Patent – Patently-O America's leading patent law blog Tue, 20 Jun 2017 22:34:10 +0000 en-US hourly 1 Licensing matchmaking: the allure of reputation and organizational capital Tue, 20 Jun 2017 20:34:03 +0000 Guest post by Ian McCarthy and Karen Ruckman, both from the Beedie School of Business, Simon Fraser University. This is based on the research article: Why do some patents get licensed while others do not?

If the deluge of reality television shows about the subject is any indicator, the public has an ongoing fascination with both inventors and their innovations. Entrepreneurship programs like Shark Tank or Dragons’ Den offer some entertaining glimpses into how venture capitalists decide upon the kind of people and ideas they want to invest it.

But do these insights extend to the licensing of patents? Not exactly. But for those wondering why some innovations and patents get licensed while others do not, a less intuitive reality television genre might provide more compelling insights. I’m referring here to the reality dating show. If there is a truism from programs like The Bachelor or The Bachelorette, it is that match-making is a complex affair that goes well beyond choices that can be made from reviewing what we know to be true on paper. Fans of these shows—you might secretly be one yourself—note that a much richer set of variables guide the decision-making process on the part of the relationship-seeking protagonists– which often creates a greater degree of unpredictability within the plotlines and consequently a more compelling reason for viewers to watch week after week.

So how does this all relate to the licensing of technology patents? We’ll get there in a minute. But first, it’s worth restating what readers of Patently-O already know: The global licensing of patents is serious business these days. Within just the U.S., it is estimated that the annual value of licensed technologies has increased from $50 billion in 1997 to $200 billion in 2017. As a result, the financial and economic stakes for this form of matchmaking are quite high. Such technology licensing involves the transfer of intellectual property rights between two parties: the owner of the patent (i.e., the licensor), and a potential buyer (i.e., the licensee). It’s a growing opportunity for companies, and an increasingly integral business activity for companies who buy and sell patents in order to develop new innovations and products. When companies aren’t in a position to develop their own patent, perhaps due to their size or a lack of financing or expertise, they are at least able to license it out. Such a proposition offers much for both sides of such a transaction. Yet much remains unknown about the interplay between buyers and sellers in the patent licensing market.

Our study in the journal Industry and Corporate Change sought to address this gap, and answer the question: Why do some patents get licensed while others do not? By focusing on patents that are technologically similar, our analysis has provided new insights into why some patents are more likely to be licensed out. We looked at U.S. biotechnology patents that had been licensed over a period spanning 1993 to 2007, and those equivalent technology patents that were not. Historically, patent licensing has been studied by looking at primary measures of the patent itself—using measures such as patent cites and patent claims that reflect potential patent quality and value. Through a quasi-experiment methodological approach, our study looked at not only these characteristics of the patent, but also the characteristics of the licensor.

And that brings us back to those dating programs. When the Bachelorette whittles down a field of serious relationship prospects from 30 eligible bachelors down to 1, she is making choices beyond the immediate appearance-based qualities of her suitors, such as intelligence and physical attractiveness. She also observes her suitors in a multitude of social, cultural, and athletic environments; and in some cases she visits their hometowns and meets their parents and old acquaintances. In short, the choices made by the Bachelorette (or Bachelor) hinge not just on the intrinsic qualities of the suitors, but also their connections, standing and reputation. So we shouldn’t be surprised when the brother of a famous NFL quarterback is selected in the season finale over other equally-qualified but ultimately frustrated candidates (this actually happened). This shows that perceptions of quality can be garnered by association.

The academic equivalent of this might be found in a PhD student applying for faculty jobs. Two top candidates for a professor posting might hold the same qualifications—number of journal publications, quality of journals where published, research awards, and teaching prizes. With other measures equal, however, the prestige of their institutions will play a major role in the final decision. Rightly or not, organizational reputation matters—candidate qualities are insufficient to explain who gets chosen.

The same phenomenon holds true in the licensing of patents. Some licences happen to be more desirable than others—and they appeal to their prospective licensees through a combination of patent attributes and their organization’s attributes: prestige, experience, brand, and reputation (See Figure 1). When a patent is associated with a licensor of high repute or prestige, it benefits from a halo effect. A patent may be deemed to be more appealing than it really is, if it comes from a company with a strong reputation for producing outstanding technology. Conversely, a groundbreaking patent might be ignored or undervalued if it is from a lesser known licensor.

Specific variables help dictate the outcomes of a patent. Technological prestige reflects the licensor’s reputation for high-quality technologies. Technological depth indicates the extent of a licensor’s existing knowledge in a particular technological area. Technological breadth is the knowledge scope of a licensor’s past patenting efforts. Other key variables include experience, size, and the licensor’s past relationships with the licensee.

