by Dennis Crouch

In SAS Institute, Inc. v. Iancu (2018) [16-969_f2qg], the Supreme Court issued a split 5-4 decision holding that:

When the Patent Office institutes an inter partes review, it must decide the patentability of all of the claims the petitioner has challenged.

Although quite narrow, the decision reversed the PTO’s prior interpretation of the IPR statutes and will likely impact IPR strategies both for petitioners and patentees.

Any Patent Claim Challenged: Private parties may challenge an issued patent by filing an inter partes review (IPR) petition.  The petition must specify which claims are being challenged, and explain why the challenge is likely to succeed.  Under the statutory provisions, the USPTO Director must then decide whether or not to grant the petition and institute a trial before the Patent Trial and Appeal Board (PTAB or Board).  At the conclusion of the trial, the Section 318(a) of the Patent Act indicates that the PTAB “shall issue a final written decision with respect to the patentability of any patent claim challenged by the petitioner and any new claim added [during the IPR].”  35 U.S.C. §318(a). The Supreme Court decision here is tightly focused on statutory interpretation — holding that the statute requires that the PTO decide the patentability of all challenged claims (that are not dismissed).  The PTO had interpreted the statute to allow for partial-institution-decisions.

In the case before the court, SAS had challenged all 16 claims of the ComplementSoft U.S. Patent No. 7,110,936.  However, rather than instituting on all claims, the PTO only instituted review of 9 claims.  Writing for the majority, Justice Gorsuch explained:

The Director (in truth the Board acting on the Director’s behalf) . . . instituted review on only some (claims 1 and 3–10) and denied review on the rest.

Once a final judgment was issued by the PTAB (finding eight of the nine unpatentable), SAS appealed — arguing that the statute required decisions on the remaining five claims.

Now, SAS will get its opportunity. For SAS, the potential to challenge these additional claims may help the company avoid having to fight those claims in court.  In addition, the all-challenged-claims rule may also serve as a bargaining chip for the patent challenger in any settlement hearings.

Although the patent-challenger may benefit in this particular case, I expect that the overall benefit from the decision will help patentees. In particular, most non-instituted claims are ones that would likely have been confirmed as patentable.  That decision from the PTAB will lend strength to patentee claims in court and also raise estoppel problems down the road for patent challengers.

Simplifying petitions decisions: The decision here should simplify the petition institution decisions.  Following SAS, the question should simply be whether there is at least 1 challenged claim where the petitioner has presented a “reasonable likelihood” of prevailing on the merits.  35 U.S.C. 314(a).

The majority did not spend time on policy determinations — instead simply stating that the PTO should take its case to Congress.

The Director’s policy argument—that partial institution is efficient because it permits the Board to focus on the most promising challenges and avoid spending time and resources on others—is properly addressed to Congress, not this Court.

It will be interesting to see whether new PTO Director Iancu will go to congress on this point – I expect not, unless there are clear efficiency concerns. At this point, the Office only provided the following statement:

The USPTO is carefully considering the Supreme Court’s decisions and determining their impact on various proceedings at the PTAB.

Deference: An important element of the decision for administrative law folks is the majority statements regarding Chevron deference:

[W]hether Chevron should remain is a question we may leave for another day. Even under Chevron, we owe an agency’s interpretation of the law no deference unless, after “employing traditional tools of statutory construction,” we find ourselves unable to discern Congress’s meaning.

Here, the majority found no ambiguity — and thus gave no deference to the PTO.  I expect that the 5-4 split between the justices in this case largely comes down this particular question — when should courts give deference to legal interpretations made by expert administrative agencies?  Supreme Court precedent on the issue continues to be messy, although there remains some thought that Congress will solve the problem by actually spelling out whether deference applies when it writes its statutes.

On a final issue, the PTO argued that the question before the court was effectively a challenge to the PTO petition decision — something made expressly unappealable by the Patent Act §314(d).  “Even if the statute forbids his partial institution practice, the Director suggests we lack the power to say so.”  However, the majority disagreed with the PTO Director — holding that the case here involves “exactly the sort” of “shenanigans” that serve as exceptions to the Cuozzo rule.

Writing in dissent, Justice Ginsberg, joined by the other three most liberal justices, calls Gorsuch’s reading “wooden” and lacking of any true understanding or indication of congressional intent: “Court’s opinion offers no persuasive answer to that question, and no cause to believe Congress wanted the Board to spend its time so uselessly.”

Coming back to Deference: A more thorough dissent by Justice Breyer explains his position that the statute offers enough of a gap in certainty to allow the PTO to fill-in its interpretation and be given deference for that gap-filling.

Because I believe there is such a gap and because the Patent Office’s interpretation of the ambiguous phrase is reasonable, I would conclude that the Patent Office’s interpretation is lawful.

(Breyer in dissent.) Overall, this is a set of nicely written decisions that serve as an example in the patent law field of the broader and ongoing administrative law debate over the role of administrative agencies in interpreting their governing statutes.

