Quick hypothetical: Assume that a patent owner has licensed its patent to a manufacturer. Subsequently, a third party buys the patent through a bona fide purchase and without any notice of the prior license and with a promise from the prior owner that the patent has not been licensed.
Question: Is the patent still subject to the license?
This is a Guest Post from Professor David McGowan of the University of San Diego School of Law. McGowan is co-director of USD’s Center for Intellectual Property Law & Markets.
Two years ago Judge Posner wrote an opinion in Apple v. Motorola
that caught the attention of economic experts and the lawyers who work with them. He excluded expert reports on both sides of the case, notably imagining a conversation in which one of Apple’s experts reported his methodology to a client, to be rewarded with a resounding “Dummkopf! You’re fired.”
Judge Posner made three central points, each plausibly grounded in what he saw as the requirement that economic experts employ in litigation the practices clients would demand from a business consultant. The first point was that such experts must add value; they may not simply recite contentions advanced by other experts. The second point was that economic experts may not extrapolate opinions from irrelevant comparisons. The third was that such experts must consider all economic options available to an accused infringer.
These points were sound and they implied a broader critique. Judge Posner plainly felt that customary practices in the economic analysis of patent cases are deficient and should be reformed. He rightly noted that when two opinions differ by a factor of 140, a difference present in this case and unsurprising to those who litigate such cases, something fundamental is wrong. His opinion was transparently an exercise in what he saw as swamp draining.
After an initial wave of schadenfreude rippled through the expert ranks everyone had the same question: Will this approach stick? Last Friday came the answer: No. The Federal Circuit’s opinion reversing Judge Posner sees no swamp, and that is unfortunate.
Although notionally applying regional (7th) circuit law to the Daubert questions Judge Posner decided, the court’s opinion establishes principles likely to influence future patent cases in any forum. None of these principles is compelled by Daubert or by the rules of evidence. Together they are likely to worsen economic analysis in patent cases.
The Federal Circuit’s opinion rejects each of Judge Posner’s central points. On the first point the court seemed to chide Judge Posner when it warned against a court imposing “its own preferred methodology” at the expense of plausible alternatives, an ironic comment for a field in which experts routinely slog through the Georgia Pacific factors–a test articulated by a district court. The court held “questions regarding which facts are most relevant or reliable to calculating a reasonable royalty are `for the jury.'” Such questions are a large part of what a “method” is in this context, so we may expect looser constraints on methodology in the future.
The Federal Circuit’s opinion does not explain what value an economist adds by repeating an engineer’s statement about a competitor’s costs. To add value, one would think, an economic consultant would analyze market data. In this regard Judge Posner’s literary flourish proved costly. The Federal Circuit quoted, and seemed put off by, the dummkopf passage. The court held “[t]he district court’s decision states a rule that neither exists nor is correct. Experts routinely rely upon other experts hired by the party they represent for expertise outside of their field.” Quite true. That, in part, was why Judge Posner perceived a systemic rather than an idiosyncratic problem.
The Federal Circuit’s opinion is more significant on Judge Posner’s second point and third points—extrapolations from comparisons and consideration of alternatives. Judge Posner excluded one expert’s opinion in part on the ground that his figures with respect to one phone feature (turning a page with a tap rather than a swipe) actually aimed at another feature (which interpreted an imperfectly vertical swipe as a vertical swipe), which in turn were extrapolated from the price difference between a computer mouse and a trackpad. Judge Posner held the mouse-trackpad difference “tells one nothing about what they will pay to avoid occasionally swiping unsuccessfully because their swiping finger wasn’t actually vertical to the screen,” the function that was itself a proxy for the relevant damages figure. The Federal Circuit disagreed, noting that both the trackpad and the swipe feature involve finger gestures to communicate commands and that one of the client’s engineers vouched for comparability. Imagine that.
The Federal Circuit relegated the comparability question largely to the jury:
[I]f the Trackpad is not an accurate benchmark, Motorola is free to challenge the benchmark or argue for a more accurate benchmark. But such an argument goes to evidentiary weight, not admissibility, especially when, as here, an expert has applied reliable methods to demonstrate a relationship between the benchmark and the infringed claims.
The net result? If your technical expert tells your damages expert two technologies are comparable, everything else is for the jury. This aspect of the holding exemplifies what will no doubt be the most common lesson taken from the case:
unless an expert is filmed throwing darts at numbers, even the most cogent criticisms will be held to go to weight rather than admissibility.
This aspect of the opinion threatens to bleed into the use of licenses rather than technology to derive a royalty. With respect to a separate issue the court held that “whether [asserted] licenses are sufficiently comparable such that Motorola’s calculation is a reasonable royalty goes to the weight of the evidence, not its admissibility.” Taken literally that rule could undo much of the work the Federal Circuit has been doing in cases such as Laser Dynamics, which held that “[w]hen relying on licenses to prove a reasonable royalty, alleging a loose or vague comparability between different technologies or licenses does not suffice.” Does it now suffice because it is a jury issue?
The Federal Circuit applied a similar approach to consideration of alternatives. Judge Posner’s point was that a consultant asked to minimize costs from infringement would be derelict if he or she considered only non-infringing ways to implement a function and ignored the possibility that the function could be deleted profitably. The Federal Circuit was unimpressed:
[t]hat a party may choose to pursue one course of proving damages over another does not render its expert’s damages testimony inadmissible. Nor is there a requirement that a patentee value every potential non-infringing alternative in order for its damages testimony to be admissible.
Taken as a general rule (and the trackpad discussion certainly invites such a reading), the language will encourage fanciful comparisons at the expense of economically more probable options. Litigants will draw such comparisons in an effort to anchor jurors on a high or low number. Opinions that differ by a factor of 140 will be even more common than they are now. Not good.
Are the methods of patent damages analysis really so elastic that a difference of 140x bespeaks no cause for concern? Must we tolerate in innovation policy practices no one would rely on to decide any important question in their own lives? The Federal Circuit’s decision implies that the answer is yes. Its opinion will ensure that we will see plenty more such differences. It could have been, and should have been, otherwise.
By Dennis Crouch
In Octane Fitness, the Supreme Court gave discretion to district courts in determining whether to award attorney fees to the prevailing party. The court also lowered the bar for such a finding – both by removing the somewhat rigid limitations that had been imposed by the Federal Circuit and by rejecting the notion that clear and convincing evidence is a prerequisite foundation for such an award.
However, the decision will likely be seen as making an incremental change rather than being a watershed moment. The law remains that attorney fees should only be awarded in exceptional cases that involve misconduct or extreme behavior. Our long tradition in the US had avoided attorney fees except in rare cases and I do not see this court changing that tradition in any dramatic way. The point here is that even the new lower standards are a far cry from the presumptive award of attorney fees as have been proposed in Congress.
Enter Congress: Earlier this session, the House of Representatives passed H.R. 3309 (the Innovation Act) with broad bipartisan support. The bill includes a fee shifting provision that creates a presumption that fees will be awarded to the prevailing party unless the district court finds that the losing party’s position was “reasonably justified in law and fact or that special circumstances make an award unjust.” A parallel Senate proposal steps back slightly from the House version and would require a finding that the non-prevailing party’s conduct or position was objectively unreasonable.
The Senate version is intended to be a middle ground between the current law and what was passed in the House. As far as I know, Senator Leahy has not yet come-out in favor of either proposal but has stated his preference that discretion in the decision be given to district court in the decisionmaking process. One way to achieve Senator Leahy’s goals could be a simple modification of Section 285 – deleting “exceptional case” and adding “its discretion” as follows: “The court in exceptional cases
its discretion may award reasonable attorney fees to the prevailing party.”
