Supreme Court: Patent Rights Block Farmers from Saving and Re-Planting Patented Seeds

Patent, , , , , ,

by Dennis Crouch

Bowman v. Monsanto Company (Supreme Court 2013)

In a short opinion a unanimous Supreme Court has sided with Monsanto in holding that the doctrine of patent exhaustion “does not permit a farmer to reproduce patented seeds through planting and harvesting without the patent holder’s permission.” 

Read the decision below:

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Bowman v. Monsanto Company, 569 U. S. ____ (2013)

JUSTICE KAGAN delivered the opinion of the Court

Under the doctrine of patent exhaustion, the authorized sale of a patented article gives the purchaser, or any subsequent owner, a right to use or resell that article. Such a sale, however, does not allow the purchaser to make new copies of the patented invention. The question in this case is whether a farmer who buys patented seeds may reproduce them through planting and harvesting without the patent holder’s permission. We hold that he may not.< ?xml:namespace prefix ="" o />

I

Respondent Monsanto invented a genetic modification that enables soybean plants to survive exposure to glyphosate, the active ingredient in many herbicides (including Monsanto’s own Roundup). Monsanto markets soybean seed containing this altered genetic material as Roundup Ready seed. Farmers planting that seed can use a glyphosate based herbicide to kill weeds without damaging their crops. Two patents issued to Monsanto cover various aspects of its Roundup Ready technology, including a seed incorporating the genetic alteration. See Supp. App. SA1–21 (U. S. Patent Nos. 5,352,605 and RE39,247E); see also 657 F. 3d 1341, 1343–1344 (CA Fed. 2011).

Monsanto sells, and allows other companies to sell, Roundup Ready soybean seeds to growers who assent to a special licensing agreement. See App. 27a. That agreement permits a grower to plant the purchased seeds in one (and only one) season. He can then consume the resulting crop or sell it as a commodity, usually to a grain elevator or agricultural processor. See 657 F. 3d, at 1344–1345. But under the agreement, the farmer may not save any of the harvested soybeans for replanting, nor may he supply them to anyone else for that purpose. These restrictions reflect the ease of producing new generations of Roundup Ready seed. Because glyphosate resistance comes from the seed’s genetic material, that trait is passed on from the planted seed to the harvested soybeans: Indeed, a single Roundup Ready seed can grow a plant containing dozens of genetically identical beans, each of which, if replanted, can grow another such plant—and so on and so on. See App. 100a. The agreement’s terms prevent the farmer from co-opting that process to produce his own Roundup Ready seeds, forcing him instead to buy from Monsanto each season.

Petitioner Vernon Bowman is a farmer in Indiana who, it is fair to say, appreciates Roundup Ready soybean seed. He purchased Roundup Ready each year, from a company affiliated with Monsanto, for his first crop of the season. In accord with the agreement just described, he used all ofthat seed for planting, and sold his entire crop to a grain elevator (which typically would resell it to an agricultural processor for human or animal consumption).

Bowman, however, devised a less orthodox approach for his second crop of each season. Because he thought such late-season planting “risky,” he did not want to pay the premium price that Monsanto charges for Roundup Ready seed. Id., at 78a; see Brief for Petitioner 6. He therefore went to a grain elevator; purchased “commodity soybeans” intended for human or animal consumption; and planted them in his fields.[1] Those soybeans came from prior harvests of other local farmers. And because most of those farmers also used Roundup Ready seed, Bowman could anticipate that many of the purchased soybeans would contain Monsanto’s patented technology. When he applied a glyphosate-based herbicide to his fields, he confirmed that this was so; a significant proportion of the new plants survived the treatment, and produced in their turn a new crop of soybeans with the Roundup Ready trait. Bowman saved seed from that crop to use in his late-season planting the next year—and then the next, and the next, until he had harvested eight crops in that way. Each year, that is, he planted saved seed from the year before (sometimes adding more soybeans bought from the grain elevator),sprayed his fields with glyphosate to kill weeds (and any non-resistant plants), and produced a new crop of glyphosate resistant—i.e., Roundup Ready—soybeans.

After discovering this practice, Monsanto sued Bowman for infringing its patents on Roundup Ready seed. Bowman raised patent exhaustion as a defense, arguing that Monsanto could not control his use of the soybeans because they were the subject of a prior authorized sale (from local farmers to the grain elevator). The District Court rejected that argument, and awarded damages to Monsanto of $84,456. The Federal Circuit affirmed. It reasoned that patent exhaustion did not protect Bowman because he had “created a newly infringing article.” 657 F. 3d, at 1348. The “right to use” a patented article following an authorized sale, the court explained, “does not include the right to construct an essentially new article on the template of the original, for the right to make the article remains with the patentee.” Ibid. (brackets and internal quotation marks omitted). Accordingly, Bowman could not “‘replicate’ Monsanto’s patented technology by planting it in the ground to create newly infringing genetic material, seeds, and plants.” Ibid.

We granted certiorari to consider the important question of patent law raised in this case, 568 U. S. ___ (2012), and now affirm.

II

The doctrine of patent exhaustion limits a patentee’s right to control what others can do with an article embodying or containing an invention.[2] Under the doctrine, “the initial authorized sale of a patented item terminates all patent rights to that item.” Quanta Computer, Inc. v. LG Electronics, Inc., 553 U. S. 617, 625 (2008). And by “exhaust[ing] the [patentee’s] monopoly” in that item, the sale confers on the purchaser, or any subsequent owner, “the right to use [or] sell” the thing as he sees fit. United States v. Univis Lens Co., 316 U. S. 241, 249–250 (1942). We have explained the basis for the doctrine as follows:“[T]he purpose of the patent law is fulfilled with respect to any particular article when the patentee has received his reward . . . by the sale of the article”; once that “purpose is realized the patent law affords no basis for restraining the use and enjoyment of the thing sold.” Id., at 251. Consistent with that rationale, the doctrine restricts a patentee’s rights only as to the “particular article” sold, ibid.; it leaves untouched the patentee’s ability to prevent a buyer from making new copies of the patented item. “[T]he purchaser of the [patented] machine . . . does not acquire any right to construct another machine either forhis own use or to be vended to another.” Mitchell v. Hawley, 16 Wall. 544, 548 (1873); see Wilbur-Ellis Co. v. Kuther, 377 U. S. 422, 424 (1964) (holding that a purchaser’s “reconstruction” of a patented machine “would impinge on the patentee’s right ‘to exclude others from making’ . . . the article” (quoting 35 U. S. C. §154 (1964 ed.))). Rather, “a second creation” of the patented item “call[s] the monopoly, conferred by the patent grant, into play for a second time.” Aro Mfg. Co. v. Convertible Top Replacement Co., 365 U. S. 336, 346 (1961). That is because the patent holder has “received his reward” only for the actual article sold, and not for subsequent recreations of it. Univis, 316 U. S., at 251. If the purchaser of that article could make and sell endless copies, the patent would effectively protect the invention for just a single sale. Bowman himself disputes none of this analysis as a general matter: He forthrightly acknowledges the “well settled” principle “that the exhaustion doctrine does not extend to the right to ‘make’ a new product.” Brief for Petitioner 37 (citing Aro, 365 U. S., at 346).

Unfortunately for Bowman, that principle decides this case against him. Under the patent exhaustion doctrine, Bowman could resell the patented soybeans he purchased from the grain elevator; so too he could consume the beans himself or feed them to his animals. Monsanto, although the patent holder, would have no business interfering in those uses of Roundup Ready beans. But the exhaustion doctrine does not enable Bowman to make additional patented soybeans without Monsanto’s permission (either express or implied). And that is precisely what Bowman did. He took the soybeans he purchased home; planted them in his fields at the time he thought best; applied glyphosate to kill weeds (as well as any soy plants lacking the Roundup Ready trait); and finally harvested more (many more) beans than he started with. That is how “to ‘make’ a new product,” to use Bowman’s words, when the original product is a seed. Brief for Petitioner 37; see Webster’s Third New International Dictionary 1363 (1961) (“make” means “cause to exist, occur, or appear,” or more specifically, “plant and raise (a crop)”). Because Bowman thus reproduced Monsanto’s patented invention, the exhaustion doctrine does not protect him.[3]

Were the matter otherwise, Monsanto’s patent would provide scant benefit. After inventing the Roundup Ready trait, Monsanto would, to be sure, “receiv[e] [its] reward” for the first seeds it sells. Univis, 316 U. S., at 251. But in short order, other seed companies could reproduce the product and market it to growers, thus depriving Monsanto of its monopoly. And farmers themselves need only buy the seed once, whether from Monsanto, a competitor, or (as here) a grain elevator. The grower could multiply his initial purchase, and then multiply that new creation, ad infinitum—each time profiting from the patented seed without compensating its inventor. Bowman’s late-season plantings offer a prime illustration. After buying beans for a single harvest, Bowman saved enough seed each year to reduce or eliminate the need for additional purchases.

Monsanto still held its patent, but received no gain from Bowman’s annual production and sale of Roundup Ready soybeans. The exhaustion doctrine is limited to the “particular item” sold to avoid just such a mismatch between invention and reward.

