By David Boundy

The following is a guest post by David Boundy – a Cambridge Massachusetts attorney with a specialty at the intersection of patent and administrative law. In 2007-09, David led the teams that quashed the Continuations, 5/25 Claims, IDS, Markush, and appeal rules under the Paperwork Reduction Act.

This is a follow-up to Dennis’s two posts on Jepson claims, of Sept 1, 2017 and Aug. 30, 2017.

Wherein the Improvement Comprises

Jepson Claims (Part II)

37 C.F.R. § 1.75(e), recommending that applicants “should” use Jepson form, is a classic case of a “general statement of policy” under the Administrative Procedure Act, 5 U.S.C. § 553(b)(A).  It’s only hortatory, with no force of law.  The PTO did exactly the right thing, stating that its preference is non-binding, by using the word “should.”  Patent attorneys do exactly the right thing in recognizing the multiple substantive perils of Jepson claims, and ignoring § 1.75(e).

The point that controls everything else is that the PTO has no relevant substantive rule making authority, and therefore has no power to dictate any matter of claim form that might have substantive consequences.  The PTO is permitted to announce any preference it likes on issues of claim drafting, and can even alert the public that life is easier for the PTO if applicants follow this preference for Jepson form.  But the PTO has no authority to require any claim drafting technique that has substantive impact.

Because this is an issue where the PTO has no rule making authority, § 1.75(e) could not be promulgated as a “must” binding regulation.  To bind the public with force of law, an agency must have authority for the particular rule, and follow Congress’ procedures for promulgating it (35 U.S.C. § 2(b)(2)(B), the Administrative Procedure Act, Paperwork Reduction Act, Regulatory Flexibility Act, Executive Order 12,866, and all the rest).  So even though the PTO jumped all the procedural hoops and ended up with something that looks facially like a “regulation” in CFR (rather than in guidance), without authority, that regulation has no force of law (and would not, even if § 1.75(e) had used the word “must”).

The Administrative Procedure Act, § 553(b)(A), creates a pigeonhole for this kind of expression of agency preference, called a “general statement of policy.”  (I wrote about “policy statements” earlier this summer.)  “General statements of policy” are often used by an agency to offer helpful suggestions (at least suggestions that the agency thinks might be helpful to it).  But conversely, “policy statements” are purely hortatory, with no binding effect against the public.  That’s exactly what the PTO did here, using the word “should” in § 1.75(e) to indicate a non-binding preference, rather than “must” to indicate a requirement.

Legality of the Matal Appointment: Acting As PTO Director

“Policy statements” are also used to unilaterally promise a quid pro quo or set a floor (“If you the public do x, we the agency promise favorable outcome y.  If you don’t do x, you can still convince us to do y if you convince us under the controlling law.”)  Such quid pro quo policy statements bind the agency to give favorable action y for any member of the public that relies on x, but impose no binding requirement on the public to do x.  Here, the PTO made no promise of any favorable result that would occur if an applicant uses Jepson form, so § 1.75(e) signifies nothing—and does it without sound and fury.

When the PTO has preferences of this sort, there is no requirement to put them in CFR regulations—§ 553(b)(A) expressly exempts “statements of policy” from any requirement to be stated in regulation.  (They still have to be published, § 552(a)(1)(B), but need not be baked into CFR and notice-and-comment.)  The PTO’s preference for Jepson claims could just as well have been in a guidance document like the MPEP.  There’s no error or harm in putting a “should” policy statement in a regulation rather than guidance, but no requirement either.

The only ethical principle for patent attorneys that I see, in absence of force of law, is to avoid doing dumb stuff that hurts the client.  Patent attorneys have ethical obligations to their clients to avoid all the substantive pitfalls of Jepson claims.  I see no “ethical guideline” that would pull in the direction of § 1.75(e)—though of course I’d love to learn something new, and I look forward to the comments.

Two meanders on a rainy Labor Day weekend that were prompted by looking at  § 1.75(e)—

First—

37 C.F.R. § 1.75(d)(1) says “ terms and phrases used in the claims must find clear support or antecedent basis in the description.”  There are multiple drafting errors here, and the PTO should correct them.

(a)  There is no requirement whatsoever for “antecedent basis” agreement between the spec and claims.  Sure, § 1.75(d)(1) blurs the “must” requirement by adding an alternative, “clear support or antecedent basis,” but the Paperwork Reduction Act requires that regulations be “written using plain, coherent, and unambiguous terminology.”  Agencies are not permitted to waste the public’s time by tossing red herrings and irrelevancies into their regulations and leaving it to the public to decipher the agency’s sleight of hand (or spend hours over the years pointing examiners to the word “or” that so many overlook).

(b) § 112(b) permits “written description” and enablement support to be drawn from the drawings as well as the specification.  A rule that says it “must” be in the “description” is at the best unclear, and at worst over-prescriptive.

I get it, it’s easier for the PTO to examine an application when the claims and specification use the same terms.  But the PTO has no authority to put that preference in a “must” regulation.

Second—

The “single sentence rule” of MPEP § 608.01(m), affirmed by the D.C. District Court in Fressola v. Manbeck, 36 USPQ2d 1211 (D.D.C. 1995), stands on flimsy ground, though I’m not sure which way a better-argued case under today’s law would come out.

