Intellectual Property and the Historic Kinship Between Patents and Copyrights

Patent,

by Dennis Crouch

In a recently published article, Homayoon Rafatijo and I take-on sovereign immunity in copyright cases.  We argue that the Supreme Court got it wrong in Allen v. Cooper. Our abstract:

The FBI Anti-Piracy Warning provides that “unauthorized reproduction or distribution of a copyrighted work is illegal.” In Allen v. Cooper, the Supreme Court effectively qualified this warning by adding an exception in favor of “sovereign” pirates. In allowing the states to usurp citizens’ intellectual property rights, the justices of the Allen Court prioritized either a dogmatic form of stare decisis or the New Federalist ideology over the Constitution and its structure and history. The Allen Court largely based its decision upon a perceived historic kinship between patents and copyrights, concluding that if not patent, then not copyright. This article walks through the historical record, especially in the period following the Federal Convention, and reports key differences between the patent and copyright systems that that tilt toward a conclusion that the States agreed “to be subordinate to the government of the United States” in the copyright space. In the end, Allen creates serious practical problems for copyright holders. The decision emboldens copyright infringement by state actors by cutting-off the possibility of any recovery of damages for the infringement.

Read it here: https://papers.ssrn.com/sol3/papers.cfm?abstract_id=4163206.

Who appeals (and wins) patent cases?

Patent

By Jason Rantanen

There are lots of studies of Federal Circuit decisions, but very few involve the link between all cases filed at the district court cases and appeals. This prompted the question for me: who actually files appeals in patent infringement cases and how representative are they of the underlying civil actions filed in the courts? It turns out that the answer is “mostly patent asserters” and that they aren’t necessarily representative of case filings.

One of my research team’s ongoing projects is the Federal Circuit Dataset Project, which involves collecting all of the opinions & orders that the Federal Circuit makes available on its website, coding information about them, and then putting it all together into a publicly-accessible database that anyone can use to answer their own questions about the Federal Circuit.  There’s a user-friendly portal to the decisions dataset at empirical.law.uiowa.edu, and the full dataset is available at https://dataverse.harvard.edu/dataverse/CAFC_Dataset_Project.

This year, our major project involved linking up the CAFC dataset with datasets of patent infringement cases filed in the district courts. A draft of the first paper to spin out of this project is now up on SSRN at https://papers.ssrn.com/sol3/papers.cfm?abstract_id=4162979. (There is an option to download without logging in, but sometimes you have to hunt for it on the page.)  Thanks to the Houston Law Center’s Institute for Intellectual Property and Information Law for inviting me to present it at their national conference in June. Some takeaways:

  • For patent infringement cases filed between 2011 and 2016, about 6% have at least one appeal, although this rate has been declining from 7.8% of cases filed in 2011 to 4.4% of cases filed in 2016.
  • The average time from case filing to first appeal is 27 months, although there is substantial variation (SD of 18 months with rightward skew).
  • Appeals are overwhelmingly filed by patent asserters: 82% of first appeals in the set were filed by patent asserters compared to 18% by accused infringers.

For this particular project, we linked the Federal Circuit dataset to the Stanford NPE Litigation Database, which contains coding on patent asserter types. (Details about the Stanford dataset are available in Miller et al., Who’s Suing Us? Decoding Patent Plaintiffs since 2000 with the Stanford NPE Litigation Dataset, 21 Stan. Tech. L. Rev. 235 (2018)). Using this data, we found some differences between the frequencies of case filings and appeals.  Figure 2 from the paper shows the most frequent cases by Stanford litigation dataset category. Category 1 are companies that acquired patents but do not themselves make any products or provide any services.

Table of case filer frequency

Figure 2 from Who Appeals Patent Cases

Figure 2 shows that while companies that acquired patents (Stanford litigation dataset category 1) filed 37% of patent infringement actions from 2011-2016, only 25% of appeals from cases filed between 2011 and 2016 arose from those cases. On the other hand, while product companies accounted for only slightly more patent infringement lawsuits (just over 40%), appeals in cases filed by product companies constituted 54% of all appeals filed. In other words, cases brought by product companies are appealed at a higher rater than cases brought by companies that acquired patents. This is consistent with prior findings that cases brought by PAEs settle at a higher rate than cases brought by product companies. Not only that, but we also found a difference in who is bringing the appeal in these cases: in cases brought by a PAE, the patent asserter was the primary appellant about 90% of the time, whereas in cases brought by product companies the patent asserter was the primary appellant only about 70% of the time.

What about who wins these cases?  That’s a bit more complex, and depends on how you define “win.” We define a “win” as obtaining an affirmance if a party is the appellee and an affirmance-in-part, reversal or vacate if a party is the appellant.  Using this definition, we found that overall, patent asserters usually lose on appeal, with product companies being much more successful than PAEs. However, this is heavily affected by the fact that both patent asserters generally and PAEs specifically are in the shoes of the appellant most of the time, and more often than not, the Federal Circuit affirms the district court.

The paper itself goes into more detail, including information about affirmance rates by appellant type, other categories, and the kinds of forms that these decisions take.  You can read it here: https://papers.ssrn.com/sol3/papers.cfm?abstract_id=4162979.

Disclosure: I am receiving an honorarium from the University of Houston Law Center Institute for Intellectual Property & Information Law upon publication of this paper in the Houston Law Review.

O Prior Art, Prior Art, Wherefore Art thou Prior Art? 

Patent, ,

by Dennis Crouch

In a new opinion the court asked and answerd an interesting question: What if most on-point prior art was accidentally created due to a typographical error? In LG Electronics, Inc. v. ImmerVision, Inc., — F.4th — (Fed. Cir. 2022), the Court sided with the patentee in holding that a person of skill in the art would have “disregarded or corrected” the  error rather than relying on the error as the foundation of an inventive project.  A key to the analysis was a finding that the error would have been apparent to someone of skill in the art.  See In re Yale, 434 F.2d 666 (CCPA 1970).

ImmerVision’s patent claims an improved method for panoramic images.  The basic idea is to use a non-linear objective lens that captured and then digitally mapped onto a linear pixel grid. The claims require that the lens compress the image at its center and edges and expands intermediate zones.  You can compare the prior art linear objective lens results (Fig. 4A) with those of the proposed panorama lens (Fig 7A).

Because of lens curvature, the center and edges of a super-wide-angle-lens are typically produce lower image quality. The approach here improves the quality of those areas but at the same time creates odd distortions in the image that then need to be corrected using digital image processing.   There are other solutions that would work as well. One example would be higher sensor density in these particular areas.

Lots of smartphones now have multiple lenses, including panorama lenses.  ImmerVision sued LG (and others) for patent infringement and LG responded with two IPR petitions. The PTAB instituted the IPR here, but eventually concluded that LG had failed to prove that the claims should be cancelled. On appeal, the Federal Circuit has affirmed.  Judge Stoll penned the majority opinion joined by Judge Cunningham.  Judge Newman wrote in partial dissent — arguing that the error in the prior art was not an obvious-enough error.

Typo in the Prior Art: The key prior art (Tada) included one table of aspherical data that appeared to show a non-linear lens similar to ImmerVision’s.  The problem — those figures do not match-up with other descriptions of the embodiment in the Tada specification and there is no discussion in Tada of having such a non-linear lens.  Tada is a U.S. patent, and the clincher for the court was that the original Japanese priority document included different numbers that actually matched the other portions of the specification.  Finally, LG did not dispute that “the aspheric coefficients in Tada’s Table 5 were erroneous.”

Of course patent lawyers usually don’t get a balcony scene asking: O Prior Art, Prior Art, wherefore art thou Prior Art?  Rather, we take the printed publication as it is and compare the published words and figures to the patent document.  But for obviousness we do ask an additional WWPD question: What would POSITA do? And here, we have some precedent with the court announcing that a Person of Skill in the Art (POSITA) would disregard an obvious typographical in the prior art and instead fix the typo before trying to modify the reference. In re Yale, 434 F.2d 666 (C.C.P.A. 1970).

In Yale, a patentee was seeking protection for a specific compound of inhalation  the anesthetic—CF3CF2CHClBr.  The USPTO rejected Yale’s claims as obvious based upon a prior art publication that listed that same compound (CF3CF2CHClBr) as an known important analgesic compound.  At the time though the compound was not actually known and it was clear from context that the author of that prior art publication meant CF3CHClBr which was actually well known at the time. In correspondence, the author of the prior art admitted that was “of course, an error.” Still, the PTO rejected the claims as obvious since the compound was actually disclosed in the prior art.  On appeal, the CCPA reversed — holding that such an POSITA would “mentally disregard” such an “obvious error” in the prior art.

