When Eligibility is a Jury Question

by Dennis Crouch

In my recent Berkheimer post, I wrote that “that no court following Berkheimer has … attempted to get a jury verdict on the issue.”  Turns out that I’m potentially wrong.

In the pending case of Finjan, Inc. v. Juniper Network, Inc. (N.D. Cal. 2018), Judge Alsup has ordered a jury trial on the “inventive concept” question.  In its order, denying summary judgment, the court found that the Claim 10 of Finjan’s  U.S. Patent No. 8,677,494 was directed to the abstract idea of “collecting data, analyzing data, and storing results.” (Alice Step 1).  However, the court decided to wait for trial to determine the inventive concept question:

Juniper contends that Claim 10 of the ’494 patent contains no inventive concept sufficient to transform its patent-ineligible subject matter into a patentable invention under Alice step two. At this juncture, this order will postpone on reaching the issue of whether Claim 10 survives under Alice step two. Rather, the Court will wait to have the benefit of the trial record before determining whether Claim 10 contains an inventive concept such that it is patent eligible.

[Finjan District Court Order]

Trial is scheduled to start in December and the parties are now fighting over jury instructions. The patentee suggests the following jury instructions on the inventive concept question:

For purposes of this case, you must determine whether Claim 10 contains an inventive concept. In order to prove that Claim 10 does not contain an inventive concept, Juniper must persuade you by clear and convincing evidence that all of the elements of Claim 10, both individually and as an ordered combination, were well-understood, routine, and conventional at the time of the invention.

Whether a particular technology is well-understood, routine, and conventional goes beyond what was simply known in the field at the time of the invention. The mere fact that something is disclosed in a publication, for example, does not mean it was well-understood, routine, and conventional at the time. If you find that Claim 10 contains an inventive concept, then it is valid. If you find that Claim 10 does not contain an inventive concept, then it is not valid.

The patentee would not ask the jury to whether an inventive concept exists, but only the ultimate question – is the patent valid under Section 101. The proposed form question is below:

The accused infringer (Juniper) doesn’t appear to be objecting to the issue going to the jury (although it may have objected elsewhere).  However, Juniper has major problems with the above proposed instructions.  Probably most importantly, Juniper argues that the jury will need to understand the abstract idea exception, and understand that the innovative concept must go beyond the abstract idea itself.  “i.e., an element or combination of elements that is sufficient to ensure that the patent in practice amounts to significantly more than a patent upon the ineligible concept itself.” Alice.  I don’t believe that Juniper has submitted its competing proposed verdict form yet.

This is a case where the rubber seems to be meeting the road. The Supreme Court seems to have made clear that eligibility itself is a question of law and a threshold question for courts to decide (rather than juries).  This makes me think Judge Alsup may be setting-himself up for reversal.

Despite Misleading Question, Berkheimer Case Has Legs at the Supreme Court

by Dennis Crouch

The Supreme Court has repeatedly held that patent eligibility is a question of law. However, in Berkheimer, the Federal Circuit added some nuance — writing that the issue can include underlying issues of fact. Judge Moore explained:

Berkheimer and Aatrix stand for the unremarkable proposition that whether a claim element or combination of elements would have been well-understood, routine, and conventional to a skilled artisan in the relevant field at a particular point in time is a question of fact.

Berkheimer v. HP Inc., 890 F.3d 1369 (Fed. Cir. 2018) (en banc denial). In the lawsuit between Mr. Berkheimer and HP, the result of the underlying-material-fact revelation meant that the case was improperly dismissed on summary judgment. Rather, on remand, the court will need to be presented evidence and make appropriate factual conclusions before ruling on the eligibility question.

In its petition to the U.S. Supreme Court, HP does not directly confront the Federal Circuit holding regarding underlying facts – but instead directs the the court to a non-decided question about whether Berkheimer makes eligibility a jury question.

HP v. Berkheimer Question: The question presented is whether patent eligibility is a question of law for the court based on the scope of the claims or a question of fact for the jury based on the state of the art at the time of the patent.

In my view, the question presented by HP’s attorneys intentionally creates confusion as the Federal Circuit did not rule (1) that eligibility is a question of fact; or (2) that any aspect of the eligibility question goes to a jury.  Rather, the Federal Circuit has repeatedly ruled, including in Berkheimer, that the question of “eligible subject matter is a question of law.”  I’ll also note that no court following Berkheimer has seen eligibility itself as a question of fact or attempted to get a jury verdict on the issue.  I contacted David Salmons (counsel of record for HP) to see what I’m missing about the misleading question, but he did not respond.

Despite my misgivings about the actual question asked, the petition implicitly raises important questions of (1) whether eligibility may be based upon underlying questions of fact; and (2) the relevance of  the “state of the art” in eligibility analysis (i.e., what is an “inventive concept”).

The petition has some legs — with six amici briefs and a request from the court for a responsive brief from Berkheimer:

  • Brief amici curiae of Electronic Frontier Foundation and R Street Institute
  • Brief amici curiae of T-Mobile USA, Inc., and Sprint Spectrum L.P.
  • Brief amicus curiae of Computer & Communications Industry Association
  • Brief amicus curiae of Engine Advocacy
  • Brief amicus curiae of Askeladden LLC
  • Brief amici curiae of Check Point Software Technologies, Inc. and CableLabs

Of these briefs, Askeladden’s brief from Carter Phillips has an important section walking through jurisprudence on adjudicative facts vs legislative facts.  Engine Advocacy’s brief was filed by Stanford Law Clinic Director Phillip Malone and does a good job of explaining how Post-Alice 101 is good at ending lawsuits early and cheaply, and that Berkheimer is upsetting that system. CCIA’s brief does a good job of walking through the ways that courts have been dealing with eligibility questions on the pleadings and at summary judgment.  I have not fully read the others.

Mr. Berkheimer’s brief is due December 5, 2018 — We’ll do another post at that point talking through the various positions and the variety of issues raised in this important case. [Full Docket with Briefs].