Our holding today also follows from J. E. M. Ag Supply, Inc. v. Pioneer Hi-Bred Int’l, Inc., 534 U. S. 124 (2001). We considered there whether an inventor could get a patent on a seed or plant, or only a certificate issued under the Plant Variety Protection Act (PVPA), 7 U. S. C. §2321 et seq. We decided a patent was available, rejecting the claim that the PVPA implicitly repealed the Patent Act’s coverage of seeds and plants. On our view, the two statutes established different, but not conflicting schemes: The requirements for getting a patent “are more stringent than those for obtaining a PVP certificate, and the protections afforded” by a patent are correspondingly greater.

J. E. M., 534 U. S., at 142. Most notable here, we explained that only a patent holder (not a certificate holder) could prohibit “[a] farmer who legally purchases and plants” a protected seed from saving harvested seed “for replanting.” Id., at 140; see id., at 143 (noting that the Patent Act, unlike the PVPA, contains “no exemptio[n]” for “saving seed”). That statement is inconsistent with applying exhaustion to protect conduct like Bowman’s. If a sale cut off the right to control a patented seed’s progeny, then (contrary to J. E. M.) the patentee could not prevent the buyer from saving harvested seed. Indeed, the patentee could not stop the buyer from selling such seed, which even a PVP certificate owner (who, recall, is supposed to have fewer rights) can usually accomplish. See 7 U. S. C. §§2541, 2543. Those limitations would turn upside-down the statutory scheme J. E. M. described.

Bowman principally argues that exhaustion should apply here because seeds are meant to be planted. The exhaustion doctrine, he reminds us, typically prevents a patentee from controlling the use of a patented product following an authorized sale. And in planting Roundup Ready seeds, Bowman continues, he is merely using them in the normal way farmers do. Bowman thus concludes that allowing Monsanto to interfere with that use would “creat[e] an impermissible exception to the exhaustion doctrine” for patented seeds and other “self-replicating technologies.” Brief for Petitioner 16.

But it is really Bowman who is asking for an unprecedented exception—to what he concedes is the “well settled” rule that “the exhaustion doctrine does not extend to the right to ‘make’ a new product.” See supra, at 5. Reproducing a patented article no doubt “uses” it after a fashion. But as already explained, we have always drawn the boundaries of the exhaustion doctrine to exclude that activity, so that the patentee retains an undiminished right to prohibit others from making the thing his patent protects. See, e.g., Cotton-Tie Co. v. Simmons, 106 U. S. 89, 93–94 (1882) (holding that a purchaser could not “use” the buckle from a patented cotton-bale tie to “make” a new tie). That is because, once again, if simple copying were a protected use, a patent would plummet in value after the first sale of the first item containing the invention. The undiluted patent monopoly, it might be said, would extend not for 20 years (as the Patent Act promises), but for only one transaction. And that would result in less incentive for innovation than Congress wanted. Hence our repeated insistence that exhaustion applies only to the particular item sold, and not to reproductions.

Nor do we think that rule will prevent farmers from making appropriate use of the Roundup Ready seed they buy. Bowman himself stands in a peculiarly poor position to assert such a claim. As noted earlier, the commodity soybeans he purchased were intended not for planting, but for consumption. See supra, at 2–3. Indeed, Bowman conceded in deposition testimony that he knew of no other farmer who employed beans bought from a grain elevator to grow a new crop. See App. 84a. So a non-replicating use of the commodity beans at issue here was not just available, but standard fare. And in the more ordinary case, when a farmer purchases Roundup Ready seed qua seed—that is, seed intended to grow a crop—he will be able to plant it. Monsanto, to be sure, conditions the farmer’s ability to reproduce Roundup Ready; but it does not—could not realistically—preclude all planting. No sane farmer, after all, would buy the product without some ability to grow soybeans from it. And so Monsanto, predictably enough, sells Roundup Ready seed to farmers with a license to use it to make a crop. See supra, at 2, 6, n. 3. Applying our usual rule in this context therefore will allow farmers to benefit from Roundup Ready, even as it rewards Monsanto for its innovation.

Still, Bowman has another seeds-are-special argument: that soybeans naturally “self-replicate or ‘sprout’ unless stored in a controlled manner,” and thus “it was the planted soybean, not Bowman” himself, that made replicas of Monsanto’s patented invention. Brief for Petitioner 42; see Tr. of Oral Arg. 14 (“[F]armers, when they plant seeds, they don’t exercise any control . . . over their crop” or “over the creative process”). But we think that blame-the-bean defense tough to credit. Bowman was not a passive observer of his soybeans’ multiplication; or put another way, the seeds he purchased (miraculous though they might be in other respects) did not spontaneously create eight successive soybean crops. As we have explained, supra at 2–3, Bowman devised and executed a novel way to harvest crops from Roundup Ready seeds without paying the usual premium. He purchased beans from a grain elevator anticipating that many would be Roundup Ready; applied a glyphosate-based herbicide in a way that culled any plants without the patented trait; and saved beans from the rest for the next season. He then planted those Roundup Ready beans at a chosen time; tended and treated them, including by exploiting their patented glyphosate resistance; and harvested many more seeds, which he either marketed or saved to begin the next cycle. In all this, the bean surely figured. But it was Bowman, and not the bean, who controlled the reproduction (unto the eighth generation) of Monsanto’s patented invention.

Our holding today is limited—addressing the situation before us, rather than every one involving a self replicating product. We recognize that such inventions are becoming ever more prevalent, complex, and diverse. In another case, the article’s self-replication might occur outside the purchaser’s control. Or it might be a necessary but incidental step in using the item for another purpose. Cf. 17 U. S. C. §117(a)(1) (“[I]t is not [a copyright] infringement for the owner of a copy of a computer program to make . . . another copy or adaptation of that computer program provide[d] that such a new copy or adaptation is created as an essential step in the utilization of the computer program”). We need not address here whether or how the doctrine of patent exhaustion would apply in such circumstances. In the case at hand, Bowman planted Monsanto’s patented soybeans solely to make and market replicas of them, thus depriving the company of the reward patent law provides for the sale of each article. Patent exhaustion provides no haven for that conduct. We accordingly affirm the judgment of the Court of Appeals for the Federal Circuit.

[1] Grain elevators, as indicated above, purchase grain from farmers and sell it for consumption; under federal and state law, they generally cannot package or market their grain for use as agricultural seed. See 7 U. S. C. §1571; Ind. Code §15–15–1–32 (2012). But because soybeans are themselves seeds, nothing (except, as we shall see, the law) prevented Bowman from planting, rather than consuming, the product he bought from the grain elevator.

 

[2] 2The Patent Act grants a patentee the “right to exclude others from making, using, offering for sale, or selling the invention.” 35 U. S. C. §154(a)(1); see §271(a) (“[W]hoever without authority makes, uses, offers to sell, or sells any patented invention . . . infringes the patent”).

[3] This conclusion applies however Bowman acquired Roundup Readyseed: The doctrine of patent exhaustion no more protected Bowman’sreproduction of the seed he purchased for his first crop (from a Monsantoaffiliated seed company) than the beans he bought for his second (from a grain elevator). The difference between the two purchases wasthat the first—but not the second—came with a license from Monsanto to plant the seed and then harvest and market one crop of beans. We do not here confront a case in which Monsanto (or an affiliated seed company) sold Roundup Ready to a farmer without an express license agreement. For reasons we explain below, we think that case unlikely to arise. See infra, at 9. And in the event it did, the farmer might reasonably claim that the sale came with an implied license to plantand harvest one soybean crop.

Don’t break the chain – ensuring valid claims to priority based on US patent filings has become easier.

Patent

Guest Post by Alex Korenberg of Kilburn & Strode (UK)

The Paris Convention (and its implementation by the EPO and UKIPO) requires that the person filing a priority claiming application is the same as the person who has filed an application from which priority is claimed, or his or her successor in title. This has in the past caused problems for US based applicants on several occasions, since a mismatch cannot be fixed retrospectively.

The problematic fact situation was that the chain of title from the inventor(s) on the US priority application to the applicant (e.g. assignee company) on a priority claiming second application (e.g. a PCT application) could not be established at the second (e.g. PCT) filing date. The result in several UK court cases and EPO Board of Appeal decisions was that the claim to priority was found to be invalid, leading to a loss of the patent due to intervening disclosures in the priority year (see here http://www.kilburnstrode.com/resources/news/2011-4-21-ensuring-valid-priority-claims-for-us-originating-applications for a briefing note describing this issue in more detail). The only way to be certain the chain of tile was in place was to have assignments in place from all US applicant/inventors to the applicant on the second application prior to filing it.

The implementation of the provisions of the AIA now provides a convenient way for US patent filing companies to ensure this issue does not affect their foreign filings, making use of the ability to file the US application in the name of the assignee company, rather than the inventors. By filing in the name of the assignee company, there is then no question as to the chain of title in relation to the priority claim for a subsequent PCT or other foreign application filed in the same name. Unlike the entitlement to claim priority, the entitlement to grant of a patent can be settled in Europe after filing and at any time before grant, or even after grant by appropriate assignment. Using the provisions of the AIA to file in the name of the assignee company, the question of assignments from the inventor to the assignee company ceases to be a potentially fatal issue if not settled during the priority year.

The interaction between an invention’s chain of title and the ability to claim priority has been a niche pursuit for aficionados of the nether regions of patent law, but this may be one point where the harmonisation of patent law as a result of the AIA can provide readily available benefits for US patent filers. Of course, the complexity of the interaction of earlier inventor filed applications and the Paris Convention will still be around to keep lawyers busy for years to come.

