Guest Post: Why the (Previously) Improving Economy Likely (Also) Reduced Patent Litigation Rates

Patent, , , ,

Guest Post by Ted Sichelman, Professor of Law and Director of the Technology Entrepreneurship and Intellectual Property Clinic and Center for Intellectual Property Law & Markets at the University of San Diego School of Law, and Shawn Miller, Lecturer in Law and Teaching Fellow in Law, Science & Technology at Stanford Law School

As Patently-O has described in detail (e.g., here and here), patent litigation rates have been in flux over the last several years. First, in 2010, rates nominally went up because of false marking suits. Then, in 2011, following passage of the America Invents Act (AIA), patent litigation rates appeared to increase (and the media made much ado over this). Yet, the only thing that changed immediately after the AIA was how we counted patent litigation numbers because of new joinder rules. Indeed, the AIA’s joinder rules actually lowered total defendant counts a bit. Next came inter partes review (IPR) and covered business method (CBM) review, which appear to have substantially decreased litigation rates in 2013 and 2014. Then came Alice Corp. v. CLS Bank and its progeny, which some have claimed decreased litigation rates throughout 2014. And now rates seem to be back up in 2015—why, nobody is sure.

To further understand the drivers of patent litigation, Alan Marco (Chief Economist at the USPTO) and the two of us recently conducted the first rigorous study of the effects of the economy as a whole (the “macroeconomy”) on patent litigation rates over the period 1970-2009 (we stopped at 2009 to avoid the counting mess I just described). The study will be published this month in the Journal of Empirical Legal Studies (a draft is available here).

As background, we examined changes in the rates of total litigation, litigation per issued patent, and litigation per in-force patent. To do so, we used a new USPTO dataset that provides the most accurate numbers on total in-force patents by year gathered to date. Figure 1 below shows the number of in-force patents between 1971 and 2009 (the vertical bars represent periods of recession).

Figure 1

Figure 1. U.S. In-Force Patents (1971-2009) [from USPTO data].

Indeed, although many have noted that the litigation rates per issued patent have been fairly stable, Figure 2 below shows that the litigation rates per in-force patent have risen quite dramatically since the early- to mid-1990s (at least from 1970s rates—Ron Katznelson has argued that rates per in-force patent in the 1920s to the mid-1930s are fairly comparable to the recent rates, at least through the 2000s).

Figure 2

Figure 2. U.S. Patent Litigation Per In-Force Patent (1971-2009)

(Total Patent Litigation in Gold (with annual filings on left y-axis) and Litigation Per In-Force Patent in Blue (with annual values on right y-axis)).

We then performed numerous time-series regressions against important macroeconomic variables like GDP, R & D spending, interest rates, and related factors, controlling for in-force patents and other key variables. Our major findings (over the last 20-25 years) are as follows:

  • In economic upswings (i.e., increasing productivity, low interest rates, low economy-wide financial risk), patent litigation rates generally fall.
  • In recessions, whether rates rise or fall depends on the availability of credit.
    • When credit is freely available in a downturn, overall patent litigation rates generally rise.
    • However, when credit is scarce (like in the most recent recession), overall patent litigation rates generally fall.

We explain the first finding on a “substitution” theory—namely, when selling products and services is highly profitable, companies and investors are less concerned about earning revenue from patent litigation. We speculate that our second finding is driven by the increasing reliance by plaintiffs on external funding. Indeed, the availability of credit has only played a significant role in patent litigation rates since roughly the mid-1990s, when licensing-driven litigation began to rise—first by practicing entities such as IBM and Texas Instruments and, later, by non-practicing entities (NPEs).

Over the last five years, the mean U.S. real GDP growth rate has been about 2-3% per year. Ignoring other factors, and assuming our model applies on a going forward basis since 2009, this increase in productivity has very roughly amounted to a 6-9% decrease in annual patent litigation counts over the same period. In general, it is likely that a sizeable portion of the decrease in patent litigation rates over the last several years has been not merely due to the rise of IPRs and CBMs, and the issuance of Alice Corp. v. CLS Bank, but also to the economy as a whole. So the next time the economy worsens, if credit remains relatively available, all other factors equal, it is likely that patent litigation rates will rise significantly—not by a huge amount, but enough to notice. Whether the current increase in patent litigation is somehow related to a declining macroeconomy, only time will tell.

Please note that the views expressed herein solely express our personal views and do not express the views of the U.S. Patent & Trademark Office.

 

Media Rights Technologies v. Capital One: Williamson v. Citrix applied

Patent,

By Jason Rantanen

Media Rights Technologies, Inc. v. Capital One Financial Corporation (Fed. Cir. 2015) Download opinion
Panel: O’Malley (author), Plager and Taranto

Earlier this summer, the Federal Circuit issued a revised opinion in Williamson v. Citrix Online.  The centerpiece of the new opinion was Part II.C.1, joined by a majority of the entire court.  That section overruled past precedent holding that non-use of the words “means” or “step” in a claim created a “strong” presumption that § 112, para. 6 does not apply, one that is only overcome by “a showing that the limitation essentially is devoid of anything that can be construed as structure.”   Instead, the en banc court held, the presumption can be overcome “if the challenger demonstrates that the claim term fails to ‘recite sufficiently definite structure’ or else recites ‘function without reciting sufficient structure for performing that function'”  Williamson, 792 F.3d 1339, 1349 (Fed. Cir. 2015) (en banc in relevant part) (quoting Watts v. XL Sys., Inc., 232 F.3d 877, 880 (Fed. Cir. 2000).

On the surface, Media Rights Technologies v. Capital One involves a relatively straightforward application of Williamson.  But there are several aspects of the decision that make it stand out: the statement of the law of indefiniteness (Judge O’Malley’s first since Nautilus), the sharpness and depth of its analysis of the § 112, para. 6 issue, the holding that the specification must disclose structure for all claimed functions, and the use of factual evidence in the indefiniteness determination.

Claim 1 of Patent No. 7,316,033 is the illustrative claim.  At issue was the term “compliance mechanism.”

A method of preventing unauthorized recording of electronic media comprising:

Activating a compliance mechanism in response to receiving media content by a client system, said compliance mechanism coupled to said client system, said client system having a media content presentation application operable thereon and coupled to said compliance mechanism;

Controlling a data output pathway of said client system with said compliance mechanism by diverting a commonly used data pathway of said media player application to a controlled data pathway monitored by said compliance mechanism; and

Directing said media content to a custom media device coupled to said compliance mechanism via said data output path, for selectively restricting output of said media content.

Multiple claim meanings: The Federal Circuit’s discussion begins with what  appears to be a routine summary of the law of indefiniteness:

A claim fails to satisfy this statutory requirement [§ 112, para. 2] and is thus invalid for indefiniteness if its language, when read in light of the specification and the prosecution history, “fail[s] to inform, with reasonable certainty, those skilled in the art about the scope of the invention.” Nautilus, Inc. v. Biosig Instruments, Inc., 134 S. Ct. 2120, 2124 (2014). Notably, a claim is indefinite if its language “might mean several different things and no informed and confident choice is available among the contending definitions.” Id. at 2130 n.8 (quotation omitted).

Slip Op. at 7. While the first part of this passage is well known, but the second part is interesting because it does not merely embrace the Court’s opinion in Nautilus, but goes beyond.  Footnote 8 is actually a quotation from a district court opinion, dropped in the context of pointing out that the Federal Circuit’s “insolubly ambiguous” standard “can breed lower court confusion.”  It reads:

8. See, e.g., Every Penny Counts, Inc. v. Wells Fargo Bank, N. A., ––– F.Supp.2d ––––, ––––, 2014 WL 869092, *4 (M.D.Fla., Mar. 5, 2014) (finding that “the account,” as used in claim, “lacks definiteness,” because it might mean several different things and “no informed and confident choice is available among the contending definitions,” but that “the extent of the indefiniteness … falls far short of the ‘insoluble ambiguity’ required to invalidate the claim”).

