by Dennis Crouch

VLSI Technology LLC v. Intel Corporation, No. 2022-1906 (Fed. Cir. Dec. 4, 2023)

In its decision here, the Federal Circuit took VLSI’s $2.2 billion judgment down to zero — but it will allow a new trial on damages.  The court particularly affirmed a finding that Intel infringed claims of U.S. Patent No. 7,523,373, but found the associated $1.5 billion damage award flawed.  With regard to the second patent at issue, U.S. Patent No. 7,725,759, the appellate panel found that insufficient particularized evidence had been presented to show infringement under the Doctrine of Equivalents. This took away the $700 million damage for infringement of that second patent.  Opinion by Judge Taranto and joined by Judges Lourie and Dyk.

VLSI originally sued Intel in the Western District of Texas in 2019, asserting the two patents relating to semiconductor chip technology. The ‘373 and ‘759 respectively cover “Minimum Memory Operating Voltage Technique” for integrated circuits and a “Method of Managing Clock Speed in an Electronic Device.”  And, Intel’s Haswell and Broadwell microprocessors were accused of practicing the claims.  A jury issued its verdict in early 2021 favoring the patentee and, the district court entered judgment that Intel literally infringed the ‘373 patent and infringed the ‘759 patent under the doctrine of equivalents with $2.2 billion in total damages.

Infringement under the Doctrine of Equivalents: The most interesting part of the infringement decision focused on the doctrine of equivalents — with the Federal Circuit continuing its efforts to tightly cabin-in the doctrine.

Although the jury sided with the patent holder, the Federal Circuit found VLSI’s evidence legally insufficient to support the verdict. The court explained that “[t]he doctrine of equivalents provides a limited exception to the principle that claim meaning defines the scope of the exclusivity right in our patent system” and is “an ‘exceptional’ basis for liability that must be carefully limited.”  The court then highlighted three limiting principles of DoE:

1. All Elements Rule: First, proof of equivalents must be limitation specific, not focused only on the claim as a whole, though the limitation-specific inquiry of equivalence may be informed by the “role played by each element in the context of the specific patent claim.”
2. Function-Way-Result All Substantially the Same: Second, for the determination of whether a substitute element is only insubstantially different from a claimed element and hence an equivalent, a traditional formulation—appropriate for this case, as VLSI’s use of it indicates—asks “whether a substitute element matches the function, way, and result of the claimed element.” Such matching requires that each of function, way, and result be “substantially the same,” with the “way” requirement of particular importance, as a practical matter, in keeping the doctrine properly limited.
3. Particularized Expert Testimony: Third, the patentee must provide “particularized testimony and linking argument as to the insubstantiality of the differences between the claimed invention and the accused device.”

Of course, the court could have also added a fourth and fifth substantial limiter: prosecution history estoppel, and vitiation (which some folks argue is simply a feature of the function-way-result rule).  As you read these requirements, you’ll begin to see that the path to winning a case by equivalents is quite narrow — each particular limitation in the claim must be practiced in the accused device, either literally or by equivalents.  And, although an equivalent will, by definition, have a different structure than what is claimed, the doctrine expounded by the court here requires that it be “substantially the same” in both its function and structure.   And, as noted by the outcome of the case, those substantial similarities are treated as elements of proving equivalents and thus cannot be simply inferred by the jury.

Applying these principles, the court held that VLSI failed to adequately explain why the different way Intel’s processors operated was only an insubstantial difference from what was claimed.  During oral arguments, the judges pressed the parties to identify “particularized testimony and linking argument” to support a finding of equivalence — apparently there was not enough.  Here, the VLSI claim requires a “first master device” and a distinct “programmable clock controller.”  But, in the accused intel products these were overlapping on the same power control unit.  VLSI’s expert Dr. Conte testified that “It’s just a difference of where an engineer draws this data line. It’s a design choice.”  But, the appellate panel found that this testimony was legally insufficient to provide a basis for the jury to find that spitting functions as Intel did was “substantially the same way” as recited in the claims.  Merely labeling it a “design choice” was not enough.

The determination of equivalence under the doctrine of equivalents is a question of fact protected by the 7th Amendment right to a jury verdict. So why was the Federal Circuit reversing the jury’s finding of equivalence in this case?  The key guiding principle here is the legal sufficiency of the evidence. Even though infringement under the doctrine of equivalents is a factual issue, the patentee still bears the burden of providing particularized evidence to support its theory of equivalence. As the court stated:

“We have long demanded specificity and completeness of proof as crucial to enforcing the limits on the doctrine: The patentee must provide particularized testimony and linking argument as to the insubstantiality of the differences between the claimed invention and the accused device.”

