Sovereign Immunity Excuses University of Florida from IPR Challenge

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by Dennis Crouch

As public universities continue to obtain more patents, issues of sovereign immunity continue to arise. In a recent decision, the Patent Trial and Appeal Board (PTAB) dismissed a trio of inter partes review proceedings against the University of Florida based upon its claim of sovereign immunity.[1]

The 11th Amendment to the US Constitution limited the “Judicial power of the United States” so that it does not “extend to any suit in law or equity, commenced or prosecuted against one of the United States by Citizens of another State, or by Citizens or Subjects of any Foreign State.”[2] Although the text of the amendment appear to include several important limitations that might exclude an administrative action (“judicial power; “suit in law or equity”), the Supreme Court has broadly interpreted the statute precluding many adjudicative administrative proceedings.  For anyone who is not an American lawyer, you may need to pause here to recognize that each of the 50 American states are treated as sovereign governments and, although the Federal Government sets the “supreme law of the land,” its powers are limited by the U.S. constitution and federalist structure.

The Supreme Court has interpreted this amendment to encompass a broad principle of sovereign immunity, whereby the Eleventh Amendment limits not only the judicial authority of the federal courts to subject a state to an unconsented suit, but also precludes certain adjudicative administrative proceedings, depending on the nature of those proceedings, from adjudicating complaints filed by a private party.  Following Supreme Court precedent from other areas of law, the Federal Circuit held in Vas-Cath[3] that Missouri’s sovereign immunity allowed it to avoid an interference proceeding.

The petitioner Covidien argued that the PTAB should think of the IPR as an in rem action directed at the patent rather than at the patent owner.  However, the PTAB rejected that argument – finding that the procedural elements of inter partes reviews and estoppel provisions make it look much like contested litigation – the very thing protected by the 11th Amendment.

The Panel:

On the whole, considering the nature of inter partes review and civil litigation, we conclude that the considerable resemblance between the two is sufficient to implicate the immunity afforded to the States by the Eleventh Amendment. Although there are distinctions, such as in the scope of discovery, we observe that there is no requirement that the two types of proceedings be identical for sovereign immunity to apply to an administrative proceeding. Further, we note that there are several similarities between civil litigation and inter partes review that are not unlike those compared in Vas-Cath for interferences.

[sovereign-immunity-dismissals]

Outcome here – Dismissed before Institution based on Sovereign Immunity of the patentee.  Moving forward it will be interesting to see whether the Federal Circuit is willing to hear an appeal or instead apply the standard law that institution decisions are not subject to appeal.

The dispute between the parties extends back to a license agreement between UFL and Medtronic/Covidien of the patent at issue. UFL exerted its right to audit the books, but was refused by Medtronic.  UFL then sued in state court on the contract.  Medtronic counterclaimed for DJ of invalidity/noninfringement and removed the case to federal court on the patent claims and on diversity grounds.  The district court however remanded back to state court on sovereign immunity grounds.  That remand is now on appeal at the Federal Circuit, although the court has just issued a show-cause – asking whether the case should be transferred to the 11th Circuit.  Under the AIA-revised statute, cases go to the Federal Circuit if either the civil action “arises under” US patent law or a “compulsory counterclaim” arises under patent law.  Here, it is clear that the counterclaim is a patent claim, but the big question is whether it is “compulsory” – normally defined as one that “arises out of the transaction or occurrence that is the subject matter of the opposing party’s claim.”[4]

Of interest though, in the order to show cause, the court suggests that it might keep the case in the “interest of justice” rather than transfer it. [5][federalcircuitjurisdictionorder]

= = = =

[1] See Covidien LP v. University of Florida Research Foundation Inc., Case Nos. IPR 2016-01274; -01275, and -01276 (PTAB January 25, 2017).

[2] U.S. CONST. amend. XI.

[3] Vas-Cath, Inc. v. Curators of Univ. of Missouri, 473 F.3d 1376 (Fed. Cir. 2007).

[4] Fed. R. Civ. P. 13(a)(1)(A).

[5] 28 U.S.C. § 1631.

 

Wrongly Affirmed Without Opinion

Patent,

by Dennis Crouch

I have uploaded a draft of a short article of mine titled Wrongly Affirmed Without Opinion – If I am correct, is has some potentially of shaking up the Federal Circuit’s current practice of issuing so many Rule 36 Affirmances Without Opinion.  [Download the Paper from SSRN: https://ssrn.com/abstract=2909007]

Many see the Court of Appeals for the Federal Circuit as the patent court because of its national jurisdiction over patent cases and its congressional mandate to strengthen and bring uniformity to the patent system, presumably through precedential decision-making. Oddly, for the past few years most of the court’s merits decisions in Patent and Trademark Office appeals have not been released with precedential opinions – or even non-precedential opinions for that matter. Rather, most are filed as judgments without any opinion at all. The court’s approach is surprising considering the current high levels of uncertainty in the areas of patent law procedure (AIA Trials before the PTAB) and doctrine (eligibility under Alice and Mayo) that are being decided without opinion.

This short article raises a surprisingly simple but novel argument: the Federal Circuit is required by statute to issue an opinion in these PTO appeals. As I explain, the statute is plain and clear and is supported by strong policy goals. The court’s recent spate of hidden decisions is threatening its public legitimacy. I respect the members of this court so much, and I hope they will use this opportunity to take the next step in the right direction.

Patentlyo Bits and Bytes by Anthony McCain

Patent

Get a Job doing Patent Law                  

Can Your Patent Block Repair and Resale and Prevent Arbitrage?