CLS Bank v. Alice Corp: Court Finds Many Software Patents Ineligible

Patent, , , , ,

by Dennis Crouch

CLS Bank v. Alice Corp. (Fed. Cir. 2013) (en banc)

In a much awaited en banc decision, the Federal Circuit has affirmed the patent ineligibility of Alice Corp’s claims to a computerized method, a computer-readable medium containing computer instructions, and a computer system that implements those instructions.  The ten-member en banc panel released seven different decisions. While none of the opinions garnered majority support, seven of the ten judges agreed that the method and computer-readable medium claims lack subject matter eligibility.  And, eight of the ten concluded that the claims should rise and fall together regardless of their claim type.

All of the judges recognized that the test for patent eligibility under section 101 should be “a consistent, cohesive, and accessible approach” that provides “guidance and predictability for patent applicants and examiners, litigants, and the courts.”  However, the judges hotly disagree as to the pathway that will lead to that result.

The leading five-member opinion written by Judge Lourie provides three guideposts for its analysis:

  • First and foremost is an abiding concern that patents should not be allowed to preempt the fundamental tools of discovery—those must remain “free to all . . . and reserved exclusively to none.” . . . [T]he animating concern is that claims should not be coextensive with a natural law, natural phenomenon, or abstract idea; a patent-eligible claim must include one or more substantive limitations that, in the words of the Supreme Court, add “significantly more” to the basic principle, with the result that the claim covers significantly less. Thus, broad claims do not necessarily raise § 101 preemption concerns, and seemingly narrower claims are not necessarily exempt. What matters is whether a claim threatens to subsume the full scope of a fundamental concept, and when those concerns arise, we must look for meaningful limitations that prevent the claim as a whole from covering the concept’s every practical application.
  • Next, the cases repeatedly caution against overly formalistic approaches to subject-matter eligibility that invite manipulation by patent applicants. . . . Thus, claim drafting strategies that attempt to circumvent the basic exceptions to § 101 using, for example, highly stylized language, hollow field-of-use limitations, or the recitation of token post-solution activity should not be credited.
  • Finally, the cases urge a flexible, claim-by-claim approach to subject-matter eligibility that avoids rigid line drawing.

Abstract Ideas are Disembodied Concepts: Alice Corp’s claims are drawn to methods of reducing settlement risk by effecting trades through a third party intermediary (a supervisory institution) empowered to verify that both parties can fulfill their obligations before allowing the exchange to be completed.  This essence, the method is a form of third-party escrow that helps overcome the risk of fraud and non-payment. In thinking about that method, the court determined that it is an abstract idea because it is a “disembodied” concept that is a basic building block of human ingenuity and untethered from any real-world application.  Lourie writes:

CLS describes that concept as “fundamental and ancient,” but the latter is not determinative of the question of abstractness. Even venerable concepts, such as risk hedging in commodity transactions, see Bilski, 130 S. Ct. at 3231, were once unfamiliar, just like the concepts inventors are unlocking at the leading edges of technology today. But whether long in use or just recognized, abstract ideas remain abstract. The concept of reducing settlement risk by facilitating a trade through third-party intermediation is an abstract idea because it is a “disembodied” concept, In re Alappat, 33 F.3d 1526, 1544 (Fed. Cir. 1994) (en banc), a basic building block of human ingenuity, untethered from any real-world application. Standing alone, that abstract idea is not patent-eligible subject matter.

After identifying the portion of the claim directed to an abstract idea, Judge Lourie then looked to see whether “the balance of the claim adds ‘significantly more.’” Answering that question in the negative, the court found the claims lack eligibility.

Writing in Dissent, Chief Judge Rader disagreed with the court’s decision. He writes:

I enjoy good writing and a good mystery, but I doubt that innovation is promoted when subjective and empty words like “contribution” or “inventiveness” are offered up by the courts to determine investment, resource allocation, and business decisions. Again, it is almost . . . well, “obvious” . . . to note that when all else fails, it makes sense to consult the simplicity, clarity, and directness of the statute.

As I start my next quarter century of judicial experience, I am sure that one day I will reflect on this moment as well. I can only hope it is a brighter reflection than I encounter today.

 


 

 

Apple’s European Multi-Touch Patent Revived by the English Court of Appeals

Patent

By Dennis Crouch

HTC v. Apple, [2013] EWCA Civ 451 (Court of Appeals of England and Wales 2013)

In a Judgment by Lord Justice Kitchen, the English court of appeals has offered a decision in favor of Apple’s European Patents covering its multi-touch keyboard. See European Patent Nos. 2 098 948 and 1 964 022.

The patents cover technical data-flow solutions to for multi-touch keyboard devices and the lower court held that those claims lacked patent eligibility under Article 52 (2)(c) of the European Patent Convention which indicates that “[t]he following in particular shall not be regarded as inventions … programs for computers.” On appeal, the court reversed that decision — finding that the invention solves a sufficiently technical problem and therefore is patent eligible:

The problem which the patent addresses, namely how to deal with multiple simultaneous touches on one of the new multi-touch devices, is essentially technical, just as were the problems of how to communicate more effectively between programs and files held in different processors within a known network which lay at the heart of the decision in IBM Corporation/Data processing network, and how to provide a visual indication about events occurring in the input/output device of a text processor which lay at the heart of the decision in IBM Corporation/Computer related invention.

In this process, the court focused on what the invention contributed to the art as a “matter of practical reality” rather than focusing on the invention’s relation to computer software. The court went on to hold that a patentable contribution does not become unpatentable simply because a computer program is used to implement that contribution.

In the end, Apple’s claim 2 of its ‘948 patent still stands (claim 1 was obvious as were claims 5 and 17 of the ‘022 patent). The ‘948 claims at issue read as follows:

1. A method for handling touch events at a multi-touch device, comprising:

displaying one or more views;

executing one or more software elements, each software element being associated with a particular view;

associating a multi-touch flag or an exclusive touch flag with each view;

receiving one or more touches at the one or more views; and

selectively sending one or more touch events, each touch event describing a received touch, to one or more of the software elements associated with the one or more views at which a touch was received based on the values of the multi-touch and exclusive touch flags.

2. The method of claim 1, further comprising:

if a multi-touch flag is associated with a particular view, allowing other touch events contemporaneous with a touch event received at the particular view to be sent to software elements associated with the other views.

In his opinion, Lord Justice Lewison described his disappointment in the lack of clarity in the law.

It is, to me at least, regrettable that because these apparently simple words have no clear meaning both our courts and the Technical Boards of Appeal at the EPO have stopped even trying to understand them. However we are so far down that road that “returning were as tedious as go o’er”. Instead we are now engaged on a search for a “technical contribution” or a “technical effect”. Instead of arguing about what the legislation means, we argue about what the gloss means. We do not even know whether these substitute phrases mean the same thing. . . .

So the upshot is that we now ignore the words “computer program … as such” and instead concentrate on whether there is a technical contribution. It is, if I may say so, a singularly unhelpful test because the interaction between hardware and software in a computer is inherently “technical” in the ordinary sense of the word. If I buy a software package that malfunctions the software house will often offer me “technical support”. But that is clearly not enough for the software to qualify as making a “technical contribution”.

Is This True?: The Most Innovative Products are Not Being Patented

Patent

By Dennis Crouch

Mike Masnick at techdirt highlights an interesting new academic study by article by a group of international economists. The paper examines winners of the R&D 100 award published annually by R&D Magazine. The interesting finding is that only 10% of award winning & breakthrough innovations from 1977-2004 were actually patented. If these results are accurate then they potentially offer a major indictment of the patent system & its failure to be the driving force in encouraging breakthrough innovation.

Read the paper here:

[Update] I suspect that the authors did not do a great job of searching for the relevant patents. For a sanity-check, I just looked up the first three innovations in the 2004 awards and then found pre-2004 patents owned by the innovative company that seemingly relate directly to the innovation being championed.

Hispanic National Bar Association IP Institute

Patent

In a program sponsored by Microsoft, the Hispanic National Bar Association is setting up an IP Institute for the Summer 2013(July 7-12).

The IP Law Institute will select up to 25 law students from law schools throughout the country to participate in a week- long IP law immersion program. The costs of travel, lodging, meals, and materials will be covered by the IP Law Institute. The IP Law Institute will provide substantive instruction, hands-on practical experience, writing workshops, visits to U.S. government institutions related to IP law (U.S. Patent and Trademark Office, U.S. International Trade Commission, U.S. Court of Appeals for the Federal Circuit), briefings from leading IP practitioners and congressional and executive branch authorities, and networking opportunities, that will give participants a broad understanding of IP law practice, as well as provide contacts and avenues for potential employment. The IP Law Institute will be anchored by a briefing on issues in an active patent litigation case followed by attending live oral arguments on the same case before the U.S. Court of Appeals for the Federal Circuit (“CAFC”). Attendees will also receive a rare behind the scenes tour of the court and meet CAFC Judges and law clerks. The Honorable Jimmie V. Reyna from the CAFC will host the group at the court and will speak to the students about IP law and the court’s role in its development.

