Guest Post on Pacific Coast Marine by Prof. Sarah Burstein

By Sarah Burstein, Associate Professor of Law at the University of Oklahoma College of Law

Pacific Coast Marine Windshields, Ltd. v. Malibu Boats, LLC (Fed. Cir. 2014)
Panel:  Dyk (author), Chen, Mayer

In this case, the Federal Circuit determined—as a matter of first impression—that “the principles of prosecution history estoppel apply to design patents.” This case has a number of implications for design patent application strategy, including for applications filed under the Hague System.

Pacific Coast Marine Windshields Limited (“PCMW”) accused Malibu Boats (“Malibu”) of infringing U.S. Patent No. D555,070 (the “D’070 patent”). Here is a comparison of the patent drawings and the accused design, as shown in PCMW’s opening appellate brief:

  Fig 1

As can be seen from this illustration, a major difference between these two designs is that the patented design features four circular vent holes while the accused design has three roughly rectangular-shaped holes.

The D’070 patent matured from a patent application filed (apparently pro se) by PCMW’s owner and CEO, Darren Bach. In the original design patent application, Bach claimed an “ornamental design of a marine windshield with a frame, a tapered corner post with vent holes and without said vent holes, and with a hatch and without said hatch, as shown and described.” The submitted figures included the following:

Fig 2

A design patent may contain only one claim. It is possible to claim multiple embodiments—but only if those embodiments involve the same inventive concept. The question of whether a claimed embodiment satisfies this standard is left largely to the examiner’s discretion.

In this case, the examiner decided that Bach’s application included five “patentably distinct groups of designs” and issued a restriction requirement. Bach did not challenge the restriction requirement. He elected to prosecute the design shown in Figure 1 above—i.e., the version with “four circular holes and a hatch.” He also amended the claim language, deleting the reference to any hole and hatch variations. So when the D’070 patent issued, it simply claimed “[t]he ornamental design for a marine windshield, as shown and described.” Bach later filed a divisional application for the no-holes-with-hatch variant, which matured into U.S. Pat. No. D569,782. But he did not pursue design patents for any of the other variations, including the two-hole variation shown above.

Malibu moved for partial summary judgment, arguing that PCMW’s infringement claim was barred by prosecution history estoppel. Malibu argued that PCMW surrendered the two-hole design during prosecution and that the accused three-hole design fell within the territory surrendered “between the original claim and the amended claim.” The district court agreed and entered judgment of noninfringement based on prosecution history estoppel.

On appeal, PCMW argued that the principles of prosecution history estoppel should not apply to design patents at all. It argued, among other things, that there was no good policy reason to extend the doctrine to design patents. The Federal Circuit did not agree, noting that “[t]he same principles of public notice that underlie prosecution history estoppel apply to design patents as well as utility patents.”

The Federal Circuit then considered whether prosecution history estoppel barred PCMW’s infringement claim. That issue “turn[ed] on the answers to three questions: (1) whether there was a surrender; (2) whether it was for reasons of patentability; and (3) whether the accused design is within the scope of the surrender.” The court concluded Bach did surrender the cancelled figures and that the surrender was done for reasons of patentability. In doing so, the Federal Circuit rejected PCMW’s argument that the restriction requirement was merely “administrative” or “procedural.” The court concluded “that, in the design patent context, the surrender resulting from a restriction requirement invokes prosecution history estoppel if the surrender was necessary . . . ‘to secure the patent.’”

However, the Federal Circuit decided that the accused design was not within the scope of the surrender. It rejected Malibu’s argument that “by abandoning a

design with two holes and obtaining patents on designs with four holes and no holes, the applicant abandoned the range between four and zero.” The court noted that “[c]laiming different designs does not necessarily suggest that the territory between those designs is also claimed.” Moreover, according to the Federal Circuit, neither party claimed that the three-hole design was a colorable imitation of the surrendered two-hole design. (The Federal Circuit expressly avoided answering “whether the scope of surrender is measured by the colorable imitation standard”—an interesting issue for another day.) Therefore, prosecution history estoppel did not bar PCMW’s claim.

On remand, it will be interesting to see how PCMW argues its infringement case. It seems difficult to argue that the accused three-rectangular-hole design is not a colorable imitation of the surrendered two-rectangular-hole design but that it is a colorable imitation of the claimed four-round-hole design.

This decision also has important implications for other cases. Design patent applicants often claim multiple embodiments. If the examiner approves those embodiments, the resulting patent will be (at least arguably) stronger and more flexible. Following Pacific Coast Marine, however, this is a riskier—or, at least, potentially more expensive—strategy. If an applicant claims multiple variations on a design and the examiner decides they are patentably distinct, the applicant must file divisional applications for the unelected variants to avoid prosecution history estoppel. And more applications means more fees.

This case also will be important when the United States becomes a party to the Hague System for the International Registration of Industrial Designs. The Hague System allows applicants to file up to 100 designs in a single registration, as long as the designs are all in the same Locarno class. But the PTO has indicated that it will apply its single-invention rule to any applications it receives via the Hague System. So applicants who include multiple designs in their Hague applications should expect restriction requirements, with all the attendant estoppel risks.

Square Pegs, Round Holes: Guest Post by Mark Janis and Jason Du Mont

Guest Post by Jason J. Du Mont, Microsoft IP Fellow at the Indiana University Maurer School of Law and Mark D. Janis, Robert A. Lucas Chair of Law at the Indiana University Maurer School of Law.

In Pacific Coast Marine Windshields Ltd. v. Malibu Boats, the Federal Circuit addressed a question of first impression: whether an applicant’s actions taken during prosecution of a design patent should be available for use when determining the design patent’s scope in subsequent litigation.  The court’s answer was yes.  While the answer may be unremarkable, the court’s unusual journey from question to answer raises broader questions about the wisdom of absorbing utility patent law’s judicially-derived doctrines into design patent law.

The applicant had filed a design patent application claiming “an ornamental design of a marine windshield with a frame, a tapered corner post with vent holes and without said vent holes, and with a hatch and without said hatch, as shown and described.”  The application included eleven drawings showing windshields with various numbers of vent holes, with and without hatches. During prosecution, the examiner imposed a restriction requirement and identified five patentably distinct groups in the application: windshields having “(1) four circular holes and a hatch; (2) four circular or square holes and no hatch; (3) no holes and a hatch; (4) no holes and no hatch; and (5) two oval or rectangular holes and a hatch” (internal citation omitted):

Image 1

The applicant elected group one without traverse (which showed four circular holes and a hatch), deleted the figures not associated with this embodiment, and eventually rewrote the claim in a more conventional form, claiming “[t]he ornamental design for a marine windshield, as shown and described.”  The application issued as D555,070.  The applicant later filed a divisional directed to group three, which issued as D569,782, but there were apparently no further divisionals.

Pacific Coast subsequently asserted the ‘070 patent against Malibu Boats, which was producing a windshield having three square vent holes, as depicted below:  

Image 2

Malibu Boats moved for summary judgment of non-infringement based on prosecution history estoppel.  The district court granted the motion and Pacific Coast appealed. 

No Distinct Doctrine of Equivalents for Design Patents

Prosecution history estoppel is a limitation on the doctrine of equivalents, so before it reached the district court’s prosecution history estoppel analysis, the Federal Circuit first had to determine whether the design patent law should recognize a doctrine of equivalents.  The court concluded that for design patents, literal infringement and infringement under the doctrine of equivalents are “intertwined,” pointing to the statute (35 U.S.C. § 289, which provides a remedy when another party “applies the patented design, or any colorable imitation thereof, to any article of manufacture for the purpose of sale” (emphasis added)), and the Gorham v. White case (which holds that infringement is based on substantial similarity). 

The court could have been more forthcoming as to what it means for the two infringement standards to be intertwined, but the key takeaway is clear: the design patent infringement analysis isn’t bifurcated into a literal infringement prong requiring identicality and an equivalency prong.  It relies on a test of substantial similarity based on the design’s overall impression. The court’s analysis signals that there’s no longer a need to speak of a distinct “equivalents” concept in design patent law; concepts of equivalency are built into the substantial similarity test.

 So Why Incorporate Prosecution History Estoppel?

