Legal Conclusion of Obviousness is Based upon a Structure of Factual Findings whose Foundation Must be Evidentiary

Patent,

Elbit Systems v. Thales Visionix (Fed. Cir. 2018)

In its IPR final decision, the PTAB sided with the patentee – holding that Elbit had failed to prove that the challenged claims of Thales patent were obvious. On appeal, the Federal Circuit has affirmed – holding that “substantial evidence” supported the finding.

The challenged (U.S. Patent No. 6,474,159) is directed to a method for tracking motion relative to a moving platform. The claims basically require two inertial motion sensors and a processor “configured to determine an orientation of the object relative to the moving reference frame based on the signals received from the first and second inertial sensors.” The particular claims here are limited to include “angular” measurements.

The decision focuses primarily on the standard of review of PTAB factual findings – substantial evidence. Substantial evidence is a very low standard – simply requiring “more than a mere scintilla of evidence.” In re NuVasive, Inc., 842 F.3d 1376, 1379–80 (Fed. Cir. 2016). Although obviousness is a question of law, that legal conclusion must begin with evidence that serve as the foundation for factual conclusions. The ultimate legal conclusion of obviousness then is based upon the structure built by those factual conclusions.

Here, the PTAB made the factual finding that the prior art reference (McFarlane) did not teach the claimed “relative angular rate signal.” That finding was based upon presented evidence: both the prior art document and expert testimony regarding what was taught by the document. The patentee’s expert explained that the prior art calculated relative angular orientation using a different approach than that claimed by Thales (i.e., did not separately create an intermediary “angular rate signal”). Although the competing expert testified to the opposite (that the prior art approach is mathematically equivalent without any practical difference), the Board chose to believe the patentee’s expert based upon its conclusion that the competing expert did not provide credible citations to support those conclusion.

On appeal, the Federal Circuit held that the PTAB was the best position to determine expert credibility and thus declined to disturb those credibility determinations. Trs. of Columbia Univ. v. Illumina, Inc., 620 F. App’x 916, 922 (Fed. Cir. 2015) (“The PTAB [i]s entitled to weigh the credibility of the witnesses.”) The challenger’s attorneys attempted to support their case with an explanation that PHOSITA would understand the meaning the prior art – That argument was rejected on appeal, however, as attorney argument rather than evidence based. Rather, to make the argument, the party should have actually presented evidence on the level of understanding of a person of skill in the art.

= = = = =

Note, I’m not sure, but this may be the first precedential decision holding that PTAB has power to weigh credibility of expert testimony in IPR proceedings. The concept was previously stated in Trs. of Columbia Univ. v. Illumina, Inc., 620 F. App’x 916, 922 (Fed. Cir. 2015) (“The PTAB [i]s entitled to weigh the credibility of the witnesses.”) VirnetX Inc. v. Apple Inc., 665 Fed. Appx. 880, 884 (Fed. Cir. 2016).

= = = = =

Challenged Claim 3 is listed below:

1. A system for tracking the motion of an object relative to a moving reference frame, comprising:

a first inertial sensor mounted on the tracked object;

a second inertial sensor mounted on the moving reference frame; and

an element adapted to receive signals from said first and second inertial sensors and configured to determine an orientation of the object relative to the moving reference frame based on the signals received from the first and second inertial sensors.

2. The system of claim 1 in which the first and second inertial sensors each comprises three angular inertial sensors selected from the set of angular accelerometers, angular rate sensors, and angular position gyroscopes.

3. The system of claim 2, in which the angular inertial sensors comprise angular rate sensors, and the orientation of the object relative to the moving reference frame is determined by integrating a relative angular rate signal determined from the angular rate signals measured by the first and second inertial sensors.

Consider whether this is patent eligible.

China’s Patent System Entering Middle Age

Patent

by Dennis Crouch

Following up on Renjun Bian’s recent Patently-O post, I wanted to highlight Texas A&M Professor Peter Yu’s new article on Chinese Intellectual Property Scholarship titled “A Half-Century of Scholarship on the Chinese Intellectual Property System.”  The Chinese patent system is now over 30 years old — with explosive growth and transformation each year.  Yu explains in the article that China is now reaching a new stage that calls for the country to move beyond Western constructs of IP (“legal transplants”) and instead “devise its own intellectual property strategy.”  Because the Chinese legal marketplace continues to develop, Yu’s work here offers excellent guidance by focusing more on flow and transition rather than a snapshot. Great work Prof. Yu.

Read it here: https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3107401

How Foreign Patentees Fared in Patent Litigation in China

Patenting From China

*** The map above showing regional patent litigation comes from the Chinese Firm Jiaquan IP. http://www.jiaquanip.com.

 

In Third Round: MedCo’s Angiomax Patents Invalid Again (On Sale Pre Patenting)

Patent

The Medicines Co (MedCo) v. Hospira, Inc. (Fed. Cir. 2018)

In its 2016 en banc opinion in this case, the Federal Circuit limited the scope of the on sale bar of 35 U.S.C. § 102 (pre-AIA) – holding that “a contract manufacturer’s sale to the inventor of manufacturing services where neither title to the embodiments nor the right to market the same passes to the supplier does not constitute an invalidating sale under § 102(b).”

In the litigation, Hospira argued both (1) that the MedCo patents were invalid and (1) that Hospira’s proposed generic Angiomax drug would not infringe. The district court sided with MedCo on the first point (patents not invalid) but with Hospira on the second (patents not infringed). On appeal, the Federal Circuit has affirmed the non-infringement ruling but reversed on the on sale issue. The interesting portion is the on sale question.

