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In the end, the Patent Office was able to ramp-up production enough to end FY2016 with the most utility patents issued in any fiscal year in history – 304,500 utility patents! About 53% of the patents have a foreign origin.
From the USPTO: The U.S. Department of Commerce’s United States Patent and Trademark Office (USPTO) today announced that as part of its effort to solicit input from the public regarding the legal contours of patent subject matter eligibility, it will be holding two roundtables, one in November and one in December.
“In recent years, the jurisprudence on the very basic issue of what is patent eligible subject matter has been evolving requiring adjustments by innovators, businesses, lower courts and administrative agencies such as the USPTO,” said Under Secretary of Commerce for Intellectual Property and Director of the United States Patent and Trademark Office Michelle K. Lee. “Our goal is to minimize any uncertainty in the patent system by ensuring we not only continue to apply the statute and case law in this area as faithfully as possible, but also understand the impact of the jurisprudence on innovation by assessing what, if any, changes might be helpful to further support innovation.”
In a notice published today in the Federal Register, the USPTO announced that it will begin a nationwide conversation on patent eligible subject matter through two roundtable discussions. The first roundtable will be held November 14, 2016, at the USPTO headquarters in Alexandria, Virginia. This roundtable will focus on the USPTO’s continuing efforts to seek input from across the country and across industries on how the USPTO can improve the agency’s subject matter eligibility guidance and training examples. To facilitate a broader legal discussion on the contours of patentable subject matter, the USPTO will host a second roundtable on December 5, 2016, at Stanford University in Stanford, California. Through the power of USPTO’s nationwide footprint, each of our regional offices will also participate in both roundtables, enabling individuals and industries from around the country to share their perspectives at a location closest to them, in addition to written submissions.
Together, these roundtables will help facilitate discussion on patent subject matter eligibility in view of several decisions in recent years by the courts. If you wish to attend or participate in a roundtable, please see the Federal Register notice to learn more. You may also visit the USPTO’s Events Page.
Stay current with the USPTO by subscribing to receive e-mail updates. Visit our Subscription Center at www.uspto.gov/subscribe.
by Dennis Crouch
Constitutional Challenge to Inter Partes Review: Although the Constitutional issues in Cooper v. Lee and MCM v. HP were law-professor-interesting, they were not substantial enough for certiorari. The Supreme Court has now denied the Cooper and MCM petitions — leaving the IPR regime unchanged. Although Cooper v. Square is still pending, its chances are slight. The Supreme Court has also denied certiorari in Encyclopaedia Britannica (malpractice), Gnosis (appellate review), and GeoTag (case-or-controversy).
A new 101 Challenge: In its first conference of the term, the Supreme Court denied all of the pending petitions regarding patent eligibility. However, Trading Technologies has filed a new petition asking whether a new card game is categorically unpatentable so long as it uses a standard deck (rather than a novel deck) of cards. My post on the case asks: Does the Patent Statute Cabin-in the Abstract Idea Exception? That question references Section 100 of the Patent Act that expressly allows for the patenting of new use of a known manufacture.
Extra Territoriality of Trade Secrecy Law: On the trade secrecy front, Sino Legend has petitioned to review the Federal Circuit’s affirmance of the International Trade Commision’s ban on Legend’s importation of rubber resins used for tire production. The underlying bad-act was a trade secret misappropriation that occurred in China and the question on appeal asks: Whether Section 337(a)(1)(A) permits the ITC to adjudicate claims regarding trade secret misappropriation alleged to have occurred outside the United States. A Chinese court looked at the same case and found no misappropriation.
Design Patent Damages: Oral arguments were held earlier this week in Samsung v. Apple. During the arguments, all parties agreed that (1) the statute does not allow for apportionment of damages but rather requires profit disgorgement; (2) the article-of-manufacture from which profits can be calculated may be a component of the product sold to consumers; and (3) the determination of what counts as the article-of-manufacture is a question of fact to be determined by the jury. The only dispute then was on the factors that a jury should be considered and when the “inside gears” of a product should ever be included in the calculation.
Upcoming Supreme Court Oral Argument: SCA Hygiene (laches) on November 1; Star Athletica (copyright of cheerleader outfit) on October 31.
By Sarah Burstein, Associate Professor of Law at the University of Oklahoma College of Law
Samsung Elecs. Am., Inc. v. Apple Inc., No. 15-777 (argued Oct. 11, 2016) Transcript
On Tuesday, I attended the oral arguments in Samsung v. Apple. As mentioned in a previous Patently-O post, the Court granted cert on a single issue, namely:
Where a design patent is applied to only a component of a product, should an award of infringer’s profits be limited to those profits attributable to the component?