Having recognized that design patent law includes no distinct doctrine of equivalents, the Federal Circuit could have declared that design patent law need not incorporate the utility patent law’s prosecution history estoppel jurisprudence.   The court could have formulated a prosecution history-based limiting doctrine that was customized to connect to design patent law’s “intertwined” infringement standard.  Or, the court could have even analogized to prosecution disclaimer, a simpler concept which limits literal claim scope and avoids entanglement with the presumptions and rebuttal routes of a post-Festo prosecution history estoppel doctrine.  See, e.g., Trading Techs. Intern., Inc. v. Open E Cry, LLC,  728 F.3d 1309 (Fed. Cir. 2013) (discussing the distinction).

Instead, the court stated that the “principles” of prosecution history estoppel applied to design patents, and resolved those principles into a three-step test: “(1) whether there was a surrender; (2) whether it was for reasons of patentability; and (3) whether the accused design is within the scope of the surrender.” It then relied on Festo and other utility patent cases in applying its test, concluding that “no presumption of prosecution history estoppel could arise” because there wasn’t any showing that the third part of the test was met.

Whatever this presumption is, it surely isn’t the Festo presumption.  Festo holds that a narrowing amendment that is substantially related to patentability triggers a presumption that the applicant surrendered all territory between the original and amended claim scope with regards to the claim limitation in question.  See, e.g., Duramed Pharma. v. Paddock Labs., Inc., 644 F.3d 1376 (Fed. Cir. 2011). There isn’t any third step calling for scrutiny of the accused device.   That inquiry would only be relevant to determining the scope of the estoppel—and that only comes into issue once it’s determined that the presumption of estoppel applies, and that the presumption hasn’t been rebutted. 

The court’s approach is likely to lead to confusion in design patent cases about how much utility patent doctrine really has been borrowed.  (It may also create some confusion in utility patent cases if it’s invoked there.  Doing so would be erroneous, in our view.)  This illustrates why it’s not always so easy, or desirable, to fling utility patent doctrine into design patent law.  The court could have avoided all of these doctrinal convolutions by steering clear of prosecution history estoppel jurisprudence and either drawing on simpler analogies or developing a test specific to design patents.

Applying the Court’s Three-Step Test

The Federal Circuit’s application of its three-step test further illustrates why borrowing from prosecution history estoppel doctrine may have been a bad idea.  In addition to diverging from the Festo presumption, the court’s rhetoric slips towards the element-by-element conceptions of equivalency and estoppel that govern in utility patent law, and away from conceptions of the design’s overall impression that design patent law mandates.

The court concluded that steps one and two of its test were met.  As for step (1), the applicant had deleted drawings directed to the patently distinct two-hole and no-hole embodiments, resulting in a surrender of scope, according to the court; and, as for step (2), deletions made in response to a restriction requirement were made for purposes of patentability and thus could trigger estoppel.  As the court pointed out, however, this latter point hasn’t been resolved in utility patent law.

Nevertheless, the court decided that step (3) (whether the accused design was within the scope of the surrender) wasn’t met, and that was enough for a reversal.  The defendant had chosen not to argue that the accused three-hole design was within the scope of the patentee’s non-elected designs.  Instead, the defendant asserted that because the patentee had elected designs having four holes (in the ‘070 patent-in-suit) and zero holes (in the ‘782 divisional), the patentee had surrendered any designs having a number of holes between zero and four.  The court was not persuaded, reasoning that the notion of surrendering an entire range “does not work in the context of design patents where ranges are not claimed, but rather individual designs.  Claiming different designs does not necessarily suggest that the territory between those designs is also claimed.”  These are crucial observations for limiting the impact of prosecution history estoppel, especially since the court didn’t address any other way of rebutting this presumption.

But the court left unaddressed the key question about applying step (3): what is the standard for determining whether an accused design falls within the scope of the surrender?  Some raw notion of “colorable imitation”?  A fully elaborated substantial similarity analysis in view of the prior art as per Egyptian Goddess?  Something else?

Moreover, by framing its analysis of the designs at issue by reference to the number of holes, the court encourages a mode of analysis that rests on individual design features, rather than the design’s overall impression.   There’s a deep disconnect here between utility and design patent law.  Equivalency (and, correspondingly, prosecution history estoppel) in utility patent law is to be applied on an element-by-element basis, but that doesn’t translate neatly to design patent law.   Here, where the embodiments differed by discrete, readily-identifiable features (such as the number of holes or hatches), perhaps the presence or absence of the features dictate one’s conclusions about the design’s overall impression.  We think this will not be so easy in most cases involving visually-complex designs.

More to Come …

The prospect that restriction and election practice will give rise to estoppel in design matters has significant practical consequences.  First, the implementation of the Hague will unquestionably lead to an influx of international applications that often contain plural embodiments—either explicitly allowed or because they are filtered from registration systems.  When coupled with distinctions in the determination of scope, between offices, the USPTO can expect to receive higher volumes of applications that may necessitate restrictions.  Second, the Federal Circuit’s In re Owens decision, and the USPTO’s apparent turn towards a more aggressive application of the written description requirement in design cases, may force design patent applicants to submit applications including large sets of drawings that depict numerous implementations of a design concept.  To the extent that these implementations are deemed patentably distinct embodiments, many applicants will find themselves facing restriction requirements.

That leads to the case’s key practical point:  if courts choose to apply Pacific Marine’s estoppel rule aggressively, practitioners may need to advise their clients to expect to file more divisionals—and, consequently, face higher prosecution costs.

Supreme Court on Intellectual Property

The Supreme Court agreed today to hear four new intellectual property cases this session: Two patent cases, a copyright case, and a trademark case:

  • Nautilus v. Biosig Instruments (13-369): what is the proper standard for indefiniteness.
  • Limelight Networks v. Akamai Technologies (12-786): Does inducement require underlying direct patent infringement infringement by another as a prerequisite to liability.
  • ABC, Inc., v. Aereo, Inc. (13-461): when does an internet transmission count as a “public performance” under the copyright laws?
  • POM Wonderful v. Coca-Cola (12-761): Who has standing to challenge a food or beverage label as misleading or false under the Lanham Act.

The cases should all be decided by the end of June 2014.

 

Quiet: Introverts and Patent Rights

by Dennis Crouch

Susan Cain's book Quiet walks through an historic societal transformation toward an "Extrovert Ideal" that "dramatically undervalues introverts" and incorrectly equates introversion with shy and antisocial behavior. This transformation parallels the shift from a culture that values character to one that values personality. See, Susan Cain, Quiet: The Power of Introverts in a World That Can't Stop Talking (2013).

The movement toward extroversion is present within the patent system as well with a push toward "teamwork" in inventing. Team-developed inventions appear to be more likely to receive corporate backing and to be patented. What is unclear, however is whether the shift moves us toward better innovation. Arguably, the rise in collaborative inventing is driven by the complex nature of modern inventions and facilitated by our improved communications tools. However, I suspect that Cain's social thesis in Quiet provides a more compelling explanation: that social pressure and top business school training shift our attention toward the committee work (and hiring workers who do well in committee).

The great Steve Wozniak provides some opposite advice:

The inventors and engineers I've met are like me—they're shy and they live in their heads. They're almost like artists. In fact, the very best of them are artists. And artists work best alone where they can control an invention's design without a lot of other periople designing it for marketing or some other committee. I don't believe anything really revolutionary has been invented by committee. If you're that rare engineer who'se an inventor and also an artist, I'm going to give you some advice that might be hard to take. That advice is: Work alone. You're going to be best able to design revolutionary products and features if your're working on your own. Not on a committee. Not on a team.

Of course, Wozniak did his most revolutionary work in the 1970's when two-thirds of patents listed a single person as "the inventor," today that figure has dropped to less than one-third. Over the past four decades, the number of inventors per patent has steadily crept upward as the lone inventors have gradually been crowded out.

The chart below shows the number of inventors per patent over the past eight years. What you can see is a continued increase in the percentage of patents with teams of inventors. In particular, the percentage of patents with only one inventor continues to fall while the percentage of patents with three or more inventors continues to rise.

InventorsPerPatent

Although inventing can still be a solo endeavor, patenting data indicates that paradigm no longer predominates.

See Dennis Crouch, The Changing Nature of Inventing: Collaborative Inventing at https://patentlyo.com/patent/2009/07/the-changing-nature-inventing-collaborative-inventing.html; Dennis Crouch, Inventor Count at https://patentlyo.com/patent/2013/01/inventors.html.

Patent Term Adjustment 2013

By Dennis Crouch

In 2011, I discussed an emerging downward trend in the percent of patents awarded at least some patent term adjustment (PTA). PTA extends the life-span of patent rights beyond the ordinary 20-year term and is intended to compensate a patentee for USPTO delays in issuing the patent.

