Cardpool: Amending Claims in Reexam after Court Judgment of Invalidity

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by Dennis Crouch

The timing of a settlement is sometimes really important for patentees — especially if a court is about to find your patent invalid.

Slightly complex story: In Cardpool v. Plastic Jungle, the district court ruled on summary judgment that Cardpool’s gift-card-exchange patent claims invalid under 35 U.S.C. 101 and dismissed the case with prejudice. U.S. Patent No. 7,494,048.  That decision was initially affirmed by the Federal Circuit in a R.36 Judgment Without Opinion. Shortly thereafter, however, the USPTO issued a reexamination certificate finding the claims (as amended in reexam) patentable (of course, the PTO did not consider eligibility but only novelty and nonobviousness).

The timing of the reexamination certificate gave Cardpool the opportunity to request rehearing from the Federal Circuit. The appellate court agreed and vacated its prior summary affirmance (although not the district court’s opinion) and remanded to the district court to consider the impact of the reexamination changes.

The parties apparently came to some agreement and thus on remand the parties jointly moved for the district court to vacate its invalidity judgment since the claims had been amended and since the PTO certificate issued before the appellate mandate. See Fresenius USA, Inc. v. Baxter Int’l, Inc., 721 F.3d 1330, 1346 (Fed. Cir. 2013).

However, the district court rejected the plea for vacatur — finding that the PTO decision does not “displace a district court judgment” and that it would be “against the public interest” to allow a patentee to overcome an invalidity judgment simply by “amending its invalid claims.”

No Vacation: Now, on appeal again, the Federal Circuit has affirmed the lower court ruling that vacatur is not necessary or proper:

The Supreme Court counsels that “vacatur must be decreed for those judgments whose review is . . . ‘prevented through happenstance’—that is to say, where a controversy presented for review has ‘become moot due to circumstances unattributable to any of the parties.’” U.S. Bancorp Mortg. Co. v. Bonner Mall P’ship, 513 U.S. 18, 23 (1994).

Here, the mootness is due to amendments made by the patentee.  As such, the appellate court refused to vacate the district court judgment.

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Res Judicata: What is unclear here is the level of claim & issue preclusion that will apply going forward when Cardpool asserts the patent against some third party.  Claim 1 was found invalid by a final judgment. However, Claim 1 has now been amended.   Could Cardpool sue Plastic Jungle (or its assigns) on the revised Claim 1?  Could Cardpool sue an unrelated alleged infringer? Writing for the majority, Judge Newman suggests (but does not hold) that Cardpool will be able to do so:

On the facts and procedures of this case, the issue of validity of the reexamined claims remains to be addressed in any future proceeding. In the initial proceeding the original claims were adjudicated only on the ground of subject matter eligibility under section 101. As in Aspex, the effect of a prior judgment rendered on specific issues as applied to the original claims, depends on the facts and issues of the reexamination, and invokes equity as well as law.

I pulled-up the reexamined claims and found that they were extensively amended to require that the method be computer-implemented using a processor, computer program, data requests, validation process by the processor, etc.  I would be truly surprised, if these amendments are sufficient to overcome the Alice Corp. test for eligibility (as implemented).

 

An Early Review of the Impact of Form 18’s Elimination on Pleading Direct Infringement

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Guest Post by Leeron Morad & Andrew J. Bramhall of Quinn Emanuel[i]

Introduction

On December 1, 2015, as part of a sweeping set of amendments to the Federal Rules of Civil Procedure, Rule 84 and its Appendix of Forms were abrogated.  Patent litigators are no doubt well acquainted with Form 18, which set forth a generic complaint for patent infringement.  Under the guise of notice pleading, the Form 18 complaint recited only the most basic factual allegations: it did not identify any asserted patent claims or any specific accused product models, nor provide an explanation of how those products allegedly infringe.  Nevertheless, a direct infringement claim could survive a motion to dismiss simply by complying with Form 18.[ii]

As the effective date for the new amendments approached, practitioners began to consider how Form 18’s elimination might affect the pleading of direct infringement.  In particular, they questioned whether newly filed claims would be analyzed under the “plausibility” standard established by the Supreme Court in Twombly and Iqbal[iii] and thus would require “enough facts to state a claim to relief that is plausible on its face.”[iv]  The possibility of a heightened pleading standard caused a considerable spike in the filing of complaints in the days leading up to December 2015: more than 250 patent infringement complaints were filed on November 30 alone.[v]

Early indications from the few issued district court decisions interpreting the amended Rules confirm that the pleading standard for direct infringement claims may indeed have changed.  In this article, we look at two decisions applying the amended Rules—one from the District of Delaware and the other from the Central District of California—that provide an interesting glimpse of what may or may not suffice when pleading direct infringement today.

Case 1: RainDance Techs. Inc. v. 10x Genomics, Inc., No. 15-cv-00152, Dkt. 28 (D. Del. Mar. 4, 2016). [RainDance Decision]

In RainDance Techs., Inc. v. 10x Genomics, Inc., Judge Andrews of the District of Delaware granted 10x Genomics’ motion to dismiss RainDance’s and the University of Chicago’s claims for direct infringement of seven patents, finding that “Plaintiffs have not plausibly alleged any infringement.”[vi]  RainDance and the University of Chicago (collectively, the RainDance Plaintiffs) filed their original complaint against 10x Genomics in February 2015, and then filed an amended complaint in April 2015.  10x Genomics filed its motion to dismiss in May 2015, arguing (among other things) that the direct infringement claim fell short of the plausibility standard of Twombly and Iqbal.[vii]

The level of detail in the RainDance Plaintiffs’ complaint, which clocked in at 35 pages, almost certainly would have passed muster under Form 18.  For each of the seven asserted patents, the RainDance Plaintiffs identified a representative claim that they alleged had been directly infringed.[viii]  They also identified 10x Genomics’ accused product—a microfluidic DNA and RNA analysis platform—as well as the specific platform components implicated by the alleged infringement.  As support for their allegations, the RainDance Plaintiffs included figures from 10x Genomics’ conference presentations describing the accused platform’s structure and its chemical workflow, as well as excerpts from 10x Genomics’ website.[ix]

Judge Andrews, however, found the RainDance Plaintiffs’ amended complaint lacking.  He first noted that, despite the complaint’s length, the “essential factual allegations d[id] not take up much space.”[x]  He took issue in particular with the RainDance Plaintiffs’ reliance on 10x Genomics’ promotional materials, adding that it did not appear the plaintiffs had “purchased one of [10x Genomics’] products to see how it actually works.”[xi]  Judge Andrews also noted that the RainDance Plaintiffs filed the complaint “less than a month” after first learning about the 10x Genomics platform, suggesting they might have benefited from spending more time investigating the accused product before filing suit.

In assessing the adequacy of the direct infringement allegations, Judge Andrews also performed his own analysis of the exemplary patent claims identified in the complaint.  He appeared to be searching for express factual allegations tying each asserted claim limitation to the accused products in a way that bridged the gap between technical claim language and the accused features.[xii]  For example, Judge Andrews concluded that the complaint failed to address the “adjusting pressure” limitation of one asserted method claim: “[t]here is nothing in the complaint (at least so far as I can see) that hints at the role of pressure in Defendant’s products.”[xiii]  In reference to a different asserted claim, he likewise noted that “[i]t is not obvious to me that what Plaintiffs described is an ‘autocatalytic reaction.’”[xiv]  He ultimately determined that the RainDance Plaintiffs “ma[d]e no attempt to relate any of their factual assertions with any of the asserted claims” and dismissed the direct infringement claim as not plausibly alleged.[xv]

It is noteworthy that although the RainDance Plaintiffs filed their amended complaint in April 2015—nearly eight months before the new amendments went into effect—Judge Andrews chose “to apply the post-December 1, 2015, direct infringement pleading standard to the amended complaint” because “it would be in the interest of justice” to do so.[xvi]  He did not, however, explain his reasoning for this conclusion or give an indication of whether he would come to the same conclusion in other already pending cases.

