I’ve become somewhat callous toward patent eligibility jurisprudence and so was surprised when I read the Federal Circuit’s decision in ADASA Inc. v. Avery Dennison Corp., 55 F.4th 900 (Fed. Cir. Dec 16, 2022). The case concluded that constructively dividing a fixed-length binary number into different sub-portions was not an abstract idea. Now, the accused infringer has asked the Supreme Court for review.
ADASA’s US Patent 9,798,967 is directed toward an RFID chip “encoded with a unique object number.” This object number as various blocks pre-allocated to identify the selling-company, product reference, and serial number as shown below. The serial number has a unique feature of being divided into a section of “most significant bits” (MSBs) and “least significant bits” (LSBs). This division between MSBs and LSBs help in the allocation of unique serial numbers in a distributed production system. The basic approach:
A product-line will be exclusively allocated a particular MSB and all possible accompanying LSBs. It will then enable RFID chips using the allocated MSB and then sequentially incrementing the LSB.
A separate product line might also be simultaneously enabling other other chips. To ensure no overlap in serial numbers, the second-line will be allocated a different MSB.
The result then is that we can guarantee that each chip has a unique serial number despite parallel production lines.
The claims do not appear to include any novel features other than this constructed division between bits in a binary number. (Claim 1, is reproduced below). In its petition, the adjudged infringer relies heavily on the old cases of Benson and Flook to argue that the setup here lacks eligibility.
Question presented:
Radio Frequency Identification Device (RFID) tags are encoded with lengthy serial numbers that uniquely identify particular items. The patent at issue in this case designates the leading bits in a binary serial number as “the most significant bits,” and directs that all serial numbers in an allocated block begin with the same “most significant bits.”
The question presented is whether that claim, by subdividing a serial number into “most significant bits” that are assigned such that they remain identical across RFID tags, constitutes patent-eligible subject matter under 35 U.S.C. § 101.
Chief Judge Moore wrote the opinion and concluded that the claims were not directed to an abstract idea but rather provides a novel data structure within a serial number. Here, the idea is that the patentee was able to create a new data field that was “not a mere mental process, but a hardware-based data structure focused on improvements to the technological process by which that data is encoded;” and an improvement with “important technological consequences.”
An interesting feature is that the general idea presented by the patentee was already identified and discussed in the book RFID for Dummies. If Avery Dennison loses here, then the district court will hold a trial on anticipation. Still, the “for Dummies” label has strong rhetorical appeal — should everything in that book title be considered an abstract idea? The petitioner writes:
“[A]bstract ideas are not patentable.” … It is hard to imagine a more blatant transgression of that rule than the claim in this case, which sought a patent monopoly over the simple concept of treating one long serial number as the combination of two shorter numbers, and then [requiring] blocks of RFID tags all start with the same shorter number. At bottom, that claim is no different from a direction to mentally subdivide all telephone numbers into two component parts and then assign the same leading part to an allocated block of numbers (e.g., all telephone numbers in the District of Columbia start with 202). That may be a good idea (indeed, the concept in ADASA’s patent appears in the pages of RFID for Dummies), but it is no more patentable than the other good but abstract ideas that this Court has held unpatentable for more than 150 years.
Id. I’m confident that if the Supreme Court takes this case, it would even further expand eligibility doctrine.
I’m looking forward to speaking at Columbia Law School on Monday night (March 6, 2023) at the 5th Annual IP Law in the 21st Century Panel. The event is moderated by the really amazing professor Mavis Fowler-Williams. The panel includes a powerhouse set of speakers, including Dawn Davis EIC of Bon Appetit; Brittany Hazelwood from Cognizant, and Rebecca Michaud from Amazon.
The public is invited to attend in person, but you should register first.
The following is a really wonderful Guest Post from UC San Francisco Law School Professor Jeffrey Lefstin focusing on a recent ITC decision finding a claimed drill bit abstract because of its functional limitations.
Not too long after the Supreme Court decided Mayo v. Prometheus, I wrote an article suggesting, based on some of the history that followed Funk Brothers, that patents on ordinary industrial processes and compositions could become ineligible in Mayo’s wake. As the Federal Circuit has interpreted Mayo and Alice, some of that has come to pass. In the controversial case of American Axle v. Neapco, the Federal Circuit held claims to a process of manufacturing automobile driveshafts ineligible under § 101, because the claims were directed to ‘laws of nature’ and nothing more. And in Yu v. Apple, the Federal Circuit held claims directed to a digital camera ineligible as “abstract ideas.”
The latest development in that trend is the International Trade Commission’s decision in a section 337 investigation, In The Matter of Certain Polycrystalline Diamond Compacts and Articles Containing Same. [2022-10-26 [DI 783166].Commission Opinion] Affirming the Initial Determination, the ITC found that all of the asserted claims, directed to diamond composites that can be used in drill bits, were ineligible ‘abstract ideas’ under § 101.
The claims in the case were directed to polycrystalline diamond compacts (PDCs), which can be used as the cutting elements in tools such rotary drill bits. A PDC is composed of a diamond-containing layer (a “table”) bonded to a substrate. The diamond table is fabricated by mixing diamond grains with a metal-solvent catalyst, usually including cobalt. When the substrate and the diamond-catalyst mixture is subjected to heat and pressure, the diamond grains become bonded to each other and to the substrate.
The patents are based on the technique of fabricating the PDC at elevated pressures, at least 7.5 GPa. According to the patent specifications, PDCs fabricated under those conditions show improved diamond bonding and density, resulting in higher thermal stability and resistance to wear.
The asserted claims define the diamond table in terms of three kinds of properties: (i) structural properties, such as the size of the diamond grains; (ii) performance measures, such as the degree of thermal stability or wear resistance achieved in a compact; and (iii) other parameters, such as electrical conductivity or magnetic coercivity of the table, that are said to reflect the amount of remaining metal-solvent catalyst or the distance between the diamond grains in the table.[1] A representative claim is from patent US10507565, with the claim limitations at issue in the case highlighted:
18. A polycrystalline diamond compact, comprising:
a polycrystalline diamond table, at least an unleached portion of the polycrystalline diamond table including:
a plurality of diamond grains directly bonded together via diamond-to-diamond bonding to define interstitial regions, the plurality of diamond grains exhibiting an average grain size of about 30 μm or less;
a catalyst occupying at least a portion of the interstitial regions;
wherein the unleached portion of the polycrystalline diamond table exhibits a coercivity of about 115 Oe to about 175 Oe;
wherein the unleached portion of the polycrystalline diamond table exhibits an average electrical conductivity of less than about 1200 S/m; and
wherein the unleached portion of the polycrystalline diamond table exhibits a thermal stability, as determined by distance cut, prior to failure in a vertical lathe test, of at least about 1300 m.
All the asserted claims were upheld against enablement challenges under § 112. However, the Initial Determination found, and the Commission affirmed, that all the asserted claims were directed to “abstract ideas” and thus not patent-eligible subject matter under § 101.
How could the ITC reach such a result? While the reasoning is not always easy to follow (the Initial Determination dismissed the electrical and magnetic properties recited by the claim as “gratuitous rather than inventive”), the crux of the Commission’s decision is its finding that the claims recite desired properties but not the way to achieve those properties:
The claims here cover a set of goals for the PDCs that the specifications posit may be derived from enhanced diamond-to-diamond bonding. The claims do not recite a way of achieving the claimed characteristics; they simply recite the desired range of values for each characteristic.
The Commission acknowledged that the specification may have taught the conditions and input materials needed to make PDCs with the recited properties – consistent with its finding that lack of enablement had not been shown. But those conditions were not recited by the claims. According to the Commission, under the Federal Circuit’s decision in American Axlev. Neapco, “unclaimed features of the manufacturing process ‘cannot function to remove [the claims] from the realm of ineligible subject matter.’” (quoting American Axle). The claims were therefore directed only to the result or goal of a diamond table with the desired properties – an abstract idea under § 101.
The Commission thus held that a composition of matter or manufacture claim, which defines subject matter in part by effect or result, is patent-eligible under § 101 only if it additionally recites the process by which the claimed material is made. Otherwise, the claim is only directed to the abstract idea of achieving that result.
That is a remarkable proposition, and would represent a drastic change in the law. For it has long been settled that composition or manufacture claims may be defined in part by function or result, so long as the claims meet the definiteness and disclosure requirements now embodied in § 112.
It is true that for a time after the Supreme Court’s condemnation of “conveniently functional language at the exact point of novelty” in General Electric v. Wabash Appliance, 304 U.S. 364 (1938), the Patent Office and the courts were hostile to the use of ‘functional’ limitations to define compositions. In In re Fullam, 161 F2d. 247 (CCPA 1947), the Court of Customs and Patent Appeals considered a claim to a method for polishing a baked resin finish, which recited the use of a novel abrasive powder – the powder being characterized in the claim only by the property of forming flocculates with the abraded material. The CCPA held that when a claim defines a material “not in terms of what it is, but of what it does,” the claim was ‘functional’ and therefore unpatentable under General Electric. This theory survived through In re Fisher, 307 F.2d 948 (CCPA 1962), where the CCPA affirmed the rejection of a claim to a hormone concentrate defined by its potency. Now framed as a question of indefiniteness under of § 112 under the 1952 Act, (now § 112(b)), the court found the claim invalid because it defined “what that concentrate will do rather than what it is.” The courts did not invalidate these claims because the boundaries of the claim were unclear, or because the claims were broader than the disclosure. Rather, any use of functional language to define a composition was sufficient to invalidate a claim.
But after casting doubt on the Fullam doctrine in In re Fuetterer, 319 F.2d 259 (CCPA 1963)[2], the CCPA settled the issue conclusively in favor of such claims in In re Swinehart, 439 F.2d 210 (CCPA 1971). Swinehart considered the following claim to an infrared-transparent crystal (useful, among other things, for the front window of heat-seeking missiles):
24. A new composition of matter, transparent to infra-red rays and resistant to thermal shock, the same being a solidified melt of two components present in proportion approximately eutectic, one of said components being BaF2 and the other being CaF2.
