Third Circuit Revives “Exclusive Generic” Contract Claim

Patent,

By Dennis Crouch

Mylan Inc. v. SmithKline Beecham Corp., — F.3d —-, 2013 WL 3780163 (3rd Cir. 2013)

GSK holds a patent and FDA rights to market and sell AG paroxetine and it does so under the brand name Paxil CR. In a 2007 settlement contract GSK licensed Mylan as a limited generic manufacturer. In 2010, GSK began manufacturing its own generic version that was distributed and sold by Apotex. Mylan then filed suit, arguing that the GSK-Apotex generics violate the 2007 GSK-Mylan contract.

The 2007 contract particularly promised Mylan exclusive rights to market and sell generic paroxetine for the remaining life of the GSK’s patent. In response to FTC review, the license was amended to allow “GSK or its Affiliate” to market and sell its own generic version beginning in 2010.

In the lawsuit, Mylan argued that the contract limitation of “GSK or its affiliate” did not include a third-party generic competitor. The district court sided with GSK in finding that the contract language was clear in permitting the GSK-Apotex sales. However, on appeal, the Third Circuit reversed and remanded finding that “latent ambiguity” in the contract language as to whether Apotex is an “affiliate” or a “third party” under the contract.

[T]he alternative reading of the contested language suggested by Mylan [is] both reasonable and supported by objective evidence of the parties’ intentions. This demonstrates latent ambiguity in the contractual language. Hence summary judgment was not appropriate on Mylan’s breach-of-contract cause of action. “The construction of a written contract is usually a legal question for the court, but where there is uncertainty, ambiguity or the need for parol evidence in aid of interpretation, then the doubtful provision should be left to the jury.” Schor v. FMS Fin. Corp., 357 N.J.Super. 185(N.J.Super.Ct.App.Div.2002).

On remand, the court is instructed to proceed to trial.

No Federal Court Jurisdiction?: [Note Update Below] Ordinarily this type of state-law contract lawsuit would be handled in state law court. In the complaint, Mylan alleges both federal question jurisdiction under 28 U.S.C. §1331 and diversity-of-citizenship jurisdiction under 28 U.S.C. §1332. GSK agreed that the case should be heard by the Federal Courts. However, a federal court’s subject matter jurisdiction is not subject to agreement by the parties. Rather, the federal courts are of constitutionally limited jurisdiction and the court has an independent duty to determine in each case whether it has proper jurisdiction. And, in this case, it appears that the district court failed in that duty. First, there is no allegation of any violation of federal law. In Gunn v. Minton (2013), the Supreme Court again restated that the mere involvement of a patent law issue is insufficient to create a federal question. Second, the case appears to lack the required complete diversity of citizenship as require under §1332 since both the plaintiff (Mylan Inc.) and a named defendant (SmithKline Beecham Corporation) have their principal places of business in Pennsylvania. See Strawbridge v.. Curtiss, 7 U.S. 267 (1806). Finally, the 2007 contract between the parties indicates that any lawsuit arising from the contract will be brought in the New Jersey Federal District Court. However, once again, consent to jurisdiction of the Federal Court does not provide that court with subject matter jurisdiction over the case.

On remand, district court Judge Pisano and Magistrate Judge Goodman should request briefing on subject matter jurisdiction to determine whether the case should be dismissed.

UPDATE – A reader sent over a case-on-point directly on-point decided two weeks ago by the Third Circuit. Lucier v. SmithKline Beecham Corp., — F.3d —-, 2013 WL 2456043 (3rd Cir. 2013). Lucier was a thalidomide case against GSK, SmithKline Beecham, Sanofi-Aventis, Grunethal, and others and was originally filed in Pennsylvania state court. Defendants removed the case to Federal Court based on diversity allegation. The plaintiffs challenged diversity by arguing that SKB was a Pennsylvania entity. The Third Circuit sided with the defendants – finding that SmithKline Beecham is not a Pennsylvania entity. It turns out that in 2009, SKB officially changed its name to GSK LLC and converted from a Pennsylvania corporation to a Delaware LLC in order to obtain certain tax benefits. In the conversion, the GSK LLC’s headquarters and seeming principal place of business remained in Pennsylvania.

When considering diversity of citizenship, the rule for corporations is that a corporation is a citizen of both its state of incorporation and the state of its principal place of business. However, in Lucier, the Third Circuit determined that the rule is different for limited liability corporations and that the principal place of business is irrelevant. Rather, for LLC’s the rule is that the LLC’s citizenship is determined by the location of its members (owners). GSK LLC’s only member is GSK Holding Company and, since GSK Holding is incorporated and operates from Delaware, both it and its wholly owned LLC are Delaware citizens. In its decision, the Third Circuit admitted the formality of its rule, but said tough.

 

Guest Post by Christopher Cotropia on Existing Deference in Patent Claim Interpretation

Patent, ,

Christopher Cotropia is a Professor of Law and the Austin Owen Research Fellow at the University of Richmond School of Law.  Below he highlights a few important conclusions from an empirical study on patent claim construction that he recently completed.  The full study is available here.



Is Patent Claim Interpretation Review Deference or Correction Driven?

Christopher A. Cotropia

The Federal Circuit’s now fifteen-year practice of reviewing lower court claim interpretation de novo is being reconsidered en banc in Lighting Ballast Control LLC v. Philips Electronics North America Corporation. Although the question of whether review should be de novo can be answered under a number of criteria, in patent cases it is commonly viewed as a tradeoff between certainty and correctness.  

With regards to certainty, the current belief is that de novo review results in great uncertainty in patent cases because litigants cannot predict the controlling claim construction in a case until the Federal Circuit makes its independent determination on appeal.  Giving district courts greater deference would, in turn, allow certainty as to claim construction to come earlier in patent cases.

In contrast, appellate review is in place, at least in part, to correct mistakes made by lower courts and ensure the “correct” result is reached in a given case. The more deference provided to lower courts, the less opportunity the Federal Circuit has to correct (or incorrect, depending on your view of the Federal Circuit) the decision.  Standard of review presents the question of who—that is which tribunal—is more likely to reach the correct answer regarding claim interpretation and, given claim meaning’s central nature to the patent dispute, the ultimate question of who should win the case.   

