decision,” but tellingly provides no suggestion of what that impact might have been.  In any event, the requirement of at least presumptive judicial retroactivity is rooted in Article III and the Court’s jurisprudence, and cannot be overridden or waived by an executive branch brief.  See James B. Beam, 501 U.S. at 549 (Scalia, J., concurring in the judgment) (“‘the judicial Power of the United States’ . . . Art. III, § 1, must be deemed to be . . . the power to say what the law is . . . not the power to change it”).

Apart from the lack of even an assertion of any actual harm caused by the prior statutory mirage of removal restrictions, such harm is unlikely also because the Supreme Court has applied standing (specifically traceability) requirements rather loosely in the Appointments Clause context.  See Free Enterprise Fund v. Pub. Co. Accounting Oversight Bd., 561 U.S. 477, 511-12 n.12 (2010).  It is one thing to allow litigants to raise Appointments Clause challenges that make no likely difference to their case, but it is another to retrospectively vacate prior agency actions that were almost certainly unaffected by those issues, especially where doing so is not required by and in fact runs counter to the Court’s retroactivity jurisprudence.

Finally, concurring in the denial of rehearing en banc, Judge Moore downplayed the disruption of the unnecessary rehearings, stating that the Arthrex decision would result in at most eighty-one remands.  See Arthrex, 953 F.3d at 764 n.4.  Squaring this statement with the PTAB general order issued on the first of May staying over one-hundred remanded matters (and expecting more to come) pending certiorari petitions would seem to be more than trivial.  Regardless, even if the PTAB chooses not to reopen briefing or the record, a new hearing before a new panel of APJs plus a new final written decision subject to a new appeal, in each of the dozens of remanded matters, is not without significant expense, disruption, and waste.

More to the point though, the disruption is legally improper, as explained further in my forthcoming article, Retroactivity and Appointments, available here: http://ssrn.com/abstract=3650166

Cross Armory loses its Mandamus Appeal against AR Maglock

Patent

by Dennis Crouch

In re Cross Engineering, LLC (Fed. Cir. 2020) (Cross Armory) [CrossArmoryPetition]

Evolution Concept’s U.S. Patent No. 8,756,845 covers an AR-15 semi-automatic rifle converted to have a small fixed-magazine. (Sold as the AR Maglock).  The patent explains that the motivation for the change is to avoid the proposed “Assault Weapons Ban of 2013” in the wake of the Sandy Hook Elementary School Shooting.  That Bill (never passed) would have banned certain semi-automatic weapons with a detachable magazine.  However, California’s assault weapon ban created a market for the modification.  My understanding is that the proposed modification here is easy to undo as well in case someone wanted to go-back to having removable magazines.

Evolution sued competitor Cross Armory for infringement and after some amount of litigation, the parties entered into a courthouse settlement agreement that Cross would pay 19% royalty for its sales of “every accused product.”  The parties also agreed to give Magistrate Judge Berg (who mediated the settlement) “authority to achieve finality regarding disputes” about the settlement and agreed that any decision by Judge Berg would be “FINAL AND BINDING WITH NO APPEAL.” The expectation here was that a more fully and complete agreement would be forthcoming.

Cross then refused to pay the amount Evolution thought it was owed.  Judge Berg ordered Cross to pay the money–finding that certain “kits” were also licensed products requiring royalty payments. Judge Berg also ordered the parties to sign a finalized agreement that he approved.

Cross then petitioned the Federal Circuit on writ of mandamus, which the court has now denied.

Right to Appeal: The court began its brief analysis with discussion of Cross’s waiver of its right to appeal.  The court explained “That agreement would seem on its face to waive further review of these decisions, or at least suggest that we should not exercise our discretion to review them.”

On the merits: The court went on to look a bit into the merits of the case — holding that “Cross has not shown a clear and indisputable right to its requested relief” and thus is not deserving of a mandamus order.

Cross’s basic argument was that its “kits” were not supposed to be included in the term ‘accused products.’  On appeal, the Federal Circuit noted that the original courthouse settlement agreement did not define the term.  However, Cross “consented” to having the Magistrate Judge decide all disputes regarding the settlement.  Further, there is no presentation of “any judicial usurpation of power or clear abuse of discretion” that might require action by a superior court.