Figure 1: The allure of patent and licensor characteristicsFigure1

In many ways this boils down to organizational capital, or the status of the licensor. When the qualities of a patent or technology are equal, licensees will seek out other information to make a decision, such as the status of the organization selling the licence. The owners are deemed to have more experience, alongside deeper and broader knowledge capabilities. We are looking at the characteristics of the licensor in terms of what makes them attractive beyond the technology itself. It’s not just the functional quality of the patent that takes priority—the appearance and prestige of the owner also matters. Bluntly put, it’s important to look good at producing good technology.

Granted, this doesn’t always produce reasonable outcomes. A PhD graduate from second-tier university might be just as qualified as a PhD grad from an Ivey League school, after all—but we can predict who stands the best chance of getting the faculty position. Similarly, a worthy patent from a lesser-known licensor might be overlooked in favor of technological similar inventions from licensors of higher repute or standing.

Our findings provide a reminder for licensors of all patents that halo effects are important—they play a major role in framing and licensing technologies. Technological brand and reputation directly influences one’s ability to licence a patent out. Licensees look not only to the qualities of patents, but also to the profile and prestige of their owners. Licensors can’t change these variables overnight, but they should be strategically aware of them. On the flipside, some high-value patents might be ignored or undervalued because they do not have this kind of halo effect working for them.

Ultimately, the matchmaking analogy holds true across different outcomes for patents. Licensors emit reputational signals to licensees, which in turn influence a firm’s success in licensing out patents. Impressions not only matter—they are the driving force in the licensing process for otherwise equal patents.

= = =

Acknowledgements: We are grateful to Derek Moscato for his ideas and work on this posting.


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Matal v Tam: Only I Can Disparage You! Mon, 19 Jun 2017 15:09:15 +0000 The Supreme Court has affirmed that Trademark law’s restriction on registration of disparaging marks violates the free speech provision of the US Constitution.

Read it: 15-1293_1o13

Although the court’s logic is largely incomprehensible, the result is simple: the PTO will begin allowing registration of disparaging marks and will not cancel Registered marks because they are disparaging.

Although not at issue here, disparaging marks will likely be somewhat more difficult to enforce based upon the greater expressive content of the speech.


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Where Does Infringement Occur?  Lessons from Extraterritoriality Cases Fri, 16 Jun 2017 08:00:33 +0000 Guest post by Josh Landau, Patent Counsel for CCIA

It seems like a truly simple question to answer: where is an act of infringement committed?  And it’s one that became more important after TC Heartland’s decision that venue is proper “in the judicial district where the defendant resides, or where the defendant has committed acts of infringement and has a regular and established place of business.”  There’s been a lot of discussion, here and elsewhere, of what “regular and established place of business” means, but less focus on where acts of infringement occur.

Fortunately, there is one place where the issue of where infringement happens has come up: extraterritorial infringement cases.

Methods Abroad in NTP

The Federal Circuit defined the location of infringement tautologically in NTP v. RIM, saying “[t]he situs of the infringement ‘is wherever an offending act [of infringement] is committed.’”  And for simple machines or processes that operate entirely in one place, this provides a simple and workable definition.  But what about more complex systems that have components or perform steps in disparate geographic locations, like the claims in NTP?

For system claims, NTP says that use occurs in “the place at which the system as a whole is put into service, i.e., the place where control of the system is exercised and beneficial use of the system obtained.”

But for method claims, we have to answer a different question.  The NTP court said that a process cannot be used “within” the United States unless each and every one of the steps is performed in the United States.  For a method claim, the place where infringement occurs is the place where each and every step is performed.

TC Heartland

While NTP was decided in reference to 35 U.S.C. § 271(a) and TC Heartland dealt with 28 U.S.C. § 1400(b), both sections include the notion of the location where the act of infringement occurs.  If the test for where use of a method claim occurs is a consistent test for both determining whether it’s within the United States and for whether it’s within a judicial district, then the NTP test would apply.

That would mean that the only place where venue may be proper for method claims with steps performed in multiple locations (e.g., cloud computing claims with both user and server limitations, or networking claims with client and server relationships) could be the district where the alleged infringer is incorporated.  If there’s a server in the Northern District of California and a user’s smartphone is in the Eastern District of Texas, then the method isn’t performed in either place under the NTP test.  That leaves a patent holder with the option of suing where the server is (assuming they can show a user within the same district as the server) or else suing where the company resides.