The downward trend first reported in 2011 is continuing and is a further indication that the PTO is beginning to seriously tackle the rampant backlog and prosecution delays that have been an ever-present part of the system for so long. Still, over 70% of recently issued patents have lengthened patent terms due to patent office delays that go beyond the statutory bounds outlined in 35 U.S.C. 154. The time-series chart below breaks-down the numbers even further, showing impressive drops in the percentage of patents that receive more than one- and two-years of term adjustment.

The break-point of the charts in early 2010 shows the impact of the Federal Circuit’s Wyeth decision holding that the PTO had been under-calculating patent term. The second chart shows the average PTA award (for those receiving PTA).

Federal Circuit Claims Jurisdiction over Regulatory Decision but Denies Nationwide Injunction for State Law Infraction

By Dennis Crouch

For many innovative new products, regulatory approval is a much greater hurdle than patent protection. And, unlike patent rights, regulatory approval is often a necessity. The present case is interesting in that the mascara product straddles the border between a lightly regulated beauty aide and a medical drug treatment.

Allergan, Duke University, and Dr. Murray Johnstone v. Athena Cosmetics (Fed. Cir. 2013) (CaseText)

Duke & Dr. Johnstone each hold several patents that are apparently embodied by Allergan's eyelash growth medicine Latisse and exclusively licensed by Allergan. In 2009, these partners collectively sued Athena Cosmetics for selling RevitaLash mascara in a way that infringes the patents. In addition, Allergan alleged violation of state (California) unfair competition law by selling drugs (i.e., medicated mascara) without regulatory approval.

Following some amount of pretrial litigation (including a claim construction and summary judgment of non-infringement), the district court dismissed all of the patent claims without prejudice (stipulated dismissal). A dismissal without prejudice means that the patentee to can re-file those claims at a later date. The district court then found summary judgment for the plaintiffs — holding that Athena violated California's unfair competition law (UCL) by marketing, distributing and selling the mascara without regulatory approval. The district court then ordered a nationwide injunction against the sales.

Federal Circuit Jurisdiction. On appeal, the Federal Circuit first focused on the question of appellate jurisdiction. Under the law, the Federal Circuit has appellate jurisdiction over "any civil action arising under, or in any civil action in which a party has asserted a compulsory counterclaim arising under, any Act of Congress relating to patents."

Although the original complaint clearly raised substantial issues of patent law, Allergan argued that the stipulated dismissal without prejudice removed the arising under jurisdiction. See Gronholz v. Sears, Roebuck & Co., 836 F.2d 515 (Fed. Cir. 1987) (dismissal of patent claims without prejudice operated as an amendment of the complaint and thus eliminated arising under jurisdiction); Rothe Dev. Corp. v. Dep't of Def., 545 F.3d 1023 (Fed. Cir. 2008) ("the basis of a district court's jurisdiction—and thus the path of appeal—may change over time in a case, for example, if certain claims are dismissed without prejudice").

On appeal, the Federal Circuit determined that the non-prejudicial dismissal did not eliminate the court's arising-under appellate jurisdiction. The court agreed that a non-prejudicial dismissal can eliminate its appellate jurisdiction, but distinguished this case because the prior patent rulings in the case indelibly altered the parties legal rights. In particular, the district court's prior claim construction ruling and summary judgment of non-infringement.

In the decision, the Federal Circuit did not discuss either the importance of amendments to the jurisdictional law found in the AIA or the recent Minton v. Gunn decision. By ignoring Minton, the Federal Circuit skipped over the more holistic interests-based approach to arising-under jurisdiction required there in favor of a more bright-line analysis that has been previously rejected by the Supreme Court.

= = = = =

No Nationwide Injunction for Violating California Law: The Federal Circuit agreed that the district court correctly found Athena liable for violating California law, but the Appellate Panel rejected that court's nationwide injunction order as an abuse-of-discretion. The Federal Circuit wrote:

The injunction impermissibly imposes the UCL on entirely extraterritorial conduct regardless of whether the conduct in other states causes harm to California. This injunction is so broad that it would bar Athena from making its product in Idaho, distributing it from a facility in Nevada, and selling it to Connecticut consumers.

Interestingly, because the cause of action here was based on California law, the Federal Circuit looked to see whether California courts would have imposed a nationwide injunction and found that the "[t]he conduct enjoined here is exactly the sort of purely extraterritorial conduct that the California Court of Appeals expressly held could not be regulated by the UCL."

In addition, the Federal Circuit held that such extraterritorial application of California would be a violation of the U.S. Constitution's dormant Commerce Clause.

In short, California may, as it has in this case, conclude that its own unfair competition law has been violated, and it may prohibit any future conduct within its borders that would cause continued violation of its law. California is not permitted, however, to extend its unfair competition law to other states.

The upshot then is that RevitaLash is back on the market, but not in California (as shown in the image above).

= = = = =

Professor Shubha Ghosh has written a number of important and interesting academic works. One is his recent book titled Identity, Invention, and the Culture of Personalized Medicine Patenting (2012 Cambridge Press). That book relates here because Ghosh identifies the '105 patent as a "race specific patent." The patent made Ghosh's book because identifies the race and gender of study subjects: e.g., "[study included] 38 Caucasian, 3 African-American, 1 Asian, 1 Hispanic; 13 male, 30 female." Ghosh argues that race-specific categories should not be allowed to be particularly claimed (they were not in this particular patent).

USPTO Approves of And/Or Claim Limitation

By Dennis Crouch

Ex Parte Gross (PTAB 2014)

Patent attorney J. Nicholas Gross has a number of his own patents pending. Application No. 11/565,411 is directed to a computerized business method of serving content appropriate advertisement.

Claim 1 requires a “plurality of different websites characterized by a common parameter including at least one of a common content topic and/or a common contractual arrangement.”

The examiner rejected claim 1 as indefinite based upon the “and/or” term. On appeal, however, the PTAB reversed – finding that “A and/or B” does have a meaning and that meaning is A alone, B alone, or A and B together. However, the Board noted the “preferred verbiage” should be more simply “at least one of A and B.”

The biggest problem with the Board’s decision is that it was four-years in the making – reversing an examiner rejection mailed February 2, 2010.

USPTO Fees

In early 2013, the USPTO raised many of its fees and lowered a few. One accounting trick, however, is that some of the fee reductions were delayed until January 1, 2014. The two key areas of newly reduced fees are the publication fee and the issue fee.

  1. Publication Fee was $300 and is now $0, even for early-publication requests. This takes away one incentive to file a non-publication request.
  2. Issue fee was $1,780 and is now $960. That fee is reduced by 50% for small entities and 75% for micro entities and universities.
  3. PCT Fees are now subject to the small and micro entity status discounts.
  4. Assignment recordation is now free if done electronically.

Utility Patents Granted in 2013: A New Record (For the Fourth Consecutive Year)

By Dennis Crouch

Despite being held-back by the Federal spending sequester and a focus on implementing the first-to-invent and post-issuance review procedures of the America Invents Act, the US Patent Office has also awarded more patents than ever. The preliminary figure for 2013 is 277,861 patents issued, which represents a 10% jump over last-year’s record. See USPTO Patent Grants: Another Record Year (3rd in a Row). The average pendency of utility applications (application filing to issuance or abandonment) has been slowly decreasing over the past several years, but has hovered around 37-months for the past six months.

One more Click: Settlement Agreement Revives Disney’s Business Method Patent

by Dennis Crouch

Disney v. Rea (Fed. Cir. 2013)

Disney's Patent No. 5,963,915 covers an internet purchase method. The patent was filed by Steve Kirsch and originally owned by his company InfoSeek that was purchased by Disney as part of what Wikipedia calls the "expensive failure" of Go.com.

The patent issued on October 5, 1999.  On October 4, 2001 (less than two years later), the patentee filed a broadening re-issue application that claimed a one-click purchase method to rival that of Jeff Bezos. Over the next eleven yars, the patentee argued back-and-forth with the PTO examiners over a variety of patentability issues. In due course, the patentee kept the application alive by filing three requests for continued examination (RCEs) and one administrative Appeal along with more than 100 different patent claims.  After losing at the BPAI, Disney then filed a civil action under 35 U.S.C. 145, asking the district court to order the USPTO to issue the patent. However, Federal Judge Brinkema sided with the USPTO and found that the claims as presented were invalid. Disney then appealed to the Federal Circuit.