Mandamus denied.

ITC: Non-Party has No Right to Challenge Injunction against Its Product

Patent

by Dennis Crouch

Mayborn Group, Ltd. (Shanghai Jahwa) v. International Trade Commission (Fed. Cir. 2020)

Mighty Mug owns U.S. Patent 8,028,850 — a self-anchoring mug (suction). Back in 2017, the company petitioned the ITC to investigate competing imports and the ITC eventually issued a General Exclusion Order (GEO) “barring importation of infringing goods by any party.”  The ITC’s preferred practice is to issue “limited exclusion orders” only against the parties actually investigated.  However, here the agency found a pattern of violations and difficulty in identifying the source of infringing products.

Mayborn makes a “No-Knock Cup” and was notified of the action while it was pending, but Mayborn was not particularly investigated.  Still, the company did not intervene into the proceedings until after the exclusion order had already been issued. At that point, Mayborn petitioned for rescission of the order — arguing that the claims were invalid as anticipated by the prior art.

Changed Circumstances: Under its governing statute, a Section 337 order will “continue in effect until … the conditions which led to such exclusion from entry or order no longer exist.”  Although Mayborn discovered the prior art after the exclusion order, the Commission found that discovery didn’t count as a changed condition. On appeal, the Federal Circuit has affirmed — holding that the ITC “had no obligation to consider the substance
of Mayborn’s petition.”

Let me say here that the outcome is a bit off-the-wall for folks thinking primarily about Federal Courts.  The ITC issues a general injunction, including against non-parties to the investigation and those non-parties are now barred from challenging the judgment.  Note here that the issue of validity was not contested — rather the parties in the original action all settled or defaulted. A court applying traditional principles of res judicata would allow Mayborn to challenge the order.  But here, the Federal Circuit agrees that no challenge is available. This is why patentees like to sue in the ITC.

Before we go crying about Mayborn, recognize that the company can challenge the patent in court or in the PTAB.  And, invalidation/cancellation of the patent in an alternative forum will be deemed a sufficiently changed circumstances to rescind the order.

Standing to Appeal: Mayborn is actually still importing its allegedly infringing product. Apparently, Customs & Border Patrol is waiting for additional information from the patentee before moving forward with enforcing the exclusion order. Because of continued imports, the ITC challenged Mayborn’s standing to bring the appeal to the Federal Circuit.

On appeal, the Federal Circuit found sufficient injury-in-fact to allow the appeal to move forward. “Mayborn imports products that potentially infringe the ’850 patent and therefore violate the GEO. . . . [And] CBP may at any moment determine that Mayborn’s products violate the GEO and halt their importation.
§ 1337(d)(1).”  Mayborn has also alleged lost-sales and business relationships due to the exclusion order (Mighty Mug sent letters to Target + Amazon).  Collectively this was enough injury to allow the appeal to move forward under the Constitutional standing requirement.

Federal Circuit Eliminates Pre-Suit Damages for Failure of Licensee to Mark

Patent

by Dennis Crouch

This is an important case in a few ways.  The biggest holding, I think, is the court’s statements that “method patents” cannot be used to “circumvent” the marking requirement of Section 287.  In addition, although not covered in depth here, the software claims were found patent eligible. 

Packet Intelligence LLC v. NetScout Systems, Inc. (Fed. Cir. 2020)

A jury sided with the patentee Packet Intelligence–finding its three patents willfully infringed by NetScout and the claims not-invalid.  The jury also awarded the patentee $5.75 million in a running royalty. US6665725; US6839751; US6954789. Judge Gilstrap topped the awarded with extra $2.8 million in enhanced damages and also denied a variety of post-verdict JMOL motions.  On appeal, the Federal Circuit has affirmed most aspects of the decision, but has reversed the pre-suit portion of the damage award.