Indirect infringement

This is only for direct infringement, of course.  I’m unaware of comparable cases to NTP v. RIM that provide a definition for where indirect infringement takes place.  The limited set of extraterritoriality cases handling the issue don’t specifically address the location of the infringing act of indirect infringement; they focus more on whether a direct infringement has occurred within the United States in order to avoid raising concerns about extraterritorial applications of U.S. law.

So the question becomes: if I induce infringement by acts taken in the Northern District of California, but the direct infringement occurs elsewhere (or across multiple districts), did the act of inducing infringement occur in the place where I took the action that induced the infringement?  Or did it occur somewhere else?

The extraterritoriality cases with respect to inducement suggest that as long as there’s a directly infringing act in the district, actions taken outside the district to induce infringement would be subject to venue in the district.  However, as we saw above, there might not be a directly infringing act in the district, so inducement might not be available at all.  Contributory infringement might prove a stronger avenue, as it explicitly conceives of sale or importation of an article practicing the patent as the infringing act.

But all of this has to be taken in view of the existing difficulties for a plaintiff trying to assert induced or contributory infringement, such as the requirement to show specific intent to infringe or to show a lack of any substantial non-infringing use.  While a plaintiff might be able to use indirect infringement to manufacture venue for a method claim in order to choose a forum, it might not be a strong claim.

How much does this really matter?

It might not matter much.  While patents that only have method claims could have a limited set of venues in which they can be asserted, most patents include both method and apparatus claims and both sets are asserted together.  That could be enough to manufacture a “supplemental venue” over the method claims, even if there are method steps performed elsewhere.

The Federal Circuit doesn’t seem to have addressed this question, but other courts have.  Prior to the creation of the Federal Circuit, the 7th Circuit determined that when a patent has both method and apparatus claims, venue is proper for both the method and apparatus claims even if only the apparatus claim is infringed within the judicial district.  See General Foods Corporation v. Carnation Company, 411 F. 2d 528 (7th Cir. 1969).  The Carnation court’s concern was that, otherwise, “an action for patent infringement in a situation such as we have here would be tried piecemeal, some claims in one jurisdiction and others in another.”

But the Carnation court didn’t address the fact that the statute allows using the district “where the defendant resides” as an alternative to the district where acts of infringement occur.  In other words, the case wouldn’t have to be tried piecemeal at all, but could always be heard in one location—the place of incorporation of the defendant.  If the only interest weighing against severing the venue-less method claims into their own case and transferring that case is the interest in hearing claims with similar scopes in the same court, then the proper remedy is a requirement to transfer all of the claims to a location where venue is proper, not to create a “supplemental venue” provision.


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Guest Post: Secret Software Sales Thu, 15 Jun 2017 10:50:19 +0000 Guest post by Matthew Fagan, Principal at KDP where he handles patent matters.  Much of the post-Helsinn analysis has focused on its impact on pharma where substantial strategic pre-filing activity is the norm. I asked Mr. Fagan to come at the problem from the computer and software perspective.  – DC

= = = = 

When the Federal Circuit decided Helsinn v. Teva last month, the patent world expected to the Court to resolve an issue simmering since 2011: namely, do purely private, secret sales toll the on-sale bar of post-AIA §102?  The court declined to provide an answer, instead reframing Helsinn’s activity as a public sale in which the details of the invention were not publicly disclosed.

Practitioners may be inclined to dismiss Helsinn as a judicial dodge in which the Court avoided the more interesting “secret sales” question.  But the issue the case turned on may ultimately be of more significance.  Cases of purely private sales are relatively rare as compared to public sales in which the details of an underlying technology are not fully disclosed or are actively hidden – especially in the software industry.

When combined with the Federal Circuit’s 2010 decision in Finjan v. Secure Computing and its 2006 decision in Plumtree Software v. Datamize, the Helsinn case raises interesting questions about how developers release software products.  There are several techniques available for distributing software to customers; after these cases, the date on which patented software is “sold” to the public may vary depending on the distribution method.  In fact, a patent directed to a single algorithm might have two different on-sale dates arising from the same transaction.

Most software patent claims are constructed as method claims or medium/apparatus claims.  In a computer-implemented method, a computing device performs a series of steps in an algorithm.  Plumtree offered two scenarios under which a computer-implemented method would be placed on sale: first, if the patentee “made a commercial offer to perform the patented method (even if the performance itself occurred after the critical date);” second, if the patentee “in fact performed the patented method for a promise of future compensation.

In medium claims, computer code is embedded in a computer-readable medium or implemented in an apparatus.  Finjan stands for the proposition that, because medium claims are directed to the device storing code rather than the actions embodied in the code, they do not necessarily require performance of a patented algorithm for infringement.  Any medium storing the instructions can infringe (or anticipate) a medium claim regardless of whether the claimed steps are actually performed.

