The Imminent Outpouring from the Eastern District of Texas

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The following guest post by Professor Paul Janicke ties-in with his new article published at: Paul M. Janicke, The Imminent Outpouring from the Eastern District of Texas, 2017 Patently-O Patent Law Journal 1. – DC

by Paul M. Janicke┼

When the Supreme Court reverses the Federal Circuit’s venue ruling in the TC Heartland case, a reversal widely expected, it will return patent venue to the time prior to 1988, when the residence of a corporation for patent venue purpose was limited to (i) a district within the state of incorporation, or (ii) a district where the corporation has a regular and established place of business and has allegedly committed an act of infringement. Presently pending in the Eastern District of Texas are 1,000+ patent cases. The number may go up or down a little before the Court’s ruling, but it’s not likely to change much in that short time.[1] My inquiry is: What will happen to those cases?  My analysis on this subject can be found at Paul M. Janicke, The Imminent Outpouring from the Eastern District of Texas, 2017 Patently-O Patent Law Journal 1..

The new venue statute upon which the Court will base its ruling became effective in January 2012. That means it applies to nearly all the cases now on the Eastern District’s docket, and the venue for hundreds of those cases was likely improper. Those defendants who are not Texas corporations and who lacked any regular and established place of business in Eastern Texas when suit was filed will be entitled to dismissal or transfer to a district that would have been proper under the new law, unless they have waived the improper venue defense. Let’s take a look at the groups of possibly affected defendants.

Local Merchants

Some defendants are local merchants in the Eastern District, accused of infringement only because they sell products made by others. Venue as to these merchants will be proper under either the old or new venue rules, so they are entitled to neither dismissal nor transfer. If the case against a merchant’s vendor is transferred, the merchant’s best bet is to seek a stay of the case against it. While stays are not particularly favored in the Eastern District, a situation like the present one has not likely been encountered before. It may work.

Active Players As Defendants

These are typically manufacturers of high-tech products or vendors of software. Computer-related technology is said to be the subject of over 90% of patent case filings in the district. Most of them lack any regular place of business in Eastern Texas, although we have found some 70 companies who employ 100 or more persons in the district and are defendants in pending patent cases there. Most of these businesses are in Plano, with a few in Beaumont. They too will have to stay put. It isn’t required that the place of business be related to the accused infringing activity.

The Many Other Defendants, And the Problem of Waiver

Those companies lacking a regular business location in the Eastern District will, for the most part, want to exit that district. Some may choose to stay there in order to effect a quick settlement or to show support for their beleaguered customers who have been sued in the district, but I estimate at least 800 will consider seeking a transfer. These break down into two roughly equal groups, those who have waived improper venue and those who have not. Waiver of this defense most typically occurs by failure to plead it in the answer or in an early motion under Rule 12. A sampling of pleadings in pending Eastern District patent cases reveals that in roughly 400 cases the main defendant did not plead improper venue or make a Rule 12 motion. (Note that this is a different subject from inconvenient venue, which is handled under a different statutory section and was sometimes pleaded in the answers.) It is understandable why the improper venue pleading was missing in so many cases: No one knew or even suspected until very recently that the venue rules had been changed by Congress in 2011, effective for all cases filed after January 2012. Good ethical lawyers know they shouldn’t plead a matter for which they have no legal or factual basis, and so they didn’t, and therein lies the waiver. Unfortunately, they cannot undo it by arguing “change in the law.” The change occurred in 2012.

The other group of defendants may have been insightful, but more likely were just following a form-book shotgun answer, and so they did plead improper venue in their answers. Answering this way is usually enough to preserve this defense, but not always. It has been held that taking discovery does not trigger a waiver, nor does proceeding to trial. It is thought that the corporate defendant who has pleaded the defense unsuccessfully has been forced to remain in the improper forum, so these litigation activities are not held against it. However, some courts have held that moving for summary judgment (unsuccessfully of course) is a different matter and does cause a waiver. You are not obliged to seek summary judgment, and you are invoking the court’s power. So some in the second group may find they too have waived.

For Those Exiting, Where Will They Be Sent?

This leaves about 400 non-waived cases. The case law on improper venue cases shows a distinct judicial preference for transfers rather than dismissals. To what districts will these non-waived defendants be transferred? Whatever districts are chosen, we should bear in mind that some of the NPE plaintiffs may not wish to follow, due to the expense involved, so those cases may effectively end. For more serious plaintiffs, we do not know where the cases will go. It depends on subjective factors applicable to each case, but here are some possible options: (1) Choose a district that one or both parties ask for. (2) Select a proper district that has a number of patent pilot judges, the three largest being Northern Illinois, Southern New York, and Central California. (3)  Use history as a guide: In 1997, one year before the large influx to Eastern Texas began, the busiest patent districts were Northern California (172 filings), Central California (162 filings), and Northern Illinois (116 filings). In that year the number of patent cases filed in the Eastern District of Texas was: 10. We shall soon see.

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┼ Professor of Law, University of Houston Law Center

[1] The case is set for argument March 27, with a decision very likely before the end of the Court’s term in June.

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Read the Article: Janicke.2017.Venue

Prior Patently-O Patent L.J. Articles:

  • Mark A. Lemley, Erik Oliver, Kent Richardson, James Yoon, & Michael Costa, Patent Purchases and Litigation Outcomes, 2016 Patently-O Patent Law Journal 15 (Lemley.2016.PatentMarket)
  • Bernard Chao and Amy Mapes, An Early Look at Mayo’s Impact on Personalized Medicine, 2016 Patently-O Patent Law Journal 10 (Chao.2016.PersonalizedMedicine)
  • James E. Daily, An Empirical Analysis of Some Proponents and Opponents of Patent Reform, 2016 Patently-O Patent Law Journal 1. (Daily.2016.Professors)
  • Tristan Gray–Le Coz and Charles Duan, Apply It to the USPTO: Review of the Implementation of Alice v. CLS Bank in Patent Examination, 2014 Patently-O Patent Law Journal 1. (GrayLeCozDuan)
  • Robert L. Stoll, Maintaining Post-Grant Review Estoppel in the America Invents Act: A Call for Legislative Restraint, 2012 Patently-O Patent Law Journal 1 (Stoll.2012.estoppel.pdf)
  • Paul Morgan, The Ambiguity in Section 102(a)(1) of the Leahy-Smith America Invents Act, 2011 Patently-O Patent Law Journal 29.  (Morgan.2011.AIAAmbiguities)
  • Joshua D. Sarnoff, Derivation and Prior Art Problems with the New Patent Act, 2011 Patently-O Patent Law Journal 12 (sarnoff.2011.derivation.pdf)
  • Bernard Chao, Not So Confidential: A Call for Restraint in Sealing Court Records, 2011 Patently-O Patent Patent Law Journal 6 (chao.sealedrecords.pdf)
  • Benjamin Levi and Rodney R. Sweetland, The Federal Trade Commission’s (FTC) Recommendations to the International Trade Commission (ITC):  Unsound, Unmeasured, and Unauthoritative, 2011 Patently-O Patent Law Journal 1 (levi.ftcunsound.pdf)
  • Kevin Emerson Collins, An Initial Comment on King Pharmaceuticals: The Printed Matter Doctrine as a Structural Doctrine and Its Implications for Prometheus Laboratories, 2010 Patently-O Patent Law Journal 111 (Collins.KingPharma.pdf)
  • Robert A. Matthews, Jr., When Multiple Plaintiffs/Relators Sue for the Same Act of Patent False Marking, 2010 Patently-O Patent Law Journal 95 (matthews.falsemarking.pdf)
  • Kristen Osenga, The Patent Office’s Fast Track Will Not Take Us in the Right Direction, 2010 Patently-O Patent L.J. 89 (Osenga.pdf)
  • Peter S. Menell,  The International Trade Commission’s Section 337 Authority, 2010 Patently-O Patent L.J. 79
  • Donald S. Chisum, Written Description of the Invention: Ariad (2010) and the Overlooked Invention Priority Principle, 2010 Patently‐O Patent L.J. 72
  • Kevin Collins, An Initial Comment on Ariad: Written Description and the Baseline of Patent Protection for After-Arising Technology, 2010 Patently-O Patent L.J. 24
  • Etan Chatlynne, Investigating Patent Law’s Presumption of Validity—An Empirical Analysis, 2010 Patently-O Patent L.J. 37
  • Michael Kasdan and Joseph Casino, Federal Courts Closely Scrutinizing and Slashing Patent Damage Awards, 2010 Patently-O Patent L.J. 24 (Kasdan.Casino.Damages)
  • Dennis Crouch, Broadening Federal Circuit Jurisprudence: Moving Beyond Federal Circuit Patent Cases, 2010 Patently-O Patent L.J. 19 (2010)
  • Edward Reines and Nathan Greenblatt, Interlocutory Appeals of Claim Construction in the Patent Reform Act of 2009, Part II, 2010 Patently‐O Patent L.J. 7  (2010) (Reines.2010)
  • Gregory P. Landis & Loria B. Yeadon, Selecting the Next Nominee for the Federal Circuit: Patently Obvious to Consider Diversity, 2010 Patently-O Patent L.J. 1 (2010) (Nominee Diversity)
  • Paul Cole, Patentability of Computer Software As Such, 2008 Patently-O Patent L.J. 1. (Cole.pdf)
  • John F. Duffy, The Death of Google’s Patents, 2008 Patently O-Pat. L.J. ___ (googlepatents101.pdf)
  • Mark R. Patterson, Reestablishing the Doctrine of Patent Exhaustion, 2007 Patently-O Patent L.J. 38
  • Arti K. Rai, The GSK Case: An Administrative Perspective, 2007 Patently-O Patent L.J. 36
  • Joshua D. Sarnoff, BIO v. DC and the New Need to Eliminate Federal Patent Law Preemption of State and Local Price and Product Regulation, 2007 Patently-O Patent L.J. 30 (Download Sarnoff.BIO.pdf)
  • John F. Duffy, Are Administrative Patent Judges Unconstitutional?, 2007 Patently-O Patent L.J. 21. (Duffy.BPAI.pdf)
  • Joseph Casino and Michael Kasdan, In re Seagate Technology: Willfulness and Waiver, a Summary and a Proposal, 2007 Patently-O Patent L.J. 1 (Casino-Seagate)

Patentlyo Bits and Bytes by Anthony McCain

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Prior Settlement Agreement Helps the Jury find Liability and Damages

Patent, ,

by Dennis Crouch

Prism Tech v. Sprint Spectrum (Fed. Cir. 2017) [prismtech]

The Nebraska jury found Sprint liable for infringing Prism’s patents and awarded $30 million in reasonable-royalty damages. U.S. Patent Nos. 8,127,345 and 8,387,155. [verdict]prismverdict

AT&T was also sued under the patents but ended up settling the case for [REDACTED LARGE SUM OF MONEY].  On appeal, Sprint argued (unsuccessfully) that the settlement should not have been shown to the jury under Federal Rule of Evidence 403.

FRE 403 permits exclusion of “relevant evidence” when its “probative value is substantially outweighed by a danger of one … unfair prejudice, confusing the issues, misleading the jury, undue delay, wasting time, or needlessly presenting cumulative evidence.”

Prior settlement agreements are obviously probative since they help to establish value of the patented technology in the industry.   Traditionally, the settlement value is modeled as less than the value of the patent once its validity and infringement are established.  However, the mixture of risk aversion and litigation costs lead to some settlements that appear greater than the expected value of patent rights.

Here, the Federal Circuit found found “adequate basis for admitting the AT&T Settlement Agreement.” The agreement covered the same patents and – at trial – Prism’s expert explained differences between usage of AT&T and Sprint to help the jury use the prior agreement as comparable.

That Agreement covered the patents at issue here, though not only the patents at issue here. In that common situation, evidence was needed that reasonably addressed what bearing the amounts in that Agreement had on the value of the particular patents at issue here.

For me, the larger potential issue is that the jury is more likely to find the patent valid and infringed if it know that AT&T already paid a [REDACTED LARGE SUM OF MONEY] to settle the case.  This would suggest at least a bifurcated trial.  However, Sprint did not appear to make that argument on appeal.

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A very interesting argument raised by Sprint on appeal was based upon Rude v. Wescott, 130 U.S. 152 (1889).  In particular, Sprint argued that prior licenses can be used to prove an “established royalty” but not to prove a “reasonable royalty.”  Of course, a single license would not be sufficient to prove the established royalty. See also Cornely v. Marckwald, 131 U.S. 159 (1889).

 

The Court held in Rude that there was insufficient evidence to prove what has been called an “established royalty” as a measure of damages at law for patent infringement—i.e., “such a number of sales by a patentee of licenses to make, use and sell his patents, as to establish a regular price for a license.”  On appeal, the Federal Circuit rejected the argument as too-old: “The Court in Rude used both the language of patent damages law and the language of evidence law, and both have changed significantly since Rude.”  In addition, the court likely cut-short certiorari on the issue by finding that Sprint had failed to properly preserve the arguments for appeal.

Limits on Disclaimer in Claim Construction

Patent,

by Dennis Crouch

Technology Properties Ltd. v. Huawei Tech, et al. (Fed. Cir. 2017)

This decision by Judge Moore recalls the Federal Circuit’s long history of rejecting district court claim constructions and also highlights Judge Moore’s formalistic approach to claim construction.

Here, the claim term on appeal is “entire oscillator disposed upon [an] integrated circuit substrate” as used in Tech Properties’ U.S. Patent No. 5,809,336.  The patent is directed to a microprocessor system that has two independent clocks: A variable frequency CPU ring oscillator clock and a fixed frequency quartz crystal I/O clock.  The improvement here is in linking the variable frequency clock to the CPU so that the performance of both vary according to external stress (such as temperature) while not impacting the I/O clock speed.

cpuclock

Following a Markman hearing, the district construed the oscillator term as being the variable-speed clock and requiring “an oscillator located entirely on the same semiconductor substrate as the central processing unit that does not require a control signal and whose frequency is not fixed by any external crystal.”  Although the claims do not expressly include the negative limitation of no-control-signal and no-external-crystal for the CPU, the district court found that the prosecution history showed that the patentee disclaimed scope of its claims when attempting to overcome prior art rejections.

Claim construction: The general process of claim construction is to interpret the claims according how a person of skill in the art (PHOSITA) would understand the claims in the context of the intrinsic record (patent and prosecution history).  This standard process uses the intrinsic record to help give meaning to the claim terms.  Phillips v. AWH.

Disclaimer: Unlike the soft and seemingly flexible approach of Phillips, any disclaimer of scope must be “clear and unmistakable.” to one of ordinary skill in the art.  Statements by the patentee that are either “ambiguous or amenable to multiple reasonable interpretations” do not create a disclaimer.  Disclaimer is big because it allows the court to permissible add limitations from the specification and prosecution into the claims.

PTO ERROR: Let me note here that – in my view – every time we have a strong prosecution disclaimer argument, we know that the PTO erred.  When the patentee made the argument that the claimed oscillator was variable-speed, the examiner should have replied: “Please amend the claims to actually include that limitation.”