Pre-Suit Damages and Patent Marking:

35 U.S.C. § 287(a) provides a limitation on damages in patent cases.  If authorized patented articles are being sold or imported, they should be marked as patented (with the patent numbers). If not marked, then the statute bars any damages from before “the infringer was notified of the infringement.”  The statute was amended as part of the AIA to allow for “virtual marking” that has now become common.

Although Packet Intelligence doesn’t make any products itself, it has licensed its patents, and the marking requirement extends to authorized (i.e., licensed) products made under the patent.

In Arctic Cat Inc. v. Bombardier Recreational Prods. Inc., 876 F.3d 1350 (Fed. Cir. 2017), the Federal Circuit endorsed a burden-shifting process associated with patent marking:

  1. The infringer has the initial burden of production to provide evidence of unmarked products. “[T]his is a low bar” and one that would seemingly be confronted as summary judgment. Arctic Cat.
  2. However, if the case gets to trial, the patentee then has the burden of proving that it complied with Section 287 (either showing that the products were marked or they didn’t need to be marked).

Arctic Cat was decided after the jury verdict in this case and the district court followed a different approach — placing the entire burden on the defendant of proving the existence of a licensed product.  The question of marking was given to the jury with instructions for the jury to award six-years of back damages unless NetScout “show[s] the existence of a … a licensed product that practices one or more claims of the ’789 patent.” (Note below, NetScout did not object to this portion of the verdict).

On appeal, the Federal Circuit reversed the pre-suit damage award — finding that NetScout had met its burden-of-production by identifying a product that arguably embodied the invention and that the patentee had not proven that the product “does not practice the []patent.”

“Method Patents” and Patent Marking:  The claims in two of the patents were all method claims — not subject to the marking requirement which focuses on “patented articles.”  However, on appeal, the Federal Circuit also found that no substantial evidence supported the jury verdict for back damages of those method claims.

Packet Intelligence cannot simply count sales of the software accused of infringing the ’789 patent as sales of the method claimed in the ’725 and ’751 patents. Instead, Packet Intelligence was required to produce evidence that the claimed method was actually used and hence infringed.

Apparently some evidence was produced of infringement-by-use, but it was all regarding internal-use, sales, and training — and there is “no evidence supporting damages caused by or resulting from these pre-suit activities.”  Instead, all of the damages calculations focused on sales.

The court went-on to hold that it would be improper to allow the patentee to “circumvent § 287” by capturing sales of an unmarked product with its method claims:

Packet Intelligence is barred from recovering damages for pre-suit sales of the [accused] products because it failed to comply with the marking requirement. It cannot circumvent § 287 and include those products in its royalty base simply by arguing that NetScout’s infringement of related method claims drove sales. Because neither the record nor the law supports Packet Intelligence’s recovery of pre-suit damages for any of the asserted patents, NetScout is entitled to judgment as a matter of law on this issue.

Id. In the end, the court found that the infringer was entitled to judgment as a matter of law cancelling the pre-suit damage award.  I would have thought that a new trial would be preferred because of the faulty jury instructions.

= = = =

The jury instructions were in error because they placed the burden on the infringer of proving no-marking rather than on the patentee of proving that it properly marked.  However, the infringer (NetScout) did not object to those particular instructions.  Failure to object normally means no appeal, unless there is a “plain error” in the instructions.  Fed. R. Civ. Pro. R. 51(d). In this case, the court did not find “plain error” but instead pursued an alternative approach on appeal.

According to the court, jury instructions do not become “law of the case” for evaluating sufficiency of the evidence. Rather, the appellate panel will not look to see whether the jury followed the instructions as presented but rather they should have been presented:

We are bound by the law, not by the jury charge, even if the charge was not objected to. Markman v. Westview Instruments, Inc., 52 F.3d 967, 975 n.5 (Fed. Cir. 1995) (en banc). And NetScout’s failure to object to the district court’s jury instruction does not render the instruction law of the case for evaluating the sufficiency of the evidence. Boyle v. United Techs. Corp., 487 U.S. 500, 514 (1988) (citing City of St. Louis v. Praprotnik, 485 U.S. 112, 120 (1988) (plurality opinion)).