Put another way, Judge O’Malley is not merely quoting Nautilus; she is adopting a standard that is not directly mandated by the opinion.  (To be clear, I think the language adopted here is in line with Nautilus, and perhaps even indirectly mandated by the decision.  Also, it is not the first time this language has appeared in a post-Nautilus decision.  Judge Chen quoted it in Interval Licensing LLC v. AOL, Inc., 766 F.3d 1364, 1371 (Fed. Cir. 2014), but not as a firm statement of the law.)

The §112, para. 6 analysis: The appeal presented two issues related to “compliance mechanism”: whether it is a means-plus-function term and, if so, whether the specification discloses corresponding structure.  Under Williamson, the lack of the word “means” creates a rebuttable presumption that “compliance mechanism” is not a means-plus-function term.  Here, the patent holder neither contended that “compliance mechanism” had a commonly understood meaning nor that it is generally understood in the art to connote a particular structure.  Instead, Media Rights Technologies argued that “compliance mechanism” was like the term “modernizing device” found to be definite in Inventio AG v. Thyssenkrupp Elevator Ams. Corp., 649 F.3d 1350, 1357 (Fed. Cir. 2011).  Not so, said the court.

Here, unlike Inventio, the claims do not use the term “compliance mechanism” as a substitute for an electrical circuit, or anything else that might connote a definite structure. Rather, the claims simply state that the “compliance mechanism” can perform various functions. A review of the intrinsic record does not change this conclusion. The written description only depicts and describes how what is referred to as the “copyright compliance mechanism” is connected to various parts of the system, how the “copyright compliance mechanism” functions, and the potential—though not mandatory—functional components of the “copyright compliance mechanism.” See ’033 Patent col. 18:57–col. 19:5; col. 20:32–49; Fig. 3; Fig. 5B. None of these passages, however, define “compliance mechanism” in specific structural terms. And, the addition of the term “copyright compliance mechanism” in the specification only confuses the issue further. Media Rights does not contend that “copyright compliance mechanism” is the equivalent of the electrical circuit detailed in the written description at issue in Inventio. Indeed, Media Rights asserts that the “copyright compliance mechanism”—the only “compliance mechanism” referenced outside the claims and the summary of the invention, and the only one depicted in the figures to which it points—is narrower than the structure it claims as the “compliance mechanism.” Without more, we cannot find that the claims, when read in light of the specification, provide sufficient structure for the “compliance  mechanism” term.

Slip Op. at 10.  Furthermore, Inventio was a pre-Williamson decision, and was decided under now-superceded case law that imposed a “heavy presumption” against finding a claim term to be in means-plus-function format.  “Because we apply no such heavy presumption here, and the description of the structure to which Media Rights points is far less detailed than in Inventio, we do not believe Inventio carries the weight Media Rights attaches to it.”  Slip Op. at 11.

All functions must be disclosed  Since the claim was a means-plus-function term, the court turned to the question of whether the specification disclosed corresponding structure.  “Where there are multiple claimed functions, as there are in this case, the patentee must disclose adequate corresponding structure to perform all of the claimed functions.”  Slip Op. at 12 (emphasis in original).  Here, there were four claimed functions, so the specification needed to disclose adequate structure to achieve all four of the claimed functions.  And because these were computer-implemented functions, “the specification must disclose an algorithm for performing the claimed function.”  Id. at 13.  Claims that fail to disclose sufficient corresponding structure are invalid for indefiniteness.

Factual evidence in the indefiniteness determination:
Examining the question of whether such an algorithm was disclosed, the court considered the specification’s recitation of source code that Media Rights contended was sufficient.  Since the court could not read the code outright, it needed to look to “expert witness testimony to determine what that source code discloses at an algorithmic level.”  Slip Op. at 14. (Media Rights apparently conceded to this at oral argument.)  The unrebutted expert testimony was that the code returned only various error messages.  From this, the court concluded that “[t]he cited algorithm does not, accordingly, explain how to perform the diverting function, making the disclosure inadequate.”  Id.  In addition, the court held that there was no corresponding structure for another function because “the cited portion of the specification provides no detail about the rules themselves or how the ‘copyright compliance mechanism’ determines whether the rules are being enforced.”  Id.  The consequence was that all of the patent’s claims (all containing the term “compliance mechanism”) were invalid due to indefiniteness

Bits and Bytes on IP Law

Patent,
  • Video Contest: IPO is again hosting its IP Video Contest – for entertainment value I like the LOTR and Cavemen skits. [http://www.ipvideocontest.com/?page_id=410]
  • Lighting Ballast: The Federal Circuit has denied a motion for another en banc rehearing in the longstanding lighting ballast case. Thus, the latest panel decision should stand that affirms the district court holding that the claimed “voltage source means” is not a means-plus-function case.  That outcome is largely based upon the appellate court giving deference to the lower court’s factual findings that were derived from expert testimony discussing the level of skill in the art.
  • Patent Reform: Senator Grassley’s PATENT ACT of 2015 (S.1137) has been placed on the Senate Calendar queue after having been reported out of committee in June.  The bill also includes a number of substantive amendments.
  • ShowerThoughts: Our objective system of judging obviousness almost always gathers more prior art than was actually known to the inventor at the time of the invention.  This means that (for valid patents) the inventor’s actual inventive-step (based upon what the inventor knows) is typically greater than what is required by law – perhaps significantly so.

Obviousness: Despite KSR, Still Tough to Win in Court

Patent, , , ,

Ivera Medical v. Hospira (Fed. Cir. 2015)

On summary judgment, the district court found Ivera’s asserted patent claims invalid as obvious under 35 U.S.C. § 103. On appeal, the Federal Circuit has reversed – finding that Ivera’s submitted expert testimony raised genuine issues of material fact.

Ivera’s patents are directed to a more reliable mechanism for disinfecting connectors (such as an IV port).  The idea is basically a screw-on cap full of disinfectant.  

The patented cap at issue here is an improvement on the original idea found in several prior art references. In particular, Ivera added a vent in the cap “to allow evaporation of the cleaning agent from the inner cavity and to inhibit a buildup of pressure in the cap when the cleaning material is compressed by the site of the medical implement.”

Although the primary prior art reference (Hoang) did not disclose the vent limitations, the district court found – as a matter of law on summary judgment – that a person of skill in the art would have recognized the need for a vent to relieve pressure.  I suspect that the district court was swayed by the fact that the patent is also under final-rejection in an inter partes reexamination based upon the same prior art reference.  On appeal, the Federal Circuit found that the facts were not so clear.

Law of Obviousness:

“A party seeking to invalidate a patent on obviousness grounds must demonstrate by clear and convincing evidence that a skilled artisan would have been motivated to combine the teachings of the prior art references to achieve the claimed invention, and that the skilled artisan would have had a reasonable expectation of success in doing so.” InTouch Techs., Inc. v. VGO Commc’ns, Inc., 751 F.3d 1327 (Fed. Cir. 2014). Determining whether one of ordinary skill in the art would have been motivated to combine the teachings of different references is a flexible inquiry, and the motivation is not required to be found in any particular prior art reference. KSR Int’l Co. v. Teleflex Inc., 550 U.S. 398 (2007).

Here, the evidence before the district court included declarations from Huang (the inventor of the prior art) and others explaining how the Ivera idea was a significant invention because it broke with the conventional wisdom of having a fluid tight seal.  The appellate court saw these submissions as sufficient to raise a genuine dispute of fact that cannot be resolved on summary judgment.

The panel also noted in passing that the examiner during the inter partes review had refused to consider the same declarations because they were filed late in the process — leading to the implication that – if filed earlier – the declarations might have changed the examiner’s viewpoint. The examiner’s reexamination decisions have been appealed to the PTAB and are awaiting judgment.

This case again highlights the power of expert evidence to explain the invention within the context of the prior art.