Essentially, while the ultimate determination is a question for the jury, there is still a minimum legal threshold of providing substantive, thorough evidence explaining why any differences are insubstantial. The Federal Circuit found VLSI failed to meet that threshold with conclusory, unsupported testimony.

This decision continues the court’s strict policing of the doctrine of equivalents — here by overturning a jury verdict and rejecting the district court’s JMOL denial.  In a complete reversal from its historic origins, I now see DoE as a highly technical strategy full of almost unavoidable pitfalls.

Damages Award Vacated: Although the Federal Circuit affirmed the literal infringement judgment as to the ‘373 patent, it vacated the $1.5 billion damages award after finding that VLSI’s damages expert made a clear error in calculating the power savings attributable to the patented technology. Specifically, according to the Federal Circuit, the expert used data from processor states that did not practice the patented functionality in order to create a model. Although this issue was presented to the jury, the Federal Circuit found the “readily identifiable” methodology problem required vacating the award. The court remanded for a new trial on damages, allowing VLSI the opportunity to correct this issue. Note here that the patentee strongly disagreed that there was any error, much a “readily identifiable” one sufficient to overturn the jury verdict.

License Defense Permitted

Finally, in a procedural ruling, the Federal Circuit held that the district court improperly denied Intel’s request to amend its answer to add a license defense. Intel alleged that its recent acquisition of Finjan gave it a license to VLSI’s patents under Intel’s earlier agreement with Finjan. The district court found the defense futile and thus refused to permit the amendment, but the Federal Circuit disagreed. While not concluding Intel would ultimately succeed in proving it held a license, the court explained there were open questions under Delaware law that required further litigation. “We hold only that it was error to deny the motion to add the license defense to the case.”

by Dennis Crouch

I was looking forward to the oral arguments in the interesting case of Karl Storz Endoscopy v. STERIS Instrument Management  Services (IMS) focusing the threshold between permissible repair and impermissible reconstruction.  Oral arguments were scheduled for December 4, 2023, but the parties filed a joint dismissal on December 3.

Storz is a medical device manufacturer and sells its patented endoscopes throughout the united States that included a specialized optical system covered by two patents. US7530945 and RE47044.  The patents claim an endoscope with an optical relay components surrounded by transparent shrink wrap, which allows the components to be pre-assembled and optically tested before insertion in the endoscope body.  Hospitals hire IMS to repair its medical devices, including the Storz endoscopes — a process that could involve breaking open the endoscope, removing the optical relay, replacing damaged lenses/spacers with new or recycled ones, inserting the rebuilt optical relay back into the endoscope body, and resealing the device.

A manufacturer’s patents covering its product are “exhausted” as soon as the company places product in the chain of commerce.  Those particular authorized products can be resold, used, and repaired by third parties without creating any patent infringement liability.  But, the buyers do not have permission to create new copies of the patented work, and that includes wholly reconstructing the product after it has been “spent.” The seminal Supreme Court case addressing  the distinction between permissible repair and impermissible reconstruction is Aro Manufacturing Co. v. Convertible Top Replacement Co., 365 U.S. 336 (1961), which held that “replacement of unpatented parts, one at a time, whether of the same part repeatedly or different parts successively, is no more than the lawful right of the owner to repair his property.” In Wilbur-Ellis Co. v. Kuther, 377 U.S. 422 (1964), the Court found extensive refurbishing and resizing of multiple unpatented components was repair because it extended the useful life of the original patented article. The Federal Circuit expanded on the scope of repair in Dana Corp. v. American Precision Co., 827 F.2d 755 (Fed. Cir. 1987), permitting rebuilding of worn unpatented parts, and in Jazz Photo Corp. v. ITC, 264 F.3d 1094 (Fed. Cir. 2001), allowing invasive modifications so long as there was no complete reconstruction. However, in Sandvik Aktiebolag v. E.J. Co., 121 F.3d 669 (Fed. Cir. 1997), the court found impermissible reconstruction where a patented drill bit was recreated with a new cutting tip after the drill was spent.

