Get a Job doing Patent Law
A few months ago I wrote about the Fourth Circuit decision in Shammas v. USPTO under the headline “USPTO Can Demand Attorney Fee Awards, Even When it Loses the Case.” The Shammas case surrounds the question of when, and to what extent, the PTO may request reimbursement of its costs associated with a civil action filed by a petitioner trying to force the USPTO to grant the applied-for rights. The particular case here is focused on a trademark civil action, but the statute is virtually parallel for patent cases. In particular, both provisions include cost-shifting would seemingly force the applicant to pay the PTO’s expenses of the proceedings, win-or-lose.
Patent Cases: “All the expenses of the proceedings shall be paid by the applicant.”
Trademark Cases: “unless the court finds the expenses to be unreasonable, all the expenses of the proceeding shall be paid by the party bringing the case, whether the final decision is in favor of such party or not.”
Here, the district court sided with the USPTO – agreeing that the term “PROBIOTIC” was generic for its proposed use and therefore not registrable.
The district court then awarded attorney fees to the USPTO, which the 4th Circuit affirmed — holding that the “all the expenses” provision of the statute includes attorney fees.
The losing mark-seeker has now filed a petition for writ of cert asking:
Whether the Fourth Circuit’s holding – that “the expenses of the proceeding” that “shall be paid” by a trademark applicant bringing an action under Section 21(b) include the salaries of attorneys and paralegals employed by the United States Patent and Trademark Office – violates the American Rule.
Although the PTO seems to have the upper hand with regard to the statutory language, the right to fee shifting is hard for petitioners to accept — especially considering the rarity of strict fee-shifting mechanisms within our court systems (especially where one-side always pays).
A surprising aspect of the case is that the statute has been around for a while (170 years) and during that time, the USPTO has apparently never before sought (or been awarded) attorney fees under the statute. Without a grant of certiorari, that trend will have come full-stop and about-course.
[Shammas v Focarino certiorari pet and pet app]
Following up on the Shukh v. Seagate petition for en banc rehearing, the Federal Circuit has now taken an important first step of asking Seagate for its response to the petition, due by November 13, 2015.
The issue here is the construction of an employment agreement where the patentee “hereby assigns” all future inventions (created within the scope of the employment). The Federal Circuit rule is that the agreement serves as an effective property right transfer such that, at the moment* of invention, rights to the invention automatically transfer to the employer.
One reason why the issues in the case are interesting to me is because the current Federal Circuit rule is contrary to the traditional property law notion expounded in the UCC that “a purported present sale of future goods or of any interest therein operates as a contract to sell.” Although relatively new, these same limits on property transfer stretch back hundreds of years in our common law history. In the background of the case is the notion that the Federal Circuit has created a federal law of assignment agreements that seemingly operates worldwide — again going against the norm that in the patents are to be treated as personal property in the exchange context, and personal property exchanges are normally governed by local state or foreign law.
In the patent context the question the Federal Circuit’s rule serves as an important and additional thumb on the side of employers rather than their employee inventors. In addition questions of legal tradition noted above, the the case raises important innovation policy questions and questions of inventor/employee rights. The issues here can be thought of as in parallel to other areas where the law places limits on how far employment contracts can go to strip an employee of her rights. Consider, for example, covenants-not-to-compete, inventions outside of the scope of employment, and post-employment secrecy requirements limiting what someone can do with learned skills and knowledge. In those contexts, the courts (and legislatures) have found that it doesn’t make sense to enforce overreaching employment contracts except when very particularly bargained for.
Employers obviously prefer the current rule because it so strongly favors them. Thus, I expect that any IPO/AIPLA (and probably PTO) commentary on this front will support the current automatic-assignment rule.
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* I included the asterisk next to “moment” of invention because of the reality that invention is typically a process distributed over time. As the courts have repeatedly written, invention begins with a full and complete conception of the invention remains inchoate until the invention is reduced to practice (either actually or constructively). Updated for spelling.
The following section from the Curtis Treatise on the Law of Patents is interesting in my estimation.
Section 170 The statutes however which authorize the assignment of an invention before the patent has been obtained appear to embrace only the cases of perfected or completed inventions. There can properly speaking be no assignment of an inchoate or incomplete invention although a contract to convey a future invention may be valid and may be enforced by a bill for a specific performance. But the legal title to an invention can pass to another only by a conveyance which operates upon the thing invented after it has become capable of being made the subject of an application for a patent This is apparent from the provisions of the statute which require the specification and the application to be made in the name of the inventor. A contract to convey a future invention or an improvement to be made upon a past invention cannot alone authorize a patent to be taken by the party in whose favor such contract was intended to operate.
George T. Curtis, A Treatise on the Law of Patents for Useful Inventions (1873).
Alexander Shukh v. Seagate Tech. (Fed. Cir. 2015) (en banc petition)
In an en banc petition, Shukh has challenged the Federal Circuit’s “automatic assignment” rule announced in its 1991 FilmTec decision. The basic rule from the Federal Circuit is that a pre-invention contract that states “I hereby assign” potential future inventions is deemed an effective transfer of title even though the future inventions have not yet been conceived. The more standard interpretation of a purported transfer of a not-yet-owned property is, at most, as a conveyance of equitable rights but not legal title. See Stanford v Roche (2011) (Breyer, J., dissenting) (citing G. Curtis, A Treatise on the Law of Patents for Useful Inventions §170 (1867)). Legal title then requires a new affirmative act by the seller once title is acquired. See Pomeroy on Equity Jurisprudence §1287 (1918); Joseph Story, Equity Jurisprudence, §1040 (1853); Murray, Corbin on Contracts §50.2 (2007); UCC Section 2-105(2) (“A purported present sale of future goods or of any interest therein operates as a contract to sell.).