By Jason Rantanen

Oil States Energy Services v. Greene’s Energy Group: Inter partes review does not violate Article III or the 7th Amendment.  Patents are public rights for purposes of this question.  This holding is a self-proclaimed narrow one that “should not be misconstrued as suggesting that patents are not property for the purposes of the Due Process Clause or Takings Clause.” Thomas for the majority; Breyer with a concurring opinion (joined by Ginsburg and Sotomayor), Gorsuch dissenting (joined by Roberts).  Opinion here: Oil States v. Greene’s Energy

SAS Institute v. Iancu: When the USPTO institutes an inter partes review, it must decide the patentability of all of the claims the petitioner challenged, based on the plain text of § 318(a).  Gorsuch for the majority; Ginsburg dissenting (joined by Bryer, Sotomayor, and Kagan); Breyer dissenting (joined by Ginsburg and Sotomayor, and Kagan in part).  Opinion here: SAS v. Iancu

Off to teach Administrative Law, so more to come later.

Update: Prof. Tom Cotter has a longer summary on his Comparative Patent Remedies blog: http://comparativepatentremedies.blogspot.com/2018/04/us-supreme-court-upholds-inter-partes.html

by Dennis Crouch

Director Iancu has made clear that the current state of patent eligibility jurisprudence is untenable.  Examiners need clear guidance — something he and I both see as lacking in the Supreme Court jurisprudence.  In addition to being ambiguous, we also share the perspective that the Alice/Mayo test unduly restricts the scope of eligible subject matter.  The PTO’s action here involves several fronts: (1) issuing guidance that is as-clear-as-possible for examiners and applicants; (2) working with Congress to legislatively broaden eligibility scope; (3) using the PTO’s to push public sentiment toward supporting strong and broad patent rights (when an underlying invention truly exists).

On the first front, the USPTO has: (1) issued a new “Berkheimer memorandum” focusing on the Federal Circuit’s holding in Berkheimer that”[w]hether something is well-understood, routine, and conventional to a skilled artisan at the time of the patent is a factual determination;” and (2) issued a Request for Public Comment on USPTO “subject matter eligibility guidance, and particularly … guidance in the Berkheimer memorandum to the Patent Examining Corps.”

The USPTO follows a multi-step process in determining patent eligibility.  First, the office considers whether the invention meets the express statutory requirements under Section 101 (“process, machine, manufacture, or composition of matter, or . . . improvement thereof”).  This first step is at times called either Step 0 or Step 1 of the eligibility analysis.  After satisfying the statute, the PTO must then consider whether the atextual limitations apply (abstract idea, law of nature, natural phenomenon).  In Alice/Mayo, the Supreme Court explained that this later inquiry involves two sub-steps identified as either (a) Alice/Mayo Step 1 and 2 or (b) Step 2A and 2B of the USPTO Eligibility Guidance.   In the two sub-steps, the Agency must first determine whether the claim is directed toward one of the eligibility exceptions. Then, if so directed, determine whether the claim includes “significantly more” than the ineligible concept — such as an “inventive concept.”

Although eligibility is considered a question of law, an open issue is the extent that  underlying elements are questions of fact.  In Berkheimer, the Federal Circuit started to answer this question — by holding that “whether a claim element or combination of elements is well-understood, routine and conventional to a skilled artisan in the relevant field is a question of fact.”

Running with that holding the Berkheimer memo requires examiners base any conclusion of well-understoodness upon evidence. Running in the background here is a reminder that patent examination begins with an assumption of patent eligibility unless the examiner shows otherwise.   In the memo, the PTO identifies four ways to prove that an element is well-understood in the art:

1. An express admission by the applicant;
2. A citation to a PTO-approved court decision holding that a the particular element at issue is well-understood in the art;
3. “A citation to a publication that demonstrates the well-understood, routine, conventional nature of the additional element.” Here, the focus is not simply whether the element was known in the prior art, but whether it was “widely prevalent or in common use in the relevant field.” Here, the USPTO draws in written-description doctrine – noting that this is “comparable to the types of activity or elements that are so well-known that they do not need to be described in detail in a patent application to satisfy 35 U.S.C. 112(a); or
4. Taking “official notice” of the well-understoodness of the element.  The memorandum cautions that “[t]his option should be used only when the examiner is certain, based upon his or her personal knowledge, that the additional element represents well-understood, routine, conventional activity engaged in by those in the relevant art, in that the additional elements are widely prevalent or in common use in the relevant field, comparable to the types of activity or elements that are so well-known that they do not need to be described in detail in a patent application to satisfy 35 U.S.C. 112(a).”  Further, if an applicant challenges the “official notice” then the examiner must provide direct evidence to satisfy the element.