What Helsinn adds to this line of cases is the concept that a sale of a medium holding an algorithm, or a performance of a method embodying the algorithm, will trigger the on-sale bar even if the invention is not discernible to the end-user.

Helsinn could be problematic for software developers using typical software development methods.  For example, one common software engineering strategy is the “continuous release” technique, whereby a publisher releases software and then rolls out updates repeatedly over short intervals (e.g., every two weeks).

Because the cycle is so rapid, oftentimes new features are partially developed but not ready for release by the time that the next update is due.  Accordingly, some developers use feature toggles or feature flags, like the following:

if(version == “test”)

              <implement new feature>

if(version == “release”)

              <implement old feature>

This allows the developer to control which version of the code is available to the public by changing the “version” variable: if set to “test,” the new features are enabled for use by programmers; if set to “release,” the old feature becomes active to avoid exposing undeveloped features to the end user.  When the new feature is tested and ready, the programmer can copy the code to the release section and the next version of the code can be implemented in the test section.  This technique is currently used by Netflix, Gmail, Reddit, Flickr, and Etsy, among others.

The critical observation is that, although the new feature will not be performed in the version of the software released to the public, the released software may include both the old version of the feature and an inaccessible copy of the code for the new version.  Even though users may not be able to invoke the test code, Helsinn does not require “that members of the public be aware that the product sold actually embodies the claimed invention.”  Consequently, under Finjan the on-sale bar may be triggered for a medium claim.

In contrast, under Plumtree this scenario may not implicate a corresponding method claim.  Assuming the public was not informed of the new features, there was likely no promise to perform the method in the future.  The method may not be considered sold until the code for the new feature is moved to the “release” section and performed by the user base.

Therefore, although the release might not immediately trigger the on-sale bar for a patented method arising out of the test code, it might trigger the on-sale bar for a patented medium.

Other software distribution methods raise similar risks.  One recent trend in software engineering is to leave software in an open- or limited-beta test for an extended period.  The beta may be offered at a reduced cost as compared to the full-release version (a similar trend has more recently been labeled as “early access”).  For example, Gmail remained in limited beta for five years before being identified as “released;” the popular simulation game Kerbal Space Program was in beta for nearly four.  The beta software might include under-development code callable only by developers, which is interspersed with active code invokable by end users.  If the developer-only portion of the code includes patentable technology, then beta users may unwittingly receive a medium embodying a patentable invention even though the corresponding method is not publicly performed.

Similarly, a normal software update cycle may incorporate “code freezes,” after which programmers are instructed not to modify certain portions of the source code.   When a code freeze is called, unfinished patentable features may become stranded in the source code; these unfinished features may be flagged for inclusion in a future patch or update.  Although not used in the released version, inactive features embodied in the source code could trigger the on-sale bar for the medium holding the code.

To some extent, this problem can be alleviated with optimizing compilers that remove dead or unreachable code.  However, such optimizations take time that developers of large, complex programs may not wish to spend.  Moreover, dead code elimination is primarily used to reduce the size of a deployed program and hence might not be prioritized by developers of code deployed on servers where storage space is readily available.

These release techniques could hurt a patentee’s chances to secure a medium claim, while still possibly rendering method claims patentable.  Another release scenario called “pre-patching” implicates the opposite combination: method claims may be placed on sale while medium claims might remain protectable.

Pre-patching is typically used when software developers provide client software that works with a back-end server.  On the software’s release date, the back-end server is activated and the client can access the server’s services.  Sometimes, if the client software is particularly large, developers may allow the end-users to purchase and download the client before the release date, even though the client will not be able to immediately access features on the server.  This technique is employed for complex online games such as World of Warcraft to avoid swamping download servers on release day.

In this case, patentable activities may be performed on the server, or through a combination of actions by the client and server.  Whether the server’s software was “sold” remains ambiguous in light of the Federal Circuit’s analysis in Minton v. National Association of Securities Dealers.  Consequently, there remains a chance that the on-sale bar is not triggered for medium claims directed to software partially or entirely stored on the server.

On the other hand, it seems clear that a sale of pre-patched software in which a patentable method is performed on the server constitutes a promise to perform the patentable method when the server code is unlocked, falling under the first “on-sale” scenario of Plumtree.  Consequently, the on-sale bar is likely triggered with respect to method claims even though the user base may not be aware that the method will be performed by the server.

In each of these release scenarios, the technology remains locked in unused or inaccessible software code prior to an official release.  Helsinn makes it clear that hiding away patentable features will not prevent the on-sale bar from being triggered in these situations.  Avoiding the on-sale bar may require that programmers be aware of these issues and take special care to remove test features from the release version of the software.