On Sale Bar: The 2016 en banc decision affirmed the district court’s holding that a set of transactions between Ben Venue and MedCo “did not trigger the on-sale bar.” On remand, the district court stuck to that ruling – holding that the patent was not invalid. On appeal here, however, the panel analyzed a separate agreement – this time a Distribution Agreement between MedCo and ICS. The agreement specifically included a commercial price list, an order mechanism, and statement that title to the drugs transferred “upon receipt of product.” The Court explains:

Under the standards established by Medicines I
(en banc), the terms of the Distribution Agreement make clear that the Medicines Company and ICS entered into an agreement to sell and purchase the product. Those relevant terms include: a statement that The Medicines Company “now desire[d] to sell the Product” to ICS and ICS “desire[d] to purchase and distribute the Product,” the price of the product, the purchase schedule, and the passage of title from The Medicines Company to ICS.

The on-sale bar generally requires both (1) that a product covered by the patent is subject of a commercial offer for sale; and (2) that the invention is ready for patenting (both before the patent critical date). The paragraph above explains the commercial offer for sale. The court went on to explain that a “master batch agreement” available at the time explained how to use the claimed process.

Infringement: The claims require “efficient mixing” of the raw ingredients to form the drug solution – and that approach is defined by an example provided in the patent specifications. On appeal, the court affirmed that Hospira’s process cannot infringe since it does not perform all of the steps of the example.

Jurisdiction: The court does not explain why it has jurisdiction to decide the on sale bar question after finding no infringement (moot point?).

How Foreign Patentees Fared in Patent Litigation in China

Patent

Guest post by Renjun Bian.  Ms. Bian is a J.S.D. candidate at UC Berkeley School of Law, where she conducts research on Chinese patent law and policies. Her dissertation focuses on patent litigation and valuation. Before coming to Berkeley, Ms. Bian studied Chinese law at Peking University, where she earned an LL.B.  Ms. Bian also holds an LLM from Berkeley and interned at King & Wood Mallesons’ Silicon Valley office.  The opinions expressed are her own.  Below, she describes findings from her forthcoming article in the Berkeley Technology Law Journal.

As the Chinese government continues to stimulate domestic innovation and patent activities via a variety of policies, China has become a world leader in both patent applications and litigation. These major developments have made China an integral venue of international patent protection for inventors and entrepreneurs worldwide.

However, due to the lack of judicial transparency before 2014, we had virtually no access to Chinese patent litigation data and knew little about how Chinese courts adjudicated patent cases. Instead, we were left with a variety of impressions and guesses based on the text of Chinese law and the limited number of cases released by the press; for example, that Chinese courts have a strong bias toward domestic companies over foreign ones, to protect the local economy; that injunctions, either preliminary or permanent, are difficult to obtain under Chinese law; that monetary damages granted by Chinese courts are extremely low, and insufficient to compensate patent holders; etc.

Taking advantage of ongoing judicial reform in China, including mandated public access to all judgments made since January 1, 2014 via a database called China Judgements Online (CJO), I wrote a paper called “Many Things You Know about Patent Infringement Litigation in China are Wrong” in 2016 (available at SSRN: https://ssrn.com/abstract=3063566). It analyzes 1,663 patent infringement judgments – all publicly available final patent infringement cases decided by local people’s courts in 2014, and surprisingly finds out that most of the long-standing beliefs about patent enforcement in China cannot be supported by empirical data.

One prominent example is that foreign patent holders were as likely to litigate as domestic patent holders, as shown below:

Not surprisingly, the overwhelming majority of patent infringement cases in China (93.08%, or 1,548) were litigated by Chinese patent owners or licensees. Foreign plaintiffs accounted for only 6.92% (115) of 1,663 decisions included in the population. This percentage – although it seemed intuitively low – represented the ratio of patents granted by SIPO to international patent applicants. According to statistics released by SIPO, 93,285 patents were issued to foreign individuals and entities in 2014, making up approximately 7.16% of all 1,302,687 patents granted by SIPO that year.

Why did foreign patentees not fear enforcing their patent rights in China as the conventional wisdom suggested? The answer may be surprising: plaintiffs fared better than domestic Chinese patent holders. They had a higher win rate, injunction rate, and average damages:

Foreign plaintiffs were more likely to win and receive injunctions than their Chinese counterparts in patent infringement cases brought in China. Moreover, damages awarded to foreign patent owners (￥201,620.45, or US$32,837.21) were almost three times higher than those awarded to Chinese patent owners (￥66,217.93, or US$10,784.68). The important implication here is that Chinese courts, while not preferring foreign parties to domestic ones, certainly did not protect the local economy at the expense of foreign companies in practice.

I have also looked into many other legal and extra-legal factors in that paper and tested how the outcome of patent infringement cases – the finding of infringement, the granting of injunctions, and the awarding of damages – in China can be explained on the basis of these factors. Some of my key findings are summarized below:

(1) Plaintiffs won in 80.16% of all patent infringement cases included in the population. Such a win rate was higher than its counterparts in many major countries – Germany (approximately 66%) and the United States (approximately 60%), for example.

(2) In China, permanent injunctions were automatically granted in most cases (93.76%), based on a finding of infringement.

(3) Damages awarded by Chinese courts are frustratingly low (US$4,885.99 in median).

(4) Design patents were overrepresented in infringement litigations in China, indicating that design patent owners are more likely to enforce their patents after issuance than owners of invention patents and utility models.

(5) The overwhelming majority of patent infringement lawsuits in China involved mechanical patents (84.64%). Electrical (13.79%) and chemical (1.57%) patents made up only a rather small portion of all decisions.