The D.C. District Court noted that claims can be drafted in single sentences or multiple, as only a matter of form, with no substantive effect, and the rule is thus “procedural” and not subject to requirements for notice and comment.  Even assuming that the Court’s characterization as “procedural” is correct, it doesn’t answer the question—the APA’s §§ 552 and 553 set procedural requirements for any rule that an agency wants to promulgate with binding effect, even procedural rules, and the MPEP doesn’t qualify and never did (an administrative law point that Fressola didn’t argue).  Today’s 35 U.S.C. § 2(b)(2) is even clearer, requiring § 553 “regulations” for procedural rules, and forbidding the PTO’s practice of promulgating procedural requirements in guidance.  Further, the language of today’s § 2(b)(2)(B) (especially when contrasted to pre-1999 § 6) is similar to the language in other statutes for other agencies, and the agencies accept that the language means they “must” use notice and comment.  See, e.g., Department of State, Notice of Proposed Rulemaking, 64 Fed. Reg. 53632 (Oct 4, 1999) (“Pursuant to [9 U.S.C. § 553], the rulemaking procedures of [5 U.S.C. § 553] apply to any determination to effectuate such a modification or amendment [of the Department’s procedural rules for international arbitration]. In accordance with those procedures, notice must be published in the Federal Register, time for comment provided, and the final rule published for 30 days before the rule may become effective.”).

The Fressola court stated (citing Chevron) “the Plaintiff must nonetheless overcome a quite deferential standard of review in order to justify the invalidation of a portion of the MPEP by a reviewing court.”  Nonsense.  That kind of deference only applies to interpretations (not rules cut out of whole cloth, like the single sentence rule), issued in a reasonably formal form published to the regulated public (not squirreled away in guidance directed to agency employees).  Subsequent developments in the Chevron administrative law space (specifically Mead and Christensen) make even clearer that informal guidance is not entitled to high deference.   An agency only gets that kind of deference after it earns it by jumping several hoops of formality for its interpretation.

The reasoning of Fressola is a terribly confused mish-mash of incompatible legal principles (see my upcoming article in ABA Landslide, later this fall, which provides a helpful taxonomy of rules).  The single sentence rule and Fressola have been entirely undercut by developments since 1995.  (The continuing vitality of Ex parte Quayle practice also comes to mind.)

But at the end of the day, the “single sentence” rule could squeak through a challenge, under the administrative law standing principles of “suffering legal wrong” and “harmless error”—even Fressola admitted that his single-sentence claims suffered no substantive disadvantage relative to his multi-sentence claims.

For patents issued thus far in 2017, the average patent lists 44 references submitted by the patent applicant for the examiner to consider. The median patent, however, only has 10 applicant cited references.  The gulf between the mean and median is the result in skew in the dataset — here caused by a fairly small percentage of patents that cite a disproportionately large number of references.  Thus, if you pick a few patents at random, about half of them will have <10 references cited by the applicant.  Every once in a while, though, you’ll come across a big papi – see, for example U.S. Patent No. 9,535,563 and its 7,800 references cited by the applicant (inventor-patent attorney Steven Hoffberg).  At the other end of the spectrum, about 12% of applicants cite no prior art at all — this is down from about 20% in 2005.

One way to think about the skew is to look patents where applicants submit cite 250+ references — that represents about 3.5% of patents issued in 2017 thus far (though only 0.5% of patents issued in 2005).  Those 3.5% of issued patents account for half of the prior art submitted to the PTO.

To be clear – I’m not demonizing patentees who submit lots of references.  What I’m working toward is whether the large number of references creates any special difficulty or benefits for the examination process and whether examiners receive any special assistance in considering the large number of references submitted.

I think the chart below is interesting. I took the 2017 patents and grouped them in quintiles according to the number of references cited.  For each quartile, I then found the average pendency (in months) for the issued patents.  The results are clear – patents with more citations correlate with longer pendency.  (Note that the auto-created axis does not reach ZERO – this makes the slope appear more dramatic than reality).  Obviously we should be a bit cautious in interpreting this chart as suggesting a causal role.

by Dennis Crouch

Over the past several of years, the court has appeared to be increasingly divided on the question of when a district court (or PTAB judge) must offer an express construction of beyond simply assigning a claim its “plain and ordinary meaning” without further definition.  In NobelBiz v. Global Connect, the Federal Circuit ruled that disputed claims must be construed (despite some precedent to the contrary).  That result means that NobelBiz’s jury win is vacated and remanded.

Please Define What you Mean by Ordinary Meaning

Now in its en banc filing, the patentee has asked three questions:

1. May a district court ever assign a “plain and ordinary meaning” construction? Or is an express construction required whenever a litigant asserts an O2 Micro “dispute,” as dictated by NobelBiz and Eon?
2. May the Federal Circuit narrow claim scope without finding lexicography or prosecution disclaimer, by parsing the intrinsic record and relying on “extra-record extrinsic evidence,” as occurred in NobelBiz?
3. May a district court refer the question of infringement to a jury when claim terms are assigned their plain and ordinary meaning?

The briefing is well done and does good job of highlighting the distinct approaches by the various Federal Circuit judges.  Even if they disagree on the appropriate rule, all of the Federal Circuit judges should agree that this is an issue that needs resolution.

[Panel Opinion with Newman Dissent][Petition for Rehearing En Banc]

Oil States v. Greene’s Energy (Supreme Court 2017)

Briefing continues in the Oil States constitutional challenge to the IPR System.  Amicus briefs supporting either the petitioner or neither party were due August 31 with at least 31 filings –  Respondents’ brief (both Greene’s Energy and USPTO) will be due October 23 with supporting amicus shortly thereafter.