While many aspects of these issues need to be explored to determine the optimum standard of review (how much is greater certainty worth?, who is more likely to reach the correct answer?, and what is the correct answer we want to achieve?), there is value in establishing a baseline on both issues. Assuming the Federal Circuit’s claim construction is correct, it follows that de novo review results in greater correctness, albeit at the expense of possible increased uncertainty.  But both of these assumptions rest on the belief that the Federal Circuit currently engages in de novo review, currently provides no deference in practice, and arrives at the “correct” result in appealed cases, at least more often than district courts do on first pass.

In a new paper, I try to establish this baseline by collecting and analyzing Federal Circuit claim construction reviews over the last three-plus years.

At first blush, the results show there is a high level of certainty in claim construction appeals. The rate of affirmance of district court claim interpretations has been increasing since 2010.  And, in the first quarter of 2013, the affirmance rate has reached over 75%.   This data confirms that observed by Jonas Anderson and Peter Menell in 2011 for an earlier period.   

 

Cotropia Table 1

TABLE 1

 

However, a closer look as to which claim interpretations are affirmed and which are reversed shows little certainty at the Federal Circuit for particular types of cases.  Lower court decisions where the patentee ultimately wins are more likely to be subject to a claim construction reversal that, in turn, causes the alleged infringer to ultimately win (or at least gives them another shot on remand).

Cotropia Table 2

TABLE 2

And these claim construction reversals are even more likely in appeals of cases involving electronic, information technology, or business method patents where the patentee won below. The opposite is true in cases involving patentee wins in the biological and chemical technologies—the Federal Circuit affirms these constructions, and results, more often. 

 

Cotropia Table 3

TABLE 3

 

What appears to be certainty in all claim construction reviews is much more complex, with the Federal Circuit performing corrections in specific categories of cases.  And given that claim constructions are appealed in patentee wins and patentee loses at about the same rate, 46.67% to 45.94%, these findings about claim construction review are not likely driven by selection bias. Put simply, the Federal Circuit’s claim interpretation review is not driven solely, or perhaps at all, by deference, but instead is correction focused.

What does this data mean for Lighting Ballast Control?  A change in standard of review would have an impact—greater certainty, and less change on appeal, for particular types of cases.  This certainty would come at a cost—losing the current correction going on.  Answering whether this is truly a cost, specifically one that outweighs any certainty gained by changing the standard of review, is left for others, as is the meta-question of what the “correct” answer is in any patent claim construction case. 

This data also describes a Federal Circuit that is very different then commonly portrayed.  The Federal Circuit, when reviewing a district court’s claim interpretation, is not as patent-friendly as some would think.

A full version of the paper this post is based upon can be found here.

Integration Analysis Dooms Patent’s Written Description

Patent

By Dennis Crouch    

Novozymes A/S v. DuPont Nutrition Biosciences (Fed. Cir. 2013)

At trial, the jury sided with the patentee Novozymes on the issue of validity – finding that DuPont had failed to prove “by clear and convincing evidence that any one or more of the claims are invalid because the application filed on November 16, 2000 . . . does not contain an adequate written description.” Following the verdict, however, the district court judge rejected the jury verdict and instead held that, as a matter of law, the claims lacked written description support. On appeal, the Federal Circuit now affirms – finding that no reasonable jury could find the patent valid.

The written description requirement of 35 U.S.C. § 112(a) mandates that a patent application’s written description must ‘clearly allow persons of ordinary skill in the art to recognize that [the inventor] invented what is claimed.’ Vas-Cath. The requirement questions whether the inventor was in possession of the claimed invention at the time the patent application was filed.

In this case, Claim 1 of the invention is directed to an alpha-amylase enzyme variant with a 90%+ sequence identity to BSG alpha-amylase, an amino acid substitution at serine 239, and increased thermostability at pH 4.5, 90°C, and 5 ppm calcium. The enzyme is used to make ethanol.

The original patent application describes each element of the claimed invention. However, the application does not particularly identify this particular combination of limitations. Rather, the application lists BSG along with six other types of alpha-amylase; lists the 239 position mutation along with 32 other potential mutation positions; and indicates broader ranges for thermostability of 4.5-5 pH and 85-95°C. U.S. Patent No. 7,713,723.

In considering whether the description was sufficient, the Federal Circuit considered the claimed invention “as a integrated whole” rather than merely element by element:

While the 2000 application provides formal textual support for each individual limitation recited in the claims of the ‘723 patent, it nowhere describes the actual functioning, thermostable alpha-amylase variants that those limitations together define. Taking each claim—as we must—as an integrated whole rather than as a collection of independent limitations, one searches the 2000 application in vain for the disclosure of even a single species that falls within the claims or for any “blaze marks” that would lead an ordinarily skilled investigator toward such a species among a slew of competing possibilities.

The court makes clear here that written description is not satisfied merely by ensuring that each individual claim limitation is disclosed in the original disclosure. Rather, the written description requires disclosure of the patented claim as a whole.

Although strongly worded, this case is one in a spectrum of written description cases and thus only incrementally moves the law.

The majority opinion was written by Judge Schall. Chief Judge Rader wrote in dissent – arguing that substantial evidence supported the jury verdict.

Federal Circuit gets Technical with PTAB Failures

Patent, , , , , ,

By Dennis Crouch

In re Guiffrida (Fed. Cir. 2013) (non-precedential)

Great Lakes NeuroTechnologies is a spin-off of Cleveland Medical Devices (CMDI) and focuses on therapy systems for movement disorders. The new company took control of a handful of CMDI patents when it was formed back in 2011. However, the patent application in question would be their first post-formation patent issuance, and the company’s first patent issued listing its president (Joe Guiffrida) as an inventor.

The preamble of Guiffrida’s first claim is directed toward a “portable therapy system,” although the claims body does not provide any further portability related limitation. In its decision, the PTAB had rejected the claim as anticipated over a single prior art reference (Shields). Shields does not make any remarks regarding portability, but the PTAB found the limitation disclosed because Shields does “not appear to contain any structure confining it to a particular location.” On appeal, the Federal Circuit rejected that analysis – finding that the prior art’s failure to disclose non-portability is not the equivalent of disclosing portability.

An anticipating reference must disclose every claim limitation, either expressly or inherently [and i]nherent disclosure requires that the prior-art reference necessarily include the unstated limitation. . . .

