Converse: Secondary Meaning and Infringement Redefined for Trade Dress

Patent

by Dennis Crouch

In its decision here, a divided Federal Circuit created a new test for secondary meaning, placed limits on trade dress infringement with an analogy to design patent law, and more . . .

Converse v. ITC and Sketchers, New Balance, et al. (Fed. Cir. 2018) [ConverseITC]

The ITC found that the mid-sole portion of these Converse All Star shoes was not a protected trademark — invalidating the Chuck Taylor trade dress registration (Reg. No. 4,398,753) and rejecting the existence of common-law rights.  Although it found no trademark rights — the ITC did explain that the accused shoes would be infringing if the mark was valid.  On appeal, the Federal Circuit has vacated and remanded.

Distinctiveness is a threshold requirement for trademark rights.  In Wal-Mart Stores, Inc. v. Samara Bros., Inc., 529 U.S. 205 (2000), the Supreme Court held that a product design (such as a shoe portion) is never inherently distinctive, but that distinctiveness may be acquired and proven with “a showing of secondary meaning” — i.e., that the relevant consumers associate the particular product features with a particular source of goods. Thus, a trade dress rights are established over time as consumers become more familiar with the product design.

In this case, the dates are important — because “the party asserting trade-dress protection must establish that its mark had acquired secondary meaning before the first infringing use” on an infringer-by-infringer basis.  In the opinion, the court modified this “first infringing use” language to set rough five-year cutoff — applying Section 2(f) of the Lanham act to the Courts.  Thus, five years of exclusive and continuous use will can create a presumption of secondary meaning. Thus, in evaluating the “length, degree, and exclusivity of use” by the mark holder, “the ITC should rely principally on uses within the last five years. . . . [U]ses older than five years should only be considered relevant if there is evidence that such uses were likely to have impacted consumers’ perceptions of the mark as of the relevant date”

In this case, the 2013 mark registration by Converse creates a presumption of secondary meaning — as of the registration date.

Converse argues that it is entitled to rely on the presumption of validity afforded to registered marks. We do not agree that this presumption applies to infringement that began before registration. . . . [U]nder the statute, the registration and its accompanying presumption of secondary meaning operate only prospectively from the date of registration. . . . This rule is a straightforward application of the Lanham Act, pursuant to which the PTO examines whether secondary meaning has been acquired at the time of registration. See 15 U.S.C. § 1052(f). The resulting registration confers a presumption of secondary meaning from that point in time, see id. §§ 1057(b), 1115(a), but at the time of registration the PTO is not asked to determine whether secondary meaning had been acquired at some previous date, and therefore registration cannot support a presumption for the period before registration. Indeed, on a record such as this, with a multiyear gap between infringement and registration, registration cannot even be probative of secondary meaning at the time of infringement.

Because the ITC did not establish when (if ever) the mark established secondary meaning pre-registration, on remand, Converse will be given a chance to prove that secondary meaning was established prior to “the first infringing use by each respondent.” The dissenting opinion in this case filed by Judge O’Malley would not have given Converse the opportunity to go back and provide this new evidence.

Test for Secondary Meaning: In addition to the presumption and timing issues, the Federal Circuit also found that the ITC erred in its analysis of secondary meaning — here the court laid out its particular test:

Today we clarify that the considerations to be assessed in determining whether a mark has acquired secondary meaning can be described by the following six factors: (1) association of the trade dress with a particular source by actual purchasers (typically measured by customer surveys); (2) length, degree, and exclusivity of use; (3) amount and manner of advertising; (4) amount of sales and number of customers; (5) intentional copying; and (6) unsolicited media coverage of the product embodying the mark. . . . All six factors are to be weighed together in determining the existence of secondary meaning.

This test is similar to that adopted by the various circuits, but include some quirks. (Prepare an additional post on this).

Regarding “exclusivity,” the Federal Circuit suggested that the ITC had relied upon shoes with designs “that were not substantially similar.”

The court explained that

Although we agree with the ITC that evidence of the use of similar but not identical trade dress may inform the secondary-meaning analysis, we think such uses must be substantially similar to the asserted mark. Here, the ITC made no determination as to which of the prior uses were substantially similar.

Establishing infringement: On the infringement side, the Federal Circuit also found errors in the ITC’s likelihood of confusion test.  Here, the court held that product design trade dress can only infringe if it is “substantially similar” to the protected trade dress — noting that “We have applied an analogous requirement in the design-patent context, where infringement cannot be found unless an ordinary observer would perceive that the ‘two designs are substantially the same.'” Quoting Egyptian Goddess, Inc. v. Swisa, Inc., 543 F.3d 665, 670 (Fed. Cir. 2008) (en banc) (quoting Gorham Co. v. White, 81 U.S. 511, 528 (1871)).

Defaulting Parties: Finally, the ITC had refused to enter an exclusion order against defaulted respondents — based upon its finding that the trademark was invalid. In the appeal, the court here suggested that result should be changed.

= = = =

The majority opinion was written by Judge Dyk and joined by Judge Huges.  Judge O’Malley wrote in dissent. She explained:

I agree with the majority that the International Trade Commission (“ITC” or “Commission”) erred in its legal analysis in this matter and that its decision must be vacated. I also agree that a remand is appropriate. I even agree with many of the ways in which the majority finds that the ITC erred. I cannot join in the majority’s reasoning, however, because I believe that the majority overlooks important procedural facts and binding statutory authority to reach issues that are not properly before us. Thus, I do not agree with the majority’s decision to remand questions regarding the validity of the registered mark for further consideration or its decision to even address questions of infringement. And, I cannot accede to the majority’s failure to order the ITC to enter a remedy against the parties found in default in the proceedings below or to explain why public interest concerns would justify not doing so.

Specifically, I believe that the majority: (1) misperceives the scope of the ITC’s authority to invalidate duly issued intellectual property rights when it addresses the issue of the validity of a registered mark; (2) blurs the line between the concepts of priority of use under common law and the validity of a registered mark; (3) espouses advisory—and unnecessary—opinions on the weight to be given certain survey evidence and the question of infringement; and (4) ignores the ITC’s statutory obligation to enter remedies against defaulting parties. Thus, except where otherwise noted, I concur only in the conclusion that the ITC’s findings must be vacated, and the matter remanded to the ITC for further analysis. I dissent from the fact that the majority discusses matters not properly before us and from the nature of the remand the majority outlines.

Duplicative IPR Filings

Patent

I just saw this interesting report from Steven Carlson and Ryan Schultz of Robins Kaplan on duplicative IPR filings. [Synopsis][Full Report with data].  They looked at the most frequent filers of inter partes review proceedings and found the following:

Over 56 percent of Apple’s petitions are duplicative, in that they challenge at least one claim that is the subject of attack by another Apple petition. Microsoft is even higher, at 59 percent. Samsung, Google and LG have 38 percent, 38 percent and 34 percent duplicative petitions, respectively.