Although the situations described above specifically relate to software development, there are myriad examples from other industries in which an invention is sold without disclosing implementation details.  Thus, although Helsinn does not tell us whether purely secret sales will be patent invalidating, the case may ultimately have a greater impact than whichever dispute ultimately decides the private sales issue.



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Patentlyo Bits and Bytes by Anthony McCain Thu, 15 Jun 2017 00:46:25 +0000
  • John Duffy: The Supreme Court Reverses Another Federal Circuit Patent Case
  • Gene Quinn: Industry Reaction To SCOTUS Decision In Sandoz v. Amgen
  • Richard Lloyd: The Oil States IPR Case Could Be One Of Those Rare Instances Where SCOTUS Sides With The CAFC
  • Scott Graham: Lawmakers Plot Next Steps On Patent Reform
  • Joseph Herndon: Credit Acceptance v. Westlake Services
  •  Get a Job doing Patent Law                  

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    Cert petition granted in Oil States Mon, 12 Jun 2017 17:30:58 +0000 Question: Whether inter partes review, an adversarial process used by the Patent and Trademark Office (PTO) to analyze the validity of existing patents, violates the Constitution by extinguishing private property rights through a non-Article III forum without a jury.

    The deciSion here is very big news for the IPR system because it has the potential of bringing down the entire AIA trial regime.  The conventional wisdom with Supreme Court cases is that they usually reverse the path set by the Federal Circuit. Here, that results may well be a holding that PTO cancellation of issued patents is a constitutional violation.

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    Legality of the Matal Appointment: Acting As PTO Director Fri, 09 Jun 2017 18:17:19 +0000 The following is a guest post by David Boundy – a Cambridge Massachusetts attorney with a specialty at the intersection of patent and administrative law. In 2007-09, David led the teams that quashed the Continuations, 5/25 Claims, IDS, Markush, and appeal rules under the Paperwork Reduction Act.

    On other mailing lists, members of the patent bar have expressed concern that the appointment of Joe Matal may be illegal, because it does not follow the succession plain laid out in the Commerce Department Organization order 10-14.04. Some have wondered whether the appointment is illegal, in defiance of law. Would actions taken by Mr. Matal be ultra vires? Would patents signed by Mr. Matal be validly issued?

    The DOO is not a statute. It’s not even a regulation. The Administrative Procedure Act, 5 U.S.C. § 553, sets out the “pigeonholes” for classifying rules and their effect. Of those pigeonholes, the DOO is a “statement of policy,” and thus only “hortatory,” not binding against the agency or the public.

    Guidance is binding on an agency’s employees when that guidance promises procedural rights in favor of the public (but guidance is not binding against the public, unless it meets all the requirements of Chevron to be an “interpretation of statute or regulation”). Here, I have trouble seeing a procedural right operating in favor of the public that’s violated by appointment of one qualified individual over another, and thus there’s no binding effect for the DOO guidance.

    In the guidance alone, I don’t see anything having force of law that could be breached, I don’t see who would have standing to challenge the DoC/PTO’s self-waiver, and I don’t see what remedy a court could order. (The DOO guidance may be a paraphrase or interpretation of a statute governing agency succession—that would be a different matter. I don’t know of such a statute.)

    Very likely the law controlling validity of patents signed by Mr. Matal is expressed in Aristocrat Technologies Australia Pty, Ltd. v. International Game Technology, 543 F.3d 657, 663, 88 USPQ2d 1458, 1463 (Fed. Cir. 2008)—once a patent issues, nonstatutory procedural lapses (other than inequitable conduct) merge into the grant, and are not bases for challenging validity.

    To be sure, there are procedural issues swirling around the PTO. The PTO’s self-grant of a federal holiday is a statutory issue, and even after an unpublished district court decision in Elm 3DS Innovations LLC v Lee, that’s still an open issue clouding validity of patents. The PTO’s misunderstanding of the legal stature of guidance creates hundreds of millions of dollars of waste, fraud, abuse, and unwarranted burden for the public. The PTO’s neglect of its obligations, and self-granted waivers, under the Paperwork Reduction Act, allow these millions to be hidden from OMB’s oversight authority. Those problems are compounded by the PTO’s failure (indeed, outright refusal stated in Petition Decisions) to implement a 2007 directive from the Executive Office of the President that clarifies the role of guidance, and the legal obligation of agencies to enforce guidance against its own employees and not against the public.

    But the skirting of guidance leading to Mr. Matal’s appointment isn’t one of those legal problems. I hope the Patent Bar will join me in welcoming a lawyer into the PTO senior management. Mr. Matal is a lawyer with recent stand-up court experience. I hope that he will translate his experience into infusing the PTO with an appreciation for the importance of procedure, and respect for rule of law, to fair and accurate decisionmaking.