Now, Disney and the USPTO have settled the appeal with the agreement that Disney will drop its appeal of pending claims so long as the USPTO (1) allows Disney to file another RCE in the case and (2) considers amended claims presented by Disney in a manner "consistent with the district court's decision" and considering the evidence presented at trial.  As part of the settlement, Disney also agrees that it is not entitled to a patent on the claims that were currently on appeal and agreed to pay the ~ $100,000 in appellate costs spent by the US Government.

In a joint brief, the parties suggest that Disney could still file a broadening continuation reissue application (while the civil action and related appeals are still pending) but could not file an RCE unless the case was remanded to the PTO.  It is unclear to me what actual benefit Disney receives here from the remand/RCE instead of filing of a continuation.

The settlement document is not yet publicly available.

Institut Pasteur: Federal Circuit Takes Hard Look at USPTO Board Factual Conclusions

By Dennis Crouch

Institut Pasteur v. Focarino and Precision BioSciences, Reexam No. 95,000,443 (Fed. Cir. 2013)

The French non-profit Institut Pasteur holds several patents covering site-directed insertion of genes into eukaryotic chromosomes. See U.S. Patent Nos. 7,309,605, 6,610,545, and 6,833,252. Basically, Pasteur discovered that a set of naturally occurring enzymes that could cleave chromosomal DNA at particular recognition sites and also discovered that cells will naturally repair the cleavage through homologous recombination even when an additional gene sequence is added, so long as a proper recombinatory DNA template is also added. It turns out that this sequence of events occurs in mitochondrial DNA but Pasteur was able to make it work on chromosomal DNA as well. The patents all relate to creating the enzymes and method of using those enzymes to insert DNA.

This is old stuff and all happened in the early 1990’s The three patents all expired in 2012 while the case was pending appeal to the Federal Circuit, but companies may still be on the hook for past damages for what has become a basic tool of genetic engineering.

In 2009, Precision BioSciences filed for inter partes reexamination of the three patents. The examiner found the claimed invention obvious and that decision was affirmed by the USPTO’s administrative patent appeal board. On appeal, the Federal Circuit has come-out with three interesting rulings:

Hard Deadline on Amendments: First, for the ‘605 patent, the claims were amended during the reexamination (and prior to the patent expiration date). For those claims, the court dismissed Pasteur’s appeal as moot because “[substantially] amended claims cannot be entered now that the patent has expired.” This result is obviously important for gamesmanship because it rewards delay tactics on the part of would-be infringers and also encourages patentees to work toward concluding any post-grant reviews.

No Substantial Evidence: Second, the Federal Circuit determined that the Board lacked Substantial Evidence for its factual conclusions that led to its obviousness decision of the challenged claims of the ‘545 patent. The question of obviousness is a matter of law predicated upon a set of factual conclusions. A factual conclusion must itself be based upon evidence presented to the Court. Here, after reviewing the two key prior art references (the evidence), the USPTO Board concluded that the prior art showed that the claimed enzyme “cleaved yeast chromosomal DNA when expressed in yeast cells.” On appeal, the Federal Circuit rejected that factual conclusion after failing to find such a disclosure in either reference. One factor making the Federal Circuit’s decision easier was that the Board based its conclusion upon the text of the prior art references rather than relying upon factual or expert testimony that could have offered stronger conclusory evidence.

Motivation to Combine: Finally, with regard to the ‘252 patent, the Federal Circuit found that the Board had failed to identify the “motivation, if any, a skilled artisan at the relevant time would have had to pursue the claimed invention.”

Opinion by Judge Taranto

Verdict and Settlement

By Dennis Crouch

Cassidian Communications v. microData GIS (E.D. Tex. 2013). Last week an Eastern District of Texas jury found all of Cassidian’s asserted “multiple-call-center” claims invalid. See U.S. Patent No. 6,744,858. According to Michael C. Smith, the E.D. Texas results for 2013 are “four plaintiff verdicts in fifteen infringement trials this year.”

Meanwhile, Princeton Digital Image settled another infringement case. This time with Toys R Us. PDI’s patent is US Patent No. 4,813,056 that allegedly covers “encoding image data into JPEG files for the purposes of producing JPEG images of products” for use on a website. The Patent was originally owned by GE and has now expired. PDI is in the process of collecting back-damages.

Further thoughts on Fee-Shifting from Judges Rader and O’Malley

By Dennis Crouch

Kilopass Tech v. Sidense Corp. (Fed. Cir. 2013)

In a 2012 decision, the district court ruled that Sidense did not infringe any of the claims of Kilopass’s three asserted memory-cell patents and that decision was affirmed on appeal (without opinion). However, the district court denied an exceptional-case attorney-fee award because Sidense had failed to provide clear and convincing evidence that the infringement action was brought or prosecuted in bad faith. In a decision calling for broader awards of exceptional-case attorney-fees, the Federal Circuit has vacated and remanded. Judge O’Malley penned court’s opinion with a concurring opinion filed by Chief Judge Rader.

35 U.S.C. § 285 provides that “[t]he court in exceptional cases may award reasonable attorney fees to the prevailing party.” Over the past several years, Exceptional-case awards have been few-and-far-between and the perception is that those awards are particularly rare for prevailing defendants who successfully avoid liability for infringement. In Brooks Furniture, the Federal Circuit ruled that a prevailing accused infringer can receive fees under Section 285 based upon either (1) objectively baseless litigation brought in subject bad faith or (2) other misconduct during the litigation.

The attorney-fee issue is hot right now. The Supreme Court will hear two pending cases on the interpretation of Section 285 later this term and Congress is considering several bills that would make it easier for a prevailing party to also get its fees paid-for. These actions are primarily focuses ways to push-back against patentees who raise unsuccessful infringement claims.

Here, Sidense argued that the case should be found exceptional because the lawsuit was objectively baseless and brought in bad faith. The district court rejected that argument, and, in vacating that decision, the Federal Circuit made several important findings:

  1. A case can still be brought in bad faith even if the plaintiff-patentee did not have actual knowledge of its baselessness. Rather, the knowledge requirement can be met when a lack of objective foundation for a claim was either known or obvious. Thus, a plaintiff with a misguided belief in its case can still be found to have brought the case in bad faith if the baselessness of the claim would have been obvious to someone more reasonable.
  2. Subjective knowledge of bad faith can be proven through a variety of direct and circumstantial evidentiary proofs and should be based on the “totality of the circumstances.” Thus, even though clear-and-convincing evidence is required to prove bad faith, courts can still “infer[] bad faith from circumstantial evidence.”
  3. A “smoking gun” that reveals “that a patentee knew that he had no chance of winning a lawsuit” is sufficient to show subjective bad faith despite other evidence to the contrary (such as an opinion of counsel that the case is a good one).
  4. “Factors such as the failure to conduct an adequate pre-suit investigation, vexatious or unduly burdensome litigation tactics, misconduct in procuring the patent, or an oppressive purpose are factors which can be indicative of bad faith.”

Judge O’Malley also discussed, but rejected, the defendant’s arguments that (1) subjective bad faith be eliminated as an element of an exceptional case finding and that (2) fees should be awarded in cases where a patentee loses a week but reasonable case.

In light of patentees’ First Amendment right to petition the government (by, for instance, filing a lawsuit seeking relief in the courts), we do not think Congress intended to discourage patentees from bringing reasonable claims of infringement by raising the specter of fee shifting—even when the patentee’s legitimate claims are on less than the firmest ground.

. . . Patent owners possess presumptively valid property rights which convey the right to exclude others from practicing the claims in their patents. The property right conveyed by a patent has constitutional underpinnings. . . . And, patentees have a constitutional right to petition the government to enforce or otherwise vindicate those rights. Thus, where there is no basis upon with to predicate exceptionality other than the viability of the claims asserted, we conclude that § 285 fees should not be awarded as long as the patentee had an objectively reasonable basis for its claims [or] if an objective litigant could conclude that the suit is reasonably calculated to elicit a favorable outcome.”

Instead, when a plaintiff presses reasonable, but weak, claims of infringement, a prevailing defendant must look to the many other bases for fee shifting under § 285.

Writing in concurrence, Chief Judge Rader argued that the rule for fee-shifting should be more liberal and generally allowed whenever the circumstances require fee shifting in order to prevent a gross injustice. See Eltech Sys. Corp. v. PPG Indus., Inc., 903 F.2d 805 (Fed. Cir. 1990).