Candidates must be law students in good standing at an ABA accredited law school and have a demonstrated interest in intellectual property law as a potential practice area. Candidates are required to complete an online application that will include a personal statement, résumé, transcript and, at their option, professional and academic references. Selection criteria will include an evaluation of interest; academic record; dedication and commitment toward accomplishing goals; professional and faculty recommendations; and previous technical/scientific-related educational and employment background (if applicable). No one factor is dispositive and students with no technical or scientific background are encouraged to apply.

http://www.hnba.com/hnba-microsoft-corporation-launch-bold-initiative-hnbamicrosoft-ip-law-institute

Patent Ownership Split in Divorce and Divided Ownership Negates Standing to Sue

Patent

By Dennis Crouch

James Taylor v. Taylor Made Plastics (M.D. Fla. 2013)  Download 2013 WL 1798964

James Taylor is the named inventor of several patents covering plastic used in storm drainage system. See U.S. Patent No. 5,224,514. During his 2006 divorce, the Taylor agreed to equitable distribution of the marital assets including the patents in question here. The agreement also noted that proceeds from the patents would be divided 60/40 in favor of Mrs. Taylor. However, the settlement did not specifically state whether legal title was also divided between the two. The issue of divided legal title is important because of the general rule in patent law that a patent owner cannot bring an infringement allegation without joining all co-owners as co-plaintiffs. And here, Mrs. Taylor refused to participate (presumably because she is part of Taylor Made Plastics).

Following Florida marriage dissolution law, the district court here sided with the defendant and held that Mr. Taylor lacks standing to bring suit.

[S]ince the Patent was issued to the Plaintiff while he was married to Ms. Taylor, the Patent was presumably a marital asset…. The Divorce Settlement merely reinforced that presumption by subjecting the Patent to equitable distribution and awarding Ms. Taylor a 60% interest in any proceeds from the Patent. . . . Since Ms. Taylor has legal title to the Patent under Florida law, and has not been made a party to the action at hand, the Plaintiff lacks standing to sue for infringement.

As a portion of its decision, the court also found that issue preclusion applies in this case to prevent the court from re-examining the question of patent ownership.

Secretary of Commerce then PTO Director

Patent,

By Dennis Crouch

President Obama has nominated Chicago Business Leader Penny Pritzker to be the next US Secretary of Commerce. John Bryson stepped-down from that post in 2012 and Rebecca Blank has been the acting Secretary for the past year. The US Patent & Trademark Office operates within the Department of Commerce and is currently being led by acting director Terry Rea. The president will likely wait to offer a name for the next USPTO director until the Secretary of Commerce position is solidified.

Allergan v. Sandoz: The Thin Line of Nonobviousness

Obviousness, Patent, , , ,

By Jason Rantanen

Allergan, Inc. v. Sandoz Inc. (Fed. Cir. 2013) Download Allergan v Sandoz
Panel: Dyk (dissenting-in-part), Prost (author), O'Malley

Allergan illustrates how thin the line between obvious and nonobvious can sometimes be.  Allergan owns several patents relating to its COMBIGAN combination ophthalmic drug treatment: Patent Nos. 7,323,463, 7,642,258, 7,320,976, and 7,030,149.  Representative claim 1 of the '463 patent states:

1. A composition comprising about 0.2% timolol by weight and about 0.5% brimonidine by weight as the sole active agents, in a single composition.

Sandoz sought to market a generic version of COMBIGAN, triggering Allergan to file suit under 35 U.S.C. § 271(e)(2)(A) alleging infringement of its four patents.  Sandoz stipulated to infringement of most of the asserted claims following claim construction and the district court subsequently found that all of the remaining asserted claims were not invalid after a bench trial.  Sandoz's appeal focused primarily on the district court's nonobviousness ruling. For purposes of the appeal, the asserted claims of the '463, 258, and '976 patents were treated as a single group (I'll refer to these collectively as the '463 claims, since that's how the court refers to them) with claim 4 of the '149 patent treated separately.

The '463 claims – obvious: On appeal, the court unanimously reversed the district court's determination that the claims of the '463 patent were nonobvious.  Both timolol (a beta blocker) and brimodine (an alpha2-agonist) were commercially available in their claimed concentrations at the time of the invention and were used to treat opthalmic conditions.  The primary prior art reference, DeSantis, expressly taught serially administering both a beta blocker, such as timolol, with a brimodine in a fixed combination.  It also provided "an express motivation to combine alpha2-agonists and beta blockers in order to increase patient compliance."  Slip Op. at 8.

So where did the district court go wrong?  First, the Federal Circuit held that it committed clear error by finding that "“while patient compliance may have created a need for fixed combination products, it did not motivate a person of skill in the art to develop fixed combinations with a reasonable expectation of success, because the FDA did not consider improving patient compliance as a factor in its approval decision.” Id. at 9, quoting district court.  While FDA approval may be relevant to the motivation inquiry:

There is no requirement in patent law that the person of ordinary skill be motivated to develop the claimed invention based on a rationale that forms the basis for FDA approval. Motivation to combine may be found in many different places and forms; it cannot be limited to those reasons the FDA sees fit to consider in approving drug applications.

The CAFC also concluded that the district court erred by over-relying on the recognized unpredictability in the formulation carts.  While unpredictablity is also relevant to the obviousness inquiry, it can be overcome simply by establishing that there was a reasonable probability of success.  Furthermore, Allergan's challenges in developing its commercial COMBIGAN product were not particularly probative of the obviousness inquiry because the relevant inquiry is whether a person of ordinary skill in the art would have a reasonable expectation of success in developing the claimed invention, not COMBIGAN (which contains many elements in addition to those embodied in the claims). 

In addition, the Federal Circuit concluded that the district court's factual findings on teaching away were insufficient to overcome the motivation provided by DeSantis and that the secondary considerations of nonobviousness did not weigh heavily in this analysis. 

Claim 4 of the '149 patent – nonobvious: While the full panel agreed on the obviousness of the '463 claims, it split over claim 4 of the '149 patent. Claim 4 states:

4. A method of reducing the number of daily topical ophthalmic doses of brimondine administered topically to an eye of a person in need thereof for the treatment of glaucoma or ocular hypertension from 3 to 2 times a day without loss of efficacy, wherein the concentration of brimonidine is 0.2% by weight, said method comprising administering said 0.2% brimonidine by weight and 0.5% timolol by weight in a single composition.

The underlined language is essentially the same as claim 1 of the '463 patent.  Central to the majority's conclusions was thus its treatment of the italicised language as a claim limitation: even though the creation of a single composition of 0.2% brimonidine by weight and 0.5% timolol by weight was obvious, administering it twice a day instead of three times a day without loss of efficacy was not.

The majority reached this because it was understood at the time of the invention that when brimonidine is dosed twice per day as opposed three times per day there is a loss of efficacy in the afternoon (the "afternoon trough") and Sandoz did not identify any "evidence in the prior art that would allow us to conclude that the addition of timolol to brimonidine dosed twice per day would eliminate the afternoon trough issue."   Slip Op. at 13.  Furthermore, even though it was "true that the prior art shows concomitant administration of brimonidine and timolol was dosed twice per day," that was insufficient to establish the obviousness of claim 4 because "this art does not show that there was no loss of efficacy associated with that treatment, let alone an elimination of the afternoon trough."  Id. at 14.

Judge Dyk's dissent:   Writing in dissent, Judge Dyk would have found Claim 4 invalid.  Judge Dyk's disagreement highlights the issue of whether a claim can nonobvious if it is drawn to an unknown – but inherent – property of an obvious invention.  "While a new and nonobvious method of using an existing (or obvious) composition may itself be patentable, [] a newly-discovered result or property of an existing (or obvious) method of use is not patentable."  Slip Op. at 18 (internal citations omitted).

In Judge Dyk's view, claim 4 includes only a single limitation (in this case, a step): "applying a fixed combination of 0.2% brimonidine and 0.5% timolol twice a day."  Given the prior art, [t]he method of applying a fixed combination of 0.2% brimonidine and 0.5% timolol twice a day would therefore have been obvious over the prior art." Id. at 19. 

This did not end the nonobviousness inquiry for the majority, however.  "The majority’s outcome appears to rest, therefore, on the notion that claim 4 was not obvious because it claims the result of twice-a-day dosing—avoiding “a loss of efficacy in the afternoon.”  Id., quoting Maj. Op. 13.  This is not a limitation: "[a]voiding a “loss of efficacy” is not a separate step, but rather a result of the claimed method. []. We should recognize in this case, as we did in Bristol-Myers Squibb, that '[n]ewly discovered results of known processes directed to the same purpose are not patentable.' Bristol-Myers Squibb, 246 F.3d at 1376."  Slip Op. at 19 (internal citations omitted).  

Consequences: It's worth noting that even though it prevailed in establishing the obviousness of the asserted claims of the '463 patent, Sandoz still cannot market its generic version of COMBIGAN: "The ’258, ’976, and ’149 patents each expire on April 19, 2022. Because we concludd that claim 4 of the ’149 patent is not invalid, the Appellants will be unable to enter the market until that date. Accordingly, we find it unnecessary to address the claims of the ’258 and ’976 patents."  Slip Op. at 15.

Slow and Steady: PTAB Continuing to Address Backlog of Ex Parte Appeals

Patent

By Dennis Crouch

The Patent Trial and Appeal Board (PTAB) is turning a corner in terms of its backlog of pending ex parte appeals with a significant drop in the backlog in March 2013. Still, there are more than 25,000 appeals pending decision by the board of administrative patent judges.