Notably, eutectic compositions of barium fluoride and calcium fluoride were known in the prior art. The desirable properties of infrared transparency and thermal resistance arose from the conditions for preparation described in the disclosure. The disclosure even stated: “The essential feature of the present invention is the growing of the instant bodies under controlled conditions.”[3] Thus exactly like the claims in Polycrystalline Diamond Compacts, the claim recited desired characteristics of the crystal, but did not state how those characteristics were achieved.
The Patent Office rejected the claim as “functional,” because not all eutectic mixtures of BaF2 and CaF2 would have the properties of infrared transparency and thermal resistance recited by the claim. Reversing the rejection (and explicitly overruling Fisher), the CCPA held that there was nothing intrinsically wrong in defining a composition “by what it does rather than by what it is.” The court explained that the only issues from using such a mode of definition were (1) possible lack of novelty, where the functional characteristics were inherent in the prior art; (2) possible indefiniteness under § 112, where the language was not sufficiently precise to delineate the subject matter embraced by the claim, and (3) possible insufficient disclosure under § 112, where the breadth of the claim raised questions such as scope of enablement.
Subsequent cases confirmed that claims could define compositions by results or effects, where the results depended on the unclaimed manufacturing process rather than being derived solely from the chemical or structural properties recited by the claim. For example, in In re Miller, 441 F.2d 689 (CCPA 1971), the claim at issue recited a powdered PFTE composition defined in part by desired results (such as tensile strength when sintered), and in part by ‘gratuitous’ properties (such as dielectric strength), where the recited properties arose from the process of grinding the powder. The inclusion of properties that derived from the preparation did not even raise any issue at the Patent Office, the issue in the case being whether the powder could be defined by properties manifested only when the powder was sintered in a mold[4]. Likewise, in In re Roberts, 470 F.2d 1399 (CCPA 1973) the court approved of a claim to “Corrugated polyethylene terephthalate film having a surface coefficient of friction of less than about 0.40 as determined by the Bell test,” where the claimed reduction in friction arose from production steps disclosed in the specification but absent from the claim. According to the CCPA, “the absence in the claim of specific steps which would bring about the desired friction property is no defect. The claims define the limits of the claimed invention, and it is the function of the specification to detail how this invention is to be practiced.”
This line of authority is hardly obsolete. As recently as 2017, in BASF v. Johnson Matthey, 875 F.3d 1360 (Fed. Cir. 2017) the Federal Circuit relied on Swinehart to reverse a district court which had invalidated claims that defined a composition with functional language. Very much like the Commission in this case, the district court invalidated the claims for indefiniteness because they “recite a performance property the composition must display, rather than its actual composition.” The Federal Circuit reversed, holding that functional language was permissible so long as the claim satisfied the Nautilus standard of reasonable certainty.
But all that was before today’s regime of patent-eligibility, and before the Federal Circuit decided American Axle. When Professor Peter Menell and I filed our amicus brief urging the Supreme Court to grant certiorari in American Axle, one of the points we made was that, by making a claim’s alleged failure to describe how to carry out an invention a question of § 101, the Federal Circuit had effectively supplanted § 112. Whereas § 112 requires factual inquiries about what the disclosure teaches, American Axle teaches that under § 101 the only question is whether the “claim on its face” describes a way to reach a particular result.
At least in American Axle there might have been questions whether the claims met the requirements of § 112.[5] So perhaps we could justify the outcome in American Axle as an I-know-it-when-I-see-it test for lack patentability under § 112, much as Alice has become an I-know-it-when-I-see-it test for lack of patentability § 103. Yet in Polycrystalline Diamond Compacts the Commission specifically found that lack of enablement had not been proven. The claims were nonetheless invalid under § 101 as directed to results rather than solutions.
While perhaps surprising, the Commission’s decision is a logical development of American Axle’s approach. To quote American Axle, “features not claimed are irrelevant to step 1 or step 2 of the Mayo/Alice analysis.” The CCPA’s articulation of the basic truth of patent law in Roberts – that the claims define the limits of the invention, and the specification details how the invention is to be practiced – is arguably no longer good law following American Axle.
Rather ironically, the Commission’s patent-eligibility analysis begins with this quote from Classen Immunotherapies:[6] “The statement of patent-eligible subject matter has been substantially unchanged since the first Patent Act in 1790.” But if the Commission is correct in its application of American Axle, the Supreme Court and the Federal Circuit have swept away decades of patent jurisprudence. No doubt the judges of the CCPA would have been surprised to learn that the claims in Fuetterer, Swinehart, Miller, Roberts, and similar cases I have not mentioned here, were all “abstract ideas,” because the claims recited functions depending on “features not claimed.”
And when courts wrestled with the enablement of biotechnology claims in cases like In re Fisher, 427 F.2d 833 (CCPA 1970), or Amgen v. Chugai, 927 F.2d 1200 (Fed. Cir. 1991), where the claims recited molecules defined by their biological activity, the judges could have avoided painstaking inquiry into the facts of enablement, because the claims failed to recite how to achieve the desired activities. And today the Supreme Court can save itself a great deal of time in in the pending enablement case of Amgen v. Sanofi, because the claims are clearly directed to the ‘abstract idea’ of antibodies that block the interaction of the PSCK9 and LDLR proteins, without identifying how those antibodies are achieved.
The Commission’s decision is currently on appeal. No doubt the Federal Circuit could resolve the case, if it is so inclined, with an ad hoc rule that claims to compositions of matter are not directed to abstract ideas – much as Vanda imposed an ad hoc rule that methods of treatment are not directed to laws of nature.[7] But without addressing the deeper doctrinal and historical errors of American Axle (and ultimately Mayo), the courts may find themselves endlessly plugging their fingers in the leaking holes of today’s patent-eligibility regime. At some point we might come to think that the whole edifice is built upon a rotten foundation, and perhaps would be better swept away.
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[1] Less remaining catalyst and shorter grain-grain distances are both advantageous.
[2]Fuetterer cited the 1952 Act’s new provision on functional claiming that now appears as § 112(f). Some, but not all, of the CCPA’s subsequent case law on compositions relied on this provision as well. Swinehart was not based on this provision, but the court took it as evidence that its approach was consistent with Congress’s intent. The CCPA extended the use of functional claiming to the radical group of a compound (as compared to an ingredient in a composition) in In re Barr, 444 F.2d 588 (CCPA 1971).
[3] U.S. Patent 3,766,080. Those techniques were described in the disclosure as “conventional crystal-growing techniques.”
[4] It could be so defined, according to the CCPA.
[5] In American Axle the district court denied the defendants’ indefiniteness challenge, and the defendants did not raise lack of enablement or written disclosure.
[7] But ominously, the Federal Circuit’s recent decision in Chromadex applies the Mayo/Alice two-step inquiry to a composition claim as an alternative analysis.
What is it that makes a use “public” for purposes of the public use bar? Does it matter whether the person doing the using is a member of the public, as opposed to the inventor? Or does it matter whether the use is itself in public, as opposed to taking place in secret behind closed doors? As it turns out, the answer to both questions is “yes,” but the questions are not as distinct from one another as that formulation might make it seem. Instead, the issue of who is doing the using turns out to affect where and how that use must occur if it is to be public use.
Begin with the question of who is doing the using. Mostcasesof“public use” have involved use by at least one member of the public—“a person other than the inventor who is under no limitation, restriction or obligation of secrecy to the inventor.” And when an invention is in use by a member of the public (rather than the inventor), it is blackletter law that the use can be “public use” even if it takes place entirely in secret, behind closed doors. In addition, it is also blackletter law that the useneednotenable the invention to constitute prior art. No member of the public needs to see all the details of the invention or be able to reproduce it—it is enough that at least one person has come to rely on the availability of the invention free from any patent-based restriction.
But as we explain in a forthcoming article, a smallline of cases suggests there is a second route to public use: even if no member of the public uses the invention, an invention can be placed in public use if it is used by the inventor, but only if it is displayed to the public in such a way that the relevant public could have understood the invention. That is, there can be public use without the public using, but only if that use is out in the open and with something like an enablement requirement. SeeReal-World Prior Art, 76 Stan. L. Rev. (forthcoming 2024). These cases appear to rely on an idea of constructive public knowledge: just as a conference poster can be invalidating printed publication prior art if a researcher could have learned about the invention by reading it, an inventor’s demonstration of an invention can be an invalidating public use if someone could have learned about the invention from observing the demonstration. Likewise, the Federal Circuit hasheld that display of an invention is not public use “if members of the public are not informed of, and cannot readily discern, the claimed features of the invention.” The only exception to these rules has come when the inventor is engaged in secret commercial use of the invention. Some courts have held that this puts the invention into public use. But more recently, the Federal Circuit has instead begun to hold that this places the invention on sale, because the whole point of the use is to exploit the invention commercially. We agree with the Federal Circuit panels that have held that the on sale bar is a better fit in these situations.
The upshot from these two lines of precedent is that the question of whether an invention is in public use depends intimately on who is doing the using. If the user is someone other than the inventor, then there is public use (a) even if the use is taking place in secret, and (b) irrespective of whether the user can figure out how the invention works (enablement). But if the inventor herself is the one doing the using, then (a) the use must be taking place in public, and (b) the use must be enabling.
As one might predict, the grouping of these two approaches under the single heading of “public use” has led to confusion among litigants and, in some cases, courts. Two new Federal Circuit decisions this month add to this “public use without the public using” line of cases and demonstrate the pitfalls of failing to keep the interlocking public use rules straight. In Minerva v. Hologic, the court held that display and demonstration of a medical device at a gynecological trade show constituted public use. The patentee, perhaps misunderstanding this line of doctrine, argued that it could not be public use because no member of the public used the invention. But the court held that “public use may also occur where, as here, the inventor used the device such that at least one member of the public without any secrecy obligations understood the invention.” Similarly, In re Wingen held that display of an inventive “Cherry Star” flowering plant at a private Home Depot event placed the plant into public use. The patentee argued that the display did not disclose the claimed genetics of the plant—which could have been a successful argument given the enablement-like inquiry imposed on other similar cases—but the court held that this argument was forfeited because it was not raised in proceedings below. It seems likely that the lawyers who argued the case before the PTAB had not thought to make this argument because they did not realize that use by the inventor requires enablement. Our articleincludesnumerousexamples of district courts that were similarly confused by the rules that vary depending on who’s doing the using.
