The Japanese Foundation holds several patents relating to treatment of malignancies with a drug causing cell apoptosis. See U.S. Patent No. 6,194,187. The ‘187 patent issued in 2001. In October 2011, Japanese Foundation’s attorney filed a disclaimer of the remaining term of the ‘187 patent. Then, two months later, the Foundation petitioned the USPTO to withdraw the disclaimer. However, the USPTO refused to withdraw the disclaimer — indicating that neither statute nor the rules of practice provide a mechanism for withdrawal or amendment of a fully processed terminal disclaimer.
According to the explanation from the Foundation, a paralegal at the Japanese Firm mistakenly sent a request to Foley & Lardner to abandon the patent rather than an inquiry regarding disclaimer. In particular, the USPTO argues that it should be able to fully rely upon statements by a patentee’s legal representative.
After failing to convince the USPTO to reconsider, the Foundation filed a civil action in the E.D. Va. Federal Court. The district court sided with the patentee and held that the PTO must withdraw the disclaimer “absent a finding that the Foundation actually authorized its filing.”
On appeal, the Federal Circuit has reversed – siding with the USPTO and finding that the USPTO had not acted arbitrarily and capriciously nor had it abused its discretion by refusing to withdraw the terminal disclaimer.
Under the Administrative Procedures Act (APA), an agency’s action will be set aside if it is “arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with law.” 5 U.S.C. § 706(2)(A). This standard is normally met only if the [agency] decision was not based on the relevant factors or it fails toexamine the relevant data and articulate a satisfactory explanation for its action including a rational connection between the facts found and the choice made.” However, unlike actions of many federal agencies, USPTO statutory interpretations are ordinarily given no deference and USPTO decisions based upon an erroneous interpretations of the law will also be overturned.
An oddity of the case here is, although the Foundation did not file for a certificate of correction under 35 U.S.C. 255, it argued on appeal that the USPTO has inherent authority to withdrawing the disclaimer that is housed in Section 255.
In the appeal, however, the Federal Circuit found no basis for issuing a certificate of correction because the mistake in filing the disclaimer was not “of a clerical or typographical nature, or of minor character.”
For the past year, USPTO Deputy Director Michelle Lee’s status has been in-limbo. Although she has been acting as director of the USPTO, the law did not allow her to be identified as the acting director. During this time, the Obama administration informally floated several potential directorship nominees. However, none of those made the political cut. Finally, in October 2014, the White Housenominated Lee to move up from Deputy Director to Director. That position also comes with the title of Undersecretary of Commerce.
The Democrats in the Senate appear to be hoping to move quickly before Republicans take control in January.
Anyone who read Sigram Schindler’s petition for writ of certiorari would have walked away confused. To say that the petition makes little sense is perhaps over stating its value. The question presented by Schindler was as follows:
Does the US Constitution, in legal decisions based on 35 USC §§ 101/102/103/112, require instantly avoiding the inevitable legal errors in construing incomplete and vague classical claim constructions – especially for “emerging technology claim(ed invention)s, ET CIs” – by construing for them the complete/concise refined claim constructions of the Supreme Court’s KSR/Bilski/Mayo/Myriad/Biosig/Alice line of unanimous precedents framework, or does the US Constitution for such decisions entitle any public institution to refrain, for ET CIs, for a time it feels feasible, from proceeding as these Supreme Court precedents require – or meeting its requirements just by some lip-service – and in the meantime to construe incomplete classical claim constructions, notwithstanding their implied legal errors?”
The Supreme Court has now – as expected – denied the petition. However, the court took a major step further — ordering Schindler’s Supreme Court attorney to “show cause … why he should not be sanctioned”:
D-2827 IN THE MATTER OF DISCIPLINE OF HOWARD NEIL SHIPLEY
Howard Neil Shipley, of Washington, D.C., is ordered to show cause, within 40 days, why he should not be sanctioned for his conduct as a member of the Bar of this Court in connection with the petition for a writ of certiorari in No. 14-424, Sigram Schindler Beteiligungsgesellschaft MBH v. Lee.
The brief was filed by Howard Shipley of the Foley firm along with his partner George Quillen. Although I do not know, I suspect that the Foley firm agreed to file the brief as drafted by Dr. Schindler and without providing any substantive input or editing.
Sandoz v. Amgen is one of the first decisions by the Federal Circuit relating to the biosimilars and the Biologics Price Competition and Innovation Act of 2009 (BPCIA) (codified principally at 42 U.S.C. § 262). By rejecting jurisdiction here, the court adds incremental value to biologic patents at the cost of some chilling of the development of follow-on biosimilars.
In this case, the Sandoz sued Amgen — asking the court for a declaratory judgment that two of Amgen’s patents covering its Enbrel formulation are invalid. Patent Nos. 8,063,182 and 8,163,522. The district court rejected the lawsuit altogether — finding no case-or-controversy sufficient to create jurisdiction. On appeal, the Federal Circuit has affirmed, although on narrower grounds than did the district court.
Unlike generic drugs, follow-on (“generic”) biologics will typically require additional research because biosimilars are typically – and as their name suggests – only similar to the original treatment product. This means that a follow-on company will likely make substantial research investments prior to seeking FDA approval.
The BPCIA creates a biosimilars scheme akin to what Hatch-Waxman does with generics. In particular – like Hatch-Waxman – BPCIA creates a paper-cause-of-action labeling the filing an FDA biosimilarity application as a form of patent infringement. The particulars of BPCIA is substantially different from Hatch-Waxman, but they run in parallel at least from a 30,000-foot framework.
Here, Sandoz is working on a biosimilar of Enbrel and Amgen has notified Sandoz that its proposed biosimilar would infringe the patent. In 2013 Sandoz took two simultaneous actions: (1) it began a major (and expensive) Phase III trial of its version of the treatment product and (2) it filed this declaratory judgment action — asking the federal court for a holding that the Amgen patents are both invalid and would not be infringed by Sandoz’ product. Although Sanoz has already invested in the research, an adverse decision in the DJ case could help the company avoid wasteful spending. Because pharmaceutical patent litigation takes years to complete, the early-stage lawsuit may well only be complete at around the product launch date. Importantly, however, courts often make early claim-construction decisions that could be helpful for Sandoz in developing a non-infringing alternative. Notably, Sandoz research is not alleged to be infringing since (1) it is being done abroad and (2) it likely qualifies for the research exception of 35 U.S.C. 271(e).
