Patent Term Adjustment: Erroneous and later Withdrawn Restriction Requirement Still Counts as a Section 132 Notice

Patent,

 

By Dennis Crouch

Pfizer v. Lee (Fed. Cir. 2016) [PfizerLee Opinion]

In this case, the Federal Circuit has refused Wyeth’s (now Pfizer’s) plea for more patent-term-adjustment (PTA).[1]

The basic issue is involves the “A-Delay” category of patent term adjustment that provides for term adjustment when the PTO fails to issue its first office action within fourteen months from the application filing date.

Here, the patent examiner’s first qualifying action was a restriction requirement mailed in August 2005.  However, after a discussion with Wyeth’s attorneys, in February 2006 the examiner withdrew the restriction requirement and issued a corrected version.

The question then is whether the original restriction requirement qualifies to cut-off the A-Delay even though it was later withdrawn as insufficient.

The term adjustment statute indicates that A-Delay will stop accruing once the USPTO  “provide[s] at least one of the notifications under Section 132.”[2]  Section 132(a) in turn provides:

Whenever, on examination, any claim for a patent is rejected, or any objection or requirement made, the Director shall notify the applicant thereof, stating the reasons for such rejection, or objection or requirement, together with such information and references as may be useful in judging of the propriety of continuing the prosecution of his application.

In prior cases, the court has offered some guidance as to when Section 132 is met.  In particular, the court has held that the notice does not have to present a winning argument or overwhelming factual evidence.  Rather, the rule is simply that the notice must be sufficient to permit the applicant to recognize the grounds for rejection/objection.[3]  In Chester v. Miller, the Federal Circuit wrote that Section 132 simply requires that the applicant “at least be informed of the broad statutory basis for [the rejection of] his claims, so that he may determine what the issues are on which he can or should produce evidence.”

Coming back to the facts of this case: The failure of the original restriction requirement divided the 100+ claims into twenty one distinct groups, but the restriction requirement failed to expressly categorize of the six dependent.  On appeal, the Federal Circuit found, despite the examiner’s error, that the mailing was still sufficient to meet the notice requirement.

Here, the examiner’s detailed descriptions of the 21 distinct invention groups outlined in the examiner’s initial restriction requirement were clear, providing sufficient information to which the applicants could have responded. Indeed, the applicants never challenged the content of the invention groups defined by the examiner. And, significantly, the examiner’s defined invention groups remained identical between the two restriction requirements. Viewed as a whole, the restriction requirement provided adequate grounds on which the applicants could “recogniz[e] and seek[] to counter the grounds for rejection.” Chester. Therefore, because the examiner clearly defined to the applicants the invention groups available for election and further prosecution, the applicants were placed on sufficient notice of the reasons for the examiner’s restriction requirement.

As for the six claims whose classifications were omitted from the initial restriction requirement, Wyeth could have taken direction for their classification from the fact that their respective independent claims were each included in the initial restriction requirement. Here, the dependent claims would naturally have been classified in a subset of the invention groups to which the claims they depend from belong.[4]

The PTO’s position is somewhat strengthened by its own MPEP statements that a restriction requirement which fails to classify all of the claims still counts as providing a section 132 notice.

The majority opinion was written by Judge O’Malley and joined by Judge Dyk.  Judge Newman wrote in dissent — arguing that this was a case of clear error by the examiner and should not count as a proper notice.  If Judge Newman is correct, Wyeth would been within its rights to simply sit on its hands not respond until the USPTO issued its notice of abandonment.

= = = = =

Coming out of this case (and others), we know that even a very low quality mailing from a patent examiner will be counted sufficient notice and thus force a response on threat of abandonment.  Where a procedural error exists, the best practice action then is to quickly contact the examiner and identify the error.   Here, Wyeth waited until four days before the deadline to respond.

= = = = =

[1] The case involves U.S. Patent No. 8,153,768 that issued from U.S. Patent Application No. 10/428,894.

[2] 35 U.S.C. § 154(b).

[3] Chester v. Miller, 906 F.2d 1574 (Fed. Cir. 1990).

[4] In a footnote, the Federal Circuit suggests that failure to classify and independent claim could possibly fail the notice requirement of Section 132.

Inter Partes Review: An Unconstitutional Delegation of Judical Power

Patent, ,

Carl Cooper has now filed his constitutional challenge to the Inter Partes Review (IPR) system — arguing that the system is an unconstitutional delegation of judicial power to an administrative agency. [Petition: Cooper v. Lee]

Question presented:

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 brief here is well-written because it focuses on the tight issue of parallel court/proceedings and the history:

No previous court has ever approved delegating validity-determination authority over common-law-adjudicated property rights to a non-Article III decisionmaker.

And, the petition suggests a way-out via an advisory opinion from the PTAB:

[T]his Court may make the process constitutionally sound by doing what it has always done under these circumstances: make the outcome of inter partes review advisory and subject to de novo treatment in an Article III trial court. So corrected, inter partes review may still identify and appropriately target “junk patents,” though an Article III trial court will need to perform the final act of invalidation.

 

Cooper also suggests that the court link this case to Cuozzo:

This Court may thus hear the two cases together, the one raising smaller issues (Cuozzo) alongside the one raising larger issues (this case). That would secure a more complete vetting of administrative agency authority.

Obviously, a favorable decision here could render Cuozzo completely moot, and wouldn’t that be quite interesting.

 

Anonymous Loan Shopping — An Unpatentable Abstract Idea

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By Dennis Crouch

On summary judgment, Judge Guilford (C.D.Cal) found Mortgage Grader’s asserted patents[1] ineligible under 35 U.S.C. § 101.[2]  On appeal, the Federal Circuit has affirmed this substantive holding as well as the district court’s procedural decision to allow the defendant (First Choice) to re-add its Section 101 contention after first dropping it.[3]  The appellate decision here was authored by Chief Judge Stark (D.Del) who was sitting by designation.  Judges O’Malley and Taranto joined the unanimous opinion.

A patent is not permitted to effectively claim an abstract idea.  In Mayo/Alice, the Supreme Court outlined a two-step process for determining whether this exception applies to Section 101’s otherwise broad eligibility principles: (1) is the claim at issue directed to a patent-ineligible concept and (2) if so, does the claim include an “inventive concept … sufficient to ensure that the patent in practice amounts to significantly more than a patent upon the [ineligible concept] itself.”[4]

Here, the district court found that the claims-at-issue were generally directed to “anonymous loan shopping” which is an unpatentable abstract idea.[5]  According to the court and apart from the computerization claim limits, the “series of steps covered by the asserted claims—borrower applies for a loan, a third party calculates the borrower’s credit grading, lenders provide loan pricing information to the third party based on the borrower’s credit grading, and only thereafter (at the election of the borrower) the borrower discloses its identity to a lender—could all be performed by humans without a computer.”  These human-mind-potentials cannot be claimed in the abstract.  In step two of Mayo/Alice, the court considered the computerization elements of the claims, but found only “generic computer components such as an ‘interface,’ ‘network,’ and ‘database.’ These generic computer components do not satisfy the inventive concept requirement.”