The relevant statute is 35 U.S.C. § 289, which provides a special additional remedy for certain acts of design patent infringement. Section 289 states:
Whoever during the term of a patent for a design, without license of the owner, (1) applies the patented design, or any colorable imitation thereof, to any article of manufacture for the purpose of sale, or (2) sells or exposes for sale any article of manufacture to which such design or colorable imitation has been applied shall be liable to the owner to the extent of his total profit, but not less than $250, recoverable in any United States district court having jurisdiction of the parties.
Nothing in this section shall prevent, lessen, or impeach any other remedy which an owner of an infringed patent has under the provisions of this title, but he shall not twice recover the profit made from the infringement.
In Apple and a case decided briefly after it, Nordock v. Systems, the Federal Circuit ruled that § 289 requires a court to award the total profit from the entire infringing product to a successful design patentee—even when the design patent claims a small portion of the overall product design.
In its cert petition and merits brief, Samsung argued that the “article of manufacture” in § 289 could be something less than the entire infringing product. In its brief opposing cert, Apple defended the Federal Circuit’s interpretation. Yet, in its merits brief, Apple agreed with Samsung (and the United States) that the relevant “article of manufacture” could be something less than the entire infringing product.
At oral argument, Samsung informed the Court that it was dropping its “causation argument” (i.e., that § 289 must be read in light of background causation principles from general tort law) and wanted to focus on its “article of manufacture” argument (i.e., its argument that a successful design patentee should be entitled to the “total profit” from the “article of manufacture” but that the relevant article should be determined mainly by looking at whether the patent claims a whole design or only part).
Unsurprisingly, the bulk of the oral argument was spent discussing how factfinders should determine what constitutes the relevant “article of manufacture” for the purposes of § 289. The Justices seemed particularly interested in how a jury could be instructed to perform this determination. The Justices spent a lot of time pressing the parties about the desirability of the four-part test proposed by the United States, asking if they thought that approach was appropriate and if there were any factors they would add.
It was also very clear during the argument that Apple really wanted to focus on its new waiver argument. In its merits brief (though not in its brief opposing cert), Apple argued that Samsung failed to preserve the “article of manufacture” argument for appeal. After a few questions, however, the Justices’ patience for this line of argument waned and the Chief Justice rather pointedly told Apple’s counsel to move on. The clear message conveyed was that the Justices didn’t need to be told what was in the record; they were perfectly capable of reviewing it for themselves.
On the whole, and based solely on the arguments, it seemed like the Justices were leaning toward adopting some form of multi-factor test to determine what constitutes the relevant “article of manufacture.” What that test might look like was far from clear. At some points, the Justices seemed visibly frustrated by the prospect of coming up with a workable test; whether they were convinced that any of the proposed tests would, indeed, be workable remains to be seen.
In this observer’s opinion, the real problem is the attempt to add a qualitative element to this test, instead of focusing on what the patentee actually claims. Also, it’s no wonder that the Justices and parties had difficulty trying to identify the relevant article of manufacture for the D’305 patent, which claims a design for a single screenshot of the iPhone graphical user interface (“GUI”). Like other GUI designs, the D’305 patent claims a design for software, not a design for a screen (no matter what the PTO says).
In any case, there was no indication that any of the Justices were seriously considering upholding the Federal Circuit’s whole-product rule, which a couple of justices derided as clearly absurd. Justice Breyer did express some concern, at the end, about subverting the original congressional intent. However, he seemed more concerned about creating/affirming a rule with “absurd results.”
One thought: The phrase “article of manufacture” doesn’t just appear in § 289. It also appears in § 171, which defines design-patentable subject matter. Although the Federal Circuit wasn’t asked to construe that phrase in § 289 until Apple, it has issued a number of decisions on what constitutes an “article of manufacture” in the context of § 171. The Federal Circuit didn’t mention any of those cases in its decision in Apple and the parties haven’t relied on them to make their points before the Supreme Court. However, under normal principles of statutory construction, this phrase should mean the same thing in both of these key design patent provisions. It seems fairly clear that the Federal Circuit expanded the definition of “article of manufacture” in § 171 without thinking of the potential consequences for § 289 (arguably leading to the worst of the “absurd results” created by the Federal Circuit’s Apple/Nordock rule). And it seems likely that the reverse might happen here—the Justices might redefine the “article of manufacture” in § 289 without considering any potential consequences for § 171. Of course, those issues weren’t briefed. But it’s still an issue worth keeping an eye on.
by Dennis Crouch
In a new Supreme Court petition, Trading Technologies (TT) has again challenged USPTO and Federal Circuit eligibility determinations.