The article provides its expectation that the PTO will likely become even more aggressive at limiting this approach of repeat filings. “Therefore it may be prudent to concentrate the best arguments into a single petition, that is, to only count on a single bite at the apple.”

Alexander Milburn Co. v. Davis Bournonville Co., 270 U.S. 390 (1926)

Patent

Alexander Milburn Co. v. Davis Bournonville Co., 270 U.S. 390 (1926)

Syllabus

1. Where a patent application fully and adequately disclosed, but did not claim, the thing patented to a later applicant alleging a later date of invention, the later applicant was not the “first inventor” within Rev.Stats. § 4920. P. 270 U. S. 399.

2. As regards “reduction to practice,” a description that would bar a patent if printed in a periodical or in an issued patent is equally effective in an application. P. 270 U. S. 401.

MR. JUSTICE HOLMES delivered the opinion of the Court.

This is a suit for the infringement of the plaintiff’s patent for an improvement in welding and cutting apparatus alleged to have been the invention of one Whitford. The suit embraced other matters but this is the only one material here. The defence is that Whitford was not the first inventor of the thing patented, and the answer gives notice that, to prove the invalidity of the patent, evidence will be offered that one Clifford invented the thing, his patent being referred to and identified. The application for the plaintiff’s patent was filed on March 4, 1911, and the patent was issued on June 4, 1912. There was no evidence carrying Whitford’s invention further back. Clifford’s application was filed on January 31, 1911, before Whitford’s, and his patent was issued on February 6, 1912. It is not disputed that this application gave a complete and adequate description of the thing patented to Whitford, but it did not claim it. The district court gave the plaintiff a decree, holding that, while Clifford might have added this claim to his application, yet as he did not, he was not a prior inventor. 297 F. 846. The decree was affirmed by the circuit court of appeals. 1 F.2d 227. There is a conflict between this decision and those of other Circuit Courts of Appeal, especially the Sixth. Lemley v. Dobson-Evans Co., 243 F. 391. Naceskid Service Chain Co. v. Perdue, 1 F.2d 924. Therefore a writ of certiorari was granted by this Court.

The patent law authorizes a person who has invented an improvement like the present, “not known or used by others in this country, before his invention,” etc., to obtain a patent for it. Rev. Sts. § 4886, amended by Act March 3, 1897, c. 391, § 1, 29 Stat. 692. Among the defences to a suit for infringement the fourth specified by the statute is that the patentee “was not the original and first inventor or discoverer of any material and substantial part of the thing patented.” Rev. Sts. § 4920, March 3, 1897, c. 391, § 2, 29 Stat. 692. Taking these words in their natural sense as they would be read by the common man, obviously one is not the first inventor if, as was the case here, somebody else has made a complete and adequate description of the thing claimed before the earliest moment to which the alleged inventor can carry his invention back. But the words cannot be taken quite so simply. In view of the gain to the public that the patent laws mean to secure, we assume for purposes of decision that it would have been no bar to Whitford’s patent if Clifford had written out his prior description and kept it in his portfolio uncommunicated to anyone. More than that, since the decision in the case of the Corn planter Patent, 23 Wall. 181, it is said at all events for many years, the Patent Office has made no search among abandoned patent applications, and by the words of the statute, a previous foreign invention does not invalidate a patent granted here if it has not been patented or described in a printed publication. Rev. Sts. § 4923. See Westinghouse Machine Co. v. General Electric Co., 207 F. 75. These analogies prevailed in the minds of the courts below.

On the other hand, publication in a periodical is a bar. This as it seems to us is more than an arbitrary enactment, and illustrates, as does the rule concerning previous public use, the principle that, subject to the exceptions mentioned, one really must be the first inventor in order to be entitled to a patent. Coffin v. Ogden, 18 Wall. 120. We understand the circuit court of appeals to admit that, if Whitford had not applied for his patent until after the issue to Clifford, the disclosure by the latter would have had the same effect as the publication of the same words in a periodical, although not made the basis of a claim. 1 F.2d 233. The invention is made public property as much in the one case as in the other. But if this be true, as we think that it is, it seems to us that a sound distinction cannot be taken between that case and a patent applied for before but not granted until after a second patent is sought. The delays of the patent office ought not to cut down the effect of what has been done. The description shows that Whitford was not the first inventor. Clifford had done all that he could do to make his description public. He had taken steps that would make it public as soon as the Patent Office did its work, although, of course, amendments might be required of him before the end could be reached. We see no reason in the words or policy of the law for allowing Whitford to profit by the delay and make himself out to be the first inventor when he was not so in fact when Clifford had shown knowledge inconsistent with the allowance of Whitford’s claim, [Webster] Loom Co. v. Higgins, 105 U. S. 580, and when otherwise the publication of his patent would abandon the thing described to the public unless it already was old, McClain v. Ortmayer, 141 U. S. 419, 141 U. S. 424. Underwood v. Gerber, 149 U. S. 224, 149 U. S. 230.

The question is not whether Clifford showed himself by the description to be the first inventor. By putting it in that form, it is comparatively easy to take the next step and say that he is not an inventor in the sense of the statute unless he makes a claim. The question is whether Clifford’s disclosure made it impossible for Whitford to claim the invention at a later date. The disclosure would have had the same effect as at present if Clifford had added to his description a statement that he did not claim the thing described because he abandoned it or because he believed it to be old. It is not necessary to show who did invent the thing in order to show that Whitford did not.

It is said that, without a claim, the thing described is not reduced to practice. But this seems to us to rest on a false theory helped out by the fiction that, by a claim, it is reduced to practice. A new application and a claim may be based on the original description within two years, and the original priority established notwithstanding intervening claims. Chapman v. Wintroath, 252 U. S. 126, 252 U. S. 137. A description that would bar a patent if printed in a periodical or in an issued patent is equally effective in an application so far as reduction to practice goes.

As to the analogies relied upon below, the disregard of abandoned patent applications however explained cannot be taken to establish a principle beyond the rule as actually applied. As an empirical rule, it no doubt is convenient, if not necessary, to the Patent Office, and we are not disposed to disturb it, although we infer that originally the practice of the Office was different. The policy of the statute as to foreign inventions obviously stands on its own footing, and cannot be applied to domestic affairs. The fundamental, rule we repeat, is that the patentee must be the first inventor. The qualifications in aid of a wish to encourage improvements or to avoid laborious investigations do not prevent the rule from applying here.

Decree reversed.

How Cool: Using Bankruptcy to Upset Intellectual Property Licenses

Patent

by Dennis Crouch

The Supreme Court has granted certiorari in the bankruptcy-trademark case of Mission Product Holdings v. Tempnology LLC.  The licensed marks are COOLCORE and DR. COOL.