In the appeal, the patentee argued a factual dispute regarding the history of loan processing in an attempt to show that the process here was not “old.”  The appellate panel, however, found the testimony essentially irrelevant to the legal question of whether claim is directed to an abstract idea.

====

On the procedural point, the defendant had dropped its eligibility defense from its contentions. However, following the Supreme Court’s Alice decision added the contention back into place – but well after the court appointed deadline.  On appeal, the appellate panel confirmed that the district court did not abuse its discretion in allowing that procedural anomaly because of the significance of the decision:

In Alice, the Supreme Court held that “merely requiring generic computer implementation fails to transform [an] abstract idea into a patent-eligible invention.” 134 S. Ct. at 2352. We recognized the significance of Alice in buySAFE, Inc. v. Google, Inc., 765 F.3d 1350, 1354–55 (Fed. Cir. 2014), in which we stated that Alice “made clear that a claim directed to an abstract idea does not move into § 101 eligibility territory by merely requiring generic computer implementation” (internal quotation marks omitted). The impact of Alice is also illustrated by our decision in Ultramercial, Inc. v. Hulu, LLC, 772 F.3d 709 (Fed. Cir. 2014) (“Ultramercial III”). Ultramercial had sued WildTangent for infringement of U.S. Patent No. 7,346,545, a patent directed to allowing consumers to view copyrighted media products on the Internet at no cost in exchange for viewing an advertisement. See id. at 712. When the case was first before us, in 2011, we reversed the district court’s grant of WildTangent’s Rule 12(b)(6) motion to dismiss, holding that “as a practical application of the general concept of advertising as currency and an improvement to prior art technology, the claimed invention is not so manifestly abstract as to override the statutory language of § 101.” Ultramercial, LLC v. Hulu, LLC, 657 F.3d 1323, 1330 (Fed. Cir. 2011) (“Ultramercial I”) (internal quotation marks omitted). The Supreme Court granted WildTangent’s petition for certiorari, vacated our order, and remanded for further consideration in light of Mayo. Ultramercial III, 772 F.3d at 713. On remand, we again reversed the district court, holding yet again that the claims were patent-eligible. Ultramercial v. Hulu, 722 F.3d 1335, 1354 (Fed. Cir. 2013) (“Ultramercial II”). Once more, the Supreme Court granted WildTangent’s petition for certiorari, vacated our order, and remanded, this time for further consideration in light of Alice. Id. On this further remand, with the “added benefit of the Supreme Court’s reasoning in Alice,” we affirmed the district court and found the claims to be not patent-eligible. Id. Our conclusion was expressly based on Alice’s holding that “adding a computer to otherwise conventional steps does not make an invention patent-eligible.” Id. at 713, 716–17.

Ultramercial III demonstrates that a § 101 defense previously lacking in merit may be meritorious after Alice. This scenario is most likely to occur with respect to patent claims that involve implementations of economic arrangements using generic computer technology, as the claims do here. For example, the asserted claims of the ’694 patent require use of a “computer system” or “computer network” for facilitating anonymous loan shopping and the asserted claim of the ’728 patent requires “programmatically generating” and uses a “network” for shopping for loans. In this context, it was not an abuse of discretion to allow Appellees to inject a § 101 defense into the case after Alice.

= = = = =

[1] U.S. Patent Nos. 7,366,694 (“’694 patent”) and 7,680,728 (“’728 patent”).

[2] Mortgage Grader, Inc. v. Costco Wholesale Corp., 89 F. Supp. 3d 1055, 1065 (C.D. Cal. 2015) (Costco was later dismissed as a party).

[3] Mortgage Grade, Inc. v. First Choice Loan Services, ___ F.3d ___, App. No. 15-1415 (Fed. Cir. 2016) available at http://www.cafc.uscourts.gov/sites/default/files/opinions-orders/15-1415.Opinion.1-15-2016.1.PDF.

[4] Mayo Collaborative Services v. Prometheus Laboratories, Inc., 132 S. Ct. 1289 (2012) (as clarified by Alice).

[5] Claim 1 of the ‘694 patent, that the court found sufficiently representative is listed as follows:

1. A computer-implemented system for enabling borrowers to anonymously shop for loan packages offered by a plurality of lenders, the system comprising:

a database that stores loan package data specifying loan packages for home loans offered by the lenders, the loan package data specifying, for each of the loan packages, at least a loan type, an interest rate, and a required borrower credit grading; and

a computer system that provides:

a first interface that allows the lenders to securely upload at least some of the loan package data for their respective loan packages to the database over a computer network; and

a second interface that prompts a borrower to enter personal loan evaluation information, and invokes, on a computer, a borrower grading module which uses at least the entered personal loan evaluation information to calculate a credit grading for the borrower, said credit grading being distinct from a credit score of the borrower, and being based on underwriting criteria used by at least some of said lenders;

wherein the second interface provides functionality for the borrower to search the database to identify a set of loan packages for which the borrower qualifies based on the credit grading, and to compare the loan packages within the set, including loan type and interest rate, while remaining anonymous to each of the lenders and without having to post a request to any of the lenders, said second interface configured to display to the borrower an indication of a total cost of each loan package in the set, said total cost including costs of closing services not provided by corresponding lenders;

and wherein the computer-implemented system further enables the borrower to selectively expose at least the personal loan evaluation information to a lender corresponding to a selected loan package.

Pending Supreme Court Patent Cases 2016 (January 20 Update)

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by Dennis Crouch

This week, the Supreme Court granted certiorari in the administrative patent review case of Cuozzo v. Lee. Cuozzo raises the following two questions: (1) Whether the court of appeals erred in holding that, in inter partes review (IPR) proceedings, the Patent Trial and Appeal Board may construe claims in an issued patent according to their broadest reasonable interpretation rather than their plain and ordinary meaning; and (2) whether the court of appeals erred in holding that, even if the Board exceeds its statutory authority in instituting an IPR proceeding, the Board’s decision whether to institute an IPR proceeding is judicially unreviewable. The petitioner (Cuozzo) now has forty-five days to file its opening merits brief with amici briefs due one week later.

The other major patent issue before the court this term involves the enhanced damages questions raised in the parallel cases of Halo and Stryker. Oral arguments are set for those cases for February 23, 2016. Although not a party, the Solicitor General has requested permission to participate in oral argument as amicus curiae and for divided argument filed. The US Government generally supported the petitioners’ position that the Federal Circuit has unduly limited the availability of enhanced damages for willful infringement and other egregious acts by an adjudged infringer.

This week, the Supreme Court also issued a GVR in Medtronic v. NuVasive – ordering the Federal Circuit to reconsider whether the mens rea evidence presented was sufficient to prove active inducement under Commil.