Certainly he would not be led by the typographical error to use the erroneous compound as an anesthetic even if as a chemist of ordinary skill in the art he would know how to prepare the compound. He simply would not get so far in the thought process as to determine if he knew how to make CF(3) CF(2) CHClBr, as it would have long since been discarded by him as an obvious typographical error.

Yale. One aside about Yale.  Yale was decided by the Federal Circuit’s predecessor court, the Court of Customs and Patent Appeals (CCPA) and remains good law and binding precedent on the Federal Circuit.  In its first decision back in 1982, the Federal Circuit adopted all prior CCPA holdings as binding precedent. South Corp. v. U.S., 690 F.2d 1368 (Fed. Cir. 1982):

In LG, the Board concluded that the Tada error was an obvious error in line with the holding of Yale. On appeal, the Federal Circuit affirmed — holding that substantial evidence supported the Board’s findings.

This is where Judge Newman dissent comes into play.  She notes that the error was not discovered “until an expert witness conducted a dozen hours of experimentation and calculation.”  Further, Tada’s owners had filed a certificate of correction to fix some aspects of the patent — but did not correct the table.  Judge Newman also notes that the only way that the expert witness firmly concluded that the error existed was by translating the Japanese priority document–something even optics experts are unlikely to do.

I agree with the panel majority that Yale establishes the correct standard to determine if an error would be obvious to a person of ordinary skill in the field. However, I do not agree with the majority’s application of this standard to the facts herein. An “obvious error” should be apparent on its face and should not require the conduct of experiments or a search for possibly conflicting information to determine whether error exists. When a reference contains an erroneous teaching, its value as prior art must be determined.

The error in the Tada reference is plainly not a “typographical or similar error,” for the error is not apparent on its face, and the correct information is not readily evident. It should not be necessary to search for a foreign document in a foreign language to determine whether there is an inconsistency in a United States patent. The foundation of the “typographical or similar” standard is that the error is readily recognized as an error. I am concerned that we are unsettling long-standing law, and thus I respectfully dissent in part.

Slip Op. (Newman, J. in dissent).  The majority disregarded Judge Newman’s arguments: “The distinction between the typographical error in Yale and the copy-and-paste error here is a distinction without a difference.”  Id. (majority opinion).

LG had asked the court to shift its standard — only disregard typographic errors that are “immediately” obvious.  The court rejected this temporal urgency as not required by Yale.

Law Prohibits All Federal Employees from Representing Private Clients before the USPTO

Patent,

by Dennis Crouch

The Federal Circuit has agreed that Kevin Correll’s 5-year suspension from patent law practice should move forward. Correll v. Vidal (Fed. Cir. 2022) (non-precedential).  Unfortunately, the per curiam decision appears poorly reasoned and seems to lack sufficient legal grounding.  The panel included Chief Judge Moore, and Judges Prost and Hughes.

Kevin Correll worked for the US Navy as an engineer, but also moonlighted for years as a solo patent attorney (prosecuting 211 patent applications). In 2016, the Navy notified the USPTO that Correll may have violated federal rules of ethics.

The key rule:

18 U.S.C. § 205: [Federal employees may not] act as agent or attorney for anyone before any department, agency, court, court martial, officer, or civil, military, or naval commission in connection with any covered matter in which the United States is a party or has a direct and substantial interest.”

The USPTO’s Office of Enrollment & Discipline (OED) conducted an investigation and then filed a disciplinary complaint against Correll.  That complaint was then decided against Correll an Administrative Law Judge and  issued a 5-year suspension from practice. Drew Hirshfeld in his role as agency head affirmed the ALJ finding.  Correll then moved to district court and again lost when the E.D.Va. judge denied his motion for a preliminary injunction against enforcement of the suspension.  On appeal here, the Federal Circuit has affirmed.

The USPTO has long taken the position that these statutory rules prohibit any federal employee from representing private clients at the USPTO.  On appeal here, the Federal Circuit agreed with the USPTO interpretation, although the court appears to limit this broad holding to cases where the attorney is compensated for the work.  Slip Op. (distinguishing Van Ee v. EPA, 202 F.3d 296 (D.C. Cir. 2000) based upon receipt of compensation).  I would suggest compensation as a distinguishing mark applies for the parallel statute 18 U.S.C. § 203, but doesn’t seem to apply directly to Section 205.

The DC Circuit’s Van Ee decision includes dicta stating that an employee representing a private party in an “application for a … patent” could create a conflict of interest. On appeal here, the Federal Circuit latched-onto that language in its conclusion that Section 205 applies to Correll’s behavior.  But, a major difference between Van Ee and this case is that the DC Circuit was considering a situation involving an EPA employee who was advising a private group regarding EPA actions.  Here, Correll is an outsider to the USPTO.  That distinction is relevant because the courts have interpreted Section 205 in light of its primary goal of preventing situations “in which a federal employee, acting as a private party’s agent or attorney, could be perceived as having divided loyalty and as using his or her office or inside information to corrupt the government’s decisionmaking process.”  Slip Op. (quoting Van Ee).  An outsider to the agency is seemingly much less likely to create a conflict.

Here, the district court also concluded that “[t]he government has a direct and substantial interest in patent applications.” Correll v. Under Sec. of Com. of Intell. Prop. (“Director” ), 121CV898AJTIDD, 2022 WL 298125, at *2 (E.D. Va. Jan. 13, 2022).  That conclusion stuck on appeal.

Correll’s biggest argument appears to be that First Amendment freedoms of speech and association should apply to limit the reach of the statute.  Courts use a balancing test to decide when a gov’t employer can permissibly limit its employees speech. Pickering v. Board of Education, 391 U.S. 563 (1968).  Here, the Federal Circuit agreed with the district court that “the government’s interest in avoiding even the appearance of impropriety outweighs the burden that Mr. Correll’s suspension has on his rights.”  The courts particularly noted that the prohibition on representing clients was only a “minimal” burden while the government interest is “direct and substantial.”  I’m not sure about the basis for that conclusion in this situation.

The court also found waiver by Mr. Correll.  In particular by signing-up as a patent attorney Mr. Correll expressly agreed to be bound by the laws and as such cannot now complain about those laws.

Even without Pickering balancing, however, it is apparent that Mr. Correll’s suspension does not violate his First Amendment rights. Mr. Correll agreed to comply with the conflict-of-interest statutes when he registered to practice before the PTO by signing an “Oath or Affirmation” in which he promised to “observe the laws and rules of practice of the [PTO].” Among those rules was a prohibition on federal employees representing private clients.

Slip Op.  I’ll note that the “rules” prohibiting federal employees from representing private clients is simply 18 U.S.C. §§ 203, 205 cited above.  This conclusion seems obviously overreaching. If the prohibition on practice is a violation of 1st Amendment rights, then any waiver requirement is also likely an unconstitutional condition in violation.

If you remember, this appeal is from a denial of a preliminary injunction. On remand the district court will still need to decide the case on the merits.   It will be a bit of a process to tease out which aspects of the decision here were definitive legal conclusions creating the law of the case and which were more deferential conclusions allowing for reconsideration on remand.

Safe Skies Eligibility Petition

Patent

David Tropp sued Travel Sentry for patent infringement back in 2006. That was the same year that I first taught a patent law class.  Back then, eligibility was almost an unknown concept in patent litigation.  The rule of thumb was “anything under the sun, made by man,” and I mean ANYTHING. But as we crawled into the 2010s, eligibility emerged as a powerful tool to invalidate issued patent claims–including Tropp’s covering covering a TSA-approved luggage lock.  The basic idea here is to give TSA a master key, or as the district court suggested: “using and marketing a dual-access lock for luggage inspection.”

Tropp recently petitioned the Supreme Court seeking a writ of certiorari on the following question:

Inventor David Tropp owns and practices two patents that disclose a solution to the problem of screening all passenger luggage for flights originating in the United States, following the September 11 attacks. Through a series of specific claimed steps, his patents describe a method of providing consumers with special dual-access luggage locks that a screening entity would access in accordance with a special procedure and corresponding key controlled by the luggage screening entity, all while allowing the luggage to remain locked following screening.