In bankruptcy, the debtor is permitted to reject exectory contracts in order to improve the business position of the debitor (and its creditors).  The question at issue here is whether a debtor-licensor is permitted to terminate a trademark license that was granted prior to the bankruptcy — and what would the impact be of such a termination.

Whether, under Section 365 of the Bankruptcy Code, a debtor-licensor’s “rejection” of a license agreement—which “constitutes a breach of such contract,” 11 U.S.C. § 365(g)—terminates rights of the licensee that would survive the licensor’s breach under applicable non-bankruptcy law.

One oddity of the setup of this case is that the bankruptcy code already spells out how this should work for intellectual property licenses. THe code allows a licensee to elect to continue to use licensed IP rights even if the debtor-licensor attempted to reject the license. 11 U.S.C. 365(n) (licensee of “a right to intellectual property . . . may elect . . . to retain its rights”).  The problem for the trademark holder in this case is that the bankruptcy code excludes trademark rights from its definition of intellectual property rights.  11 U.S.C. 101 (35A) (patents, copyrights, and trade secrets are covered but not trademarks).

Thus, the real question here is what is the result of a rejection of the license by the trustee — is the rejection avoidance of a contract or is it breach of the contract?  A law professor brief explained the situation:

Under the First Circuit’s rule, a debtor/licensor can use the power to reject to destroy a licensee’s business or hold the licensee hostage, forcing it to pay twice for a license it had already purchased. This unjust result is the unfortunate and natural consequence of treating the power to “reject” a contract as the power to “avoid,” or claw back, a transfer of property.

One way to look at the basic background here to begin with the 4th Circuit in Lubrizol Enters., Inc. v. Richmond Metal Finishers, Inc., 756 F.2d 1043 (4th Cir. 1985).  In that decision, the court held that a bankrupt licensor could use bankruptcy to unilaterally revoke the rights of a technology licensee (patent license).  Other Circuits rejected the Lubrizol approach, but Congress still acted to clear-up the disputes with the creation of 365(n).  However, as mentioned, 365(n) does not cover trademark licenses.

Is the Government a Person?

Patent

The Supreme Court has granted a writ of certiorari in the Return Mail v. U.S. Postal Service, but only as to the first question petitioned:

Whether the government is a “person” who may petition to institute review proceedings under the Leahy-Smith America Invents Act.

Over the last few years, we have learned that a person is a person, a corporation is a person, and a monkey is not a person. The question here is whether the U.S. Government is a person.

The setup here is that the statute allows for a “person” to file an AIA Trial petition (usually this is an inter partes review petition, but this case involves a covered business method review petition).  In SAS, the Supreme Court explained the process as allowing “private parties to challenge previously issued patent claims in an adversarial process before the Patent Office.”

Here, the CBM filer is the U.S. Government (US Postal Service).  One of the major arguments in this case involves a balancing: If the U.S. government sheltered as a non-person for the purposes of patent infringement, then it also shouldn’t receive the benefit of being able to file AIA Trial petitions.

The outcome here is an open question: The AIA doe not define the term; nor has the PTO through rulemaking; nor is there any real legislative history on point.  The petition cites to the 2000 Supreme Court decision of Vt. Agency of Nat. Res. v. US ex rel. Stevens, 528 U.S. 765, for the proposition that “person” does not ordinarily include the “sovereign.”

In considering the issue, the Federal Circuit first noted that “Return Mail has waived reliance on the term “person” because it failed to make any arguments in that regard in its opening brief.”  The court then went on to explain that – if the issue is somehow “not waivable” then the correct interpretation of “person” in this context would include the Government — noting that there is “no hard and fast rule of exclusion, and much depends on the context, the subject matter, legislative history, and executive interpretation.” Wilson v. Omaha Indian Tribe,
442 U.S. 653, 667 (1979).  In general though the Federal Circuit’s statutory construction analysis in this case is quite lacking.

USPTO Seeks Comments on Proposed Changes to Motion to Amend Practice in AIA Trials

Patent

From the USPTO: The United States Patent and Trademark Office (USPTO) has published a Request for Comments (RFC) about a proposed procedure for motions to amend filed in inter partes reviews, post-grant reviews, and covered business method patent reviews (collectively AIA trials) before the Patent Trial and Appeal Board (PTAB).  In essence, the proposal includes:  providing the parties with the Board’s initial assessment of the proposed amendment early in the process; providing meaningful opportunity to revise, and oppose, proposed amendments; and ensuring that the amendment process concludes within the 12-month statutory timeline. The proposal is based upon six years of experience conducting AIA trials during which time more than 350 motions to amend have been filed.

 A timeline of the proposal can be reviewed here.

Specifically, the USPTO seeks public input on a proposed amendment process that would involve a preliminary non-binding decision by PTAB regarding the merits of a motion to amend.  Such information may include whether the motion, in view of petitioner’s preliminary opposition, is reasonably likely to meet statutory and regulatory requirements and whether the proposed substitute claims are reasonably likely to meet patentability requirements. The proposed process would also provide an opportunity for a patent owner to revise, and petitioner to oppose, its motion to amend and proposed substitute claims in view of the preliminary amendment decision. The USPTO also seeks comments on the proposed timelines, designed to ensure completion within 12-months from institution. The USPTO also seeks comments in response to a number of specific questions included in the RFC. 

In addition, the USPTO seeks input regarding whether PTAB should continue to allocate the burden of persuasion regarding patentability of substitute claims as set forth in Western Digital Corp. v. SPEX Techs., Inc., Case IPR2018-00082 (Paper 13) (PTAB April 25, 2018) (informative), as well as any comments on motion to amend practice before PTAB generally. 

The USPTO seeks written comments on these topics on or before December 14, 2018.  Written comments should be submitted to TrialRFC2018Amendments@uspto.gov. 

The full text of the Request for Comments on the motion to amend proposal is published in the Federal Register.

Case in Brief: Johnstech Int’l Corp. v. JF Microtechnology SDN BHD

Patent

Johnstech Int’l Corp. v. JF Microtechnology SDN BHD, 315 F. Supp. 3d 1130 (Cal. Dist. Ct. App. 2018).

In 2009, Malaysian manufacturer JFM offered to make integrated circuits test contactors for Johnstech.  However, since Johnstech was already producing its patented ROL 200, the company declined. Shortly thereafter, Johnstech learned from customers that a ROL 200 “clone” was in the market, namely Zigma – produced by JFM. Johnstech sued and won an infringement verdict along with lost profits and a permanent injunction based upon testimony “that JFM and Johnstech were effectively the only two suppliers in the market they served, and … that 99% of JFM’s Zigma sales were made to former Johnstech customers.” See U.S. Patent No. 7,059,866.