No fixed-crystal-clock: During prosecution, the patentee distinguished the prior art by noting that unlike the “variable speed clock as claimed”, the prior art “is at a fixed, not a variable frequency” and “relies on an external crystal.”  For Judge Moore, these statements were sufficient to find that the patentee had disclaimed fixed-speed clocks from its entire oscillator claim scope.

The patentee noted that the disclaimer was not necessary to overcome the prior art. On appeal, however, the court rejected that factor non-determinative.  Rather, the question for disclaimer is whether the statements were “clear and unmistakable.”

[T]he scope of surrender is not limited to what is absolutely necessary to avoid a prior art reference; patentees may surrender more than necessary. . . [W]e hold patentees to the actual arguments made, not the arguments that could have been made.

Scope of Disclaimer: The district court also found that the patentee had disclaimed any use of a control-signal in its “entire oscillator.” On appeal, the Federal Circuit modified the disclaimer to an oscillator “that does not require a command input to change the clock frequency” since the patentee had disclaimed only a “particular use of a command signal” when it characterized the prior art as different sinc it included “a command input . . . to change the clock speed.”

The principle associated with this second point goes to the scope of disclaimer which follows the general principle that a patentee’s disclaimer only extends to the scope of what is actually disclaimed.

On remand, the district court will need to decide whether this change impacts the prior non-infringement decision.

 

Affirming Arbitration Award

Patent, ,

Bayer Cropscience v. Dow Agrosciences (Fed. Cir. 2017) (non-precedential).

The case here involves a set of genetically modified crops containing the pat gene, which confers resistance to the herbicide glufosinate.  Some of the crops include additional genetically modified resistance n a “molecular stack” with additional herbicide resistant genes such as aad-12 ( 2,4-D herbicide tolerance) and dmmg.

The parties here have a long history of licenses and cross-licenses. However, after an accusation of IP theft,  in 2012 Bayer sued Dow for infringing its U.S. Patent Nos. 5,561,236, 5,646,024, 5,648,477, 7,112,665, and RE44,962.  In response, Dow filed a set of for inter partes reexam requests (still pending)

That litigation was dismissed because of an arbitration agreement – that resulted in a $455 million arbitration award for Bayer for lost profits and reasonable royalty and also an arbitration judgment that the patents were not invalid.

In a non-precedential opinion, the Federal Circuit has affirmed the district court’s confirmation of the arbitration award with the minor exception of interest calculation.  Here, the arbitrator awards are powerful becaues they can only be overturned based upon quite “demanding standards” involving “manifestly disregard the law.”  A portion of the award included what appears to be post-expiration royalties. However, the Federal Circuit held that the manifest-disregard standard is so high that even those damages cannot be vacated (one of the five patents has not yet expired).

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This case is actually the first time that I have seen the arbitration award submitted to the USPTO as required by 35 U.S.C. § 294(d).

(a) A contract involving a patent or any right under a patent may contain a provision requiring arbitration of any dispute relating to patent validity or infringement arising under the contract. . . .

(d) When an award is made by an arbitrator, the patentee, his assignee or licensee shall give notice thereof in writing to the Director. . . . The Director shall, upon receipt of either notice, enter the same in the record of the prosecution of such patent. If the required notice is not filed with the Director, any party to the proceeding may provide such notice to the Director.

(e) The award shall be unenforceable until the notice required by subsection (d) is received by the Director.

However, anyone inspecting the award will notice substantial redacted portions (including portions relating directly to the validity and infringement issues).  I would suggest that submission does not fully comply with the requirements of Section 294.

Chan v. Yang: Can the Federal Circuit Continue to Affirm Without Opinion?

Patent,

by Dennis Crouch

Another new petition for rehearing has been filed with the Federal Circuit asking the court to reconsider its Rule 36 Jurisprudence in light of the statutory requirements  that the court issue an opinion in cases appealed from the Patent & Trademark Office.

In Chan v. Yang, App. No. 16-1214, involves an appeal from an interference case and the merits issue involves the requirement that claims subject to interference must be patentable but for the interference.  After losing before the PTAB, the petitioner appealed and the Federal Circuit issued a R.36 “Affirmance without Opinion.”  Chan’s attorney Robert Bauer writes:

The Rule 36 Judgment of the panel gives the parties and the USPTO no guidance on the key issues that were left unresolved in the PTAB decision. In particular, there is no indication whether the decision is based upon Appellees’ claims having the “white raphide” limitation or not.  There is no indication whether the claims as considered by the panel are concluded to be directed to patentable subject matter under 35 U.S.C. 101 or not. …

The statute requires that the Federal Circuit “issue to the Director its mandate and opinion, which shall . . . govern further proceedings” in the case. 35 U.S.C. 144.  I previously argued that the Federal Circuit’s practice of Affirmances without Opinion violates this requirement for issuing an opinion.

combined-petition-for-panel-rehearing-and-rehearing-en-banc

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Meanwhile, the Federal Circuit appears to be taking some limited notice of the issue. In two pending petitions for en-banc consideration of the R.36 Issue, the court has requested responsive briefing:

  • Leak Surveys, Inc. v. FLIR Systems, Inc., Appeal No. 16-1299: responsive briefing requested by March 14, 2017
  • Cascades Projection LLC v. Epson America, Inc., Appeal No. 17-1517: responsive briefing requested by March 14, 2017

The request for responsive briefing is important since in most cases the court rejects en banc petitions without even requesting responsive briefing:

At least two pending Supreme Court petitions are also based upon R.36 judgments by the Federal Circuit:

  • Oil States Energy Services, v. Greene’s Energy Group and Michelle K. Lee
  • Enplas v. Seoul Semiconductor

In both cases, the Supreme Court could properly vacate and remand with a one-line statement requiring the court to comply with 35 U.S.C. 144.

 

 

 

Oil States Energy Services v. Greene’s Energy Group

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The Supreme Court has asked for the USPTO’s input on whether it should hear the pending dispute Oil States Energy Services v. Greene’s Energy Group (Supreme Court 2017).  The case again raises constitutional questions as to the power of an executive agency (the USPTO) to cancel issued patent rights. [petition][opposition][reply]

Questions presented:

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

2. Whether the amendment process implemented by the PTO in interpartes review conflicts with this Court’s decision in Cuozzo Speed Technologies, LLC v. Lee, 136 S. Ct. 2131 (2016), and congressional direction.

3. Whether the “broadest reasonable interpretation” of patent claims–upheld in Cuozzo for use in inter partes review–requires the application of traditional claim construction principles, including disclaimer by disparagement of prior art and reading claims in light of the patent’s specification.

The request for the USPTO’s input in the case is not, however as amicus but instead as respondent.  In December, the USPTO waived its right to respond to the action.  USPTO’s brief is due March 29, 2017.

So far, no amicus briefs have been filed in the case and the deadline had been long past to support petitioner.  However, the Supreme Court’s new request for response from the PTO resets the timeline. Under Supreme Court rules, briefs in support of petitioner (or neither party) can be filed within 30 days from the February 27, 2017 request.

The Patent at issue in the case is U.S. Patent No. 6,179,053 that covers a lockdown mechanism for well tools.

LA BioMed’s Patent Case against Cialis Revived by Federal Circuit

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by Dennis Crouch

LA BioMed v. Eli Lilly (Fed. Cir. 2017) [appeal decision ipr2014-00752] [appeal decision ipr2014-00693]

In a new pair of decisions, the Federal Circuit has again rejected the PTAB’s obviousness findings as inadequate and remanded for further proceedings.  As she has done in the past, Judge Newman agreed with the merits dissented from the remand – arguing that the challenger should not be so freely given what amounts to a new trial.