The PTO is looking for commentary by August 20, 2018 to Eligibility2018@uspto.gov.

by Dennis Crouch

Droplets, Inc. v. E*Trade Bank (Fed. Cir. 2018)

Droplets Patent No. 8,402,115 (interactive link delivery) is invalid as obvious unless it properly claimed priority back to its 1999 provisional application.  The Board found that priority had not been properly claimed — a judgment affirmed on appeal by the Federal Circuit.

The ‘115 patent (the patent at issue) was filed as an application in January 2009 and claims priority to U.S. Pat. No. 7,502,838 (filed November 2003) which itself expressly claims priority to the 1999 provisional via a separate utility patent (the ‘745 patent filed in June 2000).  The ‘115 patent also claims priority directly to the 1999 provisional, although the provisional had expired well before the 2009 file date.

Full Chain of Priority: The problem for the patentee, is that the patent does not expressly spell-out the full chain of priority. In other words, the patentee should have stated something like:

The present application is a continuation of allowed U.S. patent application Ser. No. 10/720,728, filed on Nov. 24, 2003 which has issued as U.S. Pat. No. 7,502,838, which is a continuation application U.S. application Ser. No. 09/599,382 filed Jun. 22, 2000, which has issued as U.S. Pat. No. 6,687,745 on Feb. 3, 2004, and which claims the benefit of Provisional Patent Application No. 60/153,917, filed Sep. 14, 1999.

Instead, the the patentee left-out the full chain (omitting the middle application):

The present application is a continuation of allowed U.S. patent application Ser. No. 10/720,728 … Priority is [also] herewith claimed  … from copending Provisional Patent Application No. 60/153,917, filed Sep. 14, 1999.

At an abstract level, the patentee has done enough to show its intent to claim priority through the chain of priority back to the 1999 application. In my view, the Statute seems to support what the patentee has done. 35 U.S.C. 120 (requiring only “specific reference to the earlier filed application”); see also Section 119(e)(1).

The Earlier Filed Application: The problem, though is that the statute is quite poorly written on the chain-of-priority point.  The statute allows for a priority claim to the filing date of a no-longer-pending “first application” if filed during the pendency of a later filed and still pending application that is “similarly entitled to the benefit of the filing date of the first application.”  The primary requirement in that circumstance is that the new application must include a “specific reference to the earlier filed application.” Note here, that the statute does not discuss further intermediary priority filings — only the “first application” and the later filed application that claims priority back to the first application.  We’re left without a definition of what Congress meant by “the earlier filed application.”  I would suggest three possible definitions: (1) the first application; (2) the later-filed application or (3) both the of these applications (the only two mentioned in the statute).  Federal Circuit holds here, however, that a fourth possibility is correct: (4) “the earlier filed application” means all applications in the priority chain, including all intermediate priority documents.

Let me note here, this decision is not new, but repeats prior Federal Circuit decisions, including Medtronic CoreValve, LLC v. Edwards Lifesciences Corp., 741 F.3d 1359, (Fed. Cir. 2014).  In Medtronic, the Federal Circuit particularly held that Section 120 “requires ‘a specific reference’ to each earlier filed application.”  The PTO also has regulations on point that require “specific reference to each prior-filed application to which the application seeks to claim priority … [including] a reference to each such prior-filed application, identifying it by application number … and the relationship of the applications.” see 37 C.F.R. § 1.78(d)(3).   See also Encyclopaedia Britannica, Inc. v. Alpine Elecs. of Am., Inc., 609 F.3d 1345 (Fed. Cir. 2010).  Perhaps this is beating a dead horse, but I have quite a bit of difficulty following the Federal Circuit’s interpretation of the Statute, but it is the precedent.

Incorporation by Reference: The priority statement in the Droplets patent also included an incorporation-by-reference provision.  Here the Federal Circuit also held that the intermediate priority claims could not be made “specific” via incorporation by reference.

Raniere v. Microsoft and AT&T (Fed. Cir. 2018)

Chain of Title problem.  Keith Raniere is one of the listed inventors of U.S. Patent Nos. 7,215,752 and 7,844,041. Back in 1995, all the inventors, including Raniere, assigned their rights and interests to Global Technologies Inc. (GTI). However in 1996, GTI was administratively dissolved. 18 years later, in 2014 Raniere executed a document purportedly on GTI’s behalf transferring the patents from GTI to Raniere.  He then sued Microsoft and AT&T for infringement.  Unfortunately for Raniere – he could not provide sufficient evidence that he had authority to effect the transfer by GTI (he was never an officer of the company, rather it was substantially owned by his ex-gf).

Rubens’s documents showed the GTI shareholders’ consent to a transfer of shares from Raniere’s ex-girlfriend — who owned 75% of GTI’s shares — to Raniere. The documents Raniere proffered did not indicate that any such transfer was ever completed, however, and did not establish that Raniere owned the patents at issue.