TT v. Lee asks the following question:
Given that 35 U.S.C. § 100(b) sets forth that a patent eligible “process” includes a “new use of a known process, machine, manufacture, composition of matter, or material,” did the Federal Circuit err by holding that an indisputably new and non-obvious use (i.e., game steps) of an existing manufacture (i.e., playing cards) was patent ineligible under Alice Corp. v. CLS Bank Int’l, 134 S.Ct. 2347 (2014)?
The underlying appellate decision In re Smith involves a patent application claiming a new method of playing Blackjack. The new approach offered by offers ability to bet on the occurrence of “natural 0” hands as well as other potential side bets. Claim 1 in particular requires a deck of ‘physical playing cards” that are shuffled and then dealt according to a defined pattern. Bets are then taken with the potential of more dealing and eventually all wagers are resolved. The Federal Circuit affirmed the PTAB/Examiner determinations that the claimed method of playing cards constitutes an unpatentable abstract idea. As I previously wrote:
The court held that a wagering game is roughly identical to fundamental economic practices that the Supreme Court held to be abstract ideas in Alice and Bilski. . . . Following the Board’s lead, the appellate court then found that the “purely conventional steps” associated with the physical act of playing cards do not “supply a sufficiently inventive concept.”
Important for this case, the court noted that some card games are patent eligible, but that universe appears to be limited only to patents claiming “a new or original deck of cards.” Of course, the patent statute expressly states that processes are patent eligible – and that set of eligible processes “includes a new use of a known process, machine, manufacture, composition of matter, or material.” 35 U.S.C. 100(b).
Above the Statute?: An important fundamental question is whether the eligibility exceptions of Alice and Mayo supersede the statute. Some argue that their origins are Constitutional – embedded in the “discoveries” limitation and thus control the law regardless of the statutory text. But the Supreme Court has repeatedly indicated that the abstract idea and law of nature exceptions are grounded in the 35 U. S. C. §101 (despite the absence of express language). Under a plain language interpretation, these atextual exceptions should not be extended so far as to conflict with the statute — especially the express definitions of §100(b). Thus, TT writes:
Under the statute, new processes that use conventional equipment or materials are clearly patent eligible subject matter. 35 U.S.C. § 100(b) (patent eligible processes include “a new use of a known process, machine, manufacture, composition of matter, or material.”). This Court has never abrogated § 100(b). And Alice did nothing to change this. Indeed, to fail the first step of the Alice test, a claim needs to tie up an “abstract idea,” which for purposes of this test was defined to be a preexisting practice that serves as a fundamental “building block of human ingenuity,” such as a “longstanding” and “prevalent” economic practice. . . . The Federal Circuit has improperly extended Alice step one to claims that indisputably recite a new set of game steps that was not preexisting, let alone “fundamental.”
My own take is that the Constitutional intellectual property clause probably does have some teeth and – as an extreme example – would not empower Congress to authorize patents covering abstract ideas as such. That said, Congressional power certainly extends to authorizing the grant of patents covering the types of inventions being identified as abstract ideas under Alice Corp such as the blackjack game at issue here.
DISCLOSURES – The petition was filed by my friends and former colleagues Leif Sigmund and Jennifer Kurcz at the MBHB firm and the firm is a paid sponsor of Patently-O. I also represented TT in other matters up until 2007. That said, I have not discussed this particular case or my here with TT/MBHB other than to request a copy of the petition after I noted its filing.
Apple v. Samsung (Fed. Cir. 2016) (En banc)
Note: This SamsApple case is not the design patent damages case now before the US Supreme Court. Rather, this case involves Apple’s patents covering slide-to-unlock; phone number recognition; and auto spell correction. At the district court, the jury found that three of Apple’s touch-screen patents infringed by Samsung devices (resulting in $119.6 million in damages). The jury also found one Samsung patent infringed by Apple, but only awarded less than $200,000 in damages. In a February 2016 opinion authored by Judge Dyk, the Federal Circuit reversed the jury verdicts – finding two of Apple’s patents invalid as obvious and the other not-infringed.
Now, in a surprise en banc ruling Friday, the Federal Circuit has chastised the that original panel in this case – writing to:
[A]ffirm our understanding of the appellate function as limited to deciding the issues raised in the appeal by the parties, deciding these issues only on the basis of the record below, and as requiring appropriate deference be applied to review of fact finding.
Zeroing in here, the en banc found that the original panel had improperly considered “extra-record extrinsic evidence to construe a patent claim term.”