[Updated] I collected a small large sample of file histories (here, only 21 500+ file histories) for ex parte PTAB appeals decided in April 2013 to find an estimate of the current timeline for appeal decisions. The chart below shows a histogram of the decision timing based on the number of years from applicant’s filing of an appeal brief until the PTAB’s decision on the merits of the case. The median and average appeal pendency under this calculation is just over three years.

Guest Post: Nine Reasons why the Supreme Court Should Side with Myriad and Affirm the Patenting of Isolated Human Genes

Patent, , ,

Guest Post by Benjamin Jackson, Senior Director of Legal Affairs at Myriad Genetics, Inc.

The Myriad Case: A Golden Opportunity to Bring Clarity and Fairness to Subject-Matter Eligibility

Two weeks ago the US Supreme Court heard oral argument in the landmark case of AMP v. Myriad Genetics. The Justices appeared engaged in the argument and seemed to be genuinely seeking understanding of the science and the potential impact of any decision they might take. Several specific points emerged from the argument that warrant further discussion:

1. What Does "Isolation" Really Mean? Some Justices seemed to struggle with what is involved in "isolation" under the patents. This is the most critical issue in the case as a correct understanding of this word leads to the inescapable conclusion that the claims are directed to human-made inventions rather than what exists in nature. Regardless of any meaning used in the Petitioner's arguments and those of prominent amici such as Dr. Lander, "isolation" as defined by the patents requires that a new chemical entity be created either synthetically from scratch or by chemically/structurally modifying an existing molecule. The patents explicitly define "isolated" DNA as removed from its natural environment, whether that environment be in the nucleus or, as the Lander brief emphasizes, floating around outside the cell in someone's blood. But isolation under the patents is not just "snipping" molecules as they sit in their natural environment. Isolation under the patents also requires purification (i.e., concentration) of the newly created molecule out of the interfering milieu.

What is ignored in ACLU's arguments is that purification is a critical element of what it means to "isolate" something under the patents. The Lander brief calls purification of DNA routine, but only in the context of randomly purifying all nucleic acids out of a sample. "Isolation" under the patents requires specific, targeted purification/enrichment of BRCA1– or BRCA2-related molecules, which was not routine or even possible before Myriad's invention. Under this proper understanding of everything that "isolation" under the patent requires, ACLU made Myriad's case by conceding in their reply brief and in oral argument that purification to yield a significant new utility is sufficient to warrant a patent. Some Justices seemed to agree: A molecule sitting in a leaf of an Amazonian plant is not "new" or patent-eligible, but it becomes both once it is purified and concentrated into a useful form. Similarly, DNA in its natural environment, whether whole in the cell or fragmented in the blood, is neither new nor patent-eligible, while a DNA molecule chemically modified and purified by man is both.

2. Splitting the Baby Doesn't Work Out Well for the Baby. Some see patent-eligibility for cDNA and not isolated genomic DNA, advocated by the Department of Justice, as a compromise position that the Court is seriously considering. I am hopeful that instead the Court has merely recognized that cDNA is so clearly patent-eligible that it needs no serious discussion and has efficiently moved on to the marginally closer question of isolated genomic DNA. While this may superficially seem like a nice, neat compromise, it quickly falls apart under scrutiny. In the area where the Myriad case has the most potential impact, because new isolated DNA patents are common and thus incentivizing new discoveries is most important today, there is no distinction between genomic DNA and cDNA. Bacteria, for example, have no introns, which means the reverse transcription product of mRNA (i.e., what you might call a cDNA) has a sequence identical to genomic DNA. In essence, there is no such thing as cDNA in bacteria. DOJ's position would make all isolated DNA claims patent-ineligible in any organism without introns. The wisdom of Solomon was not in splitting the baby, but in finding a course that meant he didn't need to.

3. Methods v. Compositions. Much of the Myriad oral argument centered on whether method of use claims would be enough to incentivize innovation in the life sciences. Some Justices seemed to be trying to weigh whether an entire category of composition claims could be invalidated without negative effect on innovation because method of use claims would remain. With respect, the Court is not the body that can or should attempt these kinds of determinations where in-depth investigation and careful balancing of competing interests is needed to strike the right balance between what is or is not needed for innovation. For example, the Court is not well-positioned to survey in detail the international legal landscape to, e.g., evaluate statements such as those from DOJ on DNA use versus composition patents in Europe. Congress, not the Court, is practically equipped and Constitutionally-tasked with precisely this type of determination.

4. Analogies. The Court seemed to grapple with several analogies in trying to probe the outer reaches of patent-eligibility. Any analogy that overly simplifies complex science falls apart under close scrutiny. But more importantly, the Court need not agonize over patenting livers cut out of bodies or whole plants uprooted from the Amazon. The patented molecules in Myriad are far closer and vastly more analogous to the chemical compound purified and concentrated from the Amazonian plant than the uprooted whole plant. Indeed, Myriad's claims present an even stronger case because there has been a modification of the chemical structure in addition to the purification. We must not confuse the analogy for the thing actually at issue or let hypothetical future implications of questionable likelihood cloud what was actually patented in this case. Concerns over allowing patenting of extracted livers should not distract the Court from the simple fact that what is before it in Myriad is neither an extracted liver nor an uprooted plant, but instead a highly useful, purified and chemically modified compound that never existed in nature until Myriad created it. If someone ever tries to patent an extracted liver, the Court can address any problems then. It would be tragic, however, to let the "tail" of that remote future possibility wag the "dog" of patent-eligibility for biotech inventions today.

5. Innovation. Some Justices appeared anxious incentivizing innovation without inhibiting it, with Justice Breyer noting "uncomfortable compromises" in patent law. The Myriad patents specifically and gene patents generally require no such discomfort. First, ACLU's argument that the claims preclude any study of the BRCA genes is simply wrong. Untargeted sequencing and analysis of the genes would not infringe claims to isolated BRCA DNA because it does not involve purification (thus no "isolation") of the BRCA genes out of the genomic milieu. Second, putting ACLU's anecdotes aside, all available systematic evidence shows that gene patents do not inhibit but instead spur innovation. ACLU's imaginative assertions about what the claimed molecules can be used for are a red herring; the Petitioners in Myriad clearly stated in their declarations that they want to use the claimed molecules not for DNA-based computers or developing new drugs, but instead to replicate Myriad's test.

6. Every Chemical Invention Is Possible in Nature. Justice Alito made an insightful comment about a branch washing up on shore looking like a baseball bat. This shows the legal irrelevance of the Lander amicus brief, which figured somewhat prominently in the oral argument. That randomly fragmented DNA floating around in someone's blood might at some point comprise the BRCA1 gene is irrelevant to the question whether what Myriad claimed was produced by human ingenuity rather than by nature. The relevant question is whether the inventor merely found something unmodified in nature and staked claim to it, or instead created something by her own ingenuity. To ask whether a claimed chemical composition could conceivably ever exist in nature is an unhelpful question of probability because, given enough time, any arrangement of atoms is inevitable. See, Dan L. Burk, Anticipating Patentable Subject Matter, 65 STAN. L. REV. ONLINE 109, 114 (2013). For example, it was irrelevant to the decision in Chakrabarty that Dr. Chakrabarty assisted the natural process bacterial "breeding" that, given enough time, could certainly have yielded the claimed bacterium naturally.

7. Subtraction v. Addition. Many easily accept that combining two chemical entities creates a man-made, patentable invention, but become instantly skeptical if a single molecule is separated into two parts that do not exist in nature. This surfaced in the Myriad argument as well, but from a chemical, biological, genetic, and even legal perspective there is no defensible distinction between addition and subtraction. A molecule created by removing parts that interfered with its new utility is just as much a product of human ingenuity, and can have just as important a new utility, as a molecule created by addition.

8. Short DNA Molecules. Justice Sotomayor asked about claims directed to short DNA molecules of 15 or more nucleotides. She appeared to rely on ACLU's arguments, based on an article published after Myriad filed its merits brief, about these claims covering the entire genome. Certainly as to Claim 6 of the '282 patent, this is clearly wrong. Claim 2 is directed to a molecule with the cDNA sequence of SEQ ID NO:1 (whose patent-eligibility the Court seemed pretty comfortable with) and Claim 6 is merely directed to fragments of that molecule. If the larger molecule is a product of human ingenuity, then human-made fragments of it must also be. Regardless, ACLU's unproven allegations on this point are irrelevant from a practical perspective. Anything as small as 15 nucleotides would only be used as part of a primer pair and, when used this way, the molecules would be 100% specific for BRCA1.

9. Myriad: A Unique Chance to Return Clarity and Fairness to Patent-Eligibility by Returning to the Statute and Chakrabarty. There is currently great confusion amongst courts, the patent office, patentees and the public about patent-eligibility under section 101 of the Patent Act. While the spirit behind the judicial exclusions for patentability is correct, decisions applying them can often be, in the words of Justice Frankfurter, "infected with too much ambiguity and equivocation" due to "vague and malleable terms" such as "the work of nature" and the "laws of nature." But the language of section 101 itself and the Court's seminal decision in Diamond v. Chakrabarty provide the Court with a framework for a long overdue recalibration and clarification of patent-eligibility in the Myriad case.