Rather than hearing the case, the district court dismissed based upon lack of jurisdiction. Applying two alternate theories, the district court held (1) that the controversy was not sufficiently immediate and real as required by Supreme Court doctrine on cases-and-controversies; and (2) that the BPCIA preempts declaratory judgment lawsuits prior to the DJ-plaintiff’s FDA biosimilar application filing.
The U.S. Constitution (as interpreted by the Supreme Court) requires an actual and immediate case-or-controversy between the parties. The approach is to ask “whether the facts alleged … show that there is a substantial controversy, between parties having adverse legal interests, of sufficient immediacy and reality to warrant the issuance of a declaratory judgment.” MedImmune, Inc. v. Genentech, Inc., 549 U.S. 118, 127 (2007).
On appeal, the Federal Circuit affirmed – finding no immediate case or controversy between the parties. In addition to the fact that no infringement occurs until at least the FDA filing, the Federal Circuit found that the Sandoz ongoing research could still potentially result in a product that is clearly non-infringing. Importantly, because the court found no case-or-controversy under MedImmune, the Federal Circuit chose not to address the alternative judgment that BPCIA preempts the lawsuit.
Biopharmaceuticals are on the rise as an important and useful facet of medical technology. However the impact of BPCIA is still yet to be solidified.
Typically, Supreme Court patent cases alter Federal Circuit precedent, while – at the same time – leaving many open questions for the appellate court to address. That standard certainly fits the recent set of patent eligibility cases. In Alice Corp v. CLS Bank (2014) the Supreme Court outlined an eligibility test whose practical impact will vary greatly depending upon how it is implemented by the Patent Office and the court: broadly or narrowly?
In DDR Holdings v. Hotels.com, the Federal Circuit has affirmed the patent eligibility of DDR’s eCommerce patent. U.S. patent No. 7,818,399. Particularly, Judge Chen authored the majority opinion that was joined by Judge Wallach. Judge Mayer wrote in dissent. The case is close enough to the line that I expect a strong push for en banc review and certiorari. Although Judge Chen’s analysis is admirable, I cannot see it standing up to Supreme Court review and, the holding here is in dreadful tension with the Federal Circuit’s recent Ultramercial decision.
The basic idea behind DDR’s patent (as claimed) is to allow a website operator to include various pages within its website that each corresponds to a different merchant (such as a cruise line) with products being sold through a broker (such as a cruise broker). The various pages will have a look-and-feel that corresponds to the particular merchant (by including, for instance the cruise line logo). And, the system dynamically populates product options on the site by pinging the broker’s server. To accomplish all this, the invention uses computer networks in what appears to be standard form without what I would call “new technology.” Judge Chen writes that a major purpose of this setup is to be able to provide a diversity of stores while keeping customers on the same overall website. Representative claim 19 is posted below. The accused infringers summarize this as simply “syndicated commerce on the computer using the Internet.”
Patent Eligibility under Alice Corp: The two-step approach to eligibility decreed by Alice Corp first queries whether the invention is directed to an abstract idea. And, if so, then looks to whether the invention includes an “inventive concept” sufficient to “transform” that abstract idea into a patentable invention. In Alice, the Supreme Court particularly held that transformation is not satisfied by merely the recitation of generic computer limitations.
Here, Judge Chen finds that neither step of Alice Corp implicate the patent in question. In doing so, Judge Chen attempts to cabin-in the scope of ideas that qualify as “abstract ideas.”
Not An Abstract Idea: First, Judge Chen found the solution here to be internet-focused with no direct corresponding offline equivalence. That conclusion is important because it helps distinguish Alice Corp where the Supreme Court found the patented invention there abstract because it related to a longstanding business practice. Judge Chen writes:
[The asserted claims do not] recite a fundamental economic or longstanding commercial practice. Although the claims address a business challenge (retaining website visitors), it is a challenge particular to the Internet.
In the dissent, Judge Mayer challenges this conclusion by drawing an analogy to the pre-internet business of having kiosk within a mall or warehouse shore that sells third-party cruise vacation packages. Judge Chen rejects that analogy because it does not “account for the ephemeral nature of an Internet “location” or the near-instantaneous transport between these locations made possible by standard Internet communication protocols.” According to Judge Chen, those differences introduce new problems – and it is those problems that are particularly addressed by the patented invention.
In Ultramercial, the Federal Circuit found that even novel ideas can be abstract. Distinguishing from that case, Judge Chen writes that the claims here:
are different enough in substance from those in Ultramercial because they do not broadly and generically claim “use of the Internet” to perform an abstract business practice (with insignificant added activity). Unlike the claims in Ultramercial, the claims at issue here specify how interactions with the Internet are manipulated to yield a desired result—a result that overrides the routine and conventional sequenceof events ordinarily triggered by the click of a hyperlink.
Moving on, Judge Chen finds that – even if the claims are directed to an abstract idea – they do not preempt that idea but instead represent a “specific way” of creating a composite web page “in order to solve a problem faced by websites on the Internet.”
Writing in dissent, Judge Mayer argues that the patents at issue here are “long on obfuscation but short on substance. Indeed, much of what they disclose is so rudimentary that it borders on the comical.”
DDR’s claims … simply take a well-known and widely-applied business practice and apply it using a generic computer and the Internet. The idea of having a “store within a store” was in widespread use well before the dawn of eCommerce. For example, [NLG], one of the defendants here, previously “sold vacations at . . . BJ’s Wholesale Clubs through point of purchase displays.” . . . DDR’s patents are directed to the same concept. Just as visitors to [BJ’s] could purchase travel products from NLG without leaving the BJ’s warehouse, the claimed system permits a person to purchase goods from a third-party vendor, but still have the visual “impression that she is viewing pages served by the [original host merchant].” Indeed, any doubt as to whether the claimed system is merely an Internet iteration of an established business practice is laid to rest by the fact that one of the named inventors acknowledged that the innovative aspect of his claimed invention was “[t]aking something that worked in the real world and doing it on the Internet.” . . .