As we explain in our article, treating enabling demonstrations by the inventor as prior art makes sense as a matter of patent policy. But lumping these cases under the “public use” umbrella has created confusion and mistakes among the lower courts. Going forward, we think the Federal Circuit should be explicit that there are two distinct routes to public use: (1) use by a member of the public—someone under no obligation of confidentiality to the inventor—which can take place in secret and need not be enabling, and (2) use by the inventor, which must take place in public and enable the invention.
Alternatively, and perhaps even better, the Federal Circuit could decide that the inventor-use category of activities instead implicates the “otherwise available to the public” prong of § 102. An enabling demonstration, where the public learns about the invention but cannot use it, could be the paradigmatic example of an activity that makes an invention available to the public without creating any other type of prior art. This is not a full solution given all the pre-AIA patents still in force, and in light of the strong policy reasons for barring pre-AIA patents that were displayed publicly we can see why courts have tried to fit these cases within the “public use” category. Regardless, for patentees and their attorneys, Minerva v. Hologic and In re Wingen serve as a reminder to avoid disclosing the details of an invention before they are ready to file a patent application—and if a disclosure does occur, they should remember to preserve the argument that it wasn’t actually enabling!
In the pharmaceutical industry, there is a lot of interplay between the patents and FDA regulation. A party with an approved drug product will often list related patents in the Orange Book. Jazz’s approved drug is sodium gamma-hydroxybutyrate (“GHB”). GHB is an infamous date-rape drug and the FDA conditioned its approval on Jazz developing “Risk Evaluation and Mitigation Strategies” (REMS). Jazz created a set of strategies, and also obtained a patent covering the strategy. US8731963. The patent basically overs a computer system that keeps track of prescriptions and inventory using a “single-pharmacy system” as well as a focus on whether the drug was purchased by a cash-payer. Jazz listed this REMS patent in the Orange Book as covering its drug product. And, although the patents covering the drug use itself expired in 2022, the REMS patent is still in force. But, the FDA is actually no longer requiring Jazz to use the system.
In my view, this is a pretty weak patent, and a court will probably eventually hold that it is ineligible. But, the “beauty” of the orange book listing is that patent quality often does not really matter. As the Federal Circuit explained Orange Book listing “arm[s] the patent owner with the ability to trigger a presumptive, thirty-month suspension of the FDA’s approval of a competitive product.” In other words, if a competitor wants to enter the market, the mere existence of a listed Orange Book patent creates a 2.5 years delay in approval of their product. The law also makes it an act of infringement for a third party to submit a NDA alleging that it is either not infringing or that the patent is invalid/unenforceable.
In this case, Avadel is wanting to market its own GHB drug and has its own proposed REMS using multiple pharmacies. After Avadel filed its NDA, Jazz sued. Avadel responded with a counterclaim seeking a court order to delist the patent.
Orange Book listing is proper when the patent either (1) covers the approved drug; or (2) covers an approved method of using the drug. The Federal Circuit appeared ready to allow this type of REMS patent as an Orange Book Listing. But, here is the rub for Jazz — its patent doesn’t claim a method, but rather claims a computer system.
Each of the ’963 patent’s three independent claims describes a ‘computer-implemented system’ that comprises ‘one or more computer memories’ and a ‘data processor.’ . . . That the claimed systems can be used in the course of treating patients suffering from narcolepsy does not alter the fact that these are system claims.
Slip Op. Jazz unsuccessfully argued that the FDA required submission of a “system,” and that should alter the method requirement. In fact, the FDA does not directly review the submitted patents and has never definitively stated that REMS patents can be listed.
Thus, the Federal Circuit affirmed the lower court order to delist the patent.
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My key struggle with this case is the background law that a “system” claim automatically covers both the system itself and using the system. This stems from the definition of patent infringement that covers making, using, selling, etc. 35 USC 271(a).
In Blonder-Tongue Laboratories, Inc. v. University of Illinois Foundation (1971), the Supreme Court held that a judgment of invalidity in a suit against one infringer accrues to the benefit of any other accused infringer unless the patent owner shows that he did not have a fair opportunity procedurally, substantively and evidentially to pursue his patent claim the first time. Collateral estoppel (i.e., issue preclusion) under Blonder-Tongue is non-mutual. While a judgment of invalidity binds the patent owner and its successors in interest because it is a party to the suit with adequate opportunity to contest the matter, a judgment of validity cannot operate in the patent owner’s favor to bind persons who are neither parties nor in privity with parties to the suit.
Stare decisis, Latin for “to stand by things decided,” is a legal principle that directs courts to adhere to previous judgments, i.e., precedent, when resolving a case with comparable facts. According to Chisum on Patents, “Federal Circuit decisions decline to give great weight or stare decisis effect to prior validity rulings.” For example, in Gillette Co. v. S.C. Johnson & Son, Inc., (1990), the court held that the fact that the validity of a patent claim has previously been upheld in an earlier litigation is not to be given stare decisis effect, citing Stevenson v. Sears, Roebuck & Co. (Fed. Cir. 1983).
In a recent non-precedential opinion, C.R. Bard, Inc. v. Med. Components, Inc., the Federal Circuit applied stare decisis to a prior validity ruling involving a different patent and a different accused infringer. The Bard patents at issue are directed to radiopaque markings and structural features that can be used to identify whether a venous access port is power injectable, specifically a venous access port with an alphanumeric message that can be seen on an X-ray and that identifies the port as power injectable.
Representative claim 5 of U.S. Patent No. 7,785,302 claims:
A venous access port assembly for implantation into a patient, comprising:
a housing having an outlet, and a needle-penetrable septum, the needle penetrable septum and the housing together defining a reservoir, wherein:
the assembly includes a radiopaque alphanumeric message observable through interaction with X-rays subsequent to subcutaneous implantation of the assembly, and
the alphanumeric message indicating that the assembly is power injectable.
On motion for summary judgment, the district court found the asserted claims ineligible under § 101 because the claims were solely directed to non-functional printed matter and because the claims were directed to the abstract idea of “[using] an identifier to communicate information about the power injectability of the underlying port” with no inventive concept.
On appeal, the Federal Circuit reversed, explaining:
We are bound by our precedent in C R Bard Inc. v. AngioDynamics, Inc., 979 F.3d 1372 (Fed. Cir. 2020). There, we considered a case that is virtually identical to the one before us now. AngioDynamics also involved patents directed to radiopaque markers that could be used to identify venous access ports as power injectable, and the claims at issue were substantially similar to the asserted claims here. Furthermore, that case asked to consider the exact same question that is before us now: whether claims that include non-functional printed matter could be eligible under § 101. The court in AngioDynamics concluded that, although the asserted claims contained some non-functional printed matter, they were nonetheless eligible under § 101 because the claims were not solely directed to non-functional printed matter—they were also directed to “the means by which that information is conveyed.” Given these similarities, we must reach the same conclusion here as in AngioDynamics.
Because we are bound by our precedent, we conclude that the asserted claims in Bard’s three patents are directed to eligible subject matter under § 101.
As noted above, Chisum’s authoritative treatise on U. S. patent law states that the Federal Circuit does not give “great weight or stare decisis effect to prior validity rulings,” and does not identify any cases which this has occurred. The C.R. Bard court does not cite to any precedent, case law, or statute to justify its application of stare decisis in the present case.
Perhaps patent eligibility is uniquely amenable to stare decisis, given the amorphous nature of the Alice two part inquiry. In its opening brief, Bard argued that:
Despite acknowledging the obvious similarities between AngioDynamics and the instant case, the district court . . . declined to follow it because “the facts and procedural posture are different.” But in AngioDynamics, this Court held that Bard’s patents were valid at Alice step one. Because Alice step one presents a legal question that can be answered based on the intrinsic evidence, CardioNet, LLC v. InfoBionic, Inc., 955 F.3d 1358, 1372 (Fed. Cir. 2020), any supposed differences in the record are irrelevant and thus provide no basis to depart from this Court’s holding that claims directed to features on ports for the purposes of post-implantation identification traverse Alice step one.
AngioDynamics (the company that lost on the issue of patent eligibility in the AngioDynamics decision) filed an amicus brief in C.R. Bard in support of the accused infringer, urging affirmance of the district court’s decision finding the claims patent ineligible. The company argued that the AngioDynamics decision addressed a different factual record and different legal issues, and that:
Unlike the district court in AngioDynamics, the district court here performed a full two-step Alice analysis. The district court also considered a significantly more developed record than the one in AngioDynamics, including multiple prior art references, Bard’s admissions that it did not invent radiopaque identifiers, and Bard’s admissions that adding radiopaque identifiers to ports would be trivial. . . . Bard’s reliance on AngioDynamics is misplaced.
AngioDynamics states in its amicus brief that its interest in the case stems from its involvement in litigation related to the patents asserted in C.R. Bard, as well as other Bard patents directed to “nearly identical subject matter,” which it believes would be impacted by Bard’s appeal. Presumably, the company was hoping to benefit from the collateral estoppel effect of the district court’s patent ineligibility ruling.
Guest post by Jonathan Stroud. Stroud is General Counsel at Unified Patents – an organization often adverse to litigation-funded entities.[1] He is also an adjunct professor at American University Washington College of Law.