Section 101 requires that a claimed composition of matter be both new and useful, thus encompassing the judicial exclusions and giving courts the tools to resolve difficult questions of patent-eligibility. The claimed chemical composition must have some structural, physical or chemical change from the natural starting materials used by the inventor in order to be new under section 101. Limiting patent-eligibility to structurally, physically, or chemically "new" things addresses the judicial concern over patentees removing from the public domain that which exists in nature because there must be a modification of the natural thing. It further addresses the Mayo Court's concern over section 101 becoming a dead letter. Section 101 fills the gap in sections 102 and 103 by excluding anything the inventor found in nature but that was not previously known to others (which could not be anticipated or obvious under section 102 or 103, but which we don't want to award a patent for).

Merely being new is not enough under section 101; the claimed invention must also be useful. This is where the statute really does its work and gives courts an objective yet flexible framework for giving proper force to the legislature's intent. Not just any utility will do. The claimed composition must have one or more significant new utilities and these new utilities must directly result from the structural, physical or chemical changes made by the inventor. Courts can exert substantial discretion in determining whether the new utilities are "significant" under section 101. Courts can weigh the structural changes (how new the composition is) with the new utilities (how significant they are) to decide whether the invention is patent-eligible. If the utility is relatively minor, more of a structural change may be required. If the utility is groundbreaking, very minor structural changes may be sufficient. For example, purification of a molecule from its natural surroundings, without any change in the chemical structure, is a relatively minor structural/physical change from the natural state of things. Nevertheless, this may be patentable if the highly purified composition has significant new (e.g., therapeutic, diagnostic) uses. Importantly, these uses must be assessed from the perspective of human endeavors. The purified molecule always has some or all of the same chemical properties (e.g., polarity, electronegativity, etc.) as it did in nature, but its purification has opened up a world of human uses that take advantage of those properties.

The Court's decision in Chakrabarty, the definitive statement of patentable subject matter for compositions of matter, epitomizes the judicial exclusions and the statute working at their harmonious best. Chakrabarty cited to many of the early cases that established the judicial exclusions from patent-eligibility, then clarified that the dispositive question for patent-eligibility is whether what is claimed is a product of nature or a product of human ingenuity. The Court's analysis paralleled section 101's text, emphasizing that the claimed bacterium was different from what existed in nature (i.e., it was new) and had "significant utility" (i.e., it was useful).

In a great insight into what it means for something to be "new" under section 101, the Court made clear that it is the differences between what is claimed and what exists in nature, not the similarities, that make all the difference in patent-eligibility. Dr. Chakrabarty manipulated bacterial breeding to give one bacterium the natural ability of other bacteria to eat oil. As Dr. Chakrabarty himself noted in his amicus brief in support of Myriad, "the genetically-engineered bacterium that I created and sought to patent in Chakrabarty had a quite similar structure to what existed in nature. It shared the same genome and internal structure as naturally occurring Pseudomonas bacteria and differed only by a few pieces of DNA."

But these elegant changes resulted in "significant utility" such that the Court declared that these modest modifications yielded a product that was "markedly different." The vast similarities were irrelevant; they did not negate the fact Dr. Chakrabarty's human ingenuity brought about something that never existed before with "a distinctive name, character and use." As the Chakrabarty Court noted, legislative history makes clear that what is not eligible for patenting is that which is "created wholly by nature unassisted by man" while anything that "is unique, isolated, and is not repeated by nature, nor can it be reproduced by nature unaided by man" is eligible. The modified bacterium gained significant utility from the donor bacteria and could now be put to many important new uses (e.g., cleaning up oil spills). Again, a relatively minor structural change can be enough if the gained utility is significant.

In Myriad, the Court can readily apply this framework to find that the claimed compositions are new and useful and thus patent-eligible. The isolated DNA molecules are new because they are not found in nature by definition. As shown in point # 1 above, "isolation" under the patents requires a brand new chemical composition with significant structural changes that has been purified and concentrated out of the milieu that previously prevented its new uses. Chromosomal DNA in its natural environment, whether whole in the cell or fragmented in the blood, is neither new nor patent-eligible, while the molecule chemically modified and purified by man is both.

The new molecules have gained significant new utilities. They can be used as laboratory tools for targeted sequencing of the BRCA genes of patients, which is not just transfer of an existing utility to a new product as in Chakrabarty, but an entirely new utility never possible before. ACLU makes much of the fact that these utilities largely depend on properties shared with the natural DNA. This is true but irrelevant. The new molecules share some useful properties with the natural source material (why else would we have sought them out?), but the breakthrough new utilities were impossible before the inventors' modifications. This is precisely what the patent system was designed to incentivize.

Upholding the Myriad patents does a lot more than affirm patent protection of a deserving invention of human-made molecules with significant societal value. In Myriad the Court can honor the language and intent of the statute passed by Congress and bring the objectivity, clarity and predictability that patentees and alleged infringers alike yearn for, all while advancing the policy goals of the judicially-created patent-eligibility exclusions.

Lazare Kaplan v. Photoscribe: Make Sure to Always File a Cross-Appeal (Except When You Shouldn’t)

Patent

By Jason Rantanen

Lazare Kaplan Int'l. v. Photoscribe Technologies, Inc. (Fed. Cir. 2013) Download Lazare Kaplan v Photoscribe
Panel: Lourie (author), Dyk (dissent), Reyna

Deciding which issues to appeal can sometimes be a challenging process.  One quirky rule of appealing patent judgments is that when a district court has entered a judgment of invalidity on all asserted claims, it is improper to file a cross-appeal based on either (1) additional claims for invalidity or (2) claims of noninfringement, and doing so can potentially subject the cross-appellant to sanctions.  As Lazare Kaplan illustrates, however, when a district court has entered a judgment that the claims are not infringed and not invalid and the patent holder appeals noninfringement, the patent challenger must file a cross-appeal challenging the no invalidity judgment.  Failing to do so in this situation terminates the patent challenger's ability to raise invalidity arguments, even on remand following a broadening claim construction by the Federal Circuit. 

Background: Lazare Kaplan is the owner of Patent No. 6,476,351.  In 2006, Lazare Kaplan sued Photoscribe for infringement of the '351 patent; Photoscribe responded by filing invalidity counterclaims.  After the district court construed a key claim term, Photoscribe obtained summary judgment of no literal infringement and prevailed at jury trial on the doctrine of equivalents.  The jury also found that the claims were not invalid under the court's construction. The district court entered judgment that the claims were not infringed and not invalid. Lazare Kaplan appealed the judgment of noninfringement but Photoscribe did not appeal the judgment that the claims were not invalid.  On appeal, the Federal Circuit broadened the district court's construction and remanded for further proceedings on infringement.

Following remand, the district court agreed with Photoscribe that both infringement and validity should be retried "because the validity decision of the jury in the first trial was on the basis for a claim construction which the Court of Appeals has reversed."  Slip Op. at 4 (quoting district court).  The district court granted Photoscribe's motion for relief from the prior judgment under Rule 60(b) and its motion for summary judgment of invalidity. Lazare Kaplan appealed. 

Rule 60(b) relief:  While the majority's analysis technically involves determining whether the district court abused its discretion in granting Photoscribe's Rule 60(b) motion, because the majority concludes that the issue before it is unique to patent law, it reviews that decision without deference to either the district court or the law of the regional circuit in which the district court sits (although it does find Second Circuit decisions to be persuasive).  To the majority, the issue is simply "whether, on remand, a district court may reopen a prior final judgment as to patent validity, not appealed by either party, based on a claim construction modified by" the Federal Circuit, a pure question of patent law.  Slip Op. at 6. Framed in those terms, the majority concludes that the answer is no.

Judgment of Validity Must Be Appealed: "It is well-settled that a party must file a cross-appeal if, although successful in the overall outcome in the district court, the party seeks, on appeal, to lessen the rights of its adversary or to enlarge its own rights."  Slip Op. at 6.  An offshoot of this requirement is that "“[A] party will not be permitted to argue before us an issue on which it has lost and on which it has not appealed, where the result of acceptance of its argument would be reversal or modification of the judgment rather than affirmance.”  Id., quoting Radio Steel & Manufacturing Co. v. MTD Products, Inc., 731 F.2d 840, 844 (Fed. Cir. 1984).  In  Odetics, Inc. v. Storage Technology Corp., 185 F.3d 1259 (Fed. Cir. 1999), the Federal Circuit drew on this foundation to affirm a district court's decision that the challenger's invalidity arguments were barred in procedural circumstances similar to here.

Lazare Kaplan goes a step further, holding that a district court cannot address validity on remand where the challenger failed to appeal the judgment that the claims were not invalid, irrespective of the modified claim construction.  In reaching this conclusion, the majority expressly rejects the argument that separate appeal of validity and infringement was not necessary because the issues of validity and infringement were closely interrelated.  "Whether or not the concepts of invalidity and infringement are “closely interrelated” is irrelevant; the relevant issue is whether a ruling reversing the validity holding would expand Photoscribe’s rights or lessen Lazare Kaplan’s rights."  Slip Op. at 9.  Ultimately, regardless of the district court's view that it "makes no sense" not to entertain validity challenge on remand following a new claim construction that potentially raises new validity issues, "rules are rules, and the cross-appeal rule is firmly established in our law."  Id. at 14. 

Judge Dyk: Judge Dyk's dissent criticizes the majority for failing to adhere to the fundamental principle of patent law that “claims must be interpreted and given the same meaning for purposes of both validity and infringement analyses.”  Slip Op. at 17, quoting Amazon.com, Inc. v. Barnesandnoble.com, Inc., 239 F.3d 1343, 1351 (Fed. Cir. 2001).  Here, the district court attempted to eliminate the inconsistency of allowing the patent holder "to assert infringement on a broad claim construction while permitting it to defend against invalidity using a different and far narrower claim construction" by applying Rule 60(b)(5).  Slip Op. at 17-18. 

