Federal Circuit to Wait on Carnegie Mellon Willfulness Case until the Supreme Court Decides Halo and Stryker

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Carnegie Mellon University v. Marvell Tech (Fed. Cir. 2015) [CMUMarvellEnBanc]

The Federal Circuit has issued an interesting en banc order in this billion-dollar-case between the university patentee and the storage/chip maker Marvell. The Pennsylvania district court had originally awarded $1.5 billion to the university based upon a judgment of willful infringement. On appeal, however, the Federal Circuit panel reduced that award to a still-healthy but much smaller $278 million. The reduction was based upon (1) elimination of punitive damages for willfulness since Marvell had an objectively reasonable argument of invalidity; and (2) potential elimination of foreign sales from the award calculation – sales contracts were apparently “inked” in the US but then manufactured and delivered abroad. Regarding this cross-border infringement, the panel did not fully deny the availability of damages but instead remanded for further development as to whether the chips made and used outside of the U.S. could be considered “sold” in the U.S. based upon the contracting location.

After cross en banc petitions by Carnegie Mellon and Marvell, the court now writes:

Carnegie Mellon’s petition for rehearing en banc is denied in part and held in abeyance in part. The court will hold in abeyance any decision on the request for rehearing en banc with respect to the first issue raised in Carnegie Mellon’s petition, which seeks review of the panel’s ruling on the enhancement of damages issue. The court will hold Carnegie Mellon’s petition as to that issue pending the Supreme Court’s decision in Halo Electronics, Inc. v. Pulse Electronics, Inc., 769 F.3d 1371 (Fed. Cir. 2014) cert. granted, No. 14-1513, 2015 WL 3883472 (U.S. Oct. 19, 2015) and Stryker Corp. v. Zimmer, Inc., 782 F.3d 649 (Fed. Cir. 2015) cert. granted, No. 14-1520, 2015 WL 3883499 (U.S. Oct. 19, 2015).

Carnegie Mellon’s petition for rehearing en banc is otherwise denied. Marvell’s petition for rehearing and rehearing en banc is denied.

A partial mandate will issue returning the case to the district court, which shall have discretion to determine how and when best to handle the proceedings on remand.

Willfulness at the Supreme Court: In my view, there is a good chance that the Supreme Court will dramatically change course on willfulness doctrine. The history of patent law had given broad discretion to district courts to determine the appropriate circumstances for awarding punitive damages. And, that history fits well with other areas of law as well as with the Patent Act that broadly and simply states that “the court may increase the damages up to three times the amount found or assessed.” 35 U.S.C. §284. Note here, that the statute does not even require willful infringement as a prerequisite and certainly does not delve into the layered subjective/objective approach currently required by the Federal Circuit. Rather, the only statutory limitation on enhanced damages is that they
“shall not apply to provisional rights under §154 (d).”

In Carnegie Mellon’s case, the enhanced damages were about 20% of the total $1.5 billion (updated by 1000x).

= = = = =

Generally, the Federal Circuit’s strategy here is interesting and overall I like it. In the past there have been times where the Federal Circuit silently delayed its decision making. This case is also big-money, I wonder wither the Federal Circuit will be willing to delay all of its willfulness cases pending the outcome of Halo and Stryker. And, is this a suggestion to district courts to also delay? An important element of the decision here is that there is a parallel remand and so the willfulness issue is not the last remaining issue in the case and so the court’s delay is likely not delaying the final outcome.

Patentlyo Bits and Bytes by Anthony McCain

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Get a Job doing Patent Law

Federal Circuit Finally Sends Akamai Back to District Court with Orders to Finish It

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Akamai v. Limelight (Fed. Cir. 2015) (AkamaiV)

When it sat en banc in this case, the Federal Circuit found sufficient evidence to find Limelight liable as a direct infringer under 35 U.S.C. § 271(a). The noted that an entity can be held liability as a direct infringer based upon another’s actions “in two sets of circumstances: (1) where that entity directs or controls others’ performance, and (2) where the actors form a joint enterprise.” The court held that “liability under § 271(a) can also be found when an alleged infringer conditions participation in an activity or receipt of a benefit upon performance of a step or steps of a patented method and establishes the manner or timing of that performance.”

In Akamai, the accused infringement – Limelight – performed the bulk of the steps of Akamai’s patented method, and then provided instructions to its customers on how to complete the remaining steps. Completion of those steps are a necessary element of obtaining Limelight’s services. The en banc panel found “In sum, Limelight’s customers do not merely take Limelight’s guidance and act independently on their own. Rather, Limelight establishes the manner and timing of its customers’ performance so that customers can only avail themselves of the service upon their performance of the method steps.” That relationship thus constituted being “directed and controlled” by the accused infringer.

Because some potential issues remained, the en banc court then remanded the case back to the original Federal Circuit panel for clean-up. On remand, the panel has rejected a set of arguments brought by Limelight in a cross-appeal – finding them to “have no merit.”

On remand, the district court has thus been ordered to reinstate the 2008 jury verdict of infringement and the $40 million+ lost profit award. Its hard to believe that this case has been pending since 2006!

En Banc: Should there be a Supplier Exception to the On Sale Bar?

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The Federal Circuit has granted a petition for en banc rehearing in The Medicines Co. v. Hospira and requested briefing on the following questions:

(a) Do the circumstances presented here constitute a commercial sale under the on-sale bar of 35 U.S.C. § 102(b)? (i) Was there a sale for the purposes of § 102(b) despite the absence of a transfer of title? (ii) Was the sale commercial in nature for the purposes of § 102(b) or an experimental use?

(b) Should this court overrule or revise the principle in Special Devices, Inc. v. OEA, Inc., 270 F.3d 1353 (Fed. Cir. 2001), that there is no “supplier exception” to the on-sale bar of 35 U.S.C. § 102(b)?

En banc Order.