The solution offered by DDR’s claims, however, is not rooted in any new computer technology. Its patents address the problem of preventing online merchants from losing “hard-won visitor traffic,” and the solution they offer
is an entrepreneurial, rather than a technological, one. DDR has admitted that it did not invent any of the generic computer elements disclosed in its claims. There is no dispute, moreover, that at the time of the claimed invention the use of hyperlinks to divert consumers to particular web pages was a well-understood and widely-used technique. While DDR’s patents describe the potential advantages of making two web pages look alike, they do not disclose any non-conventional technology for capturing the “look and feel” of a host website or for giving two web pages a similar appearance.
In concluding that DDR’s claims meet the demands of section 101, the court focuses on the fact that “they recite a specific way to automate the creation of a composite web page . . . .” The Supreme Court, however, has emphatically rejected the idea that claims become patent eligible simply because they disclose a specific solution to a particular problem. . . . Indeed, although the claims at issue in Alice described a very specific method for conducting intermediated settlement, the Court nonetheless unanimously concluded that they fell outside section 101.
= = = = =
This case may end up again delaying the expected USPTO examiner guidance on abstract idea analysis.
= = = = =
The patent itself issued in 2006 but claims priority to a 1998 filing. Five inventors are listed including father-son pair: DD Ross, Sr. and Jr. – hence DDR Holdings.
= = = = =
Claim 19. A system useful in an outsource provider serving web pages offering commercial opportunities, the system comprising:
(a) a computer store containing data, for each of a plurality of first web pages, defining a plurality of visually perceptible elements, which visually perceptible elements correspond to the plurality of first web pages; (i) wherein each of the first web pages belongs to one of a plurality of web page owners; (ii) wherein each of the first web pages displays at least one active link associated with a commerce object associated with a buying opportunity of a selected one of a plurality of merchants; and (iii) wherein the selected merchant, the outsource provider, and the owner of the first web page displaying the associated link are each third parties with respect to one other;
(b) a computer server at the outsource provider, which computer server is coupled to the computer store and programmed to: (i) receive from the web browser of a computer user a signal indicating activation of one of the links displayed by one of the first web pages; (ii) automatically identify as the source page the one of the first web pages on which the link has been activated; (iii) in response to identification of the source page, automatically retrieve the stored data corresponding to the source page; and (iv) using the data retrieved, automatically generate and transmit to the web browser a second web page that displays: (A) information associated with the commerce object associated with the link that has been activated, and (B) the plurality of visually perceptible elements visually corresponding to the source page.
Although December has just begun, the USPTO has already issued more patents in calendar year 2014 than in any other prior year. I expect that the total will be around 304,000 utility patents issued this year. The number of grants has more than doubled since 2005.
We can expect some further increase in 2015 – especially if Congress grants PTO full spending authority over its collected fees.
[Note – blue bar in 2014 shows the expected number of grants in the remaining four weeks of FY2014.]
Today, the Supreme Court granted certiorari on one of the questions presented in Commil v. Cisco. (The order). The question presented:
(1) Whether the Federal Circuit erred in holding that a defendant’s belief that a patent is invalid is a defense to induced infringement under 35 U.S.C. § 271(b);
Commil’s brief also presented a second question that the Court did not take:
(2) whether the Federal Circuit erred in holding that Global-Tech Appliances, Inc. v. SEB S.A. required retrial on the issue of intent under 35 U.S.C. § 271(b) where the jury (A) found the defendant had actual knowledge of the patent and (B) was instructed that “[i]nducing third-party infringement cannot occur unintentionally.”
Further discussion:
My summary of the Federal Circuit opinion is here: LINK
Dennis’s commentary on the cert petition is here: LINK
Ericsson, Inc. v. D-Link Systems, Inc. (Fed. Cir. 2014) Download Ericsson v D-Link Panel: O’Malley (author), Taranto (dissenting-in-part), Hughes
Standard Essential Patents (SEPs) are an integral part of the modern technological landscape. As an example, Ericsson, the patent holder in this case, alleged that the patents at issue were essential to a common Wi-Fi standard, 802.11(n); thus all 802.11(n) compliant devices infringe the patents. Due to their nature (they cover technologies whose widespread use can be as at least as much due to the adoption of the standard as the incremental value of the invention), SEPs pose particular issues when dealing with the question of remedies.
Two well-recognized problems are hold-up and royalty stacking. “Patent hold-up exists when the holder of a SEP demands excessive royalties after companies are locked into using a standard. Royalty stacking can arise when a standard implicates numerous patents, perhaps hundreds, if not thousands. If companies are forced to pay royalties to all SEP holders, the royalties will “stack” on top of each other and may become excessive in the aggregate.” Slip Op. at 7-8. Organizations that develop standards, such as IEEE, typically address these potential problems by seeking pledges from their members “that they will grant licenses to an unrestricted number of applicants on “reasonable, and nondiscriminatory’ (‘RAND’) terms.” Id. at 8. Ericsson promised to offer such licenses for its 802.11(b) SEPs.
Background: In 2010, Ericsson filed an infringement suit against D-Link, accusing it of infringing a set of its 802.11(b) SEPs. Ericsson prevailed at the district court, with a jury finding infringement of three patents, rejecting a validity challenge to one, and awarding Ericsson $10 million in damages (a royalty rate of $0.15 per product). Based on the jury award, the judge found $0.15 per product to be an appropriate running royalty. On appeal, the Federal Circuit affirmed enough of the district court findings as to liability for the issue to be one of damages. (Judge Taranto dissented as to one of the infringement conclusions but agreed with the rest of the majority opinion).