Prior to Teva v. Sandoz (and especially prior to Phillips v. AWH) Federal Circuit panels regularly relied upon extra-record evidence such as dictionary definitions in reaching appellate decisions. In Phillips, the court shifted focus away from dictionary definition toward intrinsic evidence such as the patent document and prosecution history. Then, in Teva, the Supreme Court held that extrinsic factual conclusions of a district court must be given deference on appeal. According to the en banc panel here – “After Teva, such fact findings are indisputably the province of the district court.” With this framework, the en banc majority then offered its holdings:
(1) the appellate court cannot rely on extra-record extrinsic evidence in the first instance or make factual findings about what such extrinsic evidence suggests about the plain meaning of a claim term in the art at the relevant time or how such extra record evidence may inform our understanding of how the accused device operates
(2) the appellate court is not permitted to reverse fact findings that were not appealed; and
(3) the appellate court is required to review jury fact findings when they are appealed for substantial evidence.
In discussing the obviousness determination, the en banc majority noted that the panel (and en banc dissents) raise important questions, but found those questions must wait for a different case since “no party—at the panel or the petition for rehearing en banc stage—invited this court to consider changing the existing law of obviousness.”
After chastising the original panel, the en banc majority then reaffirmed the jury verdicts – finding them supported by substantial evidence and thus reinstated the verdict for Apple.
The en banc opinion judgment here was 8-4 8-3 with Judge Moore authoring the 7-member majority opinion; Judge Hughes concurring in judgment but without authoring any opinion whatsoever; The original panel members, Chief Judge Prost, Judge Dyk, and Judge Reyna each dissented and each authored their own opinions; and Judge Taranto not participating.
Judge Dyk’s is the most interesting in the way that it reveals some inner-court-workings:
For the first time in 26 years, this court has taken an obviousness case en banc. See In re Dillon, 919 F.2d 688 (Fed. Cir. 1990) (en banc). Remarkably, the majority has done so without further briefing and argument from the parties, amici, or the government, as has been our almost uniform practice in this court’s en banc decisions. . . .
The present en banc decision will have a significant and immediate impact on the future resolution of obviousness issues. While purporting to apply established circuit law, the majority is in fact making significant changes to the law as articulated by the Supreme Court. Indeed, as Judge Reyna convincingly points out, it is difficult to understand how this case would satisfy the requirements for en banc review if the majority’s purpose were not to clarify the law.
The majority states that it takes this case en banc to correct the original panel’s reliance on extra-record evidence. This could hardly be the reason the majority has granted en banc review, since the panel has continuingly expressed willingness, and indeed desire, to eliminate references to any extra-record evidence because of concerns raised in Apple’s petition for rehearing and because they were unnecessary to the panel opinion. . . . [T]he principles that the majority announces are inconsistent with the Supreme Court’s decisions in KSR, Graham v. John Deere, as well as earlier Supreme Court cases, and will make proof of obviousness far more difficult.
Judge’s Prost and Reyna also agreed that the majority’s application of the law in this case is inconsistent with Supreme Court precedent.
If you made it here, then you you see that there is substantially more to discuss – save that for the next post.
By Dennis Crouch
I have greatly reduced my travel schedule this fall – spending time instead milling lumber and building my chicken coop (as well as teaching patent law & internet law).
I am, however, looking forward to returning to Atlanta in two weeks to take part in the 2016 Corporate IP Institute at Georgia State University. (October 25-26).
Chason Carroll, Jeff Kuester, and Perry Binder have put together a great program. In addition to Professor Hricik’s ethics talk, I’m particularly looking forward to the discussions of cybersecurity. I’ll be doing an IP Year-in-Review (Cases, Legislation, Regulation, etc.) The event typically has a high turnout of in house IP attorneys. See you there.
Get a Job doing Patent Law
The FTC has released its long awaited study on Patent Assertion Entity Activity. [FTC Report] Using its subpoena power, the agency obtained data on more than 2000 patent holding companies, a minority of which have asserted their patent rights in court.
The report offers important insight into PAE business models – primarily identifying two categories: Litigation PAEs and Portfolio PAEs. The FTC found that Litigation PAE licensies are “typically … less than the lower bounds of early stage litigation costs” and thus seen by the FTC as consistent with “nuisance litigation.” The report suggests a variety of litigation reforms to help alleviate potential abusive litigation tactics by patent owners.
The 269 page report will be a catalyst for patent reform measures and thus should be considered carefully.
In the following guest post, Professors Colleen V. Chien (Santa Clara) and Michael Risch (Villanova) follow up on their earlier work calling for patent venue reform. They have written a full article on the topic available on SSRN: http://ssrn.com/abstract=2834130. — DC
Earlier this year, we presented some initial results of our study of what might happen if patent venue reform took place. Since then, Senator Flake (R-Az) introduced the VENUE Act of 2016, and last month, petitioners, led by a group including James Dabney and John Duffy, filed a petition for writ of certiori in the TC Heartland case in the Supreme Court. Amicus briefs are due October 17, 2016 and Kraft’s brief is due on November 16, 2016.