Patent assertion finance today is a multibillion-dollar business.[2] Virtually nonexistent in the patent space in the U.S. ten years ago—at least in part due to longstanding common law rules on champerty, maintenance,[3] and patent law’s relative high risk—today third-party litigation funding (TPLF)[4] undergirds about 30% of all patent litigation, by conservative estimates.[5] Insurance options are suddenly plentiful,[6] funders are expanding and multiplying,[7] and new deal commitments are on the rise.[8] This general trend is seen in the first chart below, adapted from a recent white paper by Korok Ray.[9]
That is in no small part due to it being the fastest-growing piece of the wider U.S. litigation finance boom of the past 20 years—as has been widely reported, private equity now undergirds huge swaths of U.S. bankruptcy, class action, trademark, securities, and tort litigation, to the tune of $50 to $100 billion in investments annually.[10] According to one of the biggest litigation funders, publicly traded Burford Capital—recently featured on 60 Minutes[11]—there was a 237% increase in overall litigation funding in the US between 2012 and 2018, a trend that, by all accounts, continues unabated.[12] Industry reports show new investments pouring fastest into patent infringement litigation; new deal commitments for TPLF saw an increase of 61%; and patent litigation accounted for 29% of all new commitments by TPLFs in 2021.[13] Recent trends are shown in the chart below, adapted from a Westfleet Advisors report. [14]
In terms of how TPLF is structured, deals are variegated, complex private agreements. But generally the funder will offer non-recourse funding (or funding that is “at risk”) upfront to cover expenses in exchange for being first in line to recoup all of that funding first (i.e., to be “paid back”) out of any recovery, and then to take some hefty percentage—often 60% or more of whatever is remaining, particularly in litigations deemed high-risk (like patent litigation), though there are no rules governing how much funders can ask for. (It generally amounts to more than 50% of the total settlement recovery, acknowledging, at least by basic math, that they are the primary beneficiary of the litigation.). Sometimes all fees are paid upfront by the funder (Fortress is known for this); some pay some continuing level of a fee/contingency split with firms to split risk; some pay the original patentholder upfront, though others think that disincentivizes them from robust ongoing participation; others make all recovery, for all parties in a waterfall, contingent upon settlement. Many start with and later add investors to ongoing funds and matters. Nearly all require oversight and consultation at all key decision points.
Patent TPLF funds generally promise roughly 20% internal rates of return to funders (IRR) year-over-year, or about a 2x to 2.5x return on investment over generally four- or five-year investment cycles, suggesting, at least at the pitch level, that these investments are lucrative for the funders.[15] The biggest (or at least most well-known) players—Magnetar Capital, Burford Capital, Fortress Investment Group, Omni Bridgeway, and Curiam Capital, to name just a few[16]—have funded patent cases for years, reporting in some cases that their existing funds were on pace to return 20% or more—less than some other investments tout, but still beating the market by a fair margin.[17]
At least, that’s as far as can be pieced together. What we do know comes mostly from self-reporting, industry reports, and journalists. That’s because current disclosure of litigation funding relies on a patchwork of state law, court rules, self-reporting, FOIA requests, leaks to journalists, and funding pitches. It’s true today that no one in the government (Federal or state, judicial, legislative, or executive) knows who is funding which litigations, whether they are as profitable as they claim to be, if they are being properly taxed, or even how they are generally structured. Disclosure is limited even for the two well-known, publicly traded litigation fund managers, Burford Capital and Omni Bridgeway; it is sparser still—and highly self-selective—for all the private funds involved. According to a recent Government Accountability Office (GAO) report on litigation funding (written at Congress’ behest), “[e]xperts GAO spoke with identified gaps in the availability of market data on third-party litigation financing, such as funders’ rates of return and the total amount of funding provided,” and noted that no government body is aware of who is funding these cases, who is influencing or controlling them, or what promises they are making to investors.[18] (It also notes litigation finance industry lobbying groups active today, and their membership.)
Disclosure remains sparse at least in part because the very wealthy private investors who fund litigation claims and then reap, they claim, windfall profits—some of them concededly foreign sovereign nation funds[19]—have fought hard to keep those agreements secret, even from judges asking for disclosure, much less from government officials, researchers, reporters, opposing parties, or the public. As such, the Federal District Court of Delaware has recently found itself at the center of this high-stakes debate about transparency and the purpose of the courts.
In April of 2021, the District of Delaware’s Chief Judge, Colm Connolly, issued two standing orders requiring litigants to, inter alia, disclose third-party litigation funding.[20] (The orders apply to all parties and litigation before his Court, not just parties to patent disputes, but do not extend, as yet, to the other sitting judges there.) The orders were neither ultra vires nor exceptional—The Federal Rules of Civil Procedure have been moving toward greater ownership transparency for years, the advisory committees have recommended that judges have the right to such disclosure and are considering further requirements,[21] and similar requirements in Federal District courts across the nation have been in place for years, in districts in, for example, California, Georgia, Iowa, Maryland, Michigan, Nevada, New Jersey, Ohio, and Texas (in the Western district).[22] But that trend toward disclosure had thus far largely avoided being raised and enforced in the few Federal districts where patent litigation primarily resides (though the California and Texas districts have long had rules requiring disclosures—ones that are often ignored by LLC PAEs).
The US Supreme Court heard oral arguments today in the major internet-law case of Gonzalez v. Google, focusing on Section 230(c) of the Telecommunications Act of 1996. That provision creates a wide safe harbor for internet service providers; shielding them from liability associated with publishing third-party content. Section 230 fostered the dominant social media business model where almost all of the major internet media services rely primarily upon user-provided content. Think YouTube, Instagram, Facebook, Twitter, TikTok, LinkedIn, etc. Likewise, search engines like Google and Bing are essentially providing a concierge recommendation service for user-developed content and data. The new AI models also work by using a large corpus of user-created data. But, AI may be different since it is more content-generative than most social-media.
The safe-harbor statute particularly states that the service provider will not be treated as the “publisher” of information content provided by someone else (“another information content provider.”) 47 U.S.C. 203(c). At common law, a publisher could be held liable for publishing and distributing defamatory material, and the safe-harbor eliminates that potential liability. Thus, if someone posts a defamatory YouTube video, YouTube (Google) won’t be held liable for publishing the video. (The person who posted the video could be held liable, if you can find him).
Liability for Recommending: In addition to publishing videos, all of the social media companies use somewhat sophisticated algorithms to recommend content to users. For YouTube, the basic idea is to keep users engaged for longer and thus increase advertising revenue. The case before the Supreme Court asks whether the Section 230(c) safe harbor protects social media companies from liability when their recommendations cause harm. If you have ever wasted an hour death-scrolling on TikTok, you can recognize that the the service provided was a steady stream of curated content designed to keep you watching. Each individual vid is something, but really you were latched-into the stream. The question then is whether the safe-harbor statute excuses that entire interaction, or is it limited to each individual posting.
For me, in some ways it is akin to the Supreme Court’s struggle over 4th Amendment privacy interests related to cell-phone location information. While a single point of information might not be constitutionally protected; 127 days of information is an entirely different matter. See Carpenter v. United States, 138 S.Ct. 2206 (2018). Here, the safe harbor applies to a single video or posting by a user, but the sites compile and curate those into a steady stream that might also be seen as an entirely different matter.
Gonzalez’ child, Nohemi Gonzalez, was killed in the 2015 Paris terrorist attacks coordinated by ISIS. In the lawsuit, Gonzales allege that YouTube is partially responsible because its algorithms provided tailor made recommendations of pro-ISIS videos to susceptible individuals who then participated in and supported the terrorist attacks that killed their child. You may be thinking that Gonzales may have difficulty proving causation. I think that is right, but the case was cut-short on Section 230 grounds before really reaching that issue.
The Ninth Circuit ruled in favor of Google, and the Supreme Court then agreed to hear the case on the following question:
Does section 230(c)(1) immunize interactive computer services when they make targeted recommendations of information provided by another information content provider, or only limit the liability of interactive computer services when they engage in traditional editorial functions (such as deciding whether to display or withdraw) with regard to such information?
80+ briefs were filed with the Supreme Court arguing various positions. This is a very large number for a Supreme Court case. Many of the briefs argue that shrinking the scope of Section 230 would radically diminish the pluralism and generativity that we see online. I might be OK with that if it gets TikTok out of my house.
As noted above, the plaintiffs case seems to lack some causal links, and in my view there is a very good chance that the court will decide the case on that grounds (via the sister case involving Twitter). Justice Alito’s early question for petitioner highlights the problem.
Justice Alito: I’m afraid I’m completely confused by whatever argument you’re making at the present time.
I also appreciated Justice Sotomayor’s humility on behalf of the court.
Justice Sotomayor: We’re a court. We really don’t know about these things. These are not the nine greatest experts on the internet.
Congress passed a separate safe-harbor in the copyright context as part of the DMCA. A key difference there was that copyright holders were able to lobby for more limits on the safe harbor. For instance, a social media company needs to take down infringing content once it is on notice. DCMA notice-and-takedown-provision. Section 230 does not include any takedown requirements. Thus, even after YouTube is notified of defamatory or otherwise harmful content, it can keep the content up without risk of liability until specifically ordered to take it down by a court. Oral arguments had some discussion about whether the algorithms were “neutral,” but the plaintiff’s counsel provided a compelling closing statement: “You can’t call it neutral once the defendant knows its algorithm is doing it.”
[Note – I apologize, I started writing this and accidentally hit publish too early. A garbled post was up for about an hour while I was getting my haircut and eating breakfast.]
The U.S. Constitution authorizes Congress to legislatively create a patent system. And, Congress has so since the beginning, with George Washington signing the the First Patent Act into law in 1790. As Congress continued to legislatively develop the statute, courts also added common law nuance, including the law of patent eligibility. In Bilski, the Supreme Court recognized that the traditional exclusions of “abstract ideas” and “laws of nature” were not textually derived, but were of such antiquity that their precedent could be maintained and justified. Bilski v. Kappos, 561 U.S. 593 (2010). Later, in Mayo and Alice, the Supreme Court fleshed-out its two step test for determining eligibility for these categorical exclusions.
Ask whether the claimed invention is directed toward a categorical exclusion.
If yes, ask whether the claimed invention includes something more, such as an inventive concept that transforms the abstract idea into a patent eligible invention.
Mayo v. Prometheus, 566 U.S. 66 (2012); Alice Corp. v. CLS Bank International, 573 U.S. 208 (2014). Since 2012, almost 2,000 court decisions have referenced these cases along with 8,000+ PTAB decisions. These were clearly watershed cases that dramatically changed the landscape of patent law and patent litigation.