Lilly filed several separate IPR petitions against LA BioMed’s U.S. Patent No. 8,133,903 which covers a method of treating penile fibrosis which often leads to erectile dysfunction.  The IPR petitions were prompted by LA BioMed’s 2013 lawsuit alleging that Lilly’s popular Cialis drug led to infringement.  The basic idea here is that repeated treatments with Cialis has a long-term positive impact on the fibrosis.

In the two initiated IPR’s, the PTAB determined (1) the asserted prior art reference did not anticipate the challenged ‘903 claims (14-693 IPR); and (2) the asserted prior art references did render the challenged claims invalid as obvious (14-752 IPR).

Here, the claims are directed to a dosing regimine of a known drug treating an issue that it was already known to treat.  The particular claims require “a continuous long term regimen . . . at a dosage up to 1.5 mg/kg/day for not less than 45 days” for treating “an individual with … penile tunical fibrosis …”

On anticipation, the court drew a fine-line with its closest case being AstraZeneca LP v. Apotex, Inc. where the Federal Circuit affirmed that method claims for “once-daily dosing would likely survive an anticipation challenge by a prior advertisement that disclosed twice-daily dosing.”  Here, the prior art suggested “chronic administration” of the drug while the patent particularly requires 45 days of dosage.  A close reading of the prior art led the court to limit “chronic” to “daily administration for at least three days” and less than three-weeks (since the prior art’s study only lasted for three weeks).  Affirmed as Not Anticipated.

On obviousness, the PTAB found the claims obvious.  On appeal, however, the Federal Circuit rejected the PTAB’s claim construction of the requirement of treating “an individual with … penile tunical fibrosis.” In particular, the PTAB allowed-in prior art treating erectile dysfunction even if penile fibrosis had not been formally diagnosed.  On appeal, the Federal Circuit held the PTAB’s approach “reads that limitation out of the claim” since ED may have other causes (such as psychological).  Based upon this linguistic argument, the court made the leap that – therefore “it is unreasonable to use the symptom of erectile dysfunction as a proxy for penile fibrosis.”  In the eyes of the court, this distinction eliminated the motivation-to-combine the references since they did not directly address the penile fibrosis issue.

As mentioned above, the majority ordered a remand to the PTAB to make new findings on the motivation to combine.  Judge Newman dissented from that approach – arguing that the PTAB/Lilly had their chance and that the judgment should be final on appeal.

Provisional Priority:  A final note on the case involves LAB’s claim for priority to its early-filed provisional patent application.  As you might expect, the court ruled that it was not entitled to such priority because the provisional did not expressly disclose the claim limitation of 1.5 mg/kg/day.

 

 

Welcome Wilbur Ross – Secretary of Commerce

Patent

Mr. Wilbur Ross is now Secretary of Commerce and I expect that we will likely begin to receive further information from the PTO as to its current and future management structure.

Meanwhile, Michelle Lee appears to still be leading the PTO and again signed this week’s patents.  A somewhat odd and steady steady drumbeat from several sources has been demanding Michelle Lee’s resignation or removal.  Lee has acted in pro-patent-applicant ways in several respects. Notably, she has issued more patents per year than any other USPTO director in history; acted to limit the much of the impact of the Supreme Court’s Alice/Mayo on patents being prosecuted (except in the business method area); and has substantially reduced patent application pendency.  The calls for her removal, however, appear to be coming from the PTO’s new role as arbiter of patent disputes at the Patent Trial and Appeal Board.  Still, during her tenure, the PTAB has been somewhat tamed as compared to its initial cancellation pace under Director Kappos.  The problem largely seems to be that Lee has not been an outspoken advocate of patents-as-property.

This political setup is interesting and somewhat troubling — because of their high-value, patent trial participants have begun to exert substantial political influence on the USPTO in ways that may not align with the goals and desires of ex parte patent applicants.   More to explore on that front.

 

 

Testifying as to Obviousness and Remanding to the PTAB

Patent

by Dennis Crouch

Icon Health and Fitness v. Strava (Fed. Cir. 2017) (Reexamination of U.S. Patent No. 7,789,800)

Expert Testimony on the Conclusion of Obviousness:  In the inter partes reexamination case here, the issue arose with the patent challenger (Strava) used an expert witness to testify to the legal conclusion that the claims at issue were obvious.  This is problematic because in ordinary circumstances it is improper for an expert witness to testify as to a question of law. Rather, the ordinary use of expert testimony is solely to “help the trier of fact to understand the evidence or to determine a fact in issue.” FRE 702.  Of course, the Federal Rules of Evidence do not apply to the Patent Trial & Appeal Board proceedings or patent reexaminations.

On appeal here, the Federal Circuit appears to agree with the challenger – that an expert can make conclusions of obviousness/non-obviousness and that the PTO can rely upon those statements.

[T]here is no per se prohibition against relying on an expert’s declaration … solely because the declaration states that something “would have been obvious.” Indeed, we frequently have affirmed PTAB determinations on obviousness that rely on expert declarations that include such statements, so long as other aspects of the declarations contain statements related to factual findings. See Veritas Techs. (Fed. Cir. 2016) (affirming the PTAB’s conclusion of obviousness that relied on, inter alia, an expert’s statements that “it would have been obvious”); MCM Portfolio (Fed. Cir. 2015) (affirming the PTAB’s conclusion of obviousness that was based, in part, upon an expert’s statement that “it would have been obvious”). To determine if an expert’s statement is directed to factual findings or the legal conclusion of obviousness, we look to the statement not in isolation, but in the context of the whole declaration.

The decision here appears to carry the same weight whether a PTAB case or district court litigation.

Spelling Out the Factual Findings: The decision goes on to find some errors in the PTAB merits decision.  In particular, rather than spelling out its factual findings of where each claim element is found in the prior art, the Board issued a general catchall statement that “we agree with [Strava’s] rebuttal . . . as well as the Examiner’s response.”  The statement appeared to incorporate-by-reference a prior examiner’s statement which itself had incorporated statements by Strava’s witness.

On appeal, the Federal Circuit found that such a multi-layered incorporation by reference can be sufficient.  Here, however, none of the PTO created documents actually included the required factual findings.  Although the incorporated documents from Strava’s attorneys did include purported factual findings, the Federal Circuit indicated that those unsworn statements cannot be treated as evidence or factual findings.  [On this last point, I believe that the court incorrectly correlated evidence with factual findings].

Remand or End the Case: The decision splits at this point between the two judge majority (Judges Wallach and Reyna) and dissent-in-part (Judge O’Malley).

Since the error in failing to write-down sufficient factual findings was potentially a merely-technical-error, the majority remanded the case “for further poceedings consistent with this opinion.”  Thus, on remand, the PTAB/Examiner may have another opportunity to explain its judgment as to the invalidity of the claims:

Because the PTAB failed to comport with what these [fact finding] principles demand, the PTAB’s rejection of these claims must be vacated and the case remanded for additional PTAB findings and explanation. See, e.g., In re Van Os, 844 F.3d 1359 (Fed. Cir. 2017) (explaining that the court vacates and remands when additional fact finding and explanation is warranted).

 

Judge O’Malley dissented from this approach – arguing that remand is not appropriate for cases such as these where the PTAB has failed to establish obviousness or unpatentability generally. In this regard, Judge O’Malley agrees with Judge Newman’s dissent in Van Os.

 

Life Technologies Corp. v. Promega Corp. and the Absent Presumption Against Extraterritoriality

Patent

Guest Post by Tim Holbrook, Professor of Law at Emory University School of Law.  Professor Holbrook has written extensively on the extraterritorial application of U.S. patent law. – DC

The Supreme Court’s decision in Life Technologies Corp. v. Promega Corp. is fairly straightforward.  The Court held that 35 U.S.C. § 271(f)(1) does not apply when only a single component of a patented invention is exported.  Instead, more than one component is required to constitute a “substantial portion” of the patented invention.  While what the Court said is important, in some ways, what is more interesting is what it didn’t say and omitted.