= = = = =

I should also note Ivera has a separate infringement case going against Hospira for another cap patent. In that case, the PTAB instituted an IPR (brought by another defendant) that case was settled before final judgment.  In a recent determination, the district court ruled on motion-in-limine to exclude evidence of the PTAB’s decision to institute the inter partes review – finding that it has “little probative value” and “would be confusing to the jury and prejudicial.” [OrderInLimine]

 

 

Federal Circuit Backtracks (A bit) on Prior Art Status of Provisional Applications and Gives us a Disturbing Result

Patent,

by Dennis Crouch

Dynamic Drinkware v. National Graphics (Fed. Cir. 2015)

The underlying issue in this IPR-appeal is the effective date of prior art: How do we treat prior art patents and published applications that claim priority to provisional applications?

The patent being reviewed – National’s Patent No. 6,635,196 – was applied for on November 22, 2000 but claims priority to a provisional application filed in June of 2000.  National was also able to show that by March 2000 the inventor had completed the invention and reduced-to-practice (RTP) the claimed lenticular lens insert.

The alleged prior art is U.S. Patent 7,153,555 (“Raymond”) was filed in May 2000 and but claims priority back to a February 2000 provisional application filing.  The Raymond provisional is somewhat different from the later-filed non-provisional and so the question is whether the effective prior-art date stretches back to the provisional filing.

On its own, a provisional patent application does not qualify as “prior art” under 25 USC 102 (old or new) and the tens-of-thousands of provisional applications abandoned each year without any further patenting-action are not prior art. However, the Federal Circuit has indicated that (under pre-AIA 35 USC 102(e)) a later-filed non-provisional application will be given the prior-art date of the provisional filing (once the non-provisional is published or patented).  Giacomini.

The somewhat convoluted 102(e) indicates that a US patent application becomes prior art once it is either published or issues as a patent. And, at that point, the reference is back-dated to the application’s filing date.  Section 119(e) describes how an application having a priority claim back to a provisional patent application “shall have the same effect, as to such invention, as though filed on the date of the provisional application” so long as the provisional application sufficiently discloses the claimed invention under Section 112(a).   Weaving these together in Giacomini, the court ruled that an issued patent will be considered prior art as of its provisional filing date – so long as the provisional provides written description support for the invention claimed in that issued patent. In considering the prior art status of Raymond, the PTAB examined the patent claims and compared them to the provisional disclosure — finding that the provisional did not provide adequate support for the claims.

Anyone who works with prior art knows that this setup is an oddball way to address the situation.  A patent’s disclosure for prior art purposes should not depend upon what was claimed or not claimed but instead should focus on what was disclosed.  My belief is that, once publicly available, all provisional applications should be considered prior art as of their filing dates.

The Federal Circuit merits discussion began by stepping through the process of challenging the prior art’s provenance:

  • First the patent challenger raises the prior art and explains its priority claim (here, done in the IPR petition).  Without further challenge, the patent would be deemed prior art as of its provisional filing date.
  • Then the patentee can raise the argument that the provisional priority claim does not satisfy the Written Description. By satisfying this burden of presentation, the burden shifts back to the challenger.
  • Finally, the patent challenger must prove that the provisional provides proper support.

Thus, once the issue is raised the court will (rebuttably) presume that the provisional does not provide adequate support. “[B]ecause the PTO does not examine priority claims unless necessary, the Board has no basis to presume that a reference patent is necessarily entitled to the filing date of its provisional application.”  In Giacomini, Federal Circuit seemed to have implicitly come out the other way – counting the provisional as prior art without proof of WD satisfaction.  Here, the court distinguished that situation by noting that Giacomini had waived that argument by failing to challenge the written description support.

As noted above, the rule here is that the prior art date of a patent (or patent application) stretches back to the provisional filing date if the provisional provides written description (and enabling?) support of the claims of that patent (or application).  Confusing that rule, the patent challenger here focused on the particular disclosure-of-concern for its invalidity argument and showed that the disclosure was found in the provisional.  Unfortunately, according to this odd rule, the challenger’s explanation is insufficient.

Nowhere, however, does Dynamic demonstrate support in the Raymond provisional application for the claims of the Raymond patent. That was Dynamic’s burden. A provisional application’s effectiveness as prior art depends on its written description support for the claims of the issued patent of which it was a provisional. Dynamic did not make that showing.

With the provisional filing date knocked-out for the Raymond prior art, the unpatentability case crumbled and thus, the Federal Circuit here confirmed patentability of the challenged claims.

= = = = =

  • The result here is silly – and somewhat disturbing – that under the first-to-invent rule the second inventor gets a patent.  Raymond came up with idea at issue first and disclosed it in a provisional patent application that eventually resulted in an issued patent.  But, since Raymond’s non-provisional application included additional subject matter, the provisional disclosure no longer counts as effective prior art.
  • The AIA rewrote Section 102 and re-codified the old 102(e) into 102(a)(2) and 102(d).  The new rule is also a bit unclear — indicating that the disclosure found in a patent or published application will be given a prior art date of a priority filing document if the patent or application is entitled to so claim priority and the priority filing “describes the subject matter” being relied upon as prior art.
  • One element that is unclear from this is whether being “entitled” to claim priority/benefit requires 112(a) support of the claims. The court explains in a footnote: “Because we refer to the pre-AIA version of § 102, we do not interpret here the AIA’s impact on Wertheim in newly designated § 102(d).”
  • Post-AIA: Of course, regardless of the Wertheim issue above,  the outcome of this case flips post-AIA because the prior art cannot be avoided simply by showing an earlier date of invention or reduction to practice. Thus, the patentee would lose here because its priority filing date is subsequent to the prior art’s effective date.
  • My take is that, once the provisional becomes public that the law should regard a provisional application’s prior-art status as of its filing date.  The PTO should also be creating a public database of provisional application filings that can be searched and relied upon as a prior art tool.  For American companies, the failure to make this change means that many of their provisional application disclosures often will not prevent third-parties (half of which are non-US companies) from obtaining patents on identical innovations.

 

Hughes on Obviousness: The Problem Motivates the Solution

Patent, , ,

by Dennis Crouch

Dome Patent v. Michelle Lee in her capacity as Director of the USPTO (Fed. Cir. 2015)

Patent No 4,306,042 issued in 1981 and expired in 1998, but is still being litigated.  The patent covers a method of making oxygen-permeable material used for contact lenses. Back in December 1997, the patent owner (Dome) sued a set of defendants for infringement.  That lawsuit has been stayed since 1999 pending resolution of an ex parte reexamination requested by one of the defendants. In a 2006 final ruling, the USPTO confirmed patentability of claims 2-4, but cancelled claim 1 as obvious.  Dome then filed a civil action in DC challenging the PTO ruling. That case – filed in 2007 – concluded in July 2014 with the district court’s de novo determination that claim 1 was obvious over a combination of three prior art patents.  On appeal here, the Federal Circuit has affirmed that ruling – finding that “district court did not commit reversible error in its determination that the claimed subject matter would have been obvious to a person of ordinary skill during the relevant time period.”  Judge Hughes penned the opinion that was joined by the two other panel members, Judges Reyna and Schall.

In typical close cases, each of the major elements of a claimed invention are found in a collection of prior art — leaving the question of whether the combination as claimed would have been obvious to a person of ordinary skill in the art.   An important intermediary factual question is whether there is any evidence showing why a skilled artisan might or might not be inclined to combine the references.   In the Supreme Court’s KSR decision, the Supreme Court indicated that the motivation question involves an ‘expansive and flexible’ analysis and can consider the common sense of the skilled artisan.  Citing KSR, Judge Hughes writes:

If all elements of a claim are found in the prior art, as is the case here, the factfinder must further consider the factual questions of whether a person of ordinary skill in the art would be motivated to combine those references, and whether in making that combination, a person of ordinary skill would have had a reasonable expectation of success.

Evidence of a motivation to combine prior art references may flow from “the nature of the problem to be solved.”  Here, the district court found that the motivation came from the prior art evidence indicating a search for high oxygen permeability in contact-lens materials. That finding was then affirmed on appeal: “This understanding would have motivated a person of ordinary skill to combine the Tris monomer disclosed in Gaylord with the Tris-type cross-linking agent disclosed in Tanaka to increase the oxygen permeability of a contact lens.”  There was also some amount of teaching away (the non-Tris prior art outlined the problems of using Tris), but the appellate court affirmed the obviousness finding.