(6) On average, patent owners had waited for approximately half of the protection term of their patents (48.15% for invention patents, 65.60% for utility models, and 45.50% for design patents) before enforcement.

(7) Patent infringement cases were highly concentrated in the East Coast region – the most economically developed part of China. The nine provinces in the East Coast region heard more than three quarters of all patent infringement lawsuits in 2014.

Welcome Andrei Iancu, USPTO Director

Patent

Without dissent (94-0), the U.S. Senate has confirmed Mr. Andrei Iancu as Director of the U.S. Patent and Trademark Office and Undersecretary of Commerce for Intellectual Property.  In addition to administering the 10,000 person and $2 billion Federal Agency, Iancu will also serve as a primary adviser for the White House on Intellectual Property law issues — both domestic and foreign.

Iancu takes over from Joseph Matal who was instrumental in development and passage of the America Invents Act in his role as General Counsel of the Judiciary Committee under Republican Jeff Sessions.

As a longtime patent attorney and patent litigator, Iancu brings both a wealth of experience and understanding of the system.  I am looking forward to his leadership of the agency! Congratulations and Welcome.

 

Mapping the Patent Office Intervenor Power

Patent

Guest post by Saurabh Vishnubhakat, Associate Professor at the Texas A&M University School of Law and the Texas A&M College of Engineering.  Although Prof. Vishnubhakat was an advisor at the USPTO until June, 2015, his arguments here should not be imputed to the USPTO or to any other organization. This post is based on a new paper forthcoming in the N.Y.U. Annual Survey of American Law.  Read the draft at https://ssrn.com/abstract=3113844.

***

Since the AIA, the Patent Office has had a relatively little-known power in post-issuance proceedings. Once a PTAB decision is appealed to the Federal Circuit, the Patent Office can intervene in the appeal as a matter of statutory right under 35 U.S.C. § 143:

With respect to an appeal described in section 142, the Director shall transmit to the United States Court of Appeals for the Federal Circuit a certified list of the documents comprising the record in the Patent and Trademark Office. The court may request that the Director forward the original or certified copies of such documents during pendency of the appeal. In an ex parte case, the Director shall submit to the court in writing the grounds for the decision of the Patent and Trademark Office, addressing all of the issues raised in the appeal. 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. The court shall, before hearing an appeal, give notice of the time and place of the hearing to the Director and the parties in the appeal.

In the past few years, the Patent Office has exercised this intervenor authority frequently and with specific apparent policy objectives. In Knowles Electronics v. Matal, the Federal Circuit is now considering the extent to which the agency must establish Article III standing in order to exercise its intervenor authority—specifically in cases where the prevailing party below is absent from the appeal. Also in question, assuming agency standing, is whether the Director must defend the PTAB’s decision below or is free to take other positions on appeal.

Patent Office Interventions: An Empirical Summary

New data on Federal Circuit intervenors shows that the Patent Office’s pattern of strategic intervention intersects in important ways with constitutional limits on the agency’s power.

  • Among 96 observed disputes (across 145 docketed appeals) in which the agency intervened, every intervenor brief that the Patent Office has filed has been in full or partial defense of the PTAB’s position or of some larger structural value associated with administrative adjudication, never in opposition to the PTAB’s stance.
  • Where the Patent Office did choose to intervene on appeal, the outcomes below were usually defeats for the patent owner (about 80%), and the agency’s position was to affirm the defeat.
  • Where the Patent Office intervened specifically to stand in for a litigant who was absent on appeal, the absent litigant was always a prevailing patent challenger—never a prevailing patent owner.

This is constitutionally important because the agency’s ability to intervene often will rest on its ability to show Article III standing. The Patent Office as intervenor may be able avoid having to show its own standing—but only if (1) the agency has entered the case on the side of a party that does establish standing, and so long as (2) the agency does not seek relief that is different from what that friendly party seeks.

Patent Office Intervention and Article III Standing

The Supreme Court explained in Arizonans for Official English v. Arizona, that standing “must be met by persons seeking appellate review, just as it must be met by persons appearing in courts of first instance.” 520 U.S. 43, 64 (1997). Where the friendly party with proven standing declines to appear, the intervenor “cannot step into the shoes of the original party unless the intervenor independently fulfills the requirements of Article III”—even where the intervenor takes the same position as that of the absent party. Id. at 64–65.

Importantly, adverse parties must also have standing independently of each other. It is a common shorthand to say that a plaintiff’s duty to show standing means that standing is required only from plaintiffs. But in fact, standing to defend is necessary as well. It is true that any given defendant probably can establish standing, as a defendant’s potential injury from an adverse judgment is generally enough to satisfy Article III. Still, the case-or-controversy requirement does not merely demand standing to sue. As the Court explained in Arizonans for Official English, what is needed is standing “to sue or defend.” Id. at 64.

This view also calls into question the Federal Circuit’s recent panel decision in Personal Audio, LLC v. Electronic Frontier Found. (Fed. Cir. 2017). It also calls into question the Patent Office position in Knowles. In its briefing on the Article III standing questions, the agency has adopted an expansive view of its own authority and a very limited view of its constitutional limits. In its first supplemental brief, the Patent Office argued that it need not show its own Article III standing because it can piggyback on the standing of Knowles Electronics, the patent owner mounting the appeal—even though the Patent Office as intervenor is adverse to Knowles. The agency also argued, apparently quite broadly, that “the Director may take any substantive position he likes” on appeal. The agency’s second supplemental brief clarified, however—in light of the Chenery doctrine—that this freedom to choose “any substantive position” pertained only to “an issue [actually] decided by the Board.”