I’ll note that on this point that the Federal Circuit cites its own law and not 5th Circuit as it did for other procedural matters in the case. One reason for this is that the Federal Circuit’s approach is not in the majority. See:

When a party fails to object to instructions in the trial court, those instructions normally become the law of the case, and appellate review is precluded unless plain or fundamental error can be found.

Corpus Juris Secundum, 89 C.J.S. Trial § 876 (2020). A number of sources disagree on this front.

=  == = =

Finally I’ll note that Judge Reyna dissented-in-part. He would have found the asserted claims ineligible under Section 101:

In my view, the claims are directed to the abstract idea of identifying data packets as belonging to “conversational flows” rather than discrete “connection flows.” While the claimed implementations of this idea may ultimately contain inventive concepts that save the claims, it was clear error for the district court to base its finding of inventiveness on the abstract idea itself and its attendant benefits.

Slip Op.  The majority disagreed — holding that “The claim solves a technological problem by identifying and refining a conversational flow such that different connection flows can be associated with each other and ultimately with an underlying application or protocol.”

Woops: Fixing an error in my prior chart on patent grants

Patent

A few days ago I posted a chart showing the number of patents granted per year.  That chart had a major error.  I had inadvertently included data from all issued patents (utility + design + plant + reissue) for the pre-2020 bars, but the 2020 forecast only included utility patents.  This made the current year forecast appear small in comparison. Sorry for temporarily leading folks astray.

Please find a corrected chart below (with 1-additional week of data). The chart still shows a forecast of 2020 ending behind 2019 in terms of sheer numbers, but only slightly.  After my post, folks at the PTO also told me that examiners have been working full steam through the COVID pandemic.

Joint Inventorship: Court Maintains Low Standard for Joint Inventorship

Patent

by Dennis Crouch

In an interesting inventorship dispute, the Federal Circuit has affirmed a lower court ruling that two scientists should be added to the list of inventors on a set of patents obtained by Ono Pharmaceuticals. The change in inventorship means a change in ownership rights as well, and these are valuable patents.

Dana-Farber Cancer Institute, Inc. v. Ono Pharma Co. (Fed. Cir. 2020).

Ono holds a number of tied to cancer therapies that disrupt PD-1 receptor/ligand activity on certain cancer cells.  That disruption then allows a stronger immune response by the patient’s body. US7595048; US8168179; US8728474; US9067999; US9073994; and US9402899.

In the 1990’s Dr. Tasuku Honjo discovered the PD-1 receptor, isolated its DNA sequence, and studied various aspects of its relationship to “programmed cell death.” He was awarded the Nobel Prize for this research. Honjo then started a quest to find a ligand binding to PD-1.

At some point, Honjo began collaborating with Drs. Freeman and Wood who were working in the US.  The trio shared substantial data and plans back-and-forth and began a collaborative research project.

Then what happened — Freeman and Wood filed a patent application on a response-modulation therapy but did not include Honjo on the application (even after he asked to be included). Honjo then filed his own patent application in Japan — the parent application for all of the patents at issue here. Although years later, Dana-Farber eventually sued for correction of inventorship under 35 U.S.C. § 256(b) — a move that would give it partial ownership over the patents.

Invention is generally thought to have two key points of demarcation: (1) conception of the invention; (2) reduction of the invention to practice.  That said, the primary focus is usually on the first point – conception.  Joint inventorship creates some confusion on this point – but the basic requirement is that each joint inventor must significantly contribute to the conception or reduction to practice. On this point, the Judge Lourie quotes one of his own opinions from 1998:

All that is required of a joint inventor is that he or she (1) contribute in some significant manner to the conception or reduction to practice of the invention, (2) make a contribution to the claimed invention that is not insignificant in quality, when that contribution is measured against the dimension of the full invention, and (3) do more than merely explain to the real inventors well-known concepts and/or the current state of the art.

Quoting Pannu v. Iolab Corp., 155 F.3d 1344 (Fed. Cir. 1998). Regarding conception, the court also notes that “conception” may be somewhat speculative:

[C]onception is complete when an idea is definite and permanent enough that one of skill in the art could understand the invention. An inventor need not know, however, that an invention will work for its intended purpose in order for conception to be complete, as verification that an invention actually works
is part of its reduction to practice.