In the original opinion, penned by Judge Hughes and joined by Judges Dyk and Wallach, the Federal Circuit reversed a district validity determination — holding on appeal that the “district court clearly erred in finding that the bivalirudin batches prepared by Ben Venue Laboratories before the critical date were not sold to The Medicines Company and were prepared primarily for an experimental purpose.”  This is one of a series of cases where the patent has been invalidated based upon a private supplier arrangement that counts as a “sale” or being “on sale” even though there is no public notice of the sales activities.

Although the “on sale” language in Section 102  is identical post-AIA, many believe that the structure of the first-to-file provisions of the AIA should be interpreted to narrow the definition of the term to only include sales and offers to sale that are themselves available to the public.  In that situation, the sale that seemingly occurred here would likely not be seen a prior art.

—

There are a number of ways that large companies benefit from the patent system (apart from having more money).  In a addition, the laws negate a substantial amount of what would otherwise be prior art if it was created within the company.  Larger companies have more activity going on within their company and thus benefit from this network effect.  In this case, the patentee went outside its company to order supplies for further testing and ran afoul — there would have been no problem if it had first purchased the supplier and then obtained the supplies.  The court is considering a supplier-exception that would eliminate this as prior art — that probably works post-AIA, but not pre-AIA.

 

Personalized Medicine May be Patentable, but Not for Prometheus

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By Dennis Crouch

Prometheus Labs v. Roxane Labs (Fed. Cir. 2015)

In this case, the Federal Circuit has affirmed the district court’s holding that that Prometheus’ asserted patent claims are invalid as obvious. The district court had also rejected the claims as invalid based upon the doctrine of obviousness-type double-patenting, however that issue was not reached in the appeal.

The patent at issue is U.S. Patent No. 6,284,770 and claims a method of treating “diarrhea-predominant female IBS” by giving the patient “an effective amount of alosetron or a pharmaceutically acceptable derivative thereof.”

At a bench trial, the district court held that the elements of the claim were found in the prior art – with “insubstantial” differences.” In particular, the prior art taught treating IBS using alosetron, but apparently not particularly treating “female IBS.”

In the appeal, the Federal Circuit recognized the starting-point rule in genus-species patenting – that a particular species (adding new limitations) may be patentable even if the broader genus is in the prior art. Eli Lilly & Co. v. Bd. of Regents of Univ. of Wash., 334 F.3d 1264 (Fed. Cir. 2003). And here, in the somewhat-personalized-medicine context, the court wrote that these additional limitations may be quite important because it represents focusing treatment on populations where it works best (and causes the least harm).

After reciting the potential for patentability, the court then found that the case at hand failed to present non-obvious subject matter. Notably, the court found that the “female” limitation was simply obvious since women represent half of the population and the majority of IBS patients, and the prior art taught differences in male/female reaction to the proposed treatment:

The first limitation of asserted claim 5 of the ‘770 patent pertains to treating women. Prometheus argues that the district court erred in framing its inquiry as whether alosetron was administered to women with IBS-D in the prior art, rather than as whether it was obvious to focus on treating women rather than men. It is not disputed that it was well known in 1997 that a majority of IBS patients were women. As the district court found, it was well known that “approximately 75% to 80% of IBS-D patients . . . have always been[] women.” For example, the 1992 Thompson article reported that female IBS patients predominate in Western countries. Even if the claims should be read as focusing treatment on women, as Prometheus urges, the district court found the prior art taught precisely that. The Hysu study (1995) taught that females taking alosetron “had higher concentrations of alosetron in their blood and total amount of the drug absorbed compared to [males taking alosetron]” and the district court found that “[t]his could reasonably suggest that women would have a greater response to the drug than men.” At the time of the ‘770 patent’s priority date, it would have been obvious to a person having ordinary skill in the art to treat women as a separate group of IBS patients.

With this reading of the prior art, it was an easy conclusion for the Federal Circuit that the patent was invalid.

Double Patenting: The patent at issue in this case (U.S. Patent No. 6,284,770) was originally owned by Glaxo as was the primary prior art reference (U.S. Patent No. 5,360,800). Because the ‘800 patent was public well before the priority filing of the ‘770 it was clearly prior art. The non-statutory obviousness type double patenting doctrine is generally designed for a different situation – one derived from a judicial pushback against the statutory limitation on counting certain actions of the patentee as prior art. Because OTDP is a non-statutory action by the courts, it was appropriate here for the Federal Circuit to focus on statutory obviousness as the issue and not reach the alternative non-statutory OTDB issues.

Of course, it remains to be seen whether OTDP remains in post-AIA world.

Correcting your Patent Based upon Later Advances in Science

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Cubist Pharma v. Hospira (Fed. Cir. 2015)

An interesting aspect of this Hatch-Waxman decision involves the question of whether the PTO properly issued a certificate of correction.

Justification for a Certificate of Correction: The Patent Act authorizes the issuance of a certificate of correction when “a mistake in a patent, incurred through the fault of the USPTO, is clearly disclosed by the records of the Office” 35 U.S.C. § 254 or “a mistake of a clerical or typographical nature, or of minor character, which was not the fault of the USPTO, appears in a patent and a showing has been made that such mistake occurred in good faith.” 35 U.S.C. § 255.

In this case, the original patent filing included a structural diagram of the claimed daptomycin compound that was inaccurate because it misidentified a stereoisomer of asparagine. It was only after the patent issued that researchers discovered that the compound contained the D-isomer rather than the L-isomer. To be clear, when the patent issued, scientists thought that the compound actually had the L-isomer but then later learned that it had the D-isomer.

Seeing that mistake, the applicant petitioned the PTO for a certificate of correction to correct the error in the specification and the PTO agreed. Now, Hospira argues that the correction unduly broadens the scope of the claims and thus should be stricken.

Impact of Striking a Certificate of Correction: I’ll pause here to note that the Patent Act does not directly identify any remedy associated with improper issuance of a certificate of correction. Generally, the only result is that an improperly issued certificate will be stricken – and only after clear and convincing evidence showing the improper issuance. Following this line of cases, the defendant Hospira is asking for here is simply that the patent be returned to its original pre-amended state.