The legislative proposals also have the creative element of helping ensure that the rule cannot be skirted by underfunding the patent enforcement entity. Rather, the proposal would allow for limited veil piercing in order to collect any attorney fees owed from investors and others with interests in the litigation.
One bottom line is that the proposed statutory changes would still push the law well beyond its (newly) current state. As such, I suspect that the push to include these provisions as key elements of patent reform will continue.
By Dennis Crouch
[Transcript of Oral Arguments]
The Supreme Court heard oral arguments today in Limelight Networks Inc. v. Akamai Technologies, Inc. Limelight is best seen as part of a series of cases considering what it means to be an infringer. In particular, the court has struggled to determine what to do when one party performs a portion of a patented invention and then another party performs the remaining portion. In this setup, the parties are able to collectively benefit from the invention without being labelled infringers under the Federal Circuit’s strict single-entity-infringer rule. See BMC v. Paymentech (Fed. Cir. 2007). The BMC line of cases creates an avenue for avoiding infringement by properly dividing the corporate structure. That pathway is further solidified by our current age of distributed computing that allows for servers and systems to closely interoperate even though controlled by different parties. In this case, the invention is focused on a mechanism for quickly delivering video streams to lots of people over the internet by distributing servers. The patent spells out the entire method and system for accomplishing this result, but the defendant here each only practice a portion of the whole invention but expressly encourages its customers to perform the rest. In an admittedly biased way, the patentee’s attorney Seth Waxman explained the setup as follows:
Mr. Waxman: This case is not complicated. This case involves a four or fivestep method in which Limelight performs all but one or two of the steps and tells its customers, if you want to use our service, you have to perform the other step. Here’s exactly how you do it. We have somebody 24 hours a day, seven days a week assigned to you to help make sure you do it the right way.
In Limelight, the Federal Circuit (sitting en banc) offered one outlet to limit avenues-of-infringement. Here, the appellate court held that an entity can be liable for inducing infringement if that party induces performance of the entire invention, even if no single party performed all of the elements. That holding is a shift in thinking – prior case law required evidence of underlying single-actor direct infringement as a pre-requisite to an inducement finding. The statute for inducement indicates simply that “whoever actively induces infringement of a patent shall be liable as an infringer.” 35 U.S.C. § 271(b). An interesting element of this case is that the Limelight originally indicated that it would reconsider the BMC doctrine regarding direct infringement. However, the en banc panel decided to limit its analysis only to the inducement theory. If Limelight is successful on appeal, the Federal Circuit may then have an opportunity to reconsider the single-actor rule for direct infringement under Section 271(a). More particularly, the Federal Circuit has applied a fairly strict agency doctrine rule, but other areas of law have allowed for a more liberal agency doctrine that would potentially capture the type of joint infringement alleged in this case.
The question presented is:
Whether the Federal Circuit erred in holding that a defendant may be held liable for inducing patent infringement under 35 U.S.C. § 271(b) even though no one has committed direct infringement under Section 271(a).
Aaron Panner argued on behalf of the petitioner Limelight (the accused infringer) and shared time with Assistant Solicitor Ginger Anders who filed a brief in support of the petitioner. Seth Waxman argued on behalf of the respondent-patentee Akamai. In the case, the US government took the middle-ground position that the patentee has the best policy argument but that the statute clearly supports reversal.
Focusing first on the policy issues, the court asked whether Limelight is asking for a rule that allows patentees to skirt infringement simply by altering its corporate structure:
CHIEF JUSTICE ROBERTS: Your position makes it pretty easy to to get around patent protection, doesn’t it? All you’ve got to do is find one step in the process and essentially outsource it or make it attractive for someone else to perform that particular step and you’ve essentially invalidated the patent.
MR. PANNER: I don’t think so, Your Honor. In the two following senses.
First of all, empirically speaking, there have not been very many cases in which this has proven to be a problem. It has been a long understood principle of patent claim drafting that method claims should be drafted from the point of view of a potential infringer so that all of the steps can be carried out by that potential infringer. And prospectively, certainly and given that this rule has been clearly articulated by the Federal Circuit now for many years, or at least several years, prospectively, the patent applicant has every incentive to draft claims from the point of view of a single potential infringer.
This the claim that’s at issue here, there’s no dispute. It could have been written in such a way that the steps would have been carried out by a single infringer and, indeed, that may have been the intent. . . .
JUSTICE SCALIA: I’m just arguing about whether the safe haven you have given us for patentees really exists. It doesn’t seem to me you can avoid the problem by simply requiring all the steps to be conducted by one person.
MR. PANNER: Well, Your Honor, in in my experience in in terms of dealing with patents that are written to technologies that do involve interaction, for example, between cellular phones and networks and content providers who are sending content to a phone, for example, it is very common to draft claims from the point of view of someone who’s participating in that process so that all of the steps will be carried out in that by that person. . . .
JUSTICE KAGAN: [N]otwithstanding what you said about 10 of 11 judges, it was clear that the judges thought that there was a real problem here in terms of an end run, and that they looked at this and said, well we could do it under 271(a) or we could do it under 271(b), and 271(b) seems a lot more natural and better for various reasons. But your sense in reading the opinion that all those judges who did it under 271(b) are just going to go back and do the exact same thing under 271(a).
Panner’s argument here does not seem like one that the judges would truly support – that the patentee wins or loses here based upon whether it correctly followed the proper claim-drafting trick.
Responding to the same issues, the US Government lawyer (Anders) recognized the “end run” problem as legitimate.
MS. ANDERS: I think the Federal Circuit was understandably concerned about allowing inducers to perform some stops of a process themselves to escape liability, but this Court has twice held in both Microsoft v. AT&T and before that Deep South v. Laitram that judicial concerns about gaps in 271’s coverage should not drive the Court’s interpretation of that provision. That is because any time that you close a gap in 271, expanding patent rights, you are invariably implicating competing concerns and it’s for Congress to resolve those concerns.
When his turn to speak, Waxman hit home the policy concerns:
MR. WAXMAN: Please make no mistake about what Limelight is asking you to do. Under Limelight’s theory, two or more people can divide up and perform the steps of any method claim, however drafted, without liability. . . . Let’s assume that there is disclosure and patenting of a cure for cancer or a novel treatment for cancer that involves, as they often do, the administration of different drugs sequentially. And two parties get together and say, I’ll administer Drug 1, you administer Drug 2, and we can take advantage of this marvelous patented process without paying anything giving anything whatsoever to the company that spent a billion dollars and 25 years developing.
Several of the Justices rightly recognized the potential notice problems of joint liability in a strict liability scenario. However, those fears are greatly reduced in the inducement context because liability requires knowledge that the acts being induced would constitute infringement. Waxman attempted to also allay those fears by referencing a common law knowledge requirement implied into joint-concert liability.
When the Federal Circuit decided this case, it appeared to be a new rule regarding inducement liability. In his appealing way, Waxman argued that it is not really new but rather it is a return to the common law notions that were disrupted by the Federal Circuit’s unnatural limitations on 271(a) joint liability that began in 2008.
JUSTICE SOTOMAYOR: [Is] this is a new rule by the Federal Circuit?
MR. WAXMAN: The answer is no. What is new is the 2008 beginning in 2008 jurisprudence in the Federal Circuit on 271(a) that unnaturally limited the common law attribution rules.
Very little time was spent on statutory construction – what is meant by the term “infringement” in 271(b)? Waxman does lay out his textual argument that infringement in 271(b) is not limited to “direct infringement under 271(a).” but rather offers the following notion:
MR. WAXMAN: A patentholder has the exclusive right to make, 15 sell, use, or offer to sell his invention during the term of the patent. That’s what sets out the metes and bounds of the property right. And any encroachment on that property right is an infringement. . . .