The Board found that Shields inherently discloses a portable system because Shields does “not appear to contain any structure confining it to a particular location.” But that observation does not indicate that Shields “necessarily” includes a portability limitation, or even that Shields must necessarily be free from “confin[ement] to a particular location.” On the contrary, a finding that Shields does not say that its system is not portable—which is all that the Board’s statement implies—is just a restatement of the fact that Shields does not expressly disclose a portability limitation. It does not suggest anything about what Shields inherently discloses that would suffice to shift the burden to Giuffrida to disprove inherency.

A confusing aspect of patent claims is that a claim preamble is often seen as non-limiting. Here, any confusion was eliminated because the PTO and the applicant agreed that the portability limitation is limiting. In the appeal, the Federal Circuit accepted that interpretation without comment.

Broadest Reasonable Interpretation Requires Consideration of Specification: The parties did not wholly agree on the meaning of portability. For its part, the PTO applied its wrong-headed “broadest reasonable interpretation” to suggest that a portable device is one that “can be carried.” Although irrelevant for this case, the Federal Circuit took the PTO to task for applying that “dictionary definition” of the claim term rather than construing the term “in light of the specification as it would be interpreted by one of ordinary skill in the art.” Quoting Phillips v. AWH. According to the appellate panel, the specification provides that a portable system is one that is “capable of being transported relatively easily.” In fact, the specification states that “By portable it is meant among other things that the device is capable of being transported relatively easily.” The Federal Circuit seems to have skipped over the wiggle-words “among other things” that were certainly inserted in order to open the term to a much wider variety of definitions.

Cryptic PTAB Decisions: In an earlier essay, I wrote about the Board’s new approach of writing shorter opinions. Here, the Federal Circuit gave some credence to that approach. Noting that cryptic obviousness rejections can be upheld where the analysis can be “reasonably discerned.” Here, the court noted that the board can rely upon the examiner’s brief in its decision.

Board made a number of obviousness rejections and those were affirmed on appeal except for claim 24 that I will discuss below. On remand, the PTO may also replace the reversed anticipation rejections (discussed above) with obviousness rejections – especially since the result of this case is that many of the here-adjudged novel claims have dependent claims that are here-adjudged as obvious.

Claim 24 in the patent application adds a limitation that some of the system components communicate using “a two-way RF link.” I don’t think that anyone (even a Federal Circuit judge) believes that a two-way RF communication limitation would normally transform an unpatentable system into one that is non-obvious (without something more). But, here the Federal Circuit reversed the rejection – finding that the PTO had failed to prove-up its burden.

[The proffered prior art’ uses ultrasound transducers that communicate with a compact unit, which, in turn, communicates with a computer. Those communications are twice referred to as “wireless,” but the document says little else about them. It does not mention a radio frequency (RF) link, a two-way or bidirectional link, the retransmission of data over such a link, or any benefits from such retransmissions. We have been pointed to no substantial evidence that Zheng teaches such features.

Nor has the Director persuasively explained why Zheng [the prior art] renders those limitations from claim 24 obvious. On the contrary, the reasoning within the PTO has been inconsistent and conclusory in this matter. In stating that it “fail[ed] to see how a system that can both receive signals from sensors and deliver them to, for example, FES systems, could operate absent a two-way link,” the Board cited a paragraph in Zheng that mentions a wireless link between units embedded in the body and an “outside control unit.” The Examiner invoked different paragraphs from Zheng to find that a two-way link is “implied” or “required.” Broad-brush statements based on Zheng’s generic references to a “wireless” link are insufficient to support the conclusion that Zheng renders obvious a claim calling for the “wireless[ ] retransmi[ssion] [of sensor signals] over a two-way RF link.” We therefore reverse the rejection of claim 24.

On remand, the PTO should be able to find some prior art that shows wireless RF two-way communication that fits this case.

Federal Circuit Deciding USPTO Procedure: New Grounds for Rejection

Patent

By Dennis Crouch

In re Adler, Appeal No. 12-1610 (Fed. Cir. 2013)

The Israeli company Given Imaging makes a swallowable capsule imaging device takes readings as it passes through a patient’s GI tract. The company has dozens of patents on various aspects of the device and its use. In this case, the company has asked the USPTO for a patent on the method of comparing the images taken by the capsule with “a reference value of blood and to a reference value of healthy tissue” and then displayed with color-coding on a monitor with “red color” indicating blood in the esophagus.

The USPTO examiner rejected the claims as obvious when compared against two prior art references – one that disclosed the capsule imaging device and the other that disclosed the comparison process and color-coding of blood findings. On appeal, the PTAB affirmed – finding the claims obvious in light of the two prior art references. However, the PTAB used somewhat different language to describe why the references rendered the invention obvious.

On appeal to the Federal Circuit, the Given Imaging argued that the Board’s new reconception of the prior art formed a new ground of rejection not relied upon by the examiner. As a consequence, Given Imaging argued, it is therefore entitled to reopen prosecution or to request a rehearing. Here, the Federal Circuit appears to support the idea that if the PTAB had issued a new ground of rejection then the applicant would be entitled to a new hearing. See In re Stepan Co.,660 F.3d 1341 (Fed. Cir. 2011). However, in this case, the court found that no new ground of rejection was offered.

Adler contends that the Board’s “facts and rationale for the affirmance (Hirata’s image processing and colorimetric analysis) changed the thrust of the Examiner’s rejection (Hirata’s classification of red color signs).” . . . . When the Board relies upon a new ground of rejection not relied upon by the examiner, the applicant is entitled to reopen prosecution or to request a rehearing. 37 C.F.R. § 41.50(b). This court has stated that “[t]he thrust of the Board’s rejection changes when . . . it finds facts not found by the examiner regarding the differences between the prior art and the claimed invention, and these facts are the principal evidence upon which the Board’s rejection was based.” In re Leithem, 661 F.3d 1316, 1320 (Fed. Cir. 2011). “‘[T]he ultimate criterion of whether a rejection is considered ‘new’ in a decision by the [B]oard is whether [applicants] have had fair opportunity to react to the thrust of the rejection.'” Id. (quoting In re Kronig, 539 F.2d 1300, 1302–03 (C.C.P.A. 1976) (modifications in original)).

Here, Adler mischaracterizes the examiner’s grounds for rejection, and neither points to specific facts found by the Board but not by the examiner, nor illustrates how any such facts formed the basis of the Board’s rejection. . . .