To support these deliberations, we examined the history of the patent venue law and presented some statistics about plaintiff venue preferences for the Eastern District (for even more statistics on this point see the new paper by Brian Love and James Yoon). Additionally, we empirically modeled both reforms by randomly selecting 939 cases from 2015, and making our best guess as to where cases would have been filed under the proposed rules, assuming they would have been filed at all. Since 2015, the overall number of patent cases has declined, about 20% YTD based on data from Lex Machina (4,216 cases by this time last year vs. 3,369 today). The Eastern District of Texas has made a number of changes and its share is also down from 44% in 2015, to 35% 2016 YTD (30% in 1Q, 36% in 2Q, and 38% in 3Q); the next closest district (Delaware) has seen about 9% of filings, based on data from Lex Machina.
In modeling different venue reform choices, we do not purport to claim that any venue reform would be, on balance, welfare enhancing, nor can we know with certainty where or if cases would be filed. However, we do make one thing clear: a patent system in which so much rides on where a lawsuit is filed is deeply flawed, and, as we have said before, we hope that policymakers will take the opportunity to clarify what has been a complicated area of law.
A draft of the complete paper is available here. In brief, however, TC Heartland reform would require cases to be filed either where the defendant is incorporated or where the defendant has a place of business and is infringing. VENUE Act would add the location of the original inventors as well as anywhere the patent owner performed R&D on the patent (patent assertion entities are, by definition, excluded). To model these provisions we gathered relevant case and location information; we also gathered information on industries, plaintiffs, and defendants of different sizes to understand the differential impacts of reform.
In brief, we looked to see the following under the conditions of each reform: 1) could the plaintiff have filed in the district that the case is already in? 2) if not, could the plaintiff have sued in a district in which it has sued in the last two years? 3) if not, could the plaintiff have sued in a district popular among plaintiffs like it in the last five years? 4) if not, we assume that the plaintiff would sue at the defendant’s primary place of business. Option 1 means “no change” – the case would stay put. Options 2, 3, and 4 mean, “change”—the case would have been filed in another district and the model where the suit would end up based on the proposed venue rules. Note that the 2nd and 3rd assumptions bias our model towards the currently concentrated status quo. Patentees might well pick other favorite districts if they can find a basis for venue there.
Applying this methodology, we found a few interesting things.
First, 86% of cases were filed outside the defendant’s primary place of business,[1] including 80% of cases brought by operating companies and 90% of cases brought by NPEs. When we considered any of defendant’s place of business, cases were filed outside of where the defendant had a location 83% of the time. This suggests that, in general, permissive venue leads to plaintiffs filing where it is convenient or advantageous, which is usually not where the defendant is located.
Second, we find that if TC Heartland reform had been in effect, 52% of operating companies would have to pick a different district than they had originally chosen. For NPEs, 60% would have to pick a different district. If the VENUE Act were passed, however, the change from the status quo would be a lot less dramatic for operating company plaintiffs – only 18% would have to move their case while the rest could have been filed as is. NPE plaintiffs would have been impacted differently, particularly under the VENUE Act, with PAEs most impacted. The reason for this is relatively straightforward: the VENUE Act allows operating companies (and failed companies or individuals) to sue where they do research and development, but does not allow PAEs to do the same. Furthermore, operating companies are more likely to sue where they do research and development, while NPEs are more likely to sue in the Eastern District of Texas.
Third, we find that cases would be more geographically distributed, but our reported distributions are likely in the eye of the beholder and sensitive to our assumptions particularly about the prioritization of familiar districts by plaintiffs, which might not hold in practice. That said, we believe that one thing is clear: cases would leave the Eastern District of Texas. The following table shows the top 5 districts before and after reform as we modeled it:
| Final Districts – OpCo π | Final Districts – NPE π | |||||
| District | Actual Case | Prediction Heartland | Prediction VENUE Act | Actual Case | Prediction Heartland | Prediction VENUE Act |
| E.D.Tex. | 7.8% | 4.6% | 5.0% | 64.1% | 19.0% | 19.1% |
| D.Del. | 10.0% | 18.9% | 11.0% | 7.3% | 25.8% | 23.1% |
| D.N.J. | 10.3% | 12.1% | 10.7% | 0.9% | 2.4% | 2.0% |
| C.D.Cal. | 7.5% | 14.2% | 9.6% | 2.1% | 2.6% | 2.4% |
| N.D.Cal. | 5.0% | 2.8% | 3.9% | 3.0% | 17.3% | 16.6% |
Fourth, Heartland and VENUE Act reform would affect companies of different sizes differently. In general, Heartland would require suits to be filed where the defendant is located much more often than the VENUE Act (on the order of ~65% to ~45% depending on company size). Smaller defendants would benefit more from TC Heartland venue reform than would larger defendants, because of their relatively smaller footprints.