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    When Logic Fails Fri, 09 Jun 2017 09:38:37 +0000 2017-June-comic-stripJi-Yong (David) Chung is a patent attorney and partner at Snyder, Clark, Lesch &

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    Metallizing Forfeiture Post-Helsinn Thu, 08 Jun 2017 10:27:01 +0000 The following guest post is by Daniel Taskalos. After reading his 2013 Stanford Technology Law Review article on Metallizing Engineering post-AIA, I asked Mr. Taskalos to revisit those issues here in Patently-O. – DC

    In Helsinn Healthcare S.A. v. Teva Pharmaceuticals USA, Inc., the Federal Circuit had its first opportunity to address the impact of the “or otherwise available to the public” clause contained in post-AIA 35 U.S.C. § 102.  In finding that the AIA “did not change the statutory meaning of ‘on sale’ in the circumstances involved here,” the Federal Circuit provided insight into the continued relevance of the forfeiture doctrine of Metallizing Engineering v. Kenyon Bearing.

    The critical issue in Helsinn was whether the post-AIA definition of prior art requires public disclosure of the details of an invention in order to trigger the on-sale bar.  In the AIA, Congress revised § 102—otherwise known as the “novelty provision.”  As revised, the new novelty provision states:

    (a)  NOVELTY; PRIOR ART. — A person shall be entitled to a patent unless—

    (1)  the claimed invention was patented, described in a printed publication, or in public use, on sale, or otherwise available to the public before the effective filing date of the claimed invention.

    While the AIA maintained the pre-AIA language of “patented,” “described in a printed publication,” “in public use,” and “on sale,” it added the emphasized clause above (the “catch-all clause”).  The AIA does not provide any elaboration on the import of the catch-all clause, leaving many to wonder exactly what its presence means for the interpretation of the other, well-known categories of prior art.

    Since its enactment in 2011, scholars have debated the effect of the catch-all clause on the “public use” and “on sale” statutory bars.*  Helsinn asserted that the catch-all clause modifies prior-art categories such that only disclosures that publicly disclose the details of the invention qualify as prior art.  Advocates like Helsinn contend that the intention of Congress was to overrule “secret” use and sale decisions, like Metallizing Engineering.

    Others, including Teva, argue that the addition of the catch-all clause does not invalidate the years of case law interpreting “public use” and “on sale.”  These advocates contend that interpreting the catch-all clause to impose a “public” requirement would be a foundational change to the purpose and rationale for the public use and on sale bars support—in the absence of a clear repudiation by Congress of the pre-AIA law.

    *The number of articles discussing both sides of the debate is far too numerous to provide a full list.  You can find a few of these articles listed here.

    The facts of Helsinn presented a unique situation in which to consider this important question.  Helsinn sued Teva for allegedly infringing four patents directed to a formulation of palonosetron for reducing chemotherapy-induced nausea and vomiting (“CINV”).  All the asserted claims covered a specific palonosetron amount in a solution—0.25 mg.  The parties agreed that the critical date for all four patents was the same—but different laws were implicated by the patents.  Three of the patents were governed by the pre-AIA patent laws, while the last patent fell under the AIA.

    Teva alleged that Helsinn’s asserted patents were invalid under § 102.  The conduct in question concerned an agreement entered into by Helsinn with another party to market and distribute Helsinn’s palonosetron formulation.  Almost two years before the critical date, Helsinn agreed with MGI Pharma, Inc., that MGI would market and distribute one or more formulations of palonosetron, contingent on approval by the FDA.  The agreement identified the 0.25 mg dosage as one of the potential formulations to be purchased and sold.  Although the existence of the deal was made public (through a required SEC filing), the specific formulation details were redacted.

    Thus, the district court faced analyzing the same conduct under two sets of laws:  pre-AIA and post-AIA.  Under either, however, the same two-prong framework explicated in Pfaff v. Wells Electronics applied: the on-sale bar is triggered where before the critical date (1) there is a sale or an offer for sale and (2) the claimed invention was ready for patenting.  Under the Pfaff framework, the district court found that the distribution agreement constituted a sale with respect to the three pre-AIA patents.  But the district court interpreted Congress’ addition of the catch-all clause as a modification to the “on sale” category that placed a public requirement on the disclosure itself.  The district court found that under the AIA, a § 102-triggering sale must publicly disclose the details of the invention; a public sale that did not disclose the claim limitations was insufficient.