On appeal, however, the Federal Circuit sided with the USPTO and district court – holding that the amendment was proper.

[T]he [district] court characterized the PTO’s action as simply correcting an error in the diagram … without changing the scope of the patent. The court agreed with Cubist that the specification made clear that the patent claimed the daptomycin compound all along; the pre-correction version merely misidentified the stereoisomer of the asparagine amino acid found in that compound. . . .

Contrary to Hospira’s argument, the original structural diagram … did not establish that the patent was directed to a compound other than daptomycin. As this court has noted, a chemical structure is “simply a means of describing a compound; it is not the invention itself.” UNM v. Knight (Fed. Cir. 2003).

In light of the heavy burden on a party seeking to invalidate a certificate of correction, we uphold the district court’s conclusion that the certificate of correction did not alter the scope of the patent, but merely corrected an error as to the chemical structure of daptomycin.

As noted above, the statute provides for correction of “a mistake of a clerical or typographical nature, or of minor character.” Here, the correction was deemed to fit within the “minor character” prong of the test. The decision itself is quite fact specific, but it does highlight the general fact that the “error” being corrected need not be simply a typo.

The Divide between a Covenant and a License

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A few weeks ago, I wrote about the pending Supreme Court petition in Meso Scale v. Roche that asks the question of whether a covenant … not to sue for the infringement of a federal patent is a license of that patent as a matter of federal law.

Roche has waived its right to respond, but at least two friend-of-the-court briefs have been filed in the case.

Spectrum Five is a satellite broadcast company and is concerned that its covenants not-to-sue will not be treated as license rights: “Although [the Supreme] Court has held that licenses and covenants not to sue are the same, lawyers who draft intellectual-property licenses recognize that lower courts have reached conclusions inconsistent with this Court’s. The Delaware courts here have added to those inconsistent conclusions.”

Verato, Inc. indicates its concern that exhaustion principles are greatly muddied if a covenant-not-to-sue isn’t treated as a license because it leaves an open question as to whether a patent is considered exhausted as to third-party-manufactured goods if the manufacturer operates under a covenant-not-to-sue but is not otherwise licensed.

The case still has fairly low odds of being heard by the court, but the potential of having a huge impact – especially if the court distinguishes between a license and a covenant.

No Deference for Misquoting your Sources

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By Dennis Crouch

I already wrote about the holding in yesterday’s ClearCorrect decision – transmission of an electronic communication cannot be considered importation of an “article” and thus is not within the USITCs Section 337 jurisdiction. I wanted to focus here for a few minutes on Chief Judge Prost’s remarks regarding the USITC’s problematic citations ITC in its final decision. In particular, it appears that the commission altered the Senate Report in a way that supports the commission’s ultimate conclusion that non-good electronic transmission count as “articles” under the statute.

The Commission’s Opinion cites the Senate Report, S. Rep. 67-595, as authority for this conclusion and then quotes it as follows: “The provision relating to unfair methods of competition is broad enough to prevent every type and form of unfair practice and is, therefore, a more adequate protection to American industry than any antidumping statute the country ever had.”

However, the actual quote reads as follows: “The provision relating to unfair methods of competition in the importation of goods is broad enough to prevent every type and form of unfair practice and is, therefore, a more adequate protection to American industry than any antidumping statute the country ever had.”

As you can see, the actual quote from the senate report is tied to importation of goods, and that segment of the report was simply left-out when relied upon in the ITC Decision. The Chief Judge Prost writes:

The Commission’s omission of the phrase, “in the importation of goods” is highly misleading; not only was a key portion of the quote omitted, but it was omitted without any indication that there had been a deletion. Furthermore, while we may agree that the quote, as incorrectly stated by the Commission, would indicate a broad authority for the Commission, the phrase “in the importation of goods” clearly limits the Commission’s authority. And as we discussed above, it limits it in such a way as to exclude non-material things. Because the Commission uses this misquote as its main evidence that the purpose of the act was to cover all trade, independent of what form it takes, the Commission’s conclusion regarding the purpose of the Act is unreasonable.

Chief Judge Prost also highlights a second important citation problem in Footnote 21:

It is noteworthy that this is not the Commission’s only failure to cite evidence correctly. The Commission additionally states that “goods, commodities, and merchandise” have the same definition as “articles” as defined in the second edition of BLACK’S LAW DICTIONARY. Final Comm’n Op. at 43. However, BLACK’S LAW DICTIONARY does not provide the cited definition.

Taking this “in sum”, Chief Judge Prost writes that the Commission’s opinion “represents a systematic pattern of the Commission picking the wrong conclusion from the evidence.”

Although somewhat unclear, it looks like the patentee (who benefits from the misinterpretation) promoted the misinterpretation. In its Federal Circuit brief the patentee Align Tech repeated the misquotation. Align writes:

From its inception, section 337 has afforded U.S. holders of intellectual property rights broad protection against unfair trade practices, including *22 importation that infringes U.S. patents and copyrights. See, e.g., S. Rep. No. 67-595, at 3 (1922) (“[t]he provision relating to unfair methods of competition is broad enough to prevent every type and form of unfair practice”).

When the actual quote includes a particular limitation to the “importation of goods” and thus suggests that electronic transmissions are not included within the scope. I have not yet obtained the original briefing to the USITC on the issue to uncover the original source of the misquotes.

Federal Circuit Bites Back against USITC Expansion into Electronic Importation

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By Dennis Crouch

In ClearCorrect v. ITC and Align Tech, the Federal Circuit reversed the ITC’s prior determination – holding instead that the Commission’s jurisdiction over the importation of “articles that infringe” does not extend to the “electronic transmission of digital data”. Rather, the court holds that the Section 337 of the Tariff Act is limited to “material things” as used in common parlance (i.e., beyond an “electron’s invariant mass” that may be associated with a digital transmission).