In the end, the court ruled that the Board’s decision did not include a new ground of rejection and affirmed the obviousness rejection. Appellants have been focusing more on the new-grounds-for-rejection argument because it is reviewed de novo on appeal unlike ordinary factual findings that require only substantial evidence.

Drafting License Agreements: Agreement Unenforceable Post-Patent-Expiration Even When Contract Says Otherwise

Patent

By Dennis Crouch

Kimble v. Marvel Enterprises Inc. (9th Circuit 2013) File Attachment: kimbleMarvel.pdf (341 KB) 

Kimble’s patent covers a pretty-cool web-shooting toy designed to mimic (in toy form) spider-man’s super powers. U.S. Patent No. 5,072,856.

Following a typical David-and-Goliath pattern, Kimble approached Marvel about the idea. Marvel rejected the idea but then later began using the idea. The subsequent patent/contract lawsuit was settled back in 2001 with Marvel paying royalties to Kimble that eventually reached more than $6 million. The agreement covers both products that “infringe the patent … as well as sales of the Web Blaster product.” The agreement also includes a release of other potential causes of action. However, the agreement itself contains no expiry date.

The patent is now expired, and the new dispute is about whether Marvel is required to continue to pay royalties. Kimble argues that it is still owed royalties under the agreement so long as the Web Blaster is sold. In particular, Kimble focuses on the language of the agreement; the fact that the settlement released Marvel from several non-patent causes of action; and the fact that Marvel has always maintained in court that the Web Blaster does not infringe the patent. Based on those factors, Kimble argues that the patent expiry is immaterial to Marvel’s ongoing obligation to pay the monies due.

Marvel argues conversely that the case is controlled by Brulotte v. Thys Co., 379 U.S. 29 (1964). In Brulotte, the Supreme Court found a licensing agreement unenforceable because it required royalty payments beyond the expiration date of the underlying patent. Following Brulotte, the Ninth Circuit as well as several other circuit courts have held that a contract requiring royalty payments for an invention after a patent expires is unenforceable unless the contract provides a discount from rate collected while the patent was in force. See Zila, Inc. v. Tinnell, 502 F.3d 1014 (9th Cir.2007); Meehan v. PPG Indus., Inc., 802 F.2d 881 (7th Cir.1986); Boggild v. Kenner Prods., 776 F.2d 1315 (6th Cir.1985); Pitney Bowes, Inc. v. Mestre, 701 F.2d 1365 (11th Cir.1983); Aronson v. Quick Point Pencil Co., 440 U.S. 257 (1979).

Here, the 9th Circuit again followed Brulotte, Aronson, and Zila, holding that a “so-called ‘hybrid’ licensing agreement encompassing inseparable patent and non-patent rights is unenforceable beyond the expiration date of the underlying patent, unless the agreement provides a discounted rate for the non-patent rights or some other clear indication that the royalty at issue was in no way subject to patent leverage.”

The rule that follows, in relevant part, is that a license for inseparable patent and non-patent rights involving royalty payments that extends beyond a patent term is unenforceable for the post-expiration period unless the agreement provides a discount for the non-patent rights from the patent-protected rate. This is because—in the absence of a discount or other clear indication that the license was in no way subject to patent leverage—we presume that the post-expiration royalty payments are for the then-current patent use, which is an improper extension of the patent monopoly under Brulotte.

The result here is nothing new, but should serve as an important reminder for anyone drafting a patent license agreement. Special care must be taken if the parties expect for royalties to extend beyond the life of the patent-rights in question.

This case will likely see a petition for writ of certiorari.

Bits & Bytes from Jonathan Hummel

Patent

#1. Victory in Sino-US IP Relations?

Grant Ross, at IDG News Service reports that Chinese officials have agreed to “crack down on software and other piracy” and to “take steps that state-owned organizations use legal software.” The specifics of what steps the Chinese Government will take are as of yet forthcoming, leading the US Chamber of Commerce to describe any “progress” as being “incremental.” Regardless, should the promises hold true, this may be an important step in the relationship between the two countries as DRM moves closer to the center of the media industry in the years to come.

#2. Medtronic Loses Patent Fight in German Court

Michael Flannelly at The Dividend Daily reports that on Friday, the District Court of Mannheim, Germany ruled against the medical giant when it held that Medtronic’s (NYSE: MDT) transcatheter heart valve technology infringes a patent owned by Edwards Lifesciences (NYSE: EW). Shares of Edwards were up 3.7 percent at $68.25 in early afternoon trading on the New York Stock Exchange, while shares of Medtronic were down 1.4 percent at $53.01. In November, the US Court of Appeals decided similarly and awarded Edwards $74 million.

Read more: http://medcitynews.com/2013/07/german-court-rules-against-medtronic-in-latest-round-of-patent-fight-shares-fall/#ixzz2Z2q4ekJH

#3. Interview with a TROLL

David Segal, at the New York Times sat down with Erich Spangenberg, owner of IPNav (a full service “Patent Monetization” firm) and talked about his work as a Troll. According to a recent report by RPX, a patent risk management provider, over the past 5 years, IPNav has sued over 1,600 companies, the most by any “entity” in the patent field.

Read the article here.

#4. Washington Redskins QB, RG3 Hits Gets Blocked in Pursuit of Trademark.

Mandour & Associates, APC, reports a hiccup in Robert Griffin III’s bid to trademark his nickname, RG3. Griffin, the rising NFL star formed Thr3escompany, LLC in January 2012 to develop a label and start producing merchandise bearing his nickname, RG3. However, an Irivine, CA based motorcycle company, Research Group 3 asserts that Griffin is infringing their RG3 trademark used on merchandise.

#5. London Olympic Opening Ceremony Raising More IP Issues

Oliver Wainwright at The Guardian reports that in addition to the Olympic Torch raising IP eyebrows, the glowing duvets used in the Opening Ceremonies might have infringed somebody’s property rights. Rachel Wingfield claims to have invented a similar bed covering 10 years before the opening of the London Games. 

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  • The World Congress present Keynote speaker Judge James Donald Smith, Chief Administrative Patent Judge, Patent Trial and Appeals Board
  • July 24-25 in New York City

Bits & Bytes from Jonathan Hummel

Patent

RECENTLY 

#1. House Bill Would Exempt USPTO from Sequestration.

