Infringing by Using a System vs Making/Selling the System

by Dennis Crouch

Omega Patents LLC v. CalAmp Corp. (Fed. Cir. 2019)

Omega’s patents cover remote control and monitoring systems for vehicles.  The defendant, CalAmp, helps companies and governments monitor their vehicles (location and status, such as battery health and vehicle speed).  In the infringement trial, a Florida jury sided with the patentee – finding the patents willfully infringed and not invalid.  The district court then trebled the damages and awarded attorney fees — for a tidy sum of $15 million (with an ongoing royalty of $13 per unit).

On appeal, the Federal Circuit has made several interesting rulings. In a later post, I’ll return to the validity issue.

This post will focus on infringement: Some of Omega’s claims require both “a transmitter and a receiver for receiving signals from said transmitter.” (33 and 31 in the figure above).  CalAmp’s accused device has the transmitter, but the accompanied receiver is a cell-phone tower.  Since CalAmp does not supply cell towers, the appellate panel found CalAmp cannot be a direct infringer under the All Elements Rule.

Making and Selling vs Using: Note here that we’re talking about system claims, and the patentee particularly accused CalAmp of “making and selling” the invention.  As explained below, infringement allegations for “using” an invention can be treated more expansively under the beneficial control doctrine.

The patentee had also alleged CalAmp’s indirect infringement — that CalAmp should be liable for its customers’ infringing use of the system. On appeal, the court agreed that there was sufficient evidence to find that the customers had “used” the claimed system:

“[T]o use a system for purposes of infringement, a party must put the invention into service, i.e., control the system as a whole and obtain benefit from it.” Centillion Data Sys., LLC v. Qwest Commc’ns  Int’l, 631 F.3d 1279 (Fed. Cir. 2011). “[A] person must control (even if indirectly) and benefit from each claimed component.” Intellectual Ventures I v. Motorola Mobility, 870 F.3d 1320 (Fed. Cir. 2017). Here, there was evidence from which the jury could infer that customers controlled and used the system and received the required benefits.

In other words, the cell-phone tower was being “used” by the customers as part of the system, and therefore it didn’t matter that they were owned by and more generally controlled by a separate entity.

Despite finding potential liability here, the court substantially vacated the infringement verdict on other grounds (informing the jury of the proper claim construction / proof of knowledge for inducement / etc).

At the end of the appeal, only one claim was left as valid/infringed.  The Federal Circuit determined that the patentee had not provided sufficient evidence at trial to support the full damage award based upon that lone claim. Thus, the new trial will also be needed on damages.

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Combating the Trafficking in Counterfeit and Pirated Goods

On April 3, 2019, President Trump released a “memorandum on combating trafficking in counterfeit and pirated goods” which calls for a report on the state of the issue to be completed by November 1, 2019.  Homeland security is in charge, with consultations from Commerce, Justice, OMB, USTR, and others, including intellectual property rights holders.

The memorandum mentions a couple of prior studies on counterfeiting and piracy, but the current data continues to be lacking — as the GAO wrote in 2010: “U.S. government estimates of economic losses resulting from counterfeiting cannot be substantiated due to the absence of underlying studies.

A few elements of the memorandum are important to consider:

  1. The Administration is treating counterfeit goods and copyright piracy as homeland security and law enforcement issues — directing those groups to to step-up their efforts.
  2. The Administration is focusing as much on trafficking as it is production.  Think about vendors such as Amazon, Physical carriers such as FedEx, digital pipeline operators; payment providers, and customs brokers.  For legitimate intermediaries, however, the focus is on acting as “beneficial partners in combating trafficking.”

Although counterfeit goods may be costing the makers of branded products, the companies trafficking in the goods are making money.  It will be interesting to see the extent that those companies operating on an international scale will be willing to cooperate with US law enforcement.

Eligibility Train Wreck Continues its Skid: Skidmore Deference for the PTO on Eligibility

by Dennis Crouch

A key point of argument and policy over the past decades has been the level of authority given to the USPTO as the government’s expert patent law agency.  When the USPTO makes a decision — is that decision respected by other tribunals?  At times the agency is given substantial deference (factual conclusions made by the PTAB), but other agency decisions are also regularly reviewed de novo without deference.  With regard to interpretation of substantive patent law, PTO determinations are often simply ignored.

Cleveland Clinic Found. v. True Health Diagnostics LLC (Fed. Cir 2019) (nonprecedential) offers a case-in-point with the following key statement from the Federal Circuit:

While we greatly respect the PTO’s expertise on all matters relating to patentability, including patent eligibility, we are not bound by its guidance. And, especially regarding the issue of patent eligibility and the efforts of the courts to determine the distinction between claims directed to natural laws and those directed to patent-eligible applications of those laws, we are mindful of the need for consistent application of our case law.

In the case at hand, the Federal Circuit refused to follow or give any deference to PTO guidelines and instead affirmed a lower court determination that the claims at issue were ineligible as effectively claiming a law of nature.

Over the years, the PTO has shifted policy.  In the old eligibility cases like Diehr and Chakrabarty, the agency was refusing to issue patents that it saw as crossing-the-eligibility-line.  However, the new statements by Dir. Iancu go the other-way, with the USPTO creating a policy of issuing patents that the courts would find invalid (if given the opportunity).

The statement from the court here is important although buried in a non-precedential opinion.  One reason for its importance is its clear tension with the Federal Circuit’s recent decision in Natural Alternatives that called for Skidmore deference to be given to the PTO statement on eligibility.

The U.S. Patent and Trademark Office has adopted guidance on how examiners [and the agency as a whole] should determine whether a claim is eligible under § 101 and provided examples of eligible and ineligible claims. Under these guidelines, a claim to a practical application of a natural product to treat a particular disease is patent eligible. The parties dispute the persuasiveness of this document and the weight we should afford it under Skidmore v. Swift & Co., 323 U.S. 134, 65 S.Ct. 161, 89 L.Ed. 124 (1944).

Nat. Alternatives Intl., Inc. v. Creative Compounds, LLC, 2018-1295, 2019 WL 1216226, at *5 n.2 (Fed. Cir. Mar. 15, 2019).  Although Natural Alternatives was precedential, its statement regarding Skidmore deference was admittedly dicta by Judge Moore.  Judge Moore was also on the Cleveland Clinic panel, and I suspect that she would not have signed the opinion if it had been issued as precedential. Of course, that begs the question of why sign it as a non-precedential opinion?