The opinion by the court was filed by Chief Judge Prost, although not strictly a majority opinion. Judge O’Malley joined in the holding that the ITC lacks jurisdiction over the case, but wrote a concurring opinion that differed as to issues of administrative law deference. Judge Newman wrote in dissent – arguing that the decision guts the future of Section 337 cases.

This is a 3D printer case involving teeth aligners. In this case, the accused infringer’s has a four-step process:

  1. Make a physical model of a US patient’s teeth;
  2. Use a 3D scanner to digitally recreate the patient’s initial tooth arrangement;
  3. Transmit the digital file to Pakistan where workers digitally determine a final tooth placement and generate the set of sequential aligners (digital files) to reach that result;
  4. Transmit the digital files of the aligners to the US; and
  5. Print the aligners out with a 3D printer and given to the patients.

Align alleged violation based upon a set of seven different patents, including U.S. Patent No. 6,217,325.

19 U.S.C. § 1337(a)(1)(B) provides the USITC with authority to take action against the the “importation … of articles that (i) infringe a valid and enforceable U.S. patent.” The only importation here was the set of digital 3d blueprints, but the USITC found that a digital article counts as an article and thus within the ambit of USITC authority.

The three opinions can roughly be characterized as follows:

Chief Judge Prost: Since Congress delegated authority to the USITC to resolve any ambiguity in Section 337, then the court must give deference to agency interpretations. However, there is no ambiguity about the definition of “articles” in that it should be interpreted to mean “material things” – and thus no reason to move to Chevron step two. Still, under a step-two analysis, the agency’s interpretation is unreasonable and not a permissible construction.

Judge O’Malley: This is an attempt by the USITC to regulate the Internet – an area over which it has no authority and thus need not be given deference.

Judge Newman: The ITC is designed to regulate unfair competition coming from foreign sources – that is what is going on here and should be within the agency’s authority.

= = = = =

The case had potential major importance in the copyright realm. The ITC also has jurisdiction to act against importation of articles that infringe US copyrights. Allowing the ITC to take action against digital importers would create a heyday for copyright owners going after foreign streamers – especially because the USITC procedures are designed to handle the situation where the defendant is abroad.

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One thing to keep in mind is that the USITC’s jurisdiction is entirely duplicative of the federal district courts – it is simply an alternative (friendly) jurisdiction when the accused infringement involves the importation of articles. Here, the parallel lawsuit against ClearCorrect is still pending in the Southern District of Texas. That case has been stayed since 2012 pending the outcome of the USITC investigation.

A monkey, an animal-rights organization and a primatologist walk into federal court . . .

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Patent Litigator Andy Dhuey is also representing Photographer David John Slater who has been sued by the monkey Naruto for copyright infringement. In the 9th Circuit Brief, Dhuey writes:

A monkey, an animal-rights organization and a primatologist walk into federal court to sue for infringement of the monkey’s claimed copyright. What seems like the setup for a punchline isreally happening. It should not be happening. Under Cetacean Community v. Bush, 386 F.3d 1169 (9th Cir. 2004), dismissal of this action is required for lack of standing and failure to state a claim upon which relief can be granted. Monkey see, monkey sue is not good law – at least not in the Ninth Circuit. 
More from ATL.

Certificates of Correction

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The chart above shows the number of certificates of correction issued by the USPTO each year with a forecast through the end of 2015. After a patent issues, a patentee can petition for a correction of “clerical or typographical nature, or of minor character” or mistake by the USPTO. There is no fee if the error is a USPTO mistake and currently a $100 fee for correcting applicant-mistakes.

The number of corrections has remained relatively steady over the past 15 years. Since the number of patents issued has risen so dramatically, this steady-state of correction filings means that the average number of corrections per recently issued patent has dropped significantly since 2001.

Support for Mandamus Action to Limit Patent Forum Shopping

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Last week I discussed the TC Heartland mandamus petition here and here. Two amicus briefs have now been filed in support of the petition.

The basic issue is whether the particular limits on patent venue spelled out in 28 U.S.C. 1400(b) should be given effect in the face of broader venue allowances in the more generalized Section 1391(c).

1400(b) reads:

(b) 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.

 

For the past several decades, the court has applied the broader statute 1391(c), and permitted venue so long as the district court has personal jurisdiction over the defendant.  That application has opened the door to venue in E.D. Texas even when the defendant has no place of business there.

John Vandenberg’s team at Klarquist has filed a brief on behalf 24 companies many of which are oft-sued in the E.D. Texas, including Asus, Google, eBay, LinkedIn, NewEgg, SAP, SAS, etc.

The analysis … must start by asking whether this special patent venue statute, standing alone, limits a domestic corporation’s residence to its state of incorporation. The answer is yes: “where the defendant resides” in § 1400(b) “mean[s] the state of incorporation only” for a corporation. (quoting the Supreme Court Fourco decision). . . .

The analysis turns next to the current general venue statute. The question is whether it supersedes this restrictive definition of domestic corporation residence in the special patent venue statute. The answer is that it does not [because the]  current general venue statute expressly subordinates itself to the special venue provisions.

On the policy side, the Amici first highlight the recent John Oliver show ridiculing the E.D. of Texas patent litigation.  The amici then make the argument that forum shopping should not be allowed because it “allows patent owners to choose the forum least likely in our country to allow a speedy or low-cost determination of invalidity or non-infringement. . . . This does not merely disadvantage individual defendants. It undermines the public policy favoring strict scrutiny of issued patents. . . . [H]aving 40% of patent suits in a single district not only burdens individual defendants, it also defeats core public policies of our patent system.”

The Electronic Frontier Foundation (EFF) and Public Knowledge also filed a joint brief in support of mandamus. EFF highlights Judge Moore’s earlier work (then as Professor Moore) where she wrote that extensive forum shopping “conjures negative images of a manipulable legal system in which justice is not imparted fairly or predictably.” Kimberly A. Moore, Forum Shopping in Patent Cases: Does Geographic Choice Affect Innovation?, 79 N.C. L. Rev. 889 (2001).  The brief also highlights a new work by Daniel Klerman & Greg Reilly entitled Forum Selling that argues “judges in the Eastern District have consciously sought to attract patentees and have done so by departing from mainstream doctrine in a variety of procedural areas in a pro-patentee (pro-plaintiff) way.” Neither Moore nor Klerman/Reilly make the 1400(b) argument, but both suggest that forum shopping – when taken too far – is a problem.