Before the district court, IMS moved for summary judgment that its activities constitute permissible repair and not infringing reconstruction. The district court agreed, holding that IMS was exercising its customers’ right to repair the devices they had purchased and therefore did not infringe.  The district court particularly found that IMS’s repairs preserve the useful lifespan of the endoscope and do not “reconstruct” or make a wholly new article.  On appeal, Karl Storz raised three main grounds for reversing the district court’s decision:

1. Readily Replaceable Parts: Karl Storz argued that replacing “readily replaceable” parts can be repair, but replacing parts that are not readily replaceable constitutes impermissible reconstruction. From the briefing it appears undisputed that the optical relay in its endoscopes and covered by its patents is not a readily replaceable part.
2. Novel/Inventive Aspect: The district court found the optical relay assembly was the “novel and distinguishing” part of Karl Storz’s patents. Karl Storz contended that by fully replacing this inventive aspect, IMS has impermissibly reconstructed the device, even though the patent does not have a claim directed solely to the optical relay assembly.
3. New Article: Case law says repair does not allow a party to construct an essentially new article. Karl Storz argues that IMS’s replacement of nearly all the patented components results in an endoscope that is so different from the original that IMS has created a new device.

The would have been an important one in the evolving area of patented medical device repair and third-party servicing rights.

• Opening Brief
• Opposition Brief
• Reply Brief

by Dennis Crouch

In a recent decision, the U.S. Court of Appeals for the Federal Circuit denied a petition for a writ of mandamus filed by Cozy, Inc. seeking to set aside a district court discovery order piercing attorney-client privilege. In re: Cozy, Inc., No. 2023-145 (Fed. Cir. Dec. 4, 2023). The discovery dispute arose out of Cozy’s patent infringement lawsuit against Dorel Juvenile Group, Inc. (“Dorel”) and Dorel’s inequitable conduct counterclaims alleging that Cozy made fraudulent misrepresentations to the PTO. 21-cv-10134-JGD.

After reviewing documents in camera, the district court granted in part Dorel’s motion to compel production of certain Cozy documents listed as privileged on the basis that the crime-fraud exception to attorney-client privilege applied. The court found that Dorel had established a prima facie case that Cozy’s founder, Dr. Arjuna Rajasingham, “manipulated the PTO into recognizing priority dates to which he was not entitled” and “relied on the advice of his counsel to perpetrate a fraud on the PTO.”

The crime-fraud exception provides that attorney-client privilege does not apply to communications between a client and attorney that are made for the purpose of furthering criminal or fraudulent activity. Specifically, the ordinarily strong privilege may be pierced if the party seeking disclosure can show that (1) the client was engaged in or planning criminal or fraudulent activity when the attorney-client communications were made, and (2) the communications were intended in some way to facilitate or conceal the criminal or fraudulent activity. The policy rationale is that the usual protections afforded by attorney-client privilege should not extend to communications made to enable or aid the commission of a crime, fraud, or other misconduct.  Because attorney-client privilege is typically so strongly protected by the legal system, the exception is typically narrowly construed.

On mandamus here, Cozy challenged the privilege ruling, arguing that the exception requires a stronger showing of inequitable conduct, which requires both materiality and intent.  In particular, the patentee argued that the defendant must provide “a clear showing [of materiality,] that the patent would not have issued but for [the] misrepresentations.”  The Federal Circuit, however, denied mandamus relief, finding no “clear and indisputable” right to relief nor a lack of other adequate means to challenge the decision. The court cited Supreme Court precedent stating that “post-judgment appeals generally suffice to protect the rights of litigants and ensure the vitality of the attorney-client privilege.” quoting Mohawk Indus., Inc. v. Carpenter, 558 U.S. 100 (2009).

The Federal Circuit further held that attorney-client communications used to commit fraud on the PTO after a patent has already issued could potentially still fall within the crime-fraud exception.

[I]t is far from clear why “[a] client who consults an attorney for advice that will serve him in the commission of a fraud” on the PTO following patent issuance should get “help from the law” by shielding communications used in commission of that fraud.

Quoting Clark v. United States, 289 U.S. 1 (1933).  The court also cited federal statutes associated with fraud against the US: 18 U.S.C. §§ 371 (Conspiracy to commit offense or to defraud United States), 1001 (false statement to US).

The outcome here is that the Federal Circuit denied mandamus, but it left open the possibility that it reconsider the privilege issue after final judgment — assuming that it makes a difference in the actual outcome.  In that vein, the appellate panel provided an expectation and a suggestion to the district court: (1) Expectation: “that the communications and related documents will be kept under seal to mitigate the potential harmful effects caused by disclosure.” and (2) Suggestion: “it would be helpful if the district court could indicate separately what findings it would make with and without the documents used as a result of piercing the privilege at issue here.”

While I understand the Federal Circuit’s cautious suggesting to keep the communications secret from the public – just in case the privilege issue was decided wrongly. If this turns out to be a fraud on the PTO, I expect that it will be very useful for the patent bar to see the details of the communication.   To be clear, at this point I can’t tell you the particularly details of the communications other than the notion that they involve discussion of issues related to priority dates, patent term, certificates of correction, and prosecution strategy.