• Petitioner Merits Brief [Brief][Discussion of Brief]
• Amicus in Support of Petitioner
  • Alliacense (N.Heller) [Brief][Discussion of Brief]
  • Grass Root Inventors (R.Greenspoon) [Brief]
  • 27 Law Professors (Mossoff) [Brief]
  • CATO Institute [Brief]
  • Affected Patent Owners [Brief]
  • Eagle Forum [Brief]
  • Unisone Strategic IP [Brief]
  • Security People [Brief]
  • Abbvie [Brief]
  • BIO and AUTM [Brief]
  • Blackwell [Brief]
  • Karshtedt [Brief]
  • Evolutionary Intelligence [Brief]
  • Gary Lauder [Brief]
  • IEEE-USA [Brief]
  • InterDigital [Brief]
  • Liquid Power [Brief]
  • Pacific Legal and Private Property Interest Groups [Brief]
  • PhRMA [Brief]
  • Prof. Ely [Brief]
  • UNM [Brief]

• Amicus in Support of Neither Party
  • Gomez-Arostegui [Brief][Discussion of Brief]
  • Association of Amicus Cousel [Brief]
  • NYU Civil Jury Project [Brief] (Important Brief by Chemerinsky)
  • IPO [Brief] (Patents are private rights)
  • Shire Pharma [Brief]  (IPRs harm the biotech industry)
  • 3M [Brief] (ending IPRs won’t harm the patent system)
  • AIPLA [Brief] (IPR system is OK; although property, patents are public rights for the Article III analysis)
  • BPLA (Boston) [Brief] (IPRs serve an important goal) 
  • PTAB Assn [Brief] (IPR “Benefits all parties”)
  • IPLAC (Chicago) [Brief] (Patents issued after AIA might be treated differently than those issued before-hand) 
• Petitions-stage Briefs
  • 16-712-petition
  • 16-712-respondents-BIO
  • 16-712-Reply-Brief-for-Petitioner
  • 16-712-Government-BIO
  • 16-712-Reply-to-Federal-Respondent

I have not reviewed all of these these briefs, yet, but have a few notes above.  As expected, the vast majority of these top-side briefs support the petitioner. I have highlighted above the few briefs, including that by AIPLA, that support keeping the current system.

by Dennis Crouch

In an earlier post, I wrote about the Code of Federal Regulations’ requirement that patent claims “should” be drafted in Jepson form. 37 C.F.R. 1.75(e).  This claim structure uses the preamble to particularly identify the elements of the invention known in the art with the body simply reciting the “portion of the claimed combination which the applicant considers as the new or improved portion.”  In my view, Jespon claims are so nice to read because they actually spell out what has been improved by the invention.  Unfortunately, they also are seen as increasing the chance that the patent will be both narrowly interpreted and found invalid – and that the statement regarding the prior art will be seen as an admission.  For much these same reasons, most patents no longer particularly identify their “invention” beyond stating that it is embodied by each claim taken as a whole.  Prof. Kayton, who trained generations of patent attorneys in his PRG classes was particularly adamant about avoiding Jepson claims.

Gene Quinn on his blog writes “No patent attorney in their right mind would follow this suggestion.” (referring to Rule 1.75(e)).  While I largely agree that Jepson claims are problematic for the reasons stated above – I would caution patent attorneys to ensure that their ethical guidelines are being met.  In particular, when the law says that attorneys “should” do something, it seems improper to entirely ignore the law’s suggestion. Rather, the patent attorney should consider – as stated in the Rule – whether “the nature of the case admits” such a claim form.  An additional ethical trick when thinking through this is to consider whether a family-member patent claim has already been (or will be) filed in a separate jurisdiction that requires this form.

In a 2009 post, Aaron Feigelson reported some interesting data on the use of Jepson claims in the US.  Essentially that its use had dropped tremendously as shown by Feigelson’s chart below (reproduced with permission).

Feigelson’s data just ran through 2009 and may actually overstate the prevalence of Jepson claims because he includes any patent with the word “improvement” in the claim. I just updated the data up through 2017 with the chart shown below – looking for patents having at least one claim with the following phrase “the improvement compris.”  As you can see, less than 1 out of every 1,000 newly issued patents is in this claim form. 

The most recent patent with a Jepson claim is U.S. Patent No. 9,744,559 covers the use of nanoparticle materials for “high contrast surface marking,” and is only found in Claim 24.

24. In a thermally activated, chemically based marking method comprising the steps of:

applying a layer of a marking composition to the surface of a substrate and irradiating said layer with radiant energy which is absorbed by at least one component of said marking composition,

the improvement comprising the use of marking compositions comprising amounts of at least one pigment encapsulated in silica nanoparticles and further comprising nanoparticles of materials selected from the group consisting of silica, metal oxides and metal compounds comprising at least one of tungsten, molybdenum and chromium, and combinations thereof,

wherein these materials are all colloidally suspended in a liquid comprising aqueous and/or organic solvents, said amounts being sufficient to produce a marking layer atop said substrate having improved properties including at least one of stronger bonds, better color properties, and finishes smooth enough not to retain bacteria.

In a sua sponte en banc order, the Federal Circuit has announced its intent to reevaluate the NantKwest decision permitting the PTO to recoup its attorney fees in defending a Section 145 civil action.

Issue: Did the panel in NantKwest, Inc. v. Matal, 860 F.3d 1352 (Fed. Cir. 2017) correctly determine that 35 U.S.C. § 145’s “[a]ll the expenses of the proceedings” provision authorizes an award of the United States Patent and Trademark Office’s attorneys’ fees?

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 panel ruled that the “expenses” include attorney fees.

[Panel Decision][Patently-O Write-up]

The panel decision was split – with Judges Prost and Dyk in majority and Judge Stoll in dissent and arguing that the term “expenses” is not sufficient to overcome the traditional american rule regarding attorney fees.

We begin claim drafting today in my patent law course. I wonder what Patently-O readers think of the following patent office rule found in 37 C.F.R. 1.75(e)

Where the nature of the case admits, as in the case of an improvement, any independent claim should contain in the following order:

1. A preamble comprising a general description of all the elements or steps of the claimed combination which are conventional or known,
2. A phrase such as “wherein the improvement comprises,” and
3. Those elements, steps, and/or relationships which constitute that portion of the claimed combination which the applicant considers as the new or improved portion.

Recognize here (1) as a promulgated rule, the provision has the force of law but (2) very few claims follow this suggested form.