Fifth, we found that manufacturing and biopharma defendants would benefit the least from venue reform. For biopharma, the result is complicated. Contrary to conventional wisdom, all of the cases are not in New Jersey, though as shown in the table above, many of them are. Instead, because reform allows for suit where parties are incorporated, many cases would remain in Delaware, where they are already located. Industries that would see the most benefit from Heartland reform would be in high tech and consumer/durable goods manufacturing. These are often companies with only one place of business, which limits where they could be sued. High tech, especially, is a sector that is often sued by NPEs, so their cases would be relocated under either Heartland or the VENUE Act. On the other hand, manufacturing industries are often sued by operating companies and thus, they would see much less benefit under VENUE Act reform than they would under Heartland.
Despite its limitations, we believe that this study provides valuable insight into patent venue. Examination of venue by industry, comparison of the differences between the options (including who wins and who loses), and analysis about where cases might wind up will hopefully provide fruitful information for anyone involved in patent practice and policy. The full paper has much, much more analysis, with a representative sample of the types and sizes of companies being sued in addition to detailed discussion of how each reform proposal will affect parties by plaintiff type, geography, and defendant industry and size.
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[1] We found that, for a random sample of 99 of our defendants’ other litigations, 80% were filed outside the defendant’s primary place of business
The USPTO has issued a notice of proposed rulemaking (NPRM) on patent and PTAB fees with the goal of raising revenue in order to improve patent quality and examination timeliness. Public comments are due by December 2, 2016.
The proposal includes:
Read More and Comment:
by Dennis Crouch
Lyda v. CBS (Fed. Cir. 2016)
Although at first glance, Lyda appears as a narrow decision against an individual-inventor plaintiff, the decision is important because it establishes that a patent infringement complaint must provide factual allegations at the claim-element-by-claim-element level in order to avoid a dismissal on the pleadings.
In a civ-pro focused decision, the court has affirmed the dismissal of Lyda’s infringement case for failure to state a claim – finding that Lyda’s complaint fails to satisfy the Twiqbal pleading standards.[1] Rule 8 of the Federal Rules of Civil Procedure require a “ a short and plain statement of the claim showing that the pleader is entitled to relief.”[2] Failure to state a claim is grounds for dismissal under R. 12(b)(6).[3] The Supreme Court gloss requires allegations of sufficient facts to state a plausible claim for relief. Although statements in the complaint are taken as true, “threadbare recitals of the elements of a cause of action, supported by mere conclusory statements, do not suffice.”[4] “While legal conclusions can provide the framework of a complaint, they must be supported by factual allegations.”
Until recently, Twiqbal was not directly applied to patent complaints because the existence of a bare-bones form infringement complaint (Form 18) that the rules deemed to be sufficient. Form 18 was eliminated in the December 1, 2015 changes to the rules. In the present case, the amended complaint was filed prior to the change, but the court held that Form 18 does not apply in this case because Lyda implicitly alleged a claim of joint infringement rather than the standard direct infringement that is the focus of Form 18.[5]
Applying Twiqbal is not easy – although the general rule is that the pleadings must include enough plausible facts that – if taken as true – would lead to a verdict for the plaintiff. In discussing its application, the Supreme Court noted that it will be “context-specific” requiring both “judicial experience and common sense.” Applying that approach to patent infringement cases, the court here took the fairly bold stance of requiring that the facts plausibly pled be “sufficient to allow a reasonable inference that all steps of the claimed method are performed.”
Lyda’s case was particularly dismissed because the patentee failed to plead the elements of joint infringement required by Akamai. The Lyda court writes:
[Under the plaintiffs theory of infringement, the] Amended Complaint must plausibly allege that Defendants exercise the requisite “direction or control” over the performance of the claim steps, such that performance of every step is attributable to Defendants. The Amended Complaint alleges that CBS Interactive controls certain independent contractors who in turn direct and control the “participation” of unnamed third persons to send votes on either their own or borrowed cell phones. Mr. Lyda does not set forth any factual allegations in support of his assertion that CBS Interactive directed or controlled the independent contractors. Nor does the Amended Complaint contain factual allegations relating to how the independent contractors directed or controlled the unnamed third parties. Most importantly, the Amended Complaint does not allege any relationship between the Defendants and the unnamed third parties, who own or borrow cell phones, in a way that the actions of these unnamed third parties should be attributed to Defendants. Rather, the Amended Complaint alleges conclusively and without factual support that CBS directed or controlled the independent contractors who then directed or controlled the unnamed third parties. There are thus no allegations in the Amended Complaint that can form the basis of a reasonable inference that each claim step was performed by or should be attributed to Defendants. The Amended Complaint fails to plausibly plead sufficient facts to ground a joint infringement claim under this court’s Akamai decision and does not satisfy the Iqbal/Twombly pleading standard.