Case 2: InCom Corp. v. The Walt Disney Co., No. 15-cv-3011, Dkt. 26 (C.D. Cal. Feb. 4, 2016). [InCom Decision]

In contrast to Judge Andrews’ decision in RainDance, Judge Gutierrez’s decision in Incom Corp. v. The Walt Disney Co. provides an example of what at least one court considers to be sufficient to plead direct infringement under the amended Rules.[xvii]  InCom filed its original complaint on April 22, 2015, and an amended complaint seven months later on Nov. 23, 2015, alleging infringement of three patents related to tracking systems using Radio Frequency Identification.  Like the RainDance plaintiffs, InCom identified specific accused products in the complaint—namely, Disney’s attendance tracking device, “MagicBand,” and the “MyMagic+” attendance monitoring system.  On December 10, 2015, not long after the new amended Rules went into effect, Disney moved to dismiss InCom’s amended complaint, arguing that it did not plausibly allege a claim for direct or indirect infringement.

Judge Gutierrez denied Disney’s motion to dismiss to the extent it sought to dismiss InCom’s direct infringement claims.  As in RainDance, he first rejected InCom’s argument that the amended Rules should not apply because it filed the complaint before their effective date, December 1, 2015.[xviii]  Citing the Supreme Court’s order adopting the amended Rules, which stated that the amendments should apply “insofar as just and practicable [in] all proceedings then pending,” Judge Gutierrez held that it was appropriate to require InCom to meet the “plausibility” standard in its amended complaint.[xix]

Even under the heightened pleading standard, however, Judge Gutierrez held that InCom’s amended complaint sufficiently pleaded a direct infringement claim.  While acknowledging that “merely naming a product and providing a conclusory statement that it infringes a patent is insufficient to meet the ‘plausibility’ standard set forth in Twombly and Iqbal,” he found that InCom had done enough “by specifically identifying Defendants’ products and alleging that they perform the same unique function as Plaintiff’s patented system.”[xx]  In particular, Judge Gutierrez emphasized that InCom “describe[d] how its Attendance Tracking System uses RFID technology and ID badges to track human presence in large volumes,” and “name[d] specific products developed, manufactured and used by Defendants which, like Plaintiff’s system, track human presence in large volumes.”[xxi]

Notably, in contrast with Judge Andrews, Judge Gutierrez did not require InCom to identify any exemplary asserted claims in its complaint, much less conduct any element-by-element analysis.  Despite these missing details, he concluded that “[a]t this stage, it is sufficient that Plaintiff has made plausible allegations that each Defendant is responsible for direct infringement.”[xxii]  In comparison with the RainDance decision, the InCom decision therefore appears to establish a lower threshold for “plausibly” alleging direct infringement under the amended Rules.

Conclusion

These two early decisions, while by no means definitive of the pleading standards under the amended Rules, suggest that patent plaintiffs were right to be concerned about a heightened requirement for pleading direct infringement.  Because the amendments only went into effect fairly recently, however, only time will tell whether other district courts will apply the “plausibility” standard to direct infringement claims as well.  It also remains possible that, despite the abrogation of Rule 84 and the Appendix of Forms, some courts may find that compliance with Form 18 is still enough to survive a motion to dismiss.[xxiii]

Yet even under the heightened “plausibility” standard, we would not be surprised to see meaningful differences emerge in the ways different districts—and even individual judges within districts—apply that standard to direct infringement claims.  The decisions discussed in this article suggest such a trend: one seems to demand allegations that directly tie the claim language to the accused product, whereas the other accepts general discussion of the patented invention without the identification of any asserted claims.

Before filing suit, litigants should be mindful of these differences, lest they be faced with the prospect of having to amend and re-file their complaint—or perhaps worse.  Indeed, it would be prudent for would-be plaintiffs to closely follow this area of law in the year to come, as it appears Form 18’s elimination is already changing how patents are litigated.  Finally, existing plaintiffs should be aware that merely filing a complaint prior to December 1, 2015—even many months before that date—does not guarantee application of the Form 18 pleading standard.

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[i] Leeron Morad is an associate and Andrew Bramhall is a partner in Quinn Emanuel’s Silicon Valley office.  The opinions expressed are those of the author(s) and do not necessarily reflect the views of the firm or its clients. This article is for general information purposes and is not intended to be and should not be taken as legal advice.

[ii] In re Bill of Lading Transmission & Processing Sys. Patent Litig., 681 F.3d 1323, 1336 (Fed. Cir. 2012).

[iii] Bell Atl. Corp. v. Twombly, 550 U.S. 544 (2007); Ashcroft v. Iqbal, 556 U.S. 662 (2009).

[iv] Twombly, 550 U.S. at 554-55, 570.

[v] Based on a Docket Navigator search of cases filed on November 30, 2015.  By comparison, in the entirety of 2015, plaintiffs filed approximately 5,500 new patent cases.  The filing of 250 cases represents almost 5% of the total for the year.  http://www.law360.com/articles/755311/how-2015-s-crush-of-patent-lawsuits-kept-ip-attys-busy.

[vi] Case No. 15-cv-00152, Dkt. 28, at 5 (D. Del. Mar. 4, 2016).

[vii] According to 10x Genomics, the “plausibility” pleading standard should apply to the RainDance Plaintiffs’ direct infringement claim because pleading is governed by regional circuit law in the Third Circuit.  Id., Dkt. 16, at 14-17.  10x Genomics also argued that the “plausibility” standard should apply because Form 18 was expected to be abrogated “during the early stages of this case.”  Id. at 17.

[viii] E.g., id., Dkt. 12 ¶ 26.

[ix] Id. ¶¶ 16-20.

[x] Id., Dkt. 28, at 1.

[xi] Id. at 3.

[xii] See id. at 4 (“The requirements of the next to last element might be met, but involves quite a bit of supposition.  I think, but am not sure, that partitioning samples is the same as amplification. . . .”).

[xiii] Id. at 3.

[xiv] Id. at 4.

[xv] Id.  Judge Andrews dismissed the complaint without prejudice, however, because “Plaintiffs might very well be able to [plausibly allege infringement],” and gave the RainDance Plaintiffs three weeks to re-file.  Id. at 5.

[xvi] Id. at 4-5.

[xvii] Case No. 15-cv-3011, Dkt. 39 (C.D. Cal. Feb. 4, 2016).

[xviii] Id. at 3.

[xix] Id. at 3-4 (quoting Supreme Court of the United States, Order Regarding Amendments to the Federal Rules of Civil Procedure (Apr. 29, 2015)).

[xx] Id. at 4.

[xxi] Id.

[xxii] Id. at 5.

[xxiii] According to the Committee Notes to the amended Rules, “[t]he abrogation of Rule 84 does not alter existing pleading standards or otherwise change the requirements of Civil Rule 8.”  It seems possible that a court could interpret this as intending to maintain the notice pleading standard for direct infringement claims.

Defend Trade Secret Act Moving Forward

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by Dennis Crouch

I am always amazed how gridlock is pushed aside to implement intellectual property laws.  In a unanimous vote yesterday, the Senate passed the Defend Trade Secret Act (DTSA, S. 1890) that would create a federal cause of action for trade secret misappropriation and provides for damages and injunctive relief (including a seizure order to prevent dissemination).  Neither Senators Ted Cruz nor Bernie Sanders voted.  The identical bill H.R. 3326 is pending in the House of Representatives and includes 127 co-sponsors (mostly Republican).  President Obama has announced his support as well.