1. Petitions Granted:

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

3. Petitions for Writ of Certiorari Pending:

  • Design Patents: Samsung Electronics Co. v. Apple Inc., No 15-777 (design patent scope and damages calculation)
  • 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)
  • Inducement: Arthrex, Inc. v. Smith & Nephew, Inc., et al., No. 15-559 (Commil re-hash – if actions were “not objectively unreasonable” can they constitute inducement?)
  • Post Grant Admin: 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)
  • 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?)
  • Claim Construction: Universal Lighting Technologies, Inc., v. Lighting Ballast Control LLC, No. 15-893 (intrinsic vs extrinsic evidence for claim construction).
  • Preclusion or Jurisdiction: Vermont v. MPHJ Technology Investments, LLC, No. 15-838 (Federal court jurisdiction in anti-troll consumer protection case)
  • Preclusion or Jurisdiction: Alexsam, Inc. v. The Gap, Inc., No. 15-736 (appellate jurisdiction over patents that were dropped from case pre-trial) (New Petition)
  • Preclusion or Jurisdiction:
    ePlus, Inc. v. Lawson Software, Inc., No. 15-639 (what happens with a finally-determined permanent injunction after PTO cancels the patent claim?)
  • Preclusion or Jurisdiction: 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.)
  • 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))
  • Claim Construction: 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.”)
  • Patent Term Adjustment Dispute: 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)
  • Damages: 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.)
  • Damages: Innovention Toys, LLC v. MGA Entertainment, Inc., et al., No. 15-635 (Stryker/Halo follow-on – potential wait-and-see)

3. Petitions for Writ of Certiorari Denied:

  • 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
  • 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
  • W.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

4. Prior versions of this report:

 
 

Supreme Court Orders FedCir to reconsider Medtronic Lawsuit

Patent

The Supreme Court has issued a GVR order in Medtronic v. NuVasive and ordered the Federal Circuit to consider how Commil impacts the case.

The petition for a writ of certiorari is granted. The judgment is vacated, and the case is remanded to the United States Court of Appeals for the Federal Circuit for further consideration in light of Commil USA, LLC v. Cisco Systems, Inc., 575 U. S. ___ (2015).

In its petition, Medtronic had directly requested for the Supreme Court to issue this GVR – Grant-Vacate-and-Remand order.

The primary holding of Commil is that belief-of-patent-invalidity is not a defense to allegations of inducement.  Relevant for Medtronic, the Supreme Court also indicated in Commil that inducement requires proof that the accused inducer knew that the actions being induced constituted patent infringement.  Those statements from the Supreme Court have been seen as clearing up some uncertainty following Global-Tech.

Although Medtronic did know of the patent at issue, the patentee apparently did not prove that the defendant “knew surgeons using its [accused] NIM-Eclipse medical device during spinal surgery would infringe NuVasive’s patent.”  Rather, Medtronic argues that it “reasonably believed using its NIM-Eclipse device during surgery did not infringe under a proper reading of the patent claims.”

The case will likely serve as a bellwether indication of how the Federal Circuit will work through the mens-rea requirements for inducement post Commil and Global Tech.

 

Samsung v. Apple: Functional Design Patents and Profit Disgorgement

Patent,

by Dennis Crouch

Six amici briefs have now been filed in support of Samsung’s petition for writ of certiorari in its design patent defense against Apple.  

Law Professor Brief: [SamsungLemley] In a petition primarily drafted by Professors Mark Lemley and Mark McKenna, and filed by Lemley, a group of 37 law professors strongly support Samsung’s position that design patent rights should be severely limited. The brief first looks at design patent scope and argues that design patent rights should only be permitted to cover non-functional and ornamental aspects of a product.  “Crucially, design patents protect only ornamentation. They may not cover the functional aspects of a product.”  As I and others have written, the functionality limitation in design patents is much weaker than that of trademark and copyright law.  The brief argues, however, that those regimes should be squared so that utility patent remain the sole domain of for the protection of functional design elements.  “Giving a design patent owner control over utilitarian features undermines the policy goals of the [trademark] functionality doctrine.”

Regarding damages, the brief argues that entire-profit-disgorgement for design patent infringement “makes no sense in the modern world”,  leads to “absurd results”, is “draconian”, and is not required by the statute.   Remember, the idea here is that Apple is collecting all of Samsung’s profits on its infringing Galaxy phones even though only some of the components of the devices infringe.

Public Knowledge and the Electronic Frontier Foundation: [SamsungPKEFF] PK and the EFF argue that we are likely to move into a world of design-patent-trolls filled with “abusive [design] patent litigation.”  PK also suggest a constitutional crisis – that these high damage awards for design patent infringement may violate the Fifth and Fourteenth Amendments (due process).   For part of their argument, the groups quote my 2010 design patent article where I wrote that  “design patent prosecution is a relatively quick, inexpensive, and assured process without substantive examination as compared with either utility patent prosecution or trade
dress registration.”  From my analysis, they reached the conclusion that “the low-quality patent concerns common with abusive utility patent litigation are even more so present with design patents.”

CCIA: [SamsungCCIA]  Although less-so than PK and EFF, the CCIA is fairly consistent in arguing for narrower patent rights.  Here, the organization makes the argument that entire-profit-disgorgement raises constitutional questions by going beyond the “exclusive Right to their respective … Discoveries.”

Systems, Inc: [SamsungSystems] Longtime patent litigator Philip Mann filed a brief on behalf of Systems who is litigating design patent damages issues.  The brief outlines several examples of how the profit disgorgement rule is having a “very real and accelerating” negative impact on  the business community. The brief cites its own case of Nordock v. Systems as well as Pacific Coast Marine Windshields v. Malibu Boats and Microsoft v. Corel.

Tech Companies: [SamsungTech] A group of oft-patent-defendants, including eBay, Dell, Facebook, Google, HP, and NewEgg joined together in a brief arguing for a narrowed interpretation of ‘article of manufacture’ from Section 289 rather than focusing on the entire retail product.

Marginalized Americans: [SamsungHLF] A set of groups that self-identify as “communities that are marginalized in American society” have filed a brief arguing that these strong design patent rights threaten to raise retail prices and limit access to affordable new technology, including smartphones and internet access.

Guest Post: Why we Need a Seizure Remedy in the Defend Trade Secrets Act

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Guest post by James Pooley.  Pooley is the former Director General of WIPO. He recently testified at the Senate Judiciary Committee in favor of the Defend Trade Secrets Act. See his earlier Patently-O guest post here.

INTRODUCTION

In a recent essay published in the Washington and Lee Law Review Online,[1] Professor Eric Goldman of the Santa Clara University School of Law criticized the ex parte seizure provisions of the Defend Trade Secrets Act (“DTSA”), which is pending before Congress in identical Senate (S.1890) and House (H.R.3326)  bills. In his view, the legislation is unnecessary, unprecedented, and carries an unacceptably high risk of abuse and collateral damage.

I strongly disagree. Trade secrets face far different threats in the digital age, and having federal courts able to intervene immediately in cross-border cases is critical. In exceptional circumstances, impoundment of a secret by the court will do what this sort of remedy has always done: get the property out of the hands of someone who threatens to destroy it or flee the jurisdiction, so that the matter can be heard on notice before the harm occurs. The seizure provisions of the DTSA have been carefully constrained to prevent abuse, to minimize harm, and to discourage any but the most compelling applications.

SEIZURE PREVENTS TRADE SECRET LOSS BEFORE IT HAPPENS

Most trade secret theft can be adequately addressed with preventive orders entered after a noticed hearing. This is because most actors in these cases can be expected to follow the orders of a court, and because our legal tradition values notice and the higher quality of information that is produced by the adversarial process.