After the verdict, JFM asked for a new trial or JMOL on obviousness grounds. At trial, JFM had challenged the patent based upon three prior art references, and Johnstech defended by focusing on, among other things, the first Graham factor – “scope and content of the prior art.”  In particular, the patentee argued one of the cited references (Rathburn) should not count as prior art for the obviousness analysis because it was not “relevant prior art.” Although Rathburn was directed to IC test equipment, it exhibited a “multitude” of differences from the claimed invention.  The District Court explained:

[Johnstech’ witness] testified that the Rathburn invention is designed to test a “ball grid array IC device” unlike the device that the’866 patent is designed to test, which has “metal leads on the edges.” Andres explained that the Rathburn invention differs from the ‘866 patent in a “multitude of ways.” For example, Rathburn lacks a housing, and instead of two round elastomers, Rathburn uses a “thin sheet of elastomer” with “perforations” and has a “grid of contacts” instead of “rows of contacts.”

 

Although obviousness is a question of law, the underlying Graham factors are questions of fact for the jury to decide.  Of course, the jury was not asked to spell out its decision-making process other than yes/no on the ultimate question of obviousness.

In its post-verdict decision, the court supported the jury verdict of nonobviousness by giving deference to “the jury’s presumed factual findings” –holding particularly that the presumed finding that “Rathburn is not relevant prior art” was not “contrary to the clear weight of the evidence.”

The infringement verdict here appears based upon a doctrine of equivalents finding for several claim elements.  In its post-verdict decision, the District Court again supported the jury verdict – finding that the presumed DOE verdict was supported substantial evidence.

The case is subject to pending cross appeals at the Federal Circuit and so we will look for more guidance going forward.

Remarks by Director Iancu at the AIPLA Annual Meeting

Patent

In remarks today, USPTO Director Iancu has proposed the PTAB’s next step in reforming AIA Trials — giving the patent owner a six-week window following an institution decision to file a motion to amend. See below. 

October 25, 2018

As prepared for delivery

This is a new day for the USPTO and our Patent Trial and Appeals Board (PTAB). For we are now increasing balance, consistency and transparency, especially in post grant proceedings. And in doing so, we are increasing confidence in these important proceedings.

Since Congress passed the America Invents Act (AIA) in 2011, we have received more than 9,000 petitions and issued over 2,000 final written decisions. So, we now have broad experience in understanding the true benefits and true challenges of these proceedings.

Opinions on how post-grant proceedings have been conducted to date diverge widely. Some vigorously dislike them, arguing that they are unfair and tilt too much in favor of the petitioner. Indeed, some would like to see the system abolished entirely. Others love the system, believing it’s the best tool we have to correct errors, eliminate “bad patents,” and improve patent quality. In fact, some would like to see IPRs expanded to consider even more issues.

As the agency in charge of administering these proceedings, it is our duty to carefully weigh all these points of view, and everything in-between, and to bring balance to the current process. It is our duty to look at validity challenges holistically, and determine the overall best approach for the patent system as a whole.

The USPTO has carefully studied the past 6 years of these proceedings; we have discussed the issues with our stakeholders, including many of you in this room today; and we have listened to all who spoke up. And so now, in order to ensure balance, consistency and transparency, in order to increase confidence in the proceedings, and in order to make the patent system as a whole more effective, more efficient and more reliable, we took action.

To that end, we updated the Trial Practice Guide this past August, published two new Standard Operating Procedures for PTAB in September, and published a final rule on the claim construction standard in October. And in just a few days, we will formally publish a proposal for an updated claim amendment procedure in AIA trials.

All of which is what I mean when I say: It is a new day at the PTAB!

To start, our recent update to the Trial Practice Guide was the first since it was published in 2012. In the update, we outlined some non-exclusive factors regarding the institution decision, including considerations regarding follow-on petitions, the overall effect on the economy, the integrity of the patent system, and the like; added sur-replies for the patent owner; provided new guidance on the proper use of expert testimony, and procedures for oral hearings before the Board; and established a pre-hearing conference, which could help focus disputes and expedite resolution of issues.

Second, in an effort to further improve Board practices and transparency, we issued two revised Standard Operating Procedures, or SOPs.

The first SOP outlines the procedures the Board uses for assigning (or re-assigning) judges to cases. This SOP also clarifies that the PTAB will expand panels only in very limited circumstances, generally where consistency among multiple related cases is needed. And even then, the expansion must be done with the approval of the Director and advance notice to the parties.

The second SOP creates a Precedential Opinion Panel and governs precedential and informative decisions of the Board. This panel will mostly be convened to decide issues of exceptional importance that will set forth binding agency policy. Members of this panel are by default the USPTO Director, the Commissioner for Patents, and the Chief Judge, although in some circumstances this authority can be delegated to a pre-defined list of individuals for a particular case.

This panel will enable top agency management to address some of the thorniest issues that come to us, and to instill consistency throughout the agency. This will help ensure that the different groups within the agency speak, where appropriate, with one voice. We are, after all, one agency.

This SOP also outlines the requirements for designating, or de-designating, a decision as precedential or informative – to address concerns about consistent guidance for practice before the PTAB. This new designation procedure should help increase the number of precedential opinions issued by the PTAB.

To date, we have averaged only a handful of precedential opinions every year, an amount that seems far too low for the volume and importance of the cases we see. By comparison, the TTAB, on the trademarks side, designates significantly more precedential opinions, despite a much smaller docket. I am not suggesting that the PTAB should necessarily designate as many precedential decisions as the TTAB, but, to increase consistency at the PTAB, something more than the current mere handful seems in order. The designation process outlined in the new SOP should help in that regard.

Combined, these two SOPs increase transparency, promote consistency, and—I believe—will increase confidence in the process.

Third, on October 11, we published the final rule for claim construction in AIA proceedings before the PTAB. The same standard will now be applied in AIA Trials before the Board as in civil actions in district courts, and in proceedings at the International Trade Commission (ITC). Furthermore, any prior claim construction decision in a civil action or before the ITC will be considered by the Board, as long as it is introduced into the record on a timely basis. The new claim construction standard will apply to all petitions filed on or after November 13, 2018.

Looking at the patent system holistically, this is a critically important rule change.

For the sake of predictability and reliability, the boundaries of a patent should not depend on which forum happens to analyze it. People who want to invest in a patented technology, or who want to invent or design around one, should be able to determine, within reason, what that patent means. Objectively speaking, that meaning cannot, and should not, depend on the happenstance on which forum might review the patent, years after issuance. The rule change, therefore, increases the predictability of our patent system.

Likewise, using the same claim construction standard should improve efficiencies for everyone involved. Parties can develop a single set of claim construction arguments and can leverage the work already done in district court proceedings, or vice versa. Plus, one forum can consider the work previously done by another forum. The rule will therefore also improve consistency between proceedings.

After all, some 85 percent of patents contested at the PTAB are involved in parallel litigation. It seems self-evident that the same patent contested in different tribunals should have its meaning – its boundaries – determined using the same standard.