  • Tony Dutra at Bloomberg BNA reports a Bill has been introduced into the House that would exempt the USPTO from government cuts forced by sequestration. The Bill, and an accompanying letter signed by several Silicon Valley Congressman urgers Congress to exempt the USPTO because that Office is funded solely by fees paid with the applications it receives. The USPTO stands to lose about $150 million in funding.

#2. Judge's Facebook Friends not grounds for Recusal

  • Venkat Balasubramani at Eric Goldman's Technology & Marketing Law Blog reports on two cases that seek to answer the question whether or not Facebook "friendships" are grounds for Judicial recusal. The two opinions are further evidence of the way the social networking site is affecting the law in very basic ways by defining or redefining relationships.

#3. Library of Congress Logging Blawgs

#4. New Digital Rights Management Technology (& the Fictitious Lillian Virginia Mountweazel).

  • James Bridle at The Observer reports that Germany's Fraunhofer Institute recently revealed that it is working on a new digital rights management system, entitled SiDiM. Regular DRM involves making changes to the code of the media. The proposed SiDiM, however, make literal changes to the content of the media. For example, the word "unhealthy" would automatically change to "not healthy" and thus distinguish a plagiarist's work from a licensed work. Indeed, there is precedence for this: the "Mountweazel" is a made-up word inserted into a dictionary to catch unwary plagiarists, which originates in the fictitious Lillian Virginia Mountweazel who first appeared in the New Columbia Encyclopedia of 1975.

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Related articles

 

Bits & Bytes from Jonathan Hummel

Patent

RECENTLY 

#1. House Bill Would Exempt USPTO from Sequestration.

  • Tony Dutra at Bloomberg BNA reports a Bill has been introduced into the House that would exempt the USPTO from government cuts forced by sequestration. The Bill, and an accompanying letter signed by several Silicon Valley Congressman urgers Congress to exempt the USPTO because that Office is funded solely by fees paid with the applications it receives. The USPTO stands to lose about $150 million in funding.

#2. Judge's Facebook Friends not grounds for Recusal

  • Venkat Balasubramani at Eric Goldman's Technology & Marketing Law Blog reports on two cases that seek to answer the question whether or not Facebook "friendships" are grounds for Judicial recusal. The two opinions are further evidence of the way the social networking site is affecting the law in very basic ways by defining or redefining relationships.

#3. Library of Congress Logging Blawgs

#4. New Digital Rights Management Technology (& the Fictitious Lillian Virginia Mountweazel).

  • James Bridle at The Observer reports that Germany's Fraunhofer Institute recently revealed that it is working on a new digital rights management system, entitled SiDiM. Regular DRM involves making changes to the code of the media. The proposed SiDiM, however, make literal changes to the content of the media. For example, the word "unhealthy" would automatically change to "not healthy" and thus distinguish a plagiarist's work from a licensed work. Indeed, there is precedence for this: the "Mountweazel" is a made-up word inserted into a dictionary to catch unwary plagiarists, which originates in the fictitious Lillian Virginia Mountweazel who first appeared in the New Columbia Encyclopedia of 1975.

JOBS

Patent Search Attorney – Large Corporation – Evanston, Ill.

  • Cardinal Intellectual Property, an Intellectual Property Search and Services company, is seeking a Patent Search Attorney to work in its Evanston, Illinois office.

Patent Attorney / Agent – Law Firm – Fairfax, Va.

  • MG-IP Law, PLLC is accepting resumes for a Patent Attorney or Patent Agent with an electrical or computer science background and at least two years of experience. MG-IP is a growing top 40 IP firm located in the northern Virginia area and offers a flexible work environment.

UPCOMING EVENTS

Related articles

 

Bits & Bytes from Jonathan Hummel

Patent

RECENTLY 

#1. House Bill Would Exempt USPTO from Sequestration.

  • Tony Dutra at Bloomberg BNA reports a Bill has been
    introduced into the House that would exempt the USPTO
    from government cuts forced by sequestration. The Bill, and an
    accompanying letter signed by several Silicon Valley Congressman urgers
    Congress to exempt the USPTO because that Office is funded solely by fees
    paid with the applications it receives. The USPTO stands to lose about
    $150 million in funding.

#2. Judge's Facebook Friends not grounds for Recusal

  • Venkat
    Balasubramani     at Eric Goldman's Technology & Marketing Law Blog
    reports on two cases that seek to answer the question whether or not Facebook "friendships"
    are grounds for Judicial recusal. The two opinions are further evidence of
    the way the social networking site is affecting the law in very basic ways
    by defining or redefining relationships.

#3. Library
of Congress Logging Blawgs

#4. New Digital Rights Management
Technology (& the Fictitious Lillian Virginia Mountweazel).

  • James Bridle at The Observer reports that Germany's
    Fraunhofer Institute
    recently revealed that it is working on a new digital rights management
    system, entitled SiDiM.
    Regular DRM involves making changes to the code of the media. The proposed
    SiDiM, however, make literal changes to the content of the media. For
    example, the word "unhealthy" would automatically change to
    "not healthy" and thus distinguish a plagiarist's work from a
    licensed work. Indeed, there is precedence for this: the "Mountweazel"
    is a made-up word inserted into a dictionary to catch unwary
    plagiarists, which originates in the fictitious Lillian Virginia
    Mountweazel who first appeared in the New Columbia Encyclopedia
    of 1975.

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Patent Search Attorney – Large
Corporation – Evanston, Ill.

  • Cardinal Intellectual Property,
    an Intellectual Property Search and Services company, is seeking a Patent
    Search Attorney to work in its Evanston, Illinois office.

Patent Attorney / Agent – Law Firm –
Fairfax, Va.

  • MG-IP Law, PLLC is
    accepting resumes for a Patent Attorney or Patent Agent with an electrical
    or computer science background and at least two years of experience. MG-IP
    is a growing top 40 IP firm located in the northern Virginia area and
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Myriad Seeks to Enforce its BRCA1/BRCA2 Gene Patents

Patent

By Dennis Crouch

Myriad Genetics v. Ambry Genetics (D. Utah 2013)

In AMP v. Myriad, the Supreme Court ruled that the process of isolating naturally occurring DNA is insufficient to transform the natural phenomenon into a patentable invention. At the same time, the court ruled that a manmade cDNA version of naturally occurring human DNA is patent eligible.