Guest Post: So what if a True Invention Uses a Computer!

Guest Post by Martin Goetz

In the Alice vs. CLS Bank case that is before the Supreme Court the question by Alice is "Whether claims to computer-implemented inventions – including claims to systems and machines, processes, and items of manufacture – are directed to patent-eligible subject matter…". That's the wrong question to ask.

Equally wrong is to boil down that question to "Is software patentable"which both IP lawyers and the media are quick to do (see Crouch'sblog "Is Software Patentable?: Supreme Court to Decide"and Forbes articleSupreme Court Takes Up Case Challenging Software Patents).

The correct question, which the Supreme Court has answered indirectly and affirmatively in the past, but never in the way I have re-phrased the question is, "Is a 'true invention' that contain as part of (or all of) its disclosure (in its patent application) a digital computer (and a computer program), entitled to US patent protection."

I deliberately put in quotes true invention for that's not part of the debate. In previous patently-O articles I give just a few examples of true inventions which used a digital computer and software as part of their implementation of the invention e.g., artificial retina, voice translation, driverless car, Reading machine for the Blind and 3-D printer. Few, I believe, would debate whether those examples deserve the protection of the US patent System.

For a more in-depth discussion on my arguments of why "Is software patentable?" is the wrong question to ask, see my four patently-O blogs Do the Wright Brothers Deserve a Patent for their Flying Machine?: Why Eliminating Software Inventions from the Patent System Makes No Sense. , "No" to Software Patents Per Se: Software is Only a Means to an End. , In Defense of Software Patents and In Defense of Software Patents – Part 2.

Today, there are hundreds if not thousands of true, and undebatable, inventions that contain a digital computer and computer programs as part of their disclosure in virtually all world-wide industries, including the software industry.

For those that believe that the US patent system has spurred innovation and the growth of the United States since the patent system became law in 1790, eliminating true inventions that contain software as part of their disclosure, would be a catastrophe for the growth and health of the US economy.

Michelle Lee, Hal Wegner and Professor Scalia

Guest Post by Professor John F. Duffy, University of Virginia School of Law

[PDF of this Post with the Delegation of Authority: Download Michelle Lee2]

This title of this post, which addresses the legality of Michelle Lee’s recent appointment within the PTO, needs a bit of explanation.  The first two names in the title are not surprising because those two are at the center of the ongoing controversy.  On December 11, 2013, Michelle Lee was appointed by the Secretary of Commerce to be Deputy Director of the PTO and Deputy Under Secretary of Commerce for Intellectual Property.  Hal Wegner, the prominent patent commentator, has argued in a series of widely distributed papers that Lee’s appointment was unlawful.

The third name is the surprising one.  What does former Professor, now Justice, Antonin Scalia have to do with the controversy over Michelle Lee’s appointment?  The short answer is that the work of Professor Scalia, when he was a professor, is what convinces me that Hal Wegner is absolutely right to devote significant attention to the issue, but absolutely wrong in concluding that Lee was improperly appointed.  Let me explain.

First off, it is worthwhile to summarize the timeline of relevant events and Hal Wegner’s argument against the legality of Lee’s appointment.  After David Kappos left the position of PTO Director on February 1, 2013, his Deputy Director, Teresa Rea, assumed all the powers of the Director pursuant to 35 U.S.C. § 3(b)(1).  Ms. Rea served as Deputy Director until her departure on November 21, 2013.  Secretary of Commerce Penny Pritzker appointed Lee Deputy Director on December 11.  If Lee is validly appointed, then she like Rea has authority under § 3(b)(1) to exercise the powers of the Director while that office is vacant.    

Wegner begins his argument against the legality of Lee’s appointment by noting that the Secretary of Commerce has statutory authority to appoint a Deputy Director of the PTO only “upon nomination by the Director [of the PTO].”  35 U.S.C. § 3(b)(1).  At the time of Lee’s appointment, the PTO did not have a PTO Director to make such a nomination.  As just mentioned, all functions and powers of the PTO Director devolve by statute (§ 3(b)(1)) to the PTO Deputy Director in the case of a vacancy in the Director’s office, but of course at the time of the appointment of Lee, the Deputy Director’s position was also vacant. Thus, because the PTO lacked both a Director and Deputy Director (so Wegner’s argument goes), no person could properly make a “nomination” of Lee, and because a nomination is a statutory prerequisite for appointment, the appointment is not valid.  Wegner has even gone so far as to say:  “Why would a person of heretofore spotless reputation and noted achievement [i.e., Lee] accept an appointment in violation of the strict statutory wording that the appointment is only ‘upon nomination by the Director,’ 35 USC § 3(b)(1), at a time when there is no Director?” 

In sum, Wegner’s argument about the legality of Lee’s appointment turns on the absence of a proper statutory nomination.  Here’s where the work of Professor Scalia comes in. 

Years ago, when I was leaving law practice to begin a career in teaching, I asked Justice Scalia (my old boss) if he had any advice or suggestions about teaching administrative law—a subject that I intended to teach and that he had taught both here, at the University of Virginia, and at the University of Chicago.  In response, he gave me a real treasure: a copy of a 900+ page, unpublished manuscript of an administrative law casebook that he had coauthored and had used when he was teaching the subject. 

Scalia’s unpublished casebook taught me two things relevant to this current controversy about Michelle Lee’s appointment.  First, the casebook devotes a great deal of attention—about the first fifth of the book—to basic structural issues concerning delegations of power and the appointment and removal of officers.  That was much more attention, and much more prominent attention, than had been afforded to such issues in the administrative law casebook that I had used as a student.  I have come to think, however, that Professor Scalia’s approach is quite wise. 

Administrative law is, at its core, all about the allocation of power.  Thus, a great deal of attention should be devoted to understanding the law governing both proper delegations of power and the proper recipients of those delegations.  For that reason, I applaud Hal Wegner’s attention to the issue of whether Michelle Lee is lawfully appointed to be a proper recipient of the PTO’s important statutory powers. 

The second lesson I learned from Scalia’s administrative law casebook, however, tells me that Hal Wegner is not correct in concluding that Lee was invalidly appointed.  Within the section of his manuscript devoted to delegation and appointment issues, Scalia and his coauthor (the great constitutional law scholar David Currie) devoted an entire chapter to the topic of “Delegation Within the Executive Branch.”  That chapter was the most surprising to me when I first received the book, for it includes a whole set of cases on a topic that is almost unmentioned in modern administrative law courses: the ability of the President and other Executive Branch officers to delegate their powers to subordinates.  And it is that vein of authority on inter-executive delegations that demonstrates the flaw in Wegner’s argument.

The law on inter-executive delegations of authority has an overarching theme, which is that most executive branch officers may delegate their powers to subordinate officers.  Nondelegable executive powers are very much the exception, and the PTO Director’s power to nominate a candidate for appointment as Deputy is not such an exception. 

Wegner’s argument about Lee’s appointment assumes that the statutory power of the PTO Director to nominate a candidate for Deputy Director must be exercised by the PTO Director or someone who is expressly authorized by statute to act as the PTO Director (i.e., the Deputy Director).  In other words, Wegner assumes that the Director's deputy-nomination power is nondelegable.  That assumption is wrong.

The heads of most executive branch agencies have very broad statutory authority to delegate their powers.  The PTO is no exception.  The Patent Act expressly gives the Director the power to “delegate to [other PTO officers] such of the powers vested in the Office as the Director may determine.” 35 U.S.C. 3(b)(3)(B).  Supreme Court precedent establishes that such a general authorization for an executive branch agency head “permit[s] the delegation of any function vested in the [agency head] under the Act unless a specific limitation on that delegation authority appears elsewhere in the statute.”  Touby v. United States, 500 US 160, 169 (1991). 

The Supreme Court’s Touby case is interesting because it involved the delegation of a very substantial power—the Attorney General’s power under the Controlled Substances Act to add new drugs to the list of drugs the possession of which could result in criminal prosecution (e.g., cocaine, heroin, etc.).  In other words, it was the power to create new criminal prohibitions through administrative rulemaking rather than through legislative action.  So substantial was this power that most of the Court’s opinion was devoted to addressing the constitutional limits on congressional power to give that power to any Executive Branch officer.  However, once the Court sustained the constitutionality of the statute giving the Attorney General the power to criminalize new conduct, the Court devoted a mere two paragraphs to upholding the Attorney General’s delegation of the power to the Administrator of the Drug Enforcement Administration (DEA).  See Touby, 500 U.S. at 169 (sustaining the Attorney General’s delegation power in 29 C.F.R. §0.100(b) to the DEA Administrator). 