Documents:

Kraft’s brief in opposition is due November 9.

Director Michelle Lee: Moving toward Patent Clarity

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The following is a post from Under Secretary of Commerce for Intellectual Property and Director of the USPTO Michelle K. Lee and was published on the PTO Director’s blog. 

Patent quality is central to fulfilling a core mission of the USPTO, which as stated in the Constitution, is to “promote the Progress of Science and useful Arts.” It is critically important that the USPTO issue patents that are both correct and clear. Historically, our primary focus has been on correctness, but the evolving patent landscape has challenged us to increase our focus on clarity.

 Patents of the highest quality can help to stimulate and promote efficient licensing, research and development, and future innovation without resorting to needless high-cost court proceedings. Through correctness and clarity, such patents better enable potential users of patented technologies to make informed decisions on how to avoid infringement, whether to seek a license, and/or when to settle or litigate a patent dispute. Patent owners also benefit from having clear notice on the boundaries of their patent rights. After and after successfully reducing the backlog of unexamined patent applications, our agency is redoubling its focus on quality. 

 We asked for your help on how we can best improve quality—and you responded. Since announcing the Enhanced Patent Quality Initiative earlier this year, we received over 1,200 comments and extensive feedback during our first-ever Patent Quality Summit and roadshows, as well as invaluable direct feedback from our examining corps. This feedback has been tremendously helpful in shaping the direction of our efforts. And with this background, I’m pleased to highlight some of our initial programs under the Enhanced Patent Quality Initiative. 

 First, we are preparing to launch a Clarity of the Record Pilot, under which examiners will include as part of the prosecution record definitions of key terms, important claim constructions, and more detailed reasons for the allowance and rejection of claims. Based on the information we learn from this pilot, we plan to develop best examiner and applicant practices for enhancing the clarity of the record.

 We also will be launching a new wave of Clarity of the Record Training in the coming months emphasizing the benefits and importance of making the record clear and how to achieve greater clarity. Recently, we provided examiners with training on functional claiming and putting statements in the record when the examiner invokes 35 U.S.C. 112(f), which interprets claims under the broadest reasonable interpretation standard and secures a complete and enabled disclosure for a claimed invention. Training for the upcoming year includes an assessment of a fully described invention under 35 U.S.C. 112(a) and best practices for explaining indefiniteness rejections under 35 U.S.C. 112(b).

 Second, we are Transforming Our Review Data Capture Process to ensure that reviews of an examiner’s work product by someone in the USPTO will follow the same process and access the same facets of examination. Historically, we have had many different types of quality reviews including supervisory patent examiner reviews of junior examiners and quality assurance team reviews of randomly selected examiner work product. Sometimes the factors reviewed by each differed, and the degree to which the review results were recorded. With only a portion of these review results recorded and different criteria captured in those recordings, the data gathered was not as complete, useful, or voluminous as it could have been. As a result, the USPTO has been able to identify statistically significant trends only on a corps-wide basis, but not at the technology center, art unit, or examiner levels. We are working to unify the review process for all reviewers and systematically record the same and all review results through an online form, called the “master review form,” which we intend to share with the public. 

 What are the implications of this new process and new form? This new process will give us the ability to collect and analyze a much greater volume of data from reviews that we were already doing, but that were not previously captured in a centralized, unified way. As we roll out this new review process the amount of data we collect will significantly increase anywhere from three to five times. This will allow us to use big data analytic techniques to identify more detailed trends across the agency based upon statistically significant data including at the technology center, art unit, and even examiner levels. Also, this new process will give us better insight into not just whether the law was applied correctly, but whether the reasons for an examiner’s actions were spelled out in the record clearly and whether there is an omission of a certain type of rejection. For example, for an obvious rejection we are considering not only whether a proper obvious rejection was made, but whether the elements identified in the prior art were mapped onto the claims, whether there are statements in the record explaining the rejection, and whether those statements are clear.

 The end result will be the (1) ability to provide more targeted and relevant training to our examiners with much greater precision, (2) increased consistency in work product across the entire examination corps, and (3) greater transparency in how the USPTO evaluates examiners’ work product. You can read more about these and our many other initiatives, such as our Automated Pre-examination Search pilot and Post Grant Outcomes, which incorporates insight from our Patent Trial and Appeal Board and other proceedings back into the examination process on our new Enhanced Patent Quality Initiative page on our website.

 Finally, let me close by emphasizing that our Enhanced Patent Quality Initiative is not a “one-and-done” effort. Coming from the private sector, I know that any company that produces a truly top quality product has focused on quality for years, if not decades. The USPTO is committed to no less. The programs presented here are just a start. My goal in establishing a brand new department within the USPTO was to focus exclusively on patent quality and the newly created executive level position of Deputy Commissioner for Patent Quality will ensure enhanced quality now, and into the future. With your input we intend to identify additional ways we can enhance patent quality as defined by our patent quality pillars of excellence in work products, excellence in measuring patent quality, and excellence in customer service.

 To that end, we will continue our stakeholder outreach and feedback collection efforts in various ways, such as our monthly Patent Quality Chat webinars. The next Patent Quality Chat webinar on November 10 will focus on the programs presented in this blog and our other quality initiatives. I encourage you to join in regularly to our Patent Quality Chats and visit the Enhanced Patent Quality Initiative page on our website for more information.  The website provides recordings of previous Quality Chats as well as upcoming topics for discussion. We are eager to hear from you about our Enhanced Patent Quality Initiative, so please continue to provide your feedback to WorldClassPatentQuality@uspto.gov(link sends e-mail).  Thank you for collaborating with us on this exciting and important initiative!