JUSTICE GINSBURG: An infringement without an infringer?
MR. WAXMAN: You can certainly have infringement without an actionable infringer, absolutely. Under anybody’s rule you can do that. The whole debate we have with the other side on the (a) question is how what attribution rules do or don’t apply. . . . .
JUSTICE SCALIA: What does what does (b) require? Does it require inducing an infringement or inducing an infringer?
MR. WAXMAN: Inducing an infringement. And I’ll give you a concrete example. Let’s say that there’s a fivestep patented method that I know about, and I convince I induce Mr. Panner to do steps 1, 2, and 3 and Ms. Anders to do steps 4 and 5. If I’m doing that because I know about the patent and I want to take advantage of their otherwise innocent performance collectively of the steps, at common law and at patent law, it was uncontroversial that I was liable. I was responsible.
Overall the oral arguments here are difficult to follow and thus the outcome is difficult to predict. The justices are rightly concerned that the their decision on 271(b) is dependent upon the meaning of joint infringement 271(a), but that may only be decided on remand.
JUSTICE ALITO: It’s it’s a good reason to think that the question before us really has no significance that I can think of unless the the Court of Appeals unless the Federal Circuit is right about [the limited scope of 271](a). . . . So you’re asking us to decide a question to assume the answer to the question on (a) and then decide a question on (b) that is of no value no significant maybe I don’t understand some other I don’t see some other situations where it would apply, and no significance unless the ruling on (a) stands, unless Muniauction is correct?
Waxman expressly suggested that the court go ahead and rule on the 271(a) issue (as it had suggested in a cross petition for certiorari) or simply remand the case to the Federal Circuit to decide the underlying 271(a) issue.
Read Dave Kappos Open Letter to President Lincoln:
(Published by the great folks at Managing IP)
Guest post by Prof. Lucas Osborn, Campbell University School of Law.
In the Matter of Certain Digital Models
(ITC 2014)
The ITC’s recent decision demonstrates the increasing importance of digital patent infringement – infringement based not on tangible products, but rather on computer files. It also indicates the coming importance of three-dimensional printing (“3D printing”) technology to intellectual property law.
The case involved patents covering methods of making Align Technology, Inc.’s (“Align”) Invisalign® products. Align’s products avoid the need for metal braces by using a series of plastic teeth aligners (essentially molds worn over the user’s teeth) that slowly guide the user’s teeth to the proper alignment. Scans of the user’s teeth are converted into digital files, which are used to design a series of digital models of the teeth aligners, each one successively moving the teeth closer to the proper alignment. The patents largely cover methods of making the aligners by generating the digital data sets for the aligners and then making (usually by 3D printing) the actual aligners. Some claims do not require the step of making the physical aligners, and would thus be infringed by merely creating the digital data sets.
Align alleged that ClearConnect Operating, LLC’s (ClearConnect) products and methods violate Section 337 and constitute patent infringement. ClearConnect created the initial teeth scans in the U.S., sent those files to Pakistan where the intermediate digital data sets were computer-generated, accepted digital transmission from Pakistan of the complete data sets into the U.S., and finally 3D printed the physical aligners in the U.S.
The parties vigorously argued whether the electronic transmission of digital data sets constituted “importation of . . . articles” within the meaning of 19 U.S.C. § 1337, and the Commission received written submissions from Google and the Motion Picture Association of America, among others, on the topic. In the end (after 30+ pages of discussion), the Commission found (over a dissenting commissioner) that the digital data sets were “articles.” The Digital Models opinion concluded this issue, stating,
In sum, our task is to determine whether the phrase “importation of . . . articles” encompasses this modern form of international commerce, or should be understood as limited to the kinds of international transactions in existence when the statute was first enacted. Having carefully reviewed the plain language of the statute, its legislative history and purpose, pertinent case law, and the arguments of the parties and public commenters, we conclude that the statutory phrase “importation . . . of articles” should be construed to include electronic transmission of digital data because the digital data sets at issue in this investigation are true articles of international commerce that are imported into the United States and their inclusion within the purview of section 337 would effectuate the central purpose of the statute.
Digital Models, p. 55.
The Digital Models decision is interesting in its own right, but it also raises some interesting questions for the future of 3D printing technology and patent law. 3D printing is rapidly progressing into a consumer technology – soon the alleged infringers of Align’s patents won’t be companies, but individuals who will generate their own digital data sets on home computers and print the aligners with their desktop 3D printers.
Two of the many issues raised by 3D printing technology are (1) how should patent law treat claims directed to digital representations of physical objects, and (2) how should patent law treat claims directed only to physical articles where the alleged infringement involves only or primarily digital renderings of the physical articles. Align’s patents fall under the first question, because they positively recite the digital data files (essentially 3D CAD files) in the claimed steps. Claims directed to digital representations are very similar to traditional software application claims; they may face patentable subject matter challenges under 35 U.S.C. § 101 and questions about when and whether they are “components,” “materials,” or “products” under the various subsections of § 271. Companies looking to protect their physical products should increasingly think about protecting digital versions of them as well.
The second issue raised by 3D printing may be the most interesting. Traditionally, companies have not sought to protect digital representations of physical products; their patent claims were simply directed to the physical objects. Much as music and movie industries had to battle digital copyright infringement, patent owners may be on the cusp of their own digital patent war. People can create, modify, and transmit 3D CAD files just as easily as they can .mp3 files. Coupled with the Internet, 3D printing technology decentralizes and largely anonymizes the manufacture of tangible objects. If the physical object is only a click away from being produced by a person’s 3D printer, should a court hold that the digital file infringes a patent claim to the physical object, either directly or under the doctrine of equivalents? If not, will claims of indirect infringement be an effective tool against the individuals and websites that host and transmit the CAD files? These questions will be of increasing importance in an era of ubiquitous 3D printing technology.
Lucas Osborn is an Associate Professor of Law and Campbell University School of Law in Raleigh, NC. He has explored 3D printing technology’s effects on the law here and here, and continues to explore these issues in his research, including a project with Tim Holbrook of Emory University School of Law.
By Dennis Crouch
Octane Fitness v. Icon Health (Supreme Court 2014)
The Patent Act allows district courts to award attorney fees to the prevailing party in “exceptional cases.” 35 U.S.C. § 285. However, the Federal Circuit has repeatedly limited district court discretion in determining whether a particular case is exceptional. See Brooks Furniture Mfg., Inc. v. Dutailier Int’l, Inc., 393 F. 3d 1378 (Fed. Cir. 2005).
In a 9-0 decision, the Supreme Court has rejected the Federal Circuit’s Brooks Furniture test as “unduly rigid.” In its place, the Supreme Court returns discretion to the district courts in determining whether a case is exceptional based upon the general principle:
[A]n “exceptional” case is simply one that stands out from the others with respect to the substantive strength of a party’s litigating position (considering both the governing law and the facts of the case) or the unreasonable manner in which the case was litigated. District courts may determine whether a case is “exceptional” in the case-by-case exercise of their discretion, considering the totality of the circumstances [and without any] precise rule or formula for making these determinations.
Even without Section 285, courts hold the inherent power to impose fees on parties for bad behavior. Here, the court made clear that Section 285 should be construed to go beyond that inherent power – otherwise it would be merely superfluous.
The decision here is balanced in that it does not expressly favor plaintiffs or defendants; patentees or accused infringers. However, it has eliminated an important safe-harbor created by the Federal Circuit to protect plaintiffs. In the past, attorney fees were not allowed based upon filing a losing case unless the case was “objectively baseless.” In patent cases, that standard is difficult to meet because of all the avenues for ambiguity. That safe-harbor is now gone.