= = = = = =

The patent at issue here is U.S. Patent No. 7,447,713, which issued back in 2008.  At that time, I hardly even talked about eligibility in my patent law class because the door was so wide open.  The ‘713 patent is broadly directed to “archiving and outputting documents or graphical items.”  The Federal Circuit found claim 1 was properly held ineligible, but ruled that there were some underlying factual disputes about whether claims 4 and 5 crossed into the eligibility threshold.

Claim 1. A method of archiving an item comprising in a computer processing system:

presenting the item to a parser;

parsing the item into a plurality of multi-part object structures wherein portions of the structures have searchable information tags associated therewith;

evaluating the object structures in accordance with object structures previously stored in an archive; [and]

presenting an evaluated object structure for manual reconciliation at least where there is a predetermined variance between the object and at least one of a predetermined standard and a user defined rule.

Claim 4. The method as in claim 1 which includes storing a reconciled object structure in the archive without substantial redundancy.

Claim 5. The method as in claim 4 which includes selectively editing an object structure, linked to other structures to thereby effect a one-to-many change in a plurality of archived items.

Distinguishing between “Res Judicata” and “Law of the Case”

by Dennis Crouch

DBN Holdings v. International Trade Commission (Fed. Cir. 2018)

In 2013, accused-infringer DeLorme signed a stipulated settlement with the ITC agreeing to stop importing products certain products accused of infringing U.S. Patent No. 7,991,380.  Later that year, the ITC re-opened the action — finding that DeLorme violated the Consent Order and assessed a $6.2 million penalty.  Subsequently, a district court found the asserted patent claims invalid.   Those cases were appealed and the Federal Circuit and the court affirmed both: (1) agreeing that the patent was invalid, but that DeLorme was still liable for violating the Consent Order. DeLorme Publ’g Co. v. BriarTek, 622 Fed. App’x. 912 (Fed. Cir. 2015).

Following the Federal Circuit decision, DeLorme petitioned the ITC to rescind the civil penalty in light of the invalidity finding — based upon “changed conditions
in fact or law or in the public interest.” 19 C.F.R. § 210.76.  However, the Commission refused act — finding the whole matter “res judicata” based upon the prior Federal Circuit decision.

Now on appeal, the Federal Circuit has sided with DeLorme — finding that the ITC improperly relied upon estoppel principles to refuse to reconsider its civil penalty.

Res judicata usually refers to the doctrine of claim preclusion, although it sometimes applies to both claim preclusion and issue preclusion (also known as collateral estoppel).  Regardless, both of those doctrines require a prior determination in a separate lawsuit.  Here, the ITC’s res judicata reference was based upon the prior Federal Circuit decision in this same case — that doesn’t work. The Federal Circuit explains here:

For either issue or claim preclusion to apply, a second, separate case must exist. Here, where we have a continuation of the same proceeding, Investigation Number 337-TA-854, neither issue nor claim preclusion apply.

The court went on to discuss the right doctrine to apply – law of the case. “[R]econsideration of matters already resolved ordinarily is referred to [as] law-of-the-case theory” or “direct estoppel.” Wright & Miller.  However, that doctrine doesn’t apply here because neither the ITC nor the appellate court had previously decided the issue of “whether the Commission should rescind or modify the civil penalty in light of the district court’s grant of summary judgment of invalidity.”  Thus, on remand, the ITC can consider this question.

= = = =

I’ll note here that the Commission’s confusion likely arose from the Federal Circuit’s statement in its prior decision that “the [ITC] penalty or sanction cannot be vacated by subsequent events such as invalidation of the claims.”  Here, the court further explained that statement to mean that the parallel invalidation does not automatically cancel a prior-issued sanction.  However, it does open the door to request reconsideration.

Schlafly Wins and Loses at Federal Circuit — You may Register a Distinctive Surname

by Dennis Crouch

Bruce Schlafly v. St. Louis Brewery (Fed. Cir. 2018)

Thomas Schlafly started the St. Louis Brewery and began selling SCHLAFLY beer in 1991.  When the company finally got around to registering the mark in 2011, some of his relatives opposed the registration. Thomas’s aunt, Phyllis Schlafly (now deceased) and her son Bruce Schlafly both filed oppositions.  Andrew Schlafly (another son of Phyllis) was the lawyer for her case.

The opposition here focused on the Phyllis Schlafly brand — arguing that  “the
surname Schlafly is primarily associated in the minds of the public with Phyllis Schlafly and the traditional values that she represented.”  Phyllis Schlafly was a conservative activist who opposed the Equal Rights Amendment, rejected the idea of “marital rape” (“by getting married, the woman has consented to sex”), and co-wrote the ABA’s influential Red-Scare guide to  “Communist Tactics, Strategy, and Objectives.” [PDF of Guide: CSTO]

In the opposition proceedings, the TTAB sided with St. Louis Brewery — finding that the mark had acquired distinctiveness and that there was no evidence of “market proximity” between the beer and Schlafly’s political work.

Of importance to the appeal — Section 2(e)(4) of the Lanham Act prohibts registration of a mark that “is primarily merely a surname.” On appeal, the Federal Circuit affirmed the registration — holding that the distinctiveness test is appropriate even for words that primarily known as surnames:

No law or precedent suggests that surnames cannot be registered as trademarks if they have acquired distinctiveness in trademark use. Because the Board found that the SCHLAFLY mark for beers had acquired secondary meaning, Section 1052(e)(4) did not bar the registration.

Correct outcome here on the law. The prohibition found in 2(e)(4) basically sets up a system where a word that is primarily a surname will never be assumed distinctive. Rather the applicant must prove acquired distinctiveness to overcome the limits of Section 2(e)(4).

The opposition also argued that the trademark registration by the Beer company will impinge their First Amendment free speech rights and also represents a governmental taking in violation of the Fifth Amendment of the U.S. Constitution and a due process violation.  The Federal Circuit rejected these arguments out of hand.