But while piggybacking on a friendly party’s standing is one thing, piggybacking on an adverse party’s standing—especially where the friendly party is absent—is quite another. Indeed, though Knowles Electronics’s supplemental brief led with this point, the agency’s briefing contained no responsive discussion of Arizonans for Official English.

Implications for Patent Office Policy and Participation in the Patent System

Choosing to intervene only in certain cases, to support only certain positions, and to stand in only for certain absent appellate parties are plainly acts of policy. The plain language of § 143 suggests that it is a policy instrument that Congress intended for the Patent Office. But the constitutional limitations of Article III, as elaborated by the Court, remain a meaningful constraint on how the agency can exercise its statutory powers. This is especially true given the agency’s observed preferences as intervenor, preferences that require standing to sue or defend and that limit the ability to piggyback on adverse or absent parties.

Apart from their inherent importance, these constitutional imitations also matter for broader participation in the patent system. Since the Patent Office began intervening in Federal Circuit appeals, the relative share of interventions by private parties has declined. The remainder has shifted to a pattern of more concentrated, multi-party interventions. Data on non-governmental intervenors during the same period (Dec. 2013–Sept. 2017) as Patent Office interventions shows that 142 private parties intervened in only 43 docketed Federal Circuit cases. By contrast, in an equivalent period of time before the Patent Office began using its intervenor power (Feb. 2010–Nov. 2013), 63 private parties had intervened in 30 docketed cases while the Patent Office apparently did not intervene in any. In other words, there has been a net offloading onto the Patent Office of the responsibility to intervene.

As I argue in my paper, this is significant precisely because private-party intervenors can often show, more than the Patent Office could, enough of a stake to intervene in a given case. However, Congress chose not to entrust the protection of larger social interests diffusely to private-party intervenors. Instead, it recognized the coordinating and policymaking function that agency intervention can properly serve—within constitutional limits. When understood this way, private parties’ interventions are a useful adjunct to the agency’s. This is especially true where parties may be dissatisfied by the agency’s priorities, which may change considerably from one administration to another. If the decline in private-party intervention has reached some equilibrium with agency intervention—or will soon do so—then that outcome seems preferable to a complete abdication by private parties of the effort to intervene. The Patent Office can do much, but it should not be required to do all that intervenors can do.

Climate Change is an Abstract Idea?

Patent

By Dennis Crouch

Ex parte Gerlitz, APPEAL 2017-002398, 2018 WL 619852 (PTAB Jan. 26, 2018)

GlucoVista’s patent application claims a method of determining glucose concentration in a body (i.e., physical matter) by changing the body’s surface temperature and measuring the change in infrared (IR) radiation emitted at the wavelength associated with Glucose IR emissions.  The concentration is then calculated based upon these measurements.  Claim 1 though is not tied to glucose, but rather a generic method for determining the concentration of a ‘substance.’

In the ex parte appeal, the PTAB has affirmed the examiner’s rejection on eligibility grounds – finding that the claims were directed to the abstract idea of “selecti[ng] data (temperature, radiation) obtained from known and existing technology and then using the data to make a correlation.” Citing Digitech.[1]

Although transformation is not a “litmus test” of eligibility it is still relevant – here the PTAB held that changing a body’s temperature does not count as Diehr-style transformation.[2]

With respect to Alice/Mayo step-two (“something more”), the PTAB found that the improvement offered by the invention “is an improvement in the application of the mathematical relationship in determining substance concentration, which is, itself, an abstract idea.”

The decision would look like a good candidate for a civil action challenge or appeal – except that the PTAB also found the claims obvious. The examiner had also rejected the claims as obvious. However, those rejections were reversed on appeal.  In my mind, that makes this case a good candidate for challenge – either through civil action or appeal. 

[1] Digitech Image Technologies, LLC v. Electronics for Imaging, Inc., 758 F.3d 1344, 1351 (Fed. Cir. 2014).

[2] Diamond v. Diehr, 450 U.S. 175 (1981).

= = = = =

1. A method comprising:

decreasing a temperature of a surface of a body from a first temperature to a second temperature less than the first temperature;

thereafter, recovering to the first temperature by increasing the temperature of the surface of the body from the second temperature to the first temperature;

measuring a first amount of infrared radiation absorbed or emitted from the body in a first wavelength band at predetermined time intervals during the recovery increasing the surface of the body from the second temperature to the first temperature, the first wavelength band being a wavelength band or bands in which a substance in the body emits or absorbs infrared radiation;

measuring a second amount of infrared radiation absorbed or emitted from the body in a second wavelength band at predetermined time intervals during the recovery increasing the surface of the body from the second temperature to the first temperature;

measuring a temperature of the surface of the body; measuring an ambient temperature; calculating a normalized ratio parameter based on the first amount, the second amount, the body surface temperature, and the ambient temperature; and

determining a concentration of a substance in the body non-invasively by using a correlation with the normalized ratio parameter.

Firms with the Most Registered Patent Attorneys and Agents

Patent

The chart below comes from the USPTO OED registry of practitioners and so suffers from potential registry issues (I did do some amount of name-matching to overcome different firm name spelling and punctuation.).

According to these records, Finnegan has the most total practitioners while Knobbe has the most patent attorneys. IBM is the only operating company that breaks the top-10. The top 25 firms represent ~8% of all registered patent practitioners. The newest patent attorney on the list is Hallie Wimberley, a first-year associate at Reed Smith.  My former firm (MBHB) is now up over 100.