The district court then dismissed the case with prejudice — finding that it was highly unlikely that Raniere would be able to cure his standing defect.  In addition, the court found that Raniere’s testimony absolutely lacked credibility and his conduct involved “a clear history of delay and contumacious conduct.”  Raniere appealed that decision, which was affirmed by the Federal Circuit without opinion (“summary affirmance”).

The district court noted that Raniere promised repeatedly that he could produce evidence that would cure the standing defect identified by Appellees and the district court. Id. Raniere failed to satisfy these promises, according to the district court, as “[d]espite numerous representations, [Raniere] failed to produce any written document or other credible evidence that he had an interest in GTI that would allow him to transfer the patents to himself.” Id. Raniere’s conduct required Appellees “to expend significant resources to oppose [Raniere]’s arguments, which the Court now finds were made in bad faith to vexatiously multiply these proceedings and avoid early dismissal.”

The subject of this appeal is the subsequent award of attorney fees and costs under 35 U.S.C. 285. And here, the Federal Circuit found it an easy case —

Raniere challenges the district court’s decision on four grounds. First, he contends that the district court erred in finding that Appellees are prevailing parties under § 285. Second, he argues that the district court abused its discretion in finding this case “exceptional.” Third, he asserts that the district court erred in sanctioning Raniere under its inherent authority, in the alternative to a fee award under § 285. Finally, he argues that the district court abused its discretion in determining the amount of the fee award. We conclude that Appellees are prevailing parties, and that the district court did not abuse its discretion in finding this case exceptional under § 285 or in its fee award. We, thus, need not reach the district court’s sanction under its inherent authority in the alternative.

Following Octane Fitness and Highmark, we know that attorney fee awards are within the discretion of district court judges and are reviewed with deference on appeal.  Easy judgment here:

The district court specifically found that Raniere’s behavior throughout the litigation employed “a pattern of obfuscation and bad faith,” and that this behavior caused Appellees to incur significant fees and costs to oppose Raniere’s positions. These positions, in the district court’s view, “were made in bad faith to vexatiously multiply these proceedings and avoid early dismissal”—in effect, to stall the termination of the proceedings. Fees Decision, 2016 WL 4626584, at *5. “Because the district court lives with the case over a prolonged period of time, it is in a better position to determine whether a case is exceptional and it has discretion to evaluate the facts on a case-by-case basis.” SFA Sys., LLC v. Newegg Inc., 793 F.3d 1344 (Fed. Cir. 2015). The district court properly examined the totality of the circumstances in this case and found the case to be exceptional. We see no reason to disturb the district court’s well-reasoned determination.

Here, those costs add up — $450,000 in attorney fees for the defendants win at the ultra-preliminary stage for lack-of-standing. Let me note – this is ridiculous $450k to win on standing grounds. OMG! Note – the bill submitted was greater, but the Judge reduced it by 20%.

To put this dollar figure into perspective — excellent lawyer for the defendant Constantine Trela from Sidley argued the appeal and explained the case with the following analogy:

[This case is akin to someone] throwing together a set of documents that says ‘I own a controlling interest in Apple, I hereby name myself chairman, and hereby assign all of Apple’s patents to me.”

I would hope that defendants could win that case for less than $450,000.

by Dennis Crouch

In WesternGeco v. Ion Geophysical, the Supreme Court is focused on the extraterritorial application of U.S. Patent Law.  The particular situation is the scope of damages available for the harm caused by exporting a components of a patented invention in violation of 35 U.S.C. 271(f). The April 16 oral arguments began with Former US Solicitor Paul Clement arguing on behalf of the patentee seeking lost profits associated with would-be infringing uses on the high-seas.  Zachary Tripo argued on behalf of the U.S. Government as Amicus Curiae supporting the patentee.  On the other side was Kannon Shanmugam supporting the Federal Circuit’s decision.

[Read the Oral Argument Transcript]

In my view, the Supreme Court is quite likely to overturn the Federal Circuit’s limitation on lost profit damages and hold instead that Section 284 allows for full compensation for all forms of infringement. The key analogy that may well have won the day is that of the hypothetical French Tourist injured while visiting the US and left unable to work.  Under ordinary U.S. tort law, the tourist would still be able to collect full damages even though the job-loss is in France.  Likewise, according to petitioner and USGov’t, the US patent infringement act (export) should lend itself to full compensatory damages.  That said, I expect for the Supreme Court’s opinion to place additional language on the meaning of proximate cause that may eventually force the Federal Circuit to tighten its doctrine in that area.

The following are a set of somewhat re-arranged excerpts — an attempt to bring some amount of meaning to the ranging discussion.

MR. SHANMUGAM (for the infringer): The presumption against extraterritoriality applies with particular force to the Patent Act. . . . And while the Act of infringement here all of the parties now agree was concededly domestic, our submission is that the damages here were, in fact, foreign. . . . The only thing that you have domestically here — and we all agree that this is true — is the initial act of infringement.