It was important for the appeal here that the ‘motivation’ found by the district court was seen as an issue of fact — a subset of some unnamed Graham factor — rather than a question of law.  Thus, although the appellate court may have disagreed with some aspects of the original decision, the district court’s findings were not “clearly erroneous.”

 

Review of Civil Action: As I mentioned above, the case began as a reexamination and, after losing, the patentee filed a civil action in district court who reviewed the case de novo.  Under i4i, a court patent may only invalidate a patent after being presented with clear and convincing evidence proving that result. See also 35 U.S.C. 282(a) (“In General. – A patent shall be presumed valid.”).  On the other hand, the USPTO operating in reexamination mode only requires a preponderance of the evidence to render the claims null and void.  These competing standards came to a head in the civil action challenging the reexamination finding.  On appeal here, the Federal Circuit affirmed that in this situation only a preponderance is necessary. 

“‘[A reexamination] is in essence a suit to set aside the final decision of the board.’ Fregeau v. Mossinghoff, 776 F.2d 1034 (Fed. Cir. 1985).

[I]f the Patent Office decides after an ex parte reexamination that a preponderance of the evidence establishes the claimed subject matter is not patentable, § 145 authorizes the district court to review whether that final decision is correct. The § 145 action in such a case does not concern the different question of whether, as part of a defense to an infringement action, clear and convincing evidence establishes that an issued and asserted patent should be held invalid.

Somewhat oddly, the court ruled that Section 282 does not apply here because that section only relates to defenses in patent infringement litigation. “The § 145 action before the district court did not involve a defense to a charge of infringement of an issued patent. Section 282 therefore does not apply in this instance.

Is it Appropriate Prosecute Patents for Direct Competitors on Inventions on Similar Technology without Disclosure and Waivers?

Ethics, Patent,

by Dennis Crouch

[Prof  Hricik may have more to say on this conflict-of-interest case, but I believe it is an interesting one and important for discussion.]

Maling v. Finnegan, Henderson, Farabow, Garrett & Dunner, LLP, SJC-11800.

A patent law malpractice case is pending before the Massachusetts Supreme Court that has major implications for patent prosecution practice.  Many patent patent attorneys and law firms develop technology-specific specialties as a marketing strategy.  The professional responsibility problem arises when the strategy is successful enough to attract multiple clients with substantial technological crossover.  Of course, this likelihood is intensified in larger law firms where more lawyers means more clients and more (potentially overlapping) invention disclosures.

Back in 2003, Maling hired Finnegan Henderson to prosecute a set of patent applications relating to screwless eyeglass hinges.  According to the allegations, it turns out that Finnegan was also representing a competitor (Masunaga) with a similar invention in the same screwless eyeglass hinge field.  Finnegan says that these were “attorneys in different offices.”  Neither client was informed or gave consent to this alleged conflict of interest and Maling argues that Finnegan’s “independent professional judgement” was impaired by the conflicting representation in violation of the Massachusetts Rules of Professional Conduct.  Among the various harms Maling alleges a delay in filing his application and wasted efforts on technology not sufficiently protected by patent.

ScreenShot163

The state trial court dismissed on failure-to-state-a-claim for the civil action with the court finding no direct adversity of interests and no nexus between the conflicting representation and the claimed harm.  The Supreme Judicial Court of Massachusetts (MA’s highest court), is now focused on the question of whether an actionable conflict arises when a single law firm files and prosecutes patent applications for similar inventions on behalf of two existing clients.

Massachusetts law:

  1. 1.7(a): “A lawyer shall not represent a client if the representation of that client will be directly adverse to another client.”
  2. 1.7(b) “[A] lawyer shall not represent a client if the representation of that client may be materially limited by the lawyer’s responsibilities to another client or to a third person, or by the lawyer’s own interests.”

 

Finnegan here argues that the allegations of filing and prosecuting a competitor’s “similar” invention is “insufficient” to even suggest a conflict of interest.   Rather, Finnegan argues an ethical conflict only arises if one of the client’s inventions are blocked by patent disclosures made by another client.

The distinction between “similar” and “novel and non-obvious” is well-illustrated by the Maling and Masunaga inventions described in the patents at issue in this case. Both inventions attempt to solve the problem of how to construct an eyeglass frame without utilizing screws. As the PTO concluded, however, each patent claims a novel solution to this problem. . . .
Here, there is no allegation that Maling and Masunaga ever were “directly adverse” to one another, in patent proceedings or otherwise. Maling cites to no case law, nor is Finnegan aware of any, in which a court has held that parties are directly adverse to one another simply because each seeks to patent technology in the same field. Such a standard, moreover, would be inconsistent with the statutory-framework discussed above, which recognizes that multiple patents may be granted in the same field so long as each claims a “new and useful” invention, or a “new and useful improvement thereof.”

Finnegan also explains that conflicting-out large law firms would make it difficult for inventors to find representation — quoting Hricik as saying that “a rule that limits a firm to representing only one client in a particular technical field ‘imposes unnecessary costs on lawyers, clients, and the system.'” Hricik & Meyer, Patent Ethics: Prosecution (2015).

In his brief, the plaintiff-appellant argues that its allegations of violation and harm are sufficient to overcome a motion to dismiss. Their brief does not detail an explanation of how similarity should be treated.

In an amicus filing, a group of major law firms, including Knobbe Martins; Honigman Miller; Nixon Vanderhye, and others arguing that direct conflict issues only arise if the inventions are so close as to lead to an interference (pre-AIA).

The amicus brief suggests that the rules may be different post-AIA because the new law sets up more of a race to the PTO (first-to-file vs first-to-invent).  This, of course, is disingenuous as the pre-AIA system included a large number of adverse impacts caused by delays in filing.

One interesting issue that arises here is that Maling had Finnegan conduct a pre-filing prior art search in 2003.  At that point, the Masunaga patent was on file, but not yet published and so did not turn-up in the search results – even though Finnegan attorneys knew of the reference and knew that it was prior art.

Michael McCabe has more of a discussion of the case on his IP Ethics and Insights Blog.

= = = = =

Most civil-action malpractice claims fail because of the difficulties of proving harm. At the USPTO and State Bars, mere violation – even without client harm – is actionable as a violation of the rules of professional responsibility. It will be interesting to see how the USPTO treats this case.

= = = = =

Read the Briefs:

 

Dickstein Shapiro Dodges Malpractice Suit by Showing Long-Ago Issued Claims Were to Ineligible Subject Matter

District Court, Ethics, Patent, Statutory Construction

By David Hricik

This one will make your head spin, especially the statutory construction part.  The case is Encylopaedia Britannica, Inc. v. Dickstein Shapiro LLP (D. D.C. Aug. 26, 2015).

The Dickstein Shapiro firm was retained by Encyclopaedia Britannica, Inc. (EB) in 1993 to file a patent application. The patent issued, and in 2006 EB sued several companies for infringing it. The patent was held invalid due to “an unnoticed defect” in the 1993 application.  The basis for invalidity was not 101, however.

EB then sued the law firm for malpractice in prosecuting the 1993 application.  EB contended that, but for the firm’s negligence, it would have made a lot of money in the infringement suit.

After the malpractice suit was filed, Alice was decided.  The firm then argued that, as a result, the claims were ineligible and so any malpractice by it in 1993 could not have been the but-for cause of harm.  The claims would have been “invalid” under 101 even had it not botched the 1993 application, and so there was no harm caused by any error it made.

To put this in context:  Because of a 2014 Supreme Court decision, the 2006 case would have been lost anyway because, in 1993, the claims were not eligible for patenting.

And the argument worked.  The district court granted a motion to dismiss for failure to state a claim, finding the subject matter ineligible on the face of the patent.

I’ll leave the merits of that to others.