Notwithstanding that preference, as we all learned in civil procedure class, courts in extraordinary cases may act without giving notice because of an acute danger to someone or something. This has been true across the range of legal disciplines, including trade secrets, and the majority of state laws, as well as the Federal Rules, have acknowledged this by articulating the high bar that a plaintiff has to meet before any matter can be heard ex parte. While that bar is necessary to ensure the case is exceptional, the flip side of the coin is that the harm to be avoided is irreparable.

Professor Goldman argues that the DTSA will be useless against the thief who plans to hijack information over the Internet, or who is on his way to the airport with the secrets in his pocket. But these scenarios only prove the need for a federal remedy: when a trade secret owner discovers that such a thing is about to occur, he can’t waste time figuring out what some county court might do. If there is a chance that a surprise intervention by law enforcement can prevent the loss, it is a federal court that is in the best position to respond and to deliver process that works across state lines. Like a terrorist attack, we can only hope to be vigilant and discover it before the button is pushed. But when we do have that kind of information, we also should be able to deploy the most effective tools to prevent the harm. In the right circumstances, one of those tools should be law enforcement, acting under the guidance and supervision of a federal court, to take temporary possession of the trade secret. That is the focus of the DTSA seizure provisions.

EX PARTE SEIZURE FOR TRADE SECRETS IS NOT “UNPRECEDENTED”

In his essay, Professor Goldman asserts that the seizure provisions “would represent an unprecedented innovation. No state trade secret law has a trade secret-specific ex parte seizure process [that is] similar . . . .” This stretches the meaning of “unprecedented” pretty far. He gets away with it only because the second sentence is so narrowly drawn, claiming only that no state has a “trade secret-specific ” process. But that doesn’t mean that states have not used broadly applicable seizure procedures in trade secret cases. In fact they have, although they may call them by another name, such as sequestration, or attachment. Texas, for example, allows for ex parte sequestration in a variety of circumstances, and it has been applied in at least one case to software. See Glenn, Ex-Parte Seizure of Intellectual Property Goods, 9 Tex. Intell. Prop. L.J. 307 (2001) (discussing Tex. Civ. Prac. & Rem. Code §62.001, and Learn2.com, Inc. v. Bell, 2000 U.S. Dist. Lexis 14283 (N.D. Tex. July 20, 2000)).

Moreover, the UTSA itself includes § 2(a), which “authorizes mandatory injunctions requiring that a misappropriator return the fruits of misappropriation to an aggrieved person, e.g., the return of stolen blueprints or the surrender of surreptitious photographs or recordings.” Commissioners’ Comment, 14 U.L.A. at 451. While the Act doesn’t expressly authorize granting such injunctions ex parte, neither does it prohibit them. Again, the circumstances justifying issuance of an order without notice have traditionally been defined by local rules in state courts and by FRCP Rule 65 in federal courts.

Indeed, Professor Goldman acknowledges that trade secret owners “already may seek ex parte TROs, including impoundment,” under FRCP Rule 65, reinforcing this with the statement that “existing federal TRO procedures already provide for ex parte seizures for trade secret owners.” He finds this authority in the Committee Notes to the 2001 amendments, which explains that “impoundment may be ordered on an ex parte basis under subdivision (b) [of Rule 65] if the applicant makes a strong showing of the reasons why notice is likely to defeat effective relief.” While he uses this reference to argue that the DTSA seizure provisions are unnecessary, it directly contradicts his claim that they are “unprecedented.”

DTSA SEIZURE PROVISIONS ARE BUILT ON THE LANHAM ACT

Another reason why the “unprecedented” argument fails is that the DTSA seizure language was directly patterned on the Lanham Act, 15 U.S.C. §1116(d), expressly authorizing ex parte seizure and impoundment of counterfeit goods. As a condition of such an order, the statute requires that it clearly appear from specific facts sworn by the applicant that some other order would not be adequate, that the applicant is likely to succeed on the merits, that immediate and irreparable injury will occur without the order, and that the “matter to be seized” is located at a specific place. Execution of an order has to be by law enforcement, and seized materials must be held by the court in accordance with a protective order to prevent disclosure of confidential information. The plaintiff must be prohibited from publicizing the order or getting access to the defendant’s trade secrets in the course of the seizure. Finally, a hearing has to be held between ten and fifteen days later, at which the plaintiff will have the burden to demonstrate continuing justification for the order.

The DTSA imposes all of these same restrictions, but adds more. Only property “necessary to prevent propagation or dissemination of the trade secret” can be seized. This means, for example, that records and other evidence of the acts of misappropriation or misuse cannot be taken away, thereby reducing the risk of disruption to the defendant’s other business operations. In fact, the court is specifically required to order only “the narrowest seizure of property necessary” and to provide that the seizure “be conducted in a manner that . . . does not interrupt the legitimate business operations of the [defendant] that are unrelated to the trade secret that has allegedly been misappropriated.”

As with other predicate requirements, the plaintiff’s showing must “clearly” demonstrate “from specific facts” that the information is a trade secret, that the target of the seizure has the secret in their possession, and that if notice were given the target “would destroy, move, hide, or otherwise make such matter inaccessible to the court . . . .” (This latter requirement provides assurance to cloud vendors and others who might be holding information for someone accused of misappropriation.) And the merits hearing must be held no more than seven days later (not ten to fifteen as in the Lanham Act), during which time anyone affected by the order may move to modify or dissolve it.

THE RISK OF ABUSIVE SEIZURE IS LOW AND WELL MITIGATED BY DTSA

So it should be obvious – particularly to any practitioner that has tried to convince a federal judge to issue any sort of ex parte order – that getting relief under this section will be very, very difficult. And while making it hard to get is the first line of defense against abuse of any legal process, the legislation provides serious consequences in case it turns out that the plaintiff was wrong. In the first instance, the court has to require a bond adequate “for the payment of the damages that any person may be entitled to recover as a result of a wrongful or excessive seizure” or attempted seizure. But the amount of the bond is only a guarantee and “shall not limit the recovery” of damages for wrongful seizure. Those damages are expressly tied to the Lanham Act, 15 U.S.C. § 1116(d)(11), which includes lost profits, cost of materials, loss of good will, punitive damages where bad faith is shown, and attorneys fees.

In other words, the risk analysis that any litigant must do before requesting a seizure remedy is not just that it might try and fail – although in my experience that is a very likely outcome – but that if it succeeds in getting the order it may be found to have oversold its case. Federal judges are not known for suffering fools gladly, and in addition to the opportunity to impose liability for damages they have Rule 11 sanctions in their tool kit. Therefore we can reasonably assume that the vast majority of counsel will exercise good judgment in discouraging marginal applications, and that to the extent any abusive behavior occurs, appropriate consequences will be imposed, just as they have been in other areas of the law.