From Senator Hatch:

Trade secrets–such as customer lists, formulas, algorithms, software codes, unique designs, industrial techniques, and manufacturing processes–are an essential form of intellectual property. Other forms of intellectual property, such as patents, copyrights, and trademarks, are covered by Federal civil law. Trade secrets, by contrast, are the only form of U.S. intellectual property where the owner does not have access to a Federal civil remedy for misuse or misappropriation. As a result, billions of dollars each year are lost to trade secret theft, which stifles innovation by deterring companies from investing in research and development. Currently, the only Federal vehicle for trade secret protection is the 1996 Economic Espionage Act, which makes trade secret theft by foreign nationals a criminal offense. But this remedy criminalizes only a small subset of trade secret theft and relies on the thinly stretched resources of the Department of Justice to investigate and prosecute such offenses. . . . State laws today are perhaps even more variable in their treatment of trade secrets than they were at the time the Uniform Trade Secrets Act was proposed in 1979. This next mixed bag of differing legal regimes forces victims of trade secret theft to wade through a quagmire of procedural hurdles in order to recover their losses. . . . Put simply, State law is designed for intrastate litigation and offers limited practical recourse to victims of interstate trade secret theft–the contrast between intrastate and interstate. Maintaining the status quo is woefully insufficient to safeguard against misappropriation. U.S. companies must be able to protect their trade secrets in Federal court.

Most trade secret cases involve former employees who take knowledge with them as they move to a new venture.  The bill apparently includes minor safeguards for whistle-blowing employees and bar a court from preventing a person from moving to a new job. However, as far as I know, no employee groups have supported the Bill.

More info: 

Misappropriation is defined as “(A) acquisition of a trade secret of another by a person who knows or has reason to know that the trade secret was acquired by improper means; or (B) disclosure or use of a trade secret of another without express or implied consent by a person who–(i) used improper means to acquire knowledge of the trade secret; (ii) at the time of disclosure or use, knew or had reason to know that the knowledge of the trade secret was–(I) derived from or through a person who had used improper means to acquire the trade secret; (II) acquired under circumstances giving rise to a duty to maintain the secrecy of the trade secret or limit the use of the trade secret; or (III) derived from or through a person who owed a duty to the person seeking relief to maintain the secrecy of the trade secret or limit the use of the trade secret; or (iii) before a material change of the position of the person, knew or had reason to know that–(I) the trade secret was a trade secret; and (II) knowledge of the trade secret had been acquired by accident or mistake.”

Improper means “(A) includes theft, bribery, misrepresentation, breach or inducement of a breach of a duty to maintain secrecy, or espionage through electronic or other means; and (B) does not include reverse engineering, independent derivation, or any other lawful means of acquisition.”

 

 

Effective Date: The amendments shall apply with respect to any misappropriation of a trade secret for which any act occurs on or after the date of the enactment of this Act.

Not Intellectual Property: The new trade secrecy law “shall not be construed to be a law pertaining to intellectual property for purposes of any other Act of Congress.”  Thus, for example, the bankruptcy IP exception 365(n) would not apply to licenses of trade secret information.

Again with the Redundancy: Although MPHJ’s claim might be obvious, HP can’t pursue that argument

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HP v. MPHJ (Fed. Cir. 2016)

Over the past few years, MPHJ has raised the ire of many with its enforcement campaign of U.S. Patent No. 6,771,381.  The claims seemingly cover HP’s multi-function scanner-printers that can be configured to email the scanned documents.  However, rather than suing HP for infringement, MPHJ sent letters to tens of thousands of businesses who HP printers seeking royalties.  A number of states took direct action against MPHJ, including Vermont and Nebraska.

HP’s response to this was to file an inter partes review proceeding challenging all 15 claims of the ‘381 patent.  IPR2013-00309.  The PTAB largely sided with HP – finding 14 of the claims unpatentable, but confirmed the patentability of claim 13.  HP appealed on claim 13, but the Federal Circuit has affirmed the Board ruling.

HP challenged claim 13 on both obviousness and anticipation grounds. However, the Board refused to institute review on the obviousness grounds — seeing that ground a ‘redundant’ to the two counts of anticipation.  The unique aspect of claim 13 is that it requires a “list of available module means for maintaining a registry” (e.g., “input, output, and process modules”).  This list was not found in either of the two separate anticipation references (Cotte or SJ5) as such, the Board found no anticipation. 

As a question of fact, an anticipation conclusion by the Board is given substantial deference on appeal and will be affirmed if “a reasonable mind might accept the evidence presented as sufficient to support the finding.” Here, the appellate panel agreed that at least some evidence supported the conclusion that the element was missing from the prior art since HP was “unable to specify” how the required list was disclosed in the prior art.

HP also challenged the Board’s refusal to institute on obviousness grounds and its failure to explain its redundancy conclusion.  On appeal, the Federal Circuit refused to address that issue — finding that appellate review of the institution decision is barred by statute.

Allowing an APA challenge to the Board’s decision to institute on the basis that the Board had insufficiently articulated its reasoning would eviscerate § 314(d) by allowing substantive review of the institution decision. Although there is a strong presumption of judicial review of administrative action, that presumption may be overcome where “there is persuasive reason to believe that such was the purpose of Congress.” Bowen v. Mich. Acad. of Family Physicians, 476 U.S. 667 (1986). Congress, through § 314(d), has explicitly stated that the Board’s institution decision “shall be final and nonappealable.” Thus, that specific statutory language precludes our review.

It is unclear to me at this point whether Claim 13 is valuable – i.e., do the current HP models infringe? I guess that we’ll see.

 

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MPHJ’s case against Vermont is still pending before the U.S. Supreme Court.

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The court here did not address how HP had standing to appeal, from the briefs neither party addressed that issue as well.

Pharma Looks to Limit Activis-Style Antitrust Liability to Only Reverse Payments

Patent

by Dennis Crouch

As part of a litigation settlement agreement, GlaxoSmithKline LLC (“GSK”) granted an exclusive generic marketing license to the challenger Teva for sales of lamotrigine and also agreed not to introduce its own competitive ‘authorized generic’ version. The question in the case, now pending before the U.S. Supreme Court is whether that license structure can raise a plausible antitrust claim under F.T.C. v. Actavis, Inc., 133 S. Ct. 2223 (2013).

Following the settlement a set of direct purchasers (including King Drug) filed a class action lawsuit alleging that the exclusive license settlement was anticompetitive and in violated Sections One and Two of the Sherman Act.  The N.J. Federal District Court sided with GSK/Teva and dismissed the case after interpreting the Actavis rule-of-reason approach to apply only to actual monetary reverse payments.  On appeal, however, the Third Circuit reversed – finding that the exclusivity (including the authorized-generic restriction) should be subjected to a full rule-of-reason analysis to consider the harm done to consumers.[1]  The court wrote: “we think that a no-AG agreement, when it represents an unexplained large transfer of value from the patent holder to the alleged infringer, may be subject to antitrust scrutiny.”

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

Whether the Third Circuit’s sweeping holding that a patentee’s grant of an exclusive license must undergo antitrust scrutiny by courts and juries – even though such a license is specifically permitted under the patent laws – is inconsistent with this Court’s decision in Actavis and decades of this Court’s earlier precedents.[2]

Here, the contracting parties argue that the right to exclusively license a patent is a fundamental aspect of the bundle-of-rights associated with a patent and guaranteed by the Constitution, federal common law, and by statute.[3]  Further, GSK argues that these rights should be seen as “exceptions” to the monopoly laws even if they might restrict competition in the short-term and are simply “not subject to antitrust challenge.”

This will be an interesting case to follow. Kirkland & Ellis Supreme Court lawyer Jay Lefkowitz filed the petition with Bruce Gerstein on the other side. At the petition stage, briefs have also been filed by the Generic Pharmaceutical Association PhRMA, WLF, and the Nat’l Assn of Manufacturers.

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[1] King Drug Co. of Florence, Inc. v. SmithKline Beecham Corp., 791 F.3d 388 (3d Cir. 2015).

[2] Supreme Court Docket No. 15-1055.

[3] 35 U.S.C. § 261 (patent holder “may … grant and convey an exclusive right under his application for patent, or patents, to the whole or any specified part of the United States”).

Event: Intellectual Property in the Supreme Court

Patent

Call-In Now: (888) 752-3232.

I’m looking forward to the Federalist Society teleforum this Friday, April 8, 2016 at 2:00 pm EST on the topic: Intellectual Property in the Supreme Court.  I will be moderating. Speakers include Garrard Beeny who is a partner at Sullivan & Cromwell and co-counsel for both Cuozzo and Stryker; and Matthew Hellman who is a partner at Jenner & Block and co-counsel for Wiley & Sons in Kirtsaeng.  The one-hour audio-only program will include time for Q&A.