Finally, and importantly, the Supreme Court rejected the Federal Circuit’s rule requiring clear and convincing evidence before an award of fees. Here, the court held that there is “no specific evidentiary burden.” Rather, as mentioned, the decision is “a simple discretionary inquiry.”
= = = = =
Highmark Inc. v. Allcare (Supreme Court 2014)
In the Octane Fitness companion case, the Supreme Court also rejected the idea that exceptional case determinations should be reviewed de novo on appeal. Rather, consistent with the discretionary standard offered above, the appeal standard should focus on whether the district court abused that discretion. Typically, that is a difficult threshold to meet on appeal.
Both opinions were penned by Justice Sotomayor and unanimous.
By Dennis Crouch
Nautilus v. Biosig (Supreme Court 2014) [Transcript of Oral Arguments]
On April 28, 2014, the Supreme Court heard oral arguments in the important indefiniteness case concerning a fitness monitor patent. In my estimation, most issued patents have claim terms that are arguably indefinite. The usual litigation resolution of that problem is through the process of claim construction. The patent statute requires A patent can be held invalid as indefinite under 35 U.S.C. §112(b) for failing to “particularly point[] out and distinctly claim[]” the invention. However, the Federal Circuit has repeatedly found that the invalid-as-indefinite doctrine is quite narrow and only applies when a term is “insolubly ambiguous” and when “reasonable efforts at claim construction result in a definition that does not provide sufficient particularity and clarity to inform skilled artisans of the bounds of the claim.”
The result of this policy is that it provides patentees an incentive to seek a claimset that includes some “solubly” ambiguous terms that create colorable infringement argument and whose scope retains malleability. We only learn the true scope of a claim once it is interpreted in court – an often only after an appeal to the Federal Circuit. One approach to push against this downward spiral would be to follow the contract canon of construing claims against the drafter. Another approach is what Nautilus suggests – make it easier to invalidate claims on indefiniteness grounds. At the same time, lowering the standard could open the door to a new intensity of linguistic-noodling by accused infringers.
In this case, two questions are presented:
1. Does the Federal Circuit’s acceptance of ambiguous patent claims with multiple reasonable interpretations—so long as the ambiguity is not “insoluble” by a court—defeat the statutory requirement of particular and distinct patent claiming?
2. Does the presumption of validity dilute the requirement of particular and distinct patent claiming?
Claim construction is an issue in the vast majority of patent infringement lawsuits and, over the years, the Federal Circuit has altered a district court’s claim construction in hundreds of different cases. In many of those, the district court’s opinion was a reasonable interpretation of the claim scope even if not what the Federal Circuit saw as the very best interpretation. In that framework, it is easy to see how the Nautilus focus on “multiple reasonable interpretations” could have a dramatic impact on the validity since all of those claims would seemingly be invalidated based upon the existence of multiple reasonable interpretations.
Predicting Outcome: The oral arguments suggest that the Federal Circuit’s “insolubly ambiguous” test will be thrown out as too strict. However, none of the Justices appeared interested in the seemingly too loose rule that would invalidate claims that are open to multiple reasonable interpretations. The middle ground of requiring claim scope be of “reasonable certainty” seems to be the likely course.
The claim term at issue in this case involves two electrodes of a heart monitor being in a “spaced relationship” with each other. The district court held that term indefinite because the patent did not include any parameters as to the scope of that space. On appeal, the Federal Circuit reversed, determining that the term was amenable to construction since the purpose of the space was recited in a whereby clause (to help remove EMG signals coming from a single hand). In particular, the court held that the term had an upper and lower bound: each half must be held within a hand and it cannot physically be infinitesimally small. Now, one interesting aspect that relates to prior functional-claim cases is that on reexamination, the examiner found that the functional whereby clause to be the crucial limitation that made the claim patentable. Federal Circuit cited and discussed Halliburton. However, the court did not address the Taboo against functional element at the point of novelty but instead cited to a list of Federal Circuit decisions holding that functional claim limitations are just fine.
The arguments: Patent litigator John Vandenberg argued on behalf of the petitioner Nautilus while appellate specialist Mark Harris argued for the patentee Biosig. Harris shared time with US Assistant Solicitor Curtis Gannon as amicus. Overall, the oral arguments were not highly elucidating the one major area of new ground covered was an analogy to Chevron analysis whose first step is to determine whether a statute is ambiguous (or silent) as to a particular issue. In Chevron, statutory ambiguity allows government agencies more leeway in interpreting the law. In this context, the ambiguity would lead to a patent being held invalid. However, the court was clearly not comfortable with that test essentially because it is too loose for the resulting reaction (patent invalidity). Of course, invalidating a patent claim does not involve the same level of drama as invalidating a congressionally mandated statute. Apart from the constitutional-political issues, the patent claim being invalidated is typically one of many claims within the patent and that patent is one of many covering the accused activity. In addition, unlike statutes, the party benefiting most from the patent has full control of the language used in the patent grant.
In the oral arguments, Vandenberg makes two compelling points: (1) that ambiguity in the patents is intentional but not justified; and (2) that its requested rule is parallel to that already applied by the USPTO:
MR. VANDENBERG: I think it’s important to remember here that there is no legitimate need or excuse for ambiguity in patent claims. Once the applicant has satisfied paragraph one [of section 112] and its strict requirements for describing the invention, it is easy to claim the invention particularly and distinctly. The only reason that there are so many ambiguous claims out there today is that patent attorneys are trained to deliberately include ambiguous claims. Ambiguous claims make the patent monopoly more valuable. Every patent attorney knows that. . . .
There is no legitimate need for ambiguous claims. There is a strong economic incentive for patent attorneys to draft ambiguous claims, not to put all their eggs in that basket. They want some clear claims in case some copyist comes along, but they want ambiguous claims so they can their client can treat it as a nose of wax later, as happened here. That is well established in the patent bar, that there is this strong economic incentive. But patent attorneys have ample tools to avoid ambiguous claims if this Court tells them that it will no longer be permitted. That that is the key here, is that there’s a strong economic incentive. The patent attorney and the inventor are in the best position to avoid the ambiguity that Congress prohibits and therefore, the problem is, the Federal Circuit has blessed ambiguity with its test. And in order to stop all of the problems that the amici have pointed out that are caused by ambiguous claims, we submit this Court needs to be clear and go back to United Carbon and General Electric and to the statutory text and be clear that ambiguity is simply not permitted.
After a bit of dancing, Vandenberg began to hit his stride in a discussion with Justice Kennedy:
JUSTICE KENNEDY: Do you agree that the standard at the PTO, and let’s say that it’s whether or not the claim is definite if a person skilled in the art would be reasonably certain of its scope. Is the standard used by the PTO the same standard that the CA Fed ought to use?
MR. VANDENBERG: Yes, it is, Your Honor.
JUSTICE KENNEDY: All right, that’s a sensible answer, I think. Now, how does the presumption of validity bear on the application of that same standard in the court of appeals?
MR. VANDENBERG: The presumption of validity certain applies to this defense. It requires the challenger to raise the defense, to preserve the defense, plead it as affirmative defense, to make the initial argument as to why the claim is
JUSTICE KENNEDY: Doesn’t that imply some deference on findings of fact?
MR. VANDENBERG: Your Honor, it would be rare for there to be, in an indefiniteness case, to be any underlying finding of fact. The the issue of indefiniteness is really subsidiary.
JUSTICE KENNEDY: That is, the presumption of validity, does that accord some deference to the PTO? And how would that apply or not apply here?
MR. VANDENBERG: It would apply it does not apply in this case. There are no fact findings out of the Patent Office regarding indefiniteness. But if there was the same indefiniteness issue came up and the Patent Office found, for instance, that a term of art, let’s say nanotechnology, biotechnology term of art had a particular meaning, then that factfinding may be entitled to deference by the trial court.