The IP Section — Stream the First Four Episodes

by Dennis Crouch

I first worked with Wes Austin back in 2006 as he developed his Dunes CLE program and later followed with some interest his Utah-based patent firm Austin-Rapp.  As the image shows below, Austin has expanded from patent law into comedy as well.  His new sitcom – THE IP SECTION – merges the two (as well as Mormonism) and stars a patent lawyer who wants to be a stand-up comedian.

Watch the series here:

  1. The first four episodes are available for streaming on YouTube:
  2. Austin also made a video of the back-story:

Do any of your experiences as a patent attorney or inventor fit easily into a comedy routine?

The Role of Profit Disgorgement in IP Law

by Dennis Crouch

In its new petition to the Supreme Court, Romag asks “whether willful infringement is a prerequisite for an award of an infringer’s profits.”  In utility patent law, courts have held that disgorgement of the infringer’s profits is never available as a remedy.  That option was eliminated from the Patent Act in 1946.  In design patents, however, disgorgement is the ordinary remedy.

Romag’s case falls under a different law (Trademark Law) and statutory scheme (The Lanham Act).  Section 35 of the Lanham Act (15 U.S.C. § 1117(a)) expressly provides for disgorgement of an infringer’s profits:

When a violation of any right of the registrant of a mark registered in the [USPTO], a violation under section 1125(a) or (d) of this title, or a willful violation under section 1125(c) of this title, shall have been established in any civil action arising under this chapter, the plaintiff shall be entitled, subject to the provisions of sections 1111 and 1114 of this title, and subject to the principles of equity, to recover (1) defendant’s profits, (2) any damages sustained by the plaintiff, and (3) the costs of the action.

The setup here appears pretty clear — defendant’s profits are available as a remedy to trademark infringement action – so long as they comport with “the principles of equity.”

This is a major circuit split: Six of the appellate circuits follow the statute by allowing a plaintiff to recover infringer’s profits without any additional showing (such as willfulness); Five other circuits require a prerequisite showing of willfulness prior to allowing disgorgement; and one circuit (the First Circuit) has hybrid requirement where willfulness must be shown when the parties are not direct competitors.   The Federal Circuit does not have its own law on this issue, but follows the law of the appropriate regional circuit court when hearing a TM case.

The plaintiff here – Romag – is a leading supplier of magnetic fasteners for bags and wallets. In 2002 Fossil started using Romag fasteners. Around 2008, however, Fossil’s products began appearing with counterfeit Romag branded fasteners.

A jury found for Romag — both for trademark infringement and patent infringement.  However, the jury also found that the infringement was not willful. The basic idea is that the mental-state culpability was on Fossil’s Chinese supplier, not Fossil itself.  The jury did go ahead and award a portion of Fossil’s profits — finding that 1% of Fossil’s profits were attributable to the TM infringement ($6.7 million).

Following trial, the Connecticut district court threw-out the profit disgorgement verdict — holding that the 2nd Circuit required willful infringement before disgorging profits.  The appeal went to the Federal Circuit (because of the patent issue) who affirmed — applying 1st Circuit law.  After a bit more civil procedure, the petition is now before the U.S. Supreme Court:

Whether, under section 35 of the Lanham Act, 15 U.S.C. § 1117(a), willful infringement is a prerequisite for an award of an infringer’s profits for a violation of section 43(a), id. § 1125(a).

This is a case with a very good shot of being heard by the U.S. Supreme Court.

Romag Fasteners, Inc., v. Fossil, Inc., et al., 2018-1233 (RomagCertPetition])

Power of Negative Limitations

IBM v. Iancu (Fed. Cir. 2019) (non-precedential)

In two separate IPR proceedings, the PTAB found several of IBM’s claims unpatentable as anticipated obvious. U.S. Patent No. 7,631,346 claims 1, 3, 12, 13, 15, and 18.  On appeal, the Federal Circuit has vacated / reversed those opinions.  [error fixed above]

The patent here claims a  user-authentication method for a “single-sign-on . . . within a federated computing environment.”  The basic setup here is that user known to a “first system” wants access to resources on a “second system” that doesn’t know about the user.  The invention works by the first system providing an “identifier” associated with the user and the second system creating a user account using that identifier — not too complex here.  A “single-sign-on” is basically a setup for user convenience so that the user only logs-in on one system but can access the whole federation.

Both systems are part of a “federated” environment – which seems potentially complex except for the definition found in the patent:

A federation is a loosely coupled affiliation of enterprises which adhere to certain standards of interoperability; the federation provides a mechanism of trust among those enterprises with respect to certain computational operations for the users within the federation.

In the appeal here, the patentee argues that the Board too-broadly defined the terms “federated computing environment.”  Of some interest here, both IBM and the IPR petitioners (Priceline, OpenTable, etc.) agreed upon the term’s definition and that it was limiting even though it appeared only in the claim preamble.  The PTAB disagreed with the parties — and in particular held that the term “federation . . . is not limited to enterprises” but could instead more generally includes a group of “entities.”  Under the Board’s interpretation, any two computer systems could be seen as “entities” even if both are within a single “enterprise.”  That broader scope is important because the closest prior art authentication system involved two computers within a single enterprise.

On appeal, the Federal Circuit found the PTAB’s construction unreasonable – given the plain definition in the specification.  On remand, the PTAB will consider whether the prior art still anticipates the invention based upon this narrower construction.

= = = =

I considerably simplified the facts above.  It turns out that the patent specification was not as consistent in stating that a “federation” required computers from at least two different “enterprises.” In particular, the specification states that:

In the context of the present invention, a federation is a set of distinct entities, such as enterprises, organizations, institutions, etc., that cooperate to provide a single-sign-on, ease-of-use experience to a user. . . . The terms ‘entity’ or ‘party’ generally refers to an organization, an individual, or a system that operates on behalf of an organization, an individual, or another system.

Notice that this definition of federation is not limited to enterprises, but instead is tied to the broader category of “entities,” and entities include “systems” — i.e., computers.  Thus, the Board found that a federation can be created by two computer systems even if operating within the same business enterprise.