Prior to Alice/Mayo, most courts focusing on eligibility issues contended with major policy goals associated with preemption of ideas and fundamental principles. That analysis reeks of policymaking and helps explain why courts shied away. The Alice/Mayo revolution systemized eligibility doctrine into a framework more familiar to judges. Although the purpose is still to avoid improper preemption of fundamental ideas, courts no longer have to grapple with the question of preemption, but rather only the jurisprudential proxies created by the Court.
The recent decision in Hawk Tech Sys. v. Castle Retail, — F.4th — (Fed. Cir. 2023), highlights the current state of the law. Hawk’s patent relates to video surveillance systems, and claims a method of receiving and/or converting stored video images and then displaying them simultaneously on a remote viewing device. The district court quickly dismissed the case under R.12(b)(6), finding the claim ineligible on its face. On appeal the Federal Circuit affirmed.
At some level, all inventions rely upon abstract ideas and laws of nature for their operation. At Step 1, Alice asks a more pointed question — is the claim “directed to” one of those excluded forms. The primary focus then is on what the patent itself “asserts to be the focus of the claimed advance,” looking to both the claim language and the associated specification. Solutran, Inc. v. Elavon, Inc., 931 F.3d 1161 (Fed. Cir. 2019). Hawk’s claims are directed to a method of viewing images, and includes a series of steps: “receiving, displaying, converting, storing, and transmitting digital video” that are all claimed “using results-based functional language.” This combination of a data-manipulation process claimed at a high level of abstraction has been regularly tagged as being directed to an abstract idea. In other cases, details in the specification showing a technological solution has saved claims at step 1. Here, however, the court concluded that the abstract idea analysis focuses on the claim language itself. Here, the court (in my view) mis-cited ChargePoint, Inc. v. SemaConnect, Inc., 920 F.3d 759 (Fed. Cir. 2019). In that case, the court noted that technical details in the specification shouldn’t be imported into the claims for Alice step-on analysis. Hawk’s argument was somewhat different — it suggested that the specification provided an explanation as to how the claimed approach solved a particular problem. Even still, the patentee’s arguments are likely lacking because of the dearth of details in both the claims and the specification. The court concluded that the claims simply “fail to recite a specific solution to make the alleged improvement … and at most recite abstract data manipulation.”
At step 2 the appellate panel agreed with the district court that the claims failed to show any technological improvement sufficient to be considered an inventive concept. Here, the court concluded that achieving a novel technological benefit was insufficient because the claims were written in “generical functional language” relying upon “conventional computer and network components operating according to their ordinary function.”
One quirk of the district court decision was that it held a hearing and considered some evidence prior to deciding the R.12(b)(6) motion. But, those motions are designed to be based simply on the pleadings. The rules further provide that, if a court considers matters outside the pleadings then “the motion must be treated as one for summary judgment.” FRCP 12(d). And, once it becomes summary judgment, then the court needs to allow more time for the parties to develop the factual evidence. On appeal, the Federal Circuit agreed that the district court erred, but concluded that the error was harmless since the district court’s decision did not hinge on any of the additional material presented.
Affirmed.
Note: The patent here claims a 2002 priority date, but the particular application was filed in 2017 and issued in 2019. I.e., the case was considered and passed muster under the USPTO’s eligibility examination guidelines.
Justin Hasford of Finnegan handled the the case below and the appeal for the defendant, Castle Retail. Chris Austin of Weide & Miller represented the patentee .
Rule 1 of the Federal Rules of Civil Procedure sets out a bold goal for civil litigation: “the just, speedy, and inexpensive determination of every action.” Patent litigation is rarely speedy; quite expensive; and, many would argue, often unjust. In the case below, one party attempted some quick relief via preliminary injunction, but the Federal Circuit has vacated on free-speech grounds.
Light-Netics owns U.S. Patent Nos. 7,549,779 and 8,128,264 that cover easy-to-hang Christmas lights. These lights include a magnetic backing that can attach easily to metal surfaces (such as a metal roof). Light-Netics sued after discovering competing products on sale from Holiday Bright Lights (HBL). And, in addition, Light-Netics sent a notice to various light stores warning them that HBL lights were infringing. Lite-Netics LLC v. Nu Tsai Capital LLC (DBA Holiday Bright Lights), — F.4th — (Fed. Cir. 2023).
Light-Netics sued for infringement, HBL responded with unfair competition counterclaims. The district court quickly issued a TRO followed-up with a preliminary injunction against the patentee. Judge Buescher (D.Neb.) ordered the patentee to (1) stop publicly stating that HBL copied the invention and (2) stop telling HBL customers that they could also be liable for infringement. Part of the district court’s justification here was a preliminary consideration of the merits of the lawsuit: narrowed claim construction eliminated literal infringement; and a finding that the patentee was estopped from asserting DOE. At base, the issue has to do with the meaning of the article “a”: can “a” be plural? Here, the claim requires a light socked with “a neodymium magnet [having] a pull strength of at least five pounds” while the accused device uses several magnets.
On appeal, the Federal Circuit has vacated and remanded — holding that the district court went too far in restricting the patentee’s protected speech.
Objectively Baseless: The Federal Circuit has given patentees a fairly-wide berth with regard to public accusations of infringement and customer cease-and-desist letters. In particular, the court has held that state court tort claims associated with out-of-court patent enforcement activities are preempted by federal law unless the patent holder “acted in bad faith.” Breaking this down, the court requires that the infringement allegation be “objectively baseless” and that the patentee conducted its affairs with subjective bad faith. Although the court does not conduct a full First-Amendment analysis, the high burden is justified by our individual liberty interest (that includes corporate commercial speech).
In its decision, the Federal Circuit concluded that it is not-unreasonable for a patentee to assert that a claimed “magnet” could be infringed by two or more magnets.
Decisions of this court lend strong support to the proposition that, “in patent parlance,” at least in an open-ended “comprising” claim, use of “a” or “an” before a noun naming an object is understood to mean to “one or more” unless the context sufficiently indicates otherwise. . . .
The patent uses “the” or “said” when referring back to an antecedent “a” phrase, but that usage does not itself suffice to demand the singular meaning because if the “a” phrase means “one or more,” so would the subsequent reference-back phrases.
Slip Op. The court notes that the patentee’s embodiments all just show a single magnet, but the court found nothing in the specification that limits the claim to that embodiment.
There is no “present invention” or other specification language that restricts the invention to a single (or single-piece) magnet, and there are no structural limitations in the claims that implicitly demand such a configuration. Importantly, and more generally, nothing in the ’779 patent indicates that the evident purpose of the magnet on the socket base (to attach the light string to a metal surface) can be achieved only, or with specified effectiveness, through a single (or single-piece) magnet, rather than a plurality of magnets collectively having the specified pull force.
Id. Likewise, the Federal Circuit also concluded that the doctrine of equivalents could be pursued. The patentee had argued that “two semicircular magnets in the Magnetic Cord light-fixture bases are equivalent to the one [claimed] magnet.” The Federal Circuit found “nothing unreasonable” about that allegation. Further, Lite-Netics did not make any amendments or statements during prosecution concerning the number of magnets in a way that would create estoppel.
On remand, the patentee may seek a narrower preliminary injunction — focusing on the patent not discussed by the Federal Circuit. Still, the Federal Circuit’s discussion gives a big boost to the patentee’s case.
I’m finally getting to Pascal Attali’s wonderful 2022 book titled Once Upon a Time: The Patent. The book’s 300 pages is divided into 50+ short chapters written as vignettes on the global patent system. Every vignette typically begins with a fictionalized historical narrative and then a more detailed explanation of the historical context and its importance. Attali is a European patent attorney and so the focus is more European and global stories. That has been wonderful for me since I already know lots of U.S. stories. I’m only half way through the book, but my favorite so far is reading about the abolition and later reinstitution of Dutch patent law 1869-1912. Big thumbs up. Don’t take my word for it, read the review from Anastasiia Kyrylenko. IPKat found it to be the BEST PATENT BOOK OF 2022.
The launch of the Unified Patent Court (UPC) has been waiting on Germany to formally ratify the UPC agreement. That has now happened.
The court is set to begin operation on June 1, 2023. Folks with European Patents will want to consider whether to file opt-outs for your patents (beginning March 1, 2023). Some patentees with highly valuable patents will likely opt-out because the UPC rules allows competitors to challenge and invalidate the patents. Unlike in the US IPR system, EPO opposition does not appear to create any estoppel against later UPC challenges.
The following guest post comes from Berkeley Law Professor Peter S. Menell* who took on the pro bono task of assembling and managing a fabulous team of leading lawyers to create the Trade Secret Case Management Judicial Guide. The guide will quickly become leading the go-to source as Federal Judges manage their growing trade secrecy caseloads. The following is an introduction and request for comments. – D.C.
As the knowledge economy expanded and concerns about trade secret misappropriation mounted in the digital age, federal policymakers undertook efforts to reinforce trade secret protection a decade ago. These efforts came to fruition with passage of the Defend Trade Secrets Act of 2016 (DTSA). This landmark legislation, modeled on the Uniform Trade Secrets Act, elevated and expanded trade secret law’s role in the federal intellectual property system. DTSA fully opened the federal courts to trade secret litigation as well as added several new features, including an ex parte seizure remedy and whistleblower immunity.
DTSA added to the large and growing federal caseloads. It also exposes more federal judges, relatively few of whom studied or litigated trade secret cases prior to their judicial appointments, to the distinctive challenges of trade secret litigation.
Origins and Design of the Trade Secret Case Management Judicial Guide
In 2019, as part of my work educating federal judges about intellectual property law and case management in conjunction with the Federal Judicial Center, I set out to assemble a team of leading practitioners, scholars, and judges experienced with trade secret litigation to develop a case management treatise to guide judges, litigators, in-house counsel, policymakers, scholars, and students in navigating this new and expanding terrain of federal intellectual property law.