 

IPR Appeal: Federal Circuit Tells PTAB to Reject More Claims

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Belden v. Berk-Tek (Fed. Cir. 2015) on appeal from IPR2013-00057 (Patent Trial & Appeal Board) .

In an inter partes review appeal, the Federal Circuit has sided with the patent challenger – finding that the PTAB had erred by upholding the patentability of two of Belden’s claims.  This case is important largely for its result. The case is also one to be studied for some attempt to tease out the Federal Circuit’s purported legal analysis.

In the IPR of U.S. Patent No. 6,074,503, the PTAB cancelled claims 1-4 as obvious over a combination of prior art references but upheld claims 5-6.  In this process, the Federal Circuit must give substantial deference to PTAB factual findings (such as the factual underpinnings of the obviousness analysis) but reviews questions of law (such as the ultimate determination of obviousness) de novo on appeal.  Thus, all other things being equal, it is a much less daunting process to base your appeal on an issue of law rather than upon a factual dispute.

In reversing the PTAB’s decision upholding claims 5-6, the Federal Circuit wrote that the Board’s “contrary finding rests on legal errors.”  However, the analysis in the analysis that followed, the court appeared to point out a series of incorrect factual conclusions and perhaps suggests that ‘motivation to combine’ should truly be considered a question of law rather than of fact.

There is no meaningful dispute here, and the Board did not deny, that the two pieces of prior art in combination teach or suggest the methods of claims 5 and 6. The dispute concerns motivation to combine. The Petition and the Institution Decision reveal the two related ways in which that issue was presented and considered: whether a skilled artisan would substitute the twisted pairs of CA ’046 into the method of JP ’910; alternatively, whether a skilled artisan making the cable of CA ’046 would look to the JP ’910 method to make it. The brief discussion in the Petition suggests both views of the matter. …

As the Board found, it is “undisputed that CA ’046 discloses ‘a helically twisted cable.’” There is no dispute that the twisted pairs in CA ’046 need to fit into the notches of (i.e., be aligned with) the separator, as shown in the two figures from CA ’046 reproduced above, for the resulting cable to be made. And the Board correctly recognized in its discussion of claims 1 and 2 that JP ’910 clearly teaches the importance of aligning conductors with a separator (core), and suggests doing so with a die to prevent twisting of the separator, before they are all bunched together for twisting in a stranding device. That evidence points clearly toward a motivation of a skilled artisan to arrive at the methods of claims 5 and 6 based on JP ’910 and CA ’046, as the Board reasoned in its preliminary determination in the Institution Decision.

None of the Board’s reasons for concluding otherwise in its Final Written Decision withstands scrutiny through the lens of governing law. The Board’s first reason was that JP ’910 shows only conductors that are not individually insulated, so that “one of ordinary skill…would not have been motivated … simply to substitute twisted pairs of insulated conductors for the bare metal conductors.” But JP ’910 plainly discloses the need to align the conducting wires with the core and how to do so, as the Board recognized in its analysis of claims 1 and 4. The alignment problem and solution do not depend on whether the wires are insulated. The Board’s disregard of the insulation-independent alignment teaching of JP ’910 violates the principle that “[a] reference must be considered for everything it teaches by way of technology and is not limited to the particular invention it is describing and attempting to protect.” EWP Corp. v. Reliance Universal Inc., 755 F.2d 898, 907 (Fed. Cir. 1985) (emphases in original); see In re Applied Materials, Inc., 692 F.3d 1289, 1298 (Fed. Cir. 2012). . . .

The Board, returning to its focus on insulation of individual conductors, further reasoned: “Berk-Tek also has not explained why a person of ordinary skill in the art would have had sufficient reason to use the final jacketing/extrusion step of JP ’910, which serves to insulate electrically the bare-metal conductors of JP ’910, to manufacture a cable comprising twisted pairs of individually insulated conductors that do not require additional electrical insulation.” The Board found no answer to Belden’s statement that the final jacketing step, if the conductors themselves were insulated, would be “‘redundant.’ ” But that logic misconstrues the claim language and overlooks on-point evidence. . . .

In short, the record is one-sided on the proper question of whether JP ’910 taught a solution to the problem of aligning cable components that a skilled artisan would have been motivated to use in making CA ’046’s cables. The Board erred in determining that Berk-Tek had not proven the obviousness of the methods of claims 5 and 6 of the ’503 patent by a preponderance of the evidence.

Read the decision here: http://www.cafc.uscourts.gov/sites/default/files/opinions-orders/14-1575.Opinion.11-3-2015.1.PDF.

 

New Federal Rules of Civil Procedure

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After a long rule-change process, a new set of amended Federal Rules of Civil Procedure (FRCP) will become effective on December 1, 2015.

Directly impacting patent cases is the elimination of the form patent complaint that allowed patentees to file a complaint without particularly spelling out any theories of of infringement.  New complaints will be required to satisfy the Twiqbal standard of alleging facts that make the claim for relief plausible.  In the patent situation, courts may begin requiring at least a particular statement of which patent claims are being infringed and perhaps at least one claim chart.

The amendments also include changes a set of case management and discovery rules to better streamline that process and focus on proportionality.

 

McCarthy on the Federal Circuit as a trademark court

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by Dennis Crouch

Thomas McCarthy and Dina Roumiantseva have published a new article titled: Divert All Trademark Appeals to the Federal Circuit? We Think Not.  They write:

With some regularity over the years, a proposal is made to change the Lanham Act so that appeals in all Lanham Act trademark and false advertising cases from district courts across the United States will be diverted from the regional circuit courts of appeal to the Court of Appeals for the Federal Circuit. We think it is time to discuss this proposal head on and hopefully to convince the reader that this diversion is not a good idea and should never be implemented. Advocates of this proposal claim that trademark law would benefit from the consistency that a single appeals court could provide and that the Federal Circuit has exceptional expertise in trademark law. We believe, however, that trademark law does not suffer from the kind of circuit conflict that led to the channeling of all patent appeals to the Federal Circuit in 1982. Moreover, our review of case law suggests that some regional circuits have a comparable or greater experience with trademark law. We argue that no change in the present system of trademark appeals is needed.