In the appeal, the Federal Circuit rejected this approach holding here that the “such as” language limits was intended as an exclusive listing of what counts as federation elements.

The column 10 passage refers to entities “such as” the ones listed and includes “etc.”—both of which, in this context, indicate that only things of a type similar to the itemized ones are covered, namely, other establishments or ventures or firms or the like. We have recognized that “such as” and “etc.” sometimes have just that meaning. (“rule of ejusdem generis). That understanding is the only reasonable one for the passage, given the plain meaning of the definitional and other language we have already discussed.

It is hard for me to say what the take-away is for patent drafters on this claim construction except – who knows what the court will decide?

I’ll note here that the IPR petitioners settled the case with IBM but the USPTO stepped in to defend the PTAB sua sponte claim construction decision.

= = = = =

Does Silence Disclose a Negative Limitation: The panel also addressed the single-sign-on element of the claims — the single-sign-on requirement is interesting because it may sound like a positive limitation but is really being interpreted as a negative limitation. Basically, once the user gives credentials for the first system, the user doesn’t need more authentication (i.e. passwords) to access the second system.  In the appeal, the Federal Circuit found that the silence on a topic was not sufficient to disclose the absence of a feature:

Even if the Board were correct that Mellmer is “silent” …  that characterization would not alone support a finding that there was no user authentication action….  Silence in that sense would not by itself suffice for the Petitioner to meet its burden to prove, by a preponderance of the evidence, that there was no user authentication action in this scenario.

In other words – a negative limitation can be powerful.  On appeal, the Federal Circuit has reversed the holdings based upon single-sign-on being found in this reference.

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Trump Troll’s Trademark Application Rejected in UK

Trump Int’l. Ltd. v. DTTM Operations LLC, [2019] EWHC 769 (Ch).

In a decision today, the High Court of Justice (Chancery Div.) has upheld the UK Intellectual Property Office (UKIPO) decision siding with DTTM and finding that Trump Int’l. had filed its opposed trademark application in bad faith and also acted in bad faith during the proceedings.

A quirk here regarding the names –– DTTM most likely stands for “Donald Trump Trademarks” and is a holding company owned by President Trump and/or his family.  Trump International Limited is not related to President Trump in any way and is rather owned by Michael Gleissner an “infamous trademark troll.” To avoid confusion, I’ll use the name Gleissner rather than Trump Int’l.

A few days before the 2016 election, Gleissner applied to register ‘TRUMP TV” — DTTM opposed.  The UK IPO Hearing Officer sided with DTTM.  The High Court has now affirmed that judgment (1) rejecting the argument that the hearing officer was biased — finding it “obviously unsustainable”; and (2) agreeing with the bad-faith finding.

[Gleissner]  had applied to register a trade mark which was plainly associated with Mr Trump, with whom it had no connection. That, of itself, required a very clear explanation to refute an inference of bad faith. The similar fact evidence was not mere rumour or supposition. It raised some very serious matters, which required a detailed explanation and refutation, in evidence. The fact that other companies owned or  controlled by Mr. Gleissner had made numerous other applications to register well-known trade marks with which they had no connection (for example EUIPO) was potentially probative of
the issue of bad faith. It made it less likely that the inference of bad faith could be refuted.

Consideration of such evidence in the Registry proceedings accorded with the overriding objective of deciding cases justly.

Thus, a key holding in this case is that a pattern of bad-faith trademark filing is admissible as evidence that a new filing was also done in bad faith.

The people of the UK can also rest easier knowing that TRUMP TV will not be controlled by a notorious troll.



Federal Circuit: Hardening the Line on Method-of-Treatment Claims

by Dennis Crouch

This case focuses on patents covering the opioid drug oxymorphone that Endo sells as Opana ER.  In 2017, the FDA requested that (reformulated) Opana ER be removed from the  market in response to the high risk of its illicit use.  Endo had previously pulled Opana ER from the market in 2012 and then re-launched in a “non-crushable form.”  However, that form continued to be abused (including by liquefying and injecting). In response to a new FDA request, Endo again removed the reformulated version from the market. The appeal here is focused on one a subset of the patents covering Opana — a fight between Endo and generic manufacturers who want to start distributing the drug once again. 

Endo Pharmaceuticals Inc. v. Teva Pharmaceuticals USA, Inc. (Fed. Cir. 2019)

Endo’s patents at issue on appeal claim a personalized method-of-treatment that has three distinct steps:

  1. “Providing” the drug (5 to 80 mg of oxymorphone in a controlled release matrix);
  2. “Measuring” the patient’s creatine clearance rate; and
  3. “Administering” the drug with dosage calculated based upon the patient’s creatine clearance rate (using a particular formula).

The inventors here were concerned about renal impairment experienced by some folks taking oxymorphone.  In their research, they discovered that some folks clear the drug faster (and have fewer kidney problems). The inventors here used the metabolite creatine as an easier to measure proxy for measuring drug clearance (creatine clearance rate) since it comes out in the urine.

These discoveries in hand, the inventors came up with the scheme of giving lower dosages of oxymorphone to individuals with lower clearance rates.

The district court reviewed the claims and found them invalid — holding that the claims were effectively directed to a law of nature.  On appeal, the Federal Circuit has reversed and reinstated the patent’s validity.  This decision here is the next in a series of decisions creating a hard rule that method-of-treatment claims are patent eligible. See Vanda Pharmaceuticals Inc. v. West-Ward Pharmaceuticals International Ltd., 887 F.3d 1117 (Fed. Cir. 2018) and Natural Alternatives International v. Creative Compounds, LLC, 2019 WL 1216226 (Fed. Cir. Mar. 15, 2019).  Here, the court writes:

[T]he asserted claims are not directed to patent-ineligible subject matter. On the contrary, the claims are directed to a patent-eligible method of using oxymorphone … to treat pain in a renally impaired patient. . . .

The claims at issue here are legally indistinguishable from the representative claim in Vanda. Both claims recite a method for treating a patient.