It is difficult for me to judge the merits of the Oil States constitutional arguments as I am neither a legal historian, a constitutional law expert, nor an expert on administrative law.  What I do know is that it would be a rather big deal if the Supreme Court ruled that the IPR regime is constitutionally prohibited.

My question of the day:

Assuming hypothetically that IPR is ruled unconstitutional, how should the courts and PTO deal with the thousands of patents whose claims have already been found unpatentable and cancelled by the PTAB?

An easy practical answer is that Oil States would effectively overrule those administrative decisions and thus removes any preclusive impact of an IPR cancellation.  That approach runs into significant problems when a court has already relied upon an IPR cancellation to issued a final judgment (with appeals exhausted).  Our federal courts strongly favor finality of judgments and are wont to revisit those judgments even when later evidence suggests that the judgment was based upon faulty information.

I should note here, however, that IPR cancellations or ordinarily not relied upon for their preclusive effect, but rather courts hold essentially that a patentee has no standing to assert cancelled claims – the patentee’s cause of action goes away.  In a property sense, the patentee no longer has any property right to the cancelled claims.  With that theory in mind, it is not clear to me that win for Oil States would automatically annul prior IPR final decisions.  Rather, those already-cancelled claims are likely to require a revival action by the PTO before the patents are again assertable.

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Get a Job doing Patent Law                  

• NSIP LAW
• Holland & Hart
• The Webb Law Firm
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• Brown & Michaels

Recurring Patently-O contributor Ned Heller has filed his brief in support of petitioners in the Oil States case. Heller represented MCM v. HP in its parallel bid for consideration of the Article III issues.  [16-712 tsac Brief][Filed on behalf of Alliacence where Heller is Counsel]

The basic argument is historic — Inventors had a right to a trial by jury prior to 1791; those rights were guaranteed by the Seventh Amendment of the US Constitution; and Congress cannot now eliminate those established rights.

Heller reflects upon the remedy of scire facias that was at times commenced in the Chancery court.  As the law historians brief reflects, in this particular, the Chancery action operated as a common law court (rather than a court of equity) — “the Chancellor at all times was acting with his ordinary, common law powers, not his extraordinary, equitable powers.”  Thus, a scire facias action is also subject to the right of Jury Trial.

Because Inter Partes Review is effectively scire facias, it is improper without a jury trial.

[IPR] provides the same remedy, revocation, and the same grounds, invalidity as do scire facias, albeit, limited only to the claims challenged. Both are contested proceedings. Both begin with a petition by an interested party to the government. The common law proceeding was pursued in the name of the King, but the real party in interest was the petitioner who had to post a very large bond to pay the attorney’s fees of the patent owner.

Because IPR does not provide a jury trial, the statute authorizing IPR is unconstitutional.

Heller’s brief delves into the “public rights” debate and argues that argument is a red herring.  Regardless of the statutory basis of patent rights, a contested revocation proceeding has a right to a jury trial because it had such a right at common law in England in 1791.

Heller does offers an upper-cut to the Government’s argument at the petition stage:

Because they were filed in Chancery, the government has argued that the actions were equitable (apparently not even knowing that Chancery had a law side) thereby providing no basis for a Seventh Amendment right.

The law historians brief along with Heller’s brief here begin to nail down this historical point. “[E]quity could not and did not revoke patents for invalidity since an adequate remedy at law was available.”

Regarding the privy council’s ability to cancel patents without jury trial. Heller argues that longstanding political battle between the king and courts effectively ended in the 1750’s – in favor of a common law courts. However, in 1779, the Privy Council did cancel one last patent – this one on National Security grounds. (England needed the patented cannons to conduct war against the American colonies).

More amicus briefs in this important case are expected this week.

= = = = =

A key point in the briefs so far is that IPR is substantially parallel to litigation.  However, in the very recent Cuozzo decision, the Supreme Court held that in “significant respects, inter partes review is less like a judicial proceeding and more like a specialized agency proceeding.”  An upcoming amicus would do well to address this point.

Ultratec v. CaptionCall and Matal (Fed. Cir. 2017)

Ultratec’s patents relate to systems for facilitating phone calls for deaf people.  In eight parallel IPR proceedings, the PTAB found the challenged claims anticipated and/or obvious.   On appeal, the Federal Circuit has vacated – holding that “the Board failed to consider material evidence and failed to explain its decisions to exclude the evidence.”   As you might expect, the panel of Judges Newman, Linn, and Moore held the PTAB’s feet to the fire.

The setup here is typical of the problematic parallel proceedings with the PTAB cancelling patents after final court judgment enforcing patent rights:

Ultratec sued CaptionCall … for infringement [and] the jury found the patents valid and infringed and awarded damages of $44.1 million. Five months after the verdict, the Board issued final written decisions holding all challenged claims of Ultratec’s patents were either anticipated or would have been obvious. The district court subsequently stayed all post-judgment proceedings pending final resolution of the IPRs.

The particular issue here involves the patent challenger CaptionCall’s expert witness Benedict Occhiogrosso who provided testimony both for the court proceedings and for the IPR.

One week after the court trial, the patentee Ultratech attempted to introduce Occhiogrosso’s trial testimony into the IPR proceedings to show conflicts between the two – but the PTAB repeatedly blocked that attempt without ever reviewing the trial testimony. Ultimately, the PTAB issued a final decision crediting Occhiogrosso’s credibility for its final conclusion of unpatentaiblity.

When the patentee first attempted to introduce the original trial testimony, its request was denied because Ultratech had not followed the rules of first requesting authorization to file a such motion. 37 C.F.R. § 42.123(b).  Subsequently, Ultratech did request authorization, but that request was denied (orally) without the Board ever reviewing the conflicting testimony since, under PTAB rules, the request may not include information related to the supplementary evidence.   The PTO solicitor’s office then refused to include the full documentation regarding these submissions in the ‘official’ record submitted to the Federal Circuit.