Firm or Company Name

Number of Registered Practitioners

Patent Attorneys

Patent Agents
Finnegan Henderson

261

202

59
Fish & Richardson

256

183

73
Knobbe Martens

248

216

32
KILPATRICK TOWNSEND

216

174

42
Wilson Sonsini

209

121

88
IBM

162

127

35
Foley & Lardner

158

129

29
Schwegman, Lundberg & Woessner

150

136

14
Baker Botts

149

124

25
Jones Day

146

111

35
Perkins Coie

146

128

18
Cooley

144

82

62
Morrison & Foerster

137

87

50
Morgan, Lewis

120

91

29
Brinks

119

99

20
Harness Dickey

117

106

11
Sterne Kessler

117

80

37
Alston Bird

114

101

13
Baker Hostetler

113

106

7
Qualcomm

112

96

16
Oblon

109

77

32
McDermott Will & Emery

105

83

22
Kirkland & Ellis

103

91

12
K&L Gates

101

90

11
Haynes & Boone

101

80

21
General Electric

101

75

26
McDonnell Boehnen Hulbert & Berghoff

100

73

27
Banner & Witcoff

100

89

11
Cantor Colburn

98

75

23

Federal Jurisdiction when Copyright/Patent Claim Found in Permissive Counterclaim?

Patent,

Anne Schafly Cori v. Eagle Forum and John F. Shafly, 2018 WL 656598 (S.D. Ill. Feb. 1, 2018)

This is an odd case to raise the America Invents Act. It is a continuation of the break between Conservative Eagle Phyllis Schafly (d.2016) and some members of her Eagle Forum (including her daughter Anne Schafly Cori – the break was precipitated by Phyllis Shafly’s support of Donald Trump’s presidential campaign and ouster of dissenters (including the plaintiff) from the Eagle Forum.

The basic setup in this particular case is that the plaintiff (Schafly Cori) alleged breach of fiduciary duty, trademark infringement and unfair competition against the Eagle Forum. The defendants counterclaimed alleging copyright infringement along with trademark infringement, rights of publicity, unfair competition, and challenging the validity of a license to use certain trademarks. Rather than filing in Federal Court, the Plaintiff originally filed in Illinois State Court (Madison County) and the Defendants removed the case to Federal Court.

Not wanting to be in Federal Court, the plaintiff then amended her complaint to only assert state-law claims and asked for remand back to state court. This is where the America Invents Act comes into play. The AIA amended the federal removal statute 28 U.S.C.A. § 1454 to particularly allow for removal of civil actions where “any party asserts a claim for relief arising under any Act of Congress relating to patents, plant variety protection, or copyrights.” The AIA also expressly removed jurisdiction from state courts – “No State court shall have jurisdiction over any claim for relief arising under any Act of Congress relating to patents, plant variety protection, or copyrights.” 28 U.S.C. § 1338. Here, I expect that the defendants included the copyright claim primarily to get Federal Jurisdiction.

In its motion decision, the district court recognized the AIA requirement of removal of cases where one party asserts a copyright claim.** However, the district court ended up remanding the case – finding that the “core” of the plaintiff’s case is about ouster and legal control – not the particular materials being used. Based upon that disconnect, the court found the copyright counter claim “immaterial and made solely for the p purpose of obtaining jurisdiction.” Case remanded back to state court.

[ANNE SCHLAFLY CORI DECISION]

Note 1. It is clear that the district court missed some major steps in its analysis, although it might still have reached the correct conclusion. The statute is clear that a copyright infringement counterclaim gets the case federal jurisdiction, and the holding here suggests that there is leeway with that result. I don’t think so. Rather, the court should have determined whether the copyright claim should be properly dismissed and, if so, then remand.

Note2. ** The February 1, 2018 decision discussed here was based upon a request for rehearing. In its original decision, the court had incorrectly stated that “only the complaint may be considered when determining jurisdiction.” That ruling was based upon Holmes Group v. Vornado, 535 U.S. 826 (2002) that was overruled by the AIA statutory changes.

USPTO Fees and Revenue

Patent

Three months into FY2018, the USPTO has released some budget numbers – noting that spending is currently outpacing revenue. However, the Office has an optimistic outlook and is planning for revenue to catch-up (and spending to slow down).

Several USPTO fees were modified in January 2018. I’ll note here that the America Invents Act (AIA) of 2011 substantially expanded the USPTO’s fee setting authority. However, that authority is set to sunset in September of this year (2018).

Tax Cuts and Jobs Act (Public Law No.115-97)

Patent
  • Excludes certain patents, designs and secret formulas or processes from the definition of “capital asset”
  • Removes the ability to treat such intellectual property as a capital asset that would have been subject to lower capital gains tax rate of 20%
  • Treats gain from the sale of such assets as ordinary income, subject to higher rates

https://www.uspto.gov/sites/default/files/documents/20180201_PPAC_Legislative_Update.pdf

(Almost) Director Andrei Iancu

Patent

The USPTO should have a new director within the next few days. President Trump nominated Irell & Manella partner Andrei Iancu for the position last fall.  A vote is now scheduled on the Senate Floor for late Monday. So far, no Senators have voiced any direct opposition to the nomination.

Image result

 

Anthony McCain

Patent

Patently-O readers have been reading Anthony McCain’s “Bits and Bytes” on Patently-O for the past few years. McCain was one my Patent Law students but now has joined Duke Yee’s Dallas Firm (Yee & Associates).  Hopefully he’ll still have time to provide us with some insights now and then. Congratulations Anthony!