This is an issue that has been boiling under the surface for some time and the court should grant en banc rehearing.
The petition raises a second issue involving attorney-client privilege that could have an important impact on patent prosecution.
Whether, in a Section 256 Correction of Inventor action, does the common interest doctrine of attorney-client privilege entitle an inventor to access and use his own invention records and communications?
A potential outcome of this decision could be further clarification as to the relationship of the attorney to inventors who are the employees of the client at a time when the inventors continue to have title to the invention at name-listing rights.
Read the petition: AMS En Banc Petition
WARF v. Apple (W.D. Wisconsin 2015)
Following a jury verdict on infringement and validity (October 10) and another verdict on damages awarding $230 million in reasonable royalty (October 19), Judge Conley (W.D.Wisc.) has now quickly disposed of the case by entering judgment in favor of the patentee (WARF) the amount awarded and denying Apple’s motion for judgment as a matter of law. The case is now set for appeal to the Federal Circuit.
During trial the Judge rejected WARF’s willfulness claim – finding that Apple had a pretty good – thought ultimately losing – obviousness argument:
Apple demonstrated at trial that the elements of the asserted claims of the ‘752 patent were all known in the prior art, and many were well-known for those skilled in the art. Indeed, WARF did not meaningfully dispute this. As a result, the only factual dispute as to Apple’s obviousness defense was whether a person of ordinary skill in the art would have combined those elements and had a reasonable chance of doing so successfully.
Under the current requirement of both objectively and subjectively willful behavior, the court found that WARF could not prove with clear and convincing evidence that Apple acted “despite an objectively high likelihood that its actions constituted infringement of a valid patent.”
It turns out that Apple had also presented its obviousness argument to the PTAB in an inter partes review challenge. In that case, the Board refused to grant the IPR petition – finding that Apple “has not shown, under 35 U.S.C. § 314(a), that there is a reasonable likelihood that it will prevail with respect to at least one of the challenged claims.” Back in the lawsuit, Judge Conley rejected WARF’s argument that the PTAB’s denial is relevant. Unfortunately, it appears that the Judge’s ruling is based upon a misunderstanding of PTAB procedure and burdens. In particular, the judge rested his decision upon the incorrect notions that IPR cancellation requires “clear and convincing evidence” and that granting an IPR petition requires proof that the challenger is “likely to prevail” on the merits. The Judge writes:
All PTAB found was that Apple was not likely to prevail on its defense by proving obviousness by clear and convincing evidence. PTAB did not consider whether this defense was objectively reasonable or raised a substantial question. As such, the PTAB finding — like the jury’s finding rejecting the invalidity challenge — does not settle the issue of whether Apple’s defense was objectively reckless.
Of course, the PTAB cancellation is based upon a substantially lower standard – a preponderance of the evidence – not clear and convincing evidence. In addition, the PTAB decision at the petition stage looks only for a “reasonable likelihood” of prevailing rather than simply being “likely” to prevail. (In most cases, the ‘reasonable’ modifier makes it easier to prove a conjecture: compare “certainty” with “reasonable certainty.”)
Although the PTAB decision is not identically written to the willfulness test, it is not clear to me which standard is higher. And, I think that the statistics would play out here to easily show that it is a rare case where a well-pled obviousness argument was rejected by the PTAB at the petition stage and then relied upon by a jury to invalidate a patent.
The comparison:
I will pause here to apologize for the complexity of the comparison. You can thank the Federal Circuit for creating these tricky rules to replace what has traditionally (and by statute) been a much more open doctrine. The Supreme Court is addressing these issues in Halo and Stryker.
The point here for me is that Apple was unable to pass the petition stage of an IPR – i.e., they did not have a reasonable chance of winning on the lowered standard for invalidity. At least we can say that they had even less of a shot of winning with the same challenge presented in court with the higher burden. In context, this seems to me that the PTAB decision is quite relevant to the question presented here.
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I’ll note here that the district court briefing on the issue was all filed under seal and not available. In addition, the district court has just agreed to seal a large set of trial evidence and demonstrative exhibits. It appears that WARF offered no objection – why would they? Here, at the least the court should order a redaction rather than complete sealing to support the strong public interest in patent cases and in an open court system. See also, Secret Patent Trials are OK; Access to Courts; A Call for Restraint in Sealing Court Records.
Guest post by Bernard Chao
On September 17, 2015, the Federal Circuit issued another decision in the Apple v. Samsung smartphone war (summarized previously here). In the fourth court decision dealing with injunctions, Apple IV gave new guidance on the level of proof necessary to satisfy the “causal nexus” requirement. Although this requirement demands that patentees prove that the specific infringing feature cause irreparable harm, the majority opinion (by Judge Moore) observed that proving causation was “nearly impossible” in cases involving products with thousands of components. So the court watered down the causal nexus requirement by saying that it was enough for Apple to show the infringing features to be “important to product sales and that customers sought these features in the phones they purchase.” On October 19, 2015, Samsung filed a Petition for Rehearing en banc on this issue. Although I don’t agree with everything Samsung has to say about Apple’s injunction request, I do believe that the full Federal Circuit should revisit the decision and reinvigorate the “causal nexus” requirement.