The district court also denied Lyda leave to amend the complaint a second time. On appeal, the Federal Circuit affirmed that determination – finding that the district court has “broad power to control its own docket.” With the case dismissed, I expect that Lyda can refile and just potentially lose some of the back damages.
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[1] Bell Atl. Corp. v. Twombly, 550 U.S. 544 (2007); Ashcroft v. Iqbal, 556 U.S. 662 (2009).
[2] Fed. R. Civ. Pro. R. 8.
[3] Fed. R. Civ. Pro. R. 12(b)(6) (“a party may assert . . . (6) failure to state a claim upon which relief can be granted”).
[4] Iqbal.
[5] See Akamai Techs., Inc. v. Limelight Networks, Inc., 797 F.3d 1020 (Fed. Cir. 2015) (en banc) (requiring that “(1) one party exercises the requisite ‘direction or control’ over the others’ performance or (2) the actors form a joint enterprise such that performance of every step is attributable to the controlling party).
The Supreme Court has greatly simplified the patent docket by denying certiorari in 10+ cases. Gone are GEA Process (IPR termination decision), Amphastar (scope of 271.e safe harbor) , Commil (appellate disregard of factual evidence), MacDermid (obvious combination), Jericho (Abstract Idea) , Trading Technologies (mandamus challenging CBM initiation), Tobinick (interference), Neev (arbitrator autonomy), Genetic Tech (eligibility), Essociate (eligibility), Dreissen, and Pactiv (ex parte reexamination procedure). Notably, all of the eligibility petitions have been denied.
The constitutional challenges of MCM and Cooper are the only cases that particularly survived the Court’s latest culling. Those cases have been relisted for consideration at the next conference (October 7). However, there is some chance that the court is simply waiting for Square’s responsive brief due October 12. Meanwhile, on October 11, the court will hear oral arguments in Samsung v. Apple.
The big news from Intellectual Ventures v. Symantec (Fed. Cir. 2016) is not that the court found IV’s content identification system patents invalid as claiming ineligible subject matter. (Although that did happen). Rather, the big event is Judge Mayer’s concurring opinion that makes “make two points: (1) patents constricting the essential channels of online communication run afoul of the First Amendment; and (2) claims directed to software implemented on a generic computer are categorically not eligible for patent.”
Read Judge Mayer’s opinion in full:
MAYER, Circuit Judge, concurring.
I agree that all claims on appeal fall outside of 35 U.S.C. § 101. I write separately, however, to make two points: (1) patents constricting the essential channels of online communication run afoul of the First Amendment; and (2) claims directed to software implemented on a generic computer are categorically not eligible for patent.
Get a Job doing Patent Law
by Dennis Crouch
In its decision in this trademark registration case, the Federal Circuit found the statutory prohibition against registering “disparaging marks” an unconstitutional governmental regulation of speech in violation of the First Amendment. (En banc decision). I noted in my December 2015 post that “there would be a good chance for Supreme Court review of the case if the government presses its position.”
The Supreme Court has now granted the USPTO’s petition for writ of certiorari asking:
Whether the disparagement provision of the Lanham Act, 15 U.S.C. 1052(a), which provides that no trademark shall be refused registration on account of its nature unless, inter alia, it “[c]onsists of . . . matter which may disparage . . . persons, living or dead, institutions, beliefs, or national symbols, or bring them into contempt, or disrepute” is facially invalid under the Free Speech Clause of the First Amendment.
In the case, Simon Tam is seeking to register a mark on his band name “The Slants.” The USPTO refused after finding that the mark is disparaging toward individuals of Asian ancestry.
Tam’s responsive brief was unusual in that he agreed that Certiorari should be granted. The brief also restated and expanded the question presented as follows:
1. Whether the disparagement clause bars the registration of respondent’s trademark.
2. Whether the disparagement clause is contrary to the First Amendment.
3. Whether the disparagement clause is unconstitutionally vague under the First and Fifth Amendments.
While the Federal Circuit majority opinion had agreed that the disparagement clause was contrary to the First Amendment, only a two-judge concurring opinion indicated that the clause is unconstitutionally vague. Thus, the reframing of the question presented here appears an attempt to offer alternative reasons for affirmance. The Supreme Court offered no indication as to which question is proper.