On Appeal, the Federal Circuit found that the Board had abused its discretion in refusing to supplement the record:

This record affords but one reasonable conclusion: Ultratec satisfied both of § 42.123(b)’s requirements for allowing Ultratec to file a motion to admit Mr. Occhiogrosso’s trial testimony. First, the evidence could not have been obtained earlier. Ultratec emailed the Board requesting authorization to file a motion to supplement the record the week after the jury trial concluded. This is not evidence that could have been located earlier through a more diligent or exhaustive search; it did not exist during the IPR discovery period. . . . The Board offers no reasoned basis why it would not be in the interest of justice to consider sworn inconsistent testimony on the identical issue. . . . Ultratec sought to offer recent sworn testimony of the same expert addressing the same patents, references, and limitations at issue in the IPRs. A reasonable adjudicator would have wanted to review this evidence. If Mr. Occhiogrosso gave conflicting testimony on cross-examination, this would be highly relevant to both the Board’s analysis of the specific issues on which he gave inconsistent testimony and to the Board’s overall view of his credibility. Mr. Occhiogrosso’s testimony was critical to the Board’s fact findings in this case, as the opinions’ repeated reliance on it establishes. Under such circumstances, no reasonable fact finder would refuse to consider evidence of inconsistent sworn testimony. Moreover, any such inconsistencies would likely bear on the overall credibility of the expert. . . . Admitting and reviewing Mr. Occhiogrosso’s trial testimony would have placed minimal additional burden on the Board.

After finding problems with this particular decision, the court went on to particularly find problems with the Board’s procedures that “contributed to its errors in this case.”

The first problem is that the rules suggest that the Board will decide motions to request a supplement without “the information necessary to make a reasoned decision.”  Basically, the problem is the required request to file a motion to supplement may not include any discussion of the content of what is to be supplemented — this means that the request may be denied (as here) without the Board ever reviewing the information. “The Board’s only exposure to the disputed testimony was the parties’ competing characterizations of it during the conference call for which there exists no record.”

The second problem is that “the Board’s procedures allowed it to make significant evidentiary decisions without providing an explanation or a reasoned basis for its decisions.”  This violates general principles of administrative law.

The third problem is that the Board’s procedures impede appeals by keeping meaningful information out of the record. For instance, the appellate court writes “We are also prohibited from viewing Mr. Occhiogrosso’s testimony because it is not part of the record.”

Unfortunately, although the Federal Circuit identifies problems with various PTAB rules and procedures, the Court did not expressly hold that those rules must be revised.  Rather, the holding is simply:

On remand, the Board shall admit and consider Mr. Occhiogrosso’s trial testimony. If the Board finds he gave inconsistent testimony, the Board shall consider the impact on the specific patents at issue in the trial testimony as well as on his credibility as a whole.

Read the decision.

= = = = = =

U.S. Patent Nos. 5,909,482 (“the ’482 patent”), 6,233,314 (“the ’314 patent”), 6,594,346 (“the ’346 patent”), 6,603,835 (“the ’835 patent”), 7,003,082 (“the ’082 patent”), 7,319,740 (“the ’740 patent”), 7,555,104 (“the ’104 patent”), and 8,213,578 (“the ’578 patent”).

The Trump Administration has announced its nomination of Andrei Iancu for the role of PTO Director.  Iancu is a patent attorney and IP litigator at Irell & Manella where he is also managing partner of the firm.

by Dennis Crouch

The America Invents Act of 2011 brought about sweeping changes to the US Patent System — most dramatic of these was the creation of the administrative trials: especially Inter Parties Review (IPR) and Covered Business Method Review (CBM).

But if initiation of the AIA Trial system has been dramatic, the potential outcome of Oil States Energy Servs., LLC v. Greene’s Energy Group, LLC (Supreme Court 2017) is even more so.  Oil States is asking the Supreme Court to find the IPR system unconstitutional and thus order the system dismantled.

Earlier in 2017, the Supreme Court agreed to hear the Oil States case on the following question:

Whether inter partes review—an adversarial process used by the Patent and Trademark Office (PTO) to analyze the validity of existing patents—violates the Constitution by extinguishing private property rights through a non-Article III forum without a jury.

Oil States has now filed its very well written opening merits brief.  Briefing will continue over the next few months, and I expect substantial amicus filing on both sides of the case, as well as input from President Trump’s Department of Justice.

The patent at issue in the case is U.S. Patent No. 6,179,053 that covers a lockdown mechanism for well tools. After being sued for infringement, Green filed the IPR petition with the USPTO and the agency eventually found the challenged claims unpatentable on a broad claim construction (after first rejecting the district court’s claim construction).   The Federal Circuit then affirmed the case without opinion (R.36).  The implication here: Oil States believes its patent is valid when properly construed.

The argument in this case begins with a focuses on history — for centuries, patent infringement and validity disputes have been decided in courts. “Article III promises a court to these litigants, and the Seventh Amendment promises a jury.”  The America Invents Act (AIA) shifts the approach – to having an administrative agency handle the “trial proceedings.”

With this background, Oil States argument is straightforward:

As this Court has long held, “Congress may not ‘withdraw from judicial cognizance any matter which, from its nature, is the subject of a suit at the common law, or in equity, or admiralty.’ ” Stern v. Marshall, 564 U.S. 462 (2011) (quoting Murray’s Lessee v. Hoboken Land & Improvement Co., 18 How. 272 (1855)). That is just what Congress has done with inter partes review, which wrests patent-validity cases from federal courts and entrusts them to administrative-agency employees, who decide questions of law that Article III reserves to judges and questions of fact that the Seventh Amendment reserves to juries. Neither Article III nor the Seventh Amendment tolerates this circumvention. . . . “When a suit is made of ‘the stuff of the traditional actions at common law tried by the courts at Westminster in 1789,’ * * * the responsibility for deciding that suit rests with Article III judges in Article III courts.”  Stern (quoting N. Pipeline Constr. Co. v. Marathon Pipe Line Co., 458 U.S. 50, 90 (1982)).