CONCLUSION

Professor Goldman envisions the future without giving sufficient weight to the past or present. Of course there is risk involved in this as in all other processes run by humans. The relevant questions are: how important is the goal, how serious are the risks, and what can be done — informed by our analogous experience — to mitigate those risks to an acceptable level? By any objective measure, the authors of the DTSA have done their job well, and we have reliable answers.

The goal — having a federal resource that matches the modern threat of irreparable harm to an essential industrial asset — is critically important, not just for the limited number of cases where the tool will be used, but also for those that will not mature into problems because it is there. The abstract risk of meritless, abusive applications to federal courts must of course be acknowledged, but our experience with similar procedures shows what it takes to discourage such behavior. And the measures written into the seizure provisions of the DTSA — demanding the greatest care and judicial scrutiny possible and imposing very serious consequences for getting it wrong — provide a generous margin of comfort to conclude that seizures will happen only where necessary and where properly controlled to minimize harm.

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[1] http://ssrn.com/abstract=2697361.

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Links: 

 

 

Supreme Court grants Certiorari in Challenge of Inter Partes Review Proceedings

Patent, , , , ,

by Dennis Crouch

The Supreme Court has granted writ of certiorari in the pending Inter Partes Review challenge of Cuozzo Speed Tech v. Lee, Docket No. 15-446. 

Questions Presented:

  1. Whether the court of appeals erred in holding that, in IPR proceedings, the Board may construe claims in an issued patent according to their broadest reasonable interpretation rather than their plain and ordinary meaning.
  2. Whether the court of appeals erred in holding that, even if the Board exceeds its statutory authority in instituting an IPR proceeding, the Board’s decision whether to institute an IPR proceeding is judicially unreviewable.

Nine briefs amici were filed at the petitions stage. I expect that number will double for the merits stage.

More from Patently-O on the case: https://patentlyo.com/?s=cuozzo

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The court also granted certiorari for a second time Kirtsaeng v. John Wiley. This time, the focus is on the award of attorney fees to the prevailing party in copyright cases.

Question Presented:

What constitutes the appropriate standard for awarding attorneys’ fees to a prevailing party under section 505 of the Copyright Act.

Section 505 (17 U.S.C. 505) states that: “the court may also award a reasonable attorney’s fee to the prevailing party as part of the costs.”  However, there is a circuit split as to when it should be awarded. According to the petition:

The Ninth and Eleventh Circuits award attorneys’ fees when the prevailing party’s successful claim or defense advanced the purposes of the Copyright Act. The Fifth and Seventh Circuits employ a presumption in favor of attorneys’ fees for a prevailing party that the losing party must overcome. Other courts of appeals primarily employ the several “nonexclusive factors” this Court identified in dicta in Fogerty v. Fantasy, Inc., 510 U.S. 517, 534 n.19 (1994). And the Second Circuit, as it did in this case, places “substantial weight” on whether the losing party’s claim or defense was “objectively unreasonable.” Matthew Bender & Co. v. W. Publ’g Co., 240 F.3d 116, 122 (2d Cir. 2001).

 As a reminder, in Kirtsaeng I, the Supreme Court ruled that copyright exhaustion (first sale doctrine) applies to international sales of the copyrighted work that were lawfully made abroad.  This rule is opposite to that in patent cases (Jazz Photo), but the issue is core to the pending en banc Lexmark case. A decision is expected any day in Lexmark.

Lighting Ballast at the Supreme Court: The Role of Extrinsic Evidence in Claim Construction

Patent, ,

by Dennis Crouch

In Lighting Ballast, construction of the claimed “voltage source means” has been the subject of five different court opinions. Three interpreted the claim term as a means-plus-function limitation and the other two found it not to be in MPF form.  The distinction is important for the case because it serves as a validity trigger.  The patent specification did not describe an embodiment of the voltage source means and so the term would necessarily be deemed indefinite if interpreted as an MPF under 35 U.S.C. 112¶6 (now renumbered as section 112(f)).

The five prior decisions included a district court reversing itself and then being re-reversed by the Federal Circuit panel whose decision was reaffirmed by an en banc Federal Circuit. Finally, after an opinionless post-Teva vacatur (GVR) from the Supreme Court, the Federal Circuit reversed course again and gave deference to the district court’s fact-finding.  The result of this last judgment was to reinstate the final district court determination that a person of skill in the art would interpret the term as connoting a structural element and thus not a pure “means” claim. This was a win for the patentee.

Now, the adjudged infringer Universal Lighting has petitioned the Supreme Court for a writ of certiorari with the following question presented:

When and how can expert testimony or other extrinsic evidence be used to avoid the construction of a patent claim otherwise dictated by the patent’s intrinsic record, including in particular to avoid the restrictions imposed by 35 U.S.C. §112 ¶ 6 on functional claiming?

The original lighting ballast issue focused on appellate deference – an issue largely decided by the Supreme Court in its 2015 Teva v. Sandoz decision.  Markman was also a case focused on process (judge vs jury).  As presented here, the case has the potential of shifting to substance of claim construction.  If it takes the case, the court will almost certainly need to delve into the goals and purposes of claim construction and the inherent conflicts between a claim’s most literal meaning, its drafter’s intended meaning, and the notice of scope provided to the world.

The brief was drafted by Steven Routh and his team at Orrick who also represented ULT at the Federal Circuit. Read the petition here: https://patentlyo.com/media/2016/01/LightingBallastPetition.pdf.

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I used this case as the subject of last fall’s Patent Law Moot Court Competition (sponsored by McKool Smith) and most of the arguments centered around this same issue of whether the expert testimony that a engineers understand Voltage Source Means as a structural term of art (a Battery or Rectifier) was sufficient to overcome the strong presumption that accompanies the use of the term “means.”  The students also debated whether, following Williamson v. Citrix, any such presumption should still exist.

TC Heartland: Next Step in Limiting Patent Venue and Jurisdiction

Patent,

In the pending mandamus action of TC Heartland, the merits panel has taken one step forward by ordering oral arguments – set for March 11, 2016.  Although the order was a per curiam decision by the Merits Panel, it does not, on its face, reveal the identity of the three judge panel. The petition asks the Federal Circuit to change its rule on patent venue and personal jurisdiction.  If the petitioner here wins, we could see a dramatic shift in the geographic distribution of patent cases.  In other words, it would become much more difficult to bring an infringement action in the ongoing hot-spot of the Eastern District of Texas.

More on the case from Patently-O: https://patentlyo.com/?s=Heartland

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As I’ve written before, the actual venue and jurisdiction issues in the case are both important and fascinating.  My question on this ruling stems from the secrecy — that the merits panel issued an order without revealing the identity of the panel members.  [OK – a couple of folks have convinced me that this secrecy is proper (or at least SOP) since the court did not make any substantive decisions but only provided notice of oral arguments.]

 

 

IPR Challenge Moves Forward with One Step Back

Patent, ,

by Dennis Crouch

In a non-precedential order, the Federal Circuit has rejected Carl Cooper’s challenge to constitutional propriety of the inter partes review (IPR) system as implemented by the USPTO.  The identical issues had already been decided in MCM v. HP (Fed. Cir. 2015). In that case, the Federal Circuit held that the IPR system does not violate Article III of the U.S. Constitution nor does it violate the Seventh Amendment of the U.S. Constitution.  As I wrote in December, the MCM decision “essentially forecloses Carl Cooper’s parallel proceedings.”