Now, as it turns out, the change from the Broadest Reasonable Interpretation to the Phillips construction has generated significant interest among our stakeholders. We have received about 375 public comments, and the rule change has been met with widespread support from industry, academics, individuals, and trade organizations, including the AIPLA.

A few, however, are not pleased with the change. Some of these groups have suggested that this change makes it easier to preserve what they call “low-quality patents.”

That’s curious, because all we did was to say that we will use the same standard currently used by district courts and the ITC, and that has been used in countless court proceedings for many years to date. Arguments that using the very same standard already used in federal courts preserves “low-quality patents” are, therefore, unconvincing. In other words, whatever a “low-quality” patent means, it cannot be that it is a patent that survives challenge based on a claim construction standard used in district court.

Put another way still: There is no reason for the USPTO to be using a claim construction standard in IPR that eliminates patents that would otherwise survive challenge in District Courts. Doing so is an example of what I have referred to as an over-correction that risks throwing out the baby with the bathwater.

Our filters need to be appropriately set. Aligning AIA proceedings at the PTAB with the district courts and the ITC brings balance, predictability and consistency to the patent system as a whole.

Finally, in the next few days, we will formally publish a notice seeking comments on a new claim amendment process for post grant proceedings.

I believe that the current amendment process in AIA proceedings is not working as intended. As noted just last year by the Federal Circuit in its lead Aqua Products decision: “Despite repeated recognition of the importance of the patent owner’s right to amend during IPR proceedings—by Congress, courts, and the PTO alike—patent owners largely have been prevented from amending claims in the context of IPRs.”

Indeed, claim amendments have been relatively rare – filed in less than 10 percent of AIA trials – and infrequently granted. Of the already small number of cases where the Board decided a motion to amend, the Board granted or granted in part only 10 percent of such motions. Some have suggested that parties have simply stopped even trying to amend the claims because they see the effort as largely futile.

But the AIA statute specifically provides for claim amendments in IPRs, so in order to fully implement the intent of the AIA, we must find a way to make this amendment process feasible and meaningful. In other words, it is important to ensure that post grant proceedings are not all-or-nothing. It is not in the interest of the patent system as a whole to invalidate a patent entirely if it actually describes patentable subject matter, and appropriately-scoped claims can be drafted.

Therefore, the amendment process should allow the patent owner a meaningful opportunity to draft narrower claims. And in order for the opportunity to amend to be truly meaningful, the patent owner needs input from the petitioner and the Board, so that appropriately-scoped claims can be drafted in light of the prior art and arguments presented.

The AIA statute itself requires a number of things with respect to claim amendments. For example: First, 35 U.S.C 316(d) requires that patent owners must have an opportunity to amend their claims during the proceeding itself. In fact, 35 U.S.C 318(a) requires the final written decision to address both the original and the amended claims. Thus, amendments must be available within the AIA trial itself.

Second, 35 U.S.C. 316(a)(11) states that AIA trials generally should conclude within 12 months from institution. Therefore, the amendment procedures should generally fit within the allotted 12 month window. Third, these are inter partes proceedings. Thus, the Petitioner must have a meaningful opportunity to participate.

And so, based on extensive analysis and consultation with a wide variety of stakeholders, we have developed a detailed solution that meets all of these requirements.

To achieve these goals, we propose a new amendment process that would involve a motion filed by the patent owner soon after institution, an opposition by the petitioner, a preliminary non-binding decision by the Board, and the opportunity for the patent owner to revise the amended claims in light of this preliminary decision.

Specifically: the patent owner will have a window of six weeks following an institution decision to file a motion to amend, if they so desire. The petitioner will then have six weeks to oppose.

After receiving both parties’ papers, one month after the opposition is due the Board will provide a preliminary non-binding decision on the proposed amended claims, similar in concept to the institution decision for the original claims. This preliminary decision would provide valuable insight to both parties regarding the merits of the motion to amend.

Then, the patent owner will have one further opportunity to revise the amended claims, and the petitioner will have a corresponding opportunity to oppose the revision. In the end, the Board will consider both the original claims and any amended claims at the hearing and in the final written decision.

Having the Board provide this extra feedback to the parties earlier in the case should lead to more narrowly-tailored and focused claim amendments, and potential earlier resolution of the issues. As I said, we will seek public comments before finalizing the new procedure. We want to ensure that the final amendment procedure takes into account all of your views.

And so, with the newly updated trial practice guide, the new standard operating procedures, the claim construction standard newly aligned with federal courts, and a robust new amendment process, it is indeed a new day at the PTAB!

I firmly believe that this combination brings more balance to the proceedings, and better aligns them with the original intent of the AIA legislation. . . .

 

Indian Tribes, States, and Sovereign Immunity before the PTAB

Patent

by Dennis Crouch

Saint Regis Mohawk Tribe v. Mylan Pharmaceuticals Inc., App. No. 18-1638 (Fed. Cir. 2018)

The Federal Circuit has denied the Mohawk Tribe’s petition for en banc rehearing on the issue of whether sovereign immunity may be asserted in inter partes review (IPR) proceedings.  Although the case focused on immunity of federally recognized Indian tribes, the Federal Circuit decision is broadly written to also include patents owned by individual states.  [Fed.Cir.St.Regis.Decision] A parallel case involving Minnesota is pending before the Federal Circuit. Regents of the Univ. of Minn. v. LSI Corp. Appeal No. 18-1559.  Of course, the states and tribes do not receive a lot of sympathy from private patent holders whose patents are subject to IPRs.

The St. Regis petition focused particularly on Federal Maritime Comm’n v. S.C. State Ports Auth., 535 U.S. 743 (2002) (“FMC”).  In FMC, the Supreme Court held that sovereign immunity applies to protect a state sovereign from having to defend itself in an administrative adjudicatory system involving adversarial private parties.  As the Supreme Court explained in SAS, IPR is a “procedure allow[ing] private parties to challenge previously issued patent claims in an adversarial process before the Patent Office that mimics civil litigation.” SAS Inst. Inc. v. Iancu, 138 S.Ct. 1348 (2018).

The closest prior Federal Circuit case on-point may well be VasCath, Inc. v. Curators of University of Missouri, 473 F.3d 1376 (Fed. Cir. 2007).  In that case, the court focused on whether interference proceedings trigger sovereign immunity.  In its Saint Regis decision, however, the court did not discuss or even cite to that prior determination.

The case is now set-up for a petition for writ of certiori from the St. Regis tribe.

The Scheme: Any post about this case is not complete without a discussion of how the tribe came to own these Allergan patents at issue here.  Basically, Allergan is paying the tribe to own these Restasis patents for the sole purpose of taking advantage of the Sovereign Immunity benefits.  This involved a reverse-payment: Allergan paid St. Regis to take ownership of patents and is paying an annual royalty for their continued participation in the scheme.