The key precedent here is Mayo v. Prometheus (2012). As in Vanda and Natural Alternatives, the Federal Circuit has characterized Mayo as directed only to a method of optimizing a treatment plan — rather than being a treatment itself.   The claims at issue in Mayo require administering a particular drug for treatment of a GI disorder. However, the Federal Circuit explained away that aspect of the claim:

Although the representative claim in Mayo  recited administering a thiopurine drug to a patient, the claim as a whole was not directed to the application of a drug to treat a particular disease. Furthermore, the administering step in Mayo is distinguishable from the administering step in the [Endo] patent because the administering step in Mayo is the first step in the method that simply describes giving the drug to a patient with a certain disorder. By contrast, the administering step in the ’737 patent is the step that describes giving a specific dose of the drug based on the results of kidney function testing.

The district court had rejected the clams — agreeing with its magistrat judge that “[t]he administering step merely instructs physicians to dispense oxymorphone for the treatment of pain in a well-know[n] manner, while utilizing the natural law to manage the dosage.”

= = = = =

Question for those of you doing software – What is your equivalent of a “method-of-treatment” claim.

A Diligent Delay – Claiming Priority to Invention Dates.

by Dennis Crouch

In its final judgment, the Patent Trial & Appeal Board (PTAB) found against Arctic Cat — finding all of the challenged claims unpatentable.  On appeal, the Federal Circuit has rejected the judgment — holding that the Arctic Cat patent claims should be given priority as of their invention date rather than simply the priority filing date.  This is a case were the patent claims appear valid under pre-AIA law, but would be invalidated if AIA prior art rules applied. 

U.S. Patent Nos. 7,072,188 and 7,420,822, covering an electrical connection box for distributing power in a Recreational Vehicle (RV). These Arctic Cat patents claim a priority filing date of October 29, 2002.  The key prior art reference (Boyd) was filed as a patent application seven months prior – April 1, 2002. Boyd was not yet prior art at the moment it was filed, but did become prior art once the application published in 2003.  The point of publication is the trigger for recognizing a U.S. application as prior art — however, at that point its effective prior art date is set back to the filing date.

This case is a pre-AIA lawsuit and thus 102(e) applies.

A person shall be entitled to a patent unless — (e) the invention was described in — (1) an application for patent, published under section 122(b), by another filed in the United States before the invention by the applicant for patent …

Pre-AIA 102(e) is directly parallel to post-AIA 102(a)(1). A key change in Section 102 was a move toward a filing-date focus and away from an invention-date.  That shift is reflected in comparing these two provisions.  Pre-AIA 102(e) looks for prior art filings from “before the invention” while the post-AIA 102(a)(2) looks for prior art applications filed “before the effective filing date of the claimed invention.”

Under traditional U.S. law, invention is a two step process: (1) conception; and (2) reduction to practice.  The courts treat conception as an important marker and can count as the priority date of invention so long as the inventor acted diligently to reduce the invention to practice.  Here, everyone accepted that Actic Cat’s inventor had conceived of the invention prior to April 1, 2002.  The dispute centered on whether the inventor exhibited “reasonable diligence” up until the application was filed (constructive reduction to practice).

In its ruling, the PTAB held that the inventor lacked diligence. In particular, the inventor could not account for particular reduction-to-practice activities for about three months of the seven-month delay: April 1 – April 29 and also August 16 – October 18.  A quirk of the case is that during those gaps, period Arctic Cat had actually hired Boyd’s employer Tyco to test the invention.  On appeal, the Federal Circuit found sufficient diligence by hiring Tyco to test the idea and persisting in pushing Tyco to complete its testing.

An unusual aspect of the court’s decision here is the way that it appears to focus on whether the PTO provided the required evidence to disprove diligence whereas the diligence question ordinarily focuses on whether there is sufficient evidence to prove diligence.

Lack of diligence cannot be inferred from putting the invention into someone else’s hands for needed testing and awaiting test results for a short period commensurate with the testing need, at least where oversight was diligent. . . There is no substantial evidence of any meaningful inattention to the task of reducing the invention to practice.

The court’s conclusion here is that the inventor was sufficiently diligent in pursuit of reducing the invention to practice and therefore can claim priority back to the proven invention date that predates the asserted prior art.

Derivation: Post-AIA, it is still possible that Arctic Cat would get its patent. In particular, Arctic Cat argues that the asserted prior art (Boyd) included material derived from the Arctic Cat inventor. If correct, then Boyd could be knocked-out under the 102(b)(2) exception.  The PTAB rejected this argument (as it applied pre-AIA) and the Federal Circuit found the question moot based upon the already discussed pre-dating.

= = = =

I mentioned in the introduction that the electric box is designed to be used for a Recreational Vehicle. That statement is included within the claims, but only in the preamble:

1. A power distribution module for a personal recreational vehicle comprising: . . .

Recreational Vehicle is not included elsewhere in the claims and here the court found that it was a non-limiting statement of purpose for an already structurally complete invention. (Noting that “it makes no difference to our conclusion whether the standard from Phillips or a ‘broadest reasonable interpretation’ standard applies to this threshold issue of claim construction.”).

Inventive yet Not: Reconciling Eligibility and Obviousness

by Dennis Crouch

Mario and Jose Villena have thus far been stymied in their attempt to obtain patent protection for their claimed “system for distributing real-estate related information.” The pair filed an international PCT application in 2004 followed by a U.S. non-provisional in 2005 that has been abandoned, and finally the present application in 2011.  U.S. Patent App. No. 13/294,044.

The Examiner issued a final rejection in 2014 on several grounds – obvious and anticipated / indefinite / failed written description / ineligible subject matter.  The PTAB sided with the applicant on most grounds — but affirmed the rejection based on failed eligibility.  The Federal Circuit then affirmed — holding that the three claims on appeal “directed to the abstract idea of property valuation and fail to recite any inventive concepts sufficient to transform that abstract idea into a patent-eligible invention.”

The Villenas have now petitioned the U.S. Supreme Court for its views with some interesting questions. [SCT Docket]

Remember, that the Board sided with the applicant on obviousness and anticipation but then held that the claims did not recite any inventive concept.  The first question asks the Supreme Court to reconcile these seemingly opposing holdings:

Question: Is it remotely plausible under any noncapricious administration of the Alice/Mayo test that five separate claim limitations can be completely unknown and nonobvious under Titles 35 U.S.C. §§ 102/103, yet at the same time be well-understood, routine, and conventional individually and as an ordered combination under an Alice/Mayo § 101 analysis?