Damages and SEPs: The below paragraph from the court’s opinion summarizes its key holdings on damages:
In sum, we hold that, in all cases, a district court must instruct the jury only on factors that are relevant to the specific case at issue. There is no Georgia-Pacific-like list of factors that district courts can parrot for every case involving RAND-encumbered patents. The court should instruct the jury on the actual RAND commitment at issue and must be cautious not to instruct the jury on any factors that are not relevant to the record developed at trial. We further hold that district courts must make clear to the jury that any royalty award must be based on the incremental value of the invention, not the value of the standard as a whole or any increased value the patented feature gains from its inclusion in the standard. We also conclude that, if an accused infringer wants an instruction on patent hold-up and royalty stacking, it must provide evidence on the record of patent hold-up and royalty stacking in relation to both the RAND commitment at issue and the specific technology referenced therein.
Slip Op. at 56. The first sentence is probably the most widely applicable, and arguably applies beyond the RAND context. It is legal error to simply recite the Georgia-Pacific factors in a set of jury instructions. Courts must be cognizant of which factors actually apply in a given situation. “Although we recognize the desire for bright line rules and the need for district courts to start somewhere, courts must consider the facts of record when instructing the jury and should avoid rote reference to any particular damages formula.” Slip Op. at 50.
Of course, legal error in a jury instruction does not mandate reversal; that error must still be prejudicial. Here, the errors were significant and in combination sufficiently prejudicial. For example, some Georgia-Pacific factors are directly contrary to the RAND commitment, such as factor 4, “'[t]he licensor’s established policy and marketing program to maintain his patent monopoly by not licensing others to use the invention or by granting licenses under special conditions designed to preserve that monopoly.’ Georgia-Pacific, 318 F. Supp. at 1120. Because of Ericsson’s RAND commitment, however, it cannot have that kind of policy for maintaining a patent monopoly.” Slip Op. at 48.
Another important piece of the court’s holding is its clarification of what the patent remedy must relate to in the context of SEPs: the “incremental value of the invention not the value of the standard as a whole or any increased value the patented feature gains from its inclusion in the standard.” In other words, just as modern devices incorporate many different technological components, so too do standards include multiple technologies. “Just as we apportion damages for a patent that covers a small part of a device, we must also apportion damages for SEPs that cover only a small part of a standard.” Id. at 52.
Finally, on patent hold-up and royalty stacking, an accused infringer can obtain such an instruction but there must be record evidence: “The district court need not instruct the jury on hold-up or stacking unless the accused infringer presents
actual evidence of hold-up or stacking. Certainly something more than a general argument that these phenomena are possibilities is necessary.” Id. at 54.
The chart above comes from the USPTO’s 1993 annual report. Back then, applications received a first action on the merits within eight months of filing and appplications issued/abandoned in under 20 months (on average).
This opinion is notable because it involves an emerging split in the Federal Circuit’s jurisprudence on “X plus function” claim language. At the heart of the split is the presumption that arises from the non-use of the word “means” in a claim. Under the majority’s ruling in this case, that burden is extremely difficult to overcome; a holding that furthers the tension with the Federal Circuit’s recent decision in Bosch v. Snap-On.
Williamson v. Citrix Online, LLC (Fed. Cir. 2014) Download Opinion Panel: Moore,* Linn (author), Reyna (dissenting)
The patent in this case is part of the bankruptcy estate of the @Home Corporation, a late 1990’s venture to provide cable internet and later, a content portal. (Those of you who were online in the late 1990’s may remember the company or the multi-billion dollar merger of @Home and Excite in 1999). Shortly after the dot-com bubble burst, @Home collapsed and entered bankruptcy proceedings. The plaintiff in this case, Richard Williamson, acts as trustee for the At Home Bondholders’ Liquidating Trust and has brought a series of patent infringement suits against major technology companies in an effort to recover assets for the debt holders.
Patent No. 6,155,840 describes and claims “[a] system for conducting distributed learning among a plurality of computer systems coupled to a network.” Williamson brought an infringement suit against an array of defendants, including Citrix, Microsoft, Adobe, Cisco, and IBM. At the district court, the defendants obtained a favorable claim construction at the district court on three key terms, two in independent claims 1 and 17 and one in independent claim 8, leading to a stipulation of noninfringement of claims 1-7 and 17-24 and of invalidity due to indefiniteness of claims 8-12.
On appeal, the Federal Circuit reversed the district court’s claim constructions for both groups of claims. The reversal as to the first group (1-7 and 17-24) is not particularly noteworthy. There, the majority concluded that the district court erroneously imported an extraneous limitation into the claims: the claim element called for “a graphical display representative of the classroom” and the district court construed this as requiring a “pictorial map illustrating an at least partially virtual space in which participants can interact, and that identifies the presenter(s) and audience member(s) by their locations on the map.” “While the specification discloses examples and embodiments where the virtual classroom is depicted as a “map” or “seating chart,” nowhere does the specification limit the graphical
display to those examples and embodiments.” Slip Op. at 10. The proper construction is “a graphical representation of an at least partially virtual space in which participants can interact.”
Judge Reyna disagreed in part. In his view, “the specification and prosecution history make clear that the ‘graphical display representative of a classroom’ terms are properly construed as requiring a visually depicted virtual classroom.” Dissent at 2 (emphasis added). Judge Reyna reached this conclusion based on the specification and prosecution history’s distinguishing of the invention from the prior art based on the presence of this additional element. [Given Judge Reyna’s views, it sounds like these claims may be invalid under the majority’s claim construction].
The Section 112 Issue: The more significant portion of the opinion involves the second group of claims, which implicate issues of claim construction, functional language, and indefiniteness. The district court construed the element “distributed learning control module for…” as being a § 112, ¶ 6 [now § 112(f)] means-plus-function element. Because there was no corresponding structure for the claimed function disclosed in the specification, the claim was indefinite. (I’ve highlighted the relevant section of the claim in the image above).