The question presented is: Whether the claims at issue in Tropp’s patents reciting physical rather than computer-processing steps are patent eligible under 35 U.S.C. § 101, as interpreted in Alice Corp Pty v. CLS Bank Int’l, 573 U.S. 208 (2014).

Tropp Petition.  The parties agreed that the following claim is representative:

1. A method of improving airline luggage inspection by a luggage screening entity, comprising:

making available to consumers a special lock having a combination lock portion and a master key lock portion, the master key lock portion for receiving a master key that can open the master key lock portion of this special lock, the special lock designed to be applied to an individual piece of airline luggage, the special lock also having an identification structure associated therewith that matches an identification structure previously provided to the luggage screening entity, which special lock the luggage screening entity has agreed to process in accordance with a special procedure,

marketing the special lock to the consumers in a manner that conveys to the consumers that the special lock will be subjected by the luggage screening entity to the special procedure,

the identification structure signaling to a luggage screener of the luggage screening entity who is screening luggage that the luggage screening entity has agreed to subject the special lock associated with the identification structure to the special procedure and that the luggage screening entity has a master key that opens the special lock, and

the luggage screening entity acting pursuant to a prior agreement to look for the identification structure while screening luggage and, upon finding said identification structure on an individual piece of luggage, to use the master key previously provided to the luggage screening entity to, if necessary, open the individual piece of luggage.

US7021537.

Reasonable Expectation of Success as the Post-KSR Nonobviousness Hook

Patent, , ,

Tris Pharma v. Actavis Labs (Fed. Cir. 2022) (non-precedential opinion)

One quirk of the Patent Act is Section 271(e), which creates infringement liability for simply seeking FDA approval to market a generic version of an already approved drug. 35 USC 271(e).  Here, Actavis filed an Abbreviated New Drug Application (ANDA) seeking FDA approval to market a “liquid methylphenidate (MPH) oral suspension.”  This is the same drug found in Ritalin and used to treat ADHD and other neurological concerns.  This particular formulation is in liquid form and the active ingredient is designed for slow release. (Tris sells under the brand “Quillivant XR”).  Tris responded to the Actavis ANDA by suing under 271(e) and asserting three separate patents.

271(e) actions are seen as a form of declaratory action similar to those taken by courts of equity prior to the merger of law and equity.  As such, there is no Constitutional right to a jury trial in these cases and instead all issues of fact and law are typically determined by a federal district court judge.

The usual jury verdict just requires the ticking of an [X] invalidity box. Likewise, the Federal Circuit regularly decides its cases with by ticking the [X] affirmed without opinion box.  The trick with bench trials though, is that the judge is required to explain its factual and legal conclusions.  Fed. R. Civ. Pro. 52(a).

In an action tried on the facts without a jury or with an advisory jury, the court must find the facts specially and state its conclusions of law separately.

Id.  Here, Judge Connolly (D.Del.) held a bench trial and original sided with the generic manufacturer–finding the asserted claims obvious.  That original decision though was vacated by the Federal Circuit back in 2018 (the also panel slightly amended its decision in a 2019 rehearing order). In its decision, the Federal Circuit found that the district court had failed to explicitly and specifically consider a number of factual disputes and thus remanded for further findings:

[T]he district court failed to make the necessary factual findings and provide sufficient analysis of the parties’ arguments to permit effective appellate review. Specifically, the district court’s opinion merely recites the parties’ arguments but fails to explain or identify which arguments it credits or rejects. We thus cannot reach the merits of whether the Quillivant XR® formulation would have been obvious over the prior art. Rather, we identify gaps in the district court’s opinion and remand for the district court to conduct further factfindings and detailed analysis consistent with this opinion.

Tris Pharma, Inc. v. Actavis Lab’ys FL, Inc., 755 F. App’x 983 (Fed. Cir. 2018) (Tris I).

On remand, the district court accepted further briefing on the merits and then flipped the outcome–this time siding with the patentee.  In particular, the district court held that “Actavis failed to prove by clear and convincing evidence that a person of ordinary skill in the art would have been motivated to combine the prior art references with a reasonable expectation of success.”  On appeal here, the Federal Circuit has affirmed.

Claim 1 of Tris Pharma’s U.S. Patent Nos. 8,465,765 reads as follows:

1. A methylphenidate aqueous extended release oral suspension comprising (1) an immediate release methylphenidate component, (2) a sustained release methylphenidate component, and (3) water, said suspension having a pH of about 3.5 to about 5,

wherein said suspension provides a single mean average plasma concentration peak and a therapeutically effective plasma profile for about 12 hours for methylphenidate, and

wherein the suspension has a pharmacokinetic profile in which the single mean plasma concentration peak for methylphenidate has

  • an area under the curve (AUC)0->∞ of about 114 to about 180 ng-hr/mL,
  • Cmax of about 11 to about 17 ng/mL,
  • Tmax of about 4 to about 5.25 hours, and
  • T1/2 of about 5 to about 7 hours

following a single oral administration of said suspension at a dose equivalent to 60 mg racemic methylphenidate HCl in adults.

By the time Tris filed its patent application, several other methylphenidate oral formulations & extended release versions were already on the market, including Concerta, Daytrana, Focalin XR, Metadate CD, and Ritalin LA. As with most obviousness cases, the prior art taught all the claim limitations in various subsets, but no single reference disclosed an embodiment with all the limitations.  And, the Federal Circuit agreed with the district court that the patent challenger had failed to show that PHOSITA would have a reasonable expectation of success when attempting to make any of the proffered combinations.

Without delving into the merits here, I only want to note the court’s focus on motivation-to-combine that is now regularly coupled with the requirement that the combination be based upon a “reasonable expectation of success.”   The Federal Circuit (as well as lower courts and the USPTO) have increasingly used the “reasonable expectation of success” as a prong in the obviousness analysis.   The chart below shows the number of Precedential Federal Circuit decisions that discuss a the Reasonable Expectation of Success test as part in the context of an Obviousness determination. As you can see, there was a substantial rise in its use beginning in 2006 during the lead-up to KSR (2007).

I’ll note also that this appears to be a case where forcing the tribunal to fully explain its decision ended up shifting the ultimate result.

Guest Post by Prof. Contreras: Continental’s Antitrust Suit Against Avanci is Dismissed, but with Fewer Consequences for FRAND

Patent

Guest Post by Professor Jorge L. Contreras

On June 22, 2022, the Fifth Circuit reissued its opinion in Continental v. Avanci, replacing an earlier opinion that it issued on February 28.  While the reissued opinion continues to uphold the district court’s dismissal of the suit, it also eliminates the entirety of the Circuit’s earlier dicta concerning the nature of FRAND commitments and Article III standing, dicta that was heavily criticized by amici curiae.

Background

The standardization of wireless telecommunications protocols is largely conducted under the auspices of the European Telecommunications Standards Institute (ETSI) and organizational partners such as the US-based Telecommunications Industry Association (TIA) and Alliance for Telecommunications Industry Solutions (ATIS). Parties that participate in these standards development organizations (SDOs) generally agree to license patents that are essential to the implementation of those standards (standards-essential patents or SEPs) to manufacturers of standardized products on terms that are fair, reasonable and nondiscriminatory (FRAND).

Avanci is a collective licensing platform (similar to a patent pool) that was formed in 2016 to license wireless SEPs to manufacturers in vertical markets including the automotive industry. As of this writing, Avanci’s website indicates that it has licensed SEPs to 37 automotive brands including BMW, Volkswagen, Mercedes, Ford and GM, and that its licenses cover SEPs held by nearly fifty different firms including Nokia, Qualcomm, Ericsson and InterDigital.  Avanci’s licensing rate for automotive 4G SEPs is $15 per vehicle.  Though Avanci itself is not a member of the relevant SDOs, most of the SEP holders participating in Avanci are members, thereby requiring that Avanci abide by their FRAND licensing requirements.