Patent, ,

resaleby Dennis Crouch

The first rounds of merits briefs have now been submitted to the Supreme Court in Impression Prods. v. Lexmark. The case questions the extent a patentee can control the entire resale and repair market for its products.  For products originally sold in the US, the Federal Circuit held that express use/resale limits at the point of first-sale are effective – even against subsequent bona fide purchasers. For products sold overseas, the Federal Circuit held that US Courts should presume no exhaustion of the US patent – this would automatically prohibit 3rd party importation into the US.

As a property law professor, I tend to think about about the mass confusion among the students as they try to work through the law associated with real covenants and equitable servitudes on land.  It creates substantial confusion among lawyers. But what we want is a system where property rights can be fairly and openly traded without even having lawyers extensively involved with each of our purchases.  With personal property courts long ago rejected servitudes (such as use and resale restrictions) that bind subsequent purchasers. Unlike real property, personal property moves and is often transferred without substantial paperwork or record-keeping, and allowing a set of unique restrictions has the potential of gumming up the marketplace.  The Federal Circuit in this case went all the way to the other side — holding that the presumption in foreign sales is that no US patent rights are exhausted.  I purchased my last couple of smart phones through the used market – and have also repaired them several times.  Under the law, I probably should have taken steps to ensure that all of the original equipment manufacturers affirmatively granted repair and resale rights.  Coming together, the Federal Circuit’s approach here has the potential to limit the market for the repair and reselling of goods.  I would suggest that those activities are incredibly beneficial to our society in terms of resource allocation and avoiding waste as well as empowering citizens and avoiding anticompetitive market behavior.  Although these policy goals are relevant to the Supreme Court decision-making, the Court’s primary analysis pathway should be doctrinal.

In these cases, the most important brief is often the amicus filing by the U.S. Government. Here, the brief USG brief was filed on January 24 by President Trump’s newly appointed acting solicitor general (Noel Francisco) who (like Obama’s SG) has taken the position of supporting the challenger (Impression) against the patentee (Lexmark) and the Federal Circuit.  Time will tell whether this stance is more generally predictive of the new administration’s stance on patent rights and patent enforcement. [15-1189_amicus_reversal_united_states]

The Government frames the questions presented as follows:

  1. Whether a U.S. patent owner may invoke patent law to enforce restrictions on the use or resale of a patented article after the first authorized sale of the article in the United States.
  2. Whether and under what circumstances a U.S. patent owner may authorize the sale of a patented article in a foreign country, either under a foreign patent or otherwise in accordance with foreign law, while reserving its exclusive rights under U.S. patent law.

Answering these questions, the Government argues simply that “restrictions on post-sale use or resale are not enforceable under U.S. patent law” and that the Federal Circuit’s approach is wrong.  This is the same rule that applies generally to attempts to place a restrictive covenant on personal property.  As a minor caveat, the Government takes the position that, under limited circumstances, a foreign sale might not exhaust the associated U.S. patent rights.

The basic justification for this approach is to ensure that we have a working commercial market. The brief quotes the 1895 Keeler decision: “The inconvenience and annoyance to the public” if patent rights are not exausted by the first authorized sale [is] “too obvious to require illustration.”

Since A.B. Dick was overruled in 1917, this Court has rejected every attempt to invoke patent law to control the use or resale of an article after the first authorized sale in the United States.

At the international level, the Government suggests that the court allow express reservation of rights for foreign sales – this would thus allow a German company to sell its products in Germany (with an express export restriction) and then use its U.S. to patent to prevent those products from being sent to the U.S.  This gives the manufacturer more control over the market and would allow for price discrimination (i.e., charging higher prices in the U.S.).

In its merits brief, petitioner Impression Prods. takes a harder stand on international exhaustion — arguing that the court should follow its own prior precedent in the copyright case of Kirtsaeng and hold that any authorized sale by the patentee exhausts all U.S. patent rights – even if the authorized sale is abroad.  [15-1189-merits-petitioner]   Professor Feldman agrees in her brief, naming the Federal Circuit’s actions as “reversal from below” [15-1189_amicus_pet_professor_robin_feldman] as did the Huawei brief (although in different words) [15-1189_amicus_pet_huawei_technologies].

A common argument for exhaustion is that it allows for a robust resale market that greatly benefits consumers and helps price discrimination by allowing third party arbitrage.  Although U.S. prices are low for some goods, they are very high for others (such as pharmaceuticals and printer ink).  International exhaustion would help to solve that problem (although there are many regualtory hurdles associated with importing .  In its brief, the AARP join with EFF and Public Knowledge (and others) to argue this point: “Manufacturers currently exploit weak exhaustion rules to harm consumers. . . . Limitations on resale and repair rights lead to monopolization rather than competition.” [15-1189_amicus_pet_public_knowledge]

Costco is a business that is actively engaged in the sort of price lowering arbitrage discussed by AARP and argues that the Federal Circuit’s exhaustion rules “impose enormous costs for manufacturers, retailers, and consumers.”  They effectively ask – will the american retailers need to inspect patent licenses for all of the components and sub-components found in the products they sell? [15-1189_amicus_pet_costco_wholesale_corporation]  Similarly, an interesting trade group – the Association of Service and Computer Dealers International filed its brief and explained how the no-exhaustion rules impact the market for hard drives, DVDs, Flash Memory, and other consumer product. [15-1189_amicus_pet_ascdi] The UCC (Article 2) provides some protections here, but does not, for instance, provide authority to repair.

FSU Professor Frederick Abbott has an interesting take. Abbott is an expert on international trade law.  He writes:

A fundamental flaw in the approach of the Federal Circuit involves its reasoning that a rule of territoriality of patent rights precludes U.S. courts from taking into account activities of U.S. patent owners outside of the United States. The international agreements governing the international patent system do not prescribe such a rule of territoriality. . . The rule of independence of patents prescribed by the Paris Convention[] provides that acts taken by patent authorities in one country do not affect patent rights in other Paris countries.  recognition by this Supreme Court that first sales in foreign countries exhaust U.S. patent rights would not affect patents granted outside the United States.