The brief does an excellent job of demarcating a justiciable line for the Court.  According to the briefs, the problem with IPR isn’t really that the PTO is invalidating patents, but instead that the IPR regime is set-up as a full-on adversarial judicial proceeding to invalidate patents that is designed to promote a different outcome and without the Article III protections of district courts.  That wholesale replacement of the Article III court and Jury rights is simply not allowed.

One way that the court could rule against Oil States is by ruling that the IPR cancellation process involves “public rights” rather than private property rights.  To do so, however, would come in fairly directly conflict with the court’s recent statements in Stern.

More to come on this interseting ! Top-side amici briefs are due in 7-days.

Read the Brief: Oil States Energy Services 082417 AS FILED

The Federal Circuit rejected many of these arguments in MCM. Read the court’s decision here.

by Dennis Crouch

In an earlier post, I commented on what I suggested was an error by Professor Oren Bracha in his SJD Thesis Owning Ideas: A History of Anglo-American Intellectual Property.  On further reflection – Bracha was not wrong, but exactly correct. 

Bracha’s work cited a 1904 treatise on English Patent Law as stating that “revocation clauses authorizing the Privy Council to revoke patents were continued to be inserted in the patent grants up to 1902.”  Although the 1904 treatise itself is somewhat cryptic, the 1852 patent law sets out a “statutory form” for a patent right that includes the caveat for the privy counsel (or the queen herself) to void the patent if it turns out it was improperly issued or becomes “prejudicial or inconvenient.”  The form indicates the following statement should be included with each patent grant:

Provided always, and these Our Letters Patent are and shall be upon this Condition, that if at any Time during the said Term hereby granted it shall be made appear to Us, Our Heirs or Successors, or any Six or more of Our or their Privy Council, that this Our Grant is contrary to Law, or prejudicial or inconvenient to Our subjects in general, or that the said Invention is not a new Invention as to the public Use and Exercise thereof, or that the said is not the true and first Inventor thereof within this Realm as aforesaid, these Our Letters Patent shall forthwith cease, determine, and be utterly void to all Intents and Purposes, anything herein before contained to the contrary thereof in anywise notwithstanding.

Patent Law Amendment Act of 1852 [PL Amendment Act (1852)].

The historic point here – although the it did not actually revoke any patents after 1779 — the privy council seemingly held that power up until at least 1902.

I only had a chance to look through one English patent issued during this time period – the 1896 Marconi patent. The patent does include the caveat that permits the Privy Council to void the patent – following the form language almost identically.

Thank you to Professors John Golden and Oren Bracha for providing copies of these historic references and pointing out my error. 

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Applying it to Oil States: When the US was formed, we rejected the notion of royalty and the surrounding apparatus (including a privy council).  So, in my view, there is not a direct line of reasoning that somehow transfers the privy council power to the PTO or even to Congress to distribute as it wishes.  Rather, the way that I think about the privy council issue in relation to Oil States is to focus on the question of whether administrative revocation somehow offends our American court structure and its place within the federal government.  I can imagine the Supreme Court writing something along the lines of: “Even in England, at the heyday of common law courts, patents could be administratively cancelled upon private petition.”  Under this interpretation privy council supports the PTO’s power to revoke.

There is a flip-side argument here that might support Oil State’s position.  The argument involves the manner in which the Privy Council (and Queen’s) power to cancel was created for each patent by expressly including the power as an express caveat to each patent grant.  In the US, these sorts of caveats were never included within the patent grant (as far as I’m aware), and certainly were not included within pre-AIA patents being cancelled via Inter Partes Review.

= = =

One further note for those delving into history:  I mentioned Bracha’s Thesis work Owning Ideas: A History of Anglo-American Intellectual Property.   Bracha has a much more recent book: Owning Ideas: The Intellectual Origins of American Intellectual Property, 1790–1909 (Cambridge Press 2016) that focuses on development of American law.

by Dennis Crouch

Nidec Motor v. Zhongshan Broad Ocean Motor (Fed. Cir. 2017)

Serial Filings: Important statement here from the Court against allowing a PTAB IPR patent challenger to continue to file additional IPR petitions after the 1-year deadline of 315(b) via the joinder process of 315(c); and also against stacking of PTAB Board to achieve particular results on rehearing.  The court’s statement though is entirely dicta – it actually affirmed the PTAB decision here where these actions occurred. 

On appeal in this case is the PTAB’s cancellation of the claims of Nidec’s Patent No. 7,626,349.  The patent covers an HVAC with an improved motor controller that uses sinus-wave powering (rather than square-waves) for reduced noise.

In September 2013, Nidec sued Broad Ocean for infringement and Broad Ocean followed with an IPR petition in July 2014 (within the one-year deadline).  The Board (acting on behalf of the PTO Director) partially instituted the IPR – but denied on the grounds relating to a Japanese Publication since Broad Ocean had attested to the translation accuracy.  In February 2015 (a month after the original petition decision), Broad Ocean filed a second petition – this one including the required affidavit.

The PTAB originally denied the new petition – holding that it was filed after the 1-year statutory deadline following the lawsuit initiation. 35 U.S.C. § 315(b).  That original panel decision was split, with Judges Wood and Boucher in the majority, and Tartal in dissent.  Tartal argued that the late-filing should be allowed to be joined (under § 315(c)) to the original IPR proceeding in a way that avoided the 1-year filing deadline.    Statutes at issue:

315 (b)Patent Owner’s Action.— An inter partes review may not be instituted if the petition requesting the proceeding is filed more than 1 year after the date on which the petitioner … is served with a complaint alleging infringement of the patent. The time limitation set forth in the preceding sentence shall not apply to a request for joinder under subsection (c).