I see merit to the McCarthy-Roumiantseva argument.  However, I also see a major problem with the current intellectual property system is its disjointed implementation nature.  Copyright is adminstered by a branch of the Library of Congress. Patent and Trademark registration is handled by a single agency, except for state-law and FDA exclusivity issues. And, the appellate courts that hear most copyright and trademark infringement actions almost never hear any patent infringement actions – and vice versa. Trade secret is almost (but not quite) entirely state law derived. These major divides in administration and adjudication have led to a system that lacks substantial coherence across doctrinal silos and has opened the door for special interests to tweak individual portions of the law toward their favor.

Federal Circuit: Denies En Banc Rehearing on Lost Profit Sales for Component Export

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In a split opinion, the Federal Circuit has denied WesternGeco’s en banc petition on the issue of whether a patentee can collect lost profit damages stemming from foreign sales that constitute infringement under 35 U.S.C. § 271(f).   The question presented:

When there has been a finding of infringement under 35 U.S.C. § 271(f) for supplying components of a patented system to be combined outside the United States, is a patentee, in effect, categorically barred from recovering proven lost profits that occurred outside the United States, which were the direct and foreseeable result of the infringement under § 271(f)?

In its original panel decision, the Federal Circuit indicated that its tradition of avoiding extraterritorial application of U.S. patent law led it to apply Section 271(f) in a restrictive rather than expansive way.

 

WesternGeco cannot recover lost profits resulting from its failure to win foreign service contracts, the failure of which allegedly resulted from ION’s supplying infringing products to WesternGeco’s competitors. . . . Section 271(f) does not eliminate the presumption against extraterritoriality. Instead, it creates a limited exception. . . . It is the act of exporting the components from the United States which creates the liability. . . . Just as the United States seller or exporter of a final product cannot be liable for use abroad, so too the United States exporter of the component parts cannot be liable for use of the infringing article abroad.

Of course, the fact that WesternGeco is not entitled under United States patent law to lost profits from the foreign uses of its patented invention does not mean that it is entitled to no compensation. Patentees are still entitled to a reasonable royalty, and WesternGeco received such a royalty here. . . .

As he did in the original panel decision, Judge Wallach also dissented here – joined by Judges Newman and Reyna.  In the original opinion, Judge Wallach wrote:

[T]he limited geographic reach of United States patent law does not mean activities occurring outside the United States are categorically disregarded when determining issues of patent infringement. . . . [In 271(f)] Congress imposed liability on those supplying from the United States components of a patented invention “in such manner as to actively induce the combination of such components outside of the United States in a manner that would infringe the patent if such combination occurred within the United States.” . . .

In general, a patentee is entitled to full compensatory damages where infringement is found. . . . . The[] general principles of full compensation, of course, do not directly address the question of whether foreign activities may be considered when calculating such compensation. The Supreme Court, however, has answered this question in the affirmative, looking to noninfringing foreign sales to calculate lost profits where the patented product is manufactured in the United States. For example, [see] Goulds’ Manufacturing Co. v. Cowing.

There is a strong chance that WesternGeco will petition for a writ of certiorari and this type of international patent law case has some background before the court. See, Microsoft Corp. v. AT&T Corp., 550 U.S. 437 (2007) and Deepsouth Packing Co. v. Laitram Corp., 406 U.S. 518, 531 (1972).

= = = = =

As a comment, I should mention here that the question petitioned is somewhat disingenuous in that the lost-profits would be available associated with foreign component sales, just not those tied to sale of the would-be-infringing-product. The problem for the patentee is that the real profits are in the final product not the underlying components.

Trademark Cases

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Trademark cases are almost interesting. Here are the last 10 filed according to my docket report:

  1. Kentucky Mist Moonshine Inc. v. University of Kentucky (E.D.Ky.) (declaratory judgment lawsuit that UK can’t control the term Kentucky).
  2. Star of Texas Fair & Rodeo v. El Rodeo, Inc. (W.D.Tex.) (arguing that “El Rodeo” is confusingly similar to “Rodeo Austin”.)
  3. Yeti Coolers, LLC v. Evans (W.D.Tex.) (Defendant accused of making knock-off cooler’s using Yeti mark.)
  4. Haru Holding Corp. v. Sapporo Ichiban Inc. (E.D.N.Y.) (Allegations that “Sapporo Haru” restaurant is confusingly similar to the Haru Sushi marks.)
  5. El Holdings Lake City v. Lake City RV Resort (N.D.Fla.) (Allegations that defendant’s “Lake City RV Resort” is confusingly similar to “Lake City Campground and RV Resort”. Both are located within 1-mile of Lake City, Florida.)
  6. Garçon v. FanDuel Inc. (D.Md.) (Class action with Pierre Garçon (NFL Player) as lead plaintiff against fantasy football site.)
  7. Smart Energy Today, Inc. v. DOES (C.D.Cal.) (Alleging that anonymous competitors wrote bad reviews on Yelp.)
  8. Luxottica Group S.p.A. v. The Partnerships and Unincorporated Associations Identified on Schedule “A” (N.D.Ill.) (counterfeit Ray-Bans.)
  9. Direct Niche, LLC v. Via Varejo S/A (D.Minn.) (cybersquatting ACPA action asking US court to overturn WIPO UDRP decision on  casasbahia.com).
  10. Rosenstreich et al v. L’Oreal S.A. (S.D.N.Y.) (Allegation is that L’Oreal’s “TXT IT” cosmetics campaign is too close to the mark “T3XT !T C0$M3T!C$”.)

PTO Rules: File Sharing and Correcting Foreign Priority Claims

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By Dennis Crouch

NOTE: See final paragraph for Nov. 5 pending rule change for correcting foreign priority claims.