What is interesting is the court’s approach to retroactive application of Alice.  The issue was whether in the 2006 case, even had the firm’s alleged malpractice not caused the invalidity judgment, the claims were “invalid” under 101 then.  The district court held that Alice did not change the law, but merely stated what it had always been.    Specifically, the district court stated:

When the Supreme Court construes a federal statute… that construction is an authoritative statement of what the statute has always meant that applies retroactively.  Alice represents the Supreme Court’s definitive statement on what 101 means — and always meant.  Because the underlying case is governed by 101, it is appropriate for this Court to apply the Supreme Court’s construction of 101 as set forth in Alice.

(Citations omitted).

For this and other reasons, the court reasoned that “the only rule that makes sense in this context is to apply the objectively correct legal standard as enunciated by the Supreme Court in Alice, rather than an incorrect legal standard that the [district court in the 2006 infringement case] may have applied prior to July 2015 [when the court was deciding the motion.]”  The court then applied Alice and found the claims “invalid” under 101.

There’s a lot to unpack here.

First, the retroactivity of Alice bodes ill for lawyers who obtained patents now being held “invalid” under 101.  If the law “always” was this way, why did you advise your clients to spend so much money on a patent so clearly invalid that a judge could decide it by looking at it? But keep reading, because you and I know Alice and the rest changed the law.  (Indeed, the USPTO changed its examination procedures to adjust to it!)

Second, there could be enormous consequences if Alice changed the Court’s prior interpretations of 101.

While as a matter of statutory construction the retroactivity principle relied upon by the district court is correct, retroactivity does not ordinarily apply when an interpretation is changed.  (This perhaps explains why the Supreme Court is careful to avoid saying it is changing an interpretation, because changes to interpretations of a statute are prospective, only, as a general rule.  In that regard, think about Therasense for a moment.) So, if Alice changed the law, then the district court was likely wrong to apply it retroactively.

More broadly, however, if Alice (and the rest) changed the meaning of 101, then it means many patents now being held “invalid” should not be judged under Alice.

I’ve been waiting for someone to make the retroactivity argument (as with Therasense, which clearly changed the CAFC’s interpretation of “unenforceability”).  It would be fun to try to see someone use Alice and apply it to the Supreme Court line of cases and make them all fall in a line.

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Dow v. Nova: “Nautilus changed the law of indefiniteness”

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By Jason Rantanen

The Dow Chemical Company v. Nova Chemicals Corporation (Fed. Cir. 2015) Download Opinion
Panel: Prost, Dyk (author), Wallach

Earlier this year in the opinion on remand in Biosig v. Nautilus, Judge Wallach rejected the argument that the Supreme Court’s opinion on the indefiniteness doctrine  “articulated a new, stricter standard.”  783 F.3d 1374, 1379 (Fed. Cir. 2015).  Instead, the Court  “modified the standard by which lower courts examine allegedly ambiguous claims; we may now steer by the bright star of ‘reasonable certainty,’ rather than the unreliable compass of ‘insoluble ambiguity.’”  Id. The thrust of Judge Wallach’s opinion was that the problem the Supreme Court saw with the Federal Circuit’s previous indefiniteness doctrine was not with the standard that the Federal Circuit was actually applying; it was that the words the Federal Circuit had been using could lead district courts astray.

Dow v. Nova presents a dramatic contrast, one that (in my view) goes a long way towards righting the boat.   Here, Judge Dyk reiterates in the strongest words since Nautilus that the Court’s opinion clearly changed the standard for indefiniteness.  There is no hint of mere Supreme clarification in this opinion, as the outcome turns entirely on whether the pre- or post-Nautilus standard applies.  Under the old standard, the result at the Federal Circuit was that the claims were definite; under the new standard, the result was that they are indefinite.  And given the purely nondeferential review applied in both cases, this pair of cases provides possibly one of the neatest examples of how a legal standard can be outcome determinative.

Background: In 2010, Dow obtained an infringement judgment against NOVA, with a jury rejecting NOVA’s indefiniteness argument.  The Federal Circuit affirmed in 2012, holding that the patents were not indefinite under its pre-Nautilus precedent.  On remand, the district court held a bench trial on supplemental damages for the period after the judgment through expiration of the patents (October 2011). While NOVA’s appeal was pending, the Supreme Court issued Nautilus.  NOVA argued that this intervening decision required the supplemental damages award to be vacated because the patents are invalid for indefiniteness.

Bars to re-litigation of indefiniteness: Nova’s challenge faced a substantial procedural hurdle, however.  Because it had litigated, and lost, its indefiniteness challenge, it would ordinarily be barred from re-litigating that issue under the doctrine of issue preclusion or law of the case.  (Claim preclusion does not apply under Federal Circuit precedent because a claim based on continuing conduct constitutes a separate claim.)     “[T]he doctrine [of law of the case] posits that when a court decides upon a rule of law, that decision should continue to govern the same issues in subsequent stages in the same case.”….Issue preclusion “bars ‘successive litigation of an issue of fact or law already litigated and resolved in a valid court determination essential to the prior judgment.’” Slip Op. at 11 (citations omitted).  However, “when governing law is changed by a later authoritative decision,” these two doctrines do not apply.  Id. at 12.

Nautilus and change in law: There are three requirements for the change in law exception to apply: (1) “the governing law must have been altered;” (2) “the decision sought to be reopened must have applied the old law;” and (3) “the change in law must compel a different result under the facts of the particular case.”  Slip Op. at 14-15.  Here, the court held, those requirements were met by the Nautilus opinion.  “First, there can be no serious question that Nautilus changed the law of indefiniteness. This was indeed the very purpose of the Nautilus decision.”  Slip Op. at 16.  Second, the earlier decision in Dow applied the old law:

Dow argues that our opinion in the previous appeal was not inconsistent with
Nautilus and that we did not apply the “amenable to construction” or “insolubly ambiguous standard.” But the fact that we did not include that particular language does not mean that we were not applying the prevailing legal standard. We cited Exxon, see Dow, 458 F. App’x at 917, which Nautilus specifically cited as exemplary of the rejected Federal Circuit standard…..We also explained that “the test for indefiniteness is not whether the scope of the patent claims is easy to
determine, but whether ‘the meaning of the claim is discernible, even though the task may be formidable and the conclusion may be one over which reasonable persons will disagree.’” Id. at 920 (quoting Exxon, 265 F.3d at 1375). This language corresponds exactly to the “amenable to construction” or “insolubly ambiguous” standard rejected in Nautilus.

Slip Op. at 17-18.

Third, the outcome was different under the Nautilus standard than under the pre-Nautilus caselaw.  Here, the issue was a measurement problem: which methodology should be applied to determine the “slope of strain hardening.”  “Three methods existed to determine the maximum slope, each providing, as Dow admits, “simply a different way of determining the maximum slope.”  Slip Op. at 21 (emphasis added).   None of these methods were taught in the patent, nor did it provide “any guidance as to which method should be used or even whether the possible universe of methods is limited to these four methods.”  Id. at 23.  And Dow’s expert used a fourth method, which he used after applying “only his judgment of what a person of ordinary skill would believe.”  He did not testify that one of ordinary skill in the art would choose his method over the three known methods.

Under the previous indefiniteness standard, the court observed, that Dr. Hsaio had developed a method for measuring maximum slope was sufficient.  But under the Nautilus standard, “this is no longer sufficient:

The question is whether the existence of multiple methods leading to different results without guidance in the patent or the prosecution history as to which method should be used renders the claims indefinite. Before Nautilus, a claim was not indefinite if someone skilled in the art could arrive at a method and practice that method. Exxon, 265 F.3d at 1379. In our previous opinion, relying on this standard, we held that the claims were not indefinite, holding that “the mere fact that the slope may be measured in more than one way does not make the claims of the patent invalid.” Dow, 458 F. App’x at 920. This was so because Dow’s expert Dr. Hsiao, a person skilled in the art, had developed a method for measuring maximum slope. See id. at 919–20.