No registration necessary, just call in at 2:00 pm to: (888) 752-3232. More details here.

Chao & Mapes: An Early Look at Mayo’s Impact on Personalized Medicine Patenting

Articles and Publications, Journal

Many predicted that the Supreme Court’s 2012 decision in Mayo v. Prometheus would have a major impact on the patenting of personalized medicine inventions, such as those at issue in Sequenom. In their Patently-O Patent Law Journal essay, Professor Bernard Chao and Amy Mapes (Denver ’17) take a look at the data:

The percentage of office actions that contain § 101 subject matter eligibility rejections abruptly increased after Mayo [for Personalized Medicine patent applications]. . . . The percentage of such rejections then continued to gradually increase every year until last year. . . . Mayo has significantly increased patent eligibility rejection rates at the patent office for at least one class of patents.

Chao & Mapes present this early look as a mechanism for providing some context for the Sequenom v. Ariosa case whose petition for writ of certiorari is pending before the United States Supreme Court.

Read the Article: Bernard Chao and Amy Mapes, An Early Look at Mayo’s Impact on Personalized Medicine, 2016 Patently-O Patent Law Journal 10.

Pending Supreme Court Patent Cases 2016 (April 1 Update)

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by Dennis Crouch

Design Patent Damages: The Supreme Court has granted Samsung’s petition for writ of certiorari on the issue of design patent damages under 35 U.S.C. 289.  The statute allows for disgorgment of the infringer’s “total profit,” but the question is total-profit-as-to-what? Certainly not the entire company. The Federal Circuit has ruled that the total profit applies to the article of manufacture (here a mobile phone) while Samsung argues that the profit should be reduced to the profits associated with the component at issue (the screen). The Supreme Court rejected the second proposed issue of design patent scope.

No Standing for Cuozzo?: I wrote some about the standing and appellate jurisdiction issue in Cuozzo earlier this week.  [Link].  Up to now, Cuozzo has not explained how a Phillips claim construction would impact the outcome of its inter partes review.  Cuozzo’s reply brief may address that issue – either way they almost have to come-up at oral arguments under questioning from Justice Breyer or Justice Sotomayor.

Post Sale Restraints: A key new petition was filed in Impression Products v. Lexmark on the issue of patent exhaustion and the extent that a manufacturer can rely upon patent rights to create post-sale use requirements and restrictions and limits on international trade. [Link]. In Sequenom, v. Ariosa, the court is subtly asked to reconsider and scale-back the language of Mayo v. Prometheus.  The petition actually asks the court to stop mis-interpreting Mayo. [Link].  Vehicle Intelligence and Safety as well as Cloud Satchel also raise Section 101 challenges, but those cases are battling long odds.

Reviewing a Jury Verdict of Definiteness: New petition Dow v. Nova raises the interesting question regarding the standard for appellate review of factual findings that serve as the underlying basis for a definiteness determination. Based upon a logical extension of Teva v. Sandoz, those factual findings should be given deference even though the ultimate determination of definiteness is a question of law.  An important distinction from pure claim construction is that (as here) juries may be tasked with the job of ruling whether a claim is indefinite.  In that situation, the juries do not separate their factual conclusions from legal conclusions creating some amount of confusion.  The original Federal Circuit opinion cited to Teva, but not for its holding regarding deference. I would not be surprised by a GVR order from the Supreme Court asking the Federal Circuit to reconsider based upon that holding. [DowPetition].

Flexible Obviousness Test Does Not Apply to Secondary Indicia of Nonobviousness: In Cubist Pharma v. Hospira, the petitioner-patentee challenges the Federal Circuit’s increasingly bright line limits on secondary indicia of nonobviousness.  How do those limits mesh with the flexible doctrine outlined in Section 103 and explained by Deere and KSR.  [CubistPetition].

Did the AIA Shrink Federal Circuit Appellate Jurisdiction?: Finally, in Globus Medical, the question focuses on Federal Circuit jurisdiction over appeals in former-patent-cases, but where the only issue appealed is a non-patent issue.  This same issue was previously decided in favor of Federal Circuit jurisdiction. However, the AIA modified the language of the Federal Circuit appellate jurisdiction statute and opened the door to a re-visitation.  28 U.S.C. 1292.  However, the argument barely carries the weight of its linguistics if that.

Previously, the Federal Circuit had appellate jurisdiction over cases if the district court’s jurisdiction could at least in-part be traced to 28 U.S.C. 1338 (giving district court’s jurisdiction over patent cases). The AIA amended the statute to give appellate jurisdiction to the Federal Circuit in any “civil action arising under” the patent laws.  Since appellate jurisdiction ordinarily attaches at the notice-of-appeal filing stage, Globus Medical argues that former patent cases no longer “arise under” the patent laws once final judgment is issued and no patent questions are appealed.

Denials: Cert was denied in Daiichi Sankyo v Lee (term adjustment); ParkerVision (standard for setting aside jury verdict based upon errors in expert testimony); Biogen (district court jurisdiction over interferences post-AIA); Morales v. Square (eligibility); Joao Bock v. Jack Henry (eligibility); and BriarTek v. DeLorme (USITC preclusion issue).

The big list:

1. Petitions Granted:

2. Petitions Granted with immediate Vacatur and Remand (GVR)

3. Petitions for Writ of Certiorari Pending:

  • Indefiniteness: The Dow Chemical Company v. Nova Chemicals Corporation (Canada), et al., No. 15-1160 (standard for appellate review of jury verdict of definiteness that is inherently based upon the jury’s factual findings) [DowPetition]
  • Exhaustion: Impression Products, Inc. v. Lexmark International, Inc., No. 15-1189 (unreasonable restraints on downstream uses)
  • Obviousness: Cubist Pharmaceuticals, Inc. v. Hospira, Inc., No. 15-1210 (bright line limits on secondary indicia of nonobviousness) [CubistPetition]
  • Infringement by Joint Enterprise: Limelight Networks, Inc. v. Akamai Technologies, Inc., et al., No. 15-993 (can a defendant be held liable for the collective performance of method steps by multiple independent parties?)
  • Post Grant Admin: Versata v. SAP, No. 15-1145 (scope of CBM review)
  • Post Grant Admin: Cooper v. Lee, No. 15-955 (whether IPRs violate Separation of Powers; two amici now filed in support)
  • Post Grant Admin: Click-to-Call Tech, LP v. Oracale Corp., No. 15-1014 (Same questions as Cuozzo and now-dismissed Achates v. Apple)
  • Post Grant Admin: GEA Process Engineering, Inc. v. Steuben Foods, Inc., No. 15-1075 (Flip-side of Cuozzo: Can there be no appeal when the PTAB exceeds its authority by terminating an instituted IPR proceeding?)
  • Post Grant Admin: Interval Licensing LLC v. Michelle K. Lee, No. 15-716 (Can the Patent and Trademark Office appropriately apply the “broadest reasonable interpretation” standard in construing patent claims in post-grant validity challenges?)
  • Post Grant Admin: Stephenson v. Game Show Network, LLC, et al., No. 15-1187 (is BRI proper for IPR validity challenges?; Same as Cuozzo) [GameShowNetworkPetition]
  • Laches: Medinol Ltd. v. Cordis Corporation, et al., No. 15-998
  • Laches: SCA Hygiene Products Aktiebolag, et al. v. First Quality Baby Products, LLC, et al., No. 15-927 (three amici filed in support)
  • Biologics Notice of Commercial Marketing: Sandoz Inc. v. Amgen Inc., et al., No. 15-1039 (Does the notice requirement of the BPCIA create an effective six-month exclusivity post-FDA approval?) (cross-petition asks for recourse on failure to dance).
  • Design Patents: Systems, Inc. v. Nordock, Inc., No. 15-978 (design patent damage calculations – similar issues as Samsung v. Apple)
  • Inducement: Life Technologies Corporation, et al. v. Promega Corporation, No. 14-1538 (whether an entity can “induce itself” under 271(f)(1))(CVSG, awaiting government brief)
  • Preclusion or Jurisdiction: Vermont v. MPHJ Technology Investments, LLC, No. 15-838 (Federal court jurisdiction in anti-troll consumer protection case)
  • Preclusion or Jurisdiction: Globus Medical, Inc. v. Sabatino Bianco, No. 15-1203 (Appellate jurisdiction of the Federal Circuit) [GlobusMedicalPetition]
  • Eligibility Challenges: Sequenom, Inc. v. Ariosa Diagnostics, Inc., et al., No. 15-1182 (scope of the natural phenomenon eligibility exclusion)
  • Eligibility Challenges: Retirement Capital Access Management Company, LLC v. U.S. Bancorp, et al., No. 15-591 (Whether subject matter eligibility under 35 U.S.C. § 101 is a ground specified as a condition for patentability under 35 U.S.C. § 282(b)(2))
  • Eligibility Challenges: Hemopet v. Hill’s Pet Nutrition, Inc., No. 15-1062 (natural phenom case of tailoring a diet to a pet’s genomic characteristics)
  • Eligibility Challenges: Cloud Satchel, LLC v. Barnes & Noble, Inc., et al., No. 15-1161 (abstract idea eligibility) [CloudSatchelPetition]
  • Eligibility Challenges: Vehicle Intelligence and Safety LLC v. Mercedes-Benz USA, LLC, et al., No. 15-1201 (abstract idea eligibility) [VehicleIntelligencePetition]
  • Damages: Innovention Toys, LLC v. MGA Entertainment, Inc., et al., No. 15-635 (Stryker/Halo follow-on – potential wait-and-see)
  • Damages: WesternGeco LLC v. ION Geophysical Corporation, No. 15-1085 (consequential lost-profit damages for infringement under Section 271(f))
  • Written Description: Tas v. Beach, No. 15-1089 (written description requirement for new drug treatments)