David Almeling and Victoria Cundiff are two of the most experienced trade secret litigators in the nation. They have been instrumental in the Sedona Conference Working Group on Trade Secrets. Jim Pooley has long been the unofficial dean of the trade secret world—author of a leading trade secret treatise, experienced trade secret litigator and advisor, and former WIPO Deputy Director General. Peter Toren is an experienced criminal trade secret litigator who served for many years in the as a federal prosecutor with the Computer Crime and Intellectual Property Section of the Criminal Division of the United States Department of Justice where he served as Acting Deputy Chief. Professor Elizabeth Rowe litigated trade secrets cases before entering academia, where she has published numerous trade secret articles and co-authored the first trade secret law casebook. Professor Rebecca Wexler is a rising star in scholarship at the intersection of data, technology, and secrecy in the criminal legal system, with a particular focus on evidence law, trade secret law, and data privacy.
I brought experience as a contributor to DTSA (my research and reform proposal was the basis for DTSA’s whistleblower immunity provision), lead author of a widely adopted intellectual property casebook, lead author of the Patent Case Management Judicial Guide (PCMJG), and organizer of over 60 IP education programs for federal judges since 1998.
Using the PCMJG as a template—with chapters organized in the stages of litigation and guided by an early case management checklist—we have worked through countless drafts over the past three years in developing the Trade Secret Case Management Judicial Guide. We have now completed the draft and received comments from a Judicial Advisory Board. We have submitted the draft to the Federal Judicial Center for publication within its resource library for federal judges. We hope to complete that process this spring and welcome comments from practitioners and other members of the public in the interim. The public can access the guide at: https://papers.ssrn.com/sol3/papers.cfm?abstract_id=4360102
Distinctive Features of Trade Secret Litigation
Trade secret litigation has both similarities with and significant differences from other types of civil and criminal litigation. It also parallels and differs from other types of intellectual property—patent, copyright, and trademark—litigation. Three such differences stand out: (1) the tensions surrounding protecting trade secrets over the course of litigation in public tribunals; (2) the high emotional level in many trade secret litigations; and (3) the potentially complex interplay between civil and criminal trade secret actions.
1. The Challenge of Identifying Trade Secret and Then Protecting Them throughout the Litigation
Perhaps the key difference relates to the subject matter: secrets. The secret nature of the information at issue poses significant challenges for case management because of public nature of federal litigation and freedom of expression. Patent cases also involve aspects of secrecy—such as unpublished patent applications that might bear on validity and business strategy related to damages—but trade secret litigation goes to the very heart of the cause of action: that the information that was allegedly misappropriated was not known or readily ascertainable.
Unlike a patent, which affords an exclusive right about the public, trade secrets are relative rights. While the trade secret owner will necessarily need to disclose the secret to some third parties, such as employees or commercial partners, to exploit it, once a trade secret is disclosed by the trade secret owner without restriction or is broadly revealed by third parties without authorization, it cannot be a secret. Those who learn of the secret through publicly accessible websites or publications are free to use that knowledge. The bell cannot be unrung. Moreover, those who independently develop information claimed by another as a trade secret are free to use and disclose it—so long as their development was in fact independent.
Trade secret disputes also present an early “identification” problem that differs from disputes arising over other forms of intellectual property. In patent, copyright, and trademark cases, the intangible resource has already been identified and registered with a regulatory body (or, in the case of unregistered trademarks, made public through use), and therefore can be publicly specified in the pleadings. The protected information claimed to be at issue in a trade secret case cannot be disclosed in public filings, however, without destroying the very subject matter of the plaintiff’s legal claim. Yet defendants need to know what the secrets are that they have allegedly misappropriated and the court needs to know what the case is all about to be able manage and decide it.
This produces three interrelated quandaries at the outset of trade secret case:
Do the pleadings adequately set forth a cause of action under the familiar Twombly and Iqbal standards?
When, how, with what level of specificity, and subject to what protective order provisions will the trade secret owner be required to reveal its trade secrets to the defendant?
What is the boundary between protectable trade secrets and general knowledge and skill?
The first of these questions requires the plaintiff to provide more than vague, conclusory statements that restate the elements of a trade secret to survive a motion to dismiss. The second quandary often requires the court to assist the parties in customizing the discovery process to ensure that the trade secrets stay protected during the course of litigation while facilitating the exchange of sensitive information, often to competing business enterprise defendants. This typically entails fashioning an appropriate protective order that takes into consideration the trustworthiness of the various players in the litigation drama: counsel, litigants, employees, experts, and possibly others. Plaintiffs will understandably be concerned that the very effort to enforce their trade secrets could result in the loss of what may be their most valuable business assets. At the same time, defendants will want to know what they are accused of misappropriating. And the public (including journalists) will be interested in what may be high profile disputes affecting important industries. Consequently, courts will often be called upon to tailor and enforce protective orders and oversee the trade secret identification process.
The third question is primarily a question on the ultimate merits, although it may inform management of the first two. Its resolution will require the court and the ultimate factfinder to delve into the thorny question of where general knowledge and skill end and protectable trade secrets begin. This assessment inevitably involves an appreciation of the technologies or information at issue, which may be beyond the general knowledge of the court. The court and factfinder may need the assistance of experts to sort out these issues to determine liability and frame out the contours of any ultimate relief.
Compounding these challenges, trade secret owners often seek immediate equitable relief to prevent the defendant and third parties from using or disclosing a trade secret before trial. Yet, for the reasons noted above, the contours of the alleged trade secrets and any improper encroachment upon them will often be difficult to assess with precision before there has been sufficient discovery to reveal what information is at risk and to fully test claims of misappropriation. And defendants will fear that early equitable relief on an incomplete record will interfere with their business operations.
Moreover, the secrecy imperative runs through the entire litigation process, not simply the pleading stage. The court must take care to ensure that hearings and filings with the court during the pretrial and trial stages do not disclose trade secrets to the general public. In enacting the EEA, of which the DTSA is now a part, Congress recognized that victims of trade secret thefts could face a dilemma between reporting the matter to law enforcement and concerns that the trade secret will be disclosed during discovery or during a criminal trial. To alleviate this concern, the Act authorizes the court “to enter such orders and take such other action as may be necessary and appropriate to preserve the confidentiality of trade secrets.” 18 U.S.C. § 1835(a). At the same time, the court must balance the public’s interest in knowing about civil and criminal proceedings against the trade secret owner’s right to limit access to the trade secrets themselves.
2. High Emotional Quotient
Complicating all of these issues is the fact that many trade secret cases are hotly contested battles that have the emotional intensity of child custody cases. Many trade secret cases pit a business enterprise against business partners, former employees, and contractors who have left the business to form or work for a competing enterprise. In some cases, the former associates are actual family members. But even if not related by blood or marriage, the ties between the plaintiffs and defendants can run deep. Co-founders of companies often have deep and continuing personal, financial, and social bonds. And the alleged misappropriation represents not just a competitive injury but a betrayal of sacred trust. The trade secrets are the product of countless hours devoted to a shared enterprise. They are the intellectual offspring of a joint relationship. The departure of a business associate or former employee can be like the dissolution of a marriage. And where the former colleague competes with the prior business, it can feel like an extreme form of disloyalty.
Trade secret protection can become intertwined with noncompetition agreements and other contractual restraints on the activities of former business associates and employees. The enforceability of such restraints on trade varies according to state law. Even where permitted, such restraints are typically required to be narrowly tailored to protect only legitimate interests, including trade secrets. Absent enforceable noncompetition agreements, employees are generally free to take their general knowledge and skill with them, even to competing enterprises. But therein lies one of the difficulties alluded to above: distinguishing protectable trade secrets from general knowledge and skill.
A second challenging tension may arise if an employee or contractor believes that an employer is engaged in unlawful activity. The employee might plan or be reporting sensitive information to the government as part of a False Claims Act case or other whistleblower action. In such cases, there is a risk that the plaintiff may use a trade secret claim to attempt to silence the whistleblower and gain backdoor discovery of what the government might be investigating. To guard against this overreach, the DTSA immunizes whistleblowers from liability under federal and state trade secret law for disclosure, in confidence, of trade secrets to government officials and attorneys solely for the purpose of reporting or investigating a suspected violation of law.
Another sensitive and difficult pattern relates to economic espionage cases in which the claim is made that an organization, potentially backed by a foreign government, has embarked upon a scheme, sometimes years in duration, to acquire trade secrets to assist development of a competing business or industry. These concerns can lead to both civil and criminal cases and have become more common and salient with growing concerns about international, sometimes state-backed espionage. These cases can be especially difficult to investigate and prosecute as a result of the discovery and jurisdiction impediments posed by international borders and the challenges posed by encrypted digital files. Some may pose concerns relating to sovereign immunity as well as diplomatic issues.
As a result of these patterns, judges in such cases may have to deal with especially high levels of distrust and willingness to escalate the litigation for business, personal, and criminal liability reasons.
3. The Interplay of Civil and Criminal Proceedings
Criminal trade secret investigations or suits are often known or anticipated to be underway during the pendency of a civil proceeding involving trade secrets. Both the government and the defendant in a civil case may have reasons for seeking a stay of the civil proceedings pending resolution of the criminal case. The government may seek a stay of the civil proceeding or of discovery in the civil proceeding to prevent interference with its investigation. The defendant may seek a stay to avoid having to invoke the Fifth Amendment during an active criminal investigation. On the other hand, the plaintiff in a civil case may want to pursue its claim expeditiously. Although most “garden variety” trade secret disputes do not include a criminal component, these are just some of the tensions that courts and litigants need to navigate when dealing with potentially parallel civil and criminal proceedings.
Using the Guide
Trade Secret Primer: Chapter 2 provides a comprehensive overview of trade secret law, tracing its legal sources, history, requirements, whistleblower immunity, defenses, and remedies. It then contrasts trade secrets with other forms of intellectual property, surveys common coincident claims and international aspects.
Early Case Management. Building upon Chapter 2’s survey of trade secret law, Chapter 3 frames the critically important early case management phase and sketches a flexible plan for the initial case management conference. Trade secret litigation typically unfolds quickly, often with the trade secret owner seeking preliminary equitable relief. The court must be ready to assist the parties in crafting a protective order, trade secret identification process, and a discovery plan. Chapter 3 offers a detailed checklist for guiding early case management and a suggested case management order that will anticipate common litigation challenges and facilitate the exchange of information, scheduling of trial stages, and promotion of efficient resolution of the case through litigation or settlement.