What next for RPX: Protecting its Members as a Real Party in Interest

Patent

by Dennis Crouch

In Applications in Internet Time v. RPX Corporation, the Federal Circuit send a PTAB decision of invalidity back down for reconsideration on the issue of whether the RPX IPR petition was time-barred under 35 U.S.C. § 315(b).  Section 315(b) sets up a one-year deadline for filing an IPR petition against a patent following an infringement complaint for the patent at issue served on either the “the petitioner, real party in interest, or privy of the petitioner.”

315(b) Patent Owner’s Action.— An inter partes review may not be instituted if the petition requesting the proceeding is filed more than 1 year after the date on which the petitioner, real party in interest, or privy of the petitioner is served with a complaint alleging infringement of the patent.

The particular factual problem for the patent challenger (RPX) stems from its setup as a member-driven patent-protection company.  Salesforce.com was previously charged with infringement of the patent at issue; since Salesforce.com is a member of RPX — then it seems likely that Salesforce.com is a “real party in interest” under the statute. For the Federal Circuit, the real-party-in-interest inquiry should be conducted “with an eye toward determining whether the nonparty is a clear beneficiary [of the IPR] that has a pre-existing, established relationship with the petitioner.”  Note here that the lawsuit against Salesforce.com is still pending — the Nevada district court has stayed the case pending outcome of the RPX IPR proceedings.

Rehearing en banc: Following the Federal Circuit’s decision, RPX requested en banc rehearing — that request has now been denied.

The court’s ruling creates real challenges to the business model of defensive patent groups such as RPX.  I expect that RPX will now petition for Supreme Court review and could become a companion case of the company’s already pending petition on the issue of when such a group has standing to appeal an adverse PTAB decision. RPX Corporation v. ChanBond LLC.

In its unsuccessful rehearing petition, RPX argued that the panel improperly expanded the meaning of real-party-in-interest because of its desire to protect patent holders against defensive patent groups.

En Banc Petition: What Evidence and Facts are Useful to the Eligibility Analysis

Patent

In their petition for en banc review, Nader and Kamran Asghari-Kamrani ask the Federal Circuit to come together to explain the facts (and the law) of patent eligibility under 35 U.S.C. § 101.  In particular, the new petition filed by Antigone Peyton raises two questions:

1. Is the threshold inquiry for patent eligibility under 35 U.S.C. § 101 a pure question of law without underlying factual issues relating to the question of whether the claims transform an abstract idea into a patent eligible application, including whether they are directed to improvements in computer technology or merely describe well-understood, routine, and conventional activities known in the industry (the Alice Step Two inquiry)?

2. Can a district court conclude, when considering a Rule 12(b)(6) motion, that a computer-based invention’s claims directed towards authenticating a user during an electronic transaction with an external entity by way of a central entity—using a digital identity and dynamic code—fail to recite an improvement in authentication technologies implemented on a computer network and merely recite well-understood, routine, and conventional activities without construing the claims or applying the patentee’s proposed construction, considering the patent’s teachings, or considering relevant fact evidence such as expert testimony on the nature of the invention and state of the art, prior art teachings, or industry practices?

[Read the petition: 2018-10-11 0069 Petition for en banc rehearing filed by Appellants Kamran Asghari-Kamrani and Nader Asghari-Kamrani]

The case at issue here stems from the CAFC’s affirmance of the lower court’s Rule 12(b)(6) dismissal — finding that the claims of U.S. Patent No. 8,266,432 are invalid as directed an abstract ideas.  The claims here are directed to a user authentication system that uses using a central computer to send a temporary dynamic code to a user and then validate the code when submitted by a third party (who is conducting a transaction with the user).

The patentee argues that the facts would show that its approach is an innovative implementation — but the district court dismissed the case without considering any submitted evidence. The district court issued its decision prior to Berkheimer and Aatrix.  However, on appeal, the Federal Circuit affirmed the dismissal without considering the impact of those decisions (R. 36 Judgment without Opinion).

Although the claims expressly and repeatedly require computer intervention, the district court noted that invention would still work for its purpose even without the computer technology.  That setup led the court to find the claims directed toward an abstract idea:

The claims are directed to the abstract idea of using a third party and a random, time-sensitive code to confirm the identity of a participant to a transaction. This formulation is admittedly verbose. It is verbose because the patent claims combine two abstract ideas: the use of a third party intermediary to confirm the identity of a participant to a transaction and the use of a temporary code to confirm the identity of a participant to a transaction. It is an obvious combination, and nothing about the combination removes the patent claims from the realm of the abstract.

Intra-Circuit Split: In its brief, the patentee highlights the current intra-circuit split among the Federal Circuit judges on the issue of when facts are relevant and important to the eligibility inquiry.

[The Berkheimer analysis] has been alternatively characterized by some members of the Court as an “unremarkable proposition” that
is consistent with the Court’s precedent, Aatrix, 890 F.3d at 1355 (Moore, J., concurring), and by others as “contrary to that well-established precedent” with “staggering” consequences, id. at 1362, 1365 (Reyna, J., dissenting). Other members of this Court have explicitly suggested that it should wait for help or guidance from Congress or the Supreme Court. Berkheimer (Lourie, J., concurring).

. . . This Court should join the USPTO’s current effort to roll up its sleeves and bring more certainty, predictability, and clarity to the Section 101 analysis.

It is unlikely that the court will take the bait with this case, but we shall see.

 

Claim 1 below:

1. A method for authenticating a user during an electronic transaction between the user and an external-entity, the method comprising:

receiving electronically a request for a dynamic code for the user by a computer associated with a central-entity during the transaction between the user and the external-entity;

generating by the central-entity during the transaction a dynamic code for the user in response to the request, wherein the dynamic code is valid for a predefined time and becomes invalid after being used;

providing by the computer associated with the central-entity said generated dynamic code to the user during the transaction;

receiving electronically by the central-entity a request for authenticating the user from a computer associated with the external-entity based on a user-specific information and the dynamic code as a digital identity included in the request which said dynamic code was received by the user during the transaction and was provided to the external-entity by the user during the transaction; and

authenticating by the central-entity the user and providing a result of the authenticating to the external-entity during the transaction if the digital identity is valid.

 

 

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:

The Impact of 101 on Patent Prosecution

Patent,

Guest Post By: Colleen Chien, Professor, Santa Clara University Law School

Over the last several years, the USPTO has continued to release high-quality data about the patent system. This is the first of a series of posts by Professor Chien based on insights developed from that data. (The accompanying Patently-O Law Journal Paper includes additional views and methodological notes, and links to queries for replication of the analysis by Chien and Jiun-Ying Wu, a 3L at Santa Clara Law. )

“Everything should be made as simple as possible,
but not simpler” — Albert Einstein

A few weeks ago, the USPTO Director Andrei Iancu announced progress on new guidance to clarify 101 subject matter eligibility by categorizing exceptions to the law. The new guidance will likely be welcomed by prominent groups in the IP community,[1] academia,[2] and the majority of commentators to the 2017 USPTO Patentable Subject Matter report[3] that have called for a overhaul of the Supreme Court’s “two-step test.” Behind these calls are at least two concerns, that the two-step test (1) has stripped protection from meritorious inventions, particularly in medical diagnostics, and (2) is too indeterminate to be implemented predictably. To Director Iancu’s laudable mission, to produce reliable, clear, and certain property rights through the patent system, 101 appears to pose a threat.