Slip Op. citing Burroughs Wellcome Co. v. Barr Laboratories, Inc., 40 F.3d 1223 (Fed. Cir. 1994).

Some of the information provided by Freeman and Wood had already been made public by the time of the “complete invention.”  The Federal Circuit, however refused to “hold categorically that research made public before the date of conception of a total invention cannot qualify as a significant contribution to conception of the total invention.”

[A] collaborative enterprise is not negated by a joint inventor disclosing ideas less than the total invention to others, especially when, as here, the collaborators had worked together for around one year prior to the disclosure, and the disclosure occurred just a few weeks prior to conception.

Id.  In the end, the court concluded that Ono’s arguments were essentially a request to “adopt an unnecessarily heightened inventorship standard.” The court declined.

In Eligibility Doctrine – What Claim Elements do you Ignore?

Patent

by Dennis Crouch

Thomas v. Iancu (Supreme Court 2020)

Doug Thomas is a silicon valley patent attorney at a small (and thriving) firm. Thomas is also a prolific inventor and entrepreneur. In April 2020, I wrote about the Federal Circuit’s opinion affirming a USPTO rejection of his claimed method of “notifying users having patents of subsequent publications that reference the patents.”  The April decision was one of four cases that he has brought to the Federal Circuit:

  1. In re Thomas, Appeal No. 17-1100 (November 17, 2017) (Affirming anticipation rejection for Application No. 12/878,19–method for creating an electronic document using a word processing program).
  2. In re Thomas, Appeal No. 17-1149 (December 13, 2017) (Affirming rejection for Application No. 13/099,285 without opinion– managing computer
    temperature by measuring temp and changing fan speed) [ThomasThermalTemp].
  3. In re Thomas, Appeal No. 19-2053 (March 5, 2020) (Affirming 101 rejection for Application No. 11/253,299 without opinion–method for producing an online survey).
  4. In re Thomas, Appeal No. 19-1957 (April 8, 2020) (Affirming 101 rejection of method for notifying users of publications that reference their patent). See, Dennis Crouch, Patenting the Patenting Process, Patently-O (April 8, 2020).

Thomas now filed a petition to the Supreme Court in the third case (the ‘299 application) that was rejected for lack of eligibility. Thomas writes the question as follow:

Contrary to Congress’ directives and this Court’s guidance, the United States Court of Appeals for the Federal Circuit (“Federal Circuit”) fabricated legal theories to unfairly discriminate against software innovations. The Federal Circuit incorrectly held that the Patent Trial and Appeal Board of the United States Patent and Trademark Office (“USPTO”) did not commit legal error when, under the guise of following the framework provided in Alice Corp. Pty. Ltd. v. CLS Bank Int’l, 134 S. Ct. 2347, 2354 (2014) (so called “Alice/Mayo framework”), it (i) excessively abstracted the claims, and (ii) ignored claim limitations that were found to be nonobvious when concluding that the claims lacked an inventive concept. The questions presented are:

1. Whether software innovations, simply because they are implemented on a general purpose computer, are ineligible for patenting unless they claim some hardware limitations beyond a general purpose computer that provide an improvement to computer technology.

2. Whether, contrary to Diehr, claim limitations can be ignored, under the guise of the Mayo/Alice framework, when a claim is evaluated for presence of an inventive concept, even when the ignored claim limitations were found to be nonobviousess.

Thomas Petition. The basic thrust of the petition is that innovative engineering solutions do not require a new physical technological component — and that the claimed creation of online documents should be treated as eligible.

The petition goes on to argue that the abstract idea exception should be eliminated or severely curtailed:

The time has come for this Court to reevaluate the abstract idea exception to Section 101. This exception is entirely a judicial creation, having no basis in the text of the statute. The Court should undertake to implement Section 101’s broad and explicit language. Thus, where, as here, the patents claim a “new or useful process” or new and useful improvement to a process, the inventions should be eligible under Section 101 as Congress intended based on the language of that provision.