The Litigation

Continental AG is a German supplier of automotive electrical and navigation systems to automotive manufacturers.  In 2019, Continental’s U.S. subsidiary filed suit against Avanci, Nokia, Sharp and several other SEP holders, alleging, among other things, that Avanci breached its FRAND commitment by refusing to offer Continental and other automotive component suppliers a license to SEPs covering the 2G, 3G and 4G standards.  Specifically, Continental alleged that because Avanci’s $15 per-vehicle licensing fee would be exorbitant (i.e., in excess of FRAND) if applied to the $75 telematics control unit (TCU) sold by Continental, Avanci refused to license SEPs to component suppliers like Continental, and instead offered licenses only to automobile manufacturers.  Then, because $15 is negligible in comparison to the overall cost of an automobile, automobile manufacturers would likely pay the charge, but later seek indemnification from Continental for those supra-FRAND costs.  Continental thus argued that it was damaged by Avanci’s refusal to license it directly at a FRAND rate.

Continental’s complaint alleged that this refusal constituted, among other things, a breach of the nondiscrimination element of the SEP holders’ FRAND obligations, a group boycott in violation of Section 1 of the Sherman Act, and an abuse of the standardization system constituting monopolization in violation of Section 2 of the Sherman Act.

Dismissal at the District Court (485 F. Supp. 3d 712 (N.D. Tex. 2020))

Chief Judge Lynn in the Northern District of Texas declined to exercise supplemental jurisdiction over Continental’s breach of contract and other state law claims and, given that the court lacked diversity jurisdiction over the parties, dismissed those claims for lack of subject matter jurisdiction (Continental subsequently filed an action in the District of Delaware making those claims).

Judge Lynn next granted the defendants’ motion to dismiss, finding that Continental lacked antitrust standing to bring suit.  First, she held that Continental did not adequately plead an antitrust injury, as it did not suffer direct harm from Avanci’s alleged failure to grant it a SEP license.  She points out that despite Avanci’s alleged refusal, Continental continued to sell TCUs to automotive customers, and any indemnification claims by those customers were speculative.  Moreover, she found that any antitrust violation arising from Avanci’s charging SEP licensing rates in excess of FRAND were felt by the automotive manufacturers and not by Continental.  Accordingly, Continental was a “remote or indirect” victim of the alleged conduct, and therefor lacking standing to bring suit.

The court went on to find that, even if Continental had standing, its Sherman Act claims would fail.  Under Section 1, the rule of reason analysis as applied to patent pools is generally satisfied when pool members are free to license the pooled patents individually, as is the case with Avanci.  Citing Bell Atlantic v. Twombly, 550 U.S. 544 (2007), the court noted that “[t]o the extent the Licensor Defendants refused to negotiate with Plaintiff or only agreed to do so at the same prices at which they license to the OEMs, this alleges at best parallel conduct and the possibility of concerted action, which are insufficient to state a claim of an unlawful agreement to restrain trade” (485 F. Supp. 3d at 732).

Under Section 2, the court observed that the additional monopoly power that a SEP holder obtains through the inclusion of its patented technology in a standard is “inevitable as a very frequent consequence of standard setting, and is necessary to achieve the benefits served by the standard, including procompetitive benefits” (citing Allied Tube & Conduit Corp. v. Indian Head, Inc., 486 U.S. 492, 501 (1988)) (485 F. Supp. 3d at 733).  It further noted that “[a] lawful monopolist’s charging of monopoly prices, is not only not unlawful; it is an important element of the free-market system” and that “[a] patent owner may use price discrimination to maximize the patent’s value without violating antitrust law.” (485 F. Supp. 3d at 734).  Expressly disagreeing with other cases holding that “deception of an [SDO] constitutes the type of anticompetitive conduct required to support a § 2 claim”, Judge Lynn found that “[e]ven if such deception had also excluded Defendants’ competitors from being included in the standard, such harms to competitors, rather than to the competitive process itself, are not anticompetitive.” (Id. at 735). Accordingly, she found no violation of Section 2.   Continental appealed.

Fifth Circuit – Withdrawn Decision (27 F.4th 326 (5th Cir. 2022))

On February 28, 2022, the Fifth Circuit, in a surprising turn of events, vacated the district court’s judgment and remanded with instructions to dismiss Continental’s claims for lack of Article III standing. This holding obviated the Circuit’s need to address the district court’s holdings regarding antitrust standing and the merits.

The Fifth Circuit’s decision to reject standing on Article III grounds – a theory that was neither briefed by the parties nor addressed by the district court – surprised many.  This move was still more surprising given that the Circuit based much of its reasoning on facts that were not in evidence and assumptions that were not supported by the record.

For example, the Circuit reasoned that Continental was not an intended third party beneficiary of the FRAND commitments made by Avanci’s members because Continental was not a member of the relevant SDOs.  This conclusion contradicts numerous other cases, including the Fifth Circuit’s own decision in HTC Corp. v. Telefonaktiebolaget LM Ericsson, 12 F.4th 476, 481 (5th Cir. 2021), in which it held that “[c]ompanies seeking to license under [FRAND] terms become third-party beneficiaries of the contract between the standard-essential patent holder and the standard setting organization” and “are thus enabled to enforce the terms of that contract.”

Likewise, the Circuit reasoned that a component manufacturer like Continental “does not need SEP licenses” from SEP holders because those SEP holders “license the [automobile manufacturers]” that purchase its components.  This conclusion overlooks the fact that even if a SEP holder grants licenses to automotive manufacturers, not all manufacturers are licensed at any given time. Moreover, except in the unusual case in which a component supplier makes components to order for an automobile manufacturer, the manufacturer’s license does not necessarily insulate the component supplier from claims of patent infringement.

Rehearing and Withdrawal of Fifth Circuit Decision

These and other issues in the Fifth Circuit’s opinion led Continental and various amici to petition the Fifth Circuit for rehearing en banc.

On June 13, 2022, the Fifth Circuit treated the pending petition for rehearing en banc as a petition for panel rehearing, granted that petition, and withdrew its February 28 opinion in its entirety.

On June 21, the Circuit issued an unpublished, nonprecedential per curiam opinion in which it “affirm[ed] the judgment of the district court that Continental failed to state claims under Sections 1 and 2 of the Sherman Act.”  Thus, the Circuit’s prior discussion of Article III standing, as well as its statements regarding the nature and beneficiaries of the FRAND commitment, are nullified.  In addition, by mentioning only the district court’s substantive Section 1 and 2 holdings, the Circuit does not uphold the district court’s ruling on antitrust standing.

Conclusions

Continental v. Avanci is not necessarily over.  Additional appeals of the Northern District of Texas decision are still available, and the Delaware contractual breach case continues.  Yet, the Fifth Circuit’s unusual withdrawal of its February 28 decision is a positive development in the evolving law concerning FRAND and SEP licensing.  First, it reinforces the widely held understanding that all implementers of standards are intended third party beneficiaries of FRAND licensing commitments made to SDOs (or at least declines to introduce dicta contrary to that understanding).  Second, it fails to support the notion that a SEP holder may avoid its obligation to license the suppliers of standardized components by licensing their end customers.  And most importantly, it declines to support the abstemious construction of antitrust standing adopted by the district court.  While there is clearly more to come in this and other disputes between component suppliers and SEP holders, the Fifth Circuit has avoided further muddying the waters in this already murky area.

[Note: the author led a group of thirteen law and economics scholars advised by Setty Chachkes PLLC in the filing of an amicus brief supporting en banc rehearing of this case.]

Atextual Conditions for Patentability and Stare Decisis

Patent, ,

by Dennis Crouch

The new petition in SawStop v. USPTO (Supreme Court 2022) focuses the question of whether COURTS have power to create non-statutory patentability doctrines.

Does the judiciary have the authority to require a patent applicant to meet a condition for patentability not required by the Patent Act?

SawStop Petition for Certiorari.  You might imagine this argument being raised as tied to any number of patent doctrines: atextual eligibility limitations; assignor estoppel; doctrine of equivalents, etc.  This particular case focuses on obviousness-type double patenting (OTDP).  Question 2 of the petition focuses the question further: “Is the judicially created doctrine of nonstatutory double patenting ultra vires?”

Section 103 of the Patent Act generally defines the doctrine of obviousness and instructs tribunals to look to the prior art and consider whether the claimed invention is sufficiently beyond the prior art. But, even if a claims are found patentable under Section 103, the USPTO still considers obviousness-type double patenting.  Even if there is no prior art, the USPTO still bars a patentee from obtaining a separate patent claiming an obvious variation of already-issued claims held by the patentee/inventor. Thus, although 102(b)(2) explains that certain prior-filed patents are not prior art when attributed to the applicant/inventor, OTDP steps in on the back-side to effectively assert those excused documents as prior art.  Pause here to note that one big difference between obviousness and OTDP is that applicants can skirt OTDP rejections by filing a terminal disclaimer that effectively links the two similar patents together along two axes: same term and same owners.