Last November, the USPTO released the Office Action Dataset, a treasure trove of data about 4.4 million office actions from 2008 through July 2017 related to 2.2 million unique patent applications. This release was made possible by the USPTO Digital Services & Big Data (DSBD) team in collaboration with the USPTO Office of the Chief Economist (OCE) and is one of a series of open patent data and tool releases since 2012 that have seeded well over a hundred of companies and laid the foundation for an in-depth, comprehensive understanding of the US patent system. The data on 101 is particularly rich in detail, breaking out 101 subject matter from other types of 101 rejections and coding references to Alice, Bilski, Mayo and Myriad.

With the help of Google’s BigQuery tool and public patents ecosystem[4] which made it possible to implement queries with ease, research assistant Jiun-Ying Wu and I looked over several months for evidence that the two-step test had transformed patent prosecution. We did not find it, because, as the PTO report notes, a relatively small share of office actions – 11% – actually contain 101 rejections.[5] However once we disaggregated the data into classes and subclasses[6] and created a grouping of the TC3600 art units responsible for examining software and business methods (art units 362X, 3661, 3664, 368X, 369X),[7] which we dub “36BM,”[8] borrowed a CPC-based identification strategy for Medical Diagnostic (“MedDx”) technologies,[9] and developed new metrics to track the footprint of 101 subject matter rejections, we could better see the overall impact of the two-step test on patent prosecution. (As a robustness check against the phenomenon of “TC3600 avoidance,” as described and explored in the accompanying Patenty-O Law Journal article, we regenerate this graph by CPC-delineated technology sector, which is harder to game than art unit, finding the decline in 101 more evenly spread).

Mayo v. Prometheus, decided in March 2012, and Alice v. CLS Bank, decided in June 2014, elicited the strongest reactions. The data suggest that an uptick in 101 subject matter rejections following these cases was acute and discernible among impacted art units as measured by two metrics: overall rejection rate and “the pre-abandonment rate” rate – among abandoned applications, the prevalence of 101 subject matter rejections within the last office action prior to abandonment.

Within impacted classes of TC3600 (“36BM”), represented by the top blue line, the 101 rejection rate grew from 25% to 81% in the month after the Alice decision, and has remained above 75% almost every month since then. (Fig 1) In the month of the last available data, among abandoned applications, the prevalence of 101 rejection subject matter rejections in the last office action was around 85%. (Fig 2)

Among medical diagnostic (“MedDx”) applications, represented by the top red line, the 101 rejection rate grew from 7% to 32% in the month after the Mayo decision and continued to climb to a high of 64% (Fig 1) and to 78% among final office actions just prior to abandonment (Figure 2). In the month of the last available data (from early 2017), the prevalence of subject matter 101 rejections among all office actions in applications in this field was 52% and among office actions before abandonment, was 62%. (Fig 2)

However, outside of these groupings and other impacted art units (see paper for longer list) the impact of 101 caselaw has been more muted. 101 rejections overall (depicted by the thick black line) have grown – rising from 8% in Feb 2012 to 15% in early 2017 (Fig.1) – but remain exceptional.

On balance, the data confirm that 101 is playing an increasingly important role in the examination of software and medical diagnostics patents. More than four years after the Alice decision, the role of subject matter does not appear to be receding, remaining an issue in a large share of cases not only at their outset but among applications that go abandoned through the last office action. That patentees cannot tell before they file whether or not their invention will be considered patent-eligible, and perceive that much depends not on the merits of the case but in what art unit the application is placed also presents a challenge to the goal of predictability in the patent system.

It is also the case that the vast majority of inventions examined by the office are not significantly impacted by 101. Even when an office action does address subject matter, rejections and amendments on 101 subject matter on the record are often cursory, in contrast with, for example, novelty and nonobviousness discussions.

What does the data teach us and what directions for policy might it suggest? I save this topic, as well as the impact of USPTO guidance on prosecution and some data issues left unexplored here, for the next post, as data gathering continues.

In the meantime the USPTO continues to move forward on revised examiner guidance. As it does, it may want to decide which metrics most matter – overall prevalence of 101, 101 in pre-abandonment phases, or others – and how it hopes the metrics might change as a result of its revised guidance. The USPTO should also consider keeping the office action data up-to-date — right now, high quality data stops around February 2017[10] without any plans to update it of which I’m aware (my subsequent FOIA request for updates was denied). That leaves a gap in our ability to monitor and understand the impact of various interventions as they change over time – certainly not a unique phenomena in the policy world – but one that is fixable by the USPTO with adequate resources. In the meantime, it is thanks to the USPTO’s data release that this and other analyses of the impact of the two-step test is even possible.

Thanks to Jonah Probell and Jennifer Johnson for comments on an earlier draft and Ian Wetherbee for checking the SQL queries used to generate the graphs. Comments welcome at cchien@scu.edu.

= = = = =

[1] The AIPLA has proposed a “clean break from the existing judicial exceptions to eligibility by creating a new framework with clearly defined statutory exceptions.”; the IPO has suggested replacing the Supreme Court’s prohibition on the patenting of abstract ideas, physical phenomena, and laws of nature with a new statutory clause, 101(b), to be entitled “Sole Exception to Subject Matter Patentability.”

[2] https://patentlyo.com/patent/2017/10/legislative-berkeley-workshop.html.

[3]  Patent Eligible Subject Matter: Report on Views and Recommendations From the Public, USPTO (Jul. 2017).

[4] Google Public Patents is a worldwide patent bibliographic database linked with other datasets described more fully in the accompanying Patently-O Law Journal article.

[5] Office Action Dataset at 2 (also mentioning that “101 rejections” include subject matter eligibility, statutory double patenting, utility, and inventorship rejections).

[6] Using Google Patents Public Data by IFI CLAIMS Patent Services and Google, used under CC BY 4.0, Patent Examination Data System by the USPTO, for public use, Patent Examination Research Dataset by the USPTO (Graham, S. Marco, A., and Miller, A. (2015) described in “The USPTO Patent Examination Research Dataset: A Window on the Process of Patent Examination”), for public use.

[7] As detailed in the accompanying PatentlyO Bar Journal paper, available at http://ssrn.com/abstract=3267742.