As I argue in greater depth in my upcoming essay, Causation and Harm in a Multicomponent World
(forthcoming University of Pennsylvania Law Review Online), Apple IV is troubling on both doctrinal and theoretical grounds. On the doctrinal level, the decision fails to appreciate that most multicomponent technology products are made up of countless small advances, not a few far-reaching ones that change consumer preferences. Presumably, Apple chose its most valuable patents to assert against Samsung; but a review of the three Apple patents at issue show how minor the infringing features are — a conclusion that Chief Judge Prost’s dissent also made. If a powerhouse like Apple doesn’t have a pioneering patent to assert, there probably aren’t very many such patents out there. My point is that a single feature rarely, if ever, drives consumers from one technology-based product to another. Holding that causation is present for every important feature is therefore inconsistent with how consumers actually decide to buy multicomponent devices.
On a theoretical level, Apple IV reveals a deeper debate within patent law. Some view patents as a kind of traditional property that allows owners to do with it what they will. Others understand patent law to be focused on the public good. Reviewing Judge Moore’s majority opinion and Judge Reyna’s concurrence reveals that their willingness to accept less evidence of harm has been clouded by their view of patents as a form of traditional property. But this view of patents is wrong. The fundamental purpose underlying patent law is to promote innovation. To the extent that inventors receive financial rewards, it is simply a byproduct of encouraging innovation. This concept is rooted in the Constitution, which authorizes laws “to promote the Progress of Science and the useful Arts . . .” Moreover, the Supreme Court has repeatedly sought to maximize innovation on behalf of the public when shaping various different patent doctrines. Most importantly, that is the view the Court took in eBay Inc. v. MercExchange, L.L.C., 547 U.S. 388 (2006) when it held that patent owners no longer possess the automatic right to exclude others from infringing their patents. They must first satisfy eBay’s equitable four factor test. Of course, the first factor involves showing that the infringing feature actually caused irreparable harm.
In sum, there are both doctrinal and theoretical reasons for the full Federal Circuit to reconsider Apple IV and restore the “causal nexus” requirement so that patentees have to show real causation and harm. The failure to do so will allow patentees to use a permanent injunction (or the threat of one) to force an infringer to take a license at a rate that reflects the value of the injunction, which is often greater than the value of the patented feature. This is the kind of patent holdup that a prudent application of eBay helps avoid.
by Dennis Crouch
Back in 2008, I remember speaking with Judge Rader about the court’s recent jurisprudence. My thought was that In re TS Tech (Fed. Cir. 2008) was the most important of the year thus far. In that case, the Federal Circuit started the trend of mandamus actions for venue change that had an important (although not conclusive) impact on venue in patent cases. Following TS Tech, patent plaintiffs learned ways to shape their behavior to better ensure venue by, for example, incorporating in Texas and creating a headquarters in Marshall. At that time, we also saw a rise in patent infringement filings in Delaware – the corporate home for many companies, plaintiffs and defendants alike.
The new pending mandamus petition of In re TC Heartland (Fed. Cir. 2015) has the potential of even more dramatically shaking-up patent litigation filing strategy and limiting the extensive forum shopping available under current Federal Circuit doctrine. In particular, the E.D. Texas filings might be brought-back into the norm.
The Federal Circuit has taken its first step toward hearing the mandamus action by ordering Kraft to provide a response to Heartland’s petition. The per curiam order requires Kraft to respond within seven days. 10-26-15Order.
In the case, Heartland proposes a reinterpretation of the more powerful doctrine of jurisdiction rather than the venue requirements of TS Tech.
Under Heartland’s proposed statutory interpretation, a patent case could only be filed in districts (1) where the defendant resides or (2) where the defendant has both committed acts of infringement and has a regular and established place of business. This stems directly from the language of 28 U.S.C. 1400(b).
Further, in cases where a court’s personal jurisdiction over the defendant is based on acts of infringement in the forum (specific jurisdiction rather than general jurisdiction), Heartland argues that the courts don’t have jurisdiction to adjudge the alleged out-of-state infringement.
Susan Decker provides more perspective in Bloomberg.
By Dennis Crouch
In re TC Heartland LLC (on mandamus to the Fed Cir. 2015) (read-it: Heartland Mand)
An interesting mandamus action was recently filed by the Prof John Duffy and Jim Dabney (both now with Hughes Hubbard) raising the following: Whether 28 U.S.C. § 1400(b) precludes the district court from hearing this action.
Section 1400(b) is the jurisdiction statute for patent cases indicates two mechanisms for jurisdiction: (1) the district where the defendant resides or (2) the district where the defendant infringed and has a regular place of business.
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.
28 U.S.C. § 1400(b). Section 1391(c) further provides for a broad definition of residency, broadly including both (1) the district of domicile and (2) any district where the defendant is subject to the court’s personal jurisdiction on the issue of the case.
The question ultimately raised by the case is whether the broad residency definition of §1391(c) applies to modify and expand the “resides” language of 1400(b).
The history goes back-and-forth: In Fourco Glass Co. v. Transmirra Products Corp., 353 U.S. 222 (1957), the Supreme Court ruled that “28 U.S.C. § 1400(b) is the sole and exclusive provision controlling venue in patent infringement actions, and that it is not to be supplemented by the provisions of 28 U.S.C. § 1391(c).” Then in 1988, §1391(c) was amended to expand the definition of residency and also to include a statement that its residency definition was “for purposes of venue under this chapter.” Subsequently, the Federal Circuit in VE Holdings held that the 1988 amendment overruled Fourco and that the expanded residency definition §1391(c) now applies in patent cases since §1400 (the patent jurisdiction provision) is in the same chapter as §1391. In 2011, Congress again changed its statute – this time repealing the “for purposes of venue under this chapter” and instead added in that the statute applies in all civil cases “except as otherwise provided by law.”