    The Federal Circuit reversed this decision and provided an analysis may prove instructive in future cases concerning public uses and other non-informing disclosures.  In its opinion, the Federal Circuit noted that the support for Helsinn’s argument that § 102’s requirements changed with Congress’ addition of the catch-all phrase rested outside of the text of the amended provision; Helsinn relied primarily on floor statements by a few individual members of Congress.

    The Federal Circuit noted that those floor statements appeared to show “at most” an intent to do away with case precedent concerning “public use” cases, not “on sale” cases.  According to the Court, the only “precedent” cited by the Congressmen were cases in which the invention was used in public, but that use did not disclose to the public the details of the claimed invention.  E.g., Egbert v. Lippman; Beachcombers International v. Wildewood Creative Products; Jumpsport, Inc. v. Jumpking, Inc.  Moreover, the Federal Circuit explained that even assuming the statements could be stretched to cover sale cases as well, the “secret sale” cases “were concerned entirely with whether the existence of the sale or offer was public,” not whether the details of the invention were disclosed.  Thus, the Court found the floor statements were of little support for a different interpretation of the statutory meaning of “on sale” under the AIA.

    The Federal Circuit further found Helsinn’s argument unpersuasive because imposing a publicity requirement would  “work a foundational change in the theory or the statutory on-sale bar.”  In fact, the Federal Circuit noted that the issue of whether to impose a publicity requirement was exactly the situation in Pennock v. Dialogue, in which Justice Story created the on-sale bar.  In Pennock, Justice Story found that allowing a patent to stand after a sale that did not disclose the claim limitations “would materially retard the progress of science and the useful arts, and give a premium to those who should be least prompt to communicate their discoveries.”  Relying heavily on its prior case law, the Court also explained why  such a publicity requirement has never been considered necessary.  The Federal Circuit concluded by hold that at most, the catch-all clause just requires that the sale must put the patented product in the hands of the public,* not that it must be informed of all the limitations of the claim.

    *Of course, the Federal Circuit did not mean that the product must be explicitly in the hands of the public.  As discussed in the opinion, “our prior cases have applied the on-sale bar even when there is no delivery, when delivery is set after the critical date, or, even when, upon delivery, members of the public could not ascertain the claimed invention.”

    Looking at the Federal Court’s reasoning in Helsinn and The Medicines Co. v. Hospira, Inc., that Metallizing Engineering may remain good law under the AIA.  As the Federal Circuit made clear, it does not view the floor statements in Congress as evidencing a clear intent to overturn the “on sale” precedent, instead “at most” supporting an argument that the intent was to overturn the “public use” case law.  In The Medicines Co., the Federal Circuit referred to Metallizing as an “on sale” case: the conduct at issue in Metallizing was the sale of performing a particular claimed process for compensation before the critical date, i.e. activity triggering the on-sale bar.  Thus, the Federal Circuit would likely find mere floor statements to be of little relevance to a factual situation similar to Metallizing.  Moreover, as the Federal Circuit identified, the law regarding “secret sales” has always been concerned with whether the existence of the sale itself was publicly disclosed—not the details of the invention.  There is no indication in Metallizing that the sales at issue were not publicly known, so the same rationale from Helsinn should apply.

    In Helsinn, the Federal Circuit anchored its holding on the fact that imposing a requirement that a triggering sale disclose the details of the invention directly contradicts Justice Story’s reasoning in Pennock for creating the on-sale bar.  As Justice Story saw it, to allow an inventor to exploit commercially his or her invention for an extended period and still maintain the ability to seek patent protection would undercut the “progress of science and the useful arts” and promote undesirable behavior.  This principle has been consistently reiterated by the Federal Circuit.  See The Medicines Co.; Atlanta Attachment Co. v. Leggett & Platt, Inc. (“The overriding concern of the on-sale bar is an inventor’s attempt to commercialize his invention beyond the statutory term.”).  The aim of discouraging the inventor from improperly extending the monopoly was one of the underlying reasons behind Judge Learned Hand’s decision in Metallizing.  Thus, it is possible that the Federal Circuit may find Metallizing to remain applicable after the AIA, despite the reduced ability for such conduct under the first-to-file concept of the AIA.*

    *This is one argument raised in support of the view that the AIA explicitly overrules Metallizing.  Under the first-to-invent approach, this type of secret commercialization provided a greater incentive because even if another filed a patent on the claimed invention prior to the commercial exploiter, the exploiter could, in theory, establish prior invention and obtain the patent.  As prior invention is no longer a valid argument under first-to-file, the incentive to secretly exploit an invention is diminished.  However, the fact that success may be more difficult does not, in and of itself, mean the forfeiture doctrine no longer has value or applicability.  As long as one person is still able to commercially exploit his or her invention in a manner like that in Pennock or Metallizing, the reasoning for the doctrine would still apply.