[8] We put the remainder of TC 3600 art units into the category “TC36 Other” however because many months contained insufficient data (of less than 50 office actions), we did not include it in the Figures.

[9] Coded using a patent classification code (CPC)-based methodology developed from Colleen Chien and Arti Rai, An Empirical Analysis of Diagnostic Patenting Post-Mayo, forthcoming (defining medical diagnostic inventions by use of any of the following CPC codes: C12Q1/6883; C12Q1/6886; G01N33/569; G01N33/571; G01N33/574; C12Q2600/106).

[10] The later months of 2017 have insufficient counts for research purposes.

Chien and Wu: Decoding Patentable Subject Matter

Journal, Patent

Professor Colleen Chien and Jiun Ying Wu are working their way through an analysis of millions of USPTO office actions.  In this Patently-O L.J. essay, the pair reports on how the PTO is examining applications for patentable subject matter.  The article documents “a spike in 101 rejections among select medical diagnostics and software/business method applications following the Alice and Mayo decisions.”  Although rejections rose within certain art units, the pair found little impact elsewhere.

Colleen Chien and Jiun-Ying Wu, Decoding Patentable Subject Matter, 2018 PatentlyO Patent Law Journal 1.

Prior Patently-O Patent L.J. Articles: (more…)

Modernizing Copyright Registration

Patent

The US Copyright Office (a branch of the Library of Congress) has published a Federal Register notice seeking comments on ways to improve (“modernize”) its copyright registration system:

The U.S. Copyright Office is building a new registration system to meet the demands of the digital age. As the Office develops a new technological infrastructure for this system, it is considering several legal and policy changes to improve user experience, increase Office efficiency, and decrease processing times. The Office is seeking public comment to inform its decisions on how to improve the regulations and practices related to the registration of copyright claims.

Some of the intended improvements include: better application tracking; improved user interface for electronic deposits; improved messaging system; and allowing users to view a draft registration certificate before final submission. Public comments due by January 15, 2019.

View the notice: NOTICE AND REQUEST FOR COMMENTS

Upcoming Patent Law Practice Events with Profs. Crouch and Hricik

Patent

By Dennis Crouch

I’m looking forward to a few of upcoming IP Law events.  Next week, I’ll be joining several hundred IP attorneys at the AIPLA annual meeting in Washington DC.  I am the final speaker of the event — you guessed it Professional Responsibility & Ethics.  The talk will take a comparative-law approach — looking at how duties and responsibilities shift according to the forum (litigation, prosecution, AIA Trials).  My ethics talk follows a year-in-review panel with four all-star speakers:

  • Trademarks – Prof. Christine Haight Farley (American)
  • Patents – Prof. Mark Lemley (Stanford)
  • Trade Secrets – Prof. Elizabeth Rowe (Florida)
  • Copyrights – Meaghan Kent (Venable)
  • Ethics Prof. Dennis Crouch (Missouri)

Because I already follow patent issues so closely, I typically learn the most from non-patent panels.  I am particularly looking forward to hearing from Daniel Lee who is a deputy U.S. Trade Representative in charge of Innovation and Intellectual Property.

After that, I’ll be headed back to Chicago for the JMLS Annual IP Conference on Nov 2 where Judge Newman will give a keynote on how “The Future Is in Our Hands.”  Thanks to Prof. Daryl Lim for organizing this event.

Meanwhile, my co-blogger Prof. David Hricik (Patent Law Ethics) has several interesting upcoming events:

Jumping ahead to January — I’m headed to the final Colorado Bar Ass’n SkiCLE (it will likely continue in future years in some other form) January 2-6 2019 in Aspen/Snowmass.  Use code “FACULTYINSIDER” for $100 off.  See you on the slopes.

ABA Issues Opinion on Lawyers’ Obligations after Electronic Data Breach

Ethics, Patent

by David Hricik

ABA Formal Ethics Opinion 483 (Oct. 17, 2018) is here.  Like many ABA opinions, it provides a useful roadmap to the issues and how to respond to them (and, in this opinion, some good proactive advice).  The opinion addressed the narrow issue of a data breach which results in disclosure of, or destruction of, client confidences as opposed to “ransomware” attacks and the like, where access is denied but the data is not compromised, or access to data is otherwise inhibited or delayed.

The first take away is an obligation to “employ reasonable efforts to monitor” for unauthorized access to client confidences, whether at the office, through vendors, or otherwise.

The second is that the lawyer must act reasonably promptly to stop any breach and mitigate, or rectify, the consequences.  In this regard, the opinion suggests creating an “incident response plan with specific plans and procedures” to do so.

Third, the opinion states that the lawyer must determine what, with reasonable care, was compromised, deleted, or misappropriated.  And, again, it suggested these be part of the “incident response plan.”

Fourth, it stated that the lawyer who knows, or reasonably should know, a data breach has occurred “must evaluate the notice obligations.”  The contours of this turn on whether the data belonged to a current, or former, client.   With current clients, the ABA stated that there was an obligation to inform the current client if its data was breached. With former clients, the opinion stated it was “unwilling to require notice to a former client as a matter of legal ethics in the absence of a black letter provision requiring such notice.”  Then, however, it suggested that lawyers in their engagement letters reach agreement on how to deal with electronic files on termination of a representation, and to recognize that laws — not legal ethics — might require notification.

Finally, if notification is required, the ABA stated the client must be given sufficient information “to make an informed decision as to what to do next, if anything,” including the lawyer’s response to the breach.  And, again, the opinion reminds lawyers that a number of laws may require additional disclosure.

Although it does not address it, of course patent lawyers need to be aware of where — in the US or not — data is maintained for export restriction issues and to take reasonable care to protect confidential client information.  It’s a good opinion that provides a framework for lawyers to use.

Practice Note: Don’t Send Drugs to the Federal Circuit

Patent

In Schirripa v. US, the Federal Circuit recently issued an interesting order:

Appellant Jeffrey Nathan Schirripa submitted to the court 18 copies of his confidential petition for panel rehearing and rehearing en banc. Upon examination, Appellant affixed to each petition what appear to be samples of cannabinoids, which may be controlled substances possessed or mailed in violation of federal law.

IT IS ORDERED THAT:

The Clerk of Court is directed to transmit these 18 documents to the U.S. Marshals Service for appropriate disposition or alternate action within the purview of the U.S. Department of Justice.

[SchirripaOrder] In the underlying case, Schirripa asked the Court of Federal Claims to enjoin the US Government from enforcing the Controlled Substances Act against his actions.  The court dismissed that case and the dismissal was affirmed on appeal.  Good luck Mr. Schirripa, and don’t tip the judges.

The cannabis attachment was apparently intended to create subject matter jurisdiction in the case.  I don’t fully understand the Schirripa’s flow chart, but it appears to be a boot-strap version a catch-22 for the court — the type of argument that you might figure out while high.

Read the en banc brief. [SchirripaEnBancBrief]