On appeal, the majority concluded that it was error to treat “distributed control module” as a means-plus-function claim term. Under the court’s precedent, the failure to use the word ‘means’ in a claim limitation creates a strong presumption that 35 U.S.C. § 112, ¶ 6 does not apply. And rebutting this presumption requires meeting a very high standard: “it must be demonstrated that ‘skilled artisans, after reading the patent, would concluded that [the] claim limitation is so devoid of structure that the drafter constructively engaged in means-plus-function claiming.’ Inventio AG v. ThyssenKrupp Elevator Ams. Corp., 649 F.3d 1350, 1357 (Fed. Cir. 2011).’ ” Slip Op. at 13 (my emphasis added). “A claimed expression cannot be said to be devoid of structure if it is used “in common parlance or by persons of skill in the pertinent art to designate structure, even if the term covers a broad class of structures and even if the term identifies the structures by their function.” Lighting World, 382 F.3d at 1359–60.
Applying this “devoid of structure” standard, the majority concluded that the presumption was not rebutted. There are at least some meanings of “module” that connote structure. “The district court, in characterizing the word “module”
as a mere nonce word, failed to appreciate that the word ‘module’ has understood dictionary meanings as connoting either hardware or software structure to those skilled in the computer arts.” Slip Op. at 14. In addition, the full term, “distributed learning control module,” is part of a structure, “distributed learning server,” and interconnects and intercommunicates with that server. “These claimed interconnections and intercommunications support the conclusion that one of ordinary skill in the art would understand the expression “distributed learning control module” to connote structure.” Id. at 16. The specification, too, suggests that “distributed control module” is not “devoid of structure.”
“Module” is a ‘nonce” word: Dissenting Judge Reyna would have agreed with the district court that the language triggered Section 112, para. 6. “Module” is simply a substitution for “means”; the effect is the same, as the claim limitation follows the term with “for” and three functions performed by the “distributed learning control module”:
This claim limitation is in the traditional means-plus-function format, with the minor substitution of the term “module” for “means.” The claim language explains what the functions are, but does not disclose how the functions are performed.[] In this case, the term “module” is a “nonce” word, a generic word inherently devoid of structure.
Dissent at 5. In support of this conclusion that “module” is tantamount to “means,” Judge Reyna cites sources recognizing that terms such as “module for” may invoke Section 112, para 6, including the Manual of Patent Examining Procedure. Furthermore, the majority’s citation of sources indicating that “module” can connote hardware, software, or both does not provide structure: “It refers only to a “general category of whatever may perform specified functions.” Id. at 6, quoting Bosch v. Snap-On. None of the addition material relied on by the majority provides any structural significance.
The Intra-Circuit Split: Setting aside the issue of whether the Federal Circuit’s current algorithmic approach to indefiniteness of functional language conflicts with Supreme Courtprecedent, an issue that Dennis and I have written about, this opinion reflects one of two different approaches to interpreting “X plus function” language in claims. (When “X” is something other than “means” or “step.”).
The majority’s holding in this case is an extension of a line of cases applying a very high threshold for “X plus function” language to trigger application of § 112, ¶ 6. To rebut the presumption in these cases, the “X” must simply “connote” structure to a person of ordinary skill in the art (and arguably under the way the standard is applied in Williamson, merely be capable of connoting structure). Put another way, the presumption is only rebutted if the claim term is “devoid” of structure.
The Federal Circuit’s recent opinion in Bosch v. Snap-On, which Dennis wrote about in October, reflects the second approach, which applies a less-strict threshold for rebutting the presumption. In Bosch, the court described the analysis as asking “if the claim language, read in light of the specification, recites sufficiently definite
structure to avoid § 112, ¶ 6…The question is whether the claim language names
particular structures or, instead, refers only to a general category of whatever may perform specified functions.” Bosch at 7 (emphasis added). There, the court concluded that “program recognition device” and “program loading device” did lack sufficient structure; the term “device” was a “nonce” word. The result was the opposite of Williamson: § 112, ¶ 6 was triggered and, because there was no corresponding structure the specification, the claims were indefinite.
For purposes of direct comparison, I’ve pasted the statements of the law from these two cases below.
From Williamson v. Citrix:
In Personalized Media Commc’ns, LLC v. International Trade Commission, 161 F.3d 696 (Fed. Cir. 1998), and again in DePuy Spine, Inc. v. Medtronic Sofamor Danek, Inc., 469 F.3d 1005 (Fed. Cir. 2006), we stated that the failure to use the word “means” in a claim limitation created a rebuttable presumption that 35 U.S.C. § 112, para. 6 did not apply. See Personalized Media, 161 F.3d at 703–04; DePuy Spine, 469 F.3d at 1023. This presumption is “a strong one that is not readily overcome.” Lighting World, Inc. v. Birchwood Lighting, Inc., 382 F.3d 1354, 1358 (Fed. Cir. 2004). To rebut this strong presumption, it must be demonstrated that “skilled artisans, after reading the patent, would conclude that [the] claim limitation is so devoid of structure that the drafter constructively engaged in meansplus-function claiming.” Inventio AG v. ThyssenKrupp Elevator Ams. Corp., 649 F.3d 1350, 1357 (Fed. Cir. 2011). A claimed expression cannot be said to be devoid of structure if it is used “in common parlance or by persons of skill in the pertinent art to designate structure, even if the term covers a broad class of structures and even if the term identifies the structures by their function.” Lighting World, 382 F.3d at 1359–60.
From Bosch v. Snap-On:
Although both “program recognition device” and “program loading device” are presumed not to invoke § 112, ¶ 6, we must next turn to the issue of whether this “strong” presumption against means-plus-function claiming is overcome. See Lighting World, Inc. v. Birchwood Lighting, Inc., 382 F.3d 1354, 1358 (Fed. Cir. 2004). In undertaking this analysis, we ask if the claim language, read in light of the specification, recites sufficiently definite structure to avoid § 112, ¶ 6. Inventio, 649 F.3d at 1357. The question is whether the claim language names particular structures or, instead, refers only to a general category of whatever may perform specified functions. See Laitram Corp. v. Rexnord, Inc., 939 F.2d 1533, 1536 (Fed. Cir. 1991) (“[t]he recited structure tells only what the means-for-joining does, not what it is structurally”). In the latter case, § 112, ¶ 6 then commands a construction of the limitation as referring to specification identified corresponding structures and their equivalents.