Judge Dyk's argument focuses on the majority's lack of any support for its conclusion that "failure to file a contingent cross-appeal bars Rule 60(b) relief." Id. at 20.  This is "not a situation governed by the traditional “cross-appeal rule”—that is, the rule that “a party must file a cross-appeal if . . . [it] seeks, on appeal, to lessen the rights of its adversary or to enlarge its own rights.” Maj. Op. 6 (citing El Paso Natural Gas Co. v. Neztsosie, 526 U.S. 473, 479 (1999)) (emphasis added). Here, Photoscribe sought on appeal not to modify the rights established by the district court judgment but to preserve them."  Id.

UK Moving on Design Patent Rights

Patent,

By Dennis Crouch

UK has an Intellectual Property Office (UKIPO) that is the go-to-agency when considering policy implications of potential changes to the laws. One recent focus of the UKIPO has been industrial design rights and “the extent to which the design industry is properly supported by the Intellectual Property Framework.” In a new whitepaper, the agency has released a proposal for amending the law and procedures of UK design rights. The agency takes the following positions:

  1. Retain Unregistered UK Design Rights (for up to 15 years), however, the unregistered right will be limited to protect only against commercial copying of unique and major elements of a company’s product.
  2. Extend the ownership limitations of Unregistered UK Design Rights to include anyone who carries out business in the EU or markets articles made to the design in the EU. The initial owner of design rights will be the designer – rather than the person who commissioned the design.
  3. Allow for a 30-month delay in publishing registered design rights.
  4. Align UK Copyright and Design Rights so that a company with permission to use a UK or EU design right implicitly has permission to use the equivalent UK Copyright.
  5. Create criminal sanctions for deliberate copying of registered UK designs.

More available here: /media/docs/2013/04/response-2012-designs.pdf

In the US, unregistered design rights are also protectable, but they have to be fit either the Lanham Act, the Copyright Act, or some state law regime (such as Trade Secret or Unfair Competition).

Biogen v. Glaxosmithkline: Prosecution History Disclaimer and Claim Construction

Patent,

By Jason Rantanen

Biogen Idec, Inc. v. Glxosmithkline (Fed. Cir. 2013) Download Biogen v GSK
Panel: Dyk, Plager (dissenting), Reyna (author)

By the mid-1990's, it was well known that rituximab, an anti-CD20 antibody, could be used to treat certain cancers of the lymph nodes such as non-Hodgkins lymphoma.  The anti-CD20 antibody binds to a portion of the CD20 antigen protein exposed on the cell surface and destroys the cell.  Scientists from Biogen discovered that patients with another type of cancer, Chronic Lymphocytic Leukemia (CLL), could also be treated using anti-CD20 antibodies.  Based on this discovery, Biogen obtained Patent No. 7,682,612.  Claim 1 of the '612 patent reads:

1. A method of treating chronic lymphocytic leukemia in a human patient, comprising administering an anti-CD20 antibody to the patient in an amount effective to treat the chronic lymphocytic leukemia, wherein the method does not include treatment with a radiolabeled anti-CD20 antibody.

Biogen filed the application leading to the '612 patent in the late 1990s.  At the time, scientists believed that only one large loop, or epitope, of the CD20 antigen was exposed on the cancerous cell's surface and that this was the only site that for an anti-CD20 antigen to bind to.  Rituximab binds to this epitope. After Biogen filed its application, other scientists discovered that the CD20 antigen had a second small loop (originally thought to be hidden inside the cell) to which other, different anti-CD20 antibodies could bind.  In 2002, Glaxosmithkline (GSK) developed a new anti-CD20 antigen that binds to the small loop.  Because it binds to a different epitope, GSK's anti-CD20 antibody has different specificity and affinity characteristics than rituximab. 

Biogen sued GSK for infringement of the '612 patent in 2010.  The district court construed anti-CD20 antibody to mean "rituximab and antibodies that bind to the same epitope of the CD20 antigen with similar affinity and specificity as rituximab."  Based on this construction, Biogen stiplated to noninfringement and appealed. 

Prosecution History Disclaimer: The issue on appeal involved the the doctrine of prosecution history disclaimer.  Prosecution history disclaimer applies when a "patentee unequivocally and unambiguously disavows a certain meaning to obtain a patent."  Slip Op. at 8.  In this circumstance, the doctrine "narrows the meaning of the claim consistent with the scope of the claim being surrendered," id. overcoming even the term's ordinary and customary meaning.  Application of the doctrine helps serve a public notice function by allowing the public and competitors rely on definitive statements made during prosecution when launching a new product or designing-around a patented invention.

During an early stage of the prosecution of the '612 patent, the examiner rejected the presented claims on enablement grounds:

Claims 1 and 12 are broadly drawn to ‘. . . an anti-CD20 antibody or fragment thereof’. This is
broadly interpreted for examination purposes to be any and all anti-CD20 antibodies, no matter
the specificity or affinity for the specific epitope on the circulating tumor cells. While the specification is enabling for the application of RITUXAN®, RITUXIMAB® and 2B8-MX-DTPA in the treatment of hematologic malignancies, the specification is not enabling in the application of all other anti-CD20 antibodies, which may have different structural and functional properties.

In response, the applicant wrote:

Applicants respectfully submit that even though antibodies directed to the same antigen might have different affinities and functional characteristics, one of skill in the art could readily identify an antibody that binds to CD20 with similar affinity and specificity as does RITUXAN® using techniques that are well known in the art. . . . With that knowledge in hand, the skilled artisan could readily produce anti-CD20 antibodies using similar techniques, and screen such antibodies for those having an affinity and functional activity similar to Rituxan®

Based on this exchange in the context of the prosecution history read as a whole, the majority agreed with the district court that prosecution disclaimer applied to limit the scope of "anti-CD20 antibody."  "[R]ather than challenging the examiner’s understanding of the crucial terms, the applicants argued that the specification was enabling for anti-CD20 antibodies with similar affinity and specificity as Rituxan®."  Slip Op. at 10.  Nor was exact recitation of the examiner's own words necessary: "While disavowing statements must be “so clear as to show reasonable clarity and deliberateness,” Omega, 334 F.3d at 1325, this requirement does not require the applicant to parrot back language used by the examiner when clearly and deliberately responding to a particular grounds for rejection. If an applicant chooses, she can challenge an examiner’s characterization in order to avoid any chance for disclaimer, but the applicants in this case did not directly challenge the examiner’s characterization."  Slip Op. at 11. 

Hierarchy of canons of claim construction: In the hierarchy of canons of claim construction, prosecution history disclaimer trumps the presumption of claim differentiation: "Our cases make clear [] that where found, prosecution history disclaimer can overcome the presumption of claim differentiation."  Id. at 12 (note that the court said "can overcome," leaving open a door for cirucumstances in which it might not). 

Dissent: Writing in dissent, Judge Plager disagreed that this was an instance of prosecution history disclaimer.  "[T]he give-and-take that is often part of the process of negotiation between an examiner and an applicant may result in less-than-clear understandings, as happened here. Making too much of such ambiguous statements 'does not advance the patent’s notice function or justify public reliance.'"  Slip Op. at 16.  For Judge Plager, the question is thus "whether the prosecution history makes it clear that using RITUXAN® [Biogen's branded version of rituximab]-like antibodies is the only way to practice the claimed invention, and that no other antibodies can be used."  Id.  In his view, the above quoted statements fail to meet the "clear and unmistakable" standard required for prosecution history estoppel.  

The avoided question: By affirming the district court's claim construction, the CAFC avoided a battle over an extremely challenging issue: enablement in the context of after arising technologies and knowledge.  Biogen's proposed construction was "an antibody that binds to a cell surface CD20 antigen."  This construction would presumably encompass methods using antibodies that bind to the larger epitope (which Biogen discovered) as well as antibodies that bind to the smaller epitope (which Biogen did not).  Since enablement is determined as of the filing date, this presents the classic patent law hypothetical: Inventor X invents one way of curing a type of cancer and then claims simply "a cure for cancer."  Should inventor X be entitled to the claim?  She's cured cancer, after all.    

FCBA and Santa Clara Program on Advanced Complex Litigation

Patent

By Jason Rantanen

This year, the Federal Circuit Bar Asociation is sponsoring a series of programs on Advanced Complex Litigation. Next Friday, May 3, the FCBA and Santa Clara Law School's High Tech Law Institute will co-host the next segment of the series. Speakers and panelists include: Chief Judge Rader, Judges Whyte and Koh, Magistrate Judge Grewal, Erich Spangenberg (IP Nav), Alan Schoenbaum (Rackspace), Mary Coyne (Verizon), Courtland Reichmann (McKool) and others. In addition, professor Colleen Chien will present the
interim results of an on-going survey of in-house counsel.

Topics include:

• Discovery
• Case Management
• Focusing Disputes
• Multiple Party Litigation

Further details are available here: http://law.scu.edu/hightech/2013-advanced-complex-litigation-series.cfm . The last program of the series will take place in Newark on May 30. Details on the entire series are available here: http://www.fedcirbar.org/olc/pub/LVFC/cpages/misc/acl_series.jsp .