Within hours of that Supreme Court ruling, Ambry Genetics issued a press release indicating that the company would begin offering genetic testing for the BRCA1/BRCA2 mutations at a significantly reduced rate.

Now, Myriad Genetics has filed suit against Ambry alleging infringement of ten different patents including the patents challenged in the original lawsuit. These include U.S. Patent Nos. 5,709,999; 5,747,282; 5,753,441; 5,837,492; 6,033,857; 5,654,155; 5,750,400; 6,051,379; 6,951,721; and 7,250,497. In the complaint, Myriad was careful to only assert claims that were left valid by the Supreme Court decision. Myriad writes:

As of the morning of June 13, 2013, Plaintiffs collectively had 24 patents containing 520 claims concerning two genes (BRCA1 and BRCA2), and methods of use and synthetic compositions of matter related thereto. On June 13, the Supreme Court of the United States ruled that five patent claims covering isolated naturally occurring DNA were not patent-eligible, thereby reducing the overall patent estate to 24 patents and 515 patent claims. This case involves none of those five rejected claims.

The lawsuit requests injunctive relief, damages for willful infringement and lost profits. In addition, Myriad filed a motion for preliminary injunction arguing that Ambry’s low prices create irreparable harm:

Ambry is able to offer testing at [a] discounted price by unfairly and improperly “free-riding” off of the hundreds of millions of dollars invested by Myriad Genetics in developing the science and market for clinical diagnostic testing for hereditary cancers. …

At a minimum, [the harm caused by ongoing infringement] consists of: (1) price erosion and the loss of the benefit of Myriad’s established pricing strategy; (2) the loss of market share; (3) reputational injury; and (4) loss of the benefit of the remaining limited term of patent exclusivity and Myriad’s business plans for that period, as well as the inability to fully obtain its reliance interest obtained by disclosing its discovery and investing hundreds of millions of dollars to commercialize that discovery in exchange for a limited exclusive right. The Federal Circuit has recognized each of these forms of damage as irreparable harm that warrant the imposition of injunctive relief.

It appears that Myriad has a very strong case here. One question will be whether the district court will entertain arguments that the public’s need for access to multiple sources of cancer diagnostic tools weigh heavily against injunctive relief.

The case has been assigned to one of the newest district court judges – Judge Robert Shelby. Judge Shelby is an Obama nominee who received his commission on September 25, 2012. Shelby’s court has become something of a dumping ground for IP cases. About half of the 83 open intellectual property cases in Utah in his docket.

File Attachment: myriadcomplaint.pdf (70 KB)

File Attachment: myriadmotionforpreliminaryrelief.pdf (608 KB)

A few recent Section 101 cases at the PTAB

Patent, , ,

By Dennis Crouch

Patenting Software: Ex Parte Betts [Computer Associates], 2013 WL 3327142, Appeal 2010-004256, Application 11/132,649 (PTAB 2013) (“[W]e conclude claims 14-26 encompass software without physical embodiment, i.e., software per se, which is an abstract idea and not a “process, machine, manufacture, or composition of matter,” as required by § 101.”)

Patenting Software: Ex Parte Krause [HEWLETT-PACKARD], 2013 WL 3246398, Appeal 2010-012129, Application 10/442,401 (PTAB 2013) (Claims directed to an “end station” within a network having an “aggressive timer.” “Appellant contends that the Examiner erred in rejecting [the] claims … under 35 U.S.C §101 because the claims recite an “end station,” which is defined as hardware. Appellant’s argument does not cite evidence to rebut the Examiner’s interpretation that the claim encompasses either hardware or software. Accordingly, we decline to reverse the rejection.”)

Patenting Software: Ex Parte Barsness [IBM], 2013 WL 3362954, Appeal 2010-011009, Application 11/316,285 (PTAB 2013) (Claim directed to “computer-executable instructions tangibly recorded on a computer-readable media” construed to include “non-statutory, transitory embodiments.” “[W]e find the Specification states the invention is capable of being distributed in the form of a wireless signal when exchanged from one signal-bearing medium to another. This falls within a propagating electromagnetic signal per se and thus, is not directed to one of the statutory categories.”)

Patenting Software: Ex Parte Svendsen [Concert Tech], 2013 WL 3363110, Appeal 2011-001873, Application 11/837,876 (PTAB 2013) (Claimed media “control system” could be implemented as software. “As such, we are not persuaded by Appellants’ argument that the mere recitation of a “control system” (even if the Specification describes it as being associated with a memory) is sufficient to make the claims patent-eligible under 35 U.S.C. § 101 . . . as it does not play a significant part in the performance of the claimed steps.” In short, the broadest reasonable interpretation of the claim language leads us to construe the “control system” as being directed to a computer program per se, which, as drafted, renders the claimed subject matter not patentable under 35 U.S.C. § 101. See Gottschalk v. Benson, 409 U.S. 63, 72 (1972).”

Patenting Method that Could be Performed by a Human: Ex Parte Xu [HEWLETT-PACKARD], 213 WL 3363011, Appeal 2010-009107, Application 10/767,075 (PTAB 2013) (“[C]laim 1 as a whole is directed to a sequence of steps that can be performed by a person. Accordingly, claim 1 is drawn to patent-ineligible subject matter and invalid under § 101.”)

Patenting Device Attached to a Human is OK: Ex Parte Robert S. Bray, 2013 WL 3293616, Appeal 2011-013427, Application 11/686,054 (PTAB 2013) (“The claims recite a device positioned between two vertebrae not, for example, a human comprising a positioned device. The claims relate only to the correct placement of the device in the human patient, and as a whole, do not encompass a human organism. There is nothing in the statute, and we are unaware of any case, that categorically excludes such devices.”)

Appealing to the PTAB: Expecting Delay

Patent

By Dennis Crouch

The PTAB continues to work on its 26,000+ backlog of ex parte appeals pending at the USPTO. The Board has reduced the backlog in seven of the past twelve months. However at the present rate, the backlog will not drop below 5,000 for more than twenty years. As the chart shows below, the large backlog of appeals cases is a historically new phenomenon.