Patently-O Bits and Bytes by Juvan Bonni

Recent Headlines in the IP World:

Commentary and Journal Articles:

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Apple v. Pepper: Can Consumers Sue Apple for an Anticompetitive App Store Market

by Dennis Crouch

Apple Inc v. Pepper (Supreme Court 2018)

On November 26, 2018, the Supreme Court will hear oral arguments in an interesting consumer antitrust class action lawsuit involving Apple’s “App Store.”  The only typical* way to install new apps on an Apple iPhone is via the App Store and the complaint in this case alleges that the single-market setup results in inflated prices.  Apple’s first response in this case is that it is simply providing the market and that App prices are being set by app developers, not Apple.  Of course the reality here is that Apple charges the app developers to sell on the App Store, and the developers raised their prices to account for the fees.

The question before the Supreme Court:

 Whether consumers may sue anyone who delivers goods to them for antitrust damages, even when they seek damages based on prices set by third parties who would be the immediate victims of the alleged offense.

Apple argues that the lawsuit should be barred by Illinois Brick Co. v. Illinois, 431 U.S. 720 (1977), which limited certain antitrust remedies to direct purchasers and not downstream parties.  Although Apple does interact directly with consumers, it argues that it does so as “an agent on behalf of third party sellers.”

The district court agreed with Apple and dismissed the case. On appeal, however, the 9th Circuit reversed and distinguished this case from Illinois Brick since Apple is dealing directly with consumers — holding that consumers can sue the party who delivers the goods even if seeking pass-through damages. This is a split from a prior 8th Circuit decision.

Apple’s argument here is essentially a technicality.  There are several ways of implementing a legal structure for the App Store market that would effectively identical in terms of market structure and pricing.  Here, Apple intentionally chose a legal structure that attempts to limit its liability to consumers all while (allegedly) abusing its market power over those consumers.  The question for the court seems parallel to what it faces in patent eligibility: Whether or not to ignore the details of the legal documents in favor of an approach that looks at a more generalized impact.

(Note – My understanding is that “sideloading” is technically possible but problematic for many reasons.)

Enplas Display v. Seoul Semiconductor: How to Police Damages Expert Testimony

by Dennis Crouch

Enplas Display Device Corp. v. Seoul Semiconductor Co. (Fed. Cir. 2018)

In this appeal, the Federal Circuit has largely sided with the patentee Seoul Semiconductor — affirming the jury verdict on induced-infringement and validity.  However, the panel split on the issue of damages — with the majority finding that the damages verdict was not supported by the evidence.  In particular, the court ruled that the SSC’s expert had included non-infringing sales in her calculations.  Judge Stoll authored the majority opinion that was joined by Judge Hughes. Judge Newman wrote in dissent and would have let the jury verdict stand.

The patent at issue here claims a method of backlighting LED displays — used in lots of TVs. Back in 2012, Enplas filed for declaratory relief, but the jury sided with the patentee on all counts — finding the patents valid and infringed and awarding $4 million as a reasonable royalty for the life of the patent. (Verdict Form Below).

The infringement theory here rests on induced infringement under 35 U.S.C. 271(b)

(b) Whoever actively induces infringement of a patent shall be liable as an infringer.

Unlike ordinary direct infringement, inducement requires specific intent to cause the infringement.  This requires knowledge of the patent and that the acts being induced “constitute patent infringement. Global-Tech Appliances, Inc. v. SEB S.A., 563 U.S. 754, 766 (2011). At trial, the patentee showed that the defendant knew of the patents and had been informed that its products were infringing once combined into TVs. “In addition, SSC presented evidence that Enplas provided its customers with product specifications that recommended infringing configurations for its accused lenses.”

Note here, that Enplas made lighting products that it supplied to other manufacturers – particularly TV makers.  Enplas products themselves didn’t fully practice the invention until used in a certain way by the TV manufacturers.  In the appeal, Enplas argued that it didn’t “know” that its lenses would be used in the infringing way.

As an issue of law, the Federal Circuit agreed with the accused infringer that “mere knowledge of possible infringement is not enough” for a finding of inducement.  However, in this case, the circumstantial evidence was enough for the jury to find knowledge of infringing use by customers and intent to induce that infringement.

The Federal Circuit called this a “close case.” Truthfully though, but it doesn’t appear close in the way described by the court since the infringer (1) had knowledge of the patents and (2) was directly informed that customers using its instructions would be infringing.

Damages: The damages case here was similar to a convoyed damages situation.  The patentee’s expert testified that the reasonable royalty for the accused lenses would have been $500,000.  However, the expert testified more “pragmatic license” negotiations would be for a broader freedom-to-operate license that would include additional similar (i.e. non-infringing) products as well as future developed infringing products.  That broader license would go for $4,000,000.

On appeal, the Federal Circuit rejected this approach to calculating damages because it goes beyond compensation for the infringement.

Here, SSC’s expert opined that Enplas and SSC would have agreed to a $2 to 4 million royalty based on a royalty base comprising sales of non-accused lenses. This testimony cannot support the jury’s damages award, for § 284 and our precedent proscribe awarding damages for non-infringing activity. Thus, the jury’s $4 million award for infringement of the ’554 patent cannot stand. . .

According to SSC, because its expert  characterized her use of the volume of sales of nonaccused lenses as a “paid-up, lump sum royalty” to ease an “administrative burden,” her application of a royalty to non-accused lenses was acceptable. We disagree. Regardless of the characterization by SSC’s expert, damages calculated by applying a royalty to sales of non-accused lenses cannot support a jury’s verdict on damages. To be sure, we have held that a jury may award a lump-sum, paid-in-full royalty in lieu of a running royalty on future sales. See Lucent. But that lump-sum must be based on an estimate of the extent of future sales of accused products, not on past sales of non-accused products.

The result here is that on remand the damages are likely cut down to $500,000 instead of $4 million.

Writing in dissent, Judge Newman suggests that the statute only sets a floor for damages — not a ceiling.