Under Nautilus this is no longer sufficient.  “[A] patent is invalid for indefiniteness if its claims, read in light of the specification delineating the patent, and the prosecution history, fail to inform, with reasonable certainty, those skilled in the art about the scope of the invention.” 134 S. Ct. at 2124; see also id. at 2129 (“[W]e read § 112, ¶ 2 to require that a patent’s claims, viewed in light of the specification and prosecution history, inform those skilled in the art about the scope of the invention with reasonable certainty.”). Here the required guidance is not provided by the claims, specification, and prosecution history.

Slip Op. at 23-24. That an expert chooses to use a particular measurement technique is insufficient for meeting the requirements of indefiniteness.  “As we held in Interval Licensing, a claim term is indefinite if it “leave[s] the skilled artisan to consult the ‘unpredictable vagaries of any one person’s opinion.’”  Slip Op. at 25.  Perhaps this could have been satisfied by expert testimony as to which methodology a person of ordinary skill in the art would have used, but that will be a question for another day.

Some more thoughts on the opinion:

  • The opinion takes pains to distinguish Biosig v. Nautilus.  In Biosig, the question was how one of ordinary skill in the art would determine what “spaced relationship” meant.  There, “we held that the prosecution history, the language of the claims, and the knowledge of one skilled in the art demonstrated that “a skilled artisan would understand the inherent parameters of the invention as provided in the intrinsic evidence” and that the claim term at issue “informs a skilled artisan with reasonable certainty of the scope of the claim.”  Dow at 25, n. 10.   One way to think about Nautilus is that it’s really about figuring out the meaning of words in the claim, whereas this case and Teva are really about how to determine whether those words, with their meaning understood, are met.
  • The weird tension about indefiniteness being a question of law but involving factual determinations remains.  Here, the issue was originally tried to a jury (probably erroneously as the Federal Circuit implied in the original Dow opinion), and the Federal Circuit’s analysis here focuses less on interpreting the text of the claims and more on identifying which measurement methodology a PHOSITA would have picked (which sounds like a factual question to me).  Regardless of this tension, I’d expect that in future cases knowledgeable counsel will make sure that there’s good support for the particular measurement methodology used by their experts, with the experts also providing support for the proposition that their methodology is the one that a PHOSITA would have used.
  • Another way to think about this case is in tandem with Wiliamson v. Citrix, in which the Federal Circuit relaxed the difficulty of invoking § 112, para. 6 when the words “means” or “step” aren’t used in the claim.  The effect of that decision was to make it riskier to use functional language in a claim when no corresponding structure is disclosed in the specification.  Dow moves in a similar direction: when no measurement methodology is described or suggested in the specification, functional limitations such as the one here may render the claim indefinite, at least when a PHOSITA would not know which of several possible methods to use.
  • Lisa Larrimore Ouellette discusses the decision on the Written Description blog as well.

Sequenom’s Patent

Patent

Sequenom’s patent claim in question:

1. A method for detecting a paternally inherited nucleic acid of fetal origin performed on a maternal serum or plasma sample from a pregnant female, which method comprises:

amplifying a paternally inherited nucleic acid from the serum or plasma sample and

detecting the presence of a paternally inherited nucleic acid of fetal origin in the sample.

The big idea here was to recognize that fetal DNA might be floating around in the mother’s blood and that the fetal DNA could be selectively amplified by focusing on the paternally inherited portion of its DNA (rather than the maternally inherited).

The claim itself has two simple steps: (1) amplifying paternally inherited DNA from a plasma sample from a pregnant female and then (2) detecting the presence of the DNA. The technology for amplifying and detecting was already well known at the time of the invention here.  Further, these two steps are the ones always almost used to detect particular DNA.

The invention here solves a very practical problem accessing fetal DNA without creating a major health risk for the unborn child.  Of course, the problems solved in Mayo and Alice were also very practical and that fact did not change the result.

I am hard-pressed to see how this claim overcomes Mayo/Alice.  The “big ideas” expressed in the invention are seeming laws of nature and the idea of amplifying paternal DNA just relies upon a natural correlation in the same way that the inventors relied upon the drug metabolite in Mayo.  The actual implementation of these ideas appear preemptive of the ideas and rely only upon well known and expected implementation steps.

To me, the push for en banc review is – at its heart – either a showpiece for the Supreme Court or a request to undermine the Supreme Court’s precedent.

Drawing Severable Lines in Claim Construction

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Inline Platics v. EasyPak (Fed. Cir. 2015)

In this claim construction case, the Federal Circuit has reversed in favor of the patentee – finding that the district court improperly limited the claims to a specific embodiment. Here, the patents at issue are directed toward tamper-resistant food packaging. The idea behind the invention is easy to see from the drawings. A plastic lid connected to the plastic base by a perforated strip. The claims identify this perforated portion as a “frangible section” and the district court interpreted that language to mean “a removable tear strip, delimited by at least two severable score lines.” The result of that construction was that the accused EasyPak containers didn’t infringe.

On appeal, the Federal Circuit held that the lower court improperly narrowed the construction. The district court had offered the prosecution history as a reason for limiting the definition to the particular embodiment. However, the appellate court (reviewing this intrinsic evidence de novo) found the district court’s conclusions of the file wrapper “inaccurate” and noted that the specification included an embodiment with a single score line.

Judge Newman offered the Federal Circuit’s opinion that leads me to the conclusion that nothing-much has changed in the area of claim construction following Teva v. Sandoz, 135 S.Ct. 831 (2015).

In its pending petition for writ of certiorari in MobileMedia Ideas v. Apple, MobleMedia asks a number of follow-on questions:

1. Did the … Federal Circuit violate due process by summarily reversing a patent infringement judgment based upon a new and unprompted claim construction without remand to the district court in denial of Petitioner’s right to present evidence at trial and fully and fairly litigate the matter of infringement for the first time based on the new construction?

2. What standard should apply to denying remand for trial on a new claim construction used by the Federal Circuit to summarily reverse a patent infringement judgment?

3. Has the Federal Circuit effectively rendered Markman hearings and rulings meaningless by creating an unworkable, burdensome and judicially inefficient precedent that will require plaintiffs to present evidence at trial of every imaginable claim construction?

(Pending Petition Case No. 15-206, mobilemediapetition).

Guest Post by Profs. Lefstin & Menell on Sequenom v. Ariosa

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In a parallel post, Dennis summarized the numerous amicus briefs filed in support of Sequenom’s petition for rehearing en banc.  Below, professors Jeffrey Lefstin (Hastings) and Peter Menell (Berkeley) discuss the core issues raised in their amicus brief.

Don’t Throw Out Fetal-Diagnostic Innovation with the Bathwater:
Why Ariosa v. Sequenom Is an Ideal Vehicle for Constructing a Sound Patent-Eligibility Framework

By Jeffrey A. Lefstin and Peter S. Menell
Over the past five years, the U.S. Supreme Court has reinvigorated patentable subject-matter limitations, issuing four significant decisions after nearly three decades of dormancy.  These decisions reflect justifiable concerns about the patenting of abstract business methods and laws of nature. Just as importantly, they reveal internal inconsistencies and confusion about the scope of patentable subject matter and tension with the centuries-old fabric of patent-eligibility jurisprudence. As Justice Breyer remarked at the oral argument in Alice Corp. v. CLS Bank Int’l (2014), the Mayo (2012) decision did no more than “sketch an outer shell of the content” of the patent-eligibility test, leaving much of the substance to be developed by the patent bar in conjunction with the Federal Circuit.

Two of the Supreme Court’s recent patent-eligibility decisions (Bilski and Alice) involve non-technological business methods.  Mayo glosses over several key issues, including how to reconcile prior discordant decisions (Flook and Diehr), and whether the requirement of “inventive concept” demands an unconventional application, or merely more than the generic instruction to “apply the law.” And Myriad departs from Mayo in a critical respect in that it authorizes patentability for a conventional transformation of a natural compound.