My middle school shop teacher was missing fingers courtesy of a table saw. Yours? Steve Gass has a PhD in physics and also a patent attorney.  He was doing some amateurs woodworking when he conceived of his SawStop technology.  The basic idea: if the spinning blade ever touching human skin, the electrical connection triggers an emergency brake that stops/retracts the blade within 5 milliseconds.  “Fast enough to turn a life changing event into a minor cut.”  Gass has over 100 patents and runs the innovative product company SafeSaw.

Gass’s U.S. Pat No. 9,927,796 was filed back in 2002 — claiming priority to a 2001 provisional application. That patent finally issued in 2018–only after SawSafe filed a civil action and received a court-judgment in its favor.  A 1974 patent had disclosed use of a safety circuit and a braking-means. However, the district court concluded  that the prior art was not enabling — i.e., a person of skilled in the art would not be able to construct (or even design) the claimed invention without undue experimentation. [2016 Decision].

Another 16 issued patents also claim priority back to this 2002 application.  One application is still pending, Application 15/935,432, that claims an obvious variant of what has already been patenting.   The USPTO rejected the ‘432 application based upon the judicially created non-statutory doctrine of obviousness-type double patenting.  SawStop did not want to file a terminal disclaimer on this valuable patent and instead appealed.  On appeal, the Federal Circuit affirmed without opinion in a R.36 Judgment.  Now, SawStop has petitioned the Supreme Court asking that the doctrine be eliminated.

= = =

Although the petition does not cite the Supreme Court’s recent abortion decision, it certainly picks-up upon some of the same themes:

  • A right to abortion “is nowhere mentioned in the Constitution.”  Similarly, obviousness type double patenting has no grounding in the Patent Act.
  • The fact that a precedent is old does not convert that precedent to a sacred text.

The Supreme Court in Bilski addressed this issue to some degree in the context of the non-statutory categorical bars of abstract ideas; laws of nature and natural phenomenon.

While these exceptions are not required by the statutory text, they are consistent with the notion that a patentable process must be “new and useful.” And, in any case, these exceptions have defined the reach of the statute as a matter of statutory stare decisis going back 150 years.

Bilski v. Kappos, 561 U.S. 593 (2010).  The Bilski court found a small textual hook, but also identified the doctrine as built upon longstanding precedent.

The longstanding nature of precedent is important in the patent context.  But unlike in the Constitutional abortion context, we have always had direct statutes guiding patent issuance and enforcement, beginning with the First Congress in 1790. In the area of obviousness, the doctrine was developed by courts and then implemented by statute in 1952.  In Graham though, the Supreme Court indicated that, with minor exceptions, the 1952 Act maintained all the old precedent.

Double Patenting in the Statute.  In its 2014 Abbvie decision, the Federal Circuit wrote that Obviousness Type Double Patenting is “grounded in the text of the Patent Act.”   In particular, the court honed-in on Section 101’s use of the singular article “a” in describing what is granted to an inventor: “a patent.”

While often described as a court-created doctrine, obviousness-type double patenting is grounded in the text of the Patent Act. . . . Section 101 reads: “Whoever invents or discovers any new and useful process, machine, manufacture, or composition of matter, … may obtain a patent therefor.” 35 U.S.C. § 101 (emphasis added). Thus, § 101 forbids an individual from obtaining more than one patent on the same invention, i.e., double patenting.

Abbvie Inc. v. Mathilda and Terence Kennedy Inst. of Rheumatology Tr., 764 F.3d 1366, 1372 (Fed. Cir. 2014).  But Judge Dyk’s conclusions in Abbvie are not well grounded themselves as there are several ways this provision could be interpreted. It also proves too much, since there are ways for a patentee to obtain multiple patents covering patentably indistinct inventions: (1) via terminal disclaimer; (2) via restriction.  If the patentee files a terminal disclaimer then the patent office will allow multiple patents to issue.  If the patentee files a divisional application (following a restriction) then the patent office will allow multiple patents to issue even without a terminal disclaimer.

 

The Federal Circuit’s Precedent/Outcomes Mismatch

Patent

By Paul R. Gugliuzza, Temple University Beasley School of Law; Jonas Anderson, American University Washington College of Law; and Jason Rantanen, University of Iowa College of Law

Recently, we wrote about the small number of mandamus decisions on transfer of venue that the Federal Circuit has designated as precedential and about how those precedential decisions are unrepresentative of overall outcomes. Specifically, the Federal Circuit has labeled only 15% of its venue mandamus orders as precedential. And, though the Federal Circuit grants venue mandamus less than a third of the time, the court has granted nearly 80% of the petitions it has decided in precedential orders.

As a comparison, we wanted to share some data on precedential opinion rates in regular Federal Circuit appeals (as opposed to mandamus petitions). Our data make two things clear.

  • First, opinions in regular appeals are more than twice as likely to be precedential than orders on venue mandamus.
  •  Second, the outcomes reported in those precedential opinions—like precedential mandamus orders—are skewed toward cases in which the Federal Circuit disagrees with the decision below.

On the first point, here’s the breakdown of precedential opinions, nonprecedential opinions, and Rule 36 affirmances for all Federal Circuit appeals from 2008 through 2021.

Table 1: Federal Circuit Panel Appeal Rulings, 2008 through 2021

Table 2 below breaks the data down by tribunal of origin.

Table 2: Federal Circuit Panel Appeal Rulings By Tribunal of Origin, 2008 through 2021

These two tables make clear that, overall, 30% of Federal Circuit appeals are decided in a precedential opinion. In district court cases—the most relevant comparator for venue mandamus petitions—the figure is 42%.

Either way, the proportion of appeals resolved in precedential opinions is substantially higher than for venue mandamus petitions. Moreover, the Federal Circuit decides more than a quarter of appeals in no-opinion affirmances—a mechanism the court does not employ for mandamus petitions. If we excluded Rule 36 affirmances from our calculations, the differences between appeals and mandamus orders would be even greater.

On the second point about skewed outcomes: Like with mandamus petitions, the results in precedential opinions disproportionately disagree with the lower court or agency. Table 3 below reports the outcomes and modes of disposition of all Federal Circuit appeals (excluding a few hundred appeals that were dismissed or that had an unusual outcome—namely, something other than affirmed, reversed, vacated, etc.) from 2008 through 2021.

Table 3: Federal Circuit Panel Appeal Rulings, Excluding Dismissals and Other Outcomes, 2008 through 2021

As the bottom row of the table makes clear, overall, the Federal Circuit fully affirms in 78% of appeals. Yet, as the first row of data indicates, only 53% of precedential Federal Circuit opinions affirm the lower tribunal; 47% vacate or reverse, at least in part. By contrast, nonprecedential opinions (the second row of data on the table) fully affirm 81% of the time. And, as indicated toward the bottom of the table, nearly 30% of Federal Circuit appeals are decided in no-opinion Rule 36 affirmances, which, by definition, also fully affirm across the board.

In short, looking only at precedential opinions, one might think that, in any given appeal, there’s about a 50-50 chance the Federal Circuit will at least partly disagree with the tribunal below. But, in reality, fewer than a quarter of the Federal Circuit’s decisions disagree with the tribunal below in any respect.

The disparity between the outcomes reported in precedential opinions versus overall results is equally stark when the data is limited to the primary sources of Federal Circuit patent cases—appeals from the district courts, the PTO, and the ITC. From those three tribunals, combined, only 48% of precedential opinions fully affirm. But the overall fully-affirmed rate in appeals from those tribunals is 73%. The figures below illustrate those vast disparities.

Figure 1: Federal Circuit Precedential Rulings in DCT, PTO, and ITC Appeals, 2008 through 2021

Figure 2: Federal Circuit Nonprecedential Rulings in DCT, PTO, and ITC Appeals, 2008 through 2021

The skew of precedential opinions toward decisions that disagree with the lower tribunal provide a misleading sense of what Federal Circuit’s rulings look like day in and day out, just like the Federal Circuit’s precedential venue mandamus orders provide an inflated sense of the likelihood of mandamus being granted. These findings also raise interesting questions about what happens to patent doctrine when it is developed in cases that are not representative of overall outcomes.