Neither side argues that the jury’s damages award was not adequate to compensate for the infringement. No argument is presented that the jury awarded less than a reasonable royalty for the use made of the invention. Nonetheless, Enplas argues on appeal that an improper theory was presented by SSC’s damages expert and, thus, the jury verdict is fatally flawed. Enplas is mistaken, in law and in reality, as well as in contravention of standard litigation procedures. . . .  The lump-sum reflects a reasonable royalty that the infringer would have been willing to pay on hypothetical negotiation under the circumstances that existed.

Judge Newman suggests here that if the patentee’s expert testimony was flawed then it should have been either challenged under FRE 702 (Daubert) or exposed on cross-examination or via counter-presentation of evidence.   The infringer did not raise any appeal on those issues.

Is this Heart Monitor Merely an Abstract Idea?

by Dennis Crouch

For the past several years, I have been conducting an annual patent law moot court competition at Mizzou. This year – the eighth annual – the case was was captioned as an appeal of a recent dismissal by District Court Judge Indira Talwani in Cardionet, LLC v. Infobionic, Inc., 2018 U.S. Dist. LEXIS 177305, 2018 WL 5017913 (D. Mass October 16, 2018).  In her decision, Judge Talwani dismissed the case for failure to state a claim — ruling CardioNet’s heart monitor patent is directed to an abstract idea rather than a patent eligible invention. U.S. Patent Number 7,941,207 (“the ‘207 patent”).  The moot court is sponsored by McKool Smith and so the winner receives $1,000.

In the mock appeal, the patentee raises two issues:

  1. Whether the district court’s opinion should be reversed because the asserted claims are patent eligible; and
  2. In the alternative, whether the district court’s opinions should be vacated based upon substantial issues of material fact that make a R. 12(b)(6) judgment for failure to state a claim improper.

The patent here covers a device for diagnosing and monitoring heart arrhythmia — particularly atrial fibrillation and atrial flutter.  The basic setup uses standard portable-heart-monitor equipment to get ECG signals.  With those signals, the patentee measures variability in beat-to-beat timing of the heart and also ventricular-beat timing.  Those two measures can be used then to diagnose a-fib while ruling out other arrhythmia. Claim 1:

1. A device, comprising:

a beat detector to identify a beat-to-beat timing of cardiac activity;

a ventricular beat detector to identify ventricular beats in the cardiac activity;

variability determination logic to determine a variability in the beat-to-beat timing of a collection of beats;

relevance determination logic to identify a relevance of the variability in the beat-to-beat timing to at least one of atrial fibrillation and atrial flutter; and

an event generator to generate an event when the variability in the beat-to-beat timing is identified as relevant to the at least one of atrial fibrillation and atrial flutter in light of the variability in the beat-to-beat timing caused by ventricular beats identified by the ventricular beat detector.

3. The device of claim 1, wherein the variability determination logic is to compare times between R-waves in three successive QRS complexes to determine the variability in the beat-to-beat timing.

CardioNet sued InfoBionic for infringement in March 2017. Rather than filing an answer, InfoBionic filed a Motion to Dismiss for “failure to meet the pleading standard of Twombly and Iqbal and for patent ineligibility of the ‘207 patent pursuant to § 101.” While the district court was considering the briefed motion, the Federal Circuit decided Aatrix and Berkheimer but did not permit supplemental briefing regarding material facts at issue in the case. The district court then granted the motion to dismiss with prejudice – finding the claims invalid as directed to an abstract idea. The court explained “the innovation of the … patent may be to use  computer equipment and logic to monitor the variability of beats, but nothing in these claims places any limitation on that abstract idea.”

I still struggle with failure-to-state-a-claim motions in this particular situation because it confounds the ordinary approach to procedure in federal civil litigation. Namely, in ordinary litigation, the complaint does not need to anticipate defenses (such as invalidity) and plead facts to get around those defenses.  Rather, the complaint is where the patentee makes its prima facie case of infringement.  That said, the courts are disagreeing, at least de facto.

Question: How would you argue this appeal?

CardioNet has filed its notice of appeal, but briefing is not due in the actual case until January 2019.

Guest Post by Prof. Yelderman: How Do District Courts Cite Prior Art?

Stephen Yelderman is a Professor of Law at the University of Notre Dame Law School.

Not all prior art is created equal. The ease of finding what’s been done before can vary dramatically—from a prior U.S. patent cited by hundreds of applicants, to the dusty doctoral thesis sitting on the shelf of a foreign library. So one might wonder: when district courts invalidate patents on prior art grounds, do they typically rely on prior art that the inventor, or the USPTO, or even a reasonably diligent searcher could plausibly have found? Or do courts regularly invalidate patents on the basis of art that only the most determined litigant could have possibly uncovered?

For the last year or so, I have been working with a team of research assistants to attempt to answer these and other questions. Drawing directly from district court dockets, we collected every decision invalidating a patent claim over a six-and-half-year period. We then coded these on a claim-by-claim, reference-by-reference basis to learn how district courts rely on prior art. Over the next several weeks, I’ll be highlighting some of the more interesting things we’ve uncovered. In this post, I’ll start by sharing some of our top-level findings and briefly explaining our collection methodology. (If you’d like to see our full results right away, a draft of the paper is available for download here.)

First, some may be surprised to learn that district court invalidation appears to be evenly split between anticipation and obviousness. This is true whether one measures by patents or claims:

Over our study period, the number of claims invalidated for anticipation (1,636) almost exactly equaled the number of claims invalidated for obviousness (1,620). As the chart above shows, while there was some up and down from year to year, the ratio held very close to 1 throughout our study period.

However, the similarities end there. In terms of the prior art relied upon to invalidate claims, anticipation and obviousness are two very different animals:

The black columns indicate the percentage of anticipation invalidations citing each category of prior art. As you can see, district court findings of anticipation rely predominantly on activity prior art (defined to include prior uses, sales, and invention by another—old § 102g).  After that, in descending order of frequency, come U.S. patents, printed publications, and foreign patents.