[15-1189_amicus_pet_abbott]

Finally, Stanford’s IP Clinic filed a law professor’s brief signed by Mark Lemley, Dan Burk, Sam Ernst, Shubha Ghosh, Orly Lobel, Pamela Samuelson, Jessica Silbey, and others that explains:

A clear exhaustion rule promotes the alienability of patented articles and reduces transaction costs. Unlike clear, reliable property rights, idiosyncratic arrangements of rights that depend on what covenants or conditions an upstream seller has attached to a chattel impose high information costs on purchasers. . . . Exhaustion doctrine also prevents patentees from extracting a patent royalty at multiple stages in a product’s distribution chain, which would compensate them in excess of the societal benefit their inventions have provided.

[15-1189-intellectualpropertyprofessors]

It will be interesting to see how the ‘other side’ responds here .

 

One Up Two Down: Trump Orders on Regulation

Patent

trumpsigningPresident Donald Trump’s newest executive order is the simplistic “two-for-one rule” that simple states: every time an agency “publicly proposes … or otherwise promulgates a new regulation, it shall identify at least two existing regulations to be repealed.”  Trump did not yet indicate which two of his prior executive orders will go to allow for this one.  Thank you very much … [Read the order it: twoforoneorder]

The policy applies immediately at the agency level, including the USPTO.  (The military is excluded from the requirements).

An element that is unclear from the order is the granularity of the term “regulation” or “rule”  – the definition provides that the terms are defined as “an agency statement of general or particular applicability and future effect designed to implement, interpret, or prescribe law or policy or to describe the procedure or practice requirements of an agency.”  Presumably, this would apply to any new rule of practice, new fee, or new PTAB requirement.  It is less clear how to what extent this will apply to an amendment to an existing regulation or fee increase.

In addition to the 2-for-1 approach, agencies are also required to ensure that the total regulatory cost of new FY2017  regulations is zero “unless otherwise required by law” or given permission from the White House.

A note on agency regulatory cost.  In general, cost calculations are done separately from benefit calculations.  In its 2014 report, the Obama OMB “estimated the total cost of federal regulations to range between $68.5 and $101.8 billion and the total benefits to be between $261.7 billion and $1,042.1 billion.”  The Congressional Research Service also explains that “estimates of the cost of regulation should be viewed with a great deal of caution” because they are usually wrong.

Question for patent prosecutors: What PTO regulations should be eliminated? 

Guest Post: Challenging PTO Institution Policies (If Not Institution Decisions)

Patent, , , ,

endrunThe following is a guest post by Oliver Richards (Fish & Richardson).  Mr. Richards is a NYU Law alum and a former clerk for Judge Dyk on the Federal Circuit. 

After several rounds at the Federal Circuit and a trip to the Supreme Court, the law surrounding what aspects of the PTAB’s decision to institute on a petition for inter partes review are reviewable remains unclear. In light of the Federal Circuit’s decision to again revisit this issue in the grant of a petition for rehearing en banc in Wi-Fi One, LLC v. Broadcom Corporation (No. 2015-1944, -1945, -1946), I wanted to share a few thoughts on what, exactly, should be reviewable under 35 USC 314(d).   I believe that the yes/no decision of the PTAB as applied to any particular petition should be unreviewable.  However, in my view, review of PTAB regulations should be available either through appeal from the PTAB, or (preferably) through an APA challenge in district court. [1]  The distinction between review of specific PTAB institution decisions and general review of PTAB regulations and policies, I believe, makes sense for at least three reasons:

First, this distinction comports with the language of the statute.  314(d) prohibits judicial review of “[t]he determination . . . whether to institute an inter partes review.”  The statute should be read to mean what it says.  A review of “the” decision to institute in any case is not allowed.  General review of any agency regulation is not review of “the determination . . . whether to institute” even if the result of that review overturns the decision in any particular case.

In McNary v. Hatian Refugee Ctr. Inc., 498 US 479 (1991) the Supreme Court drew a similar distinction relating to reviewability of “special agricultural worker” (“SAW”) eligibility decisions of immigration officials under the provisions of the Immigration Reform and Control Act of 1986.  In McNary, the Supreme Court was asked whether 8 U.S.C. § 1160(e)—which prohibits “administrative or judicial review of a determination respecting an application for adjustment of status”—deprived a district court of jurisdiction over a suit challenging agency policies and procedures.

The Supreme Court allowed the challenge.  According to the Court, “[t]he critical words in § 210(e)(1) … describe the provision as referring only to review ‘of a determination respecting an application’ for SAW status. Significantly, the statutory reference to “a determination” describes a single act rather than a group of decisions or a practice or procedure employed in making decisions.”  McNary, 498 U.S. at 491–92.  Thus the language prohibiting review indeed prohibited “direct review of individual” determinations but did not prohibit “general collateral challenges to unconstitutional practices and policies used by the agency in processing applications.”    “[H]ad Congress intended the limited review provisions of § 210(e) of the INA to encompass challenges to INS procedures and practices, it could easily have used broader statutory language” such as by prohibiting “all causes arising under any of the provisions” of the immigration program as it had done in other places.  Id. at 494. [2]

In my view, the patent law’s statutory language – “The determination . . . whether to institute” similarly indicates that § 314(d) was intended to apply to only individual determinations, not to prohibit any and all review of PTO procedures and policies relating to institution.