Id. The 15-step method claim at issue is listed below — directed to a method for producing an online survey:

20. A method for producing an on-line survey through interaction with a remote server from a network browser operating on a client computer associated with a requestor of the online survey, the network browser and the remote server capable of communicating via a data network, said method comprising:

(a) requesting initial survey remarks to be provided for the on-line survey;

(b) receiving, at the remote server, the initial survey remarks from the survey requestor;

(c) requesting identification of one or more participant groups from a plurality of available participant groups;

(d) receiving, at the remote server, selection from the survey requestor of one or more participants groups from the plurality of available participant groups;

(e) requesting at least one survey question;

(f) receiving, at the remote server, at least one survey question from the survey requestor;

(g) requesting an answer format for the at least one survey question;

(h) receiving, at the remote server, the answer format from the survey requestor;

(i) receiving content for at least one answer choice for the at least one survey question;

(j) repeating (e) – (i) for one or more additional survey questions;

(k) requesting subsequent survey remarks to be provided for the online survey;

(l) receiving, at the remote server, the subsequent survey remarks from the survey requestor; and

(m) producing, at the remote server, the on-line survey to include the initial survey remarks, the survey questions, the answer choices corresponding to the survey questions and the answer format utilizing the answer formats, and the subsequent survey remarks;

(n) providing and storing the on-line survey in an electronic manner to an Internet-based survey manager that hosts the on-line survey; and

(o) thereafter inviting a plurality of survey participants that are classified to be within the selected one or more participant groups to take the on-line survey by interaction with the Internet-based survey manager.

The application here claims priority back to a 1996 provisional application filed by Thomas. The provisional was followed by a non-provisional application that was prosecuted for 8 years before being abandoned following a Board decision affirming an obviousness rejection. (At the time, the process only had steps a-f). At that time, Thomas filed the present continuation and prosecution kept going for 15 more years.  Much of this time has been occupied by two appeals. The first appeal was actually successful with the examiner being reversed with the Board finding no prima facie case of obviousness. [11253299 First Board Decision].  However, by that time Alice had been released and the examiner added the new eligibility rejection.

Patently-O Bits and Bytes by Juvan Bonni

Bits and Bytes, Patent

Recent Headlines in the IP World:

Commentary and Journal Articles:

New Job Postings on Patently-O:

 

Asking about Upcoming Bar Dates

Patent

Follow-up survey from on my post regarding Eakin Enterprises, Inc. v. Stratton Ballew, PLLC, 2020 Wash. App. LEXIS 691 (Wash. Ct. App. March 24, 2020).

When is the Attorney-Client Relationship Created?

 

Impact of Notice-of-Allowance in Parallel IPR

Patent

by Dennis Crouch

ESIP Series 2, LLC v. Puzhen Life USA, LLC (Fed. Cir. 2020)

In its original decision, the Federal Circuit affirmed a PTAB IPR decision invalidating ESIP’s claimed essential-oil-diffuser and “method for introducing a scent into breathable air,” US9415130; IPR2017-02197.  ESIP then petitioned for rehearing en banc and the Federal Circuit has now denied that petition as well. [ESIP-petition][Original Fed.Cir. Decision]

In the petition, the patentee focuses on a family-member (continuation) patent application that had recently received a notice of allowance after the examiner expressly considered the same prior art being applied in the inter partes review.  (That application is now US9943621).  Thus, ESIP asked the following question:

Whether a Notice of Allowability in a child application of a patent in an Inter Partes Review proceeding, facing the same prior art relied upon in the Inter Partes Review, is objective evidence that must be properly considered by the Board.

During the IPR, the PTAB refused to give any weight to the examiner’s decision in a parallel case–reasoning that it should not give weight to a collateral decision since it gives no weight to the examiner’s original decision.

If the Office’s allowance of the very claims at issue does not render the challenged claims non-obvious, it is unclear why the Office’s allowance of merely similar claims would do so.