Obviousness invalidations are a bit harder to summarize concisely, since they can be based on multiple references. The hashed columns indicate the percentage of obviousness invalidations citing any art in that category; the gray columns indicate the percentage of obviousness invalidations citing art only in that category. The headline here is that U.S. patents are by far the most commonly cited category of prior art for obviousness: nearly two thirds of obviousness invalidations cite at least one U.S. patent. But less than one third of obviousness invalidations cite only U.S. patents. A similar theme bears out across the rest of the chart. When courts combine multiple references to find a claim obvious, they often do so by combining art across categories—a U.S. patent combined with a prior sale, for example, or a foreign patent combined with a printed publication.

Each of these top-level categories will be explored in more detail in subsequent posts. I’ll close this one with a bit of background about our collection methodology. For purposes of this study, our focus was limited to claim invalidity as found by district courts. Therefore, our data does not capture every distinct argument the defendant made for invalidity, or judicial findings that a claim was “not invalid.” It also does not reflect the ways these decisions may have been modified on appeal. We believe our data does capture every district court determination that a claim was invalid, whether in a published opinion, unpublished document, or jury verdict. In a few cases, these documents did not clearly specify on their face which references supported the conclusion of invalidity. When this occurred, we consulted other documents on the docket (such as post-trial briefing) to identify the prior art supporting the court’s conclusions. When we could not find a conclusive answer, we coded the prior art as “unknown” (the final category in the chart above). Additional details about how we collected and coded these documents can be found in Part II of the paper.

Finally, when interpreting all of this data, one should keep in mind that this is a study of how district courts cite prior art, not a study of patent quality overall. A tiny fraction of issued patents are ever litigated, and only a tiny fraction of those are litigated to a determination of validity. Moreover, the incentives to litigate or settle a patent dispute could very well turn on the nature of the prior art in a case, so the possibility of selection effects is real. Therefore, this data should only be used to answer questions about why patents are invalidated in district court, not why patents might be invalid in general.

Protecting your Flavor

Levola Hengelo BV v. Smilde Foods BV (Court of Appeal, Arnhem-Leeuwarden, Netherlands 2018) involves a spreadable dip known as ‘Heksenkaas’ or Witch’s Cheese.  In particular, the claimant argued that it owned a copyright in the taste of its dip.

We have copyright for protection for works that excite our other senses — works with a certain look, feel, or sound. Why not taste and odor?  We have literary and audiovisual works — why not flavorful works?

As you might imagine, the court said no — taste cannot be protected under European copyright. “The taste of a food product cannot be likened to any ‘works’ protected by that treaty and, to my knowledge, no other provision of international law provides for the copyright protection of the taste of a food product. . . . I consider that the taste of a food product does not constitute a ‘work’ within the meaning of Directive 2001/29.”

Update: The Netherlands Court of Appeals case was decided earlier this year, the EU Court of Justice has now provided its own answer to the question – agreeing with the Court of Appeals and holding that

Directive 2001/29 must be interpreted as precluding (i) the taste of a food product from being protected by copyright under that directive and (ii) national legislation from being interpreted in such a way that it grants copyright protection to such a taste.

ECLI:EU:C:2018:899.

 

Get that Case Out of Here! Federal Circuit Continues to Allow Mandamus Actions to Cure Improper Venue

by Dennis Crouch

In re OATH HOLDINGS, INC. (Formerly Known as Yahoo Holdings, Inc.) (Fed. Cir. 2018)

Oath, Inc. tagline blue transparent.svg

The outcome of this case is simple: Oath doesn’t have to defend a patent infringement lawsuit in E.D.N.Y. because that location is an “improper venue.”

Under TC Heartland (2017), patent owners in patent cases now have a fairly limited set of options for filing infringement actions.  In particular, a lawsuit against a domestic defendant must be filed either:

  1. Where the defendant resides (i.e., its state of incorporation)
  2. Where the defendant has a regular and established place of business (i.e., physical building).

TC Heartland falls directly in line with the prior supreme court decision in Fourco Glass (1957).  However, during the interim, the Federal Circuit had expanded its definition of proper venue to include any court that has personal jurisdiction over the defendant.  Thus, for someone who studies only Supreme Court law, TC Heartland was a continuation of an unchanged law. On the other hand, the case was a major shift for those of us whose gaze is directed to the Federal Circuit (and practical district court litigation). The Federal Circuit has identified the latter frame of reference as appropriate — holding that TC Heartland was a change in the law.  In re Micron Technology, Inc., 875 F.3d 1091 (Fed. Cir. 2017).  The Micron decision was important because it prompted district courts to revisit the venue question even if the issue was seemingly waived.

In its decision here, the Federal Circuit holds that Oath/Yahoo should not be considered to have waived the venue issue because it promptly raised the issue immediately following TC Heartland.

There is no dispute that venue in the Eastern District of New York in this case is contrary to § 1400(b). The only question is whether Oath waived or forfeited the right to have the case dismissed on that basis by waiting too long to invoke it. The district court answered yes to that question. The district court’s principal ground for doing so, however, rests on its failure to follow our directly controlling Micron precedent addressing the issue of waiver under Rule 12(g)(2) and (h)(1) as applied to TC Heartland’s rejection of this court’s earlier, longstanding VE Holding precedent. . . .

Micron answers the entire question of waiver under Rule 12(g)(2) and (h)(1) for purposes of this case: there was no such waiver. In what is nearly the only basis for the district court’s denial of Oath’s venue motion, the district court clearly erred in not following the Micron precedent giving that answer. That error warrants mandamus relief.

On remand, the district court is ordered to either dismiss the case or transfer it to a proper venue.

= = = =

One tricky aspect of this decision involves the question of “binding precedent.” The Federal Circuit’s patent law precedent is binding on all of the district courts with regard to patent law questions.  However, the Federal Circuit relies upon the law of the various regional circuit courts of appeals when deciding non-patent issues such as  general civil procedure.  Here, although the question of proper venue is a “patent law” question, the patentee argued that the waiver analysis of Micron was an interpretation of First Circuit law and didn’t bind the E.D.N.Y. judge sitting in the Second Circuit.  On appeal, the Federal Circuit rejected that analysis holding that “issues of waiver or forfeiture of patent-venue rights under § 1400(b) and § 1406(a) are likewise governed by our [Federal Circuit] law.” Thus, Micron controls all the district courts.