Cooper had originally filed his appeal in the 4th Circuit Court of Appeals, but that court bumped the case to the Federal Circuit.

Of interest, Cooper himself motioned for summary affirmance, but has reserved his right to raise the appeal. In his filing on Cooper’s behalf, Rob Greenspoon wrote:

While Appellants strongly disagree with the Court’s decision in MCM Portfolio that IPR proceedings are constitutional, Appellants concede that because the issues in this appeal are closely related to those in MCM Portfolio, summary affirmance is appropriate. See United States v. Fortner, 455 F.3d 752, 754 (7th Cir. 2006) (“[S]ummary affirmance may be appropriate when a recent appellate decision directly resolves the appeal.”) (citing United States v. Young, 115 F.3d 834, 836 (11th Cir.1997) (per curiam)). In the interests of preserving the Court’s and the parties’ resources, Appellants respectfully request that this Court grant summary affirmance of the district court’s judgment. In making this request, Appellants preserve all rights to subsequent review.

Next stop appears to be en banc petition or petition for writ of certiorari.

Documents:

Patent Grants 2015

Patent

As expected, the USPTO issued just under 300,000 utility patents in calendar year 2015. The new number represents a drop from 2014 – the first drop since President Obama took office and appointed David Kappos as USPTO Director. Barring a new radical transformation of the Office, I expect that the grant numbers will hover around this mark for the next several years.

Due Process and Separating Powers Within an Agency

Patent, , , , , ,

by Dennis Crouch

In this decision, the Federal Circuit has affirmed that the IPR procedure allowing the same PTAB panel to both institute an IPR and issue the final decision cancelling the claims is proper. In the process, the divided court rejected both a constitutional and statutory challenge. 

In Ethicon Endo-Surgery v. Covidien (Fed. Cir. 2016)[1], a divided Federal Circuit has affirmed the PTAB’s final judgment that all of Ethicon’s challenged patent claims are invalid as obvious.  The court also confirmed that the PTAB’s procedure of having the same panel decide both the IPR initiation petition and the final decision is proper. “Neither the statute nor the Constitution precludes the same panel of the Board that made the decision to institute inter partes review from making the final determination.”

Ethicon’s U.S. Patent No. 8,317,070 is directed to a surgical stapling device used in endoscopic surgery.  The purported novelty of the stapler is that it uses (a) two sets of staples (with different heights) and (b) staples with non-parallel legs.  The prior art included surgical staplers with each of these features, but no prior art teaches the combination of the two. “Thus, the purported inventive aspect of the ’070 patent is the combination of these two features in a surgical stapler.”

From the majority’s perspective, the case involves a straightforward application of KSR’s holding that a “combination of familiar elements according to known methods is likely to be obvious when it does no more than yield predictable results.”  Here, the court noted that the patent itself “discloses no particular synergy resulting from the combination.”  Ethicon did present evidence of commercial success of Covidien’s infringing product. However, that argument failed because, according to the court, Ethicon provided no evidence of nexus between the particular inventive combination of features and the proven commercial success.

Nowhere does Ethicon demonstrate, or even argue, that the commercial success of the Covidien products is attributable to the combination of the two prior art features—varied staple heights and non-parallel staple legs—that is the purportedly inventive aspect of the ’070 patent.

I’ll pause here to note that that the court’s nexus requirement here appears to be doctrinally different than the more traditional requirement that the commercial-success be linked to the claimed invention (as a whole) rather than the clearly more stringent inventive features of the claimed invention.  See Wyers v. Master Lock Co., 616 F.3d 1231, 1246 (Fed. Cir. 2010) (“the patentee must establish a nexus between the evidence of commercial success and the patented invention.”).

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Ethicon also argued (unsuccessfully) that the PTAB’s procedure violated Ethicon’s procedural due process rights. In particular, Ethicon argued that the final decision was invalid because it was “made by the same panel that instituted the inter partes review.”   The appellate panel rejected that argument- finding that “[t]he inter partes review procedure is directly analogous to a district court determining whether there is ‘a likelihood of success on the merits’ and then later deciding the merits of a case” and that the initial decision to grant a petition did not create any presumption of prejudice or bias against the patentee.

Ethicon’s best (but still weak) argument was that the AIA does not permit the PTAB to make the institution determination.  In particular, the statute gives the PTAB power and authority to make final determinations regarding an IPR, but assigns the USPTO Director the power to institute IPRs.  The statutory scheme, according to Ethicon, requires separation of these two functions.   On appeal, the Federal Circuit rejected that argument as well – finding that the USPTO director has implicit authority to delegate her authority to officials within the agency.

Ethicon argues that because Congress (1) specifically gave the Director the power to institute, see, e.g., 35 U.S.C. § 314(a), (2) did not explicitly give the Director authority to delegate the institution decision to the Board, and (3) gave the Board the power to make the final determination, Congress intended to keep the functions of institution and final decision separate.

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The majority opinion was penned by Judge Dyk and joined by Judge Taranto.  Judge Newman wrote in dissent arguing that the statutory scheme created a clear distinction:

At the first stage, the Director determines whether the review is to be instituted. 35 U.S.C. § 314(a) (“The Director may not authorize an inter partes review to be instituted unless the Director determines that the information presented in the petition . . . and any response . . . shows that there is a reasonable likelihood that the petitioner would prevail with respect to at least one of the claims challenged in the petition.”). (Of course, the Director may designate an examiner or solicitor to conduct this initial review.)

If instituted by the Director, the Board then conducts a trial on the merits. 35 U.S.C. § 316(c). . . .

The bifurcated design of post-grant review is clear not only from the language of §§ 314(a) and 316(c), but pervades the structure of these post-grant proceedings. Congress unambiguously placed these separate determinations in different decision-makers, applying different criteria. The majority’s endorsement of the PTO’s statutory violation departs not only from the statute, but also from the due process guarantee of a “fair and impartial decision-maker.”

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Phil Johnson (President of the Intellectual Property Owners Association) argued the case on behalf of Ethicon while Kathleen Daley of Finnegan argued for Covidien and Katherine Twomey Allen of the DOJ represented the USPTO as an intervenor.

The parties relied upon Supreme Court for support and the case has some chance of heading up.

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[1] Federal Circuit Appeal No. 14-1771, appeal of PTAB IPR 2013-00209. [EthiconDecision]

Pending Supreme Court Patent Cases 2016 (January 12 Update)

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by Dennis Crouch

As of January 12, the Supreme Court has granted two petitions for certiorari for this term. Both Halo and Stryker cover the same topic of enhanced damages, a.k.a. willfulness. Another 17 petitions remain pending. Following its latest conference, the Court denied two low-quality petitions (Arunachalam and Morgan) and also the SpeedTrack case which had focused on interesting but esoteric preclusion issues involving the “Kessler doctrine.”