The Attorney General’s power to delegate under the Controlled Substances Act is highly similar to the PTO Director’s similar power under the Patent Act.  The Attorney General is authorized to delegate “’delegate any of his functions under [the Controlled Substances Act] to any officer or employee of the Department of Justice.’” Id. (quoting 21 U. S. C. § 871(a)).  After articulating the legal standard that such executive delegation power applies “unless a specific limitation on that delegation authority appears elsewhere in the statute,” id., the Court merely looked to see whether the statute imposed any limitation on the Attorney General’s power to delegate to another officer the power to add new drugs to the schedule of controlled substances.  Finding no such limitation, the Court unanimously sustained the Attorney General’s delegation. 

A similar analysis here means that the PTO Director can delegate the deputy-nomination function, for the Director has a general power to delegate, and the statute creating the Director’s deputy-nomination power (35 U.S.C. § 3(b)(1)) also contains no restriction on delegation. 

Touby cited and distinguished an earlier case—United States v. Giordano, 416 US 505 (1974)—which shows an exception that proves the general rule.  There the Government argued that “Congress characteristically assigns newly created duties to the Attorney General rather than to the Department of Justice” and that the Attorney General could delegate any of those functions to other officers in the Department of Justice through his general power to delegate contained in 28 U.S.C. § 510.  The Supreme Court considered that argument to be, “[a]s a general proposition, … unexceptionable.”  Giordano, 416 U.S. at 514.

With respect to the specific power at issue in Giordano, however, the statute vesting the power with the Attorney General expressly addressed the issue of delegation and “specifically limited [the Attorney General] to delegating his authority to “‘any Assistant Attorney General specially designated by the Attorney General.’”  Giordano, 416 U.S. at 514 (quoting 18 U.S.C. § 2516).  The Court also cited another statute that both required a particular function to be exercised by the Attorney General or the Deputy Attorney General and expressly stated that the “‘function … may not be delegated.’” Id. (quoting 18 U. S. C. § 245(a)).   Statutes containing such language do supersede and limit general powers of executive delegation, but again, nothing like that language is contained in the statute authorizing the PTO Director to nominate a Deputy Director.

In sum, the law governing inter-executive delegation is very clear, and the PTO Director’s function of nominating a Deputy Director is fully delegable to any other officer in the PTO.  According to the PTO’s previous public statements, all of the functions of the PTO Director had been delegated to the Commissioner of Patents, Peggy Focarino, and Commissioner Focarino nominated Michelle Lee. See https://patentlyo.com/patent/2013/12/michelle-lee-director.html.  In a blog posting and widely distributed email, Hal Wegner described this PTO position to be “[r]emarkable” and “bizarre” because it means that Ms. Lee was nominated by a “Commissioner who has no statutory authority to make such a nomination.”  See http://www.laipla.net/commissioner-focarino-nominated-acting-under-secretary-michelle-lee/.  I, however, have quite the opposite reaction.  With two small caveats discussed below, I view the PTO’s position to be completely un-remarkable and un-bizarre; it is instead merely a reflection of the general rule that executive functions usually can be delegated to other officers within the agency. 

The two caveats are, I think, minor in this particular situation.  First, the Appointments Clause of the Constitution does place limits on inter-executive delegation, for only constitutionally appointed “Officers of the United States” may exercise a power that qualifies as a “significant authority pursuant to the laws of the United States.”  Buckley v. Valeo, 424 U.S. 1, 126 (1976).  Thus, significant powers cannot be delegated to non-officers within the PTO. 

It is an interesting question whether the PTO Director’s deputy-nomination function qualifies as a “significant authority.”  Typically, powers to make mere recommendations are not considered to be “significant authority,” but usually such recommendations are not binding in any way.  (Thus, if a nonofficer recommends option A, the officer receiving the advice can usually reject A and adopt options B, C, D, E, etc.)  The PTO Director’s deputy-nomination function might be a bit more significant because once person A is nominated, the Secretary of Commerce may be constrained either to accept A or to reject A and then await another nomination.  If the deputy-nomination function does constrain the Secretary’s appointment power, then the nomination function may constitute “significant authority” within the meaning of Buckley v. Valeo.  But even if so, the delegation to the Commissioner of Patents presents no problem because the Commissioner of Patents is properly appointed as an “Officer of the United States” (albeit an inferior officer) through the constitutionally acceptable process of appointment by a “head of Department[].”  U.S. Const. art. II, § 2, cl. 2; see also 35 U.S.C. § 3(b)(2)(A) (lodging the appointment of the Commissioner of Patents in the Secretary of Commerce). 

The second caveat is that the deputy-nomination power must have been actually delegated to Commissioner Focarino.  When a PTO Director leaves office (as David Kappos did on February 1, 2013), the Deputy Director assumes all the Director’s powers the automatic operation of 35 U.S.C. § 3(b)(1).  By “automatic operation,” I mean that departing Director does not have to sign any document delegating his powers because § 3(b)(1) immediately vests the Deputy Director with all of the Director’s powers as soon as the vacancy occurs.  When a Deputy Director departs while the Director’s office is vacant (as when Ms. Rea departed on November 21, 2013), no statute automatically authorizes anyone in the PTO to assume the PTO Director’s duties.  Thus, the departing Deputy Director must sign an order delegating the powers before she leaves. 

In this case, however, such a delegation did occur.  On November 15, 2013, soon-to-depart Deputy Director Rea delegated to the Commissioner of Patents Focarino all of the “non-exclusive functions and duties” assigned to the PTO Director or to the Deputy Director, with the delegation to take effect whenever the offices of Director and Deputy Director are both vacant.  See Delegation to Perform Non-Exclusive Functions and Duties (attached at the end of this paper).  That delegation is properly limited to the non-exclusive functions of the Director and Deputy Director—i.e., it does not extend to any non-delegable functions.  I’m not sure whether there are any such non-delegable functions assigned to the Director or Deputy Director, but I am certain that the Director’s deputy-nomination is surely one of the delegable functions. 

Hal Wegner has also cited the Vacancies Act, 5 U.S.C. § 3345 et seq., as providing support for his conclusion about the illegality of Michelle Lee’s appointment, but once again, his analysis of the Vacancies Act suffers from his assumption that the powers of the PTO Director are nondelegable, which is not correct. 

It is true that the Vacancies Act imposes strict limitations on the ability of other officers “to perform the functions and duties of any office of an Executive agency,” 5 U.S.C. § 3347(a), but the Act also expressly defines “function and duty” very narrowly to encompass only a statutory or regulatory function that is required “to be performed by the applicable officer (and only that officer),” id. § 3348(a)(2)(A)(ii) & (B)(ii) (emphasis added).  In short, the Vacancies Act’s restrictions apply only to the nondelegable duties of the vacant office.  As the Department of Justice’s Office of Legal Counsel has noted in its advice about the Vacancies Act, “[m]ost, and in many cases all, the responsibilities performed by a [Senate confirmed] officer will not be exclusive, and the [Vacancies] Act permits non-exclusive responsibilities to be delegated to other appropriate officers and employees in the agency.”  See Office of Legal Counsel, Guidance on Application of Federal Vacancies Reform Act of 1998 (available at http://www.justice.gov/olc/finalqa.htm (question 48)).  As discussed above, the PTO Director’s deputy-nomination function is surely delegable, and thus the Vacancies Act does not bar Commissioner of Patents Focarino from exercising it (as she apparently has in nominating Michelle Lee).

 If I am right in my conclusion that Michelle Lee has been properly nominated, and therefore properly appointed, as the new PTO Deputy Director, then the Vacancies Act does tell us one other important fact.  Ms. Lee may continue to serve as Deputy Director—and to exercise all the powers of the Director pursuant to § 3(b)(1)—without any particular time limit.