Inventors Can Challenge their Own Patents – But Only at the PTAB

by Dennis Crouch

The traditional rule of assignor estoppel prevents prior owners of a patent from later challenging the validity of the patent.  The doctrine stems from old property law cases and is based upon the idea is that the assignor “should not be permitted to sell something and later to assert that what was sold is worthless, all to the detriment of the assignee.” Diamond Scientific Co. v. Ambico, Inc., 848 F.2d 1220 (Fed. Cir. 1988); see Westinghouse Elec. & Mfg. Co. v. Formica Ins. Co., 266 U.S. 342 (1924). Of course, most ‘assignors’ are inventor-employees who assign away rights well before even conceiving of their inventions.  In his 2016 article, Mark Lemley argued that:

[T]he doctrine is out of touch with the realities of both modern inventing and modern patent law, and that it interferes with both the invalidation of bad patents and the goal of employee mobility.

Mark A. Lemley, Rethinking Assignor Estoppel, 54 Hous. L. Rev. 513 (2016).

In Arista Networks, Inc. v. Cisco Sys., Inc., 2017-1525, 2018 WL 5851331 (Fed. Cir. Nov. 9, 2018), the Federal Circuit was faced with the question of whether assignor estoppel applies to prevent an assignor from later challenging a patent in an inter partes review proceeding. In that framework, the court sided with Lemley and agreed to rethink the doctrine — holding that an inventor is not estopped from challenging his assigned patent in an IPR proceeding.

In this case, the inventor-professor-billionaire David Cheriton was formerly employed as Cisco’s chief product architect.  After inventing an improved “logging module,” Cheriton assigned rights to Cisco who patented the invention. The assignment included several promises , including a promise to “do everything possible to aid said assignee, their successors, assigns and nominees, at their request and expense, in obtaining and enforcing patents for said invention in all countries.”  Cheriton later left Cisco and founded Arista.  At that point, Cisco turned around and sued Arista for infringement.  Arista responded with the IPR challenge.

On appeal, the Federal Circuit began with a consideration of the common law approach — “that assignor estoppel is a well-established common-law doctrine that should be presumed to apply absent a statutory indication to the contrary.”  Although the AIA obviously did not mention the doctrine, the appellate court found that the law had an “evident” statutory purpose that is contrary to the doctrine. In particular, the court focuses on Section 311(a) that states:

(a) In General.— Subject to the provisions of this chapter, a person who is not the owner of a patent may file with the Office a petition to institute an inter partes review of the patent.

In reading the statute, the court decided that “plain language of this statutory provision is unambiguous. . . The plain language of § 311(a) demonstrates that an assignor, who is no longer the owner of a patent, may file an IPR petition as to that patent. . . . In sum, we conclude that § 311(a), by allowing “a person who is not the owner of a patent” to file an IPR, unambiguously dictates that assignor estoppel has no place in IPR proceedings.”

The legal analysis by the court could fairly be called low quality because it does not contend with the many other areas of patent law (and other areas of law) that allow for departures from the statute in order to allow for traditional common law doctrines.  Take for instance, Section 282(b) that provides invalidity as a defense in “any” infringement lawsuit — of course as discussed above the court has held that 282(b) does not eliminate assignor estoppel.

I will note that the appellate panel questioned the ongoing viability of assignor estoppel as it applies in any patent case, but decided to narrowly focus its decision here on IPR proceedings rather than patent law cases as a whole.

No Costs to Government when it Intervenes in IPR Proceedings

by Dennis Crouch

LG Electronics v. Iancu (Fed. Cir. 2018) [ORDER]

In a R.36 Affirmance, the Federal Circuit upheld the PTAB obviousness judgment. The USPTO promptly filed a request for a bill of costs for $387.60.  The Federal Circuit has now rejected that request since the PTO was an intervenor, not a party.

LG Electronics (LG) sued Advanced Micro Devices, Inc. (AMD) for infringement back in 2014 and AMD responded with the filing of this inter partes review (IPR) petition. U.S. Patent 7,664,971. The PTAB found all the challenged claims obvious and LGE appealed, but AMD did not defend the case on appeal since the parties settled the underlying infringement dispute.  At that point, the PTO “exercised its right to intervene” under 35 U.S.C. 143.

The Director shall have the right to intervene in an appeal from a decision entered by the Patent Trial and Appeal Board in a derivation proceeding under section 135 or in an inter partes or post-grant review under chapter 31 or 32.

After affirming on the merits, the PTO asked for its costs Federal Circuit Rule 39.  Under the rule, costs just include copying, service of process, clerk fees, etc. — and here added up to $388.

The Federal Circuit rule states that “if a judgment is affirmed, costs are taxed against the appellant.” However, the rule includes a caveat when costs are “for or against” the US. In that case, costs are assessed “only if authorized by law.”  28 U.S.C. § 2412(a) allows for costs when the Government is a party to litigation.  Here, however, the Government was an intervenor.

This appeal was not brought by or against the United States. It was a dispute arising between two private parties, AMD and LG. The PTO was an intervenor, which, although having a right to intervene, see 35 U.S.C. § 143, had no obligation to intervene. No one asked it to intervene. It was in effect a volunteer. Section 2412(a) is therefore not applicable to this case.

The court found no other particular statute authorizing costs to the government — and thus the court “decline[d] to award costs in these circumstances.”

Interesting petition

Havilland v. FX Networks LLC, Supreme Ct. Docket No. 18-453

Olivia de Havilland is a 102-year-old, two-time Academy Award winning best actress, who played Melanie Hamilton in the movie classic, “Gone with the Wind.” Of particular relevance here, she is also a woman who lives her life devoted to high moral and ethical standards.

FX Networks, LLC and Pacific 2.1 Entertainment Group, Inc. appropriated the literal name and identity of Olivia de Havilland, without consent or compensation, to be the narrator of a mini-series, “Feud: Bette and Joan,” devoted to the theme of women actors catfighting, using vulgar language, and backstabbing one another. FX, claiming artistic license, admits that many of the statements and vulgar language attributed to de Havilland were fabricated and knowingly untrue.