PTAB Final Decision. On appeal, the Federal Circuit panel decision did not address the issue even though it had been fully briefed. Now, the Federal Circuit has also refused to consider the issue via rehearing or en banc.

So, the question remains: What deference or consideration should be given to a contemporary examiner determination involving the same patentee and the same prior art? 

The issue here is similar to what the PTAB has been working through over the past five years regarding prior decisions by Article III courts, just closer to home.

When is the Attorney-Client Relationship Created?

Patent

Question: When you first talk with a new potential client, do you ask about potential bar dates?

Eakin Enterprises, Inc. v. Stratton Ballew, PLLC, 2020 Wash. App. LEXIS 691 (Wash. Ct. App. March 24, 2020)

John Eaken publicly displayed his cattle-foot-bath invention and then waited more than a year before filing a patent application.  During that time, Eaken had called-up a patent attorney (Svendsen, then of Stratton Ballew) who spoke to Eaken before running a conflict check with the firm.  During the call, Svendsen did not ask the status of invention development, or whether it had been on public use or display (or would be in the near future).  Eaken then hired Svendsen

Eaken later learned that his public displays would limit his patent protection and then sued the firm for malpractice.  The district court, however dismissed the case–holding that there was no duty-to-warn until the the creation of an attorney-client relationship and that the initial screening call did not create such a relationship.

On appeal, the Washington Court of Appeals has reversed — asking the lower court to delve deeper into whether an attorney-client relationship had been created.  The reversal – I believe – was primarily based upon one answer in Svendsen’s deposition where he stated that the client considered their relationship to have started in the fall of 2006:

Q When do you believe the attorney-client relationship began for the effort to get a patent for the cattle foot-bath system?

A I would say that that would have been in the mind of John Eakin and — and is a big part of that. And I’m sure he considered this in the fall here of 2006. That that—that relationship was—a formal relationship had started.

Slip Op.

One of the judges wrote in dissent — arguing that Eaken failed his burden of producing sufficient evidence to prove the existence of an attorney-client-relationship.

Note about the invention: The cattle-foot-bath seems all spa-like when you hear the name, but actually it is a mechanism for coating the feet with chemical fungicide (concentrated medicinal agent).

 

Vaporize your Fingerprints: Toyota’s Invention Inherently Obvious

Patent

by Dennis Crouch

Toyota Motor Corp. v. Reactive Surfaces Ltd., LLP (Fed. Cir. 2020) (nonprecedential)

Toyota’s US8394618 covers a method of removing fingerprints using a lipase “capable of enzymatically degrading a component of the fingerprint” by vaporization.

Reactive had previously attempted to trigger an interference proceeding at the PTO and then unsuccessfully sued in Federal Court to have the patent rendered unenforceable (or to transfer ownership rights).  Those approaches failed.

This inter partes review is what worked.  After granting the IPR petition, the Board conducted a trial and then issued a Final Written Decision that the challenged claims were unpatentable as obvious. On appeal, the Federal Circuit affirmed with the following notes:

Analogous arts: The Board relied upon a scientific article titled “Chemical characterization of fingerprints from adults and children” in part of its obviousness analysis. On appeal, Toyota argued that the article should not have been available for obviousness because it was not “analogous art” to the invention.

Analogous prior art includes art from the same field as the invention at issue. But it also encompasses references from other fields if such reference is “reasonably pertinent to the particular problem with which the inventor is involved.”

Slip Op. Here, the court found substantial evidence to support the Board’s finding that the scientific article would be a “natural starting point” for an inventor looking to vaporize finger prints. (The test is for substantial evidence, because analogous art is a factual finding given deference on appeal).

What the combination inherently teaches:  The method claim at issue includes three steps:

  1. provide a substrate
  2. associate a lipase with the substrate (where the lipase is “capable of enzymatically degrading a component of a fingerprint”)
  3. facilitate “the removal of a fingerprint by vaporization from the lipase associated substrate … when contacted by a fingerprint.”