Normally, the Vacancies Act imposes a time limit of 210 days on the ability of a “first assistant” to serve in an “acting capacity” in an office requiring Senate confirmation.  5 U.S.C. §§ 3345 & 3346.  Since that 210-day period (roughly 7 months) commences with the vacancy in the relevant office (here the vacancy in PTO Director’s office), the time period would have already expired since David Kappos left office on February 1, much more than 7 months ago.  But the Vacancies Act expressly states that its time limits and other restrictions are inapplicable where “a statutory provision expressly … designates an officer or employee to perform the functions and duties of a specified office temporarily in an acting capacity.”  5 U.S.C. 3347(a)(1).  Because § 3(b)(1) of the Patent Act expressly vests the Deputy Director “with the authority to act in the capacity of the Director in the event of the absence or incapacity of the Director,” the Deputy Director—first Teresa Rea, now Michelle Lee—can continue to act in the capacity of Director without a time limit.  Indeed, this has to be true or else even Teresa Rea’s service as acting Director (which extended for more than nine months) would have been unlawful.

The Deputy Director’s ability to continue exercising the Director’s powers under § 3(b)(1) should not be viewed as an improper circumvention of the Senate’s role in the appointments process.  There is certainly no constitutional problem.  The PTO Director, even though currently subject to appointment by the President with the advice and consent of the Senate, is undoubtedly an “inferior officer” because the position is subordinate to the Secretary of Commerce, and Congress may by law vest the appointment of an inferior officer in the Head of a Department such as the Secretary of Commerce.  (Indeed, if the PTO Director were not an inferior officer, then it might very well be unconstitutional for the Deputy Director to exercise the Director’s powers for any length of time.)  Nor it is troubling as a statutory matter that the Deputy Director can exercise the Director’s powers for a potentially long period of time.  As the Vacancies Act shows, Congress clearly understands how to place time limits on the ability of deputies to act with the powers of a vacant office.  But Congress included no such limit in § 3(b)(1), and the Vacancies Act expressly provides that its strict time limits are inapplicable to such statutes.  

In closing, I would be remiss if I were not to give Hal Wegner some additional words of praise.  I have already complimented Wegner for bringing a proper level of attention to the important issue whether the powers of the PTO are being exercised by a lawfully appointed officer.  While I disagree with Wegner’s legal conclusion—and to be clear, I think there’s no doubt that Michelle Lee is properly appointed as the PTO’s new Deputy Director—I nonetheless do agree with Wegner that there’s something deeply wrong as a matter of policy (though not legality) with the current situation.  

With its appointment of Michelle Lee as Deputy Director, the Obama Administration must have determined that Ms. Lee is fully qualified and capable of exercising all the powers of the Director, because that is precisely what she will be doing as Deputy Director given the vacancy in the Director’s position.  Why then not nominate her to be Director?  Surely, it cannot be that the Administration fears a tie-up in the Senate. Now that the so-called “nuclear option” has been exercised, filibusters of executive nominations are not a threat, so the Administration could expect a relatively swift confirmation.  If the Administration intends to continue seeking another nominee for the position, that seems to be really bad treatment of the new Deputy Director.  Any new Director would surely want to name his or her own Deputy, and so another nominee will bring the possibility of at least a substantial demotion of the current Deputy.  Confidence in an agency’s leadership cannot be conveyed—both inside and outside of the agency—when the agency’s current leader appears to have only the contingent and begrudging support of the Administration. 

It also cannot escape notice of anyone that the USPTO has never had a woman as a permanent head (as opposed to an acting head).  News reports have speculated that “that the administration favours the appointment of the first woman permanent Director of the USPTO.” See “The USPTO Director job has never been more important, so keep a close eye on who gets it,” Intellectual Asset Management (available at http://www.iam-magazine.com/blog/Detail.aspx?g=d05df489-6d03-418d-9bcb-d07b3152cc0b).  If that is so, the Administration is certainly doing a poor job of it, for the Administration appears to be in the process of passing over multiple highly qualified women.  Deputy Director Teresa Rea was highly qualified and served as acting director for more than nine months.  She was not nominated for the permanent position and has now left the agency.  Perhaps passing on one qualified female candidate can be explained by a variety of circumstances, but the Administration now has another highly qualified woman who will in fact be running the agency.  If the Administration balks at nominating her for the top job, the agency will face the prospect of having several qualified women serve as mere “temps” while the job search drags on.  Such a process would, to put it mildly, seem like a suboptimal way to demonstrate the Administration’s enthusiasm for having a woman as the head of this important agency with its jurisdiction over matters of science, technology and innovation.  

Top Patent Law Stories of 2013 (Webinar)

MBHB’s Patent Docs (Donald Zuhn and Kevin Noonan) are putting on a timely session focusing on the Top Patent Law Stories of 2013. The session will be a live webinar via WebEx on January 21, 2014, 10 a.m. – 11:15 a.m. (central time).

For the past six years, the Patent Docs weblog has presented an annual, end-of-the-year review of the top stories in patent law. In this presentation, Patent Docs co-authors Donald Zuhn and Kevin Noonan will take a look back at the top patent stories of 2013, many of which will likely impact patent applicants and practitioners in the coming year.

The event is free, but participants must register in advance and need to register individually to receive CLE credit.

Links:

Note – MBHB is the exclusive sponsor of the Patently-O blog.

Reading Patent Law

By Jason Rantanen

First, thank you for all the terrific comments I received in response to the Top 10 Patent Cases post.  There were some great ideas there and after substantial reflection I decided that my final list this year will be:

Bowman v. Monsanto, 133 S.Ct. 1761 (2012)
O’Reilly v. Morse, 56 U.S. 62 (1853)
Diamond v. Chakrabarty, 447 U.S. 303 (1980)
Egbert v. Lippmann, 104 U.S. 333 (1881); City of Elizabeth v. American Nicholson Pavement Co., 97 U.S. 126 (1878)
Graham v. John Deere, 383 U.S. 1 (1966); KSR v. Teleflex, 550 U.S. 398 (2007)
The Incandescent Lamp Patent case, 159 U.S. 465 (1895)
Phillips v. AWH, 415 F.3d 1303 (Fed. Cir. 2005) (en banc)
Graver Tank v. Linde Air Products, 339 U.S. 605 (1950)
Gorham v. White, 81 U.S 511 (1871)
Bonito Boats v. Thunder Craft Boats, 489 U.S. 141 (1989)

While it's hard to do justice to patent law with just 10 or 12 cases, because this is an Introduction to Intellectual Property class the amount of classroom discussion that can be devoted to individual cases is limited.  Additional cases are discussed in the mini-treatise the students read and I'll cover them in the lecture component as well.  Fortunately, I also teach Patent Law which allows a much more substantive exploration of specific issues in patent law.  Also, the above list is a combination of importance and teaching value: some cases are on there more because they're both reasonably significant and useful teaching tools.

Second, for those of you who are interested in textualism and claim construction, Landslide recently published my review of Justice Antonin Scalia and Professor Bryan A. Garner's Reading Law: The Interpretation of Legal Texts from a patent law perspective.  A copy of the review is available on Landslide's website and I've archived a copy on ssrn

I'll also note that Professor Tun-Jeng Chiang wrote to me yesterday to share that his recently published article The Interpretation-Construction Distinction in Patent Law, 123 Yale Law Journal 530 (with Lawrence B. Solum) relates to many of the issues that I discuss in the review, taking on in particular the "argument that the high reversal rate belies the certainty of textualism or suggests that claim interpretation typically involves hard cases from a linguistic standpoint."  While I ultimately don't agree with many of Professor Chiang's arguments, his work is always insightful and worth reading.  His article is available here.

“Top 10” Patent Cases of All Time

By Jason Rantanen

I teach the Introduction to Intellectual Property course each spring here at Iowa.  Because this is a survey course that covers multiple areas of law that themselves each can be covered in an intermediate-level course, I always find it a fascinating challenge to balance breadth and depth in a way that maximizes students' ability to learn and apply the law. 

This coming semester I'm trying something new: rather than use a regular casebook, I'm taking a "top 40" cases approach combined with a hornbook.  The idea here is to use the hornbook together with lectures to cover the breadth of intellectual property while using discussion of the cases to dig more deeply into particularly significant or interesting moments in patents, copyrights, trademarks, trade secrets, and associated areas of law.  (For those of you not familiar with conventional casebooks, they're typically structured so that preparing for a single class involves reading 2-4 opinions plus associated casenotes.)