Trade Secret Identification. Chapter 4 guides the court through the nuanced process of identifying the trade secrets: the nature of the identification process (a procedural rule, not a merits determination), the timing of identification, the format for trade secret identification, the particularity of identification, access to the identification, and amending the identification. This issue is unique to trade secret law and thus this chapter focuses on a process that may be new to those adjudicating or litigating a trade secret case for the first time.
Preliminary Relief. Chapter 5 discusses the legal standards for evaluating requests for pre-trial equitable relief and expedited discovery in furtherance of such requests, provides examples of evidence that has been found to weigh in favor of or against pre-trial equitable relief, and offers guidance in framing orders granting equitable relief and in managing the entire process, including conducting post-hearing case management conferences following resolution of requests for preliminary equitable relief. It includes templates, tables illustrating relevant evidence, and illustrative orders.
Discovery. Chapter 6 presents the distinctive challenges of discovery in trade secret cases. It examines common discovery mechanisms, protective orders, dealing with the particular types of records often arise in trade secret cases (such as forensic images of devices, source code, employee records, and personal vs. work accounts and devices), management of disputes (including requests to seal documents), discovery from international sources, and common discovery motions. It also discusses the challenging question of how to balance the presumption of open access to the courts and court record with the need for owners of trade secrets to protect the secrets from public disclosure to avoid their destruction.
Summary Judgment. Chapter 7 addresses the summary judgment phase of trade secret litigation. Recognizing that many of the core issues in trade secret litigation are fact intensive, it addresses burdens of proof, the amenability of particular substantive issues to summary adjudication, expert declarations, and useful ways of managing and streamlining the summary judgment process and conducting summary judgment hearings.
Experts. Chapter 8 explores the role of experts in trade secret litigation. It first examines the principal areas in which experts are used and then discusses the court’s gatekeeper role in preventing unreliable expert testimony from being considered by the jury.
Pre-Trial Case Management and Trial. Chapter 9 assists courts in managing the lead up to trial, covering the pretrial conference. Chapter 10 then maps out the distinctive issues that frequently arise in trade secret cases, including late pretrial motions, jury pre-instruction, burdens of proof and persuasion, managing confidentiality in the courtroom, motions for judgment as a matter of law, jury instructions and verdict form, injunctions after trial, and exemplary damages and attorney’s fees.
Criminal Trade Secret Case Management. Chapter 11 presents the substantive law and case management issues associated with criminal trade secret prosecutions. It includes detailed discussion of the elements of proof, identifying the trade secrets, venue, defenses, confidentiality (including protective orders, trade secret owner participation, and cooperation between the government and the victim), extraterritorial application, whether to stay a parallel civil case, and sentencing/penalties.
* Koret Professor of Law; Director, Berkeley Center for Law & Technology; Faculty Director, Berkeley Judicial Institute; University of California at Berkeley School of Law.
Reddit: Anyone can start a subreddit, and back in 2012 Jaime Rogozinski started r/WallStreetBets. Over the years, the site attracted millions of subscribers talking about aggressive trading strategies; providing middle-school humor; and pumping-up various stocks (e.g., GameStop).
In 2020, Reddit removed Rogozinski from his role controlling the subreddit as moderator, concluding that he was “attempting to monetize a community.” Rogozinski had published a book titled WallStreetBets and also filed trademark registration application for the mark WALLSTREETBETS, with him as the owner. Of course, lots of folks are monetizing their subreddits, but I have not heard of others registering a TM on the subreddit name. Immediately after removing Rogozinski from control, Reddit filed competing registration applications for the same mark and continues to control the subreddit. Opposition proceedings are now pending before the TTAB.
Reddit claims control and ownership because the subreddit is on its site and under its control; Rogozinsky argues that he did all the work building the brand for himself – not for Reddit. The issues in this case are interesting because they are similar to those being debated with regard to AI ownership and attribution. Here, the difference is that we have a corporate owner rather than an AI. And, although both the company and Rogozinsky had input in the creation — what really made this valuable is the input and connection to millions of users. Similarly, AI works well only if it has good input data — typically obtained by scooping up and examined up so many copyrighted works and user data.
In addition to the opposition proceedings, Rogozinski has now sued Reddit in Federal Court, asserting infringement of his unregistered WallStreetBets mark; infringement of his registered mark WSB; as well as violations of contract, rights of publicity, and duty of good faith and fair dealing. James R. Lawrence, III is representing the plaintiff.
Bottom line in this new Minerva case — file your patent application before bringing a new product to a trade show.
The Old Case: The battle between Hologic and Minerva went to the US Supreme Court in 2021; with the Court retained the doctrine of assignor-estoppel that bars a patent assignor from later challenging the patent’s validity or enforceability. Minerva Surgical, Inc. v. Hologic, Inc., 141 S. Ct. 2298 (2021). Although the doctrine remains, the Court narrowed its scope to only apply , but narrowed its scope to cover only situations where assurances (implied or express) made at assignment are later being undermined. Thus, when claims are materially broadened post-assignment, the assignor should probably be permitted to challenge those claims. As is true in many inter-corporate battles, the legal claims are being fought along different lines in various tribunals and cases. This week, the Federal Circuit issued a new decision — this time involving upstart Minerva as the plaintiff suing Hologic for infringing its U.S. Patent No. 9,186,208.
Minerva’s ‘208 patent claims a device for endometrial ablation and includes a 2011 priority filing date. As you can see from the diagram above, the device includes both inner and outer frame elements, and the claims require that these “have substantially dissimilar material properties.” This allows portions of the device to retain more flexibility (those coming in contact with the uterine lining) with other portions having more strength/durability. Still, the whole head needs to be collapsible as well.
The application was filed in 2011, but back in 2009 Minerva had been doing testing on a prototype “Aurora device” that included inner/outer frames made of two different types of steel. The devices were brought to a trade show (AAGL 2009) and Minerva gave a presentation on the device and distributed a brochure. It was also pitched to a potential acquirer.
In the appeal, Minerva provided three arguments as to why this activity was not an invalidating public use:
Displaying the device at a trade show table does not count as a “use”
Although the displayed device used two different types of steel, they were not different enough to satisfy the claim requirement of having “substantially dissimilar material properties.”
The invention was not yet “ready for patenting” and therefore its public use was not disqualifying.
The Federal Circuit rejected each of these arguments in-turn.
Public Accessibility equals Public Use: Although the statutory language of “public use” suggests that the bar is triggered only if the invention is actually used. The Federal Circuit explained here hat its interpretation is more expansive, and includes situations where the patentee made the invention “accessible to the public.” See, Delano Farms Co. v. California Table Grape Comm’n, 778 F.3d 1243 (Fed. Cir. 2015). Here, the Aurora device was made available to attendees at a major trade show spanning several days. Minerva brought 15 fully-functional devices and internally reported “lots of interest” and that the table was “busy.”
In Motionless Keyboard Co. v. Microsoft Corp., 486 F.3d 1376 (Fed. Cir. 2007), the Federal Circuit seemed to have ruled that public use requires use. Although publicly shown, the claimed keyboard was deemed not in public use since it was “visually displayed … without puting it into use [and] was never connected to be used in the normal course of business to enter data into a system.” Id. Here in Minerva, Judge Reyna distinguished Motionless Keyboard, noting that Minerva’s disclosures were “well beyond” what was seen in that prior case. The court focused on the sophistication level of the trade show attendees and their ability to closely scrutinize the device and see how it operated.
The inescapable conclusion … is that Minerva allowed knowledgeable individuals to scrutinize the invention enough to recognize and understand the SDMP technology Minerva later sought to patent.
Slip Op. On appeal, Minerva argued that its prototype’s inner/outer frames did not have substantially different material properties. On appeal, the federal Circuit also rejected that argument since Minerva materials from that time touted the benefits of the device’s SDMP.
Ready for Patenting: Public use only creates a bar to patenting if the invention was “ready for patenting.” Here, the court concluded that it was ready for patenting since (1) it had been reduced to practice; and (2) Minerva had sufficient documentation prepared describing the invention.
At the time, Minerva was still working to improve the technology and it had not yet been used to actually perform ablation on a living human. On appeal, the Federal Circuit noted that no evidence (beyond common sense) indicates that the device’s only use is on live human tissue. The court also noted that Minerva had conducted lab studies sufficient to move-on for clinical trials on humans. Minerva’s final product used slightly different materials, but the court concluded that Aurora was still itself ready for patenting. “later refinements” and “fine tuning” go beyond reduction to practice and do not negate a public use.
KEYnetik, Inc. v. Samsung Electronics Co. (Fed. Cir. 2023)
This short non-precedential opinion authored by Chief Judge Moore affirms a PTAB IPR obviousness finding. The case has one key sentence:
Normally, once the function to be performed by software has been identified, writing code to achieve that function is within the skill of the art.
Slip Op. This statement sits well with modernist design principles aptly stated by architect Louis Sullivan: “Form ever follows function.”
The patent challenger had provided expert testimony that software modifications needed to transform the prior art into the claimed invention would be “straightforward” and “simple.” Those statements were not backed-up with specific analysis showing exactly how the modifications would be done. However, the Federal Circuit concluded that these general conclusions combined with the implied judicial notice from above were sufficient to support the PTAB’s factual finding that PHOSITA would have “a reasonable expectation of success” in making the transformation.
Going back to the function-equals-structure statement from above: The court does not explain or particularly justify its factual conclusion other than to cite its own 1997 decision of Fonar Corp. v. Gen. Elec. Co., 107 F.3d 1543, 1549 (Fed. Cir. 1997). Fonar Corp. did not deal with obviousness, but instead was an appeal on the issue of best-mode disclosure under Section 112. The patentee had provided functions of the software in its disclosure but had not provided the computer code itself. On appeal, the Federal Circuit found that disclosure of the functionality was sufficient to satisfy best mode:
As a general rule, where software constitutes part of a best mode of carrying out an invention, description of such a best mode is satisfied by a disclosure of the functions of the software. This is because, normally, writing code for such software is within the skill of the art, not requiring undue experimentation, once its functions have been disclosed. It is well established that what is within the skill of the art need not be disclosed to satisfy the best mode requirement as long as that mode is described. Stating the functions of the best mode software satisfies that description test. We have so held previously and we so hold today.