MR. CLEMENT (for the patentee): The plain text of the Patent Act (Section 284) . . . gives the victim of Section 271(f) infringement an entitlement to adequate damages, including lost profits. And the presumption against extraterritoriality raises no obstacle to that commonsense result. . . . I do think it’s important to recognize, though, that what is the infringing conduct is what ION does in the United States [i.e., the export]. What the foreign combiners of the components do on the high seas is not infringement of a U.S. patent at all, which is why I think the presumption against extraterritoriality is really a misfit here. . . . What we’re doing [i.e., asking for] is we are collecting damages for the foreseeable consequences of the domestic act of infringement. . . . I mean, at some level, this case is pretty simple. Because of ION’s domestic act of infringement, my client has $90 million less in its wallet in Houston than it otherwise would have if they had obeyed the law.

MR. SHANMUGAM: To be fair . . . I think that what Petitioner is trying to do in this case is effectively to hold us secondarily liable for what would be or what might not be an act of foreign direct infringement . . . converting a single act of supply from the United States into a springboard for what would effectively be worldwide damages.

JUSTICE GORSUCH: [The claimed profits] arise from a third party’s use over which you have no lawful monopoly. Your patent doesn’t run to the high seas, and so your uses aren’t protected there. So help me out with that portion of the damages alone.

MR. CLEMENT: Sure. The reason that we can collect those damages, even though that conduct is not proscribed by a U.S. patent, is because it is the reasonably foreseeable result of domestic infringement.  (Here, this is simply proximate cause analysis).

JUSTICE BREYER: Imagine you have the converse case. I mean, if we can have a law like this, so can every other country. And now an American firm makes a part in some other country, all right? And that happens more and more. They have laboratories all over the world. They make a part. They bring it back here. It doesn’t violate the patent law of the other — of our country, not at all.

They sue to sell it all over the place.  And suddenly a foreign patent holder, in, say, Switzerland, has — takes this American company and obtains enormous profits on the basis of the sales in the United States, where those sales do not violate American law.

I mean, suppose 10 countries do this. I try to think about that and I see chaos or confusion. And at that point, I think part of comity is, what happens if everybody does it? And then I become uncertain about whether there’s no place for our concern with what happens when we apply American law abroad.

MR. CLEMENT: A couple of points, Justice Breyer. First of all, this has been the rule for basically 100 years. . . . The other thing is . . . I get a couple of pluses because this has also been the rule . . . in the copyright context. And the world hasn’t ended in the copyright context. . . . With all due respect, there would be no chaos. And that is my principal response. And we would have seen chaos in some context if this were really a problem.

MR. TRIPP [Gov’t Lawyer supporting the patentee]: The rule that we’re advocating of full compensation is already the rule that applies basically everywhere else in U.S. law, in tort, in contract, in copyright, that this Court previously assumed applied in patent law as well, and it hasn’t given rise to any significant foreign relations problems in — in any of those areas.

JUSTICE ALITO: But this is what makes this case difficult, because there’s such a gap between the legal injury, which is ephemeral, and the practical injury, which occurs completely abroad.

MR. TRIPP: Yeah, so I think two responses to that. So, first, the patent is a property right, and we often think of the invasion of a property right as — as being something significant, even if it doesn’t have additional tangible harm. But also more fundamentally, it’s quite common to hold a tortfeasor responsible for the harm that it causes when it sets into motion a series of events by which the victim will be — will be hurt, even if they’re not hurt at the time.

JUSTICE KENNEDY: Well, your position is that the Petitioner is not entitled to full compensation for its injury? That’s your position?

MR. SHANMUGAM: Petitioner is not entitled to compensation for foreign damages;

JUSTICE KENNEDY: Which in the full compensation for its injury, your whole position is that this Petitioner is not entitled to full compensation for his injury, yes or no?

MR. SHANMUGAM: Yes, as a consequence of the application of the presumption against extraterritoriality.

JUSTICE GINSBURG: What about proximate cause? Wouldn’t you have to establish at least that the reason that the sales that you lost to the foreign, whatever the people who sweep the high seas, that you would have gotten those contracts if they didn’t?

MR. CLEMENT: Absolutely. We have to satisfy proximate cause. It provides sufficient protection here.

MR. TRIPP: You have the proximate cause overlay on top of it. I think the other place that I think is helpful to look at this is Professor Yelderman’s amicus brief, which does a nice job of walking through the doctrine both of causation in fact and proximate cause in the Federal Circuit when dealing with problems that are analogous to these. These are a robust check.

MR. CLEMENT: I would just like to clarify two details and make a couple of points. One detail, my friend mistakenly referred to this case being brought in the Eastern District of Texas. It was, in fact, brought in the Southern District of Texas, where both of these companies are located. It may be a pedantic point, but the Eastern District of Texas has a certain implication to it that I wanted to clarify. (Laughter.)

by Dennis Crouch

Vanda is an important patent eligibility case drawing a fine line between the the eligible personalized medicine treatment claims and the ineligible methods of Mayo and Ariosa. 