The data used in this post comes from the Federal Circuit Dataset Project, available at https://doi.org/10.7910/DVN/UQ2SF7 or empirical.law.uiowa.edu.

 

Supreme Court – Looking Forward to 2022-2023

Patent

By Dennis Crouch

The Supreme Court has closed-out its 2021-2022 term without deciding or granting certiorari in any patent cases.  Overall, the court denied certiorari in 40+ patent cases, including the biggest case of American Axle.  I’ll post a review of those denied cases later this month. Meanwhile we can start a preview for the 2022-2023 term.

Eight patent cases are now pending before the Supreme Court. Several focus on the written description and enablement requirements of 35 USC 112(a).

The current most-likely big case is Amgen Inc., et al. v. Sanofi, No. 21-757.  Amgen asks fundamental questions of how the enablement doctrine should operate and whether enablement is a question-of-fact or a question-of-law. These are important issues fundamental to patentability that also touch on some of the same principles as  the eligibility cases.  The Court has requested an amicus filing from the Solicitor General.  Interactive Wearables, LLC v. Polar Electro Oy, No. 21-1281, is a patent eligibility case, but it asks a related question about the extent that principles of Section 112 are applicable to the eligibility analysis.  In Juno Therapeutics, Inc. v. Kite Pharma, Inc., No. 21-1566 focuses on “full scope” written description – arguing that the Federal Circuit’s application goes too far beyond the statutory text.  Biogen International GmbH, et al. v. Mylan Pharmaceuticals Inc., No. 21-1567, also focuses on the written description requirement – asking what level of disclosure is necessary for a claim limitation requiring a therapeutic treatment to be “effective.”

The one other case that I would suggest has a good chance of certiorari is Hyatt v. USPTO.  But, that case focuses on the summary judgment standard for APA cases and so would in reality have very little impact on the patent system.

The final three cases are all well written briefs, but I expect that they have a very low chance of being heard because of intervening events:

  1. Apple Inc. v. Qualcomm Incorporated, No. 21-1327 (appellate standing – same question as the already denied parallel Apple v Qualcomm petition);
  2. CustomPlay, LLC v. Amazon.com, Inc., No. 21-1527 (can the same PTAB judges both institute and decide IPR – I believe that Arthrex implicitly solved this issue, at least from a Constitutional perspective); and
  3. Worlds Inc. v. Activision Blizzard Inc., et al., No. 21-1554 (eligibility same question as the already denied petition in American Axle).

The court takes a summer break and then returns in the fall for the October 2022 term.

Supreme Court Refuses to Reconsider its Patent Eligibility Doctrine

Patent

by Dennis Crouch

As its final act for the 2021-2022 term, the US Supreme Court has denied certiorari in the pending patent eligibility cases of American Axle v. Neapco and Spireon v. Procon.

The Patent Act expressly lists four categories of patentable inventions: “any new and useful process, machine, manufacture, or composition of matter, or any new and useful improvement thereof, may obtain a patent therefor.”  35 U.S.C. 101. This language is almost identical to the list created for the Patent Act of 1790.  The Supreme Court added further atextual caveats — no abstract ideas; laws of nature; or natural phenomenon.

SCT: Breyer to Jackson

Patent

by Dennis Crouch

Justice Stephen Breyer is retiring today from the Supreme Court after 28 years on the bench.  Judge Ketanji Brown Jackson will be sworn-in as his replacement. Congratulations!  Justice Breyer was an administrative law and copyright scholar at Harvard before moving into the judiciary in 1980 (1st Circuit). President Bill Clinton nominated Breyer to the Supreme Court in 1994 on the retirement of Harry Blackmun.

Justice Breyer wrote the opinion for a unanimous court in Mayo Collaborative Services v. Prometheus Laboratories, Inc., 566 U.S. 66 (2012).  That decision established the two step eligibility test and broadly construed the concept of a ‘law of nature.’ In Dickinson v. Zurko, 527 U.S. 150 (1999), Justice Breyer wrote the majority opinion holding that the Administrative Procedure Act’s (APA) standards applied to appellate review of USPTO factual findings.  The result is a high level of deference and thus a low chance of overturning a PTAB factual finding on appeal.

Judge Jackson was a D.C. district court judge and then later on the D.C. Circuit Court of Appeals. on the the D.C.  In those roles, she handled a number of administrative cases in the FDA/Patent space.

Trademarks, Territoriality, and Migration

Patent,

Meenaxi Enterprise, Inc. v. Coca-Cola Company, 21-2209 (Fed. Cir. 2022)

Although goods are often shipped globally, many companies manufacture and sell region-specific products.  That divide allows the company to cater to local market preferences and regulations and also avoid potential arbitrage.

In the 1970’s Coca-Cola withdrew its flagship sugary cola from the Indian market at a time of heavy regulation of foreign companies. A local company then started Thums Up and it quickly became popular across the country.  Although similar to Coca-Cola, Thums Up is ‘spicier’ and you can almost taste the cardamom and cinnamon.  In the 1990s, the Indian market opened again to foreign competition. Coca-Cola purchased rights to Thums Up along with Limca lemon-lime and others and continues to sell those products in India (as well as other countries).  Coca-Cola holds the trademark rights in India, but not in the USA.  Apparently Coca-Cola abandoned its US version of the THUMS UP application back in 1987 and its US LIMCA mark expired in 1996.

About 5 million Indians and Indian-Americans live in the USA, and some of those people want to purchase Thums Up and Limca.  In 2008 Meenaxi began filling the US demand with its own version version of the drinks.  In 2012, the Meenaxi registered the two word marks with the USPTO (THUMS UP & LIMCA).  Coca-Cola stepped-in in 2016 seeking to cancel Meenaxi’s mark registrations.

The TTAB sided with Coca-Cola in ordering the marks cancelled.  On appeal, however, the Federal Circuit has reversed with Judge Dyk writing the opinion joined by Judge Stoll and Judge Reyna writing a concurring opinion.

A case like this begins with the territorial doctrine of trademark law:

Under the territoriality doctrine, a trademark is recognized as having a separate existence in each sovereign territory in which it is registered or legally recognized as a mark.

McCarthy on Trademarks § 29:1.  A simple assumption is that territorial limits align with both the laws and the people. e.g., Indians live in India and are subject to the law of India.  But here we know that Indians have migrated and brought their distinctiveness understandings with them to the USA.  Meenaxi has been free-riding off those understandings and continues to do so.  Here though, the this population centric notion of trademark law falls to the hard principle of U.S. law that trademark rights in the US require that the mark be used in the US.

Here, the court also considered whether Meenaxi’s use should actionable under the more general provisions of Section 43(a) of the Lanham Act. 15 U.S.C. § 1125(a).  However, the court found that Coca-Cola had failed to show any US injury.  (1) No lost sales; and (2) No reputational injury.  The court seemed to agree that it could be improper for Meenaxi to use Coca-Cola’s goodwill with Indian-American consumers.  But, the problem was that Coca-Cola failed to provide substantial evidence proving the existenece of free-riding. In particular, the evidence showed that the marks were well known in India, and that Meenaxi was marketing the products to Indians and Indian-Americans in the USA.  But, the missing link was evidence that the US-based Indians and Indian-Americans were aware of the branding.

There is no basis [in the evidence] to assume that an American of Indian descent is aware of brands in India. The Board did not consider what portion of Indian Americans had spent time in India, i.e., how many had visited India or lived in India. The Board’s conclusion relies at least in part on stereotyped speculation. . . .

Coca-Cola has not presented any survey evidence showing awareness of either mark in the United States. . . . This is plainly insufficient.

Slip Op.

Unlike IPRs on the patent side, trademark cancellation proceedings have a standing requirement.  The petitioner must “believe[] that he is or will be damaged . . . by the registration of a mark on the principal register[:] . . .”  15 U.S.C. § 1064.  And, although the “belief” element appears subjective, it is interpreted as quite objective.  Here, since Coca-Cola could not show any US injury then could not reasonably believe it was damaged.   REVERSED in favor of Meenaxi.

Judge Reyna argued that the case is governed by the territorial principal of trademark law. “[T]he majority’s opinion could be reasonably read to imply that CocaCola could have established statutory standing if it proved that U.S. consumers were aware of its Indian brands. But if that were the case, I would still reverse because the territoriality doctrine governs, and Coca-Cola waived reliance on the well-known mark exception thereto.”