    The recent Supreme Court decision in TC Heartland LLC v. Kraft Food Grp. Brands LLC also provides support for the continued relevance of MetallizingSee No. 16-341 (May 22, 2017).  At issue in TC Heartland was the impact of Congressional amendment of the general venue statute (28 U.S.C. § 1391(c)) on the interpretation of the patent venue statute that was not amended (28 U.S.C. § 1400(b)).  The patent venue statute has remained unchanged since the Supreme Court interpreted its scope, holding that a domestic corporation only “resides” for purposes of venue in a patent infringement action in its state of incorporation.  See Fourco Glass Co. v. Transmirra Products Corp. (1957).  However, after Congress amended the general venue statute in 1988, the Federal Circuit held that Congress’s amendment also changed the scope of where a corporation “resides” under § 1400(b) (although § 1400(b) remained unchanged).  See VE Holding Corp. v. Johnson Gas Appliance Co. (1990).  In TC Heartland, the Supreme Court reversed the Federal Circuit’s ruling in VE Holding, emphasizing that “[w]hen Congress intends to effect a change [to the statutory meaning of legal language], it ordinarily provides a relatively clear indication of its intent in the text of the amended provision.”

    Accordingly, the TC Heartland decision can be interpreted as requiring clear congressional intent within the text of an amended provision itself to modify the settled meaning of statutory language.  Such an interpretation would further undermine the persuasiveness of the minimal floor statements discussed in Helsinn, given that those statements were by individual senators, put forth their interpretations of post-AIA § 102, and are not included within the text of the AIA.  Moreover, the Federal Circuit in Helsinn appears to have found the catch-all clause to not be a “clear indication if [Congress’s] intent in the text of the amended provision” to change the interpretation of “on sale” in the statute.  In light of the large amount of scholarly debate on the meaning of the clause, it seems unlikely that the Supreme Court would disagree with the Federal Circuit’s apparent determination.

    After Helsinn, it appears that on-sale bar precedent has survived the AIA.  Applying the Court’s reasoning, and in view of other recent cases such as The Medicines Co. and TC Heartland, it appears the Metallizing Engineering precedent may also have survived the AIA, at least for now.  However, there is still the possibility that the Federal Circuit may take the opportunity presented by the ambiguity caused by the catch-all clause to revisit the ultimate decision in Metallizing.  Although the Federal Circuit may consider Metallizing to be an “on sale” case, Judge Hand’s opinion does rely on principles underlying both the “public use” and “on sale” bars.  As such, the forfeiture doctrine of Metallizing would appear to be an extra-statutory bar, not falling within either the “public use” or “on sale” categories entirely.  Because of this, some have questioned whether Judge Hand’s decision is actually correct.  See Dimitri Karshtedt, Did Learned Hand Get It Wrong?: The Questionable Patent Forfeiture Rule of Metallizing Engineering, 51 Vill. L. Rev. 261 (2012).  Moreover, although the Federal Circuit was not persuaded as to the “clear indication” of intent to change the meaning of “on sale” as advocated by Helsinn and others, that is not to say the Supreme Court would hold the same.

    Daniel Taskalos is an intellectual property associate at Sheppard Mullin Richter & Hampton LLP.  His practice covers a range of issues, including litigation and counseling.

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    Joe Matal – Now PTO Director (Interim) Wed, 07 Jun 2017 22:59:49 +0000


    U.S. Secretary of Commerce Wilbur Ross has named U.S. Patent and Trademark Office (USPTO) Associate Solicitor Joseph Matal to perform the functions and duties of the Under Secretary of Commerce for Intellectual Property and Director of the USPTO. The position is effective June 7, 2017 and follows the resignation of Michelle K. Lee. Matal will serve in this role during the nomination and confirmation process for a new director.

    As an Associate Solicitor in the USPTO’s Office of Solicitor, Matal has briefed and argued appeals of patent and trademark decisions before the U.S. Court of Appeals for the Federal Circuit and the U.S. District Court, and assisted in the development of legal positions taken by the U.S. Solicitor General in patent and copyright cases before the U.S. Supreme Court. Matal recently served as acting Chief of Staff for the agency, and has advised the director on legislative matters.

    Matal previously served as the General Counsel of the Judiciary Committee for former Senator Jeff Sessions (R-AL), and as a Judiciary Committee Counsel to former Senator Jon Kyl (R-AZ). In that role, he was the principal staff drafter and negotiator of legislation that became the Leahy-Smith America Invents Act, the first comprehensive patent law overhaul since 1952. Matal has a bachelor’s degree from Stanford University, and a law degree from the University of California at Berkeley.

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