One quirk of the Alice/Mayo framework stems from the disconnect between the purpose of the limitation and the elements of the test itself.  As far as purposes, the Court has primarily focused on the potential that patent rights preempt the public use of basic building blocks of society and inquiry. In Alice, for instance, the court wrote: It is “the preemption concern that undergirds our §101 jurisprudence. . . . We have described the concern that drives this exclusionary principle as one of pre-emption.”  Although the concern may be preempation, the test itself as implemented by the Federal Circuit does not actually consider preemption in its analysis — going so far as to hold that evidence of no-preemption is irrelevant to the eligibility analysis.  In a second question, petitioner addresses this issue:

Does a requirement of “invention” and “improvement” under the Alice/Mayo framework violate the statutory language of Title 35 U.S.C. § 101, legislative intent, and the Supreme Court’s repeated edict … that preemption, not invention or improvement, is the sole criteria for determining exceptions to patent eligibility?

As part of its appeal to the Federal Circuit, the patent applicant also brought Administrative Procedure Act (APA) claims based — arguing that the PTO failed its statutory duty to analyze each claim limitation individually and the claims as a whole; cite substantial evidence; and act impartially. In its appellate decision, the Federal Circuit did not address these claims, and the third question asked in the petition address whether the Federal Circuit’s “refusal to address unlawful abuses by the
USPTO” an abuse of discretion.

Role of Preemption in Eligibility Analysis

Pending Claim 57 is seen as representative. The claim is pretty bold and basically requires a database of pre-processed home valuations within a geographic region and a map-like display of the geographic region showing the valuations.  Zillow

57. A system for distributing real-estate related information, comprising:

one or more computers configured to:

receive user-provided information and determine a geographic region based on received user provided information;

produce a plurality of automated valuation method (AVM) values using residential property information, the residential properties being within the geographic region, the AVM values reflecting current market estimates for the residential properties;

provide display information to a remote terminal over a publically accessible network based on the user-provided information, the display information enabling the remote terminal to generate a map-like display for the geographic region, the map-like display containing at least: respective icons for each of a plurality of residential properties within the geographic region, the icons being spatially distributed relative to one another based on geographic information also residing in one or more computer-readable mediums; and an AVM value for at least one of the plurality of residential properties within the map-like display,

wherein each AVM value is pre-processed such that an AVM value for the at least one residential property pre-exists before a user query of the respective property is performed and wherein the one or more computers update each of the AVM values without requiring a user query.

Villena’s attorney Bud Mathis has written several articles on eligibility over the past couple of years for Quinn’s IPWatchdog. [Link]

Inventor’s Problem-Identification Carries No Patentable Weight (When Alternative Motivation Exists)

by Dennis Crouch

In re Conrad (Fed. Cir. 2019)

The decision here offers a reminder of the objective nature of the obviousness analysis.

Conrad’s invention is a urine-deflector — especially useful when toilet-training low-accuracy children. The main idea is to block the opening between the toilet seat and the toilet bowl with a bendable deflector that “lacks a folding seam” — a design element added to avoid incidental urine collection and resulting malodor. The product is sold as the P-Flector.


Prior art urine-deflectors included a shelf that allowed urine to collect.  Conrad identified that problem and then solved-it by creating his no-seam version.

The PTO basically ignored Conrad’s own problem-solution story and instead simply followed it standard approach: look for similar prior art and ask whether there was any motivation to combine those references to form the claimed invention.  On appeal, Conrad argued that the court should have given some weight to the fact that Conrad identified a particular problem and solved that problem.

In its non-precedential decision, the Federal Circuit has sided with the USPTO – confirming that the claim is obvious — and holding that the inventor’s identification of the problem need not be considered in the obviousness analysis.  And that the identified references could be combined to improve structural integrity — even without ever recognizing the odor-solution.

The Supreme Court and this court … have repeatedly held that the motivation that a person of ordinary skill in the art would have had to combine prior art references need not be the same motivation that inspired the patent owner. KSR Int’l Co. v. Teleflex Inc., 550 U.S. 398, 420 (2007) (“[A]ny need or problem known in the field of endeavor at the time of invention and addressed by the patent can provide a reason for combining the elements in the manner claimed.”); In re Kahn, 441 F.3d 977, 989 (Fed. Cir. 2006) (“[T]he skilled artisan need not be motivated to combine [a prior art reference] for the same reason contemplated by the [inventor]”); In re Beattie, 974 F.2d 1309, 1312 (Fed. Cir. 1992) (“As long as some motivation or suggestion to combine the references is provided by the prior art taken as a whole, the law does not required that the references be combined for the reasons contemplated by the inventor.”); In re Kronig, 539 F.2d 1300, 1304 (CCPA 1976). “[T]he problem motivating the patentee may be only one of many addressed by the patent’s subject matter.” KSR, 550 U.S. at 420.

The patentee cited two leading problem/solution cases: Eibel Process Co. v. Minnesota & Ontario Paper Co., 261 U.S. 45 (1923) and In re Sponnoble, 405 F.2d 578 (C.C.P.A. 1969).  In distinguishing those cases, the court explained:

Eibel Process and Sponnoble both stand for the proposition that the discovery of an unknown problem can result in a patentable invention, even if the solution would have been obvious once the problem is identified.  They did
not address whether the Board must consider the discovery of an unknown problem when there exists an independent motivation to combine prior art references. Instead, those cases found that the inventor’s discovery of and solution to an unknown problem weighed in favor of non-obviousness because the proffered reason to modify the prior art did not present a specific, alternate basis that was unrelated to the rationale behind the inventor’s reasons for making the invention. Here, the examiner and the Board determined that a person of ordinary skill in the art would combine the ’009 publication with Raviendran for a reason independent from solving the problem identified by Conrad—to improve structural integrity by removing the folding seam. And this motivation to combine was not challenged by the patentee before the Board.


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The problem/solution approach to obviousness could be interesting to consider in parallel to eligibility analysis — noting that the non-obvious problem identification can – at times – lend patentable weight.

Unauthorized Practice of Patent Law and State Regulators

by Dennis Crouch

People v. Dak Steiert and Intelligent Patent Services, LLC (Co. 2019)

A recent decision by the Colorado Supreme Court has ordered Mr. Dak Steiert (and his company Intelligent Patent Services) to cease unauthorized practice of law in Colorado.