= = =

The case cites recent work by Professors Farley & McKenna with regard to some confusion created by Belmora LLC v. Bayer Consumer Care AG, 819 F.3d 697 (4th Cir. 2016). Christine H. Farley, No Trademark, No Problem, 23 B.U. J. Sci. & Tech. L. 304, 313 (2017) (stating the Belmora decision “failed to acknowledge that its ruling challenged fundamental principles of trademark law”); Mark P. McKenna & Shelby Niemann, 2016 Trademark Year in Review, 92 Notre Dame L. Rev. Online 112, 122 (2016) (stating the Belmora decision “is especially notable . . . [in] its failure to recognize the implications of its decision for the territoriality of trademark rights”).

Protective Orders and Joint Defense Agreements

Patent

by Dennis Crouch

Static Media LLC v. Leader Accessories LLC and Jen-Feng (Jeff) Lee (Fed. Cir. 2022)

Back in 2018, Static Media sued Leader Accessories in W.D. Wisconsin for infringing its U.S. Design Patent D771,400, covering an ornamental design for a stadium seat.  The case ended with a summary judgment of non-infringement. The district court found a large number of similar prior art designs and thus narrowly construed the potential infringement window.  The district court then walked-through a number of differences that would preclude a finding of substantial similarity, including the quilted vertical columns,; difference in the lower portion of the back (straight vs sloping at the edges); narrower seat cushion; distinctive storage panel with two pockets; etc.

Parallel Cases and a JDA: While the Leader case was ongoing, Static Media also threatened and then sued OJ Commerce for infringing the same patent.  The two defendants – Leader and OJ – entered into a Joint Defense Agreement (JDA) for the purpose of creating a common defense in both cases with Jeff Lee representing Leader and Sam Hecht representing OJ.

The Wisconsin case was subject to a confidentiality agreement/order.  Lee wanted to send some confidential case documents to Hecht.  But, before doing so, first had Hecht sign the confidentiality agreement. At that point, Lee sent over some deposition transcripts as well as prior licensing/sales information from the patentee.  According to the court “[o]nly a few of the pages in those documents were marked confidential, the rest were not.”

Hecht (OJ’s attorney) later used the confidential documents from the Leader case in license negotiations.  Static Media’s attorneys were upset at this information sharing and petitioned for sanctions.  The Wisconsin magistrate and district court agreed and concluded Lee’s disclosures to Hecht were in violation of the protective order.  In particular, the protective order limited the use of confidential information: “solely for the purposes of this action.” I.e., confidential disclosures in Static v. Leader could only be used for Static v. Leader.  The court ordered a sanction under R. 37 of $1,000 plus $10,500 in attorney fees.

On appeal, a divided Federal Circuit panel has reversed–finding a “fair ground of doubt as to the wrongfulness” of the conduct.  Quoting Cal. Artificial Stone Paving Co. v. Molitor, 113 U.S. 609, 618 (1885).

Two theories of contempt:

  1. Theory 1: When Lee disclosed the material to Hecht, Lee knew (or should have known) that Hecht would use it in the OJ case.  On appeal, the Federal Circuit found this theory lacked evidentiary support.  The court particularly pointed to Lee’s requests that Hecht sign and then comply with the confidentiality agreement. “Mr. Lee had Mr. Hecht sign the Written Assurance, and with each disclosure, Mr. Lee reminded Mr. Hecht of the obligations the protective order imposed on his use of the confidential information.” Slip Op.
  2. Theory 2: Even though Hecht signed the agreement, disclosure to Hecht for the purposes of a JDA was improper. On appeal though, the Federal Circuit found focused on the purpose of the agreement — to prevent public disclosure or disclosures that would place the parties at a competitive disadvantage. The appellate panel then found that a Joint Defense Agreement does not frustrate that goal.

The majority opinion was authored by Judge Dyk and joined by Judge Taranto.  Judge Reyna wrote in dissent — concluding that the majority failed to give the district court’s sanctions order sufficient deference.

He, She, or They in US Patent Law

Patent,

by Dennis Crouch

The United States Constitution was ratified in 1789.  The following year, Congress passed the first patent act that was then signed-into law by President George Washington.

When the Patent Act of 1790 refers to inventors, it lists gender inclusive forms of “he, she, or they:”

[The inventor(s) must] set[] forth, that he, she, or they, hath or have invented or discovered any useful art, manufacture, engine, machine, or device, or any improvement therein…

Patent Act of 1790. Three years later, Congress substantially rewrote the statute and, at that time changed the pronouns.  The new law eliminated the female pronoun “she.”

[The inventor(s)] shall allege that he or they have invented any new and useful art, machine, manufacture or composition of matter, or any new and useful improvement on any art, machine, manufacture or composition of matter …

Patent Act of 1793. See, Kara W. Swanson, Making Patents: Patent Administration, 1790-1860, 71 Case W. Res. L. Rev. 777, 818 n84 (2020) (noting the change).  Thus far, I have not been able to identify any explanation or justification for this particular change in the gender language.  Perhaps the answer here was simply reestablishment of a patriarchy after some higher-minded ideals during the revolutionary era. Chief Justice Burger explained in Diamond v. Chakrabarty that Thomas Jefferson authored the 1793 Act with the intent that “ingenuity should receive a liberal encouragement.” 447 U.S. 303, 308 (1980) (quoting 5 Writings of Thomas Jefferson 75–76 (Washington ed. 1871)), but the Chief Justice did not content with the narrowing of pronouns (or the newly introduced citizenry limit).  [*** Note: Later historians have concluded that Jefferson was not the author.  See, Edward C. Walterscheid, To Promote the Progress of Useful Arts: American Patent Law and Administration – 1787-1836, 79 J. Pat. & Trademark Off. Soc’y 61 (1997) ***].  In any event, this implicit exclusion of women was common for the era (as was explicit exclusion).  Still, unlike in many other areas of American life at the time, the revised statute was not interpreted to expressly exclude women from patenting. That said, patenting by women was at an extremely low level. Women inventors are credited with only 72 patents during the first 70 years of the U.S. patent system. Although the records are unclear, I have not seen any indication that any of the patents issued 1790-1793 were awarded to women inventors.

The patent laws were rearranged and recodified in the 1952 Patent Act. At that point Congress used a more generalized pronoun “whoever” for the new Section 101: “Whoever invents or discovers…”  But, a number of purely male references remained in the statute.  Section 115 required the inventor to make an oath that “he believes himself to be the original and first inventor;” Section 102(f) prohibited a person from obtaining a patent if “he did not himself invent the subject matter sought to be patented.”  These two provisions were amended and removed respectively as part of the America Invents Act of 2011.  Section 115 now identifies inventors as either male or female–requiring an inventor’s oath stating that “individual believes himself or herself to be the original inventor.” Still, other provisions in the law were not changed during this makeover and remain male gendered.  See 35 USC 251 (“patentee claiming more or less than he had a right”); 289; 290; 33 (referring to the patent practitioner); and 116.  In addition, all references to the USPTO Director continue to refer to the director as male.

For its part, the USPTO has not historically asked for the gender of its applicant.  Still, there is plenty of evidence for historic and ongoing systemic gender bias. See, for example, Kyle Jensen, Balázs Kovács & Olav Sorenson, Gender Differences in Obtaining and Maintaining Patent Rights, 36 NATURE BIOTECH. 307, 308 (2018); B. Zorina Khan, Married Women’s Property Laws and Female Commercial Activity: Evidence from United States Patent Records, 1790-1895, 56 J. ECON. HIST. 356 (1996); Deborah J. Merritt, Hypatia in the Patent Office: Women Inventors and the Law, 1865-1900, 35 AM. J. LEGAL HIST. 235, 290 (1991); Carroll Pursell, The Cover Design: Women Inventors in America, 22 TECH. & CULTURE 545 (1981). Dan L. Burk, Do Patents Have Gender?, 19 Am. U. J. Gender Soc. Policy & L. 881 (2011).

For many years, the use of a single male pronoun in legal documents has been  frequently interpreted as including all genders of humans as well as other legal persons, such as corporations.  In recent arguments regarding AI-inventorship, the USPTO argued that the Congressional rewrite of Section 115 to focus binary gender identities indicates an intent to limit inventorship rights to only human inventors.

  • Pre-AIA: “he believes himself to be the original and first inventor.”
  • Post-AIA: “such individual believes himself or herself to be the original inventor.”