The bread-and-butter of PTAB decisions involve questions of obviousness under 35 U.S.C. §103. In May 2013, for instance, about 94% of the ex parte PTAB decisions involved obviousness rejections. About 7% involved statutory-subject-matter (most of those also included obviousness rejections). As the PTO makes its push on claim-clarity, we can expect a growing number of appeals related to indefiniteness rejections.

Subject Matter Eligibility Post-CLS Bank

Patent, , , ,

By Dennis Crouch

DDR Holdings, LLC v. Hotels.com, L.P., 2013 WL 3187161 (E.D.Tex. 2013)

In late 2012, jury agreed with DDR that its business method patents were being infringed upon and that the various defendants had failed to prove the claims invalid as either anticipated or obvious. The patents themselves are related to a method of “coordinated offsite marketing” of “internet websites.” U.S. Patent No. 7,818,399 and 6,993,572. The jury was not given the question of patentable subject matter under 35 U.S.C. 101. In a recent post-verdict ruling, Judge Gilstrap has also rejected Defendants’ Section 101 argument.

A typical claim in the patents is No. 17 from the ‘572 patent that reads:

An e-commerce outsourcing process comprising the steps of:

a) storing a look and feel description associated with a first website in a data store associated with a second website;

b) including within a web page of the first website, which web page has a look and feel substantially corresponding to the stored look and feel description, a link correlating the web page with a commerce object; and

c) upon receiving an activation of the link from a visitor computer to which the web page has been served, sewing to the visitor computer from the second website a composite web page having a look and feel corresponding to the stored look and feel description of the first website and having content based on the commerce object associated with the link.

In considering the claim scope, the Judge agreed with the patentee that the inventions embodied by the claims present “functional and palpable applications in the field of computer technology.” (Citing Research Corp). The judge also walked through the litany of “machine” elements required by the claims and concluded that the claim “also passes the machine-or-transformation test” and that conclusion strongly suggests patentable subject matter as “a useful and important indicator in the § 101 analysis.”

[The] claimed e-commerce outsourcing process requires [an] interaction between a data store storing a look and feel description of a web page and an activation of a link from a visitor computer to receive a composite web page. The method of an outsource provider also discloses a server that responds to activation by a web browser of a computer user by retrieving pre-stored data from storage, then generating and transmitting visual elements corresponding to the source page.

. . . .

As discussed above, the asserted claims disclose a specific set of physical linkages that involve a data store, server, computer, that together, and through the claimed interconnectivity, accomplishes the process of displaying composite web pages having the look and feel of the source web page. [Defendant] urges the Court to find the invention is only a business method of making two web pages look alike. While the ′572 and ′399 patents do, indeed, cover the concept of two web pages with visually corresponding elements, there is more to the asserted claims when considered as a whole. “Diehr emphasized the need to consider the invention as a whole, rather than ‘dissect[ing] the claims into old and new elements and then … ignor[ing] the presence of the old elements in the analysis.” Bilski. When the asserted claims are considered as a whole, the claimed invention lies in stark contrast to the facts of Bancorp. In Bancorp, the claimed “mathematical concept of managing a stable value protected life insurance policy” was found unpatentable as an abstract idea because mere mathematical computer was not dependent upon the computer components required to perform it. In contrast, the interactions and linkages of computer machinery to generate composite web pages in this case are integral to each of DDR’s asserted claims. Accordingly, the first prong of the machine-or-transformation test is satisfied. That being the case, this Court needs not address the transformation prong at this time.

Using the word “idea”: The word “idea” seems fairly abstract and thus potentially troublesome for a patentee. In this case, the inventor used the word “idea” repeatedly in his trial testimony. The defendants made the argument that the inventor’s language should serve as evidence that the claim is abstract. However, Judge Gilstrap rejected that argument as well:

The Court is also not persuaded that the inventor’s use of the word “idea” at least 25 times to describe his invention is evidence of unpatentable subject matter. The inventor’s testimony was given during a one week trial, and it is not unusual to explain a patent claim as a “gist” or “core idea.” Such testimony is not instructive that a claim is an abstract idea for purposes of § 101 patentability. Moreover, “all inventions at some level embody, use, reflect, rest upon, or apply laws of nature, natural phenomena, or abstract ideas,” yet, “too broad an interpretation of this exclusionary principle could eviscerate patent law.” Mayo.

In all likelihood, the case will soon move to the Federal Circuit for review.

===

Judge Gilstrap cited the recent fractured en banc decision in CLS Bank v. Alice only once and for the position posited by Judge Lourie that the statutory presumption of validity applies to the Section 101 analysis.

Fresenius v. Baxter: PTO Reexamination Decision Trumps Prior Decisions by both the District Court and the Federal Circuit

Patent

By Dennis Crouch

A substantial number of patents being enforced today are involved in parallel proceedings. Most often, these proceedings include an infringement lawsuit in federal court and a post-grant administrative proceeding before the US Patent Office. The law gives both entities power to rule on the validity of the patents in question. However, the Patent Act does not provide guidance for situations where the two political bodies conflict in judgment. An additional complicating factor stems from our Constitutionally mandated national government structure that separates power between the Administration, Congress, and the Courts. In a case decided today, the Federal Circuit says that the PTO’s invalidity decisions trump prior Court Decisions.

In Fresenius USA v. Baxter Int’l. (Fed. Cir. 2013), the Federal District Court granted “Summary Judgment of Validity” of a number of Baxter’s claims found in its U.S. Patent No. 5,247,434. (A kidney dialysis apparatus with a touch screen). In a 2009 decision, the Federal Circuit affirmed a portion of the validity decision – leaving Baxter with a handful of judicially proclaimed valid claims. In a parallel proceeding, the US Patent Office completed its reexamination of the patent and found the identical claims invalid and that decision was affirmed on appeal. The timing is somewhat important and so here is the chronological order:

  1. Court holds patent claims valid on summary judgment and proceeds toward Final Judgment.
  2. PTO finds patent claims invalid in reexamination.
  3. Court issues final judgment enforcing patent claims.
  4. Federal Circuit affirms PTO invalidity finding.

Although the district court did not stay its proceedings, the court was slow enough so that the PTO’s invalidity finding came before the court issued a final judgment in the case. That delay was key, according to the Federal Circuit decision here, since it divested the court of subject matter jurisdiction over the dispute. The Court explained, because of the USPTO decision, “Baxter no longer has a cause of action.”