However, indefiniteness itself is a legal determination. The Federal Circuit said that.
JUSTICE KENNEDY: So there’s no deference to the PTO as to that legal interpretation.
MR. VANDENBERG: No, Your Honor, no more than there’d be deference to the Patent Office claim construction or any other legal decision.
Mr. Harris began his argument defending the Federal Circuit, but immediately ran from the insolubly ambiguous language of that decision.
MR. HARRIS: The decision of the Federal Circuit should be affirmed for two reasons: First, that court correctly held that the test for definiteness is whether a claim puts a skilled artisan on reasonable notice of the boundaries of the invention, and secondly, whatever
JUSTICE SCALIA: If that’s what it held we wouldn’t have taken this case. I thought we took it because [the Federal Circuit used] some really extravagant language.
I mean, it’s one thing to run away from that language, as your brief does. It’s another thing to deny that it exists.
MR. HARRIS: Justice Scalia, we are not denying that those words exist, “insolubly ambiguous,” but what I think this court below, the Federal Circuit, in this case explained, and it’s explained consistently, is that that those two words are not the test all by themselves.
CHIEF JUSTICE ROBERTS: So it was fair, as I suggested earlier, nobody agrees with that formulation [of insolubly ambiguous]?
MR. HARRIS: Yes, I guess so, Your Honor. . . .
Beyond the particular quibble over language, Harris seems to provide a convincing case that, even under a lower standard, the Biosig claims are still definite because of the uncontroverted evidence provided that one skilled in the art at the time would have been able to understand the meaning of the claim.
The role of the US Government in this case is interesting because it is in some tension with President Obama’s ongoing initiatives to push for clarity in claim scope. However, Gannon (from USDOJ) did argue that the presumption of validity should not play a role in the claim construction process. And rather that the resulting validity of a claim should not impact which construction is chosen.
By Jason Rantanen and Joshua Haugo*
During the oral argument in Octane Fitness, Justice Alito asked an interesting question about the frequency at which district court judges hear patent cases. In response to a comment from Mr. Telscher that “I do think district court judges see a lot of patent litigation,” Justice Alito asked:
Is that really true? There’s nearly 700 district judges in the country. If we had a statistic about the average number of patent cases that a district judge hears and receives on, let’s say, a 5 year period, what would it be?
Oral Argument Transcript at 14 (full transcript available here).
The question was posed in such a way as to imply that patent cases were a rare occurrence for most district court judges, and since neither counsel nor research into secondary sources provided a ready answer, we pulled data from Lex Machina to seek some insight into this issue.
Since we were interested in frequency, we looked at the number of patent cases filed between 2010 and 2013 on a per judge basis. Our analysis shows that while patent cases are relatively common generally, their distribution is indeed highly skewed. Nevertheless, most active judges heard at least one patent case during the time and the median number of patent cases received per judge was higher than one might expect (it’s eight). The below chart illustrates the number of patents cases received by each judge who was active during the 4-year time period, sorted by the number of patent cases received (i.e.: the judges who heard no patent cases are to the left and the judges who heard the most patent cases are to the right, with Judge Gilstrap being judge #760). The chart cuts off at 100 cases received, but the line continues up with seven judges receiving more than 600 patent cases each (Judges Robinson, Sleet, Andrews, Schneider, Stark, Davis, and Gilstrap).
Methodology: To obtain the data set, we ran a search on Lex Machina for all patent cases filed between 2010 and 2013. We then copied the judge data from Lex Machina’s dynamic filter, giving us the number of patent cases per judge. We obtained data on all district court judges (not just those that appeared in the Lex Machina search results) from the Federal Judicial Center. This allowed us to filter the results to include only judges that met our criteria of “active” judges for the time period (i.e.: judges that were confirmed to a district court prior to 12/31/2013 and had not retired or been terminated until after 1/1/2010). There were a total of 760 active district court judges between 2010 and 2013, although some were active for only a short time during the window we analyzed. We were also able to limit our data set to only judges who were active for the entire time period (i.e.: who were confirmed to a district court prior to 1/1/2010 and who did not retire or take senior status prior to 12/31/2013); a chart using this data is below.
Background Statistics: In total there were 19,325 patent cases filed before 865 judges over the four year period. The judge with the most patent cases was Judge Gilstrap of the Eastern District of Texas, who received 1,636 patent cases. Although several judges received an extraordinary number of cases, many judges that heard patent cases had only 1 patent case filed before them during the 4 year window we examined.
Of the 19,325 total cases heard in District Courts, 18,061 cases were heard by 760 active judges. The remaining 1264 cases were heard by 165 judges that were primarily senior status, although there were several appellate judges sitting by designation. For this analysis, we did not include any cases filed before judges that were not active during at least some portion of the period.
There is one important caveat to this data: it reflects patent cases received by the judges. As a result, it does not directly report on the number of patent cases actually heard by district judges (since sometimes case settle soon after filing), nor does it directly report perhaps an even more important statistic relating to Justice Alito’s questioning, that of judges’ experience rendering substantive decisions in patent cases. This data does, however, provide some insight into these issues because we know that both figures cannot be greater than the number of patent cases received and (unless there is a particular selection bias operating in certain districts that affects settlement rates), it seems likely that the distribution of both patent cases heard and decided would follow a similar pattern.
Analysis: The average number of cases received by active judges was 23.8 cases over the span of four years, or almost 6 cases per year, while the median was 8 cases over the four-year span. While the highest districts in terms of filings did affect the mean, removing the three highest (the Eastern District of Texas, Central District of California, and District of Delaware) still resulted in an average of 13.3 cases per judge. Of the active judges, there were 71 that did not receive any patent cases within the window. Thus over 90% of active judges received at least 1 patent case filed during the window.
Additionally, we looked at the numbers for judges that were active throughout the 4 year time period, in order to get a sense of what an average “active” judge might see. These judges were commissioned prior to 1/1/2010 and had not been terminated or retired prior to 12/31/2013 (thus excluding both judges who were on the bench for only a part of the period and judges who took senior status during a portion of the period). For this set, there were a total of 11,096 patent cases received by 434 judges. The average number of cases received was 25.6 with a median of 11 cases over the four-year period. Removing the top three districts from this data set still produced an average of 20 cases and a median of 10 cases received over the four-year period. In total, only 28 of the 434 active judges did not receive a patent case during this time; over 93% of judges received at least 1 patent case. The graph below shows a frequency chart of only judges that were active during all 4 years (the bar on the far right reflects the fifteen judges who received over 100 patent cases during the four-year period).
While the numbers suggest that patent cases are not unicorns, even outside of the top three districts, there also may be some merit to Justice Alito’s concern that at least a substantial number of District Court judges do not hear more than an occasional patent case, and thus may find it difficult to determine which cases are “exceptional” based on their past experience with other patent cases. Of course the ultimate issue may not be one of determining whether a patent case is exceptional, but in simply determining whether a complex litigation suit is exceptional. And as to that, as Mr. Telscher observed in response to Justice Alito’s questioning about numbers of patent suits received by district court judges, “I don’t know what that number is, Your Honor. But I know that district court judges carry a widely varying docket of different areas of law and are called upon to learn the law and assess the reasonableness of those positions.”
*Joshua Haugo is a second-year law student at the University of Iowa College of Law.
Edit: Michael Risch pointed out that there may be an effect depending on how Lex Machina counts transferred cases, which he estimates at 15-20% of cases. I’m looking into the way that Lex Machina counts these types of cases: its database certainly includes both the transferor and transferee dockets, but it does not appear to count the transferor judge as being the “judge” of the case. Instead, it appears to only count the transferee judge. I’ll update the post once I have a better sense of this effect.