***
The real problem in my mind, however, is less the split over the strength of the presumption against triggering Section 112(f) when the words “means” (or “step”) are not used, and more the conflict with Nautilus. Even if Section 112(f) is not triggered, the claim could still be indefinite under the “reasonable certainty” standard for indefiniteness. In other words, the presumption simply goes to whether or not Section 112(f) is triggered; it does not address the deeper question of what happens when Section 112(f) is not triggered.
*The panel originally included former Chief Judge Rader. Upon his retirement, Judge Moore was appointed to join the panel.
In a strong opinion, the Federal Circuit has overturned a lower court summary judgment that Par’s megestrol formulation patent claims are obvious. (U.S. Patent No. 7,101,576). The case is interesting because it further solidifies the appellate court’s stance that functional claim limitations should be given their full weight and merit even when serving as the point-of-novelty of the invention.
As with many drug-related patents, Par’s claims include limitations regarding the effect of the drug. Here, the real benefit of Par’s formulation is that it is equally effective if administered in both a “fed” and “fasted” state. During prosecution (and in response to an obviousness rejection), par added the follow food-effect limitation: “wherein after a single administration … there is no substantial difference in the Cmax of megestrol when the formulation is administered to the subject in a fed versus a fasted state.” The remainder of the claim involves a series of specific dosages and particle size limitations to be used in the drug administration.
At trial, the district found the claims obvious based upon a combination of prior art references. Notably, the prior art was not shown to teach the food-effect limitation. However, the district court determined that the wherein clause deserved no weight in the obviousness analysis because it was simply describing a result inherent to the formulation.
On appeal, the Federal Circuit has vacated that finding — noting that the district court “incorrectly applied our law on inherency in the context of obviousness.”
Inherency: The traditional approach to inherency is with reference to the prior art — even when not expressly disclosed by the prior art, a feature will be deemed inherent to the prior art if “the natural result flowing from the operation as taught would result in the performance of the questioned function.” Hansgirg v. Kemmer, 102 F.2d 212, 214 (C.C.P.A. 1939). In the obviousness-combination context, the question is whether the non-disclosed limitation is the natural result of the combination of reference. In re Oelrich, 666 F.2d 578, 581 (C.C.P.A. 1981) (“[M]ere recitation of a newly discovered function or property, inherently possessed by things in the prior art, does not distinguish a claim drawn to those things from the prior art.”). The Federal Circuit here writes “the limitation at issue necessarily must be present, or the natural result of the combination of elements explicitly disclosed by the prior art.”
Of importance, however, the “natural flow” must be proven with clear and convincing evidence and may not be established by probabilities or possibilities or expectation.
In reviewing the evidence presented in this case, the appellate panel found that the challenger had failed to present sufficient evidence of inherency. In particular, althought the evidence presented showed that the combination would improve the food-effect, there was no evidence presented that the food effect was substantially eliminated as required by the claims.
While it may be true that a reduction in particle size [as disclosed in the prior art] naturally results in some improvement in the food effect, the district court failed to conclude that the reduction in particle size naturally results in “no substantial difference” in the food effect.
On remand, the district court will likely consider further evidence with regard to inherency.
The case here also ties-in with Mayo v. Prometheus. Following that decision, the claimed food-effect as a result of the particular administration would be seen as an unpatentable law of nature. The question then is whether that claimed function can serve as the point of novelty sufficient to overcome the prior art.
Guest commentary by Peter S. Menell. Professor Menell is Koret Professor of Law and at UC Berkeley School of Law and Director of the Berkeley Center for Law & Technology. Professor Menell filed an amicus brief along with Professors Jonas Anderson and Arti Rai in Teva Pharmaceuticals USA Inc. v. Sandoz Inc., 13-854. That brief can be accessed at: http://papers.ssrn.com/sol3/papers.cfm?abstract_id= 2457958.
The U.S. Supreme Court heard argument six weeks ago in Teva Pharmaceuticals USA v. Sandoz, a case addressing the scope of appellate review of claim construction rulings. While less headline-grabbing than recent cases addressing the patentability of business methods, computer software, and DNA, Teva nonetheless confronts a critical issue that has long plagued the patent adjudication system.
Nearly two decades ago, the Supreme Court sought to promote more effective, transparent patent litigation through its ruling in Markman v. Westview Instruments that “the construction of a patent, including terms of art within its claim, is exclusively within the province of the court.” While carefully avoiding characterizing claim construction as a pure question of law, the court nonetheless removed interpretation of patent claims from the black box of jury deliberations by holding that the Seventh Amendment right of trial by jury did not extend to patent claim construction and that trial judges were better equipped than juries to resolve the mixed fact/law controversies inherent in construing disputed patent claim terms. The decision ushered in a new patent adjudication era in which judges construe patent claims before trial through a process that has come to be known as a “Markman” hearing.
Notwithstanding this shift, the transparency that the Supreme Court sought has only been partially achieved and the quality of claim constructions falls short on evidentiary and analytical rigor. The U.S. Court of Appeals for the Federal Circuit’s sharply divided 1998 en banc decision in Cybor Corp. v. FAS Technologies held that claim construction is purely a legal issue subject to de novo appellate review, downplaying the Supreme Court’s more nuanced description of claim construction as a “mongrel practice.”
The Cybor decision dissuaded district judges from holding evidentiary hearings regarding the meaning of disputed claims and discouraged judges from explaining their reasoning. As several district judges have candidly acknowledged, why go through all of that trouble if the Federal Circuit is going to construe the terms de novo on appeal? Claim construction reversal rates and consternation among district (and some Federal Circuit) judges rose precipitously following Cybor. And although the Federal Circuit has twice revisited this issue en banc since Cybor and reversal rates have subsided (but not as a result of more transparent records), the controversy has festered, leading to the Supreme Court’s review.
Why the Fuss?
Patent law requires that claim terms be construed from the standpoint of persons of ordinary skill in the technical art using the patent specification and prosecution history (intrinsic evidence) as well as pertinent scientific and technical sources (extrinsic evidence) where necessary as of the time of the patent filing.