In the pending Federal Circuit appeal In re Xencor, the USPTO Director recently filed an opposed motion asking the Court to remand the case back to the PTAB.  The motion comes long after briefing has commenced and just days before the Director’s response brief was due, after already receiving an extension of time. Xencor has opposed the request, citing prejudice and lack of justification. This post examines the parties’ arguments.

As background, Xencor’s biotech patent application contains both Jepson and means-plus-function claims that were rejected by the PTAB on questionable written description grounds.  The examiner had initially issued written description rejections, but withdrew the rejections during the PTAB appeal briefing. The PTAB then reinstated the rejections based upon its authority to find new grounds for rejection, and then reaffirmed its position on request for rehearing.  Xencor then appealed to the Federal Circuit.

In its request for remand, the USPTO noted that it plans to “to issue a revised decision that clearly and thoroughly expresses the Agency’s view on the application of the case law to this important area of technology.”  On point, the Agency has not admitted any errors it made during the process, it has not conceded any point of law or fact, or identified anything that was not sufficiently briefed — and so Xencor has opposed the motion for remand.

An odd feature of agency appeals is that the agency (here, the USPTO) is both the appellee and the tribunal itself. This dual role creates an inherent tension – the agency is defending its own decision while also being responsible for carrying out further review. In this case, the USPTO’s request for a remand seems likely to be an attempt to avoid an adverse appellate ruling by bolstering the agency’s position with a better reasoned opinion. But the ordinary approach here is to recognize that the agency already had its chance to issue a final decision, and that the USPTO should deal with the consequences on appeal rather than get a second (third) bite at the apple. The Federal Circuit will now need to assess whether remand is appropriate so late in the process, or whether the case is ripe for a decision on the current record.

But the Director can fully express the Agency’s view in her response brief on appeal. Remand is unnecessary for that purpose. _See id._ (“so the board can reevaluate the bases of its decision” is an insufficient justification).

Federal Circuit Rule 27(f) provides guidance on motions for remand:

A motion to . . . remand should be made as soon as the grounds for the motion are known. After the appellant . . . has filed its principal brief, the argument supporting . . . remand should be made in the response brief of the appellee.

Fed. Cir. R. 27(f).  This provision does not provide much guidance, but there are some prior cases where the Federal circuit has appeared to generously grant remand if the USPTO requested an opportunity to reconsider its prior decision.

Remand “is usually appropriate” to allow an agency to reconsider its previous position.

Marin Partners v. Heaven Hill Distilleries, Inc., No. 2023-1624, 2023 WL 5286458, at *1 (Fed. Cir. Aug. 17, 2023) quoting dicta from SKF USA Inc. v. United States, 254 F.3d 1022, 1029 (Fed. Cir. 2001) (attempting to spell out a taxonomy of agency remand situations).

A key early case from the Federal Circuit on point is In re Hester, 838 F.2d 1193, 1194 (Fed. Cir. 1988).  In that case the Federal Circuit denied the Patent Office motion for remand that was filed a few days before the merits brief was due and the appellant had already expended the time, money, and effort to file his brief. In addition to  early filing, the court provided some examples of when remand is appropriate:

It is not the intent of the court to discourage the filing of any and all motions to remand. Parties may agree that remand is desirable, intervening law may warrant a remand, the Board may wish to concede to some or all of appellant’s demands, or other circumstances may be present that would indicate that remand is appropriate. However, none of those circumstances is present here.

Id.

The USPTO’s responsive brief is due on Friday, and so I expect the Federal Circuit to decide this motion quickly.

by Dennis Crouch

I have been following the pending Federal Circuit case of In re Xencor.  It is a quirky case involving both a Means-Plus-Function Claim and a Jepson claim.  In its decision, the PTAB went off the rails with its means-plus-function analysis.  In particular, the Board held that the MPF claim was invalid for lack of written description because the specification did not describe equivalents to the disclosed structure.

There is some logic to the decision. Let me try to explain: First, we know that written description doctrine requires a showing of possession of the full scope of the claims.   With MPF claims, we know that the statute requires a particular construction that includes both the structure described in the specification and “equivalents thereof.” 35 U.S.C. 112(f).  What we see here is that equivalents of the disclosed specification are within the literal scope of the claims — ergo, the written description must show possessions of those equivalents.

If you recall, a Jepson claim begins with a recitation something that is known or conventional, and then particularly claims the improvement — typically using a phrase such as “wherein the improvement comprises.”  The Jepson claim issue on appeal is the extent that the preamble portion of the claim must have been sufficiently supported by the original specification — even if the preamble carries no patentable weight for novelty or obviousness.