Vanda Pharma v. West-Ward Pharma (Fed. Cir. 2018)

In a split decision, the Federal Circuit has affirmed the validity/infringement of Vanda’s U.S. Patent No. 8,586,610 covering a schizophrenia treatment using iloperidone. The claims require personalized dosage — depending upon the patient’s metabolization rate of iloperidone (“CYP2D6 activity”).

West-Ward filed an Abbreviated New Drug Application (ANDA) that substantially copied Vanda’s FANPAT application — Vanda then sued for infringement.

ANDA-Filing infringement is an oddity – filing of an FDA application to make a generic version of a patented drug is the act of infringement.

It shall be an act of infringement to submit— (A) an application … for a drug claimed in a patent or the use of which is claimed in a patent.

35 U.S.C. 271(e)(2).  Infringement was straightforward here because the proposed package label recommends personalized dosage based upon the aforementioned metabolic activity (and thus would induce infringement).

Eligible Subject Matter: The primary dispute is whether the claims survive the Mayo and Ariosa — i.e,. are they eligible or are they instead directed to an unpatentable law of nature.

The claims at issue in Vanda were roughly parallel to those found unpatentable in Mayo v. Prometheus.  In Mayo, representative claim 1 of the challenged Patent No. 6,355,623 was directed to treatment method that involved (a) administering a drug (6-thioguanine); and then (b) determining blood level of the drug.  A low blood level (less than about 230 pmol per 8×10⁸ red blood cells) indicates a lack of effectiveness and a need for a higher subsequent dose while a high blood level (greater than about 400 pmol per 8×10⁸ red blood cells) indicates potential for toxicity and that the next dose should be reduced.

In finding the claim invalid, the Supreme Court unanimously held that the correlation between blood level, efficacy and toxicity was an unpatentable law of nature and that the administration and determination steps were already well known in the art and thus insufficient to transform the claim to a patent eligible invention.

In Vanda, representative claim 1 is directed to a method of treating a patient suffering from schizophrenia by (a) determining whether the patient is genetically a poor metabolizer of the drug (CYP2D6 genotype) then (b) administering iloperidone to the patient (12-24 mg per day if good metabolizer; <12 mg per day if poor metabolizer) in order to reduce the risk of “QTc prolongation” for poor metabolizers.

First the dissent — Chief Judge Prost identified the similarity here and explained her position that “the asserted patent claims [are] directed to a law of nature.”  At its crux, the invention began with the discovery of the health problems created by treating folks with lower CYP2D6 activity and recognition that a lower dose would be appropriate.

Importance of the preamble: The majority (Judges Lourie and Hughes) took the other side – and argued that the claiming differences were important between Mayo and Vanda.  Importantly, for them, the preamble in Mayo directed the claims toward “a method of optimizing therapeutic efficacy” while the Vanda claims are directed to “a method for treating a patient.”

This case, however, is not Mayo. First, the claims in Mayo were not directed to a novel method of treating a disease. Instead, the claims were directed to a diagnostic method based on the “relationships between concentrations of certain metabolites in the blood and the likelihood that a dosage of a thiopurine drug will prove ineffective or cause harm.” Id. This “relation is a consequence of the ways in which thiopurine compounds are metabolized by the body—entirely natural processes. And so a patent that simply describes that relation sets forth a natural law.”

Although the representative claim in Mayo recited administering a thiopurine drug to a patient, the claim as a whole was not directed to the application of a drug to treat a particular disease. See id. at 74, 87. Importantly, the Supreme Court explained that the administering step was akin to a limitation that tells engineers to apply a known natural relationship or to apply an abstract idea with computers. See id. at 78 (comparing the claim in Mayo to “Einstein telling linear accelerator operators about his basic law and then trusting them to use it
where relevant”). To further underscore the distinction between method of treatment claims and those in Mayo, the Supreme Court noted that “[u]nlike, say, a typical patent on a new drug or a new way of using an existing drug, the patent claims do not confine their reach to particular applications of those laws.” Id. at 87.

In this case, the ’610 patent claims are directed to a method of using iloperidone to treat schizophrenia. The inventors recognized the relationships between iloperidone, CYP2D6 metabolism, and QTc prolongation, but that is not what they claimed. They claimed an application of that relationship. Unlike the claim at issue in Mayo, the claims here require a treating doctor to administer iloperidone in the amount of either (1) 12 mg/day or less or (2) between 12 mg/day to 24 mg/day, depending on the result of a genotyping assay. The specification further highlights the significance of the specific dosages by explaining how certain ranges of administered iloperidone correlate with the risk of QTc prolongation. See, e.g., ’610 patent at col. 4 ll. 1–15. Thus, the ’610 patent claims are “a new way of using an existing drug” that is safer for patients because it reduces the risk of QTc prolongation. Mayo, 566 U.S. at 87

Very important case here. Although I believe that the invention should be patent eligible, the majority’s approach appears to latch onto simple patent drafting tricks as the basis for distinguishing Mayo — an approach directly rejected by the Supreme Court in Mayo.

by Dennis Crouch

The US Gov’t petition for en banc reheraing in the Brunetti (FUCT) scandalous mark case has been denied without opinion.