Edit2: Based on further investigations (and subject to confirmation from the folks at Lex Machina), Lex Machina counts both the transferring court and the transferee court; in other words, its not deduplicating. The effect of this is to artificially inflate, perhaps by as much as 15-20%, the case counts below. This causes me to echo the caution I noted originally: just because a judge “received” a case does not mean that he or she “heard” it, let alone on the substantive merits.
Edit3: Lex Machina confirmed that “each separately assigned civil action number is a case except, if it is an intradistrict transfer, we detag it so it does not count as a patent case. In the event of a inter-district transfer, we will have one case with the outcome “procedural: interdistrict transfer” and the other case with whatever its outcome was.” So what I observed above holds.
By Dennis Crouch
Apple v. Motorola (Fed. Cir. 2014)
Sitting by designation in the smart-device battle between Apple and Google’s proxy Motorola, famed 7th Circuit jurist Richard Posner offered the bold summary judgment conclusion that neither party had offered adequate proof of damages or ongoing harm to support injunctive relief. Here, each party had asserted infringement of three patents. However, without any remedy, the case became moot and Judge Posner dismissed the case with prejudice. The foundation for this decision was built when Judge Posner considered the lack of credibility of both sets of damages expert reports and excluded almost all of that testimony under Daubert v. Merrell Dow Pharm., Inc., 509 U.S. 579 (1993).
On appeal, the Federal Circuit has – as expected – has reversed. The majority decision has several sections, but portions regarding damages are of most interest. First, the court provides a detailed analysis of damages expert analysis and finds a number of faults with Judge Posner’s exclusionary rules. However, the court goes on to hold that, even if the damages expert testimony were properly excluded, the proper calculation for damages on summary judgment is not zero.
Once a court has found that a patent is infringed and enforceable then it has a duty to award damages “in no event less than a reasonable royalty.” Here, the Federal Circuit appears to place the burden of identifying that minimum royalty on the fact finder:
Because no less than a reasonable royalty is required, the fact finder must determine what royalty is supported by the record. . . . If a patentee’s evidence fails to support its specific royalty estimate, the fact finder is still required to determine what royalty is supported by the record. . . . Indeed, if the record evidence does not fully support either party’s royalty estimate, the fact finder must still determine what constitutes a reasonable royalty from the record evidence. . . . Certainly, if the patentee’s proof is weak, the court is free to award a low, perhaps nominal, royalty, as long as that royalty is supported by the record.
Thus, a fact finder may award no damages only when the record supports a zero royalty award. For example, in a case completely lacking any evidence on which to base a damages award, the record may well support a zero royalty award. Also, a record could demonstrate that, at the time of infringement, the defendant considered the patent valueless and the patentee would have accepted no payment for the defendant’s infringement. Of course, it seems unlikely that a willing licensor and willing licensee would agree to a zero royalty payment in a hypothetical negotiation, where both infringement and validity are assumed.
The court goes on to note that it has been unable to find any case in history where the record properly supported an infringement award of zero.
The majority was penned by Judge Reyna and joined by Chief Judge Rader. However, these two Judges disagreed on one particular point – whether Motorola’s FRAND commitment for its patent removes all possibility of injunctive relief for unlicensed infringement. Judge Reyna says yes, Judge Rader says no – and that Apple’s bad behavior as an unwilling licensee should open the door for injunctive relief.
The majority opinion also vacated Judge Posner’s SJ determination that Apple was not entitled to an injunction seemingly because of a change in claim construction that now potentially creates a causal nexus between infringement and a market harm. Writing in dissent from that portion of the opinion, Judge Prost disagreed.
Congratulations to our team from the Iowa College of Law, Joshua Galgano and Michelle Wallace, and their coaches, Prof. Christina Bohannan and Damon Andrews, for winning the national finals of the 41st Annual Giles S. Rich Patent Moot Court Competition. Dr. Galgano is a 3L who holds a PhD in chemical and biochemical engineering; he will begin his career at Sterne Kessler Goldstein & Fox this fall. Ms. Wallace is a 2L with a chemical engineering background; she will be working at Reinhart, Boerner, & Van Deuren this summer. Congratulations to both!
Congratulations also to Suffolk Law School’s team of Christina Mott and Scott Chappell, coached by Even Brown, who finished in second place. Other teams competing in the finals included Columbia, the University of Washington, the University of Utah, the University of Houston, and Michigan State.
Earlier this afternoon, the two teams argued before Judges Lourie, Tarranto, and Chen. This year’s problem involved issues of subject matter eligibility of claims relating to DNA and of subject matter jurisdiction over a licensing dispute. If you’re curious about the problem, it can be found here.
(Also, this morning the Federal Circuit issued its opinion in Apple v. Motorola, affirming-in-part and reversing-in-part Judge Posner. While the three judges agreed on most issues, they disagreed on issues of injunctive relief (Judge Rader would have allowed Motorola’s request for injunctive relief to proceed and Judge Prost would not have vacated the district court’s summary denial of Apple’s request for injunctive relief) and means-plus-function claim interpretation.) More on this opinion later.
By Dennis Crouch
Sanders v. Flanders (5th Cir. 2014)
This case is an attorney malpractice lawsuit that Eric Sanders is pursuing against his Texas-based patent attorney Harold Flanders. Although the case is based on a Texas state-law claim, it enters Federal Court on grounds of diversity (Sanders is from Georgia). And, although the case involves a number of questions of patent law, those are not substantial enough to raise Federal Circuit appellate jurisdiction. See, Gunn v. Minton, 133 S.Ct. 1059 (2013) (state-law malpractice claims “rarely, if ever, arise under federal patent law.”); See also MDS (Canada) Inc. v. Rad Source Techs., Inc., 720 F.3d 833 (11th Cir. 2013). (Note, Harold Flanders is no longer on the rolls of patent attorneys).
Here, the invention in question is an “effervescent mouthwash tablet.” Over a period of nine years, Flanders prepared and filed “numerous” patent applications on behalf of Sanders. Flanders apparently did not notify Sanders of any of the office action rejections and instead allowed the applications to go abandoned. However, the district court granted summary judgment in favor of Flanders – holding that Sanders had failed to prove either causation or damages. The difficulty with patent prosecution malpractice actions is that attorney misconduct alone is generally insufficient. Rather, the allegedly injured party must also prove that the party’s outcome would have been better absent misconduct. Here, that would mean that a valuable patent would-have-issued.
On appeal, the Fifth Circuit affirmed – finding that Sanders had only presented “speculative” and “unsubstantiated” evidence of damages. (The court did not address causation because a lack of damages was sufficient to affirm).
To prevail on any of his five claims, Sanders had to demonstrate, inter alia, that Flanders’s conduct caused damages, a point he does not contest. It is well settled that damages cannot be established merely through speculation or conjecture. Granting a judgment as a matter of law with respect to damages, the district court concluded that “Sanders’s damages testimony was too speculative as to lost investors and lost profits, and unsubstantiated by competent proof as to out-of-pocket expenses and legal fees, to be recoverable.” Because we agree and affirm the district court’s grant of Flanders’s Rule 50(a) motion on this basis, we need not address whether Sanders presented sufficient evidence with respect to the element of causation—an alternative ground on which the district court granted relief.
Sanders did refile his applications in 2011 – this time with a different patent attorney. See APN 13/316,600. However, that case has also been abandoned for failure to respond to an office action rejection.
I just found Kelly Hyndman’s patent law site Jurinspired.com. In 2014, Hyndman has been creating a weekly patent law video – each segment begins with a 10-15 minute patent law focused discussion. Check it out: http://www.jurinspired.com/category/video-2/
By Dennis Crouch
Despite his support for gun control laws, President Obama has been a major driver of American gun sales. The theory is that folks have been buying guns them now before the President limits their sale. A similar rush appears to have been going on in patent litigation. In particular, an informally proposed amendment to the Senate patent reform bill distributed last weekend includes a clause for retroactive application – naming April 24 as the effective date of the attorney fee shifting provisions, regardless of when the bill becomes law.