The California Court of Appeal reversed the trial judge’s denial of a Motion to Strike, and dismissed Miss de Havilland’s claims, based on a First Amendment defense for docudramas.

The Question for the Court is: Are reckless or knowing false statements about a living public figure, published in docudrama format, entitled to absolute First Amendment protection from claims based on the victim’s statutory and common law causes of action for defamation and right of publicity, so as to justify dismissal at the pleading stage?

Infringing?: Offers (made in the US) to Sell (abroad)

by Dennis Crouch

Texas Advanced Optoelectronic Solutions, Inc., (TAOS) v. Renesas Electronics America, Inc., fka Intersil Corporation (Supreme Court 2018)

This case focuses on TAOS’ patented photodiode array ambient light sensor that is now widely used in smartphones to adjust display brightness.  U.S. Patent No. 6,596,981.  Following failed merger negotiations with TAOS, Intersil developed a competing product and Apple signed-on as a client. However, a jury found Intersil liable for patent infringement, trade secret misappropriation, breach of contract, and tortious interference with prospective business (finding that Intersil had improperly used confidential information from the merger talks).

A tough aspect of the patent case against Intersil itself is that 98.8% of its products are manufactured, packaged, and tested abroad — then delivered to customers abroad. U.S. patent law is territorial and almost none of the products were made, used, or sold “within the United States.” 35 U.S.C. 271(a).  In its new petition for writ of certiorari, TAOS argues that the infringer should still be liable becase it made “offers to sell” the invention within the US.

Here, the evidence shows that an offer was made in California by Intersil to sell the accused sensors to Apple at $.035 each.  Although the offer was made in California, delivery was set outside the U.S.  The delivery location is critical under the leading Federal Circuit decision in Transocean Offshore Deepwater Drilling, Inc. v. Maersk Contractors USA, Inc., 617 F.3d 1296 (Fed. Cir. 2010).  In Transocean, the court held that “offers to sell . . . within the United States” are limited to offers where – if accepted – the sale will occur in the United States.   Now TAOS raises the following question to the Supreme Court:

Whether an “offer[] to sell” occurs where the offer is actually made or where the offer contemplates that the proposed sale will take place.

[Petition].  Linguistically — the basic question is whether “within the United States” clause modifies “offers” or “sell” (or perhaps both). In the context of the statute’s list of bad actions it is pretty clear that the focal point is “offers.”

[W]hoever without authority makes, uses, offers to sell, or sells any patented invention, within the United States or imports into the United States any patented invention during the term of the patent therefor, infringes the patent.

35 U.S.C. 271(a). There is really no Congressional guidance on what was intended when the law was implemented as part of the Uruguay Round Agreements Act (1994).

In Transocean, the offer was made in Scandinavia to but for delivery in the US — the court held this as infringing because the sale was going to take place in the US. “In order for an offer to sell to constitute infringement, the offer must be to sell a patented invention within the United States. The focus should not be on the location of the offer, but rather the location of the future sale that would occur pursuant to the offer.”  Id. The Supreme Court called for views of the Solicitor General in that case, but the parties settled prior to resolution.   Now the court has another chance to consider the issues.

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The importance of this case is much greater following the Supreme Court’s recent decision in WesternGeco LLC v. ION Geophysical Corp.  In that case, the court indicated that foreign consequential damages are available to compensate for U.S. acts of infringement.   Here, that could mean that TAOS could collect damages for the foreign made products that stemmed from the US originated offer.

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One way to look at this case is through a simple two-by-two table of activities showing the location of the offer as well as the location of the proposed sale.  Everyone agrees that box-1 is infringing where both the offer and eventual sale are in the US; we all also agree that box-4 is not infringing where neither the offer nor the eventual sale are in the US.  The debate is then over boxes 2 and 3.  In Transocean, the Federal Circuit held that box-3 is also infringing — focusing on the location of the eventual sale.  Here, the patentee is arguing that the statute focuses on the location of the offer and thus that boxes 1 and 2 are the actionable situations.  I can also conceive of a court saying that of the four, only box 1 is infringing or alternatively that 1, 2, and 3 are all infringing..

 

Interpreting Claims — Claiming Elements from the Background Art

DISCLOSURE: Back in 2013/14 I talked with the attorneys for Cave Consulting about serving as an expert witness for the underlying district court litigation. I ended up not doing any work related to the case. – DC

by Dennis Crouch

Cave Consulting Group, LLC, v. OptumInsight, Inc. (Supreme Court 2018) [20181102114930196_Cave Consulting v. Optuminsight Inc. Petition for Writ]

This pending case before the Supreme Court focuses on fundamental questions of how to interpret patent claim scope. 

Cave Consulting’s U.S. Patent No. 7,739,126 covers a method of determining physician efficiency that includes, inter alia, a step of calculating a “weighted statistic” associated with various “episodes of care.”  The broader claims are not expressly limited to the particular statistic used, while the dependent claims require alternatively require “indirect standardization” (Claim 25) or “indirect standardization” (Claim 26) of the weighting.  To be clear, the specification spends substantial time focusing on indirect standardization in detail, whereas direct standardization is a method known in the prior art.

In its case against Optum (a subsidiary of UnitedHealthcare and my insurance provider), the patentee argued that Optum used the direct-standardization weighting as claimed and a jury found agreed with a $12 million damages award.

On appeal the Federal Circuit shifted claim construction and reversed — holding that the independent claims implicitly excluded direct-standardization weighting. In its holding the court relied upon its precedent in Retractable Techs., Inc. v. Becton, Dickinson & Co., 653 F.3d 1296, 1305 (Fed. Cir. 2011) in stating that claims should be construed to “tether the claims to what the specifications indicate the inventor actually invented.”

Optum had argued disclaimer, but could not point toward any “clear and unmistakable” disavowal of scope or lexicographical redefinition of the terms. Rather, the court simply found that the best construction of the claimed “weighted statistic” excluded the traditional direct-standardization weighting.