Second, the distinction strikes a fair balance between making sure the PTAB is complying with its statutory mandate and maintaining the efficiency of the IPR system.  Perhaps wary of a flood of appeals clogging the courts and the corresponding slow down in IPR determinations, Congress choose efficiency in section 314(d) by prohibiting an appeal relating to every single IPR institution decision.  On the other hand, allowing parties to turn to courts to check potentially problematic regulations or practices by the PTAB is an important check on that body’s power.  See, e.g., Unwired Planet, LLC v. Google Inc., 841 F.3d 1376, 1382 (Fed. Cir. 2016) (concluding that the PTAB’s definition of a “covered business method patent” exceeded the statute.”)[3]   Prohibiting challenges to each and every institution decision but allowing general challenges provides for efficient review of PTAB regulations, policies, and procedures without slowing down the whole IPR system.

Third, the distinction is consistent with most Federal Circuit decisions on the topic.  Although the distinction I suggest was not provided as the reasoning, the CAFC has notably found many PTAB regulations/policies relating to institution reviewable.  See, e.g., Ethicon Endo-Surgery, Inc. v. Covidien LP, 812 F.3d 1023 (Fed. Cir. 2016) (hearing a challenge to 37 C.F.R. § 42.4 – “Institution of trial.  The Board institutes the trial on behalf of the Director”); Synopsys, Inc. v. Mentor Graphics Corp., 814 F.3d 1309 (Fed. Cir. 2016) (hearing a challenge to 37 C.F.R. § 42.108, titled “Institution of inter partes review”).  The cases where the Federal Circuit has found issues not to be reviewable are typically cast in case-specific ways.  See, e.g.,  Achates Reference Publ’g, Inc. v. Apple Inc., 803 F.3d 652 (Fed. Cir. 2015) (reviewing “whether Apple’s petition was time barred”); Cuozzo, 793 F.3d at 1272 (“Cuozzo argues that the PTO improperly instituted IPR on claims 10 and 14 because the PTO relied on prior art that Garmin did not identify in its petition as grounds for IPR as to those two claims.”)

Any resolution of the reviewability issue must comply with the statute, must put teeth to Congress’s embrace of efficiency, and at the same time must make sure that the rights of patent holders are adequately protected.  The approach I have outlined above, in my view, adequately balances efficiency with appropriate supervision of the PTAB.   I’m curious to see what you all think, and I look forward to reading the comments.

Note: The views views expressed here are solely my own and do not necessarily reflect the views of my firm or any clients.

___________________

[1] The CAFC left open the question of whether the APA allowed for challenges to PTAB regulations in district court in Synopsys, Inc. v. Lee, 812 F.3d 1076 (Fed. Cir. 2016).   From a practical standpoint, an APA challenge in a district court would seem to be a better option–the parties will have an opportunity to develop a fuller record removed from the facts of any particular IPR, and a district court may well provide a better first look than than the agency that promulgated the challenged regulation.

[2] NcNary follows other Supreme Court decisions distinguishing between specific challenges to a particular determination and general challenges to regulations.  See Bowen v. Michigan Acad. of Family Physicians, 476 U.S. 667, 675 (1986).

[3] For individual determinations where the PTAB clearly exceeds its statutory authority, mandamus remains available.  See, e.g., In re Cuozzo Speed Techs., LLC, 793 F.3d 1268, 1274 (Fed. Cir. 2015),  aff’d sub nom. Cuozzo Speed Techs., LLC v. Lee, 136 S. Ct. 2131 (2016).

 

The Privacy Act Executive Order

Patent

by Dennis Crouch

I teach internet law – and so I’m working through the Privacy Act statement in President Trump’s recent Executive Order: Enhancing Public Safety in the Interior of the United States.

Privacy Act.  [Federal] Agencies shall, to the extent consistent with applicable law, ensure that their privacy policies exclude persons who are not United States citizens or lawful permanent residents from the protections of the Privacy Act regarding personally identifiable information.

The basics of the Privacy Act is that it adds somewhat to the constitutional privacy protections already in place by limiting government collection, maintenance, use, and dissemination of personally identifiable information. 5 U.S.C. § 552a.  The law also facilitates individuals access to their information and to request corrections. Note here that the Privacy Act has several major exceptions – such as law enforcement and national security – that allow for more unlimited data activities.

By its term, the individual protections offered by the Privacy Act are to US Citizens and lawfully admitted permanent residents.  So, the Trump order itself does not contradict the statute. Some agencies, however, have been providing aspects of privacy-act protections to non-citizens and permanent residents.  The order appears to force agencies to stop that approach and instead expand governmental data collection and dissemination of information related to non-Americans.  Of course, European countries take online data privacy much more seriously than we do here, and the new approach may well create a significant further hiccup for American companies that operate overseas (e.g., does your US firm website reach Europe?).  The setup here also further facilitates old spy-agency agreements to share information on each other’s citizens.

I may still be stuck in the globalist view of civil liberties, but my perspective is that the US should not take the general stance of providing civil liberties to its citizenry while affirmatively trampling those same civil liberties for non-citizens.  Exceptions may arise, but as a general matter, no.

The Last Inventorship Case? (102(f))

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Cumberland Pharma v. Mylan (Fed. Cir. 2017) [cumberland]

Cumberland’s Patent No. 8,399,445 is listed in the Orange Book as covering Acetadote, an intravenous antidote for overdoses of acetaminophen.  Following the process set out in the Hatch-Waxman Act, Generic manufacturer Mylan filed an abbreviated new drug application (ANDA) with the FDA to market its own version of the drug and Cumberland sued for infringement.  While patent infringement ordinarily requires some making/using/selling of the invention, 35 U.S.C. 271(e)(2)(A) creates a form of paper-infringement – stating that “It shall be an act of infringement to submit (A) an application under section 505(j) of the Federal Food, Drug, and Cosmetic Act or described in section 505(b)(2) of such Act for a drug claimed in a patent or the use of which is claimed in a patent.”