Steiert’s website ( touted its patent expertise:

“our patents are drafted entirely by patent attorneys with at least 5 years experience. Unlike any other firm, we do not use paralegals to draft patents. we don’t let rookie attorneys draft your application) then give it to a senior employee for a brief glance…”

Steiert is not a lawyer or patent agent, but did hire experienced patent attorneys to do the work on a contract basis.  The problem though his that nonlawyer Steiert “engaged in the unauthorized practice of law by advertising, offering, and providing the legal services of patent attorneys to inventors in Colorado.”  Colorado precedent prohibits non-lawyer owned companies “from offering or purveying legal services of licensed lawyers.”

Steiert apparently also drafted at least one set of patent claims — something that the Supreme Court’s Presiding Disciplinary Judge also identified as unauthorized practice of law.  In a separate proceeding, prosecutors in Eagle County, Colorado have charged Steiert with fraudulent advertising, criminal impersonation (of patent attorneys), and criminal “bait advertising.”  That case is prepping for trial.

I’ll note here that Steiert argued that the alleged practice of law in this case was the practice of patent law.  As such, the appropriate regulator is the USPTO and not the Colorado Supreme Court.  The Presiding Disciplinary Judge rejected that allegation.  However, Steiert’s argument has some precedential merit. In particular, Federal Judge in Missouri dismissed a somewhat similar case against LegalZoom for its patent drafting system. Janson v., Inc., 802 F. Supp. 2d 1053 (W.D. Mo. 2011). In particular, the court held that Missouri’s laws governing unauthorized practice of law were preempted by the Patent Act and USPTO regulations.

Michael McCabe has discussed the case in several posts on his IPEthics Blog.

Network Monitoring and . . .

by Dennis Crouch

It appears that the Federal Circuit has sharpened its blades and is now slicing the bologna extra thin.  This results-oriented decision unfortunately shades-facts and provides no clarity in its legal analysis of eligibility. While I agree that this network security invention should be eligible for patenting – the court’s analysis does not provide a convincing foundation for that result. 

SRI International, Inc. v. Cisco Systems, Inc. (Fed. Cir 2019)

At the close of trial, the jury issued its verdict favoring the patentee and awarding $23 million in reasonable royalty damages that were then doubled by the D.Del. Judge Robinson based upon the adjudged willful infringement.  On appeal, a 2-1 Federal Circuit panel has sided with the patentee on eligibility, but rejected the enhanced damages.

The eligibility outcome here fits expectations with the majority opinion penned by Judge Stoll and joined by Judge O’Malley while Judge Lourie stood in dissent.

SRI’s asserted claims are directed to methods of “hierarchical event monitoring” used within a computer network.  U.S. Patent 6,711,615.  The basic approach is (1) using a “plurality of network monitors” to detect “suspicious network activities”; (2) generate a report at the network monitor levele; and (3) a “hierarchical monitor” “automatically receiving and integrating the report.”  The specification makes clear that the “integrating” step might be simply looking for commonalities in the intrusion reports or might further involve “countermeasures.”  The specification does not appear to define “hierarchical monitor” other than contrasting them with peer-to-peer.

In considering the claims, the Federal Circuit found that the focus of the claim is on “providing a network defense system that monitors netowrk traffic in real-time to automatically detect large scale attacks.”

Contrary to Cisco’s assertion, the claims are not directed to just analyzing data from multiple sources to detect suspicious activity. Instead, the claims are directed to an improvement in computer network technology. Indeed, representative claim 1 recites using network monitors to detect suspicious network activity based on analysis of network traffic data, generating reports of that suspicious activity, and integrating those reports using hierarchical monitors. The “focus of the claims is on the specific asserted improvement in computer capabilities”—that is, providing a network defense system that monitors network traffic in real-time to automatically detect large-scale attacks. Quoting Enfish.

The majority opinion goes on to justify its conclusions based upon platitudes from the specification — that the invention provides “a framework for the recognition of more global threats to inter-domain connectivity, including coordinated attempts
to infiltrate or destroy connectivity across an entire network enterprise.”

Writing in dissent, Judge Lourie argued that the claims are effectively data collection methods.

The claims here recite nothing more than deploying network monitors, detecting suspicious network activity, and generating and handling reports. The detecting of the suspicious activity is based on “analysis” of traffic data, but the claims add nothing concerning specific means for doing so. The claims only recite the moving of information. The computer is used as a tool, and no improvement in computer technology is shown or claimed. There is no specific technique described for improving computer network security.

Lourie drew a tight analogy to the Electric Power Group eligibility decision that invalidated claims directed toward a “method of detecting events on an interconnected electric power grid in real time over a wide area and automatically analyzing the events on the interconnected electric power grid.”  Seemingly, this case here could also be seen as a close analogy to the court’s recent cases distinguishing between methods of diagnosis and methods of treatment. See Vanda and Natural Alternatives.

The Majority opinion here attempted to distinguish Electric Power Group as in invention “using computers as tools to solve a power grid problem, rather than improving the functionality of computers and computer networks themselves.”  What the majority fails to do here is to point to any particular aspects of the claimed invention that provide anything more than what other panels have identified as abstract ideas – receiving data; reporting data; and correlating data.

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The appellate panel rejected the willfulness finding and, as a consequence, the resulting doubling of damages.

While the jury heard evidence that Cisco was aware of the patents in May 2012, before filing of the lawsuit, we do not see how the record supports a willfulness finding going back to 2000. As the Supreme Court recently observed, “culpability is generally measured against the knowledge of the actor at the time of the challenged conduct.” Halo, 136 S. Ct. at 1933. Similarly, Cisco’s allegedly aggressive litigation tactics cannot support a finding of willful infringement going back to 2000, especially when the litigation did not start until 2012. Finally, Cisco’s decision not to seek an advice-of-counsel defense is legally irrelevant under 35 U.S.C. § 298. . . .

We leave it to the district court to decide in the first instance whether the jury’s presumed finding of willful infringement after May 8, 2012 is supported by substantial evidence.

Although willfulness is missing, the court still affirmed the award of attorney fees to the patentee based dupon Cisco’s litigation tactics.  Judge Robinson had written:

Cisco pursued litigation about as aggressively as the court has seen in its judicial experience. While defending a client aggressively is understandable, if not laudable, in the case at bar, Cisco crossed the line in several regards.