 

 

Trump on Intellectual Property

Patent

President Trump’s State of the Union speech promised protection of both “American workers and American intellectual property, through strong enforcement of our trade rules.”  Trump also noted that “I have directed my Administration to make fixing the injustice of high drug prices one of our top priorities. Prices will come down.”  Although, high drug prices are, in many cases, premised upon exclusive rights granted by patents, the Administration has – thus far – not offered any indication that it will be breaking (or bending) pharma patent rights.  For both new drugs and off-patent generics, the Trump Administration is looking to speed FDA approval noting that “last year the FDA approved more new and generic drugs and medical devices than ever before in our history.”

No Opinion on De Novo Review

Patent

In its petition for writ of certiorari, Riveer asks the following question:

Whether it is a denial of due process under the Fifth Amendment to the United States Constitution for the United States Court of Appeals for the Federal Circuit, on issues requiring de novo review, to affirm summarily in a one-word per curiam judgment under Federal Circuit Rule 36 a district court judgment which itself included no reasoning or explanation, concerning intellectual property rights including patent rights.

Petter Investments, dba Riveer v. Hydro Engineering, No. 17-1055.  The issues here are different from those I addressed in my article on the topic, but still of some importance.  [Link]

Supreme Court Patent Update for January 2018

Patent,

by Dennis Crouch

The Supreme Court has heard oral arguments in Oil States and briefing is ramping-up in one additional case, WesternGeco, that focuses on lost profit damages for international activities.

A fairly large number of petitions for writ of certiorari are pending – however, the questions presented lack diversity.  The vast majority of the pending petitions are Oil States follow-on cases that basically ask whether the post-issuance review proceedings are constitutional.  Other topics of pending petitions: Dealing with ‘evidence’ in eligibility decisions; Limits on ‘teaching away’ in obviousness; apportionment of lost profit damages; assignor estoppel; defining ‘exceptional case’ for attorney fees; and whether the Federal Circuit must issue reasons for its decisions.

Eligibility:

Obviousness:

  • Nidec Motor Corporation v. Zhongshan Broad Ocean Motor Co., Ltd., et al., No. 17-751 (Obviousness: does ‘teaching away’ requires express criticism; also Oil States issue)

Damages

  • EVE-USA, Inc., et al. v. Mentor Graphics Corporation, No. 17-804 (Apportionment and Assignor Estoppel)
  • NOVA Chemicals Corporation (Canada), et al. v. Dow Chemical Company, No. 17-564 (attorney fees – how exceptional)

Review of PTAB:

  • Google LLC v. Unwired Planet, LLC, No. 17-357 (Does the Federal Circuit has jurisdiction to review the PTAB determination that a patent is a “covered business method” patent; What level of deference should be given to PTAB decisions).
  • PNC Bank National Association, et al. v. Secure Axcess, LLC, No. 17-350 (parallel court proceedings: when is PTAB proceeding moot?)

Rule 36 No Opinion Judgments:

  • Celgard, LLC v. Joseph Matal, Interim Director, United States Patent and Trademark Office, No. 16-1526 (“Does the Federal Circuit’s issuance of Rule 36 judgments without opinions for the disposition of appeals from the Patent Office violates 35 U.S.C. § 144’s requirement that the Federal Circuit ‘shall issue’ its ‘mandate and opinion’ for such appeals?”; Also Oil States issues)
  • C-Cation Technologies, LLC v. Arris Group, Inc., et al., No. 17-617 (also raises Oil States issues)
  • Integrated Claims Systems, LLC v. Travelers Lloyds of Texas Insurance Company, et al., No. 17-330 (also raises Oil States issues)
  • Petter Investments, dba Riveer v. Hydro Engineering, No. 17-1055

Oil States Follow-On

  • Uniloc USA, Inc., et al. v. SEGA of America, Inc., et al., No. 17-1018
  • Worldwide Oilfield Machine, Inc. v. Ameriforge Group, Inc., No. 17-1043
  • KIP CR P1 LP, Successor in Title to Crossroads Systems, Inc. v. Oracle Corporation, et al., No. 17-707 and 17-708 (Response Requested by SCOTUS)
  • Hitachi Metals, Ltd. v. Alliance of Rare-Earth Permanent Magnet Industry, No. 17-768 (Response Requested)
  • Enova Technology Corp. v. Seagate Technology (US) Holdings, Inc., et al., No. 17-787 (Response Requested)
  • AT&T Intellectual Property II, L.P. v. Joseph Matal, Interim Director, United States Patent and Trademark Office, No. 17-643
  • Audatex North America, Inc. v. Mitchell International, Inc., No. 17-656
  • Hillcrest Laboratories, Inc. v. Movea, Inc., No. 17-39
  • Affinity Labs of Texas, LLC v. Joseph Matal, Interim Director, United States Patent and Trademark Office, No. 17-117; 17-232; 17-232
  • Affinity Labs of Texas, LLC v. Samsung Electronics Co., Ltd., et al., No. 17-116
  • IPR Licensing, Inc. v. ZTE Corporation, et al., No. 17-159
  • Paice LLC, et al. v. Ford Motor Company, No. 17-221; 17-220; 17-229; 17-112; 17-113; 17-111; 17-110; and 17-222.
  • Security People, Inc. v. Joseph Matal, Interim Director, United States Patent and Trademark Office, et al., No. 17-214
  • Outdry Technologies Corporation v. Geox S.p.A., No. 17-408
  • Skky, Inc. v. MindGeek, s.a.r.l., et al., No. 17-349
  • TransPerfect Global, Inc. v. Joseph Matal, Interim Director, United States Patent and Trademark Office, No. 17-535

Appointments and Illegal Adjudication: A Second Patent Judge Appointments Crisis

Patent

In 2007, Prof. John Duffy penned a Patently-O essay explaining that Administrative Patent Judges are at least “inferior officers” under the US Constitution (art. II, § 2, cl. 2) — requiring appointment by a Head of Department (i.e., Secretary of Commerce).   Duffy’s work on the topic prompted statutory reform and now all PTAB follow that appointment process.