The petition argues that VM Holdings was wrongly decided in the first place and basically led to the reality known as the Eastern District of Texas. In the alternative, the petition also argues that the 2011 amendment overruled VM Holdings.
VE Holding has produced enormous venue shopping opportunities in patent infringement actions to the point where, in the most recent year, one district (E.D. Tex.) has 50% more patent filings than the next most popular district (D. Del.) and more than four times as many filings as the district with the third most patent case filings. . . . “The abuses engendered by this extensive venue,” Stonite Products Co. v. Melvin Lloyd Co., 315 US 561 (1942), are precisely the sort of abuses that were prevented by the Supreme Court’s decisions on § 1400(b) and that would be prevented once again with a return to those controlling precedents.
What isn’t clear to me is whether a mandamus panel has authority to overrule the prior precedent. Of course, an en banc panel will have that authority and in their petition Duffy & Dabney particularly request en banc consideration.
Personal Jurisdiction: The petitioner here also argues an additional personal jurisdiction question that begins with the standard notion that each act of infringement is a separate act of infringement. Their argument then is that the court only has specific personal jurisdiction with reference to allegedly infringing Delaware sales and not the sales in other jurisdictions. The usual practice in patent cases is that once the court has specific personal jurisdiction based upon one alleged act of infringement directed to the state that the court can then adjudge infringement allegations arising nationwide. Of course, that result contravenes the usual rule that “specific personal jurisdiction is limited to claims that arise from “an ‘activity or an occurrence that takes place in the forum state.'” Walden (2014). In its brief, the petitioner does a fine job of distinguishing Keeton v. Hustler (1984) that allowed for nationwide damages for defamation. The difference from patent law is that the substantive single publication rule for defamation means that the nationwide damages all stemmed from the same tortious act that led to the specific personal jurisdiction in NH; in the patent context sales in one state that might create personal jurisdiction in that state are separate acts of infringement than sales in another state. Thus, the petitioner explains: “The district court here plainly lacks personal jurisdiction to adjudicate the merits of claims arising from non-Delaware transactions or events.”
At first glance, you might think that petitioner’s rule would lead to a patentee having to sue a defendant separately in each state across the nation. That would only be true if there was no location with general jurisdiction over the defendant – nationwide claims would still be available in any state with general jurisdiction over a defendant. In addition, the availability of multi-district litigation would streamline cases where multiple parallel lawsuits are filed.
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![about_energy_black_cherry_bottle[1]](https://cdn.patentlyo.com/media/2015/10/about_energy_black_cherry_bottle1.png)
The case below is Kraft Foods v. TC Heartland (D.Del.) and alleges infringement of three patents covering the packaging and contents of a flavored liquid beverage concentrate such as Kraft’s MiO water enhancer. U.S. Patent Nos. 8,293,299; 8,511,472; and 8,603,557. TC Heartland makes its competing “Splash” water enhancers from its Carmel, Indiana HQ.
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Additional Docs:
Meso v. Roche (Meso Scale petition & app)
In a new petition for cert, Meso Scale asks the following simple question:
Whether a covenant, promise, or agreement not to sue for the infringement of a federal patent is a license of that patent as a matter of federal law.
Patent licensing is a messy area of law because it is largely governed by state law (or foreign law if contracting abroad), but is also governed by federal patent law.
The Federal Courts have been rather clear that, in the patent context, a covenant-not-to-sue is the equivalent of a license. See, De Forest Radio Telephone & Telegraph Co. v. United States, 273 U.S. 236 (1927) and TransCore, LP v. Electronic Transaction Consultants Corp., 563 F.3d 1271 (Fed. Cir. 2009). However, in this case, the Delaware Courts ruled that the covenant-not-to-sue granted by Meso to Roche was “more than a simple consent, but less than” a license. — Thus the question presented.
The importance here for Meso is that, since its covenant-not-to-sue wasn’t seen as a contractual license then Meso wasn’t able to enforce other (implied?) terms of that agreement. Meso explains this setup in its brief:
In this case, the Delaware courts’ mistaken conclusion that Meso did not grant Roche a license led them further to conclude that Meso was not a party to a license agreement between Roche and respondent IGEN, under which Roche agreed that it would use certain patented technology only within a strictly limited field. By going outside that field, as it has since 2007, Roche placed itself in direct competition with Meso and caused great harm to Meso’s business. Meso therefore sought to enforce the field restrictions in the license agreement against Roche, as the agreement permitted it to do. Because, however, they thought that Meso had not granted Roche a license (but had merely agreed not to sue Roche for otherwise infringing activities), the courts below accepted Roche’s position and held that Meso had no right to enforce the terms of the license agreement.
The issues here continue to be very important and relate to complex litigation and bankruptcy strategies as well. In its 2013 decision in Already, LLC v. Nike, Inc., 133 S. Ct. 721 (2013) and MedImmune v. Genentech (2007), the Supreme Court considered the impact of covenants-not-to-sue and licenses on federal jurisdiction questions. Two pending petitions (Mylan v. Apotex and Daiichi Sankyo v. Apotex) focus on the similar issue of patent disclaimer in the context of Hatch-Waxman gaming. In those cases, a second ANDA filer (Apotex) is trying to trigger an early completion of the first-filer’s 180 days of generic exclusivity by challenging the brand’s patents that, in both cases, have been disclaimed but remain listed in the Orange Book.