(c) RETROACTIVITY – the amendments made by this subsection shall take effect on April 24, 2014, and shall also apply to any action for which a complaint is filed on or after that effective date.
The result: an unusually large number of infringement lawsuits were filed on April 23, 2014 to ensure that the new law will not be applicable. In particular, about 180 new infringement lawsuits were filed on the 23rd, more than five times the daily average. I wonder how those defendants like patent reform?
By Dennis Crouch
Since its 2008 TS Tech decision, the Federal Circuit has repeatedly received Mandamus requests to force transfer of patent infringement lawsuits – usually out of the Eastern District of Texas and – into other, more convenient, districts. The statute, 28 U.S.C. § 1404(a), provides district court with discretion to transfer a lawsuit to another district “for the convenience of parties and witnesses [and] in the interest of justice.” Although the transfer decision is within the district court’s discretion, TS Tech and its progeny have indicated that a court abuses that discretion by unreasonably refusing to transfer a case. Because transfer of venue is not a question of patent law, the Federal Circuit purports to follow regional circuit law – primarily that of the 5th Circuit. See In re Microsoft Corp., 630 F.3d 1361 (Fed. Cir. 2011); In re Nintendo, Co. Ltd., 589 F.3d 1194 (Fed. Cir. 2009); In re Genentech Inc., 566 F.3d 1338 (Fed. Cir. 2009); In re TS Tech USA Corp., 551 F.3d 1315 (Fed. Cir. 2008); accord In re Volkswagen of Am., Inc., 545 F.3d 304 (5th Cir. 2008) (en banc). A key element for successful motions to transfer is that the movant needs to show both that the current venue is poor that the proposed venue is much better.
The Federal Circuit just released three additional mandamus decisions, denying two and granting one. In re Altair Engineering (Fed. Cir. 2014) (mandamus motion to transfer denied); In re Groupon (Fed. Cir. 2014) (mandamus motion to transfer denied); In re WMS Gaming (Fed. Cir. 2014) (mandamus motion to transfer granted). In the past, venue transfer motions have seemed quite formalistic without really reaching the issues of justice and convenience. These opinions suggest to me that the court has improved its jurisprudence on this point:
In Altair, the petitioner asked the court to move the case against Uniloc from Texas to Michigan. In denying the petition, the Federal Circuit found it relevant that the Texas court had seen the same patent in two other cases – creating significant judicial economies. In addition, some of the relevant witnesses were also located near the Texas court. Thus, although more relevant evidence was sited in Michigan, the district court did not abuse its discretion in denying the transfer motion.
In Groupon, the court also refused to order transfer out of the Eastern District of Texas. In this case, the patentee – Blue Calypso is located in Texas and that was the site of the invention and the home of the key inventor along with all of its documents. The fact that Groupon is based in Illinois does not mean that the case should be transferred to Illinois.
Finally, in WMS Gaming, the Federal Circuit ordered the case moved from the Southern District of Mississippi to Northern District of Illinois. In the case, the patentee (MTG Gaming) sued WMS and another gambling-machine manufacturer as well as several casinos that operate in Mississippi, including MGM Resorts and Caesar’s Entertainment. The district court stayed the casino lawsuits and severed the suit involving the other manufacturer. With WMS standing alone, the Illinois venue appeared much better since it was the base of operations of the accused infringer and the patentee has no connections on its own to the Southern District of Mississippi. In addition, the Federal Circuit found that no relevant evidence or witnesses were located in Mississippi.
By Dennis Crouch
Braintree Labs v Novel Labs (Fed. Cir. 2014)
I see this case as highlighting the most critical and problematic problem with our patent system – that patent claim scope is intentionally ambiguous and malleable. Consistent with the subject matter of the invention, this case may potentially serve as a trigger for cleaning-out the patent system.
Braintree’s U.S. Patent No. 6,946,149 (asserted claim 15) covers a “composition for inducing purgation of the colon of a patient” and is used to help prepare patients for colonoscopies. A major problem with colon cleansing is the risk of having a dramatic electrolyte shift in the body as a whole – leading to potential emergency health problems. Of course, colonoscopies have become very big business and this patent is potentially quite valuable.
Here, Braintree’s patent includes the clearly functional claim limitation of “wherein the composition does not produce any clinically significant electrolyte shifts.” The appeal is about the meaning of that the terms purgation, patient, and “clinically significant electrolyte shifts.” The panel here included Judges Dyk, Prost, and Moore. Each Judge had their own version of how the term should be construed and how that relates to infringement.
What is “a patient”: The preamble of asserted claim 15 indicates that that the invention covers a composition for inducting purgation of the colon of a patient. All parties agreed that the preamble term “a patient” should be seen as limiting since it is implicitly referenced by the later reference to electrolyte shifts. Here, both the district court and Judge Moore saw the “a patient” term as indicating “one or more patients” whereas Judges Dyk and Prost saw the term as meaning “a patient population.” This ends up being important since the plaintiffs provided evidence of a patient who had received the accused product and fit within the electrolyte shift limitation. However, the “general class of patients” interpretation would require evidence that the result is generally expected in all patients.
Judge Prost: Indeed, [the “one or more patients”] interpretation would allow a composition to meet the claims even if 99 patients out of 100 experienced clinically significant electrolyte shifts, as long as one patient did not. . . . [The] application of the claim terms “a patient” leads to the absurd result of infringement even if a composition causes clinically significant electrolyte shifts in a large percentage of patients
Judge Moore: The majority believes this to be an “absurd result” because it would allow “a composition to meet the claims even if 99 patients out of 100 experienced clinically significant electrolyte shifts, as long as one patient did not.” I understand the majority’s concern. But this is a question of damages, not infringement. . . . Infringement, whether on a large or small scale, is still infringement.
Judge Dyk: (Agreeing with Judge Prost) The sole evidence in the summary judgment record concerning the percentage of individuals experiencing such electrolyte shifts is data from two clinical studies … and those data are sufficient to show that the claim limitation was not met [since] a majority of patients experienced clinically significant electrolyte shifts.
In this case, the district court had awarded summary judgment of infringement to the patentee. On remand, the district court will need to revisit whether the patentee has proof that the patient population as a whole would react to the treatment as claimed. We’ll likely see this case again on revise-and-resubmit after the district court has redone its work. Of course, there is a chance that the Supreme Court may take this case – potentially seeing it as a subject matter sequel to Sakraida (“that cow shit case”).
= = = = =
This is a bit of an off-the-wall thought, but I might question whether an infringement finding is appropriate even under Judge Moore’s interpretation. Here, we basically have a setup where one claim limitation (no-electrolyte-shift) occurs in some patients and not in others – the cause of the difference is unknown but is likely a somewhat random operation of the laws of nature. What we know is that a particular treatment protocol will usually result in an electrolyte shift, but sometimes does not have such a result. Of course, for infringement to occur, the accused infringer must practice each and every step of the invention as claimed – here that includes the “no-electrolyte-shift” limitation. Now, although patent law does not require that the accused have intented to infringe the patent, the acts that eventually resulted in infringement must have been intentional.
My question on infringement, is whether performance of that no-electrolyte-shift element is properly attributable to a deliberate act by the accused or instead should it be seen simply as an occurrence of a natural phenomena – an Act of God as the old Lords might have said. See Tennent v. Earl of Glasgow (1864).