315 (c) Joinder.— If the Director institutes an [IPR], the Director, in his or her discretion, may join as a party to that inter partes review any person who properly files a petition under section 311 that the Director … determines warrants the institution of an inter partes review under section 314.

On the rehearing, the PTAB Chief (acting on behalf of the PTO Director) shuffled the Board seemingly to change the result – adding two additional judges – Medley and Arbes – with the result that the dissenting opinion became the majority who offered an interesting explanation of the statute.  Section 315(c) textually appears to focus on joinder of additional people.  However, the text actually allows for “joinder of any person” – and according to the majority that should be interpreted to allow the “same person” to join himself to his prior filing (and in the process bring-along additional claims).

§ 315(c) permits the joinder of any person who properly files a petition under § 311, including a petitioner who is already a party to the earlier instituted [IPR]. We also conclude that § 315(c) encompasses both party joinder and issue joinder, and, as such, permits joinder of issues, including new grounds of unpatentability, presented in the petition that accompanies the request for joinder.

After joinder, the Board went on to find the challenged claims obvious (based upon challenges instituted in the original petition) and anticipated (based upon challenges in the second petition)

Unfortunately for the appeal, the Federal Circuit determined that it “need not resolve” the joinder issue because the obviousness finding were proper and were based upon the original petition.

Because there is no dispute that Broad Ocean timely filed the First Petition (containing the obviousness ground), the issues on appeal relating only to the Board’s joinder determination as to anticipation ultimately do not affect the outcome of this case

The court opinion affirming obviousness was written per curiam. An important concurring opinion was filed by Judge Dyk and joined by Judge Wallach suggesting that the PTAB’s joinder decision is wrong and that stacking of panels is problematic.  The opinion’s designation as concurring appears to be an implicit recognition that the additional opinion is dicta.

They write:

[W]e write separately to express our concerns as to the [PTO] position on joinder and expanded panels since those issues are likely to recur. Although we do not decide the issues here, we have serious questions as to the Board’s (and the Director’s) interpretation of the relevant statutes and current practices. . . .

The issue in this case is whether the time bar provision allows a time-barred petitioner to add new issues, rather than simply belatedly joining a proceeding as a new party, to an otherwise timely proceeding. Section 315(c) does not explicitly allow this practice. We think it unlikely that Congress intended that petitioners could employ the joinder provision to circumvent the time bar by adding time-barred issues to an otherwise timely proceeding, whether the petitioner seeking to add new issues is the same party that brought the timely proceeding, as in this case, or the petitioner is a new party. . . .

Second, we are also concerned about the PTO’s practice of expanding administrative panels to decide requests for rehearing in order to “secure and maintain uniformity of the Board’s decisions.” . . .

[Although t]he Director represents that the PTO “is not directing individual judges to decide cases in a certain way”[,] we question whether the practice of expanding panels where the PTO is dissatisfied with a panel’s earlier decision is the appropriate mechanism of achieving the desired uniformity.

Part of the reason why this is all dicta is that the PTO Director’s decision whether or not to initiate proceedings is – by statute – not appealable.

by Dennis Crouch

In my view, a potential critical historical question in Oil States is whether the English Privy Council was empowered to revoke patents back in 1791.

For many years leading up to its last cancellation action in 1779, the Privy Council operated as a kind of administrative body empowered to revoke or void issued patent rights on signature of a sufficient number of Privy Council members.   If the Privy Council was empowered in the 1790s to cancel issued patents without judge or jury, that suggests that – in today’s world of expanded administrative power – Congress can also empower a the PTO to cancel issued patents.  Some folks may reflect that – although Old English Law matters for the Seventh Amendment jury trial issue, it is much less critical for the administrative law question.  Others will also argue that the Privy Council approach was entirely rejected by Americans when we rejected the notion of American Royalty.  I’ll slide by these points for this point and instead look at uncovering some Privy Council history.

If we begin with recognizing that the Statute of Monopolies indicated that patents should be tried by the courts, one explanatory theory for the Privy Council’s power is that English patent rights always included a caveat that permitted patents to be cancelled by the Council as an alternative avenue.   Certainly, the Privy Council was active in these proceedings prior to 1779.

A 1904 treatise titled The English Patent System (by William Martin) states that, although Privy Council had not taken any recent actions, the Patents Law Amendments Acts of 1852 and 1902 each include a proviso allowing granted patents to be revoked by the Privy Council:

Although the Statute of Monopolies declared that patent grants should be tried in the courts of common law “and not at the Council Table,” this power continued to be inserted in patents. Even at the present day the statutory form of the patent, as also that enacted for the first time in 1852, contains a similar proviso against prejudice and inconvenience “to our subjects in general.” This proviso after having lain dormant for centuries has received statutory recognition in the Patents Act of 1902.  By this Act the Privy Council is empowered to revoke a patent in the event of an existing industry or the establishment of a new industry being unfairly prejudiced.

I have not yet personally reviewed these acts to know whether Martin’s statement is correct. (Anyone?).  Minor note here that I believe Oren Bracha in his book Owning Ideas: A History of Anglo-American Intellectual Property (n.35) mistakenly interprets this passage to say that “revocation clauses authorizing the Privy Council to revoke patents were continued to be inserted in the patent grants up to 1902.”  However, I also have not reviewed pre-1902 English patent grants for these revocation clauses (Anyone?).  [See THIS POST for an update and correction]

An additional historical point comes from a sources citing one a final, albeit unsuccessful, “petition to the Council to vacate a patent in 1794.”  D. Seaborne Davies, Early History of the Patent Specification, 50 L.Q.R. 88-109 (1934) (citing Privy Council Registers, Vol. 141, p.88); E. Wyndham Hulme, Privy Council Law and Practice of Letters Patent for Invention from the Restoration to 1794, 33 L.Q.R 63, 181 (1917).  Hulme explains:

The historical record is thus starting to suggest that, although the Privy Council took no action to cancel patents after 1779, it may have been empowered to do so throughout the 18th and 19th Centuries.  At this point, I don’t have any further take-away conclusions and would be receptive to comments and guidance.

by Dennis Crouch

Oil States Energy Services, LLC, v. Greene’s Energy Group, LLC., now pending before the Supreme Court raises one important question:

Issue: Whether inter partes review … violates the Constitution by extinguishing private property rights through a non-Article III forum without a jury.