4. Petitions for Writ of Certiorari Denied or Dismissed:

  • Daiichi Sankyo Company, Ltd. v. Michelle K. Lee, No. 15-652 (Patent Term Adjustment – whether the 180 day deadline applies; could bleed into admin law issues)
  • Parkervision, Inc. v. Qualcomm Incorporated, No. 15-1092 (“Whether and under what circumstances an inconsistency in expert testimony permits a court to set aside a jury verdict and grant the losing party judgment as a matter of law.”)
  • Joao Bock Transaction Systems, LLC v. Jack Henry & Associates, Inc., No. 15-974 (defining an abstract idea)
  • Biogen MA, Inc. v. Japanese Foundation for Cancer Research, et al., No. 15-607 (Whether AIA eliminated federal district courts’ jurisdiction over patent interference actions under 35 U.S.C. § 146.)
  • BriarTek IP, Inc. v. DeLorme Publishing Company, Inc., et al., No. 15-1025 (Preclusive impact of ITC consent judgment).
  • Morales v. Square, No. 15-896 (eligibility under Alice)
  • ePlus, Inc. v. Lawson Software, Inc., No. 15-639 (what happens with a finally-determined permanent injunction after PTO cancels the patent claim?)
  • Media Rights Technologies, Inc. v. Capital One Financial Corporation, et al., No. 15-725 (Claim Construction: whether there a strong presumption against construing terms as subject to 35 U.S.C. § 112p6 that do not recite the term “means.”)
  • Alexsam, Inc. v. The Gap, Inc., No. 15-736 (appellate jurisdiction over patents that were dropped from case pre-trial)
  • Universal Lighting Technologies, Inc., v. Lighting Ballast Control LLC, No. 15-893 (intrinsic vs extrinsic evidence for claim construction).
  • STC, Inc. v. Global Traffic Technologies, No. 15-592 (Whether marking the packaging of a patented article with patent notification satisfies the marking provision of 35 U.S.C. § 287(a) where the patented article itself is undisputedly capable of being marked.)
  • Achates Reference Publishing, Inc. v. Apple Inc., et al., No. 15-842 (IPR institution decisions unreviewable, even when addressed in a final written decision by PTAB) [Note – This case was dismissed after being settled by the parties]
  • Alps South, LLC v. The Ohio Willow Wood Company, No. 15-567
  • Allvoice Developments US, LLC v. Microsoft Corp., No. 15-538
  • OIP Technologies, Inc. v. Amazon.com, Inc., No. 15-642
  • Fivetech Technology Inc. v. Southco, Inc., No. 15-381
  • Tyco Healthcare Group LP, et al. v. Ethicon Endo-Surgery, Inc., No. 15-115
  • Nautilus, Inc. v. Biosig Instruments, Inc., No. 15-561
  • Chunghwa Picture Tubes, Ltd., et al. v. Eidos Display, LLC, et al., No. 15-288
  • Kenneth Butler, Sr. v. Balkamp Inc., et al., No. 15-273
  • Arthrex, Inc. v. KFx Medical Corporation, No. 15-291
  • Arthrex, Inc. v. Smith & Nephew, Inc., et al., No. 15-559 (Commil re-hash – if actions were “not objectively unreasonable” can they constitute inducement?)
  • Daiichi Sankyo, Inc., et al. v. Apotex Inc., No. 15-281
  • Mylan Pharmaceuticals Inc. v. Apotex Inc., No. 15-307
  • Luv N’ Care, Ltd. v. Munchkin, Inc., No. 15-242
  • Automated Merchandising Systems, Inc. v. Michelle K. Lee, Director, United States Patent and Trademark Office, No. 15-326
  • I/P Engine, Inc. v. AOL Inc., et al., No. 14-1358
  • Interval Licensing LLC v. AOL Inc., et al., No. 14-1362
  • Content Extraction and Transmission LLC v. Wells Fargo Bank, National Association, et al., No. 14-1473
  • L. Gore & Associates, Inc. v. Bard Peripheral Vascular, Inc., et al., No. 15-41
  • NetAirus Technologies, LLC v. Apple Inc., No. 14-1353
  • Muffin Faye Anderson v. Kimberly-Clark Corporation, No. 14-10337
  • MobileMedia Ideas LLC v. Apple Inc., No. 15-206
  • SpeedTrack, Inc. v. Office Depot, Inc. et al., No. 15-461 (Kessler doctrine)
  • Rodney K. Morgan, et al. v. Global Traffic Technologies LLC, No. 15-602
  • Lakshmi Arunachalam v. JPMorgan Chase & Co., No. 15-691

5. Prior versions of this report:

Federal Circuit Confirms: USITC has no Jurisdiction over Purely Electronic Products

Patent

ClearCorrect v. Align (Fed. Cir. 2016)

In its panel opinion, the Federal Circuit held that the USITC jurisdiction over the importation of “articles that infringe” does not extend to the “electronic transmission of digital data”. Rather, Section 337 of the Tariff Act is limited to “material things” as used in common parlance (i.e., beyond an “electron’s invariant mass” that may be associated with a digital transmission). See Dennis Crouch, Federal Circuit Bites Back against USITC Expansion into Electronic Importation, Patently-O (November 10, 2015).  That original panel included Chief Judge Prost who wrote the majority opinion along with Judge O’Malley who also issued a concurring opinion and Judge Newman in dissent.

Following that decision, both the ITC and the patentee (Align) petitioned for en banc rehearing with the following questions:

ITC: Must the term “articles” … be limited to physical products, such that section 337 can be evaded by a respondent that 3D prints products in the United States using imported datasets representing those products

Align: Whether the U.S. International Trade Commission has jurisdiction under 19 U.S.C. § 1337 over the importation or sale of digital articles.

In addition to the statutory language, the briefs particularly focus on two cases: Nat’l R.R. Passenger Corp. v. Boston & Me. Corp., 503 U.S. 407 (1992) (on statutory interpretation), and Suprema, Inc. v. ITC, 796 F.3d 1338 (Fed. Cir. 2015) (en banc) (ITC has power to stop infringing imports if those imports are going to be used to induce infringement of a patent method of use).

With an order issued today, however, the Court has denied the en banc petition. The vote appears to be 11-1.