The appellate panel gave deference to district court conclusions on this final point and affirmed the award of fees.

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Note: In a separate case, Judge Robinson had previously held the claims invalid under 102/103. However, that decision was vacated on appeal SRI International, Inc. v. Internet Security Systems, Inc., 511 F.3d 1186 (Fed. Cir. 2008).  Here, interestingly, Judge Robinson sua sponte issued summary judgment that the claims were not anticipated.  That holding was affirmed here on appeal.

Physical-Realm: The Federal Circuit’s New Machine-or-Transformation

by Dennis Crouch

In Bilski v. Kappos, the Supreme Court issued three separate opinions — although all the justices agreed that physicality — machine-or-transformation — offers at least an important clue for deciding the issue.

  1. Five Justice majority opinion: “The machine-or-transformation test is not the sole test for deciding whether an invention is a patent-eligible ‘process.’ . . . [Rather, it is] just an important and useful clue.”
  2. Four Justice minority opinion: Arguing that a “business method” is not a “process” under Section 101, and that physicality “is a critical clue” for determining eligibility.
  3. Two Justice minority opinion: Explaining their view that only a “few patentable processes lie beyond” the machine-or-transformation test.

In InvestPic, LLC v. SAP America, Inc., No.  18-1199 (Supreme Court 2019), the question of physicality has been raised again. In that case, the patentee argues that the Federal Circuit has again recreated a physicality test for eligibility.

To reach [its conclusion of ineligibility], the Federal Circuit focused exclusively on whether the patent’s claims encompassed an invention in the “physical realm,” a requirement found nowhere in the Patent Act or this Court’s jurisprudence. The claimed novel process here
is a process that can only be performed by a computer; a human cannot perform the process. The Federal Circuit determined that the computer-executed invention does not touch the “physical realm” and therefore held it patent-ineligible.

With that basis, the patentee has asked the Supreme Court for its guidance on the following question:

Does the Federal Circuit’s “physical realm” test contravene the Patent Act and this Court’s precedent by categorically excluding otherwise patentable processes from patent eligibility?

Looking at the Federal Circuit’s decision in this case — it appears that the court has created a dichotomy with the world of ideas fitting into either (1) the physical realm or (2) the realm of abstract ideas.  The following excerpt from the Fed. Cir. decision is on point:

The claims in McRO were directed to the creation of something physical—namely, the display of “lip synchronization and facial expressions” of animated characters on screens for viewing by human eyes. . . . Similarly, in Thales Visionix Inc. v. United States, 850 F.3d 1343 (Fed. Cir. 2017), the improvement was in a physical tracking system. . . . Here, in contrast, the focus of the claims is not a physical-realm improvement but an improvement in wholly abstract ideas—the selection and mathematical analysis of information, followed by reporting or display of the results. . . . Some of the claims require various databases and processors, which are in the physical realm of things. But it is clear, from the claims themselves and the specification, that these limitations require no improved computer resources InvestPic claims to have invented, just already available computers, with their already available basic functions, to use as tools in executing the claimed process.

Note here, that the court did not give itself Bilski-style wiggle-room by suggesting that its physical-realm identity offered a “clue” to eligibility. Rather, the court held that the invention was not in the physical-realm (other than its use of computers) and therefore was abstract.  Now, to be clear, I believe that the InvestPic decision could be interpreted a different way. However, the easiest reading of the case is that the court meant what it said – the claim is directed either to something abstract or something physical.

In addition to the Bilski analogy above, this case here also runs parallel to Vanda where the court created the if-then rule that treatment claims are eligible.  The petition here also provides a list of Federal Circuit cases that the patentee identifies as not grounded in precedent:

  • Intellectual Ventures I LLC v. Capital One Bank, 792 F.3d 1363 (Fed. Cir. 2015) (using a § 101 analysis as a proxy for the independent § 112 inquiry);
  • Enfish, LLC v. Microsoft Corp., 822 F.3d 1327, 1336 (Fed. Cir. 2016) (looking to whether a software program improves computer capabilities);
  • Exergen Corp. v. Kaz USA, Inc., 725 F. App’x 959, 966 (Fed. Cir. 2018) (finding a patent eligible in part because it took “years and millions of dollars” to invent).

The problem for the patentee in this case are the claims themselves.  Claim 1 of U.S. Patent 6,349,291 (as modified by reexamination and certificates of correction) reads as follows:

A method for calculating, analyzing, and displaying investment data comprising the steps of:

(a) selecting a sample space, wherein the sample space includes at least one investment data sample;

(b) generating a distribution function using a re-sampled statistical method and a bias parameter, wherein the bias parameter determines a degree of randomness in sample selection in a resampling process; and

(c) generating a plot of the distribution function.

The idea here is good — use a bootstrapping method to determine an appropriate predictive distribution of investment data rather than rely upon a predetermined distribution (such as the normal distribution).  However, the abstract idea analysis here could look a lot like it did in Bilski.

[Read the Petition Here]


Supreme Court Shows its Interest in New Eligibility Case

by Dennis Crouch

Hikma Pharmaceuticals USA Inc., et al. v. Vanda Pharmaceuticals Inc., No. 18-817 (Supreme Court 2019)

In this case, the Supreme Court has requested input from the U.S. Government — requesting the views of the U.S. Solicitor General (CVSG).  The SG’s office will likely submit its brief in December 2019 — so we have a nice wait on this question presented:

The question presented is whether patents that claim a method of medically treating a patient automatically satisfy Section 101 of the Patent Act, even if they apply a natural law using only routine and conventional steps.

Although Hikma did not declare all method-of-treatment claims automatically patent eligible. It appears that the court has doubled-down in Natural Alternatives Int’l. Inc. v. Creative Compounds, LLC (Fed. Cir. 2019) (“These are treatment claims and as such they are patent eligible.”).

The court is also awaiting the views of the SG in HP v. Berkheimer on the question of the extent that eligibility is based upon a questions of fact. Berkheimer has become standard Federal Circuit law — as the court explained recently in Natural Alternatives: “Eligibility under § 101 is a question of law based on underlying facts.”