Of course, our new world also accepts non-binary gender, both under federal law and the law of some states. Interpreting “himself or herself” as particularly limiting is clearly wrong if it excludes non-binary humans from the patenting process.  This brings me back to the Patent Act of 1790.  It appears clear from the grammatical context that Congressional use of “they” in the 1790 Act was referring to instances what we now call joint inventorship.  But, perhaps that early Congress had already stumbled upon a right answer.

American Axle – Still Waiting

Patent

by Dennis Crouch

No decision today in the pending subject matter eligibility case of American Axle v. Neapco. Friday was the last scheduled conference for 2021-2022. However, the Court traditionally holds one additional clean-up conference once it issues all of its merits decisions.  If the court follows its past tradition, it will either grant or deny the petition at that final conference.  The court also took no action on the follow-on eligibility case of Spireon v. Procon. Certiorari was denied in both Apple v. Qualcomm (standing to appeal IPR) and EPA II (collateral shareholder challenge of patent decision).

What does this mean? Conventional wisdom is that a hold-over increases the odds of certiorari.  The up/down decision will likely be pushed back to early July.

Federal Circuit Flips “Negative Claim Limitation” Decision after Change in Panel Composition

Patent,

By Chris Holman

Novartis Pharms. Corp. v. Accord Healthcare, Inc., 2022 WL 2204163, — 4th —  (Fed. Cir. June 21, 2022)

Here we have a case in which a petition for rehearing by the Federal Circuit leads to a flipped decision that appears to be the consequence of a change in panel composition.

In the original decision, authored by Judge O’Malley and decided January 3, a divided panel upheld a district court’s determination that the patent claims at issue were not invalid for failure to satisfy the written description requirement. The Federal Circuit agreed to rehear the case, but the composition of the panel rehearing the case was altered by the replacement of Judge O’Malley (who retired in March) with Judge Hughes. The reconfigured panel flipped the result of the earlier decision, this time reversing the district court.  The second decision was authored by Judge Moore, the dissent in the original decision. Judge Linn, who sided with Judge O’Malley in the original decision, found himself writing in dissent the second time round.

The relevant issue before the court was whether a negative claim limitation was adequately supported by the priority patent application. The claims are directed towards methods of treating relapsing-remitting multiple sclerosis (RRMS) through the administration of fingolimod (an immune suppressant) “at a daily dosage of 0.5 mg, absent an immediately preceding loading dose regimen.”  The “no loading dose” limitation was added by amendment during prosecution in order to overcome an obviousness rejection.  A loading dose is a “higher-than-daily dose,” usually given as the first dosage in a dosing regimen.   It was undisputed that loading doses were well-known in the medical field generally, and that loading doses have been used with some medicaments used in the treatment of MS.

The priority application does not explicitly mention loading doses, let alone the absence of a loading dose, but the district court nonetheless found implicit support for the negative claim limitation in two examples provided in the specification (one a prophetic human clinical trial, the other an experiment conducted in rats) which disclosed dosage regimens that did not involve the use of an initial loading dose. There was expert testimony to the effect that a person of skill in the art (POSA) reading the examples would have understood them as being “complete,” and as such the fact that the examples do not mention a loading dose implicitly discloses a dosage regimen that is not preceded by a loading dose.

In the original decision upholding the district court’s decision as not erroneous, Judge O’Malley emphasized that the majority was not instituting a “new and heightened standard for negative claim limitations,” and acknowledged that the disclosure need not describe a limitation in haec verba.  Writing in dissent, Judge Moore argued that the “no loading dose” limitation could not possibly find adequate support in a patent specification that fails to even mention loading doses.

Writing for the majority in the second opinion, Judge Moore reiterates her position that the district court clearly erred in finding written description support for the “no loading dose” limitation. While she acknowledges that a negative claim limitation does not necessarily require explicit written description support when the specification describes a reason to exclude the relevant element, e.g., when the specification identifies disadvantages of using that element, or “distinguishes among” the element and alternatives to it, she maintains that the element must at least be disclosed in some form, given that “the hallmark of written description is disclosure.” Judge Moore does not dispute that the written description requirement can be satisfied if a skilled artisan would have understood that the specification inherently discloses the negative limitation, but she found no evidence on the record in this case that a skilled artisan would understand silence regarding a loading dose to “necessarily exclude” a loading dose.

In his dissent, Judge Linn does not so much disagree with Judge Moore’s characterization of the law of written description, as with the way the majority applied that law to the facts of this case. In particular, he complains that majority improperly required the priority application to disclose that the negative limitation in question was “necessarily excluded”.  He argues that it can be sufficient for the specification to merely provide a “reason to exclude” the negative claim limitation.

 

Judicial Recusal Order Saves Cisco $2.75 Billion

Patent

by Dennis Crouch

Cisco has escaped its $2.75 billion patent infringement loss with a recusal order based upon the fact that the Judge’s spouse owned $5,000 in Cisco stock. 

Centripetal Networks, Inc. v. Cisco Systems, Inc. (Fed. Cir. 2022)

Judge Dyk wrote this opinion ordering the recusal of E.D. Va. Judge Henry C. Morgan based upon his spouse’s ownership of about $5,000 of Cisco stock. The order also vacates all orders and opinions in the case entered after Judge Morgan learned of her ownership.

In this situation, the (rather small) financial interest suggests tilting things in Cisco’s favor. But, here is the crazy thing: The outcome of the case was a $2.75 billion verdict for the patentee Centripetal — i.e., Cisco lost the case. When Judge Morgan learned of the ownership, he immediately notified the parties. Centripetal indicated that it had no problem with Judge Morgan continuing to hear the case.  But, Cisco concluded that it was likely to lose the case anyway and so requested Judge Morgan recuse himself under 28 U.S.C. § 455.   The Judge denied Cisco’s motion for recusal and eventually awarded the absolutely huge judgment against Cisco.

Spousal activity and recusal has been in the news lately with Justice Thomas and his spouse’s political advocacy.  Although judicial codes of ethics provide guidance. Congress has also created a statutory regime that requires recusal in certain situations. On point for this case, the statute calls for recusal if a judge “knows that he … or his spouse … has a financial interest … in a party to the proceeding, or any other interest that could be substantially affected by the outcome of the proceeding.”  28 U.S.C. § 455(b)(4).  This requirement to step-down is not waivable. § 455(e).

Here it is clear that Judge Morgan falls within § 455(b)(4).  However, the statute goes on to indicate that a judge who has devoted substantial judicial time to a matter can keep the case so long as they “divest [themselves] of the interest that provides the grounds for the disqualification.”  § 455(f).  Here, Judge Morgan took the step of placing the stock in a blind trust.  However, the Federal Circuit here held that the blind trust was not sufficient for the statutory requirement of “divest[ment].”

Judge Morgan had considered simply selling the stock, but was concerned about the appearance of insider training. On appeal, the Federal Circuit added a footnote concluding that it would not have been insider trading: “Selling the stock to comply with ethical obligations is not insider trading, as was made clear in the Stop Trading on Congressional Knowledge Act of 2012 (“STOCK Act”), Pub. L. 112–105, 126 Stat. 291, 298 (2012).”

Remedy for failure to recuse.  Sometimes there is no ex post remedy for a judge’s failure to recuse.  Here, as I mentioned, the financial incentive favored Cisco, but it is also Cisco that is asking for vacatur.  Centripetal argued that the failure to recuse was  thus a harmless error.  In Liljeberg v. Health Servs. Acquisition Corp., 486 U.S. 847, 862 (1988), the Supreme Court highlighted three factors in considering whether failure to recuse was harmless:

(1) “the risk of injustice to the parties in the particular case”;

(2) “the risk that the denial of relief will produce injustice in other cases”; and

(3) “the risk of undermining the public’s confidence in the judicial process.”

Id. On appeal, the Federal Circuit suggested that all three factors weighed in favor of recusal.  The court noted that the statute is purposely designed to require recusal without proving any actual bias.

Making such a bias determination would require the sort of line drawing that the statute was designed to avoid. . . . The reason § 455(b)(4) establishes a bright-line rule and does not require a showing of prejudice is because of the great difficulty in establishing actual prejudice in any particular case.

Slip Op.  On remand, the case will be re-assigned and rolled-back to August 2020.  That will likely require a new trial in the case.

Note that Judge Morgan passed away in May 2022. He was 87 years old. RIP.