Judge Newman dissented from the en banc denial:

The court now holds that the word “article” in Section 337 of the Tariff Act cannot include digital goods, although “article” is the general term used throughout judicial and agency rulings for goods in trade, including digital goods. Digital goods are included in the tariff laws; they are imported, bought, and sold; they are subject to the patent laws, and have been the subject of many infringement suits. Infringement does not depend on whether the digital goods are carried on a hard substrate, or electronically.

Section 337 does not depend on the mode of importation; it depends on whether the imported goods infringe a patent or copyright or trademark or design. The amici curiae point out the consequences of the court’s change of law, for infringing imports of books, motion pictures, and other products subject to transmission in digital form. The disruption that this ruling is already causing warrants en banc attention.

The dissent also includes an interesting footnote listing thirty definitions of the term “article” — suggesting that the definition is not so clear.

Chief Judge Prost also drafted an opinion joined by Judges O’Malley and Wallach to “address certain points newly raised by the dissent.”  The basic point is that it is Congress’s failure to “bridge the gap between the non-digital world and the digital world.” As such, the solution should come from Congress as well.

Addressing the thirty definitions, Chief Judge Prost argues that “only a handful” of the definitions support the dissent’s approach.

[Denial of the petition]

Cuozzo v. Lee: The Problem of Standing

Patent, , , ,

The AIA-Trial claim construction issue is important and many of us would like to see the Supreme Court address it in Cuozzo. However, there is one legal matter that has been an elephant-in-the-room since the Cuozzo appeals began several years ago: Standing.

As a general matter, parties do not have standing to raise issues on appeal that have no impact on the underlying dispute.  Likewise, a court has no jurisdiction over issues when the parties have no standing. An important feature of standing is that it is generally non-waivable.  Rather, a court must dismiss a case when one or more parties lack standing — even if (as here) neither party raise the issue.

The standard theory of claim construction is that the USPTO’s “Broadest Reasonable Construction” is broader than the standard Phillips construction used by courts in infringement litigation.  The theory behind this change in standard is that it allows the PTO to serve a gatekeeping role to better in sure that issued patents are valid patents. The particular oddity of the underlying case is that Cuozzo is asking for the Phillips standard to be applied in order to receive a broader claim construction of the term “Integrally Attached.”   Here, on its way to finding the disputed claims obvious, the PTAB construed the term in a way that excluded a described embodiment of the invention and Cuozzo has argued that the proper construction includes that embodiment.  To be clear here, a more broadly construed claim would encompass more prior art and thus are more likely to be invalid as obvious.  Although not strictly impossible, it would indeed be a rare case where the narrower claim is obvious while the broader is nonobvious.  [edited this] Point here is that if Cuozzo gets what it wants from this question on appeal (a broader claim scope), it is no closer to overturning the decision that the claim is obvious – in fact, Cuozzo will be further from that goal.

Although only spending a few pages on the issue, the newly filed Public Knowledge amicus brief roughly outlines case:

[I]n this case, Cuozzo’s patent received a narrow interpretation, and Cuozzo seeks to have the patent read to encompass more subject matter, not less. In other words, Cuozzo is asking for a narrower claim construction standard in order to obtain a broader claim construction. . . . This backwards fact pattern is not just puzzling; it potentially means that Cuozzo has no standing to raise the question, such that this Court lacks jurisdiction over the case.”

[Read the Brief: CuozzoPKAmicus.]

Cuozzo is not run by idiots. Rather, Cuozzo appears to be taking a broader strategy — it wants the term broadly construed in this case so that it will help the enforcement of parallel claims in other cases.  PK explains again:

Why, then, does Cuozzo pursue this case? It cannot be to alter the outcome of the inter partes review, as the district court standard will leave Cuozzo’s patent claims equally invalid—a broader reading of a claim cannot be valid when a narrower one is invalid for obviousness. Instead, the record reveals that Cuozzo seeks a broader claim construction in order to facilitate its infringement arguments in unrelated litigation—a manipulative attempt to commandeer inter partes review to ends
external to the proceeding.

Apart from PK’s snide “manipulative” remark, I am on-board with this analysis.

At this point, it may make the most sense for the Supreme Court to dismiss the claim construction issue as improvidently granted but retain question two regarding the appeal of institution decisions.

 

 

PTO Brief – Looking for Supreme Support for its AIA Trial Regime

Patent, , ,

Oral arguments in Cuozzo v. Lee are set for April 25, 2016 addressing two particular questions:

  1. Whether the PTO may require that, during an inter partes review, the claims in a patent will be given the “broadest reasonable construction” consistent with the patent’s specification [as opposed to the standard construction for issued patents].
  2. Whether a party may seek to overturn the PTO’s final decision in an inter partes review based on an alleged error in the PTO’s threshold decision to institute the review, which Congress provided “shall be final and nonappealable,” 35 U.S.C. 314(d).

The briefs are available now on ScotusBlog.

The U.S. Government has also filed its responsive merits brief.  The brief appears to be a joint effort of the Solicitor General (DOJ) and the USPTO and does a solid job of justifying its positions:

On BRI:

  1. Historical: The PTO has “long applied the broadest reasonable-construction standard in all agency proceedings in which patent claims may still be amended.”
  2. Statutory: Here, although claim amendments have allowed in only exceedingly rare cases, the IPR statute does suggest that amendments are possible.  (Of course, once the motion to amend is denied, then claims cannot ‘still be amended.’
  3. Deference: The USPTO was given rulemaking authority in this area (AIA procedures) and the BRI standard is a exercise of that delegated authority.  (It is unclear what happens if the court would find this ‘substantive’ rather than ‘procedural’ and what level of deference should apply in either case).

On Appeal of Decision to Institute:

  1. Statutory: “The statute bars all judicial review, not just interlocutory appeals, of the PTO’s decision whether to institute an inter partes review.”  Rather, judicial review is limited to the Agency’s final decision on patentability.
  2. Policy: The no-review approach fits the AIA-Trial purpose of being “an efficient non-judicial alternative for testing the patentability of issued claims.”

The PTO is looking for a strong decision in this case to effectively shut-down the myriad challenges it is currently facing.

 

Federal Circuit: No Opinion Serves as the Basis for Our Opinion

Patent, , , , , ,

By Dennis Crouch

Chicago Board of Options Exchange v. International Securities Exchange (Fed. Cir. March 25, 2016)[1] and International Securities Exchange v. Chicago Board of Options Exchange (Fed. Cir. March 25, 2016) (Appeal No. 2015-1743)[2]

These appeals involve three CBOE patents directed to automated trading exchange systems. All three patents (all claims) were challenged in covered business method reviews and found by the PTAB to be ineligible under Section 101 (abstract ideas).  In addition, two of the same patents (a subset of claims) were challenged in inter partes review proceedings, but in those cases the PTAB sided with the patentee and found the ISE had failed to prove invalidity (either obvious or anticipated).

The CBOE appealed the 101 invalidations, and ISE separately appealed the inter partes review denials.  In an odd set of judgments, the Federal Circuit affirmed the PTAB 101 rejections in a Rule 36 Judgment (no opinion issued).  At the same time, the Federal Circuit also dismissed the IPR appeal as moot. However, in this second case the court did issue an opinion to explain the mootness following from the original no-opinion judgment. The court writes:

In this appeal, International Securities Exchange, LLC (“ISE”) challenges the determination of the Patent Trial and Appeal Board (the “Board”) in inter partes review proceedings involving U.S. Patent Nos. 7,356,498 (“the ’498 patent”) (IPR2014-00097) and 7,980,457 (“the ’457 patent”) (IPR2014-00098). The Board found that ISE failed to show by a preponderance of the evidence that the challenged claims of the ’498 and ’457 patents are unpatentable as either anticipated, obvious, or both, under 35 U.S.C. § 102(e) and 35 U.S.C. § 103(a). In light of our decision in Chicago Bd. Options Exch., Inc. v. Int’l Secs. Exch., Case Nos. 2015-1728, -1729, and -1730, issued contemporaneously herewith, affirming the Board’s conclusion that both patents address unpatentable subject matter under 35 U.S.C. § 101, we find this companion case moot. We dismiss the appeal and vacate the Board’s decisions.