Broadened Claims and Written Description

by Dennis Crouch

Sprint Communications Co., L.P. v. Time Warner Cable, Inc. (Fed. Cir. 2019) (Modified Opinion)(Original Opinion)

In its original decision in the case, a 2-1 appellate panel upheld a jury’s $140 million verdict in favor of the patent holder Sprint.  Time Warner petitioned for rehearing on two grounds: (1) damages apportionment; and (2) written description requirement. In response, the appellate panel has slightly modified its original opinion — but only to better explain its damages decision. As such, the $140 million verdict remains.

On apportionment, Time-Warner argues that the jury was able to rely upon a prior-verdict for damages calculation that did not correctly perform any apportionment to account for the unclaimed portions of its VoIP technology.  In the revised opinion here, the court explained its position:

  1. The “Georgia-Pacific factors, under proper instructions embody[] apportionment principles.”
  2. Here, Sprint’s expert did address apportionment and told the jury that damages should be attributed only to “incremental profits are attributable to the patents in suit.”  Further, the jury instructions indicated that damages should be based upon the value added by the patented features.
  3. Finally, the court noted that Sprint did not propose alternative jury instructions.

Written Description: The divide between the majority opinion (Judges Bryson and Chen) and the Dissent (Judge Mayer) is based upon the second issue — written description.

The Patent Act requires a “written description of the invention, and of the manner and process of making and using it.” 35 U.S.C. 112(a).  Judge Mayer concluded in dissent that description in the specification does not support the full-breadth of the asserted claims.

Here, the accused infringing systems are Voice-over-Internet-Protocol (VoIP) systems. The claims are not directed to internet protocol (IP) but rather use the broader category of “packet communication.”  Why not claim IP?: the original specification does not mention internet protocol but instead is directed toward a separate packet-communication form known as asynchronous transfer mode (ATM).  ATM was popular legacy telecommunications systems, but is being largely replaced by IP.  Although ATM and IP both involve packet communications, they are quite different in how they work.  For instance, ATM creates a virtual circuit / fixed call path while IP does not.

For Judge Mayer, the bulk of the specification is focused on the virtual circuits with no disclosure of other packet networks. He concludes that “the specification’s disclosure makes sense only in the context of ATM technology.”  As such, the claims that cover non-ATM IP-switching are not supported by the written description.

The majority disagreed with Judge Mayer and found sufficient support (giving deference to the jury’s implicit fact finding).  In its analysis, the majority first noted that IP technology “is not expressly excluded” by the specification and that the specification is not expressly limited to ATM:

[T]he specification refers to “[b]roadband systems, such as Asynchronous Transfer Mode (ATM),” a formulation that strongly suggests that the patents are not limited to ATM technology.

In addition, Sprint presented evidence that a person of skill in the art would understand the disclosure to — especially the term “broadband” — to include IP.

For the majority, the evidence here was enough to allow the patent to remain valid.  Even if the result is uncomfortable, it is easier to see after considering the level of deference.  The court should only overturn the jury verdict if the only reasonable conclusion is that invalidity was proven with clear and convincing evidence.

Patently-O Bits and Bytes by Juvan Bonni

Recent Headlines in the IP World:

Commentary and Journal Articles:

New Job Postings on Patently-O:

The invention here is a treatment claim — that is therefore patent eligible. 

by Dennis Crouch

The decision here is an important case adding substantial nuance to the product and law of nature exceptions.

Natural Alternatives Int’l. Inc. v. Creative Compounds, LLC (Fed. Cir. 2019)

Earlier this week I wrote about a separate Natural Alternatives reexamination appeal pending before the US Supreme Court on the issue of improper priority claims.

The case at hand focuses on patent eligibility.  Natural Alternatives sued Creative for infringing six of its patents covering various forms of the naturally-occurring compound beta-alanine and its use as a muscle-building supplement.  The district court dismissed the lawsuit on the pleadings for lack of eligibility — finding that the claims were directed toward a product of nature (beta-alanine) and a law of nature (that taking beta-alanine in sufficient quantities builds muscle).

On appeal the Federal Circuit has sided with the patentee.  In an opinion written by Judge Moore and joined by Judge Wallach, the court explained that we shouldn’t take the law-of-nature prohibition too far since “[w]e live in the natural world, and all inventions are constrained by the laws of nature.”

The decision here adds an important nuance to Vanda and CellzDirect.  In particular, the court explains that an important clue of eligibility for treatment claims is whether “homeostasis is overcome” in a way that leads to “specific physiological benefits.” This physiological impact tells us that the invention here is a treatment claim — that is therefore patent eligible.

The claims … they require that an infringer actually administer the dosage form claimed in the manner claimed, altering the athlete’s physiology to provide the described benefits. These are treatment claims and as such they are patent eligible.

One element of this case that could be distinguished from ordinary treatment claims is that the purpose of taking beta-alanine is to alter the body’s operation away from normal whereas most drug treatments are in pursuit of normalcy.

The court considered the fact that beta-alanine occurs in nature and is very longstanding part of the human diet. In the end, however, the court found that the law “expressly permits patenting a new use of an existing product.”  Here, the patentee argues that “the quantities being administered” do not exist in nature.

At this point in the analysis, claim construction became important.  At the pleadings stage, the district court agreed to follow the patentee’s proposed construction that would require that the dosage “elevate beta-alanine above natural levels to cause an increase in the synthesis of beta-alanylhistidine in the tissue.”

Looking at the product claims, the following claim is perhaps the broadest:

1. A human dietary supplement, comprising a beta-alanine in a unit dosage of between about 0.4 grams to 16 grams, wherein the supplement provides a unit dosage of beta-alanine.

In similar fashion to the method claims, the district court followed the patentee’s claim construction that a “human dietary supplement” should be construed as excluding “natural or conventional food” that “is manufactured.”

Although the appellate court found the claims ineligible even under this construction, the appellate panel sided with the patentee — finding that the not-natural and manufacture construed limitations sufficient to take the patents outside of the law of nature and product of nature exceptions.

Although beta-alanine is a natural product, the Product Claims are not directed to beta-alanine. A claim to a manufacture or composition of matter made from a natural product is not directed to the natural product where it has different characteristics and “the potential for significant utility.” See Diamond v. Chakrabarty, 447 U.S. 303, 310 (1980).

Judge Reyna wrote in dissent — arguing that the majority’s eligibility analysis relied upon a faulty claim construction “that improperly imports limitations into the claims and is contradicted by the written description.”