In a new article, Prof. Gary Lawson takes Duffy’s analysis a major step forward – explaining that the PTAB is special because its Inter Partes Review actions are not further reviewed by any executive actor — rendering Administrative Patent Judges principal officer (rather than inferior) and requiring appointment by the President with Advice and Consent of the Senate.

Lawson, Gary, Appointments and Illegal Adjudication: The AIA Through a Constitutional Lens (January 12, 2018). George Mason Law Review, Forthcoming. Available at SSRN: https://ssrn.com/abstract=3105511.

The key precedent on point is likely Edmond v. United States where Justice Scalia explained:

Generally speaking, the term “inferior officer” connotes a relationship with some higher ranking officer or officers below the President: Whether one is an “inferior” officer depends on whether he has a superior. It is not enough that other officers may be identified who formally maintain a higher rank, or possess responsibilities of a greater magnitude. If that were the intention, the Constitution might have used the phrase “lesser officer.” Rather, in the context of a Clause designed to preserve political  accountability relative to important Government assignments, we think it evident that “inferior officers” are officers whose work is directed and supervised at some level by others who were appointed by Presidential nomination with the advice and consent of the Senate.

Based upon this analysis, Lawson then concludes that PTAB judges must be principal offices since they have “final decisional authority.”

The so-called “Duffy Defect” was somewhat easy to solve – although it did require a one-time change in statute and then re-appointments by the Director of Commerce.  Actually having the Senate confer on each PTAB judge seems like a much larger matter.  In his draft article, Lawson suggests (with some jest) his find be identified as the “Lawson Lacuna.” My ideas: “Lawson End Run”; “Lawson Appointments Gun”; or “Yes, the Law applies to you Son”

Pushing back: Although PTAB decisions are “final” there are a few factors that  might remove the judges from Lawson’s Principal Status. For example:

  • Because the PTAB judges act as members of a three-member tribunal, their personal administrative authority is substantially reduced.   No individual PTAB judge has “final decisional authority” but rather only a minority vote.
  • Although oversight is not ordinarily done on a case-by-case basis, there is substantial oversight and direction given to PTAB judges.
  • Each decision is subject to review, including consideration by an expanded panel at the behest of the PTO director that capable of overturning the prior decision (Although some PTO officials has denied that this happens).

Although I believe these factors are relevant and weaken Lawson’s argument somewhat, it is unclear at this point the extent that they are sufficient to fully undermine his conclusion.

 

NantKwest: Attorney Fee case Moving Toward Decision

Patent

by Dennis Crouch

In NantKwest v. Matal, the Federal Circuit will sit en banc to decide whether the cost-shifting provision found in 35 U.S.C. § 145 permits the USPTO to recover its attorney fees. I explained the setup in a prior post:

After being finally rejected by both the examiner and the PTAB, a patent applicant can then take its case to court. The Statute provides two options – either (1) a direct appeal to the Federal Circuit or (2) filing a civil action in district court to pursue a trial on the merits under 35 U.S.C. § 145.

An oddity of Section 145 civil action is the last line which states: “All the expenses of the proceedings shall be paid by the applicant.” In 2010, the en banc Federal Circuit ruled that the statute means what it says – expenses are to be paid by the applicant “regardless of the outcome.” Hyatt v. Kappos, 625 F.3d 1320 (Fed. Cir. 2010) (en banc). In NantKwest, the split panel ruled that the “expenses” include attorney fees.

In a sua sponte order, the Federal Circuit then ordered en banc review of the fee shifting rule – particularly whether the statutory “expenses” include attorney fees (especially in-house salaried attorney fees). Briefs have now been filed in the case and oral arguments are set for March 8, 2018 in the Federal Circuit’s Washington D.C. Courthouse at 717 Madison Place.

[Briefs Filed (Big PDF): 16-1794_Documents]

The US Government (USPTO) brief makes the basic argument that Congress intended for patent applicants to bear the expense of the optional district court proceedings, and attorney fees are a major component of that expense. The Gov’t further explains that the Federal Circuit majority approach has also been approved by the 4th Circuit with regard to the parallel Lanham Act provision. Shammas v. Focarino, 784 F.3d 219 (4th Cir. 2015). Although not express, the Gov’t approach suggests that “all expenses” need not even be limited to reasonable expenses.

In response, Nantkwest relies heavily on history – noting that prior to this case, “neither the PTO, nor Congress, nor the courts have ever interpreted § 145 to authorize any attorneys’ fees.” That history along with the presumption against fee shifting and the limited language of the statute should collectively prevent a fee award here.

  • Amicus from Federal Circuit Bar Association: The FCBA argues in support of NantKwest that expenses as used in the statute should not include attorney fees. Their prime example is that §145 does not say “attorney fees” while a parallel provision for infringement litigation, §285 does expressly say “attorney fees.” The longstanding practice of the USPTO has been to not ask for attorney fees – that approach should add considerable weight to whether the PTO’s interpretation is correct.
  • Amicus from AIPLA: “No reading of ‘all expenses of the proceedings’ can mean reimbursement of staff salaries.”
  • Amicus from IPO: “Attorneys’ fees are not expenses ‘of the proceeding'” as required by the statute.
  • Amicus from INTA: The American rule creates a strong presumption against attorney fee awards.