Federal district judges are thus thrust into challenging, but not unfamiliar, territory. As in other areas of their docket — such as products liability, toxic torts or even criminal cases turning on forensics — in which they are called upon to resolve factual disputes about scientific and technological matters, judges have at their disposal a familiar toolbox — presentation of evidence and expert testimony. And when district courts assemble a record and explain their reasoning, Federal Rule of Civil Procedure 52(a)(6) provides that their determinations “must not be set aside unless clearly erroneous, and the reviewing court must give due regard to the trial court’s opportunity to judge the witnesses’ credibility.”
Patent claim constructions add a few additional twists to this well-established general judicial framework. Even if a district judge found that a patent claim term meant “X” to skilled artisans as of the effective patent filing date, the court would still have to construe the term to mean “Y” if the intrinsic evidence established that the patentee intended such a specialized meaning. Furthermore, many disputes about patent claim meaning turn not on meaning within the technical art but rather on claim drafting conventions. Thus, courts must pay special attention to the intrinsic evidence. But the understandings of skilled artisans will be pertinent in many claim constructions, and such subsidiary factual determinations should be subject to deference under general judicial rules as well as trial judges’ proximity to the extrinsic evidence.
For these reasons, the Supreme Court should adopt a hybrid appellate standard for claim construction: Factual determinations underlying claim construction rulings should be subject to the “clearly erroneous” standard of review, while the Federal Circuit should retain de novo review over the ultimate claim construction decision. In this manner, district court judges, in their capacity as fact-finders, could better surmount the distinctive challenges posed by the technical, mixed fact/law controversies inherent in patent claim construction. The Federal Circuit would ensure that trial judges’ constructions comport with the intrinsic evidence supporting the patents.
Parsing the Supreme Court Argument
The Teva argument began with a colloquy regarding what constitutes a “subsidiary fact” and how it relates to the ultimate claim construction determination. Midway through Teva’s opening argument, Justice Samuel Alito expressed doubt that departing from the de novo standard was worth the candle. He noted that a recent empirical study could not find any case in which a shift from the de novo standard to clear error review of factual determinations would have affected the appellate review outcome.
In an unintended manner, Justice Alito’s query highlights the reason de novo review of factual determinations raises serious concerns for a justice system. The study to which he refers does not and cannot establish the “fact” that it is purported to prove. Its analysis — which is not revealed or scrutinized in the Supreme Court colloquy — boils down to the following logic: (1) three-judge panels of the Federal Circuit will be better than a single generalist district court judge at applying the appellate court’s rules of claim construction; and (2) because most claim construction reversals (77.1 percent) are unanimous, a shift to a clear error standard would not change the outcome of any cases. The first point ignores the distinctive role of judges in fact-finding, a pillar on which our court system is based. The second point does not prove that no cases would come out differently. It also overlooks the norm that appellate judges rarely dissent unless they disagree on legal questions.
More fundamentally, according greater deference to trial courts through clear error review would encourage district judges to use focused evidentiary hearings (in conjunction with the technical tutorials that are common) to substantiate the basis for their claim constructions, thereby promoting more systematic, well-founded claim construction analysis. Contrary to the study to which Alito referred, we have reason to expect clearer substantive analysis, more settlements following claim construction and trial, more effective appellate review, and fewer reversals and remands in a parallel universe in which Rule 52(a)(6) applies to claim constructions — not business as usual in the Cybor regime.
The Court also probed how deference on subsidiary facts would affect uniformity in patent interpretation. At a basic structural level, it is difficult to see how to achieve such uniformity to the extent that claim construction has a factual component. Under Blonder-Tongue Labs., Inc. v. Univ. of Ill. Found., 402 U.S. 313 (1971), the Federal Circuit’s interpretation of a patent in one case cannot be asserted offensively by the patentee in a later infringement action against other defendants to the extent that there are disputed factual underpinnings. At most, that prior adjudication can bar the patentee from seeking an alternative interpretation under judicial estoppel principles. Because the patent system has no mechanism for conclusively establishing patent scope with regard to all potential infringers where subsidiary factual disputes exist, the certainty that flows from appellate interpretations is not ironclad, as subsequent defendants can potentially bring new evidence or more effective advocacy to bear on claim meaning. Nonetheless, district courts routinely consider prior interpretations of patent claim terms in conducting claim construction. Moreover, concerns about the clarity of patent claims are more appropriately addressed through improvements to the patent prosecution process, post-grant review and reexamination, consolidation of claim construction through multi-district litigation, and adjustments to substantive claim construction jurisprudence.
Back to Basics
The Teva case poses a fundamental question going to the heart of the American justice system. Should factual determinations underlying patent claim construction be subject to substantially less deference (or more distrust) than the factual determinations made in every other area of federal adjudication? In view of the Supreme Court’s efforts over the past decade to bring patent adjudication more in line with general civil litigation principles, it is difficult to see why the Court would make an exception here. Combining deferential review of factual findings with de novo review of the overarching claim construction determination — focused on ensuring that claim construction comports with the intrinsic evidence and that the trial court followed generally applicable rules of claim construction — would enhance the quality of claim constructions, produce a more capacious and transparent appellate record, and provide the appropriate appellate safeguard.
Jim Bessen has a short essay in The Atlantic titled: What the Courts Did to Curb Patent Trolling—for Now. In the essay, Bessen includes the following chart of showing how the USPTO has slowed-down issuance of business method patents following Alice. Notably, software patents in general have not seen the same slowdown.
The point here, according to Bessen is that, although the Supreme Court has done some work, there is still plenty of room for Congressional action to further reduce or eliminate patents covering software.
Both sides of the debate have considerably increased their lobbying activity over the past few weeks as Republicans formulate their legislative strategy for 2015.
Proud to announce that the 3rd edition of Patent Ethics: Prosecution that I co-authored with Mercedes Meyer is now available here! This edition adds a massive amount of new material to deal with the new PTO ethics rules and the fast-moving, roller coaster world of ethical issues in patent practice!