Unfortunately, the Federal Circuit’s panel decision in Ariosa v. Sequenom elides the critical questions.  In view of Congress’s reluctance to weigh in on the scope of patentable subject matter and the Supreme Court’s signals to the patent bar and the Federal Circuit to bring coherence to these rough outlines, Ariosa v. Sequenom marks a critical juncture in the development of a modern patent-eligibility framework.  Failure to vet these issues risks undermining the patent system’s role in promoting biomedical research.  Beyond Supreme Court review, which is never guaranteed (consider the havoc wreaked by the Court’s passing on State Street Bank), or corrective legislation (which is even more speculative), en banc review by the Federal Circuit presents the last clear chance to avert potentially dire consequences.

Our amicus brief urges the Federal Circuit to grant en banc review in Ariosa v. Sequenom to ventilate the critical issues left unanswered by the Supreme Court’s patent-eligibility decisions.  Although some language in Mayo could be interpreted to set forth unconventional or inventive application as a possible test for patent-eligibility, Mayo suggests two other possibilities for an “inventive concept”: non-preemptive application; and non-generic application – that is, more than a statement of a natural law coupled with an instruction to apply it.  While the panel was correct to perceive that Mayo describes preemption as the underlying justification for the patent-eligibility doctrine, not the operative test, we believe that the panel was incorrect to conclude that Mayo dictates unconventional or inventive application.

Our brief further shows that the Ariosa panel decision conflicts with several strands of prior Supreme Court decisions.  The panel decision jeopardizes valuable innovation in diagnostic research and other biomedical fields as unintended fallout of the Supreme Court’s justifiable desire to discard vague and non-technological business method patents.  The primary responsibility for developing patent-eligibility doctrine now rests with the Federal Circuit and this case presents an ideal vehicle for explicating sensible jurisprudential boundaries.

Jeffrey A. Lefstin is Professor of Law at the University of California Hastings College of Law.  Peter S. Menell is Koret Professor of Law and a Director of the Berkeley Center for Law & Technology at the University of California at Berkeley School of Law.  Their amicus brief in support of en banc review in Ariosa v. Sequenom is available at: http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2652452

In Brief: Amici Provide Reasons to Reconsider Ariosa v. Sequenom

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[This post includes links to the 12 amicus briefs supporting Sequenom’s petition for en banc rehearing in this Subject Matter Eligibility Case.]

by Dennis Crouch

Ariosa Diagnostics, Inc v. Sequenom, Inc. (Fed. Cir. 2015) (en banc petition 2015)

This subject matter eligibility case revolves around an important scientific discovery that a pregnant woman’s blood plasma/serum contains fetal DNA and that the fetal DNA can teased-out by amplifying paternally-inherited sequences from the cell-free fractions of the mother’s blood. Sequenom’s patents focus on methods of prenatal genetic diagnoses that rely upon these discovery by the inventors. U.S. Patent No. 6,258,540.

Invalid: Applying Mayo v. Prometheous, the Federal Circuit held all the claims in-suit to be ineligible. In step one of the Mayo inquiry, the court found that the claims were all directed to a natural phenomenon: the existence of paternally-inherited cell-free fetal DNA (cffDNA) in the maternal bloodstream. In step two, the search for an ‘inventive concept,’ the court found that the practical implementation of the natural phenomenon was insufficient because it merely involved well known methods of amplifying DNA.  (CitingFlook).  Without an inventive concept beyond the excluded subject matter – the claims were left ineligible for patent protection.

In his usual understated approach, Professor Chris Holman identified the Federal Circuit decision “not good news for innovation in the life sciences.”  The USPTO has also seemingly delayed providing examiner’s with guidance on how to implement Ariosa during examination.

En Banc Rehearing Petition: The patentee has now put forward a strong move for rehearing en banc  with a well drafted petition and support from a host of amici. Aptly describing the core issue, Sequenom’s counsel Tom Goldstein explains:

[Under the Federal Circuit’s rule] the person who first discovers a natural phenomenon can never obtain a patent on any practical application of that new knowledge, however surprising or revolutionary the results, unless the steps she teaches to use it are independently novel. . . . that cannot be correct.

Read the Ariosa.Petition.  The petitioner’s main argument here is with the Supreme Court’s broad language used in Mayo that also revitalized Flook.  Of course, those cases conflict with other Supreme historic precedent. In the coming months, the Federal Circuit will decide this en banc request, but the case is very much being set-up for Supreme Court review.

The 12 amicus briefs filed in support of the petition are strong and well written.

My former boss Kevin Noonan is counsel of record for a group of 23 law professors, including Adam Mossoff, Dan Burk, Tim Holbrook, and Richard Epstein. The brief makes two main arguments: (1) the genetic diagnostic tests developed and commercialized here are the type “historically unforeseen invention” that the patent system is designed to promote; and (2) the panel’s approach here of requiring novelty beyond straightforward application of excluded natural phenomenon “would call into question nineteenth century patented innovation the Supreme Court deemed valid.”Read Ariosa.lawprof.  The sentiment of the Law Professor Brief is consistent with the brief filed by Matthew Dowd on behalf of JYANT Tech, explaining that “in Diamond v. Diehr … the [Supreme] Court explained that “a new combination of steps in a process may be patentable even though all the constituents of the combination were well known and in common use before the combination was made.” Read Ariosa.JYANT

As we will discuss in a parallel post, the brief of Professors Lefstin and Menell provide their reading of recent Supreme Court cases of Mayo and Alice — arguing that (1) a close reading shows that inventive application of a law of nature is not required but instead a non-preemptive or non-generic application; and (2) the Flook-type claim dissection is prohibited. Read Ariosa.Leftsin. This analyze-it-as-a-whole sentiment was repeated by the IPO Brief field by Tiege Sheehan as well as the brief from Amarantus filed by Gideon Schor. Read  Ariosa.IPO and Ariosa.Amarantus.

My Fellow Missouri Professor Chris Holman filed a brief on behalf of the major industry organizations BIO and PhRMA making the credible argument that all this is a very big deal in the diagnostic space and that the resulting uncertainty is having a negative impact on research. Read Ariosa.BIO.

Preemption: When the Supreme Court explained its two two-step approach in Mayo andAlice, it noted the purpose was to avoid preemption of any excluded subject matter — that is, to ensure that no single entity could claim exclusive sovereignty over an abstract idea, law of nature, or natural phenomenon.  Rather, those basic fundamentals of society should not be subject to private claims of right.  Although the purpose behind the test is preventing this preemption, the test itself seemingly does not ask whether preemption has occurred. In its brief, the NYIPLA argues that this fundamental question of preemption must be asked and the Mayo/Alice framework does not authorize a court to ignore that inquiry.READ Ariosa.IPLA.  This focus on preemption is repeated by WARF’s brief filed by Dan Bagatell — writing that “the critical question is whether a patent impermissibly claims and prevents others from using a natural phenomenon, law of nature, or abstract idea itself, or instead permissibly claims a practical application of one of those things.”Read Ariosa.WARF.

Myriad‘s counsel Benjamin Jackson filed a brief on behalf of the industry organization21st Century Medicine that challenges the “gist” method of determining whether a claim encompasses excluded subject matter and suggests that the claim here is simply a technological improvement over the prior art.

Sequenom’s patent teaches it was known in the art that fetal cells can pass into the mother’s blood. Diagnostic techniques had been devised to isolate these cells and analyze fetal DNA extracted from them, but these techniques were expensive and time consuming. The phrase “cell-free fetal DNA” was therefore not an attempt to claim a natural phenomenon but instead a key claim limitation to distinguish over the art. Fifteen years ago, back when patent claiming and examination focused on prior art rather than ill-defined “natural phenomena,” Sequenom appropriately emphasized that its methods used cell-free fetal DNA rather than the cell-derived fetal DNA known in the art.

Thus, the claimed invention is a significant technical improvement in the laboratory process for prenatal diagnosis, allowing laboratories to eliminate the costly and labor-intensive step of isolating fetal cells and then fetal DNA. Such an inventive improvement to the technical performance of an existing technological process is precisely what patents are for.

Read Ariosa.21st. The Novartis brief, filed by its in house counsel Corey Salsberg, makes the important point eligibility has become a tougher test that patentability (nonobviousness). Read Ariosa.Novartis.