The Federal Circuit’s use of R.36 No Judgement opinions is on the rise even while wringing its hands over the USPTO’s failure to explain its judgments to institute AIA trials.[3]

= = = = = =

[1] Appeal Nos. 2015-1728, 2015-1729, and 2015-1730. These cases are on appeal from three Covered Business Method Post Grant Review Proceedings. CBM2013-00049 (Pat. No. 7,356,498), CBM2013-00050 (Pat. No. 7,980,457), and CBM2013-00051 (Pat. No. 8,266,044).

[2] Appeal Nos. 2015-1743 and 2015-1744.  These cases are on appeal from two inter partes review proceedings. IPR2014-00097, IPR2014-00098.

[3] See, Dennis Crouch, Federal Circuit: Our Muscles are Not Working, Patently-O (March 23, 2016)

AIA Challenges Pile On, but the Federal Circuit Deflects

Patent, ,

By Dennis Crouch

As I write about this case, I should first note Trading Technologies (TT) is a former client of mine while I was in practice at the MBHB firm (2001-2007).  I was the person who actually signed the complaint against CQG noted below.  TT gave me permission to write on the case, but did not review this post.

TT makes and sells software systems used by stock-market-exchange traders.  TT’s U.S. Patent No. 6,766,304 covers a graphical user interface (GUI) tool that served as the launching point for the company’s software and its design helps traders trade more quickly and more accurately – features demanded by folks in this hyper-industry.  The speed and accuracy improvements come from changes in how the software displays market price changes and how it responds to various user actions (usually ‘clicks’). The patent has been asserted against a number of competitors and has been repeatedly been found valid (or not invalid) on various grounds, including patent eligibility. That seemingly ended with the PTAB decision to grant a petition for Covered Business Method (CBM/PGR) Review of the ‘304 patent. (CBM2015-00161).

TT filed an emergency mandamus action asking the Federal Circuit to reject the institution decision as overstepping the limits on CBM review proceedings.  In response, the court provided a one paragraph denial:

Trading Technologies now seeks a writ of mandamus directing the Board to vacate its institution decision and terminate proceedings. Having considered the papers, we deny the petition without prejudice to Trading Technologies raising its arguments on appeal after the Board issues its final written decision. See Versata Dev. Group, Inc. v. SAP Am., Inc., 793 F.3d 1306, 1323 (Fed. Cir. 2015) (holding that this court has authority to address whether patent is a covered business method patent on appeal after issuance of final written decision).

Although it is not entirely clear, the point here appears to be that the Federal Circuit claims no authority to address whether a patent is a covered business method patent until a final written decision is issued.  This decision here by Judge Moore should likely be linked to the recently decided Shaw Industries case as well.

Under the statute, “the term ‘covered business method patent’ means a patent that claims a method or corresponding apparatus for “performing data processing or other operations used in the practice, administration, or management of a financial product or service, except that the term does not include patents for technological inventions.”  AIA Section 18. TT has argued that its GUI tool is neither a “data processing method” or “other operation” as designated by the statute – and that a district court had previously held that the patent claims a specific technological GUI tool. See Trading Techs. Int’l v. CQG, Inc., No. 05-cv- 4811, 2015 WL 774655 (N.D. Ill. Feb. 24, 2015).

Mag Aerospace v. B/E Aerospace: Assignor Estoppel

Patent

By Jason Rantanen

Mag Aerospace Industries, Inc. v. B/E Aerospace, Inc. (Fed. Cir. 2016)  Download Opinion
Panel: Prost (author), Mayer, Reyna

This case involves an advanced patent–but ancient property–law concept: assignor estoppel.  The basic idea is that when an inventor or patent owner assigns a patent to another party, the original owner cannot challenge the validity of that patent.  In Diamond Scientific Co. v. Ambico, Inc., 848 F.2d 1220, 1224 (Fed. Cir. 1988), the Federal Circuit explained the rationale for the doctrine: “Courts that have expressed the estoppel doctrine in terms of unfairness and injustice have reasoned that an assignor should not be permitted to sell something and later to assert that what was sold is worthless, all to the detriment of the assignee.” 

Here, the accused infringer (B/E) was not itself a former owner of the patents-in-suit, but had hired the original inventor after that inventor had assigned the patents to a third party (who subsequently assigned them to plaintiff Mag Aerospace).  Thus, the question for determining whether assignor estoppel applied to bar B/E from challenging the validity of the patents was whether B/E should be placed in the same shoes as the inventor–a question that boils down to the issue of privity. “Privity, like the doctrine of assignor estoppel itself, is  determined upon a balance of the equities.” Slip Op. at 10, quoting Shamrock Techs., Inc. v. Med. Sterilization, Inc., 903 F.2d 789, 793 (Fed. Cir. 1990).  In determining whether B/E was in privity with the inventor, the district court considered an array of factors from Shamrock:

  1. the assignor’s leadership role at the new employer;
  2. the assignor’s ownership stake in the defendant company;
  3. whether the defendant company changed course from manufacturing
    non-infringing goods to infringing activity after the inventor was hired;
  4. the assignor’s role in the infringing activities;
  5. whether the inventor was hired to start the infringing operations;
  6. whether the decision to manufacture the infringing product was made partly by the inventor;
  7. whether the defendant company began manufacturing the accused product shortly after  hiring the assignor; and
  8. whether the inventor was in charge of the infringing operation.

On review, the Federal Circuit concluded that the district court did not abuse its discretion in concluding that assign estoppel applied.  In reaching this conclusion, the court rejected B/E’s argument that it hired the employee specifically to avoid infringement.  Instead, the court focused on the fact that B/E used his knowledge “to conduct the activities that are now alleged to be infringing.”  The court thus focused the inquiry on the initiation the acts themselves as opposed to some sort of intent to infringe the patent.

Although it lost on the issue of assignor estoppel, and thus could not challenge the validity of the patents-in-suit, B/E nonetheless prevailed as the Federal Circuit also affirmed the district court’s grant of summary judgment of noninfringement.

Federal Circuit: Our Muscles Are Not Working :{}

Patent, , , ,

by Dennis Crouch

Shaw Industries v Automated Creel Systems[1] involves several interesting issues involving inter partes review proceedings.

One Year Filing Bar: The first involves the one-year deadline for inter partes review petitions following the service of a complaint to the future-petitioner.[2]  “An inter partes review may not be instituted if the petition requesting the proceeding is filed more than 1 year after the date on which the petitioner, real party in interest, or privy of the petitioner is served with a complaint alleging infringement of the patent.”

Here, the patentee ACS had filed an infringement lawsuit and served Shaw more than one year before the IPR filing.  However, the parties voluntarily dismissed the lawsuit without prejudice in a joint filing.  In considering the issue, the Board determined that the voluntary dismissal “nullifie[d] the effect of the alleged service of the complaint on Petitioner.” As such, the Board was free to institute the inter partes review proceeding.

On appeal the Federal Circuit followed its prior ruling Achates[3] that the appellate court lacks jurisdiction to the Board’s decision on whether the time-bar of Section 315 applies.  The panel[4] did not support the PTO’s decision and noted that the Supreme Court’s decision in Cuozzo[5] “may affect this court’s holding regarding the reviewability of the decision to institute in Achates.”

As an aside, a petition for writ of certiorari had been filed in Achates, that case, however, has settled. We’ll see if ACS takes the case up here.

The Non-Doctrine of Redundancy: The second issue involves the PTAB’s non-doctrine of redundancy.  Shaw filed two IPR petitions and in each petition the Board implemented the IPR on one ground for each claim, but declined to implement IPR on the additional grounds because they were ‘redundant’ without further explanation of that redundancy. The redundant arguments included anticipation grounds found redundant to obviousness grounds. Oddly, the PTO has stated repeatedly in the case that “there is no redundancy doctrine.”

In the appeal, the Federal Circuit again stated that it has no authority to review the Board’s decision to institute an IPR.