In particular, most viewed this case as one of a series of cases in which the Court was elaborating on the presumption against extraterritoriality.  At oral argument, the questions from the justices suggested that likely was the case as well.  The term was used over twelve times in the argument, with the Chief Justice engaging in a colloquy with Carter Phillips about whether this case truly involved extraterritoriality.  Although the Chief Justice eventually recused himself from the case, his questions suggested that he was attempting to apply the Court’s recent extraterritoriality decision in RJR Nabisco, Inc. v. European Community.  Indeed, in my amici brief before the Court, I criticized the Federal Circuit for giving short shrift to the issue.

Yet, neither the term “extraterritoriality” nor any discussion of the presumption against extraterritoriality appears in the final decision.  Instead, in the first line of the decision, Justice Sotomayor describes the case as “concern[ing] the intersection of international supply chains and federal patent law.”

Interestingly, the petitioners did not frame the case in this fashion. The petitioners’ brief never discusses supply chains expressly.  Instead, this framing of the issue apparently came from the amicus briefs.  Although the brief by Bundesverband der Deutschen Industrie E.V.  addressed the issue, Agilent Technologies’ brief is the one that seemed to catch the Court’s attention. That brief had a lengthy discussion of the modern way that supply chains work, and the commensurate potential exposure to patent liability under the Federal Circuit’s interpretation.  Justice Kennedy even referenced it during oral argument, bringing the issue of supply chains to the fore.

This concern with these chains – and the risk that some parts of the chain could be exposed to patent infringement liability – may underlie some of the Court’s reasoning.  For example, in interpreting the phrase “substantial portion of the components of a patented invention,” the Court adopted a quantitative approach as opposed to one that considered both the quantity of components supplied and their relative importance.  The Court seemed concerned with the ability of such actors ability to discern when liability may arise.  The Court asked, “How are courts—or, for that matter, market participants attempting  to  avoid  liability—to  determine the relative importance of the components of an invention?”

To those who follow the Court’s patent jurisprudence, this sudden concern for public notice and audience seems a bit ironic given the Court’s penchant for eliminating the Federal Circuit’s more predictable, formalistic rules.  But it does show the importance of amicus briefs that can bring real-world concerns to the Court.

The Courts silence as to the presumption against extraterritoriality, though, may be more important than it seems.  The presumption had been central to § 271(f).  Congress adopted § 271(f) to overrule Deepsouth Packing Co., Inc. v. Laitram Corp., which held, in part based on the presumption against extraterritoriality, that manufacturing and exportation of all of the invention’s components for recombination abroad did not constitute patent infringement.  The Supreme Court’s first interpretation of this provision in Microsoft Corp. v. AT&T Corp., the Court also relied on the presumption to afford the provision a narrower interpretation. Yet, here….silence.

That silence may reflect a significant shift in the Court’s extraterritoriality jurisprudence.  In a decision from its October 2015 term, RJR Nabisco, Inc. v. European Community, the Court provided a two-step analysis for assessing whether the presumption applies.  First, a court should assess “whether the presumption against extraterritoriality has been rebutted—that is, whether the statute gives a clear, affirmative indication that it applies extraterritorially.”  If the presumption has been rebutted, then the statute is afforded extraterritorial reach.  If after step one, however, a court concludes “the statute is not extraterritorial,” then the statute may yet afford protection.  Step two is to “determine whether the case involves a domestic application of the statute … by looking to the statute’s ‘focus.’” If the acts involving the statute’s focus occur in the United States, then the statute applies.

Applying this methodology to § 271(f) would appear to end at step one: the statute clearly contemplates extraterritorial application of U.S. law with the hook of domestic manufacture of the components.  The silence in Life Technologies may reflect this shift, and a departure from the use of the presumption as a basic statutory interpretation tool.

The Chief Justice’s comments at oral argument suggested that he believed the presumption had no role in this case.  He noted:

I’m not sure I agree with your understanding of the extraterritorial principle. I don’t – I mean, do you really take that down into the minutiae of every little clause? It seems to me its once the law applies, then you apply normal principles of statutory interpretation. I think we have cases about that in other – in other areas, which is sort of what is the reach, I think, may be the presumption against infringement in sovereign immunity, is – a case I can’t recall right away that said, well, once you get over it, you know, its over, and then you apply normal principles.

The Chief Justice appears to be referencing the RJR Nabisco approach.  Although he ultimately recused himself from the case, perhaps his comments cast a long shadow over the decision.  The silence on extraterritoriality, therefore, may be speaking volumes.  It may reflect a shift away from the use of the presumption in interpreting particular provisions within a particular statute once the extraterritorial reach of that provision already has been confirmed.

 

It’s a Good Idea to Actually Own the Patents you Sue on

Patent

The following is a guest post by Bryan Wheelock, Principal at Harness, Dickey & Pierce.  He originally published it on the HDP Blog. – Dennis

In National Oilwell Varco, L.P. v. Omron Oilfield and Marine, Inc., [2015-1406] (January 25, 2017), in a non-precedential opinion, the Federal Circuit affirmed the dismissal of claim for infringement of U.S. Patent No. 5,474,142 because of problems with the chain of title which deprived NOV of standing.

Bobbie Bowden, the named inventor on the ’142 Patent assigned the patent to Wildcat Services, L.P., on October 9, 2001.  Wildcat Services, L.P. assigned the ’142 Patent to MD/Totco, a Division of Varco, L.P., on June 30, 2004.  NOV claimed it purchased the ’142 Patent from Varco, L.P., pursuant to an Asset Contribution Agreement dated January 1, 2006.

NOV initially refused to produce the ACA, instead producing only a “Assistant Secretary’s Certificate,” which assigned only “physical assets.”  After being forced to produce the ACA, Omron renewed its motion to dismiss for lack of standing.  The district court agreed that that NOV could not prove ownership of the ’142 Patent as of the filing date of this case, and dismissed the case, with prejudice, for lack of standing.

The Federal Circuit agreed with the District Court, noting that the ACA contains no reference to patents except within Exhibit A, which had a column labeled “Patents – Patents.”  The Federal Circuit said that the district court correctly interpreted the ACA to find that its plain meaning did not include transferring the ’142 Patent from Varco, L.P. to NOV because the Exhibit A spreadsheet shows a “0” where the patents row intersects with the MD/Totco column.  The Federal Circuit concluded that a plain reading of the ACA reveals that it did not transfer the ’142 Patent from MD/Totco to NOV.

PTAB: A written decision on “every claim challenged”

Patent, ,

SAS Institute v. Lee (Supreme Court 2017)

New petition for writ of certiorari from SAS asks the following question:

Does 35 U.S.C. § 318(a), which provides that the Patent Trial and Appeal Board in an inter partes review “shall issue a final written decision with respect to the patentability of any patent claim challenged by the petitioner,” require that Board to issue a final written decision as to every claim challenged by the petitioner, or does it allow that Board to issue a final written decision with respect to the patentability of only some of the patent claims challenged by the petitioner, as the Federal Circuit held?

The basic issue – under the statute, can the PTO (the PTAB acting as the Director’s delegate) institute inter partes review to a subset of the challenged claims?  Or, does the requirement for a “final written decision as to every claim challenged” require that the Board grant or deny the petitions as a whole.

[sas-petition-for-certiorari][SCOTUS Docket 16-969]

Life Tech v. Promega: Supreme Court Limits Contributory Liability for Exports

Patent

Life Technologies Corp. v. Promega Corp. (Supreme Court 2017)

In a largely-unanimous opinion, the Supreme Court has ruled that the “supply of a single component of a multicomponent invention for manufacture abroad does not give rise to §271(f)(1) liability.”