In June 2017, the Supreme Court granted certiorari and briefing is expected to continue through November 2017.

One amicus group did not wait till their filing deadline but instead has preemptively filed a brief “in support of neither party” even before any of the party briefs have been filed. Professor Tomás Gómez-Arostegui has focused on IP legal history for the past decade joined with British legal history scholar Sean Bottomley to establish several basic historical points:

Records from the 18th century are unequivocal and demonstrate that juries decided validity questions (including novelty) at several stages of the life of a patent. Juries were tasked with determining validity during infringement litigation, whether initiated at law or in equity; during court proceedings for revoking patents; and sometimes during patent prosecution. For a time, the Privy Council could also revoke patents, but it last did so in 1779. . . .

[READ THE BRIEF: 16-0712 ac H Tomas Gomez-Arostegui]

A primary thrust of the brief is to challenge the conclusions made by Mark Lemley in his article, Why Do Juries Decide if Patents are Valid?, 99 Virginia L. Rev. 1673 (2013).  The brief “corrects recent misconceptions on the subject, including those
appearing in [the Lemley] article relied upon by the parties.”

Fairly silly way to conduct business, but the constitutional permissiblity of the AIA Trial regime will depend upon whether revocation of patent rights were handled by jury trials in England around the time the Bill of Rights was adopted.  As the Supreme Court has repeatedly affirmed, “The right of trial by jury thus preserved is the right which existed under the English common law when the Amendment was adopted.” Balt. & Carolina Line, Inc. v. Redman, 295 U.S. 654 (1935).  Although its fairly complex, the basic questions are (1) is revocation a common-law question (as opposed to one of equity) and if so (2) was it handled by a jury?   This is where Prof. Gómez-Arostegui steps in, writing:

• In infringement actions: “the validity of a patent (if contested) was always decided at law, regardless of where the plaintiff initially filed. Moreover, the law courts would always try the case before a jury unless the parties had [otherwise] stipulated.”
• In injunction actions filed in the Court of Chancery, the court would generally force the parties to file a separate common law action in order to permit the jury to resolve validity.
• “[J]uries regularly decided the following issues related to validity: (1) whether the invention was new; (2) whether the patentee was the actual inventor of the purported invention; (3) whether the invention was useful; (4) whether the specification accurately described the claimed invention; and (5) whether the specification enabled a person working in the relevant art to construct the item described in it.”
• “In a recent article, Professor Lemley argues that an ultimate or overarching issue of validity existed in the late 18th century that was ‘not itself a question
  of fact,’ but was instead a question of law. . . . Given the significance of this assertion, and the fact the Respondent has already relied upon it, it requires close inspection. In short, Lemley is incorrect and he cites no authorities that support the proposition.”
• Patent revocation via writ of scire facias did operate via the Court of Chancery.  However, according to the brief here, “The Court of Chancery always sat as a law court in these instances and always sent issues of fact related to validity to the King’s Bench for a jury trial.” “Notably, scire facias did not require fraud or inequitable conduct, as the Federal Circuit claims [in Lockwood].”

One big gap for Gómez-Arostegui is with regard to the Privy Counsel who “could also revoke patents” including when “not new.”  The last revocation in this manner was 1779 on an issue of national security.  There are, however, no records of any petitions filed after 1780 and contemporary writing suggest that the revocation process moved entirely to scire facias.   The brief suggests that, if it were available, parties would have continued to push through the Privy Counsel because scire facias was so expensive and complicated.

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Now, lets say that the Supreme Court buys the notion that patent validity was a question of law requiring a jury trial, there is still another line of important Supreme Court precedent saying that “the Seventh Amendment is generally inapplicable in administrative proceedings, where jury trials would be incompatible with the whole concept of administrative adjudication and would substantially interfere with the . . . . [agency’s] role in the statutory scheme.” Curtis v. Loether, 415 U.S. 189, 194-95 (1974), quoted in Greg Reilly, The Constitutionality of Administrative Patent Cancellation (2017).

by Dennis Crouch

Many of us have been criticizing the Federal Circuit new proclivity to issue no-opinion judgment – particularly in patent cases stemming from the Patent Trial and Appeal Board. The Court appears to be experimenting with a new method – short non-precedential decisions.  I highlight two decisions released on August 17:

• Gold Standard Instruments v. Endodontics, Appeal No. 16-2597 (Fed. Cir. 2017) (4-pages, affirming PTAB)
• Cronos Tech. v. Expedia, Appeal No., 16-2528 (Fed. Cir. 2017) (3-pages, affirming District Court)

In Gold Standard, the PTAB had found all claims of the challenged patent obvious. IPR2015-00632, U.S. Patent No. 8,727,773. That decision is now affirmed on appeal. In the four-page appellate decision identifies the evidence sufficient to support the Board’s factual conclusions (substantial evidence standard) and thus affirms.

Similarly, in Cronos Tech., the district court had granted summary judgment of non-infringement of U.S. Patent No. 5,664,110. On appeal, the Federal Circuit affirmed in a three-page opinion that essentially adopts the district court reasoning with some explanation.

Both appeals identify exactly why the patentee lost and why the lower judicial opinion was correct and should serve as models of future panels concerned with no-opinon judgments.

Although released on the same day, the two opinions are written by two completely different judicial panels – a hopeful indication that the court is considering this approach as a replacement to its R.36 approach that is now receiving so much criticism.