In the case, Judge Reyna joined the court’s opinion but also penned a judgment “concurring specially” to reflect his “deep[] concern[] about the broader impact that the Redundancy Doctrine may have on the integrity of the patent system.”  Here, the doctrine’s existence is expressly denied by those applying it. The PTO argues that it need not explain what’s happening because “the Director has complete discretion to deny institution . . . and [does] not even have to state in our institution decisions why were choosing not to go forward.”[6] Judge Reyna responds:

The PTO’s claim to unchecked discretionary authority is unprecedented. It bases this claim on the statute that makes institution or denial of inter partes review “final and nonappealable.” See 35 U.S.C. § 314(a), (d). Regardless of appealability, administrative discretion is not and never can be “complete” because it is always bounded by the requirement that an agency act within the law and not violate constitutional safeguards. See 35 U.S.C. § 2(b)(2) (PTO “may establish regulations, not inconsistent with law”). There is good reason for this. “Expert discretion is the lifeblood of the administrative process, but unless we make the requirements for administrative action strict and demanding, expertise, the strength of modern government, can become a monster which rules with no practical limits on its discretion.” Burlington Truck Lines, Inc. v. United States, 371 U.S. 156, 167 (1962) (internal quotation marks omitted).

Indeed, regardless of whether the Board’s institution decisions can be appealed, the Board cannot create a black box decisionmaking process. Conclusory statements are antithetical to the requirements of the Administrative Procedures Act (“APA”), which the PTO and its Board are subject to. 35 U.S.C. § 2(b)(2)(B); see also Dickinson v. Zurko, 527 U.S. 150, 154 (1999). The APA requires “reasoned decisionmaking” for both agency rulemaking and adjudications because it “promotes sound results, and unreasoned decisionmaking the opposite.” Allentown Mack Sales & Serv., Inc. v. N.L.R.B., 522 U.S. 359, 374– 75 (1998) (citation omitted). The APA requires that Board decisions evince both its authority to render the decision and a reasoned basis for rendering that decision. Id. at 372 (“Not only must an agency’s decreed result be within the scope of its lawful authority, but the process by which it reaches that result must be logical and rational.”). The problem here is not that the Board’s reasoning is illogical or irrational; the problem is that there is no reasoning at all.

Judge Reyna pushes further by highlighting the impact of the PTO’s non-decision on the eventual estoppel issues. The PTO suggested in the case that estoppel would not attach to the non-instituted redundant grounds since they were not instituted, but that argument makes little sense to me.[7]   And, as Judge Reyna points out, “[w]hether estoppel applies, however, is not for the Board or the PTO to decide. . . . These tribunals should not have to parse cryptic statements or search out uncited [and denied] doctrines to make this determination.”

= = = = =

Notes

[1] Shaw Industries Group, Inc. v. Automated Creel Systems, Inc., Appeal No. 2015-1116 (Fed. Cir. March 23, 2016), on appeal from the United States Patent and Trademark Office, Patent Trial and Appeal Board in Nos. IPR2013-00132, IPR2013-00584 challenging validity of U.S. Patent No. 7,806,360.

[2] 35 U.S.C. §  315(b).

[3] Achates Reference Publishing, Inc. v. Apple Inc., 803 F.3d 652 (Fed. Cir. 2015).

[4] Opinion authored by Judge Moore and joined by Judges Reyna and Wallach.

[5] Cuozzo Speed Technologies, LLC v. Lee, 136 S. Ct. 890 (2016).

[6] Quoting PTO brief and oral arguments.

[7] The PTO’s argument does have some logical merit. The statute creates estoppel for arguments “raised or reasonably could have [been] raised during that inter partes review.”  Although the denied arguments were actually raised, there were raised during the institution proceeding and not the actual review.  And, since the PTO denied institution on those grounds, the party was then prohibited from raising those grounds during the review itself.

Lexmark: Can Patent Rights Overwhelm Traditional Notions of Title?

Patent

Impression Products, Inc. v. Lexmark Int’l, Inc. (Supreme Court 2016)

I see the dispute between Impression and Lexmark as more of a property law issue than one focusing on patent law.  Of course, the Federal Circuit sees it differently.  In its en banc opinion, the Federal Circuit reaffirmed (1) that a seller can use its patent rights to block both downstream resale and downstream reuse of a product (here used printer ink cartridges) and (2) that sales of a product abroad presumptively do not exhaust the US patent rights associated with that product, even when the US patent holder expressly authorizes those foreign sales.  Both of these holdings turn on the fact that the goods in question are covered by patent rights.  For unpatented goods, these covenants and restrictions generally do not bind subsequent bona fide purchasers.

Impression raises the following questions in its newly filed petition for writ of certiorari:

1. Whether a “conditional sale” that transfers title to the patented item while specifying post-sale restrictions on the article’s use or resale avoids application of the patent exhaustion doctrine and therefore permits the enforcement of such post-sale restrictions through the patent law’s infringement remedy.
2. Whether, in light of this Court’s holding in Kirtsaeng v. John Wiley & Sons, Inc., 133 S. Ct. 1351, 1363 (2013), that the common law doctrine barring restraints on alienation that is the basis of exhaustion doctrine “makes no geographical distinctions,” a sale of a patented article—authorized by the U.S. patentee—that takes place outside of the United States exhausts the U.S. patent rights in that article.

I see the Federal Circuit’s decision as dangerous in the way that it undercuts the notion of ownership and transfer-of-title.  Restrictions on use and resale of goods have traditionally been unenforceable against downstream owners as a mechanism for facilitating a robust market economy.

Documents

Sequenom: A great discovery should be worth something!

Patent

Sequenom v. Ariosa (on petition for writ of certiorari 2016)

Sequenom’s petition for writ of certiorari argues that the Federal Circuit and the lower courts have “dangerously overextended Mayo” and its bar to patent eligibility and that clarification is needed from the U.S. Supreme Court.   The science at issue is fascinating and stems from the problem of running dangerous fetal DNA tests.  The discovery here was that fetal DNA can be found floating around the blood of the pregnant mother and that the fetal DNA can be selectively amplified by focusing on the paternally inherited portion of its DNA (rather than the maternally inherited).  Sequenom’s patent claims two simple steps: (1) amplifying paternally inherited DNA from a plasma sample taken from a pregnant female and then (2) detecting the presence of the DNA.  Of course, the technology for these two steps was already known in the art at the time of the invention, and these two steps were (and are) the fundamental steps generally used to detect particular DNA molecules.  The Federal Circuit found these claims unpatentable under Mayo v. Prometheus because they effectively claim the unpatentable natural phenomenon: the existence of paternally-inherited cell-free fetal DNA (cffDNA) in the maternal bloodstream.

The petition for writ of certiorari asks the patent eligibility, but does so in a way that attempts to also lead the court to the answer:

Whether a novel method is patent-eligible where: (1) a researcher is the first to discover a natural phenomenon; (2) that unique knowledge motivates him to apply a new combination of known techniques to that discovery; and (3) he thereby achieves a previously impossible result without preempting other uses of the discovery?

The brief here does a good job of attempting to set-up some dividing lines for the Court – if it wishes to draw them.  The petition will have strong support from industry as well as many in academia.  However, it is unclear whether a ‘win’ here for the patentee would translate to support those seeking to patent software inventions.

[SequenomCertPetition]

Patentlyo Bits and Bytes by Anthony McCain

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Supreme Court Grants Cert on Design Patent Damages

Patent, ,

By Jason Rantanen

This morning, the Supreme Court granted certiorari on the design patent remedies question in Samsung Electronics Co. v. Apple Inc.  It did not grant certiorari on the functionality/ornamentality question raised in Samsung’s petition.

The question presented is:

2. 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?

Prior PatentlyO discussion available here.  Tom Cotter also has an extensive discussion of this case on his Comparative Patent Remedies blog.

This case is particularly interesting to me, as this afternoon I’m giving a talk at the Washington & Lee School of Law on a current work in progress on the Takings Clause and changes to substantive patent law.  I’ll be touching on the design patent remedies issue as an area of potential tension–regardless of how this decision turns out, it will be an imporant subject to keep an eye on!