The case interprets the patent infringement statute 35 U.S.C. §271(f)(1) that creates liability for supplying from the US “all or a substantial portion of the components of a patented invention” to be combined abroad in a manner that would infringe the US patent (if it had been combined in the US).  The patent covers a genetic testing kit that includes five different components.  The accused infringement was shipping one component of the kit (Taq polymerase) to the UK for combination with the other components. The Federal Circuit had ruled that a single component could constitute a “substantial portion of the components” under the statute.

Writing for the court, Justice Sotomayor found that the “substantial portion” should be seen as a quantitative requirement and that a single component is not sufficient.

Although they joined with the bulk of the opinion, Justices Alito and Thomas did not join the portion suggesting that 271(f) was intended as a narrow provision enacted by congress only to fill the gap left by Deepsouth Packing Co. v. Laitram Corp., 406 U. S. 518 (1972).  Rather, in a concurring opinion, justice Alito writes that congress intended “to go at least a little further.”  The concurrence also includes its interpretative statement on the majority opinion:

I note, in addition, that while the Court holds that a single component cannot constitute a substantial portion of an invention’s components for §271(f)(1) purposes, I do not read the opinion to suggest that any number greater than one is sufficient. In other words, today’s opinion establishes that more than one component is necessary, but does not address how much more.

[14-1538_p8k01]

For CBM Review: _Claims_ Must be Directed to Financial Service

Patent

by Dennis Crouch

This case represents an important decision limiting the scope of Covered Business Method reviews.  However, its short consideration of agency-deference leaves it open to further challenge. 

Secure Axcess v. PNC (and other banks) (Fed. Cir. 2017) [secureaxcess]

The America Invents Act created a temporary mechanism (8-year) for challenging certain “covered” business method patents.  The program will sunset for new petitions in the “Transitional Program for Covered Business Method Patents” (“CBM review”) sunsets on September 16, 2020. The program allows for CBM patents to be challenged on any ground of patentability (e.g., Sections 101, 102, 103, and 112) and is not limited to post-AIA patents.

Not all business method patents fit within the program, but only those covering non-technological inventions related to a financial product or service.  In particular, the defintion states:

For purposes of this section, the term “covered business method patent” means a patent that claims a method or corresponding apparatus for performing data processing or other operations used in the practice, administration, or management of a financial product or service, except that the term does not include patents for technological inventions.

AIA Section 18(d)(1).

Here, Secure Axcess’s patent covers a computer security method that uses an authenticity key to “create formatted data” that is then sent to another computer to be used to locate an authenticity stamp from a preferences file. Patent No. 7,203,838.   Although the the patent is not limited to financial services, the patentee has sued dozens of banks and financial service providers for patent infringement.  In particular, it appears that the patentee has only sued financial service providers.

The PTAB determined that the patent here fits the CBM definition. On appeal, however, the Federal Circuit reversed holding that “the patent at issue is outside the definition of a CBM patent that Congress provided by statute.”  This decision follows the court’s recent decision in Unwired Planet, LLC v. Google Inc., 841 F.3d 1376 (Fed. Cir. 2016).

Claiming Financial Services: In its decision, the court walked through the statute – noting that the focus is on the claimed invention rather than the asserted marketplace or potential uses of the invention.  Thus, the relevant question is not how the invention is used, but rather whether the claims are directed to a financial service.  According to the court, any other reading, would “give the CBM program a virtually unconstrained reach.”

Statutory Interpretation – A Question of Law: A very interesting aspect of the decision is the standard-of-review.  Both parties suggested that the USPTO should be given some deference of its own interpretation of the statute.  With only limited discussion, the Federal Circuit rejected that suggestion and instead held that statutory interpretation is simply a matter of law, reviewed de novo on appeal:

[T]he issue here is whether the Board properly understood the scope of the statutory definition. That is a question of law.

The court did not, however cite or refer to Chevron or other Supreme Court precedents requiring deference to certain agency interpretations of law.

= = = =

The majority opinion was penned by Judge Plager and joined by Judge Taranto. Judge Lourie wrote in dissent.   The dissent would expand the scope of CBM to include patents directed to financial services even when claims themselves are not expressly limited to financial services.  In this case, the exemplary embodiment of the invention uses the security mechanism for financial services.  Further, the only example URL in the patent is “bigbank.com.”  Judge Lourie also found the patentee’s “litigation pattern” relevant to the financial services use (having asserted the patent against dozens of banks, and nobody else).

Of interest for administrative law folks, Judge Lourie also failed to consider whether deference should be given to PTO interpretation of the statute.

= = = = =

In a parallel decision, the Federal Circuit today issued a R.36 judgment (improperly in my view) affirming the PTAB’s cancellation of the the claims of a family member patent as obvious. U.S. Patent No. 7,631,191.

 

Patently-O Reader Survey – Thank you!

Patent

A team of students from the University of Missouri School of Journalism (AdZou) is using Patently-O as their capstone project.  As part of that project, they have created the following 10-minute survey that will help provide some additional perspectives and inputs from you – the Patently-O reader.  Someone will win a $50 Amazon gift card.

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Message from the AdZou team

As a Patently-O reader and newsletter subscriber, we would like to thank you for being a loyal and dedicated member of the Patently-O community. We rely on revenue from advertisement and job postings to keep our site running; we are proud that we have never required visitors to pay a fee to read the blog and we want to continue to offer the best experience possible.

In order to provide our readers with an exceptional experience, we ask that you participate in this brief survey, in which we aim to better understand our readership and determine how Patently-O can improve its service. Your participation in this survey is crucial to the success of Patently-O, as we greatly appreciate your opinion. The survey will take approximately 10 minutes. You may stop taking the survey at any time. To sweeten the deal, your participation in this survey will automatically enter you into a raffle to win a $50 Amazon gift card. Your answers will not be linked to your name or email address and will be used solely for the purpose of review by the Patently-O team. If you have any questions or comments about the survey, please direct them to amicusadvertisement@gmail.com.

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Google v. Oracle: Fair Use of a Copyrighted API

Patent,

by Dennis Crouch

Google v. Oracle (Fed. Cir. 2017) (pending software API copyright case)

In its return-trip to the Federal Circuit, the Oracle’s JAVA-Copyright case against Google appears have some chance of once again making interesting precedent.  I previously described the case as follows:

When Google wrote its program-interface (API) for Android, the company made a strategic decision to mimic the method-calls of Java.  Java was already extremely popular and Google determined that free-riding on Java popularity would facilitate its catch-up game in the  third-party app marketplace.  As an example, Google used the Java method header “java.lang.Math.max(a,b)”.  When called, the “max” function returns the greater of the two inputs.  In Android’s API, Google copied a set of 37 different Java “packages” that each contain many classes and method calls (such as “max()”).  Overall, Google copied the header structure for more than six-thousand methods.  Although Java is offered for both open source and commercial licenses, Google refused to comply with either regime.

Java’s originator Sun Microsystems was known for broadly sharing its creations without enforcing its IP rights.  That aura changed when Sun was purchased by Oracle.

Back in 2012, the N.D. Cal. district court ruled that the portions of Java structure that Google copied were not themselves entitled to copyright protection.  On appeal, however, the Federal Circuit reversed and ordered a new trial. In particular, the Federal Circuit panel led by Judge O’Malley held that the Java API taxonomy copyrightable as a whole and rejected the applicability of idea/expression merger doctrine. “Merger cannot bar copyright protection for any lines of declaring source code unless Sun/Oracle had only one way, or a limited number of ways, to write them.”