Section 2(a) of the Lanham Act (codified at 15 U.S. Code § 1052) authorizes the PTO to refuse registration of marks that are:

immoral, deceptive, or scandalous matter; or matter which may disparage or falsely suggest a connection with persons, living or dead, institutions, beliefs, or national symbols, or bring them into contempt, or disrepute… [or certain geographic indicators for wine/spirits]

In Tam, the Supreme Court held that the prohibition on registering marks that disparage persons was a free speech violation.  In that case, Simon Tam had attempted to register the mark SLANTS in reference to the East Asian heritage of his band.

Similarly, Erik Brunetti, is attempting to register the mark FUCT — which is a homonym of a well known profane word. The TTAB refused to register the mark — finding it scandalous.  It is an easy case under old Federal Circuit precedent that ‘vulgar’ marks are scandalous. On appeal, however, the Federal Circuit held that the analysis from Tam applies to scandalous marks as well; and that there is no genuine legal distinction between scandalous and immoral marks.  Thus, the prohibition on registering marks that are scandalous or immoral is also a free speech violation.

One question (of several) is what remains enforceable from the Section 2(a) prohibition? I argue that the remaining three are all still enforceable – and can justify prohibition:  Deceptive Marks; Marks that Falsely Suggest a Connection; and the Limitation on Geographic Indicators.  Although dicta, both the Supreme Court and the Federal Circuit appear to support ongoing refusal to register deceptive marks — noting that Section 2(e) also prohibits registering marks that are “deceptively misdescriptive.”  Similarly, the notion of falsely suggesting a connection seems to me to also be a form of deception.  This all makes sense as a primary purpose of our trademark laws is consumer protection against deception.

In his 1993 article, Branding Attorney Stephen Baird made this same distinction — arguing that prohibitions on Immoral, Disparaging, and Scandalous marks “do not further the stated goals of the Trademark Act.”  However, “registration prohibitions
concerning deceptive and false connection trademarks appear to facilitate the goal of
preventing confusion and deception in the market place. Stephen R. Baird, Moral Intervention in the Trademark Arena: Banning the Registration of Scandalous and Immoral Trademarks, 83 TRADEMARK REP. 661, 788 (1993). See also Friedman v. Rogers, 440 U.S. 1 (1979) (First Amendment permits barring of potentially deceptive marks.) [Note – Baird blogs at duetsblog.com]

In the Brunetti case, the U.S. Gov’t. has one last shot in the court proceedings — petition to the US Supreme Court.  In addition, Congress could move to more narrowly tailor the law to make it constitutionally permissible — for instance by only barring registration of “obscene” marks.

USPTO Director Andrei Iancu gave the keynote address at the April 11, 2018 Patent Policy Conference hosted by the U.S. Chamber of Commerce. The following is an excerpt:

… Dr. Eli Harari … risked everything: his career, his finances, and his family. That first company actually did not work out well, but a few years later, Harari risked it all again and co-founded a new company, which he ultimately called SanDisk. At SanDisk, Harari built upon his EEPROM technology, added critically important new inventions, and perfected flash memory data storage. And he obtained patents, including on how to turn memory chips into reliable systems. Harari’s flash technology came to be used almost universally in devices like digital cameras and cell phones. In 2016, Western Digital acquired SanDisk for $19 billion. But think about it: Without patents, how could someone like Dr. Harari risk everything, put aside his secure career at an established company, and strike it on his own?

As Dr. Harari told me: “The only asset you have is your idea.  If you have no way to protect your idea, you are at the mercy of the next bad guy.  The U.S. patent system is genius, really the bedrock foundation of capitalism.” Harari’s sentiment was echoed by President Ronald Reagan, who said in 1982: “Throughout our Nation’s history, the patent system has played a critically important role in stimulating technological advances.”

How true that is.

Yet today, our patent system is at a crossroads. For more than just a few years, our system has been pushed and pulled, poked and prodded. The cumulative result is a system in which the patent grant is less reliable today than it should be. This onslaught has come from all directions: There has been major reform legislation, and proposed legislation. There have been massive changes brought about by major court cases. And the USPTO itself has taken a variety of actions in an effort to implement these changes. Plus, importantly, the rhetoric surrounding the patent system has focused relentlessly on certain faults in, or abuses of, the system—instead of the incredible benefits the system brings to our nation. …

Still, we are at an inflection point with respect to the patent system. As a nation, we cannot continue down the same path if we want to maintain our global economic leadership. And we will not continue down the same path. This administration has a mission to create sustained economic growth, and innovation and IP protection are key goals in support of that mission.  So, how do we reverse the trend? The good news is that reclaiming our patent leadership status is within reach.