Congratulations to Ron Colemen for shepherding this case and Profs Volokh and Banner who apparently wrote the petition response.
by Dennis Crouch
Cooper v. Lee and Cooper v. Square are both ask the same question: whether 35 U.S.C. §318(b) violates Article III of the United States Constitution, to the extent that it empowers an executive agency tribunal to assert judicial power canceling private property rights amongst private parties embroiled in a private federal dispute of a type known in the common law courts of 1789, rather than merely issue an advisory opinion as an adjunct to a trial court.” The issues here are also parallel to those raised in MCM Portfolio v. HP (“Does IPR violate Article III of the Constitution?”). The cases received a boost this month with the Court’s call for response (CFR) in Cooper v. Square. Square had previously waived its right to respond, but its response is now expected by October 11, 2016. Under Supreme Court R. 37, the Call for Response reopens the period for filing of an amicus curiae brief in support of petitioner. (~ due October 8, 2016). Eight Amici Curiae briefs were filed in MCM and two in Cooper v. Lee. In general, each brief additional brief incrementally increases the odds of certiorari. Statistical analysis also suggests that a call for response significantly increases the odds of certiorari being granted.
I wrote earlier this week about the new IPR process challenge in Ethicon where the patentee has challenged Director Lee’s delegation of institution decision authority to the PTAB. The case is one of statutory interpretation but uses the separation-of-function doctrine as an interpretive guide. The same question is also presented in LifeScan Scotland, Ltd. v. Pharmatech Solutions, Inc. Both petitioners (Ethicon and LifeScan) are owned by J&J.
The final new petition is a personal jurisdiction case: Mylan v. Acorda. The Hatch-Waxman setup involved Mylan preparing and filing its abbreviated new drug application that created a cause of action for infringement under 35 U.S.C. 271(e)(2). Although the ANDA preparation occurred in West Virginia and the filing in Maryland, the infringement lawsuit was filed by Acorda in Delaware. Mylan asks: “Whether the mere filing of an abbreviated new drug application by a generic pharmaceutical manufacturer is sufficient to subject the manufacturer to specific personal jurisdiction in any state where it might someday market the drug.” The argument builds on the non-patent decision Daimler AG v. Bauman, 134 S. Ct. 746 (2014). In the pro-business case of Daimler, the Supreme Court reduced the scope of general personal jurisdiction to states where the defendant company is incorporated or has its personal place of business.
In the claim construction front, the Supreme Court also called for a response in Google v. Cioffi. In that case Google suggests an interpretative principle of “strictly construing” amended claim language against the patentee. [GoogleCioffiPetition]
On the merits side – we have three patent cases pending oral arguments. First-up is the design patent damages case of Apple v. Samsung. Although not a party, the Solicitor General has requested to been granted leave to participate in oral arguments. Its brief, the SJ argued (1) Section 289 does not permit apportionment but rather requires award of the infringers profits on the relevant article of manufacture; but (2) the article of manufacture can be a “component” rather than a finished product sold to end-users. In the end, the SJ argues that the jury should have been tasked with determining the appropriate article-of-manufacture and that the case should be remanded to determine whether a new trial is warranted. Briefing continues in both SCA Hygiene (laches) and Life Tech (Component Export liability).
Prof. Elizabeth Rowe (Florida) has posted a new article on trade secret damages: Unpacking Trade Secret Damages. The article looks at outcomes of about 150 federal trade secret lawsuits that went to trial and received a verdict. These cases are all pre-DTSA and thus in federal court on diversity or supplemental jurisdiction grounds. Prof Rowe found – in my view – a surprisingly low percentage of cases where punitive damages or attorney fees were awarded (~2% and 8% respectively – of cases with an award).
The award distribution is also highly skewed. “[T]en cases account for half of the total damages of the approximately $2.4 billion awarded since 2000.” Top on this list is DuPont’s 2011 award of 900 million against Kolon.
Ethicon has filed its expected petition for writ of certiorari challenging the USPTO’s delegation of IPR Institution Decisions to the Patent Trial and Appeal Board. I wrote about the case earlier:
The newly filed petition argues pure statutory interpretation:
Whether the [AIA] permits the Patent Trial and Appeal Board instead of the Director to make inter partes review institution decisions.
The setup: The statute requires “The Director” to “determine whether to institute.” 35 U.S.C. § 314(b). Under the statute, the PTAB picks up its role after institution in order to “conduct each inter partes review instituted under this chapter,” § 316(c). Rather than making the determinations herself, the PTO issued a rule that the PTAB makes the institution decisions “on behalf of the Director.” 37 C.F.R. § 42.4(a).
Although the statute does not expressly prevent the Director from delegating her authority, Ethicon argues that the statute should be interpreted in light of the “longstanding policy of separation-of-functions whereby adjudicatory officers inside an agency (such as administrative law judges or, here, administrative patent judges) are insulated from discretionary executive functions.” Of course, the Director does not have to personally do all the work – The idea here though is that it is impermissible to delegate policy issues to the administrative patent judges. And, the AIA is clear that the institution decision is at least partially based upon policy and institutional competency determinations.
Read the Petition: Ethicon Petition for Certiorari