The Federal Circuit went on to explain that the 2007 validity decision does not count as a final decision for res judicata purposes because it did not conclude the case as a whole.

The majority opinion was written by Judge Dyk and joined by Judge Prost.

In a 30 page dissent, Judge Newman argues that the majority ruling is an unconstitutional violation of separation of powers:

The court today authorizes the Patent and Trademark Office, an administrative agency within the Department of Commerce, to override and void the final judgment of a federal Article III Court of Appeals. The panel majority holds that the entirety of these judicial proceedings can be ignored and superseded by an executive agency’s later ruling.

This holding violates the constitutional plan, for “Judgments, within the powers vested in courts by the Judiciary Article of the Constitution, may not lawfully be revised, overturned or refused faith and credit by another Department of Government.” Chi. & S. Air Lines, Inc. v. Waterman S.S. Corp., 333 U.S. 103 (1948).

It is likely that Baxter will file a petition for writ of certiorari.

The PATENT Jobs Act of 2013

Patent

By Dennis Crouch

Reps. Honda, Lofgren, and Eshoo (All D-Ca) have collectively introduced the Patents and Trademarks Encourage New Technology (PATENT) Jobs Act of 2013 with the sole purpose of exempting the USPTO from the sequestration process for FY2014-2021. As I noted in my recent congressional testimony, the greatest impact of the America-Invents-Act has been increased funding at the USPTO and the resulting improved ability of the Agency to address the workload requirements. Although all of the USPTO's expenditures are matched by user-fee revenue, the sequester has been applied to the agency in a way that guarantees that a portion of every user-payment to the PTO is spent on general federal expenditures rather than for patent examination.

Both the AIPLA and IPO are strong supports of the proposed bill.

Contractual Override of Trade Secret Law

Patent, Trade Secret, , ,

By Dennis Crouch

Convolve and MIT v. Compaq and Seagate (Fed. Cir. 2013)

MIT has a long history with patent enforcement, including its historic link with Franklin Pierce Law Center (now UNH) and housing of the Lemelson-MIT Program. Of late, the not-for-profit institution has become quite a patent plaintiff. In addition to this case, MIT is the patent-owner-plaintiff in the Akamai and Ariad cases as well as many others. This case reaches back more than a decade when MIT and Convolve sued a group of defendants for both trade secret misappropriation and infringement of its U.S. Patent Nos. 6,314,473 and 4,916,635. In 2007, the Federal Circuit decided a prior appeal in this case on mandamus – In re Seagate Tech., LLC, 497 F.3d 1360 (Fed.Cir. 2007) (en banc) (holding that willful patent infringement at least requires showing of objective recklessness).

The present case began with a non-disclosure agreement and then failed license negotiation between Convolve and Compaq. The signal shaping technology in question is useful in computer read/write operations and Convolve agreed that Seagate (Compaq’s hard drive supplier) could be included in the conversation. No license was reached but Convolve and MIT sued two years later when the features (allegedly) showed up in Compaq/Seagate technology.

Contractual Override of Trade Secret Law: The main trade secret problem for Convolve in this case is the language of the non-disclosure agreement (NDA) that the parties signed. The agreement states that any confidential material or presentations must be particularly identified as confidential and Convolve was unable to show that it followed the procedures required by the NDA. In addition the trade secret claims regarding marketing information failed under NY law because NY trade secret law does not extend to marketing concepts. The Federal Circuit writes:

[B]arring waiver of the NDAs marking requirements (discussed below) we conclude that Seagate did not breach the NDA to the extent it may have appropriated the information disclosed. Because the disclosure of the information was not subject to the confidentiality obligations of the NDAs, moreover, barring some other basis upon which to predicate a promise of confidentiality (which we also discuss below) information relating to those ATSIs lost any trade secret status it might have had upon disclosure.

A major legal and practical point here, that should already be well understood, is that is that a contractual agreement to transfer otherwise secret information will override trade secret protections that may be in place.

Patent Infringement: The district court also dismissed the patent infringement side of the action based upon a finding of non-infringement. On appeal, the Federal Circuit vacated that decision – finding that sufficient factual dispute existed to allow the plaintiff to overcome the summary judgment motion of non-infringement for the ‘473 patent.

While a very close call, we find that Convolve presented enough evidence to preclude summary judgment on its inducement claims. Convolve did not merely demonstrate that the drives are capable of infringing, but provided evidence of specific tools, with attendant instructions, on how to use the drives in an infringing way. Unlike Fujitsu Ltd. v. Netgear, Inc., 620 F.3d 1321 (Fed. Cir. 2010), upon which the district court relied, the evidence here does not demonstrate that the infringing option in the Seagate drives was disabled by default. See Toshiba Corp., 681 F.3d at 1365 (analyzing the holding in Fujitsu). Accordingly, given the procedural posture in which the claim is presented to us, we conclude that Convolve may proceed with its inducement claims on remand.

Thus, on remand, the case will continue to determine whether the ‘473 patent was actually infringed.

Does Profit-Distribution to Professors Spoil Princeton’s Non-Profit Status?

Patent

By Dennis Crouch

Like many universities, Princeton University (my Alma Mater) receives millions of dollars in patent royalty revenue. By agreement, some of that money goes directly to individual inventor/professors as an equity-type profit distribution compensation. In an interesting lawsuit, a coalition of local citizens has partially challenged the private university’s New Jersey Non-Profit status based upon this profit-sharing arrangement and other commercial activities of the University. The basic idea here is that Princeton should be paying local property taxes on facilities used for commercial profit-making. In the plaintiff’s words, “under the law they are not even entitled to a tax exemption because they are engaged in commercial patent licensing, and the school give out a percentage of profits to faculty. Under the law in New Jersey, if a nonprofit gives out profits, it is not entitled to an exemption at all.” The case is now moving forward after the NJ court denied Princeton’s motion on the pleadings.

USPTO Patent Grants

Patent

By Dennis Crouch

With the sequester, the USPTO has slowed its operation somewhat over the past two months. As a result, fewer patents issued per week in May/June 2013 than in prior months. However, the Office is still on track to issue a record number of patents in 2013 — an approximate 5% increase over 2012. The recent spate of subject matter eligibility cases is not expected to have any discernible impact on this result. The following chart is updated through June 27, 2013 and shows the number of utility patents granted per calendar year with a projection for the second half of 2013 based upon the first-half returns.