For today, let me focus on two principal points:

(1) Creating a new pro-innovation, pro-IP dialogue, and
(2) Increasing the reliability of the patent grant.

First, we must change the dialogue surrounding patents. … [A] successful system must be defined by its goals, aspirations, and successes. Obviously, errors in the system should be corrected. And no abuse should be tolerated. Errors and abuse should be identified and swiftly eliminated. However, the focus for discussion, and the focus for IP policy, must be on the positive.  We must create a new narrative that defines the patent system by the brilliance of inventors, the excitement of invention, and the incredible benefits they bring to society. And it is these benefits that must drive our patent policies. …

But, how exactly do we translate this into a better patent system? Here’s a start: when we write, interpret, and administer patent laws, we must consistently ask ourselves: Are we helping these inventors? Whether it’s an individual tinkering in her garage, or a team at a large corporation, or a laboratory on a university campus—we must ask ourselves: are we helping them? Are we incentivizing innovation?

And that brings me to my second principal point for today: increasing the reliability of the patent grant. Because that is key to incentivizing innovation. Without reliable patents, inventors like Dr. Eli Harari are less likely to risk it all in order to bring their new concepts to the market. As I said at my Senate confirmation hearing: “When patent owners and the public have confidence in the patent grant, inventors are encouraged to invent, investments are made, companies grow, jobs are created, science and technology advance.” … [The Chamber] report identifies two principal reasons for the increased uncertainty (or lower reliability) of our patents:

(1) Patentability Standards, or more specifically, patent subject matter eligibility pursuant to 35 USC Section 101; and
(2) Opposition procedures, namely, the post-grant procedures, such as IPR, that were established by the America Invents Act.

Let me address each of these in turn.

First, our current law surrounding patentable subject matter has created a more unpredictable patent landscape that is hurting innovation and, consequently, investment and job creation. Recent cases from the Supreme Court – Mayo, Myriad, and Alice – have inserted standards into our interpretation of the statute that are difficult to follow. Lower courts applying these cases are struggling to issue consistent results. Patent lawyers trying to advise their clients are, in turn, struggling to predict the outcome with respect to certain patents. And examiners at the USPTO must spend increased amounts of time addressing this challenging issue. The current standards are difficult for all: stakeholders, courts, examiners, practitioners, and investors alike. System-wide, a significant amount of time is being spent trying to figure out where the lines should be drawn, and what’s in and what’s out. And multiple people looking at the same patent claims often have trouble agreeing on, and predicting, the outcome. Something must be done. To be sure, we must and will apply Supreme Court law faithfully. This does not mean, however, that more cannot be done to increase clarity and predictability. Of course, given our statutory mandate, there is only so much that the USPTO can do. But within that mandate, we will do everything we can. Currently, we’re actively looking for ways to simplify the eligibility determination for our examiners through forward-looking guidance. Through our administration of the patent laws, which we are charged to execute, the USPTO can lead, not just react to every new case the courts issue.

Second, your report also mentions our “patent opposition procedures” as a reason for the increased uncertainty of our patents. This refers primarily to our Inter Partes Review, or the IPR system. This was a creation of the America Invents Act, and since its introduction five and a half years ago, we have now conducted more than 8,000 such proceedings. It’s been a very popular proceeding. Opinions on this new system diverge widely. Yet each opinion is passionately held by its supporters. Pointing to the high invalidation rates in IPR proceedings, some hate the new system with vigor, arguing that it’s an unfair process that tilts too much in favor of the petitioner. Others love the system, and think it’s the best tool we have to correct errors, eliminate “bad patents,” and improve patent quality. Who is right? Well, both arguments have legitimate elements. But I encourage people to reduce the hyperbole and look at the process with fresh eyes, in order to understand its true benefits and true challenges. This is what we are now doing at the USPTO.  Indeed, it’s one of our highest priorities. We need to carefully balance rights-holder’s and rights challenger’s interests. On the one hand, for example, this proceeding can come years after issuance, when the patent owners and the public may both have relied on those rights and made investments accordingly. On the other hand, we do want to execute the statutory mandate and help maintain the quality of patent rights. And – assuming the Supreme Court does not declare it unconstitutional – we do want the IPR system to effectively address invalid claims, but at the same time, we don’t want to throw out the baby with the bathwater. The filters need to be appropriately set.  And so, among various other things, we are now examining: how and when we institute proceedings, the standards we employ during the proceedings, and  how we conduct the overall proceedings.The goal, with whatever action we take, is to increase predictability of appropriately-scoped claims….

We have a remarkable patent system, born from our Constitution and steeped in our history. It is a crown jewel; a gold standard. We have a unique opportunity to ensure it meets its full Constitutional mandate to promote innovation and grow our economy.

I look forward to working with all of you in support of that great endeavor. Thank you again for the invitation to participate in this important discussion.