The ‘445 patent (August 24, 2005 priority date) covers a non-chelating form of Acetadote.  Back in 2002, Cumberland was seeking FDA approval of a form of the drug that included a chelating agent (EDTA).   In a letter, to the listed inventor (Pavliv) of the ‘445 patent, the FDA requested justification for including EDTA in the formulation and later requested data proving that EDTA should be included.  Shortly after that letter, the inventor Pavliv had the idea of a formulation without the EDTA.

Based upon these (and a few other) facts, Mylan argues that (1) the ’patent had been derived from someone at the FDA – and therefore the patentee was not the “inventor” as required by pre-AIA law, 35 U.S.C. 102(f); and (2) the invention would have been obvious in light of the FDA communications.  On appeal, however, the Federal Circuit affirmed the lower court holding siding wholly with the patentee.

A request for justification of the inclusion of EDTA, supported by data, is not the same as a suggestion to remove it, let alone to remove it and not replace it with another chelating agent.

Further, the claim was not obvious because the defendant failed to prove “a reasonable expectation of success” if the non-EDTA version was tried.   That seems to be right here (based upon the evidence presented).  The inventor previously believed that EDTA (or similar agent) was needed to ensure formulation stability, but later was able to show that the non-EDTA version was still stable (and the claims expressly reflect that the formulation is stable but non-EDTA).  On appeal, the Federal Circuit agreed with the patentee:

Considerable evidence supports the finding that relevant skilled artisans believed that chelating agents were necessary to sequester metal contaminants and prevent oxidative degradation of acetylcysteine and that such artisans had no reasonable expectation of stability without such an agent. . . . As late as 2011, Mylan’s own scientists expressed concern that the removal of EDTA would make the product more vulnerable to oxidation.

 

Judgment of Not-Invalid Affirmed.

 

PTO Director Michelle Lee?

Patent

undersecretaryWith conflicting media reports and no statement from the USPTO or Department of Commerce, we are left guessing as to whether Michelle Lee continues-on as USPTO Director and Undersecretary of Commerce for Intellectual Property.  The Commerce Department leadership has been substantially filled – but the IP position remains blank.  My request for clarification from the office have also been denied.   I have also submitted a FOIA request, but that process tends to be slow.  We will likely have to wait for the Confirmation of Wilbur Ross as Commerce Secretary before stakeholders are informed of the state-of-affairs.

Meanwhile, Hal Wegner has called for Michelle Lee’s resignation in an ascorbic ascerbic letter titled “Draining the Swamp: Your Resignation as PTO Director.”  I see Wegner’s letters as stirring the pot rather than offering any genuine path forward.  Repeating what I wrote last week:

I want to give my congratulations and thanks to Michelle Lee, Russ Slifer, and other members of PTO Leadership.  The past five years have been a time of tremendous shifting in the patent system led by the legislature (the AIA of 2011) and the Supreme Court (Alice/Mayo).  PTO Leadership has offered a stabilizing force with a constant push toward an efficient and high quality system.  Many patentees were saved by by the PTO’s intentionally narrow reading of Alice and Mayo and the long-complaint-of backlog of pending cases is substantially reduced.  These days I hear two major competing complaints: (1) the PTO continues to issue too many invalid patents and (2) the PTAB is too tough on patentees.  It will be interesting to see where we arrive four years from now.

If I were a patentee, I would certainly have great concern that the next director may be far worse.

wegnerlee

PTAB Bar Association Webinar

Patent

The recently formed PTAB Bar Association is presenting its introductory and FREE Webinar on January 26, 2017 at 1:00 – 2:00 pm Eastern.  The focus is on an in-house perspective of PTAB issues. Panelists: Kenneth Maikish – Google; David Killough – Microsoft; Steve Chiang – RPX; Mark Rachlin – GlaxoSmithKline.  (Register here).  The Bar Assn’s inaugural conference will be held March 1-3 (register here).

Federal Circuit Closes the Door on CGI Preliminary Injunction

Patent

garagedoorThe Chamberlain Group (CGI) v. TechTronic Indus. (Fed. Cir. 2017) (non-precedential opinion)

Following on the heel of the Federal Circuit’s approval of preliminary relief in the water balloon case, the court here has reversed a lower court’s preliminary injunction – finding its claim construction error led the district court to incorrectly conclude that the patentee (CGI) was likely to prevail on the merits.

Since a preliminary injunction is ordinarily awarded well before any final judgment on the merits, nobody actually knows which side will win the case.  Because of the powerful nature of injunctive relief, the courts have long required that the party seeking relief to at least prove that it will likely win the case.  Although termed a “factor” in the four factor analysis, it is actually a necessary element that must be proven before relief will be granted.  “The movant must establish both “likelihood of success on the merits and irreparable harm” for the court to grant a preliminary injunction.”

The CGI patent here covers a garage door opener that transmits status-information. Whereas most garage doors are operated by a single “go” trigger, the improvement here might have one button for “up” and another for “down.”   The patent claims are broad enough to include any sort of status-information (light on, auxiliary power on, etc.).  U.S. Patent 7,224,275.  Claim 1:

1. A movable barrier operator comprising:

a controller having a plurality of potential operational status conditions defined, at least in part, by a plurality of operating states;

a movable barrier interface that is operably coupled to the controller;

a wireless status condition data transmitter that is operably coupled to the controller, wherein the wireless status condition data transmitter transmits a status condition signal that: corresponds to a present operational status condition defined, at least in part, by at least two operating states from the plurality of operating states; and comprises an identifier that is at least relatively unique to the movable barrier operator, such that the status condition signal substantially uniquely identifies the movable barrier operator.