In the bankruptcy context, we know that a Trustee generally has power to selectively reject or accept executory contracts. Section 365(n) creates an exception for licensed IP rights (thus barring an executor of an estate holding patent rights from unilaterally cancelling previously agreed-to licenses). However, the Delaware court decision implicitly suggests that a covenant-to-sue wouldn’t fit within the exception and may instead be cancelled.
The Meso petition also raises questions involving exhaustion – does exhaustion apply to an otherwise infringing article made subject to a covenant-not-sue — as well as taxation and notice.
By Jason Rantanen
I’m very much looking forward to giving the Patent Year-in-Review talk at the AIPLA annual meeting tomorrow. If you’re at the AIPLA conference, I’d love to chat with you tonight at dinner or Saturday morning. Look for the somewhat geeky guy with glasses. 😉
In connection with that talk, AIPLA asked me to put together an essay as well. I posted a copy of that original essay a month ago; surprisingly, there have been developments in patent law since then! So if you’re looking for the updated version, which includes the Federal Circuit’s en banc opinion in SCA Hygiene and the Supreme Court’s grant of certiorari in Halo and Stryker earlier this week, it’s here: http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2658737
Ex Parte Bak, Application 12/822,772 (PTAB 2015) (Owned by IBM)
Claim at issue: 1. In a network of computer controlled user interactive display stations, a method for the scheduling of meetings on the calendars of invitee users comprising:
prompting an inviter, at a sending display station, to enter into an invitation a predetermined set of general attributes for the scheduled meeting;
enabling each invitee to predetermine a set of invitee-specific attributes applicable to each invitation; and
enabling each invitee to prioritize each predetermined general attribute and each invitee-specific attribute to a numerical priority level to determine the priority of said meeting on the invitee’s calendar.
Holding: [T]he claim is directed to the abstract idea of scheduling a meeting. . . . In this case, to the extent that claim 1 requires a network of computer controlled user interactive display stations and a sending display station, we determine that the recitation of such generic component is insufficient to transform the nature of the claim into a patent-eligible application.
Ex Parte Base, Application 10/489,651 (PTAB 2015) (Owned by Siemens)
Claim at issue: 11. A method for video coding using symbols, the method performed by execution of a computer program stored on a non-transitory computer readable medium and comprising the steps of:
providing a prediction error matrix;
converting the prediction error matrix by coefficient sampling into a series of symbols; and
performing context-adaptive arithmetic encoding of the symbols, wherein the encoding includes for a symbol being encoded, selecting from different predetermined distributions of symbol frequencies a particular predetermined distribution of symbol frequencies based on the symbol encoded immediately beforehand, the predetermined distribution of symbol frequencies indicating the likelihood of different types of symbols occurring immediately following the type of the symbol encoded immediately beforehand based on known statistical interdependencies between different types of symbols occurring in succession;
wherein a number of symbols read out for coefficient sampling is encoded and transmitted.
Holding: Independent claims 11, 20, and 21 are directed to methods of video coding using symbols with three steps: providing a prediction error matrix; converting the prediction into a series of symbols; and performing context-adaptive arithmetic encoding of the symbols. These are mental process steps which can be performed in the human mind, or by a human using a pen and paper. . . . And the recitation in the preamble of independent claims 11 and 21 of performing the method “by execution of a computer program” does not transform the recited abstract idea into a patentable invention.
Ex parte Shideler, Application 11/779,876 (PTAB 2015)
Claim at issue: 12. A method of playing a story based card game associated with a predetermined story and having a series of locations associated with the predetermined story and wherein the game includes a preset number of sequential rounds, the card game comprising: a plurality of sets of location cards, one set of location cards for each of the plurality of locations associated with an aspect of the predetermined story, each set of location cards including one card for each round of the game, wherein each round includes at least one correct location card for that round, wherein each correct location card for each round includes indicia indicating that it is the correct card for that round and including a continuation of the story, whereby a series of correct locations cards for the rounds of the game combine to form a story summary, the method comprising the steps of having the players selectively choose a location card for each round and having the players repeat the selection process until one player can identify all of the correct location cards in the series of correct location cards.
Holding: It is our view that selectively choosing a card and repeating that step until a predetermined goal is reached amounts to merely receiving and evaluating data, and therefore constitutes an abstract idea. . . . [Step 2:] The use of cards having indicia specific to the subject matter of a game is well-known, well-understood, routine and conventional in the field. Thus, from our perspective, such cards, and the other limitations of claim 12, do not add “significantly more” than an abstract idea.
Interesting set of motions in an E.D. Texas case that I’ve been following where one of my former students – Adam Baumli – is representing NexusCard who is asserting United States Patent No. 5,924,080 against a set of retailers.
Retailer defendants petitioned the PTO for Covered-Business-Method-Review and then immediately petitioned for a stay of the district court proceeding under AIA Section 18(b). Although judges generally have the power to stay civil cases, Section 18(b) makes it easier to obtain a when a CBM (“transitional proceeding”) is pending. The big problem for the defendants here is the Federal Circuit’s clear holding that the proceeding is not pending (and Section 18(b)) doesn’t apply until the PTO grants the petition. See Intellectual Ventures v. JPMorgan (Fed. Cir. 2015).