Taking a more international approach,Paul Cole and Donald Zuhn teamed-up to file a brief indicating, inter alia, that the panel’s approach in Ariosa creates a potential TRIPs Violation. “This case is an example of an internationally discordant, not harmonious, result, contrary to the eligibility requirements of TRIPS Article 27.”  Read Ariosa.COLE. Similarly, the Bioindustry Association (BIA) also argues that the panel’s approach here means that U.S. eligibility is substantially narrower than that of our global trading partners. Read Ariosa.BIA.

The Federal Circuit may take several weeks to decide this en banc petition. This case is a hot potato and the court’s likely reason for ducking the case would be to avoid being scalded.

 

Citing References – An Alternative Look

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A lot has been said for the increased number of references being submitted to patent examiners. It is true that the average number of references submitted per application continues to skyrocket and for patents issued in 2015 that average number is 40 references. However, the average is skewed by a relatively small number of applications with an unusually large number of references cited.

If we look at the median case — the number of references remains reasonable. The chart below shows the median number of references submitted by patentees – grouped according to patent issue year. 1 out of every 6 recently issued patents included no prior art submissions by the patentee.

ReferencesCited3

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PTO Proposed Pilot Program on IPR Initiation

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Inter Partes Review (IPR) Trials have become an effective tool for cancelling invalid patent claims that lack novelty or fail the nonobviousness test. The IPR process has two main stages: Institution and Trial. At the institution stage, the Patent Trial and Appeal Board (PTAB) must determine whether the third-party challenge is sufficient enough to warrant a full trial on the merits of the challenge. The institution test outlined by the statute is a “reasonable likelihood that the petitioner would prevail with respect to at least 1 of the claims challenged in the petition.”

One design choice for IPRs is whether the judges who decide to institute the IPR should be kept-on to decide the ultimate merits of the trial. In its initial design of the process, the PTO determined that keeping the same judges provided for both efficiency and internal consistency. Thus, under the current rules, the same three APJs who decide whether to institute a trial also conduct the trial and ultimately decide the trial outcome.

A number of losing-patentees have argued that the process creates an improper bias or implicit presumption against the patentee during the trial stage. The basic idea is that a judge who sides with the challenger at the institution stage will be mentally locked-in to supporting the petitioner’s case and at trial will improperly give the presumption to the challenger rather.

The USPTO is now requesting comments on a proposed pilot program that would address these concerns. In particular, the PTO’s proposal is that the institution decision would be made by a single judge. If that judge decides to institute then the trial would be held before that single judge along with two additional APJs added to the panel who were not previously involved in the decision to institute.

The statute requires the two-step process and also requires a set of three APJs to decide the trial, but gives the USPTO authority to determine additional process elements. There are a host of alternative designs and structures available, such as an entirely new panel.

The PTO’s proposal benefits the PTO by requiring only one judge at the institution stage – likely allowing it to handle more cases. Right now, the PTO is looking for comments on the proposal. If those seem favorable, the PTO is likely to move ahead with a pilot program. Comments to PTABTrialPilot@uspto.gov by October 26, 2015.

I am personally concerned about the initiation decision by a single APJ.  Generally, you might think that three-judge panels would offer more consistent decisions because more eccentric judges would be outvoted.  However, there are team-project problems that can arise with panel decision making– often one or more panel member can check-out mentally and simply rely upon the decisions by a single judge.  I do not know which of these (if either) is more likely with PTAB judges.

 

A few notes on USPTO Progress

Patent
  • Filings Down?: USPTO expects application filings for FY2015 to be down 1.8% from FY2014. Most of this downward trend is in Request-for-Continued-Examination (RCEs) that the office usually counts as application filings. RCEs filings are down about 6% from FY2014 meaning that actual application filings have roughly held steady from FY2014.
  • Money Still There: Despite the drop in filings, fee collections are up over $3 billion. The USPTO is on schedule to spend about $200 million more than it collects – eating away about 1/3 of its operating reserve fund.
  • Petitions: PTO Dashboard has been updated with petitions information.
  • Ex Parte Appeals Backlog: For the first time in a decade, the backlog of ex parte appeals before the PTAB have begun to drop and are now below 23,000 pending cases. The appeals process is still about 2-years too long.
  • USPTO Solicitor Nathan Kelley is serving as the Acting Chief Administrative Judge of the PTAB as the PTO searches for a replacement for Chief Judge Smith. Although it is unclear to me, I expect that Kelley did go through the Constitutionally required appointment process.

Cancellation of Progressive’s Business Method Patents Confirmed on Appeal

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Progressive Insurance v. Liberty Mutual Insurance (Fed. Cir. 2015)

This case stems from a set of seven overlapping post-grant-review proceedings (CBM PGR) before the Patent Trial and Appeal Board (PTAB) that Liberty Mutual filed against Progressive’s “business method” patents. The patents relate to auto-insurance pricing based upon customer vehicle use patterns – such as the number of sudden stops over a given period of time – as well as online insurance policy adjustments. See U.S. Patent No. 8,140,358 as an example.

In the Covered-Business-Method Review, the PTAB found a number of Progressive’s claims invalid as either anticipated or obvious. On appeal, the Federal Circuit affirms in all respects.

Two different proceedings for the same patent: Liberty Mutual filed two different CBM proceedings against the ‘358 patent. In one, the Board invalidated all claims except for 1, 19, and 20 while in the other the second the Board invalidated all claims of the patent. These two decisions were released about 1-hour apart.

The first challenge on appeal was that the second judgment was improper because – according to Progressive’s theory – the Board lost jurisdiction once it issued the first decision. That theory stems from Section 325(e)(1) that prohibits a petitioner from “maintain[ing] a proceeding before the Office” on issues that “reasonably could have” been raised during a post-grant review that has already reached a final written decision. The argument here is that, once the PTO reached the first final judgment that the second case should immediately disappear. On appeal, the Federal Circuit rejected that approach finding (1) that the statute does not prevent the PTO from maintaining the proceeding and in any event (2) the PTAB indicated that the two decisions were “concurrent” even though actually made public about 1-hour apart. Finally, the Court noted that the PTO has statutory authority to decide how to deal with multiple related proceedings.

Written Description and Claiming Priority: On the merits, a substantial amount of the problem here dealt with patent families and the difficulty in understanding whether a later claim can properly claim priority to an earlier filed application. The PTO typically (except in Hyatt’s case) does not require a patentee to expressly connect each patent claim with its effective priority date. As a result, those arguments are typically saved until later in litigation (thus, the benefit of filing a CIP . . . )

Here, the claims in question included an interface module that produce a “driver safety score” – construed by the PTAB to mean a “calculated insurance risk value associated with driver safety.” The priority application disclosed “rating factors” that might include safety factors, but did not expressly disclose a risk value associated only with driver safety. (Note the seeming subtle shift in construction by the Federal Circuit). In any event, the ruling is that the priority application disclosed the genus but not the later claimed species – as such it does not meet the written description requirement. In this situation, the result is that the priority filing date for the particular patent at issue here is pushed back to the later filing and that date was predated by the intervening prior art disclosures.

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It does not appear that Section 101 was raised as a challenge:

1. A system that monitors and facilitates a review of data collected from a vehicle that is used to determine a level of safety or cost of insurance comprising:

a processor that collects vehicle data from a vehicle bus that represents aspects of operating the vehicle;

a memory that stores selected vehicle data related to a level of safety or an insurable risk in operating a vehicle;

a wireless transmitter configured to transfer the selected vehicle data retained within the memory to a distributed network and a server;

a database operatively linked to the server to store the selected vehicle data transmitted by the wireless transmitter, the database comprising a storage system remote from the wireless transmitter and the memory comprising records with operations for searching the records and other functions;

where the server is configured to process selected vehicle data that represents one or more aspects of operating the vehicle with data that reflects how the selected vehicle data affects a premium of an insurance policy, safety or level of risk; and

where the server is further configured to generate a rating factor based on the selected vehicle data stored in the database.