Cave does not identify, nor do we find, any indication in the ’126 patent’s description that its invention employs direct standardization, and, other than the dependent claims, Cave’s support for including direct standardization comes exclusively from the description of the prior art methods in the background section.

Although there might ordinarily be a claim differentiation argument, the court found it weak here because the aforementioned dependent claims had been added during prosecution.

[I]n view of the specification’s consistently limiting description, we conclude that these interpretive canons, despite the later-added dependent claims, cannot overcome the claim scope that is unambiguously prescribed by the specification.

Now Cave Consulting has petitioned the U.S. Supreme Court to hear the case with the following question presented:

May a court construe a patent claim in a way that contradicts its plain and ordinary meaning by relying on statements in the specification that do not constitute lexicography or disavowal?

Cave Consulting sets up the case as a debate over whether claims control the scope of the rights:

  • When there is a conflict between clear and unambiguous claim language and statements in the specification, the claim language wins. White v. Dunbar, 119 U.S. 47, 52 (1886)(“The claim is a statutory requirement, prescribed for the very purpose of making the patentee define precisely what his invention is, and it is unjust to the public, as well as an evasion of the law, to construe it in a manner different from the plain import of its terms.”)
  • Howe Mach. Co. v. Nat’l Needle Co., 134 U.S. 388, 394 (1890) (“Doubtless a claim is to be construed in connection with the explanation contained in the specification . . . but, since the inventor must particularly specify and point out [what] he claims as his own invention or discovery, the specification and drawings are usually looked at only for the purpose of better understanding the meaning of the claim, and certainly not for the purpose of changing it, and making it different from what it is.”);
  • Cimiotti Unhairing Co. v. Am. Fur Ref. Co., 198 U.S. 399, 410 (1905) (“In making his claim the inventor is at liberty to choose his own form of expression, and while the courts may construe the same in view of the specifications and the state of the art, they may not add to or detract from the claim.”);
  • Motion Picture Patents Co. v. Universal Film Mfg. Co., 243 U.S. 502, 510 (1917)(“It is to the claims of every patent, therefore, that we must turn when we are seeking to determine what the invention is . . . .”);
  • Smith v. Snow, 294 U.S. 1, 11 (1935) (“We may take it that, as the statute requires, the specifications just detailed show a way of using the inventor’s method, and that he conceived that particular way described was the best one. But he is not confined to that particular mode of use, since the claims of the patent, not its specifications, measure the invention.”);
  • Graver Tank & Mfg. Co. v. Linde Air Prods. Co., 336 U.S. 271, 277 (1949) (refusing to narrow the unambiguous claim language based on the specification, noting that the Court has “frequently held that it is the claim which measures the grant to the patentee.”).

As you can see, this is an important area of jurisprudence that the Supreme Court has discussed on multiple occasions — increasing the odds of certiorari.

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Richard Brophy and Marc Vander Tuig of Armstrong Teasdale filed the petition on behalf of Cave Consulting.

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I’ll note here that it is cases like this that discourage patentees from including any background section at all.

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Whitaker on Patent Marketing

by Dennis Crouch

Following up on the patent experience of US Attorney General Matthew Whitaker.  Although not a patent attorney, Whitaker has been a board member of the now defunct invention promotion scam World Patent Marketing.  In 2017, the Federal Trade Commission (FTC) filed suit against the company, won a preliminary injunction against its ongoing business, and then a consent decree for $27 million in judgments and injunction against ongoing business.  (Apparently at least $24 million is gone and not being repaid.)

Gene Quinn has written extensively about invention marketing scams discussed the preliminary injunction on his IPWatchdog site.  Quinn explains:

“The record supports a preliminary finding that Defendants devised a fraudulent scheme to use consumer funds to enrich themselves,” concluded United States District Judge Darrin P. Gayles. “Accordingly, the Court finds a preliminary injunction is necessary to maintain the status quo pending a trial on the merits.”

Perhaps most egregious, however, were the threats and intimidation World Patent Marketing directed toward complaining customers.

As a former Federal Prosecutor, Whitaker’s place on the Board lent the company a high level of credibility. For lending his name, Whitaker was paid only about $600 per month.  At the time, Whitaker was also managing director of his own small Iowa law firm and penned at least one letter toward a complaining customer:

Whitaker was not prosecuted by the FTC and was not named in either the preliminary injunction or the consent decree.  Unlike other board members, Whitaker has not returned the cash he received in the scheme and has made no public statement regarding his role or the scam.  My hope is that the AG will have learned from this experience, however his ongoing silence on the issue is troubling.

USPTO News and Updates

  • We have a new USPTO deputy director LAURA PETER.  Ms. Peter has been a registered patent practitioner since 1989 — working primarily in house for the past two decades. Most recently she was Deputy General Counsel at A10 Networks. She was also GC at Immersion Corp — by that point the company was really just enforcing its patents on haptic feedback game controllers. (See recent case) In 2010 Peters was the republican candidate for the California State House of Representatives — she won the primary but lost to the Democratic incumbent in the general election.
  • Ms. Peter’s Reg. No. is 33,545.  The most recent PTO registration number belongs to Mr. Noble Woo with Reg. No. 77,596 (Registered 11/5/18). Congratulations Mr. Woo!
  • The Patent Public Advisory Committee (PPAC) will hold its next meeting on November 8 (AGENDA). You can either attend in person at the USPTO or watch via web stream.
  • The USPTO is continuing its excellent STEPP program for registered patent practitioners (STEPP = Stakeholder Training on Examination Practice and Procedure).  The next training is January 15-17 in Dallas. [More Info | Apply to Attend]
  • In January we’ll see a major shift on the House Judiciary Committee — this is important because patent legislation generally goes through that committee. Hank Johnson (D-Ga) is expected to take over as ranking member of the IP Subcommittee. Although Johnson does not have extensive IP experience, he is known as an effective legislator.  Bob Goodlatte (R-Va) and Darrell Issa (R-Ca) are retiring from the House.