My current "top 10" list of patent cases is:

Bowman v. Monsanto, 133 S.Ct. 1761 (2012)
Diamond v. Chakrabarty, 447 U.S. 303 (1980)
Bilski v. Kappos, 561 U.S. __ (2010)
Egbert v. Lippmann, 104 U.S. 333 (1881); City of Elizabeth v. American Nicholson Pavement Co., 97 U.S. 126 (1878) (taught together; yes, this technically makes it 11 cases)
KSR v. Teleflex, 550 U.S. 398 (2007)
The Incandescent Lamp Patent case, 159 U.S. 465 (1895)
Phillips v. AWH, 415 F.3d 1303 (Fed. Cir. 2005) (en banc)
Therasense v. Becton Dickinson, 649 F.3d 1276 (Fed. Cir. 2011) (en banc)
Global-Tech Appliances v. SEB, 563 U.S. __ (2011)
Bonito Boats v. Thunder Craft Boats, 489 U.S. 141 (1989)

These cases track the subject matter I cover in the classroom, so while there are more great cases in each area, I've limited it to just the top case or cases in each.   Also, I recognize that Bowman v. Monsanto is probably not on most folks' top 10 lists; however, I think it's a great way to introduce students to patent law and is particularly relevant here in the midwest.

Are there other cases that you think are even more important or interesting?  Keep in mind that adding cases also requires removing an equivalent number of cases from the list.

CBT Flint v. Return Path: Applying 28 U.S.C. 1920(4) to E-Discovery Costs

By Jason Rantanen

CBT Flint Partners, LLC v. Return Path, Inc. (Fed. Cir. 2013)
Panel: Dyk, O'Malley (concurring-in-part and dissenting-in-part), Taranto (author)

This is an important pair of opinions that anyone interested in the fee-shifting proposals currently pending before Congress should read.  Two aspects are worth noting.  First, the court rejects the argument that Congress's 2008 amendment to section 1920(4) implemented a dramatic change in terms of e-discovery costs.  Second, it implements a granular framework for analyzing e-discovery cost requests that requires complex and careful line-drawing. In addition, both the majority and dissent address the policy concerns implicated in this area.

CBT sued Cisco Ironport Systems and Return Path (who I'll refer to collectively as Cisco, since most of the costs incurred here were sought by Cicso) for patent infringement.  Following claim construction, CBT stipulated to noninfringement and Cisco obtained summary judgment of indefiniteness on one asserted claim.  Cisco moved to recover its costs under 28 U.S.C. § 1920, including $243,453.02 in fees it paid to a company that handled electronic discovery.  The district court granted Cisco's request.  On appeal, the Federal Circuit reversed summary judgment of indefiniteness, construed the claim in question, and remanded for further proceedings.  The district court subsequently granted summary judgment of noninfringement to Cisco, which the Federal Circuit summarily affirmed.

After granting Cisco's motion for summary judgment of noninfringement, the district court again awarded Cisco the fees it paid to an e-discovery vendor. 

The district court's reasoning: The district court's award of costs was implicitly based on 28 U.S.C. § 1920(4), which states:

A judge or clerk of any court of the United States may tax as costs the following:
(4) Fees for exemplification and the costs of making copies of any materials where the copies are necessarily obtained for use in the case;

The Federal Circuit described the district court's reasoning as follows:

Based on a “careful review” of the vendor’s invoices to Cisco, the court characterized the services rendered as “highly technical” and “not the type of services that attorneys or paralegals are trained for or are capable of providing.”  The court concluded that the fees Cisco sought to recover were “the 21st Century equivalent of making copies” (although Cisco had not categorized them as such) and held them to be recoverable….In awarding Cisco the requested amounts, the court said that the “enormous burden and expense of electronic discovery are well known” and that “[t]axation of these costs will encourage litigants to exercise restraint in burdening the opposing party with the huge cost of unlimited demands for electronic discovery.” 

Slip Op. at 3 (internal citations omitted).  On appeal, the Federal Circuit reversed in part, vacated in part, and remanded the matter to the district court for further proceedings.

The Narrow Scope of Section 1920: In 2008, Congress amended section 1920(4) to remove a specific reference to "papers."  While the Eleventh Circuit (whose law applied in this case) has not addressed section 1920(4) as amended, its prior caselaw had interpreted section 1920 as being limited to the "reasonable costs of actually duplicating documents, not [] the costs of gathering those documents as a prelude to duplication."  The Federal Circuit concluded that the amendment did not change that interpretation: 

[W]e conclude that recoverable costs under section 1920(4) are those costs necessary to duplicate an electronic document in as faithful and complete a manner as required by rule, by court order, by agreement of the parties, or otherwise. To the extent that a party is obligated to produce (or obligated to accept) electronic documents in a particular format or with particular characteristics intact (such asmetadata, color, motion, or manipulability), the costs to make duplicates in such a format or with such characteristics preserved are recoverable as “the costs of making copies . . . necessarily obtained for use in the case.” 28 U.S.C. § 1920(4). But only the costs of creating the produced duplicates are included, not a number of preparatory or ancillary costs commonly incurred leading up to, in conjunction with, or after duplication.

Slip Op. at 10.

Three stages of e-discoveryTo analyze whether the costs fell into the category of producing duplicates versus preparatory or ancillary activites, the court divided the e-discovery process into three stages: imaging and extraction (where source media is copied as a whole and individual documents are extracted), database creation and document identification (where extracted documents are organized into a database and searched), and production copying (where the documents selected for production are copied onto memory media). 

Comment: The opinion specifically refers to this as "the document production process used in this case."  However, these stages are common enough that the court's framework can be applied to most cases involving e-discovery.

However, while they provide a framework, these categories do not answer the question of whether costs may be awarded for the respective activies.  Rather, the court's opinion envisions a careful line-drawing process, in which the specific activities and their context plays a substantial role in determining whether individual costs may be awarded.  For example, in some circumstances, costs for extraction can be recoverable under section 1920 "where they are, in fact, necessary to make copies of information required to be produced and not incurred just to make copies for the convenience of the producing party."  Slip Op. at 13.  However, "if metadata can be preserved without first using imaging and extraction techniques, then those steps are outside section 1920(4)."  Id. at 13-14.  The opinion contains numerous examples of hypotheticals and considerations to take into account, while noting that it is "an inquiry that the district court should perform in the first instance."  Id. at 15. 

Comment: One thing to keep in mind with this opinion: the flexibility that the majority perceived in Eleventh Circuit law here is not uniform across the circuits.  The court's opinion specifically recognizes that its approach to stage one costs is at odds with the Third and Fourth Circuits.  This variation should be kept in mind when applying this opinion. 

Judge O'Malley's Separate Opinion: Writing separately, Judge O'Malley agreed with most of the majority's discussion but disagreed with respect to one category: the pre-duplication expenses that the majority described as "stage one costs."  In her view, the majority's approach, which allows some of these costs to be awarded, improperly broadens the scope of section 1920(4), is inconsistent with the Eleventh Circuit's prior approach to section 1920(4), and creates an unnecessary circuit split. 

References to the Sedona Conference: The opinion references the The Sedona Conference Glossary: E-Discovery & Digital Information Management (Sherry B. Harris et al. eds., 3rd ed. 2010) numerous times.  As I've written before, this is a worthwhile program to consider becoming involved in. 

In addition, the Sedona Conference has put together an all-star program on patent litigation reform called "Patent Litigation Best Practices: A Matter for Congress or for Bench and Bar?" that will be held on January 22, 2014.  The scheduled panelists include Judge O'Malley.

Patent Law Exam: Questions 2-4

This year I gave a very straightforward patent law exam that was worth 30% of the student grade. The remaining 70% was based upon a series of graded projects during the semester that included drafting claims, drafting office action rejections; drafting responses to rejections; problem sets; case summaries; briefing a mock-appeal; and holding oral arguments in our 3rd Annual Patent Law Moot Court at the University of Missouri. – Dennis

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2. Bob’s patent application is directed to a replicating in vitro cell culture of human embryonic stem cells capable of living without differentiation on a fibroblast feeder layer. Is the application subject-matter eligible? (100 words)

3. Referring back to Bob’s application, it turns out that Bob came up with a working model of the invention and then waited 11-months to file his patent application. Meanwhile, about six-months before Bob filed his application Cindy independently created a replicating in vitro cell culture of pig embryonic stem cells capable of living without differentiation on a fibroblast feeder layer.  Cindy immediately published her work in Science magazine.  Identify three additional facts that would help you know whether Cindy’s publication counts as prior art against Bob's pending patent application and indicate the relevance of those facts. (100 words). 

4. Referring back to Bob’s application and Assuming that Cindy’s publication counts as prior art under 35 U.S.C. 102(a), what is the most likely reason why the Bob’s application would be rejected as unpatentable? (20 words).