Docs: Kroger’s Motion to Stay, Nexuscard Opposition
The CBM petition challenges the patent claims under 35 U.S.C. 101 — arguing that they lack subject matter eligibility under Alice Corp and that the patent qualifies for CBM review because it claim a method for using a financial product and is not a technological invention. KrogerCBMPetition.
Claim 1 itself is a long one with parts (a) through (q) — all relating to a method of member coupon processing:
1. The method of processing and applying merchandise discounts to a consumer’s purchases by providing a computerized membership system, said membership including a plurality of consumer members, a plurality of point of purchase merchant members, a plurality of manufacturer members, and a centralized system provider, said membership system having:
a point of purchase merchant member computer terminal and computer and a centralized provider’s computer, said provider’s computer having a database for the storage and retrieval of information, said database storing information regarding point of purchase merchant members, manufacturer members, and consumer members, in predetermined files, at least some of said information being entered into the system at the time of a member establishing membership in said system andcommunication means, said communications means providing real time communication between said member merchants’ computer terminal and said provider’s computer,comprising the steps of:
a. providing consumer members with individual identification codes, said identification codes accessing said databases;b. storing said consumer member identification codes on said provider’s computer in a consumer database;c. providing each consumer member with a membership ID, said membership ID having memory storage means, said memory storage means containing at least said consumer identification code;d. storing merchandise information provided by said manufacturer members in a manufacturer member database in said provider’s computer, said merchandise information including at least a merchandise identification code and the discount on predetermined merchandise,e. displaying to consumers indicia, said indicia identifying point of purchase merchandise subject to a price discount,f. transporting, by said consumer, consumer selected discounted and non-discounted point of purchase merchandise to a purchase location at said merchant member to form a collection of transported merchandise, each of said transported merchandise having a merchandise identification code,g. scanning merchandise identification codes of each of said transported merchandise, at said communication means,h. scanning said consumer ID,i. uploading said scanned consumer identification code, from said merchant member, through said communication means to said provider’s computer,j. comparing said consumer identification code with consumer identification codes stored in said provider’s computer and verifying said consumer’s membership,k. uploading said merchandise identification code for each of said scanned merchandise from said merchant member’s computer, through said communication means to said provider’s computer,l. comparing said uploaded merchandise identification codes with the identification codes of merchandise subject to a price discount,m. computing the discounts on said merchandise subject to a price discount,n. downloading to said merchant’s computer through said merchant communication means, the discounts on said merchandise subject to a price discount,o. printing a sales slip for said member consumer including the discounts for said merchandise subject to a price discount,p. sorting and storing in said provider’s databases said uploaded data on said consumer and said merchandise purchased by said consumer,q. storing merchant member sales data on said merchant member computer,wherein said provider maintains and processes, in real time, discounts provided by manufacturer members to member consumers without said member merchant being required to process said discounts or member consumers being required to present coupons or file rebates to obtain said discounts.
Integrated Tech Corp (ITC) v. Rudolph Tech (Fed. Cir. 2015)
Rudolph and ITC both make testers to test semiconductor chip testers (yes, layers of testing here). Basically, their equipment looks for bent and damaged probe wires that are used in the testing process. In 2006, ITC sued Rudolph for infringing its U.S. Patent No. 6,118,894 covering testing systems and methods.
At some point after being sued, Rudolph updated its software with a redesign. However, the trial court found that both the original and the redesign infringed and awarded both enhanced damages for willful infringement (on the re-design) and attorney fees. The fees were at least partially based upon changes in Rudolph’s CEO’s testimony and the eventual revelation that he knew Rudolph’s original design was infringing but continued to argue non-infringement. In an original appeal, the Federal Circuit altered the claim construction and found that the redesign did not infringe and, as a result vacated the willfulness and attorney fee issues.
On remand, the district court then reinstated the attorney fees – finding that:
[T]he record establishes the following: Rudolph hid its infringement for years, provided false discovery responses, filed summary judgment papers even though it knew its product infringed, argued a never fully explained theory that ITC did not own the underlying patent, and during and after trial played semantic games regarding what its machines did and what functions were important to it and its customers. . . . The striking weakness of Rudolph’s position regarding its pre-2007 PRVX machines, as well as the unreasonable manner in which it litigated the case through trial and post-trial motions, satisfy the Supreme Court’s standard under § 285 for awarding fees. In fact, either the substantive strength of many of Rudolph’s litigating positions or the “unreasonable manner in which the case was litigated” make this case stand out from others. An award of fees is appropriate. The parties previously stipulated to the amount of fees [as $3.25 million].
On appeal for the second time, the Federal Circuit has now affirmed that a fee award was proper – holding that the district court did not abuse its discretion in awarding fees – particularly citing Rudolph’s CEO (Ronald Seubert’s “inconsistent deposition and trial testimony”).
Stipulating the Amount of Fees: The bulk of the Federal Circuit’s opinion focused on the stipulation — Prior to the first appeal, the parties had stipulated to the amount of attorney fees as $3.25 million. The parties agreed particularly that “Rudolph will not contest the reasonableness of ITC’s request for fees in the amount of $3,252,228.” On appeal here, however, the Federal Circuit ruled Rudolph can (despite the stipulation) still challenge the amount of fees.
The Federal Circuit implicitly agreed that the stipulated fee contract is binding, but found that it inapposite to the challenge here since the stipulation occurred prior to the first appeal and the first appeal resulted in Rudolph winning on a number of important issues (e.g., the re-design is no longer considered infringing). In particular, Rudolph is not challenging the “reasonableness” of the fees that was stipulated-to but rather whether the fee award can properly be tied to the new – much more limited – scope of liability. The Federal Circuit relied upon its contractual analysis to reach its conclusion, which suggests that a well drafted contract could have fully settled the issue. However, the court also indicated that fee award must “bear some relation to the extent of the misconduct” – thus indicating that even a well drafted fee agreement stipulation would not be enforceable if not tied to the misconduct.