Although a preliminary injunction determination is reviewed with deference, any underlying claim construction is reviewed de novo on appeal.  Here, the appellate panel found that the lower court had too narrowly construed the term “controller” by requiring that it be a “self-aware controller.”  Easy decision by the court since the specification was clear that the controller need not be self-aware:

Depending upon the needs of the setting, the controller can be self-aware of such operational status conditions (as when, for example, the controller is aware that it has switched a given ambient light fixture on or off) or the controller can be provided with externally developed information regarding the condition.

In addition, at least one of the dependent claims required that the controller be provided its ‘state’ information from an external sensor.

With the broader construction, the Federal Circuit remanded to consider whether the presented prior art creates an invalidity problem.  Reminder here – it was the patentee who wanted the narrow claim construction in order to avoid prior art problems and the broad claim language (permitted by the PTO) that created trouble.

Depending upon what happens below, the patentee may instead try to narrow these claims as part of a reissue application.

====

A sideline issue in the case involved the Federal Circuit’s aggressive undermining of Teva v. Sandoz.  That Supreme Court decision requires that the Federal Circuit give deference to lower court’s factual findings on appeal. “Federal Circuit judges lack the tools that district courts have available to resolve factual disputes fairly and accurately such as questioning the experts.” Teva quoting Judge O’Malley.

In their briefs, both parties agreed that the district court relied upon factual evidence in the form of expert testimony (from both sides) for its claim construction conclusions.  However, the order apparently does not follow Fed.R.Civ.Pro. 52(a), by separately finding facts and stating conclusions of law butu instead “mingled factual and legal conclusions with no distinction between the two.” (patentee brief).

Contradicting both parties, the Federal Circuit on appeal held that it need not give any deference to any of the district court conclusions since “there is no indication that the district court made any factual findings that underlie its construction.”

Unfortunately, the district court order is under seal and therefore not available. As such, we cannot know who is right in this instance. Update: I found a redacted version of the district court opinion in the appendix filed to the Federal Circuit. [cgi_appendix]  In its claim construction, the court repeatedly refers to and relies upon competing expert testimony, but doesn’t appear to make any straight-up factual findings.  I have to think about my – conclusion here, but I have crossed-out the “aggressive” undermining from above.

KEEP AMERICA GREAT

Patent

Predicting success in his effort to MAKE AMERICA GREAT AGAIN, President Donald Trump has filed a new trademark application – focusing on his 2020 presidential campaign.  The new slogan: KEEP AMERICA GREAT.

keepamericagreat

The intent-to-use registration application for the mark KEEP AMERICA GREAT was filed on January 18, 2017 on behalf of the Delaware Corporation known as “Donald J. Trump for President, Inc.,” Headquartered in Trump Tower, New York. Attorney of record is Patrice Jean of Hughes Hubbard.

Apparently, Trump coined the phrase during in the midst of a WaPo interview.  The following is a printed excerpt:

Halfway through his interview with The Washington Post, Trump shared a bit of news: He already has decided on his slogan for a reelection bid in 2020.

“Are you ready?” he said. “ ‘Keep America Great,’ exclamation point.”

“Get me my lawyer!” the president-elect shouted.

Two minutes later, one arrived.

“Will you trademark and register, if you would, if you like it — I think I like it, right? Do this: ‘Keep America Great,’ with an exclamation point. With and without an exclamation. ‘Keep America Great,’ ” Trump said.

“Got it,” the lawyer replied.

That bit of business out of the way, Trump returned to the interview.

One potential issue with the registration process is that Andreas Mueller filed a registration application for the same mark back in 2016 (although with a narrower set of classes).  His registration application was recently rejected by the TM examiner (Doritt Carroll) for “failure to function.”  Quoting the TMEP:

Registration is refused because the applied-for mark merely conveys an informational social, political, religious, or similar kind of message; it does not function as a trademark to indicate the source of applicant’s goods and to identify and distinguish them from others. Trademark Act Sections 1, 2, 3, and 45, 15 U.S.C. §§1051-1053, 1127; see In re Hulting, 107 USPQ2d 1175, 1177 (TTAB 2013) (holding NO MORE RINOS!, a slogan meaning “No More Republicans In Name Only,” not registrable for a variety of paper items, shirts, and novelty buttons because the mark would be perceived as a commonly used political slogan and not a trademark); In re Eagle Crest, Inc., 96 USPQ2d 1227, 1229-31 (TTAB 2010) (holding ONCE A MARINE, ALWAYS A MARINE not registrable for clothing items because the mark would be perceived as an old and familiar Marine expression and not a trademark); In re Volvo Cars of N. Am., Inc., 46 USPQ2d 1455, 1460-61 (TTAB 1998) (holding DRIVE SAFELY not registrable for automobiles and automobile parts because the mark would be perceived as a familiar safety admonition and not a trademark); TMEP §1202.04.

. . .

The evidence attached to the office action dated November 17, 2016, showed that the applicant’s slogan is commonly used as a counter to the “Make America Great Again” phrase, and thus functions to advocate for openness and inclusiveness, among other things. Because consumers are accustomed to seeing this slogan or term commonly used in everyday speech by many different sources, the public will not perceive the term or slogan as a trademark or service mark that identifies the source of applicant’s goods and/or services but rather only as conveying an informational message.

As a pro se applicant who is apparently not doing much actual hat-selling, Mueller may have some difficulty overcoming this rejection.  I expect that it will be much easier work for Trump’s team.

 

Exhaustion under Judge Rich

Patent

Reading Prof. John Witherspoon’s recent remarks about Judge Giles S. Rich led me to a 1999 interview of Judge Rich by Prof. Janice Mueller titled An Interview with Judge Giles S. Rich, 9 FED. CIR. B.J. 75 (1999).  One of the topics discussed was the doctrine of patent exhaustion – also known as the first sale doctrine. The doctrine was central to Bowman v. Monsanto Co., 133 S.Ct. 1761 (2013) and is also central to the case now pending before the Supreme Court, Impression Products, Inc. v. Lexmark International, Inc., Supreme Court Docket No. 15-1189 (2017).