From the description:
Patent Ethics: Prosecution (2015 Edition), by David Hricik and Mercedes Meyer, is an essential guide to the ethical issues arising in the course of the patent prosecution process. By providing relevant rules and case law, it allows practitioners to identify ethical problems before they arise and to address them most effectively when they do. Patent Ethics: Prosecution is one of two volumes on patent ethics — the second focuses on litigation — and is the first of its kind to combine the United State Patent and Trademark Office (PTO) rules with commentary by the authors, which distills the authors’ own experience and expertise in patent prosecution into effective practice strategies.
The 2015 Edition is particularly relevant considering the significant ramifications with the United States Patent & Trademark Office (USPTO) repealing its existing rules, the USPTO Code of Professional Responsibility, and replacing them with the new USPTO Rules of Professional Conduct. Furthermore, the 2015 Edition also comprehensively discusses ethical issues of major concern for patent law practitioners such as:
• The increase in malpractice claims based upon patent prosecution as well as recent significant verdicts of $30 million and $70 million.
• The USPTO’s Office of Enrollment and Discipline’s vigorous enforcement efforts, continued persistence in asserting a broad view of its jurisdiction, and resulting increase in the volume of case law and other authorities.
• The troublesome issue of best mode and the America Invents Act.
• The various ethical issues surrounding patent agents.
The 2015 Edition features new analysis of current client conflicts in patent practice, including when prosecution and opinion work become “adverse” to a client, the conflicts of interest created by the AIA’s approach to the best mode, and duty of candor post-Therasense. It also includes an updated PTO Code completely annotated with OED decisions on each provision.
Makes a perfect Christmas present, too! Buy one for every lawyer in your firm! Heck, buy two so they have one at home!
In FY2014, the USPTO swelled to over 12,000 employees. This represents a 50% increase in less than a decade. As the chart above indicates, the bulk of the increase (and indeed, the bulk of employees overall) is in patent examiners. Today, the number of patent examiners is approaching 9,000 and Director Lee expects to continue to hire more examiners through the next year.
The idea here is to take control of the 1.1 million application backlog to ensure that patents are either issued or rejected early in the process. A major question is what will the USPTO do with the excess employees once the backlog comes down.
The backlog of pending cases generally has two major inputs: (1) how many applications are filed and (2) how fast the USPTO is at examining those applications. The USPTO is operating faster than ever, but we also have more applications than ever. I expect that the figures here will drop dramatically in FY2016.
I will be part of the faculty of the Intellectual Property Law Program at the National CLE Conference in Vail, Colorado January 7-11, 2015, www.cleandski.com. I hope to see you there. For a $100 discount, use the promo code FACULTYINSIDER. – Dennis
In Versata v. Callidus, the Federal Circuit holds that the erred by refusing to stay litigation to await the outcome of an CBM post-grant review proceedings. Generally, stays of litigation are given to the discretion of the district court judge and reviewed only for abuse of discretion. However, the AIA provides that Federal Circuit review on this issue is de novo when the justification for a stay is CBM review.
Versata filed its lawsuit in 2012 — alleging infringement of three different patents. U.S. Patent Nos. 7,904,326; 7,908,304; and 7,958,024. More than one year later, in August 2013, Callidus filed three petitions for CBM post-grant review respectively challenging the asserted patents (although not all claims of all of the patents). Then, in March of 2014 the PTAB instituted its CBM review for each patent — finding that each challenged claim was most likely unpatentable as abstract under 35 U.S.C. 101. In April 2014 Callidus filed three new CBM petitions that challenge all of the remaining asserted claims in the patents. In May 2014, the district court granted a stay of proceedings as to the ‘326 infringement action but denied it as to the other two patents and prepared to move forward for a October 2015 trial date. Callidus then filed for interocutory appeal of the stay denial. And finally, while awaiting appeal, the PTO acted on the second-round of petitions and agreed that all of the claims are likely invalid under Section 101. The CBM reviews are still ongoing, but Callidus would like the district court to stop its proceedings and wait for the PTAB to finalize its results.
The AIA provides statutory guidance for dealing with stays of litigation in light of CBM reviews. In particular, the AIA provides that the judge should consider:
(A) whether a stay, or the denial thereof, will simplify the issues in question and streamline the trial; (B) whether discovery is complete and whether a trial date has been set; (C) whether a stay, or the denial thereof, would unduly prejudice the nonmoving party or present a clear tactical advantage for the moving party; and (D) whether a stay, or the denial thereof, will reduce the burden of litigation on the parties and on the court.
AIA § 18(b)(1). The AIA also provides for immediate interlocutory appeal of decisions on stays pending CBM review and de novo review on appeal.
On appeal, the Federal Circuit has reversed – finding that the CBM review as a good chance of greatly simplifying the issues in the case. Of notable importance, the court found that, although the relevant time for judging a stay is as of the motion filing, the court may (and did) take judicial notice of the ongoing PTAB proceedings.
Since the new procedure launched in 2011, third parties have filed more than two thousand requests for Inter Partes Review.
IPR Filings
In their new University of Chicago Law Review essay, Professor Brian Love and Shawn Ambwani explore some of the results from these past two years. See Inter Partes Review: An Early Look at the Numbers, 81 U Chi L Rev Dialogue 93 (2014) [Essay].
Love, who tends to favor a strong post-issuance review regime, suggests that (based upon the initial numbers) the regime is doing its job:
Though it would be premature to make sweeping claims about IPR at this time, so far IPR appears to be a powerful shield for those accused of patent infringement (and those who anticipate that they may soon be). Compared to requests for inter partes reexamination, petitions for IPR are currently granted at a similar rate, but once instituted, they result in the elimination of every challenged claim about twice as often, reach a final decision almost twice as quickly, and make accused infringers almost twice as likely to win motions to stay co-pending litigation. In its attempt to create a formidable avenue for administratively challenging issued patents, Congress appears to have hit the mark—but only time will tell for sure.
Looking particularly at NPEs, the article reports that IPR-challenges of patents being elsewhere asserted by NPE are more likely to be instituted (as compared with the population), but less likely to result in cancellation of claims.
Over the next year, the number of results will grow tremendously and we will have a better understanding of the process and its merits. In addition, I suspect that the results will vary over time as Office hones its approach and the composition and leadership of the PTAB changes.