On remand, the jury sided with Google – finding that the accused use was a “fair use” and therefore not infringement.  On appeal, Oracle asks the court to overturn that verdict – both based upon the evidence presented and the additional evidence excluded.

Oracle has filed its opening brief that is supported by eleven additional amicus briefs. [Oracle Brief: 02-10-17_oracle-opening-brief-second-appeal].  Google’s will be due next month as well as amicus supporting the broader conception of fair use.

Although the briefs provide good arguments for the limited nature of fair use and the ‘creativity’ associated with API development, none of them squarely addressed how partial failings under 17 USC 102(b) should impact the fair use determination under Section 107.

102 (b) In no case does copyright protection for an original work of authorship extend to any idea, procedure, process, system, method of operation, concept, principle, or discovery, regardless of the form in which it is described, explained, illustrated, or embodied in such work.

Although the API was found not to violate the limitations of 102(b), I would suggest that this close-call should have a relevant impact on the scope of fair use.  I would also suggest that platform-interoperability and being able to take advantage of a skilled work-force (i.e., Java Programmers) should be included within the fair use debate even if they don’t fully reach the 102(b) threshold.  Prof. Randy Picker works in this area and tries to tease-out what counts as legitimate restrictions on access and those that are illegitimate.

The Fair Use provision is written as follows:

107 [T]he fair use of a copyrighted work, including such use by reproduction in copies or phonorecords or by any other means specified by that section, for purposes such as criticism, comment, news reporting, teaching (including multiple copies for classroom use), scholarship, or research, is not an infringement of copyright. In determining whether the use made of a work in any particular case is a fair use the factors to be considered shall include —

(1) the purpose and character of the use, including whether such use is of a commercial nature or is for nonprofit educational purposes;

(2) the nature of the copyrighted work;

(3) the amount and substantiality of the portion used in relation to the copyrighted work as a whole; and

(4) the effect of the use upon the potential market for or value of the copyrighted work.

The fact that a work is unpublished shall not itself bar a finding of fair use if such finding is made upon consideration of all the above
factors.

In walking through these factors, Oracle argues:

  1. Google’s purpose was purely commercial; not transformative; and not in good faith.
  2. API’s packages should be given strong protections because they are “undisputedly creative.”
  3. The API’s represent the “heart” of Java.
  4. The copying led to significant harms both to current and potential markets.

McNealy and Sutphin are former Sun Microsystems executives who helped develop and promote Java. In their amicus brief, the pair provide a nice overview of how Java works and its purpose.  The key portion of the brief here is the allegation that Google’s copying allowed it to “steal the legions of developers already using the Java platform.” The question for me is whether that is a harm protectable through copyright. [2017-02-17_mcnealy-sutphin_amicus-brief]  Software engineers Spafford, Ding, Porter, and Castleman add that the Java API should be given strong copyright protection because “design and expression of an API reflects the creative choices and decision-making of its author.” [2017-02-17_spafford-ding-porter-castleman_amicus-brief]

A group of 13 law professors have filed their brief in support of the copyright holder Oracle – arguing, inter alia, that (1) fair use is narrow by design; and (2) there is no special fair use test for copyrighted software.  Again here, the scholars do not address the 102(b) bar or the functional nature of the API – other than by noting that Google’s copying “achieve[d] the same functions as Oracle” and therefore was not transformative.   [2017-02-17_ip-scholars_amicus-brief]   Falling in-line, the RIAA suggests that the purpose-focused-transformation-test has no basis in the statute and should not be relied upon for fair use analysis.  [2017-02-17_riaa-amer-assn-of-publishers_amicus-brief]  Likewise, New York’s IP Law Association [2017-02-17_nyipla_amicus-brief] argues that a mere “change in context” cannot be seen as transformative for first amendment analysis.

The old Perfect-10 case almost seems to treat Google as if it is a library providing a major public service.  A number of briefs attempt to counter this pro-Google bias.  CCA (smaller mobile carries), for instance, argues that “Google’s current marketplace dominance with respect to mobile software platforms, online advertising, and online traffic is the result of many strategic decisions, including its decision to flout Oracle’s copyrights in Java – harming competition and CCA members.”  The ask her is simply: Treat Google as you would any other commercial market participant. [2017-02-17_competitive-carriers-assn_amicus-brief]

In perhaps the most moderate brief of this first round, the BSA argues that the equitable origins of the Fair Use analysis suggest favoring broad admissibility of evidence – unlike what happened in this case. [2017-02-17_bsa-the-software-alliance_amicus-brief].  Fair use should be limited to its origins as a “narrow and equitable tool for promoting public benefits like criticism, comment, news reporting, teaching, scholarship, or research.” [2017-02-17_paca-digital-licensing-assn_photographers_amicus-brief]. Former Register of Copyrights Ralph Oman agrees with this approach. “Google’s copying of the Java APIs is inconsistent with the historic goals of the Fair Use Doctrine.” [2017-02-17_ralph-oman_amicus-brief].

The MPAA, Screen Actors Guild and other combined efforts in a short brief arguing simply that the market for a copyrighted work should not be limited to the existing market for the work, but should also include “traditional, reasonable, or likely to be developed markets.” Quoting Am. Geophysical Union v. Texaco Inc., 60 F.3d 913, 930 (2d Cir. 1994). [2017-02-17_mpaa-ifta-sag-aftra_amicus-brief]. Here, the district court refused to consider (or allow the jury to consider) potential markets for JAVA including television, automobile, and wearabledevice markets. The Copyright Alliance agrees that the district court’s approach to looking at impact on current market (rather than potential market) in the fair use analysis is “particularly problematic for small businesses and individual creators . . . who may not have the resources to enter all potential or derivative marketes at once.”  [2017-02-17_the-copyright-alliance_amicus-brief]

 

In Defense of the Federal Circuit: TC Heartland and Patent Venue

Patent, , , ,

Guest Post by Professors Megan M. La Belle & Paul R. Gugliuzza

Patent litigation is, as we all know, highly concentrated in a small number of districts.  Most notably—some might say, notoriously—the rural Eastern District of Texas hears about forty percent of all patent cases nationwide.  Many lawyers and scholars consider this case concentration to be a critical flaw in the patent system.

Against this background, TC Heartland doesn’t seem like a case the Supreme Court would hear simply to affirm.  As Dennis reported last week, nearly twenty amicus briefs have been filed urging reversal, including one signed by sixty-one law professors and economists.  Predictions of a unanimous ruling against the Federal Circuit are not hard to find.  Indeed, TC Heartland looks like other recent cases in which the Supreme Court has reversed the Federal Circuit without breaking a sweat:  It involves a procedural-type rule so favorable to patent owners that, one could easily assume, it must conflict with the rules in other areas of federal litigation.

The Federal Circuit, in the caselaw on review in TC Heartland, has interpreted the patent venue statute to allow patentees to sue corporations for patent infringement in any district where personal jurisdiction exists.  For companies that sell products nationwide, venue is proper almost anywhere, and that enables litigation to cluster in places like East Texas.  Surely, the conventional wisdom seems to be, the Supreme Court will not permit the Federal Circuit to make the venue statute a dead letter in most patent cases.

In our forthcoming article, we defend the Federal Circuit’s venue doctrine, and we challenge the notion that Federal Circuit venue law is outside the mainstream.  As we explain in detail, the expansive venue options available in patent cases are consistent with historical trends in venue law more generally.  For over a century, Congress has steadily expanded plaintiffs’ venue choices, particularly in cases against corporations.  In fact, the Wright and Miller treatise has gone so far as to say that Congress has “nearly eliminate[d] venue as a separate restriction in cases against corporations.”  Venue in patent cases, simply put, is just like venue in other federal cases.