The following is an excerpt:

Question: I’ve heard that you disagree with the reasoning of the so-called “first sale doctrine.” What’s wrong with the idea that the first authorized sale of a patented product “exhausts” the patentee’s right to control the subsequent disposition of that particular item?

Judge Rich: My position is simple: No patent right is involved and nothing is exhausted. Talking about exhaustion of the patent right is nonsense and it’s about time to stop talking nonsense. To explain, I have to discuss two things: (1) what the patent right is; and (2) what is the meaning of “exhaustion.” It is no longer debatable what the patent right is. As I just explained, the Supreme Court told the country in 1852 in Bloomer v. McQuewan that it consists altogether in the right to exclude others – and that is all it is. It is not an ambiguous “exclusive right”; it is a simple right to exclude others. Period.

Now, the premise is that the patentee made and sold the patented invention. That was the so-called “first sale.” What did his right to exclude others have to do with those acts? Absolutely nothing! In manufacturing, was he excluding anyone? No. In selling, was he excluding anyone? No! Then he wasn’t exercising his patent right, was he? The trouble stems from the old ambiguous statutory definition of the patent right as the “exclusive right to make, use and sell.”

Turning to the meaning of “exhaustion,” it means the state of being drained or used up completely. It assumes that there is something to be used up. Well, since the patent right is not involved, how could it be used up? It couldn’t have been used, even a teeny bit, and it certainly was not exhausted.

But that’s not all there is to the analysis. What is this so-called “first sale” of an article on which the seller happens to have a patent? It is a simple transfer of ownership – a chattel or personal property – from one person to another. The rights of the buyer are governed by the law of property or the law of sales or both. And the law of patents has nothing whatever to do with those rights. Any restraints on the new owner have to be made under the law of contracts, and any contractual restrictions are subject to the antitrust laws. So there is neither use nor exhaustion of patent rights.

Conclusion: The term “exhaustion doctrine” is meaningless nonsense. The legal result is okay but the reasoning is all wrong. The simple fact is that no patent right is involved in the sale of merchandise by the patentee, nothing is exhausted, and the adjective “first” in “first sale” is also without significance. Let’s clean up the thinking about this law.

I do not always agree with Judge Rich’s positions – the fact that he wrote the statute did not give him unlimited authority to interpret the statute.  However, his logic is fairly sound here. The question in my mind is whether the laws of property and sales would be able to pick-up the slack — especially under our federalist system where state laws (i.e., those that govern personal property and sales) are subservient to national laws (e.g., the patent laws).  Seemingly, no state law that limits patent rights could be enforceable.  The saving grace in this chain of thought comes from 35 U.S.C. 261 which states “Subject to the provisions of this title, patents shall have the attributes of personal property.”

PTAB initiation of PGR Does not Negate Preliminary Injunction

Patent, , , ,

tinnuspatentby Dennis Crouch

Tinnus Enterprises v. Telebrands (Fed. Cir. 2017) [tinnustelebrands]

In an opinion by Judge Stoll, the Federal Circuit has affirmed an E.D.Texas preliminary injunction barring the accused infringer from selling its “Balloon Bonanza” product “or any colorable imitation thereof.”

I previously wrote about the case that involves Telebrands’ patented balloon-filling-toy. U.S. Patent No. 9,051,066.  The case is one of the first lawsuits involving a post-AIA patent.

Preliminary Injunctive Relief: Even before eBay, courts applied a four-factor test to determine whether to award a preliminary injunction to stop ongoing infringement pending a final judgment in the case. (eBay changed the rule for permanent injunctive relief.).

A decision to grant or deny a preliminary injunction is within the sound discretion of the district court, based upon its assessment of four factors: (1) the likelihood of the patentee’s success on the merits; (2) irreparable harm if the injunction is not granted; (3) the balance of hardships between the parties; and (4) the public interest.

The factors are slightly different than those considered for permanent relief in eBay.  Most importantly, at the pre-trial stage, the patentee has not established that it will actually win the case and be eligible for any remedy at all. Thus, the Preliminary Injunction factors include consideration of who is likely to win.  The Prelminary Injunction factors also eliminate the eBay factor that “remedies available at law are inadequate to compensate for the injury” by rolling that factor into the irreparable harm consideration.  A fifth element that is not usually stated in the test is that the patentee must also be willing and able to post a bond to the court that will compensate the enjoined party if it turns out that the injunction was improper. Rule 65(c) requires a bond “in an amount that the court considers proper to pay the costs and damages sustained by any party found to have been wrongfully enjoined or restrained.” Fed. R. Civ. P. 65(c). Two important aspects on appeal: (1) A district court’s PI order (either grant or denial) is immediately appealable even though it is a non-final interloctutory order. 28 U.S. Code § 1292. (2) Because district courts are given discretion in awarding preliminary injunctive relief, those judgments are given deference on appeal.

PTAB Interplay: As with so many US patent lawsuits, the case involves a parallel AIA-trial. Since the patent at issue here is a post-AIA patent, the challenger was able to file for post-grant-review (PGR).

The timeline is relevant:

  • Patentee files the lawsuit and requests a preliminary injunction.
  • District court awards PI – after considering but rejecting invalidity challenges by defendant.
  • Defendant files PGR petition – making the same invalidity arguments (indefinite and obvious).
  • USPTO initiates PGR – finding claims likely invalid as obvious and indefinite.
  • Defendant appeals court PI.