One of the basic debates here is how the general presumption against awarding attorney fees in US Courts should be applied.  The Government Lawyers makes the odd technical argument that the “American Rule” is a presumption is against awarding attorney fees to the prevailing party. Here, they argue, the presumption is not implicated since the statute awards fees win-or-lose.  That particular argument is wrong on many levels, but it does have the majority on its side as well as the 4th Circuit panel.

= = = = =

Patenting is a Pay for Service Process: In thinking through the case, one starting point is a recognition that the patent is a pay-for-service process.  Applicants pay for filing, for PTO searches, for PTO Examination, for Appeals, for Issuance, etc. Although it makes sense to spend some taxpayer money on encouraging scientific research and innovation, the pay-for-service model is much easier politically.  In that setup, it also seems reasonable that there would be a fee for filing and pursuing a civil action. With most fees today, the PTO is setting fees to reflect some average cost of providing service (with some additional policy preferences embedded into pricing).  However, the difficulty for the PTO here is that the mechanism for collecting fees under Section 145 looks just like fee shifting – which the courts historically disfavor.

GUI Menu Structure Found Patent Eligible

Patent

by Dennis Crouch

In a split opinion, the Federal Circuit has affirmed Core Wireless win over LG Electronics [DECISION] – finding the asserted patent claimed eligible subject matter and refusing to disturb the district court’s judgment of no-anticipation and infringement. U.S. Patent Nos. 8,713,476; 8,434,020; and 6,415,164 (UK Priority Date of July 2000). The patents here are directed to user-interfaces — basically users are shown a menu of applications; Selecting on an application takes the user to an “application summary” that includes functions of the application and files (“data”) associated with each application that can be selected to launch the application and enable the file to be seen within the application.

LG Challenged Claim 8 of the ‘476 patent – arguing that was improperly directed to an abstract idea. As shown below, the claim stems from independent broad claim 1.

1. A computing device comprising a display screen, the computing device being configured to display on the screen a menu listing one or more applications, and additionally being configured to display on the screen an application summary that can be reached directly from the menu, wherein the application summary displays a limited list of data offered within the one or more applications, each of the data in the list being selectable to launch the respective application and enable the selected data to be seen within the respective application, and wherein the application summary is displayed while the one or more applications are in an un-launched state.

8. The computing device of claim 1 in which the summary further displays a limited list of functions offered in the one or more applications.

Because eligibility is deemed a question of law, it is decided by district court judges (rather than juries) and reviewed de novo on appeal. Here, the district court refused to find an abstract idea – characterizing the claim as directed to “displaying an application summary window while the application is in an unlaunched state.” In the alternative, the district court also held that key innovations of the patent would render the claims eligible under Alice Step 2. In particular, the district court noted the key innovation of “directly” accessing the application summary from the menu while the application is yet “unlaunched.”

On appeal, the Federal Circuit affirmed – finding that the invented approach here is an eligible improvement to a computer system rather than simply the use of computers as a tool.

The asserted claims in this case are directed to an improved user interface for computing devices, not to the abstract idea of an index, as argued by LG on appeal. Although the generic idea of summarizing information certainly existed prior to the invention, these claims are directed to a particular manner of summarizing and presenting information in electronic devices. . . . These limitations disclose a specific manner of displaying a limited set of information to the user, rather than using conventional user interface methods to display a generic index on a computer. Like the improved systems claimed in Enfish, Thales, Visual Memory, and Finjan, these claims recite a specific improvement over prior systems, resulting in an improved user interface for electronic devices.

Holding: Claims are not directed to an abstract idea and therefore are eligible under Alice Step 1.

All judges on the panel agreed with this holding. The disagreement between the majority (Moore & O’Malley) and Dissent-in-Part (Wallach) comes over the definition of the claim term “unlaunched state.” The majority construed the term as “not displayed” while the dissent argues that it should be construed as “not running.” The two definitions result in differing treatment of apps that are running in the background. The changed construction result would likely impact both the infringement and anticipation conclusions. For its part, the majority explained that the patent used the word “launch” in several instances to be synonymous with “displayed” – thus leading to its conclusion.

PTAB on Indefiniteness

Patent

Ex Parte Barrego, APPEAL 2016-006527 (PTAB January 2018). Barrego’s claim is directed to a roofing underlay with a number of features including “a pattern having the appearance of a shingled roof printed on at least one surface of the underlayment.”  Here, the PTAB affirmed the indefiniteness rejection — finding that “one of ordinary skill would [not] be able to determine definitely whether many particular underlayment patterns do or do not have the appearance of a shingled roof.”  The patentee had referred the examiner to the submittted drawings: 


In Ex Parte Limbert, APPEAL 2017-008680 (PTAB 2018), the Board sided with the applicant on an indefiniteness rejection – holding that the claimed range for squirting out hand-hygiene gel ‘generally limited to a predetermined zone of interest’ was sufficiently definite despite a lack of definition of how much leeway the “generally limited” provides.

Finally in Ex Parte Gibbons, APPEAL 2016-005386 (PTAB 2018), the examiner had applicants’ claim for a nursing cover-up because the requirement of “a length that extends to at least the mother’s waist” would vary depending upon the waist length of a mother – and thus is indefinite as a measure. For this principle, the examiner cited MPEP 2173.05 (b) II (“a claim may be rendered indefinite by reference to an object that is a variable”). On appeal, the PTAB sided with the applicants – holding (1) the variable => indefinite statement from the MPEP is not a per-se rule; and (2) in this case a person of skill in the art will know how to make garments “to accommodate various body types is known in the art.”