Id. The Federal Circuit did not endeavor to work through its Section 112(f) jurisprudence where it has repeatedly held that disclosure of function is insufficient to satisfy the ‘structure’ requirements of that provision.
Guest Post by Jordan Duenckel. Jordan is a second-year law student at the University of Missouri, head of our IP student association, and a registered patent agent. He has an extensive background in chemistry and food science.
The Federal Circuit weighed in on the amorphous topic of subject matter eligibility in the recent opinion ChromaDex, Inc., V. Elysium Health, Inc., — F.4th —, Docket No. 2022-1116. Writing for a unanimous panel, Judge Prost affirmed a grant of summary judgment that U.S. Patent No. 8,197,807 (“the ’807 patent”) was directed to unpatentable subject matter and therefore ineligible based on 35 U.S.C. § 101.
ChromaDex’s ‘807 patent concerns nicotinamide riboside (“NR”), a form of vitamin B3 found naturally in cow’s milk. When ingested, a human body converts NR into the coenzyme nicotinamide adenine dinucleotide, or NAD+. Claim one of ‘807 states:
1. A composition comprising isolated nicotinamide riboside in combination with one or more of tryptophan, nicotinic acid, or nicotinamide,
wherein said combination is in admixture with a carrier comprising a sugar, starch, cellulose, … or polyanhydride,
wherein said composition is formulated for oral administration and increased NAD+ biosynthesis upon oral administration.
ChromaDex isolates and concentrates naturally occurring NR — selling dietary supplements that contain elevated levels of NR. The levels found in these supplements is significantly above natural levels present in milk or any other food. Although the claims require isolated NR, they do not require a specific high-concentration, only enough to “increase[] NAD+ biosynthesis upon oral administration.” In its decision, the Federal Circuit focuses on the breadth of the claim and its ability to include natural milk (a product of nature) as the key ingredient providing the NR.
The Supreme Court has two key product of nature cases from the past 45 years: Diamond v. Chakrabarty, 447 U.S. 303 (1980) and Ass’n for Molecular Pathology v. Myriad Genetics, Inc., 569 U.S. 576 (2013).
Under these cases, a determination that milk is within the scope of the claims is not, by itself fatal to eligibility. Chakrabarty requires that to be patentable the claimed composition must “ha[ve] markedly different characteristics [from the natural phenomenon] and have the potential for significant utility.” 447 U.S. at 310. The chemical composition of isolated NR is not structurally or functionally different from NR found in milk. ChromaDex’s argument at the district court that the characteristics of isolated NR are purportedly different from naturally occurring NR— stability, bioavailability, sufficient purity, and therapeutic efficacy was rejected because these improvements were not required by the claim language. On appeal, ChromaDex insists in their brief that the claims have “markedly different characteristics” that render them patent eligible, specifically that (1) NR is found in milk in only trace amounts, i.e., one part per million, and (2) what little NR is found in milk is not bioavailable because it is bound to the lactalbumin whey protein. Again though, ChromaDex’s argument is thwarted by the overly broad claim language. The claims do not require either a minimum level of NR or even that the isolated NR is more bioavailable by separation from the lactalbumin.
The corollary to Chakrabarty is Ass’n for Molecular Pathology v. Myriad Genetics, Inc., 569 U.S. 576 (2013) and is more similar to the subject matter of ChromaDex. In Myriad, the isolation of specific DNA fragments was found to be patent ineligible. ChromaDex faces the same problem. The act of isolating the NR compared to how NR naturally exists in milk is not sufficient, on its own, to confer patent eligibility.
Federal Circuit held that this Chakrabarty analysis was dispositive on the question of § 101 eligibility and affirmed the grant of summary judgment. One open question is whether the same two-step analysis of Alice/Mayo applies in the product-of-nature eligibility arena. Without fully deciding that question, the Federal Circuit conducted a subsequent analysis under the Alice/Mayo two-step test and reached the same conclusion — that the claims are ineligible. As noted by this court, the Alice/Mayo test is functionally the same as the Chakrabarty analysis, especially when a composition of matter is at issue.
It appears to me that the primary issue is a patent drafting problem. The ‘807 patent was filed on April 20th, 2006, long before the clarifying guidance from Myriad (2013), Alice (2014), and Mayo (2012). At the time of filing, the isolation and reformulation was not subject to the explicit subject matter restriction in Myriad. However, the patent drafter should have been aware of Chakrabarty (1980). Claim one was written so broadly that potential embodiments include far more than dietary supplement pills.
The Federal Circuit distinguished the current case from Nat. Alts. Int’l, Inc. v. Creative Compounds, LLC, 918 F.3d 1338 (Fed. Cir. 2019). In Natural Alternatives, “natural products ha[d] been isolated and then incorporated into a dosage form”—“between about 0.4 grams to 16 grams”—“with particular characteristics to effectively increase athletic performance.” Id. at 1348–49. The patentee may have also avoided an eligibility problem by providing evidence in the specification that the NR concentration in milk was insufficient to increase NAD+ biosynthesis as claimed, but that higher levels of concentration did provide that benefit. To be most clear, the claims could have also added a limitation that the NR is provided in an “effective amount” to achieve the claimed NAD+ synthesis.
Krzysztof Sywula’s story has some thematic elements of the Netflix Glass Onion show. As he tells it, Sywula was at the Santorini Island Grill with Alexis DaCosta & Vincent Coletti talking about creating an improved app for ride sharing. During one of the meetings, Sywula apparently sketched-out a diagram on a napkin that he gave to DaCosta and that eventually served as a basis for the patent filings in this case. The parties continued to work together for several more years with Sywula eventually becoming the CTO. Then came the patenting. Sywula was excluded from being listed as an inventor on the patents, including US11087250 and US11087252; and that was upsetting.
Sywula sued for correction of invention, and the District Court initially dismissed the case on standing, but – after an amended complaint – has now agreed that Sywula has met the requirements to survive a pleading-stage demurrer.
Standing to Sue: Federal Courts can only hear “actual cases or controversies.” U.S. Const., Art. III. The Supreme Court has massaged those words in to a three part standing requirement of (1) injury in fact that is actual, concrete and particularized; (2) a causal link between the challenged actions and the stated injury; and (3) identification of a likely mechanism for redressing the injury that is within the court’s power. These are often broken down to (1) injury-in-fact; (2) causation; and (3) redressability.
The First Problem — Assignment of Rights: Sywula signed a Consulting Agreement and an Invention Agreement, both of which promise to assign rights to DaCosta and Coletti or their newly formed company Teleport, including any inventions, trade secrets, discoveries, designs, software, etc., arising from his work on the endeavor. In patent law, inventorship is tied directly to ownership. An inventor is a presumptive owner of any resulting patent rights. However, those inchoate rights are assignable in a way that decouples inventorship and ownership. There result here is that Sywula is not suffering an ownership injury (or any other payment injury flowing from his failure to be named as an inventor). Sywula v. DaCosta, 21-CV-01450, 2022 WL 2959577 (S.D. Cal. July 26, 2022).
The Second Problem — Concrete Reputational Injury: After receiving this first rejection from the district court, Sywula reformed his complaint to claim a reputational injury due to his failure to be listed as an inventor. Here, courts have been somewhat clear that reputational-interest theory cannot be simply tied to a nebulous cloud. The District Court quotes my 2021 article explaining that courts refuse to find Article III standing based simply upon loss of “the dignity of and accompanying self-satisfaction of official inventorship recognition.” Dennis Crouch, Reattribution, The Poison Pill & Inventorship, 5 BUS. ENTREPRENEURSHIP & TAX L. REV. 138 (Fall 2021).
But, the district court concluded that Sywula had done enough to move from nebulous to concrete. In particular, Swyula’s pleading provide a sufficient showing that his career as a software engineer would have been boosted based if he had been properly listed as an inventor. This economic/pecuniary tie-in is what the Federal Circuit looked for in its key decision of Shukh v. Seagate Technology LLC, 803 F.3d 659 (Fed. Cir. 2015). The district court explains:
Sywula adequately pleads he sought employment in the field of his claimed invention. That is, Sywula, a software developer who purportedly architected, developed, and wrote the software for Teleport’s ride-sharing application, alleges he aspired to climb the hierarchical ladder for software developers and obtain a Principal Engineer role. Sywula also adequately pleads Teleport’s omission “affect[ed] his employment” by severely diminishing, if not foreclosing entirely, his opportunity for a promotion to Principal Engineer at Intel. Importantly, he alleges the prospects of his promotion from Software Engineer to Principal Engineer at Intel were not merely illusory or wishful thinking. He claims to have met nearly all of Intel’s experience-and skills-based criteria to be eligible for a promotion. However, he is missing one purportedly crucial qualification: he cannot claim to be an inventor of any patented technology. According to Sywula, “[p]ublished patents are usually required for software engineers to attain higher-ranked roles.” And Intel [his current employer], in particular, considers published patents as relevant to at least three qualities and skills it looks for in prospective Principal Engineers.
Simply put, the Second Amended Complaint contains enough factual material for this Court to infer Defendants’ withholding of inventorship credit in the Teleport patents plausibly diminished or even foreclosed his prospects of career-advancement at Intel and, more generally, in whatever software-developer position he holds or will hold. Hence, Defendants’ omission plausibly strips Sywula of the pecuniary benefits attendant to promotion. Accordingly, Sywula has adequately alleged an economic component to one of his reputational injuries.
Sywula v. Teleport Mobility, Inc., 21-CV-1450, 2023 WL 362504, at *16 (S.D. Cal. Jan. 23, 2023). In its analysis here, the court went somewhat light on the causation element — noting that it is enough that the reputational injury influenced his career trajectory without being the sole cause. The court also accepted a second justification for jurisdiction — Sywula’s failure to obtain a job as a software engineer at Apple could be partially attributed to the fact that he was not listed as an inventor.
I’m finally getting to Pascal Attali’s wonderful 2022 book titled 