By Dennis Crouch
Gilead Sciences v. Natco Pharma (Fed. Cir. 2014)
Gilead’s two virus inhibition patents at issue in this case are quite similar to one another, although there is no priority claim creating an official family relationship between the patents. Patent Nos. 5,763,483 and 5,952,375. In a not-uncommon fashion, the application resulting in the ‘375 patent was filed first, but, because of a variety of prosecution delays, was the last to issue. The ‘375 patent is also set to be the first-to-expire. Note, after the ‘483 patent issued, Gilead filed a one-way terminal disclaimer for the ‘375 patent – limiting that patent’s term so that it cannot extend beyond the term of the ‘483 patent. Of course, that limitation is meaningless since the ‘375 patent naturally expires first anyway. The following timeline may help illustrate the relevant dates:
Double Patenting: This setup raises the prospect of obvious-type double-patenting. That doctrine is not based upon any statute, but has been applied by courts as a mechanism to prevent patentees from prolonging their patent term by obtaining a second-patent with claims that are not patentably distinguishable from the claims in the first patent. The general rule is that a terminal disclaimer cures the obviousness-type double patenting. However, here, one of the patents (the ‘483) patent does not have a terminal disclaimer.
Later Issued but Earlier Expiring Patent: The district court ruled in favor of Gilead – holding that, as a matter of doctrine, a later-issued but earlier-expiring patent cannot serve as a double-patenting reference against an earlier issued but later-expiring patent. That rule cited here by Judge Wigenton (D.N.J.) follows two Delaware district court cases stating the same proposition. Abbott Labs. v. Lupin Ltd., 2011 WL 1897322 (D. Del. May 19, 2011) and Brigham & Women’s Hosp. Inc. v. Teva Pharm. USA, Inc., 761 F. Supp. 2d 210 (D. Del. 2011). Those cases are in conflict with a PTAB decision on the same topic: Ex Parte Pfizer, Inc., 2010 WL 532133 (Bd. Pat. App. & Interf. Feb. 12, 2010).
On appeal, the Federal Circuit focused on the particular legal question: “Can a patent that issues after but expires before another patent qualify as a double patenting reference for that other patent?” The answer: Yes it can. With the result here being that the district court’s decision is in error. The majority’s reasoning makes sense – the primary purpose of the double-patenting doctrine is to prevent a patentee from unduly extending its patent term and here, Gilead is attempting to do so by an additional 22-months.
The majority opinion was filed by Judge Chen and joined by Judge Prost. Chief Judge Rader filed a dissenting opinion arguing that the court should have acted more cautiously in extending the judge-made rule. Judge Rader writes:
Under the AIA’s new “first-inventor-to-file” framework, prospective patentees are under tremendous pressure to file their applications early. I am concerned that today’s opinion will have unforeseen consequences in this new race to the Patent Office.
I would suggest that – most likely – the doctrine of obviousness-type double patenting would have never been created if the current regime had been in place way back when. Most notably, calculating patent term as 20-years from filing eliminates most potential game playing and the publication rules would typically result in an earlier filed patent being seen as prior art – even if jointly owned.
Extension and Adjustment: Although this issue has been addressed somewhat in other cases, this decision does not offer any insight as to how double-patenting applies to cases where the difference in patent term is due to a patent term adjustment or extension.
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The currently proposed legislative patent reforms would codify the double patenting exception in a somewhat narrower fashion. This would potentially limit any further judicially motivated alterations in its scope.
Sanofi-Aventis v. Glenmark (Fed. Cir. 2014)
In a post on the Patent Ethics site, Professor Hricik highlights this case with the following headline: CAFC Affirms Adverse Inference Instruction Due to Spoliation.
Post Filing Recognition of Synergy: For patent prosecutors, an important headline from the case would also be: “Synergy” of patented combination that was only recognized after the application filing can still be used to prove non-obviousness. Here, that principle was applied by the appellate panel in affirming the jury’s decision that Glenmark had failed to prove Sanofi’s patent obvious.
Some background: Sanofi’s patent No. 5,721,244 covers the combination of both trandolapril (an ACE inhibitor) and a calcium channel blocker, combined “in amounts effective for treating hypertension.” A licensed drug covered by the patent is distributed by Abbott under the brand name Tarka. Mumbai-based manufacturer Glenmark filed an abbreviated new drug application (ANDA) with the FDA requesting permission to begin selling its generic version of the drug prior to patent expiry. In order for a generic manufacturer asking to receive permission to sell a drug that that the branded manufacturer has listed in the Orange Book as covering the product, the generic manufacturer must also submit a “Paragraph IV Certification” indicating their allegation that the patent is either invalid or will not be infringed by the generic activities. See 21 U.S.C. §355(j)(2)(A)(vii).
Under the Hatch-Waxman rules, an FDA filing with a Paragraph IV certification is a form of patent infringement and here Sanfi sued – alleging infringement. That lawsuit then triggered a 30-month stay in FDA approval of the generic product. However, once the stay concluded Glenmark launched its generic product (all while the district court case continued). Glenmark’s defense was invalidity, but the jury sided with the patentee that Glenmark’s proof was insufficient and the resulting damages were $16 million in lost profits and price erosion damages.
Patent Validity: The patented invention is a combination of two known hypertension medications. However, there was no evidence that the combination was known. The question thus, was whether the combination was obvious. The appeal of obviousness questions is tricky because obviousness itself is a question of law that must be supported by factual conclusions drawn from the evidence. A jury’s factual conclusions must be supported by “substantial evidence” (a fairly low standard), but any legal conclusions are reviewed de novo. “When the question of obviousness is tried to a jury, on appeal we ascertain whether the jury was correctly instructed on the law, whether there was substantial evidence in support of factual findings necessary to the verdict, and whether the verdict was correct on the supported facts.” Here, the jury was apparently not asked to report its particularly factual conclusions but instead only whether the claims were obvious. In these black-box scenarios, the jury verdict is difficult to overturn on appeal because the implicit factual findings are so difficult to pin-down and therefore challenge.
At the time of the invention (1986) it was apparently already known to combine ACE inhibitors with CC-blockers and Glenmark argued that the use of trandolapril was merely a substitution of one known ACE inhibitor for another. Sanofi argued that there were thousands of potential ACE inhibitors and none of the prior art suggested that the particularly claimed drug (trandolapril) was the best. In reviewing these arguments, the court sided with the patentee.
Post-Filing Recognition of Benefits: Some of the “synergistic benefits” of the drug combination were not recognized until after the patent application was already filed. In the appeal, the Federal Circuit held that those benefits were perfectly acceptable as evidence of non-obviousness. The court writes: “patentability may consider all of the characteristics possessed by the claimed invention, whenever those characteristics become manifest.”
How Many Plaintiffs to Screw in a Lightbulb? Another interesting aspect of the decision is whether the four plaintiff here had standing to sue. According to the case, Sanofi-Aventis Deutschland GmbH is the owner of the patent at issue and Aventis Pharma S.A. is the exclusive licensee of that patent. Abbott GmbH contracted with Aventis for the “irrevocable sole and exclusive right” to sell the drug product under the patent and Abbott Labs is the holder of the FDA-approved new drug application. Finally, ALI is the exclusive U.S. distributor for Abbott Labs.
Based upon this mess, Glenmark argued that only Abbott Labs held rights to sue on Hatch-Waxman claims (as holder of the FDA-filing) but that it did not have standing because it was neither owner nor exclusive licensee of the patent rights. On appeal, the Federal Circuit rejected this argument – agreeing with the district court that the relationships and agreements amongst the various plaintiffs resulted in Abbott Labs holding exclusive rights to the patent and thus having standing to sue. In addition, the court saw that it was important that “all entities in the license chain joined in the suit, such that there is no danger of multiple suits for infringement.”