A general take-away here is to also take-care with regard to contractual agreements with a party in the midst of an ongoing bet-your-business litigation – it is likely to be parsed fairly tightly and given de novo review by the Federal Circuit.
By David Hricik
On October 27-28, 2015, the Ninth Annual Corporate IP Institute® is being held in Atlanta. I’ll be speaking along with a lot of other folks. As usual, the Intellectual Property Owners Association (IPO) has organized a panel for the event for corporate IP management best practices. Registration for the Institute (and a bonus charity golf game, the CIP CUP® — these folks obviously have trademark and marketing lawyers around) is available here.
Get a Job doing Patent Law
The Supreme Court has now granted certiorari in two enhanced fee award patent cases: Halo Electronics, Inc. v. Pulse Electronics, Inc., S.Ct. No. 14-1513 and Stryker Corp. v. Zimmer, Inc., No. 14-1520.
The court linked the two together and will hold one big oral arguments (one hour) focusing on whether the Federal Circuit’s rigid test limiting enhanced patent damages is appropriate — especially following the Supreme Court’s decision in Octane Fitness where the Supreme Court rejected a parallel rigid test in the fee-shifting situation.
Those familiar with treble-damages know that the Federal Circuit has created a complex and rigid test for determining whether such awards may be granted. The statute though is simple and only states that “the court may increase the damages up to three times the amount found or assessed.” 35 U.S.C. 284.
In this case, the Supreme Court is very likely to require flexibility – what is unclear is what level of flexibility will be allowed. For instance, will enhanced damages continue to be limited to willful infringement?
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Questions presented (both of these appear to be in close parallel):
Halo: Whether the Federal Circuit erred by applying a rigid, two-part test for enhancing patent infringement damages under 35 U.S.C. § 284, that is the same as the rigid, two-part test this Court rejected last term in Octane Fitness, LLC v. ICON Health & Fitness, Inc. for imposing attorney fees under the similarly-worded 35 U.S.C. § 285.
Stryker: Whether the Federal Circuit improperly abrogated the plain meaning of 35 U.S.C. § 284 by forbidding any award of enhanced damages unless there is a finding of willfulness under a rigid, two-part test, when this Court recently rejected an analogous framework imposed on 35 U.S.C. § 285, the statute providing for attorneys’ fee awards in exceptional cases.
by Dennis Crouch
In re Steve Morsa (Fed. Cir. 2015) (Morsa II)
This is the return-appeal, a divided panel has now agreed with the patent office that its cited prior art is sufficiently enabling to serve as an anticipating reference.
In its 2013 Morsa decision (Morsa I) involving the same issues, the Federal Circuit ruled the PTO had applied the incorrect prior-art-enablement procedure and remanded. The disclosure in question is a short press-release from Peter Martin Associates that announces a product known as “HelpWorks” that allows folks to “use the Web to screen themselves for benefits, services, health risks, or anything else an agency wishes to implement via its eligibility library.” Morsa’s claim in question – Claim Number 271 – is directed toward a “benefit information match mechanism” that requires (1) storing benefit registrations; (2) receiving a benefit request; (3) determining whether the request matches a registration; and (4) providing a benefit results — all “at least in part via a computer compatible network.”
Enabling Prior Art: A prior art reference being used for anticipation must be enabling. To be anticipating, the prior art must “teach a skilled artisan … to make or carry out what it discloses in relation to the claimed invention without undue experimentation.” However, during patent prosecution prior art cited by the USPTO is presumed to be enabling unless that issue is directly challenged by the patent applicant. In Morsa I, the Federal Circuit ruled that an applicant’s direct challenge shift’s the burden to the PTO if it is a “non-frivolous argument that cited prior art is not enabling.”
While an applicant must generally do more than state an unsupported belief that a reference is not enabling, and may proffer affidavits or declarations in support of his position, we see no reason to require such submissions in all cases. When a reference appears to not be enabling on its face, a challenge may be lodged without resort to expert assistance. Here, Morsa identified specific, concrete reasons why he believed the short press release at issue was not enabling, and the Board and the examiner failed to address these arguments.
On remand following Morsa I, the PTO particularly addressed Morsa’s enablement argument and ruled that the anticipating reference was enabled — finding that the reference taught everything that person with ordinary computing kills needed to know in order to make and use Morsa’s claimed invention. Now on appeal, the Federal Circuit has affirmed.
In the process, the court made a set of important findings. First, the starting point of this analysis is the level of knowledge of a skilled artisan as of Morsa’s critical date — and the question is whether the prior art reference enables that skilled artisan to create Morsa’s invention. Building upon this starting point, the court included a number of admissions from Morsa’s application. In particular, Morsa had indicated in his background section that several different aspects of the invention (processors, memory, search routines, etc.) were “within the knowledge of those of ordinary skill in the art.” The court next focused a bit on Morsa’s claimed invention — finding that in includes only four basic claim limitations and that “each of those limitations can be mapped directly onto the [prior art] reference.”