The important inter partes review case Cuozzo survived its first conference and is up on the blocks for a second round this week. This type of immediate “relisting” occurs in almost all cases where certiorari is granted and raises the odds of grant to >50%. Because the US Patent Office is a party in the case, there would be no call for the views of the Solicitor General before granting / denying certiorari. Nine amici briefs were also filed at the petition stage – a factor that also raises the likelihood that certiorari will be granted.

1. Petitions Granted:

2. Petitions for Writ of Certiorari Pending:

  • Design Patents: Samsung Electronics Co. v. Apple Inc., No 15-777 (design patent scope and damages calculation)
  • 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)
  • Inducement: Medtronic Sofamor Danek USA, Inc., et al. v. NuVasive, Inc., No. 15-85 (Commil re-hash – mens rea requirement for inducement)
  • Inducement: Arthrex, Inc. v. Smith & Nephew, Inc., et al., No. 15-559 (Commil re-hash – if actions were “not objectively unreasonable” can they constitute inducement?)
  • Post Grant Admin: Cuozzo Speed Technologies, LLC v. Michelle K. Lee, No. 15-446 (BRI construction in IPRs; institution decisions unreviewable)
  • Post Grant Admin: 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)
  • 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?)
  • Preclusion or Jurisdiction: Vermont v. MPHJ Technology Investments, LLC, No. 15-838 (Federal court jurisdiction in anti-troll consumer protection case)
  • Preclusion or Jurisdiction: Alexsam, Inc. v. The Gap, Inc., No. 15-736 (appellate jurisdiction over patents that were dropped from case pre-trial) (New Petition)
  • Preclusion or Jurisdiction:
    ePlus, Inc. v. Lawson Software, Inc., No. 15-639 (what happens with a finally-determined permanent injunction after PTO cancels the patent claim?)
  • Preclusion or Jurisdiction: Alps South, LLC v. The Ohio Willow Wood Company, No. 15-567 (If patent ownership is fixed after the filing of a complaint, can jurisdiction be cured by a supplemental complaint)
  • Preclusion or Jurisdiction: 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.)
  • 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))
  • Claim Construction: Media Rights Technologies, Inc. v. Capitol 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.”)
  • Patent Term Adjustment Dispute: 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)
  • Damages: 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.)
  • Damages: Innovention Toys, LLC v. MGA Entertainment, Inc., et al., No. 15-635 (Stryker/Halo follow-on)

3. Petitions for Writ of Certiorari Denied:

  • 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
  • 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
  • W.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

4. Prior versions of this report:

 

Patentlyo Bits and Bytes by Anthony McCain

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Get a Job doing Patent Law

Year in Review – from Patent Docs

Patent

My friends at MBHB’s Patent Docs blog are running their 8th annual patent law year-in-review Webinar via WebEx.

In this presentation, Patent Docs co-authors Dr. Donald Zuhn and Dr. Kevin Noonan and Patent Docs contributor Dr. Michael Borella will take a look back at the top patent stories of 2015, many of which will likely impact patent applicants and practitioners in the coming year.

The webinar is Thursday, January 21, 2016 10:00 am  (Central Standard). No fee to participate, but participants must register in advance for CLE.

Wi-Lan v. Apple: “Clarification” or “reconstruction”?

Patent, ,

By Jason Rantanen

Wi-Lan, Inc v. Apple Inc. (Fed. Cir. 2016) Download Opinion
Panel: Reyna (author), Wallach, Hughes

Although precedential, this case doesn’t really break new patent-law ground.  Instead, it offers a data point in the tricky issue of whether a post-verdict modification to the construction of a claim constitutes a permissible “clarification” or an impermissible “reconstruction.”    The opinion also provides an example of how claim construction can operate at multiple levels, in this case by applying to both the meaning of a given term and the meaning of that term in the broader context of the claim.

Wi-Lan, the owner of RE37,802, a patent relating to wireless data communication, sued Apple and others for infringement based on their manufacture and sale of standards-compliant products. Claim 1 of the ‘802 patent reads:

1. A transceiver for transmitting a first stream of data symbols, the transceiver comprising:

a converter for converting the first stream of data symbols into plural sets of N data symbols each;

first computing means for operating on the plural sets of N data symbols to produce modulated data symbols corresponding to an invertible randomized spreading of the first stream of data symbols; and

means to combine the modulated data symbols for transmission.

(emphasis added).  The critical claim constructions related to “modulated data symbols,” which the district court construed to mean “data symbols that have been spread apart by spreading code” and “first computing means,” which the district court construed to be a means-plus-function element linked to particular structure disclosed in the specification.   Applying these constructions, a jury found that Apple did not infringe and that the ‘802 patent was invalid as anticipated.  Following trial, the district judge denied Wi-Lan’s request for judgment as a matter of law (JMOL) on infringement but granted its request for JMOL of no invalidity based on a modified construction of the structure to which “first computing means” corresponded.

The Interdependent Text and Claim Construction

On appeal, Wi-Lan challenged the district court’s denial of JMOL on infringement (effectively challenging the jury verdict of no infringement).  This issue largely turned on an issue of claim construction: whether the district court’s constructions precluded Apple’s noninfringement defense, a defense premised on the argument that the claims required that data symbols be randomized before combining them, while Apple’s products combined the symbols before randomizing them.

On appeal, the Federal Circuit agreed with Apple.  The text of the claim indicated that the modulated data symbols had to be randomized before combining them.  The “first computing means” produces “modulated data symbols corresponding to an invertible randomized spreading of the first stream of data symbols.'”  The second means then combines “the modulated data symbols for transmission.”  Since “[s]ubsequent uses of the definite articles ‘the’ or ‘said’ in a claim refers back to the same term recited earlier in the claim,” slip op. at 10, quoting Baldwin Graphic Sys., Inc. v. Siebert, Inc., 512 F.3d 1338, 1342 (Fed. Cir. 2008), the term “the modulated symbols” in the second means element referred back to the randomized modulated symbols produced by the first means element, thus requiring randomization-before-combination.  This construction was consistent with the specification.

Wi-Lan’s principal contention was that during its pre-trial construction of  “modulated data symbols,” the district court rejected Apple’s argument that the term requires randomization.   But, the Federal Circuit held, the district court’s construction only involved the unmodified, generic term “modulated data symbols.”   Apple’s argument involved the intersection of the full language in the first means element with the use of “modulated data symbols” in the second means element:  “Even though generic ‘modulated data symbols’ do not have to be randomized, the recited ‘modulated data symbols corresponding to an invertible randomized spreading‘ do have to be randomized.”  Slip Op. at 11.  Through its use of “the,” the  second means element referred back to those randomized data symbols.  Since Apple’s products combined then randomized, there was no direct infringement.  (The Federal Circuit also disposed of Wi-Lan’s argument of infringement under the doctrine of equivalents.)

Post-verdict claim construction

Prior to trial, the district court construed the means-plus-function element “first computing means” as “element 12 of Figures 1 and 4, columns 2:6–10, 2:36–40, 2:58–62, 4:2–12, and 4:35–44, and equivalents thereof.”  Using this construction, the jury found the claims to be anticipated by a prior art reference that used real multipliers to randomize the “modulated data symbols” rather than complex multipliers.  In granting Wi-Lan’s motion for JMOL of no invalidity, however, the district court “determined that, although its construction of computing means ‘does
not specifically provide for a complex multiplier,’ a complex multiplier was nevertheless necessary because ‘expert witnesses from both sides agreed that complex multipliers are part of the structure of the ‘first computing means’ as taught by the ’802 patent.'”  Slip Op. at 8.