As noted above, a key factor for awarding preliminary relief is the likelihood that the patentee will ultimately win the case on the merits.  Although a patent is presumed valid, a challenger can overcome this hurdle by showing that the patent is “vulnerable” to a specific validity challenge.  The court has also termed this as finding a “substantial question concerning the validity of the patent.”  A seemingly reasonable approach here would be to say – “If the PTO concludes that claims are likely invalid, then those claims are probably vulnerable to being found invalid.”  Here, the court does not follow that approach and – in fact – does not even mention the PTAB initiation decision in its discussion of the aforementioned vulnerability.  (The court does state that the PTAB has taken action, but does not appear to draw any conclusions for this case from that parallel proceeding).  Implicit holding here is that the PTAB initiation of a PGR Does not negate a preliminary injunction.

Rather, the appellate panel walked through the district court decision and found that (1) someone of skill in the art would likely understand the term “substantially filled” and thus it is not indefinite; and (2) the district court did not err in holding that prior art associated with filling an endoscopic balloon was not analogous or pertinent to the problem of filling toy water balloons.

Preliminary Injunction Affirmed.

= = = =

Motivated to Consider vs Motivated to Combine: The Federal Circuit is still working through how to deal with the analogous arts test post KSR.  Here, the court ultimately found there was no ‘motivation to combine’ the prior art since one of the references was not ‘analogous art.’  In at least pre-KSR tradition, these were separate inquiries within the obviousness process outlined in Graham v. John Deere.  The analogous arts test has long been thought of as part of the initial factual Graham inquiry – identify the scope and content of the prior art.  Under the doctrine as explained in Clay, the court limits the scope of prior art only to references that a worker may have been motivated to consider.  These are generally thought of as references in the same field of endeavor or addressing similar problems as those faced by the inventor.  Of course, just because two prior art references are within the same field does not mean that the worker would have been motivated to combine the elements of references in the way claimed by the inventor.  Thus, traditionally, the motivation to consider a reference is a unique and different inquiry than that of the motivation to combine the elements of multiple references.  Here, the court appears to mix them together in a way that adds to confusion in the inquiry rather than offering clarity.

Now, maybe it makes sense to throw-out the old Graham v. John Deere structured approach, but that should be an explicit process rather than a set of (perhaps-unintentional) undermining decisions.

Request for Comments on Examination Time Goals

Patent

Jan. 30 is the written comment period deadline for the USPTO’s Federal Register Notice, “Request for Comments on Examination Time Goals.”  From the PTO:

The USPTO is conducting a comprehensive study of examination time. The USPTO plans to use the public feedback as an input to help ensure examination time goals accurately reflect the amount of time needed by examiners to conduct quality examination in a manner that responds to stakeholders’ interests.

Docs:

 

The Last Days of Night – a brief review

Patent

By Jason Rantanen

I recently read Graham Moore’s The Last Days of Night, a tale about the patent war between Thomas Edison and George Westinghouse from the point of view of Paul Cravath, the young lawyer representing Westinghouse (and yes, that Cravath).  The book is historical fiction (which means that it consists of made up/condensed elements set within the broader landscape of historical evidence), but many of the themes within it ring true today.  Among them are divergent views of the role of patents in technological development.  Edison personifies the corporation-as-inventor, with his organized system for inventing.  Westinghouse embodies the practical aspects of invention–the need to take a technology and make it into a commercial reality.  And Nikola Tesla is the “flash of genius” inventor who invents for the love of inventing rather than for material rewards.

Here are a couple of memorable bits (and slight spoilers):

Thomas Edison was not, Paul thought, the first man to become rich by inventing something clever. Rather, he was the first man to build a factory for harnessing cleverness.  Eli Whitney and Alexander Graham Bell had each made his name by inventing one brilliant thing.  Edison had formed a laboratory that had invented many.  His genius was not in inventing; rather, it was in inventing a system of invention.  Dozens of researchers and engineers and developmental tinkerers labored beneath Edison in a carefully constructed hierarchical organization that he founded and oversaw.  (p. 172)

The “you can’t handle the truth” scene of Cravath’s deposition of Edison is a trifle over the top, but easily captures the tension between Edison and Westinghouse, inventor and improver:

“I hired the band; I booked the hall.  I advertised the show.  And you hate me because my name is on the poster.  Well, I say this: The light bulb is mine.  If the word ‘invention’ is to maintain even a semblance of rational sense, then it must be said that the light bulb was my idea.  It was my invention.  And it my patent.  Every bulb.  Every vacuum.  Every one of your piddling filaments.  And to the mute ingratitude with which you’ve repaid me, I will say only one last thing.”

Edison leaned back in his chair before he loosed his final words.

“You’re welcome.”

(p. 211)

In the author’s note at the end, Moore discusses historical sources and intentional fictionalizations for the sake of narrative.  And a few pages later, he thanks legal historians Adam Mossoff of George Mason and Christopher Beauchamp, now of Brooklyn Law School.  Professor Beauchamp will be giving a talk at the Iowa College of Law later this week about his actual-history book, Invented by Law: Alexander Graham Bell and the Patent that Changed America that I’m very much looking forward to.  If you’re looking for a work that aims for historical accuracy about patents and innovation in the late 1800’s, I recommend giving that one a read.

 

(I did not receive any compensation for writing this, even a copy of the book – which actually came from the library.)

More Confusion on Trump’s Next USPTO Director

Patent

departmentofcommerceFolks are having fun today with Federal Government web page conversions.

We still do not have confirmation that Michelle Lee will stay-on as Under Secretary of Commerce for Intellectual Property and USPTO Director.  The newly updated COMMERCE.GOV website shows the position vacant while other positions remain filled.

It should all be figured out by Monday.

If you remember, Dir. Lee’s initial appointment by President Obama was also filled with some amount of discord and confusion a la The Office with her “acting as director” for several months before actually being nominated for the position.

Michelle Lee, Acting as Director but not “Acting Director”