Writing in dissent, Judge Newman offers the following:
The Board recognized that some of the claim steps are not described in the press release. The Board solved this dilemma by taking what it called “Official Notice” of the missing subject matter. And my colleagues solve this dilemma by finding the missing subject matter in the Morsa specification by stating that since the specification states that a person skilled in the art would know how to “implement” the claimed system, that person would have “knowledge” to fill the gaps in the prior art. However, we are directed to no disclosure in the prior art of all the claim elements and steps. “Anticipation” is not established in accordance with law.
“Official Notice” is not anticipation. . . The applicant’s specification is not prior art . . . [Rather] Enablement of the prior art must come from prior art.
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I have pasted below the entirety of the 1999 press release being used as prior art.
CHICAGO–(BUSINESS WIRE)–Sept. 28, 1999–
Peter Martin Associates is moving eligibility screening one step closer to public availability with the announcement that its expert screening solution, HelpWorks(TM) is now Web enabled.
The launch of HelpWorks Web Edition(TM) took place today at the APHSA-ISM (American Public Human Services Association – Information Systems Management Conference) in Columbus, Ohio. The talk at the conference was the Government’s migration to e-commerce empowering the public to avoid long lines and seemingly endless forms to secure government services.
HelpWorks(TM) is a state-of-the-art software program designed to help maximize the benefits and services that consumers receive from Government agencies. It can be configured to evaluate any or all benefits and programs required – Federal, State and/or local.
HelpWorks Web Edition(TM) supports both a professionally-directed deployment model – in which end users are professional caseworkers – or as stated above, a self-service model in which consumers use the Web to screen themselves for benefits, services, health risks, or anything else an agency wishes to implement via its eligibility library.
The power behind this unprecedented flexibility in application and access is PMA’s newly released Expert Eligibility Server(TM) (EES) technology. The EES engine allows an agency to utilize HelpWorks Web Edition(TM) as well as other applications that will leverage this dynamic technology. With EES as the backbone, agencies can rapidly deploy eligibility solutions for touch-screen kiosks, interactive voice response systems, the Web and many other platforms.
Peter Martin Associates is the premier provider of software designed to support public and private social service agencies, focusing on family centered case management, information and referral, and eligibility screening. Information about Peter Martin Associates may be found on the web at www.petermartin.com.
By François deVilliers, Chief IP Counsel, Plantronics, Inc.
When negotiating a patent license, the family of patents may not have matured fully yet. The “Licensed Patents” are thus normally expressly defined to be “anything related” to the original patents (typically continuing applications and foreign counterparts) and are listed in an exhibit that may be updated during the term of the agreement as additional patents issue or are filed. The term of the license agreement is then usually defined as ending upon “the expiry date of the last to expire of the Licensed Patents.”
There may only be one or two relevant patents but the Licensee is typically amenable to a broader definition of Licensed Patents because this could reduce the likelihood that the Licensor will come knocking again and there is a perception that more licensed patents equals more value. If the license is fully paid up then there is no real problem – a broader definition of Licensed Patents may in fact be better and the expiry date is irrelevant except perhaps for amortization by the accountants.
If there are ongoing royalties then there are a number of concerns.
Firstly, if there is no defined end date when the contract details are entered into the relevant legal and financial systems, there might be no flag to cease royalty payments when the license finally expires. Don’t expect the licensor to notify the licensee of the end date either when it becomes determinable or when it arrives. Do an audit right now of patent license agreements and payments, determine the expiry dates if possible or docket a reminder if not possible and investigate whether any post-expiry license payments have been made and if they can be recovered.
Secondly, licensors have been known to add later-expiring, irrelevant but ostensibly “related” patents to updates of their exhibits. While the US twenty year patent term has alleviated this problem somewhat, all it takes is one “related” patent with a significant patent term adjustment for a licensee to be on the hook for another year or two. Review any updates to exhibits and reject any that add later-expiring irrelevant patents. Be mindful though of the language of the agreement – there may be a risk of a breach of contract claim.
Thirdly, foreign counterparts may expire a year later than their local counterparts. A first-filed US patent without a term extension will expire twenty years from its filing date, while a corresponding UK patent filed up to a year later claiming priority from the US filing will expire twenty years from its filing date. If the license agreement does not comprehend geographic differences in the royalties due, the licensor may end up paying post-expiration royalties in its biggest market as a result of the existence of a later-expiring patent in an irrelevant market.
Of course the best time to deal with these issues is at the time the agreement is negotiated. If at all possible, specify or negotiate a specific date when the license terminates based on the expiry date of a representative and relevant patent. Provide that the license becomes fully paid up on this expiry date with respect to all related or “Licensed Patents” to avoid the possibility of a post-expiry claim based on an extended or later-expiring related patent. If it is not possible to specify an explicit expiry date, include “relevant” in the definition of related patents and require that the licensor motivate any update to the exhibit listing the Licensed Patents. Alternatively (or in addition), provide for breach-free rejection of an updated schedule by the licensor even if the added patent(s) fall within the strict definition of “related patents.” Further, make sure that patents in lesser jurisdictions don’t extend payments in the most important jurisdictions. Finally, the recent Kimble v. Marvel Entertainment ruling reaffirming the bar on post-expiry royalties may be of assistance in any negotiation.
by Dennis Crouch
Following the Federal Circuit’s first interpretation of the Biologics Price Competition and Innovation Act (“BPCIA”), neither the patentee (Amgen) nor the biosimilar applicant (Sandoz) were satisfied. Each petitioned separately for en banc rehearing and both petitions have now been denied in a per curium opinion. (Background from Andrew Williams at PatentDocs). Both parties will likely petition the Supreme Court for further interpretation of the “biologics patent dance”