On appeal, the Federal Circuit concluded that this was an instance of impermissible post-verdict reconstruction.  “‘[I]t is too late at the JMOL stage to argue for or
adopt a new and more detailed interpretation of the claim language and test the jury verdict by that new and more detailed interpretation.’ Hewlett-Packard Co. v. Mustek Sys., Inc., 340 F.3d 1314, 1321 (Fed. Cir. 2003).”  Slip Op. at 16.  None of the corresponding structure in the court’s pre-trial construction mentioned complex multipliers or referred to the patent figure involving complex multipliers.

While a district judge may “adjust constructions post-trial if the court merely elaborates on a meaning inherent in the previous construction,” Mformation
Techs., Inc. v. Research in Motion Ltd., 764 F.3d 1392, 1397 (Fed. Cir. 2014), this was not such a case.  Such “clarification” is allowed because it only makes “plain . . . what should have been obvious to the jury.”  Slip Op. at 17, quoting Cordis Corp. v. Boston Scientific, 658 F.3d 1347, 1355–57 (Fed. Cir. 2011).  Here, the implicit requirement of a complex randomizers was not obvious to the jury, particularly given conflicting testimony over whether the claims actually did require the use of a complex randomizer.  The result was that the district court did not simply elaborate on the meaning of its prior claim construction in the post-verdict opinion, but altered that construction, something that it could not do.

Razing the Patent Bar

Patent

by Dennis Crouch

Many have talked about “raising the bar” in patent cases. In his most recent article, Professor Hubbard (Baltimore) argues for “Razing the Bar.”  In particular, Hubbard argues that the current structure of limiting the patent bar to only those with technical educations “is doing more harm than good.” Hubbard also notes the “paucity of critical debate” in this area.   As a first step, he proposes that any U.S. attorney, regardless of their technical background, should be permitted to sit for the registration examination.

Hubbard holds a degree mathematics from Dartmouth and a J.D. from Yale; has litigated patent cases; teaches patent law courses; has written extensively on the patenting system; … but is apparently not qualified to become a patent attorney himself.

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A benefit of shift brought about by both the Courts (Alice/Mayo/Nautilus/KSR) and Congress/USPTO (administrative post grant challenges) is that there is a greater incentive to focus patents on the detailed technological improvement rather than some abstracted notion of the invention that was more the norm for past generation.* My experience is that a technology-savvy patent attorney will be better able to cost-effectively understand the important technological details.  The technological-education requirement of the patent bar places one hurdle in that framework, but the market continues to operate in this area as well. For instance, many companies only hire patent attorneys with relevant experience in the appropriate technological area and don’t simply rely upon the “patent attorney” status as a total qualifier.

* I see that I’m making a claim here and will look into researching whether there is evidence to back that up. Are patents being drafted today qualitatively different than those written a decade-ago?

 

Patent Venue: Limits on Venue in Patent Infringement Litigation

Patent, ,

The pending Federal Circuit mandamus action of In re TC Heartland involves an interesting legal question that has now been fully briefed.  The Federal Circuit has not yet announced whether it will hold oral arguments in the patent venue debate.

In the dispute, Heartland has asked the court to reconsider its interpretation of the patent venue statute 28 U.S.C. § 1400(b) and order that the limiting elements of the provision be given effect.  Under the proposed interpretation, a patent infringement case could only be filed in districts either (1) the defendant resides or (2) the defendant has both committed acts of infringement and has a regular and established place of business. This proposal stems directly from the language of 28 U.S.C. § 1400(b) which requires either (1) residency or (2)  a combination of infringing acts plus a regular-place-of-business as a prerequisite to proper patent venue.[1] For the past several decades the limits of § 1400(b) have been given essentially no weight after being undermined by 28 U.S.C. § 1391(c). This broadened provision undermines § 1400(b) by providing a very broad definition of the term “resides” — indicating that that “except as otherwise provided by law,” a defendant will be deemed to “reside” in any venue where the defendant is subject to that court’s personal jurisdiction in the action at hand.[2]  When § 1400(b) and § 1391(c) are read together, it appears that patent cases can be filed in any venue with personal jurisdiction over the defendant.  The point of the TC Heartland mandamus action is that those two provisions should not be read together, but instead, the more traditional and limited definition of “residency” should apply when interpreting 1400(b).  If the Federal Circuit (or Supreme Court) were to flip on this, we would see a major impact on the current concentration of venue in the Eastern District of Texas.

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Party Briefs:

Briefs Amici:

  1. Heartland.Acushnet (Supporting petitioner)
  2. Heartland.EFF (Supporting petitioner)
  3. Heartland.USInventors (Supporting respondent)

Discussions of the Case.

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The history of the issues here have gone back-and-forth.  The key Supreme Court case is Fourco Glass Co. v. Transmirra Products Corp., 353 U.S. 222 (1957).  In that case, the Supreme Court ruled that “28 U.S.C. § 1400(b) is the sole and exclusive provision controlling venue in patent infringement actions, and that it is not to be supplemented by the provisions of 28 U.S.C. § 1391(c).”  This statement was reiterated by the Supreme Court in Brunette Mach. Works Ltd. v. Kockum Indus., Inc., 406 U.S. 706 (1972) (“Congress placed patent infringement cases in a class by them-selves, outside the scope of general venue legislation.”) However, in 1988 Section § 1391(c) was amended to greatly expand the residency definition to the limits of personal jurisdiction and included a statement that its residency definition in § 1391(c) was “for purposes of venue under this chapter.” Subsequently, the Federal Circuit ruled in VE Holdings that the 1988 statutory amendments overruled Fourco and that the expanded residency definition §1391(c) now applies in patent cases. (§ 1400 (the patent jurisdiction provision) is in the same chapter as §1391.) In 2011, Congress again changed its statute – this time repealing the “for purposes of venue under this chapter” and instead added in that the statute applies in all civil cases “except as otherwise provided by law.”

The petition also argues for a recognition of limits on personal jurisdiction. In particular, the petition argues that a court should not automatically have jurisdiction to rule on acts of infringement that occurred in another state when the court’s personal jurisdiction over the defendant is derived from the specific alleged acts of infringement in the forum state (specific jurisdiction vs general jurisdiction).   The logical key to the argument here is the legal fiction that each infringing act is a separate and distinct infringement – as such, sales in Delaware should not automatically give the Delaware courts jurisdiction to rule on whether sales in New York or California were infringing.

This case is certainly one to watch.

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[1] Section 1400(b) states that “Any civil action for patent infringement may be brought in the judicial district where the defendant resides, or where the defendant has committed acts of infringement and has a regular and established place of business.”

[2] Section 1391(c) states that “an entity … shall be deemed to reside, if a defendant, in any judicial district in which such defendant is subject to the court’s personal jurisdiction with respect to the civil action in question.”