In the article, we also explain why the Federal Circuit’s interpretation of the venue statute is doctrinally sound.  Though the relevant statutes are somewhat complicated and have been amended several times, our defense of the Federal Circuit’s venue law is simple.  It is based on the plain language of two sections of the Judicial Code:  28 U.S.C. §§ 1391(c) and 1400(b).  Section 1391(c)(2), a subsection of the general venue statute, says that, “[f]or all venue purposes,” corporate defendants “reside” in any district in which they are subject to personal jurisdiction.  Section 1400(b), a venue statute specifically for patent infringement cases, says that infringement suits may be brought, among other places, “where the defendant resides.”  Reading the two statutes together, a corporation can be sued for patent infringement in any district in which it is subject to personal jurisdiction—just like in all other types of federal cases.  That is precisely what the Federal Circuit held in its seminal 1990 decision, VE Holding Corp. v. Johnson Gas Appliance Co.

Of course, there’s more law on this issue than the statutes alone.  The petitioner in TC Heartland argues that the question presented is “precisely the same” as in Fourco Glass Co. v. Transmirra Products Corp., a 1957 decision in which the Supreme Court held that the general venue statute—as it read at the time—did not supplement the patent venue statute.  The Court in Fourco relied heavily on its 1942 decision, Stonite Products Co. v. Melvin Lloyd Co., in which the Court interpreted an even older version of the venue statute and held that, in patent infringement cases, a defendant “resided” only in the state in which it was incorporated.

The petitioner in TC Heartland, building on the theme of “patent exceptionalism” that has resonated with the Supreme Court in recent years, claims that the Federal Circuit has ignored this authoritative Supreme Court precedent.  As we explain in the article, however, even if the Supreme Court decided Fourco correctly (which is not beyond doubt), the general venue statute today is far different than it was at the time of Fourco.  Recent amendments to the statute make plain that the definition of corporate residence in the general venue statute does in fact apply to the patent venue statute.

To be sure, as a matter of policy, granting plaintiffs unbridled discretion over choice of forum in patent litigation may be problematic.  It has incentivized judges, particularly in East Texas, to adopt rules and practices favorable to patent holders in an effort to attract cases.  It has encouraged litigants to engage in unseemly tactics to influence prospective jurors. Ultimately, discretion in forum choice can threaten innovation by facilitating nuisance litigation.  But, contrary to the prevailing wisdom, these problems are emphatically not the result of a misinterpretation of the venue statute by the Federal Circuit, nor does Federal Circuit venue doctrine reflect any sort of patent exceptionalism.

There are better ways to reform the law of forum selection in patent cases.  Congress could amend the venue statute.  Or it could reduce the incentive for litigants to forum shop—and the ability of district judges to “forum sell”—by mandating increased procedural uniformity in patent cases.  Or the Supreme Court could alter personal jurisdiction doctrine, which, for corporate defendants, is tightly linked to venue.  Later this Term, the Court will decide a personal jurisdiction case that could have major consequences for patent litigation.

For a more detailed explanation of these points, read our draft article, which is forthcoming in a terrific symposium issue of the American University Law Review.

Megan La Belle is Associate Professor of Law at Catholic University of America.
Paul Gugliuzza is Associate Professor of Law at Boston University School of Law. 

First Possession and Patent Law

Patent

This is a bit abstract, but I’m wondering how you might describe the actual moment that a patent issues in terms of the creation of a new property right and transfer of that right to the patentee.  If we could slow-down time to look at what exactly happens: Is the right first created by the government and then granted to the patentee? Or, is the right simply created already in the hands of the patentee.  Assuming the inventor is no longer the right-holder, does anything pass through the inventor’s hands at that moment?

In the “land patent” system, ownership is originally vested in the sovereign and then transferred to the recipient, but it seems to me that the patents on inventions probably work differently.  In the end, I expect that this may have some impact on the public-rights cases. -DC

Claim Construction: “support an entire body”

Patent

by Dennis Crouch

I have been waiting for the Federal Circuit’s decision in Metalcraft of Mayville (Scag Power) v. Toro.  In my patent law class last semester, we used the appeal of a preliminary injunction order as the basis for our 5th annual Patent Law Moot-Court Competition (sponsored by McKool Smith).  I want to also thank the attorneys at Boyle Fredrickson and Merchant & Gould for being good sports and providing us with documents from the case.

[Read the Decision: 16-2433-opinion-2-14-2017-11]

SCAG and TORO are competitors in the lawnmower market.  In 2016, SCAG sued TORO for infringing its U.S. Patent No. 8,186,475 that covers a vehicle (lawnmower) having an operator-platform-suspension-system. This design differs from the more traditional seat-suspension because it supports the “entire body” of the operator and helps reduce harmful shock and vibrations on users.

In the case, the district court issued a preliminary injunction against Toro to cease “making, using, selling, and offering to sell lawnmowers equipped with platform suspension systems that infringe SCAG’s patent.”  Toro appealed both the merits of the infringement case (under a proper claim construction, no infringement) and also the terms of the injunction (Failure of the injunction order to include “reasonable detail” as required by Fed. R. Civ. Pro. 65(d)).  On appeal, the Federal Circuit has affirmed, but with a slightly modified injunction.

The patent drawing below an operator platform that supports the foot rest and the seat.  In the patent drawings, the hand-controls (55) are also supported by the operator platform. However, in the accused Toro lawnmower, the controls are directly attached to the chassis and thus not supported by the operator platform.

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The claims require that the operator platform “support an entire body of an operator” during operation use of the vehicle.  Toro argued that users of its mowers must keep their hands on the hand-controls during operation and – since hands are part of the body – their platform does not support the “entire body.”  On appeal though, the Federal Circuit rejected that argument for narrowing claim scope.  Most importantly, the court found that the claims do not specifically require steering controls mounted to the operator platform.  Moving from there, the court attempts (but in my view fails) to adequately address the core argument:

Moreover, the specification makes clear that the operator platform supports the entire body and that steering controls are connected to, but not part of, the operator platform. The specification consistently distinguishes the operator platform from components that may be attached to it.

The court here seems to suggest that the platform must directly support the entire body rather than through a component.  The problem with this argument is the seat (another component attached to the platform) actually supports most of the operator’s body.  For the claim to make any sense, the platform’s support function must pass through these attached components.

By accepting the broader claim construction, the court was also able to affirm the finding that Scag is likely to succeed on the merits of the case (proving infringement). Here, the district court’s order enjoins Toro from “making, using, selling, and offering to sell lawnmowers equipped with platform suspension systems that infringe Scag’s patent, U.S. Patent No. 8,186,457.” J.A. 6. Toro argues the district court’s preliminary injunction is overly broad. We do not agree. The Decision and Order in which the district court grants the motion for the preliminary injunction discusses both the claims at issue as well as the defendants’ accused products which it enjoins. J.A. 6–18. Claim 21 was argued to cover all the accused products, and Toro has made no meaningful arguments which delineated among the accused products. We have affirmed the district court’s conclusion that the patentee has established a likelihood of success that the accused products infringe claim 21 and that there is not a substantial question of validity as to claim 21. In such a case, we affirm the preliminary injunction as to the accused products.

Scope of the Injunction: Fed. R. Civ. Pro. R. 65(d)(1) requires that every order granting an injunction to “state the reasons why it issued; state its terms specifically; and describe in reasonable detail—and not by referring to the complaint or other document—the act or acts restrained or required.” Here, the order stated merely that TORO must cease “making, using, selling, and offering to sell lawnmowers equipped with platform suspension systems that infringe SCAG’s patent, U.S. Patent No. 8,186,475.”  On appeal, the Federal Circuit affirmed the order, with the caveat of limiting it to the accused products. “We affirm the preliminary injunction as to the accused products.”