A combination of references provided by the Board taught the first two steps, but did not expressly teach the third step.  The Board concluded that step three is simply an inherent result of the first two steps: “any combination of prior art that teaches the first two limitations of the challenged claims inherently would teach the [facilitating step]. . . . [A] surface-associated lipase . . . capable of degrading lipids . . . inherently will facilitate the removal of lipid-containing stains, such as fingerprints, by vaporization from the surface.”

While prior art may include a variety of inherent teachings, the Federal Circuit requires evidence that “the limitation at issue necessarily must be present, or the natural result of the combination of elements explicitly disclosed by the prior art.”  PAR Pharm (Fed. Cir. 2014).  Because of this “exacting” standard, inherency is typically difficult for an Examiner to show during ex parte examination. However, during an IPR the patent challenger is able to marshal expert testimony that connects the dots.  Here, the petitioner’s expert explained the connection and inherent result.  That was enough for the Board and the Federal Circuit on appeal.

Obviousness affirmed.

USPTO Grants

Patent

Woops – The original post had a big error on the chart – I’ve replaced the chart with one that is accurate.

What is happening here – Although the PTO was set to continue its trend from 2019, COVID-19 has stalled everything.  Patent examination is going slower, and patent applicants are also delaying prosecution.  That said, although 2020 will not be an all-time-high, it is likely to be in the top-5 years in terms of number of patents issued.

Novel, Technological, and an Abstract Idea

Patent

by Dennis Crouch

Primbas, et al. v. Iancu (Supreme Court 2020)

This new petition for certiorari asks the following question:

Whether recitation in a patent claim of a combination of steps determined to be inventive over an idea is “sufficient to ensure that the patent in practice amounts to significantly more than a patent upon the [idea] itself.”

Petition, quoting Alice.

Christopher Primbas and his co-inventor Philip Stamataky are seeking to patent their method of eliminating coins from cash transactions. [claim 1 is below].  The figures below attempt to highlight the invention — instead of receiving coins from a transaction, you receive a merchant credit.

The examiner actually allowed the claims back in 2014 with a notice of allowance just before the Supreme Court’s decision in Alice. The applicant paid the issue fee, but the PTO withdrew the application from issue.  The examiner then issued a new rejection — finding the claims ineligible as directed to an abstract idea under Alice. That decision was affirmed by the PTAB and by the Federal Circuit (R.36 judgment without opinion).  This setup leads folks to fight hard — they were given real hope via notice of allowance and that was pulled-out from under them.

The basic

 

Here is the claim now on appeal:

1. A method involving a retail cash transaction in which a customer uses physical currency to pay a merchant for goods or services received, in which an amount between 1¢ and 99¢ in coin change is due to the customer and used as payment for credit purchased, the method comprising the steps of:

the customer tendering cash to the merchant as payment for the goods or services and there being an amount of coin change due back to the customer, which amount the customer does not receive in the form of physical coins but rather in the form of a cash purchase of credit equal to the amount of coin change otherwise due;

in a different financial transaction than the cash-tender transaction, debiting, using an electronically readable device physically present at the customer-merchant transaction and in electronic communication with an electronic processor and a financial network, one or more accounts associated with the customer in an amount equal to a tracking fee, which is equal to the entire amount of the cash purchase of credit; and

subsequently crediting to the one or more accounts associated with the customer the sum of both the cash purchase of credit and the tracking fee;

wherein the debiting and crediting steps are performed electronically and the tracking fee reflects both the cash purchase of credit and its transfer into the one or more customer accounts.

See Petition Appendix.  The petition argues that the claim here recites a patent-eligible “technical solution” that the patent office has expressly admitted is a novel solution to a long-considered problem.

The petition particularly point to its claims that require debiting with a e-readable device (credit card) and communication with a financial network.  The petitioner argues that a benefit of the solution here is that it works with existing credit card networks and thus does not need an expensive merchant retrofit. “[T]he ability to use a conventional card reader and an existing credit card network are advantages of this technical solution, as the use of conventional electronic hardware and card networks that are already in use at most point of sale registers allows for use of this solution by retailers without purchasing or installing any new hardware.”

Jeremy Doerre filed the petition in this case and also filed Judge Rader’s recent amicus brief in Chamberlain Group.