The USPTO has published a new Final Rule notice titled: Changes To Facilitate Applicant’s Authorization of Access to Unpublished U.S. Patent Applications by Foreign Intellectual Property Offices. This is a follow-up to the proposed rules from 2014. As its name suggests, the proposal would allow the USPTO to share otherwise secret information regarding pending-unpublished US applications with foreign patent offices, such as the EPO. A major caveat here though is that the sharing of information requires applicant authorization. The change is part of the general major shift toward worksharing and international procedural harmonization. The following comes from the notice:

[The USPTO] is revising its rules of practice to include a specific provision by which an applicant can authorize the Office … all or part of the file contents of an unpublished U.S. patent application in order to satisfy a requirement for information imposed on a counterpart application filed with the foreign IP office. … The final rule changes consolidate the specific provisions of the regulations by which applicants give the Office authority to provide a foreign IP office with access to an application in order to satisfy a requirement for information of the foreign IP office. The Office is also revising the rules of practice to indicate there is no fee for providing a foreign IP office with an electronic copy of an application-as-filed or an electronic copy of file contents pursuant to a bilateral or multilateral agreement. Additionally, along with changes to the application data sheet (ADS) form [to facilitate authorization], the final rule changes simplify the process for how applicants provide the Office with the required authorization, thereby reducing the resources applicants must expend to comply with these foreign IP office requirements, and enhance the quality of patent examination.

The change has a November 30, 2015 effective date.

In this process, the PTO is setting up a major roadblock to more complete worksharing by only sharing documents when authorized by applicants. One comment to the proposed rules focused on this issue:

Comment 4: One comment asserted that the proposed rule change is based upon the assumption that a specific authority is required from an applicant in order to send out pre-publication information to a foreign IP office where applicant has filed an application and that the Office should reconsider this assumption. The comment further asserted that once an applicant files an application in a foreign IP office, applicant inherently agrees to the rules and requirements of that foreign IP office. Accordingly, the comment suggests that the Office does not need a separate authorization to either send a priority document or pre-publication information to that foreign IP office. Therefore, the comment requested that the Office reconsider the need for any authorization for access in this circumstance. The comment stated that if the Office adopts this position, then the entire authorization section from the ADS can be removed and a filing of an application in a foreign IP office by an applicant can serve as authorization for access to send priority documents and/or pre-publication information to that foreign IP office(s).

Response: After due consideration of the comment, the Office has decided to not adopt the position expressed in the comment. The written authority requirement is in accord with 35 U.S.C. 122(a), and consistent with current Office policy, practice, and procedure regarding access. Therefore, the Office is retaining the requirement for written authority from an applicant for access to the file contents of an unpublished application.

Here, the statute properly quoted by the Patent office does require that these non-published “applications for patents shall be kept in confidence by the Patent and Trademark Office and no information concerning the same given without authority of the applicant or owner unless necessary to carry out the provisions of an Act of Congress or in such special circumstances as may be determined by the Director.”

The USPTO has also announced “Change in Practice Regarding Correction of Foreign Priority Claims.” The changes – becoming effective on November 5, 2015, will make it more difficult to correct errors in foreign priority claims. Starting this week, a correction of a foreign priority claim made outside of the one-year deadline will require a petition to accept an unintentionally delayed benefit claim.

The Leahy-Smith America Invents Act (AIA) … provides that the filing date of an earlier foreign patent application may now be the effective prior art date for subject matter disclosed in a U.S. patent or a U.S. patent application publication. Therefore, U.S. patent application publications should reflect accurate foreign priority information to minimize the burden on examiners and members of the public in assessing the effective prior art date for subject matter disclosed in such U.S. patent application publications. The USPTO will thus now require that any correction of the identification of the foreign application (by application number, country (or intellectual property authority), and filing date) in a foreign priority claim after the time period for filing a priority or benefit claim be via a petition to accept an unintentionally delayed priority claim, and once the petition is granted in a pending application, will now publish a corrected patent application publication reflecting the accurate foreign priority claim information.

So, if you have a correction to make regarding foreign priority, it is probably best to get it done in the next two days. In general, the “unintentional” standard is fairly easy to overcome, but does require sworn statements that may later open-the-door to charges of inequitable conduct if it turns out that the error was known for some time. I’ll also note here that the parallel correction of US priority already requires the petition.

Federal Circuit: Attorney Reputational Harm Does Not Raise Case-or-Controversy Following Settlement.

Patent

Tesco Corp (Plaintiff) v. National Oilwell Varco (Defendant-Appellee) v. Glen Ballard & John Luman (Interested Party – Appellant) (Fed. Cir. 2015)

Interesting case here – Jury verdict for the patentee, but in post-verdict motions S.D. Texas Judge Ellison dismissed the case with prejudice as a sanction against the patentee plaintiff for litigation misconduct. The Judge found that Ballard and Luman had directly lied to the court about the origin of a critical element of prior art. The Judge wrote:

Not every lawyer who lies to a court will be caught, so when such deliberate and advantage-seeking untruthful conduct is uncovered, the penalty must be severe enough to act as a deterrent.

While an appeal of the dismissal was pending, the parties settled “all outstanding issues.” That settlement agreement was signed both by representatives of the parties and the attorneys. However, Ballard and Luman decided to pursue the appeal further – arguing that the reputational harm from the district court opinion justified continued jurisdiction. The Federal Circuit disagreed – finding “no remaining case or controversy.”

Although Ballard and Luman have not been able to defend themselves in court, they will likely get their chance to do so before the Texas Bar. Apparently, they cannot do so publicly because the records are privileged and their former client Tesco will not allow their disclosure.

The majority opinion here was written by Judge O’Malley and joined by Judge Chen.

Writing in dissent, Judge Newman argued that the lawyers should be able to defend their reputation since it is their “most valuable asset.” The basic argument from Ballard and Luman is that the “sole evidentiary basis” for their bad faith is post-trial testimony from the creator of the asserted prior art and, according to the Attorney’s, that post-trial testimony was different from what he had said years earlier. The district court had disagreed with that characterization.

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Brief on Point: TescoAttorneyArg