SO THAT’S WHAT “RAND” MEANS?: A Brief Report on the Findings of Fact and Conclusions of Law in Microsoft v. Motorola

Patent, , ,

Guest Post By Jorge L. Contreras, Associate Professor of Law, American University Washington College of Law

In a meticulous 207-page opinion released on April 25, Judge James Robart in the Western District of Washington has crafted the first-ever judicial determination of a “reasonable and nondiscriminatory” (RAND) royalty rate for patents essential to industry standards. To some observers, the dense opinion (captioned “Findings of Fact and Conclusion of Law”) may be nothing more than another bit of procedural arcana in the interminable litigation over smart phone patents (summarized here), this time in the battle between Microsoft and Motorola (now owned by Google). But for followers of industry standards, Judge Robart’s opinion was a highly-anticipated and desperately-needed attempt to establish basic guidelines for the interpretation of the RAND licensing commitments that pervade industry standardization bodies.

Patents and RAND Licensing

As I discussed here last year, so-called “interoperability standards” enable products and services offered by different vendors to work together invisibly to the consumer (e.g., WiFi, USB, and the pervasive 3G and 4G telecommunications standards). Once standards are broadly adopted, markets can become “locked-in” and switching to a different technology can be prohibitively costly. Because patent holders have the potential to block others from deploying technology covered by their patents after lock-in occurs, the industry associations that develop standards (“standards development organizations” or “SDOs”) often require that companies participating in standards-development license patents that are essential to the standard to others on terms that are “reasonable and non-discriminatory” (RAND, also known as “FRAND” when the equally ambiguous term “fair” is added to the mix).

Microsoft, Motorola and the RAND Wars

The current litigation between Microsoft and Motorola relates to two common industry standards, the H.264 video coding standard developed at the International Telecommunications Union (ITU) and the 802.11 “Wi-Fi” standard developed at the IEEE Standards Association (IEEE). These standards are used in thousands of products on the market today, including Microsoft’s popular X-Box 360 game consoles, personal computers running the Windows operating system and a variety of smart phones. According to the pleadings, in 2010 Motorola offered to license Microsoft its patents essential to the implementation of these standards. A disagreement arose, however, over the royalty calculation that Motorola proposed. Under the rules of ITU and IEEE, royalties for patents covering H.264 and 802.11 must comply with RAND requirements. According to Microsoft, however, Motorola’s initial royalty demands were anything but “reasonable” and would have resulted in royalty payments in excess of $4 billion per year. Microsoft responded by suing Motorola for breach of contract in the Western District of Washington. The crux of Microsoft’s complaint is that Motorola reneged on its RAND commitments by offering a royalty rate that was manifestly unreasonable. Last October, Judge Robart ruled in the case that the applicable RAND royalty rate must be determined before a finding can be made regarding Motorola’s alleged breach of contract. A bench trial was held in November, 2012, and Judge Robart’s Findings of Fact and Conclusions of Law were released on April 25, 2013.

Defining RAND

Judge Robart’s opinion is important, not only because it resolves several highly contentious issues between Microsoft and Motorola, but because if provides a more general framework for analyzing RAND disputes in the future. At its heart, the bulk of Judge Robart’s opinion is a fairly conventional Georgia-Pacific analysis of the “reasonable royalty” rates applicable to Motorola’s patents. He spends a considerable amount of time analyzing comparable licensing transactions and determining their applicability to a hypothetical licensing negotiation between the parties. But Judge Robart makes significant modifications to the traditional Georgia-Pacific analysis in order to adapt it to the assessment of RAND royalty rates (which are related to, but different than, the “reasonable royalties” that serve as a measure of damages in patent infringement suits) (Para. 87). Here are some of the important observations that Judge Robart makes in this regard:

1.    Broad Industry Benefits from Standardization – Judge Robarts is explicit about the potential benefits that standards can confer on the overall economy through increased production and price competition (Para. 12). He observes that a primary goal of SDOs is the widespread adoption of standards “because the interoperability benefits of standards depend on broad implementation” (Para. 13). Likewise, RAND commitments are intended to “encourage widespread adoption” of standards (Para. 51, 70). Judge Robart recognizes the public benefit of standards and the public interest in ensuring that royalty rates for standardized technology enable broad implementation. Thus, unlike most patent licensing negotiations, the licensing of standards-essential patents takes on a public character. It is not merely a closed-door negotiation between two private parties. It must be conducted, and reviewed, with these public benefits in mind.

2.    Royalty Stacking – For years, commentators have observed that the aggregation of royalty demands by multiple patent holders can result in significant and unsupportable royalty burdens on standardized products. This is the problem of “royalty stacking”, which is very real in the case of H.264 (2,500 essential patents held by 35 U.S. entities, plus 19 entities with unknown numbers of patents) and 802.11 (developed by more than 1,000 companies). Throughout his opinion Judge Robart notes the threat of royalty stacking, and insists that any RAND royalty payable to Motorola must take into account royalties payable to other holders of patents covering the standards in question (Paras. 72, 92, 112, 456). This observation is significant, as it confirms that RAND royalties cannot be computed “in a vacuum” on the basis of isolated bilateral negotiations between licensor and licensee, without regard to the broader industry context in which such negotiations take place.

3.    Relative Value of Patented Technology – Judge Robart confirms yet another point that has been advanced by commentators for years: that the royalty associated with a particular patented technology should be commensurate with the actual value that technology adds to the overall standard and to the product in which it is implemented (Paras. 80, 104). Undertaking this lengthy and complex analysis, he determines that, by and large, Motorola’s patented technology added relatively little to either the H.264 or 802.11 standards or to Microsoft’s products (e.g., Paras. 289, 299, 384, 394, 457, etc.)

RAND-arithmetic

The bulk of Judge Robart’s opinion is devoted to a detailed, patent-by-patent, standard-by-standard analysis of the relative contribution made by Motorola’s technology, followed by an equally detailed Georgia-Pacific style analysis of licensing “comparables” a derivation of the RAND royalty rates for each standard. In the case of H.264, the primary comparable is the MPEG-LA H.264 patent pool. Judge Robart constructs a hypothetical negotiation between Microsoft and Motorola, assuming that Motorola’s patents are included in the pool and then calculating the royalties that Motorola would have earned from Microsoft as a result (¢0.185/unit). He then doubles this figure and adds it to the royalty base to account for the hypothetical license benefit that Motorola would have gained from being a member of the pool, yielding a RAND royalty rate for Motorola’s H.264 patents of ¢0.555/unit. In the case of 802.11, Judge Robarts finds the Via Licensing 802.11 pool to be a less relevant comparable than the MPEG-LA H.264 pool. He thus uses as his primary 802.11 comparable a royalty rate determined in 2003 by industry analyst InteCap, which he then divides by 25 to reflect the small value actually attributable to Motorola’s patented technology. The RAND royalty rate for Motorola’s 802.11 patents is thus set at ¢3.471/unit.

Both of these rates are significantly lower than the ones Motorola urged. As reported in the press, Microsoft calculates that on the basis of these rates, it would owe Motorola approximately $1.8 million per year, as opposed to Motorola’s original 2010 demand of approximately $4 billion, or the annual amount it requested at trial, which was approximately $400 million.

Judge Robart also calculated “ranges” of RAND royalties for Motorola’s patented contributions to each standard, presumably to help establish whether Motorola’s initial offers to Microsoft constituted “good faith” offers for purposes of Microsoft’s breach of contract claims. In both cases, the computed RAND royalties fall at or near the low end of these ranges (¢0.555 to ¢16.389 for H.264 and ¢0.8 to ¢19.5 for 802.11).

Significance and What the Future Holds

Judge Robart’s April 25 opinion is important to the standards world primarily because it sets out, for the first time, a logical and consistent methodology for computing a RAND royalty. This methodology is based on a conventional Georgia-Pacific patent royalty analysis, as modified to give substantial weight to royalty stacking, relative value and public interest considerations. The opinion will thus be useful not only to other courts considering RAND issues, but also, and perhaps more importantly, to arbitrators, mediators and private parties seeking to adjudicate RAND disputes before litigation commences. Given the likely increase in arbitration of standards-essential patent disputes (prompted by the recent nudge in this direction by the FTC’s Consent Order with Google), such guidance can only be helpful for the industry.

This being said, it is not clear that Judge Robart’s methodology offers the optimal means for resolving disputes over RAND royalties. It is, at best, complex and time consuming. At worst, it may be criticized as somewhat arbitrary. It may also be less useful for standards that are less broadly-adopted than H.264 and 802.11. With these standards, Judge Robart was able to choose from several different “comparables” to develop RAND royalty rates and ranges. Most importantly, he found comparables that were not merely bilaterally negotiated licenses between private parties, which he acknowledges result in royalty rates higher than those of patent pools. Most other standards do not have so many non-bilateral comparables from which to choose, if they have any at all. Thus, RAND rates may not universally drop, as they did in this case. Finally, it may be quite difficult to assess the “value” of particular patented technology in a standard if it is not functionally discrete, as Motorola’s contributions to H.264 and 802.11 seem to have been (e.g., Motorola’s contribution to H.264 appears to have consisted primarily of “interlaced video” technology that is now relatively obsolete).

For these reasons, other proposals regarding the determination of RAND royalty rates may still be worth considering, particularly as this latest decision in Microsoft v. Motorola begins what is likely to be a lengthy and interesting appeals process.