The patent applicant appealed both of these written description holdings by the PTAB, and briefing has been ongoing for the past few months.

In an opposed motion, the USPTO Solicitor has recently asked the Federal Circuit to remand the case back to the USPTO in order to reconsider the questions presented and issue a revised decision.  Although the motion does not clearly state this, it implies that the case will be heard by the USPTO’s Appeals Review Panel (ARP) that includes the Director (Vidal), the Commissioner of Patents (Udupa), and the PTAB Chief Judge (Boalick).

The request states that Xencor’s claims “present novel questions involving the applicability of the Supreme Court’s and this [Federal Circuit’s] precedent for both Jepson-format and means-plus-function claims in the field of biotechnology, and in particular the antibody art.  The use of Jepson format and means-plus-function claiming in the life sciences is exceedingly rare.

USPTO Request for Remand. Although I agree about the current rarity of Jepsom claims, Means Plus Function claims are not exceedingly rare, even in biotech.

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Claim 8 is written in the Jepson format:

8. In a method of treating a patient by administering an anti-C5 antibody with an Fc domain, the improvement comprising

said Fc domain comprising amino acid substitutions M428L/N434S as compared to a human Fc polypeptide,

wherein numbering is according to the EU index of Kabat,

wherein said anti-C5 antibody with said amino acid substitutions has increased in vivo half-life as compared to said antibody without said substitutions.

Claim 9 is a method claim that includes a means-plus-function limitation:

9. A method of treating a patient by administering an anti-C5 antibody comprising:

a) means for binding human C5 protein; and

b) an Fc domain comprising amino acid substitutions M428L/N434S as compared to a human Fe polypeptide,

wherein numbering is according to the EU index of Kabat,

wherein said anti-C5 antibody with said amino acid substitutions has increased in vivo half-life as compared to said antibody without said substitutions.

Guest Post by Jordan Duenckel. Jordan is a third-year law student at the University of Missouri and a registered patent agent. He has an extensive background in chemistry, food science, and viticulture. 

Article III standing remains a hot topic at all levels of federal litigation and across many different areas of law. Inter partes review is not unique. In Allgenesis Biotherapeutics Inc. v. Cloudbreak Therapeutics, LLC, Case No. 22-1706 (Fed. Cir. Nov. 7, 2023), the Federal Circuit dismissed, in a unanimous opinion by Chief Judge Moore, an appeal of a PTAB final IPR decision before reaching the merits by finding that the IPR challenger did not allege sufficient “injury in fact” to confer standing necessary for Article III judicial review.  

Pterygium is the result of cellular expression of kinase in the cornea that expands beyond control and creates tumors. With surgery as the only viable course of treatment, Cloudbreak Therapeutics created a topical application of multikinase inhibitors to provide a non-surgical treatment to prevent recurring tumors, which is recognized in U.S. Patent No. 10,149,820 (the ‘820 patent). Specifically, nintedanib is one of the most powerful multikinase inhibitors for reducing corneal neovascularization, a principal cause of pterygium.

Allgenesis petitioned for IPR of all eleven claims of the ’820 patent.  After the Board instituted, Cloudbreak disclaimed the genus claims, i.e., claims 1–3 and 6–11, leaving only claims 4 and 5, which more narrowly claim the use of nintedanib.  The Patent Trial & Appeal Board issued a final written decision finding that Allgenesis failed to show that the remaining two claims were unpatentable overcoming prior art and motivation to combine asserts. As part of its decision, the Board made a priority decision that a Patent Cooperation Treaty (PCT) application belonging to Allgenesis was not prior art to Cloudbreak’s patent.  While standing was not necessary to file an IPR because of the administrative nature of the PTAB, standing is a constitutional requirement for appeal to the federal courts. 

The Federal Circuit dismissed Allgenesis’s appeal because Allgenesis failed to establish Article III standing to appeal. Article III standing stems from the Constitutional requirement that federal courts only decide actual “cases” and “controversies” and avoid speculative advice administration. Lujan v. Defs. of Wildlife, 504 U.S. 555 (1992) is the seminal Supreme Court case that set forth the requirements for establishing Article III standing – namely that a party must show: 

1. An “injury in fact” that is concrete, particularized, and actual or imminent (not hypothetical) 

1. Causation between the injury and the challenged conduct 

1. Redressability (a favorable court decision would likely redress the injury) 

In Lujan, the Court found the plaintiffs failed to show an imminent, concrete injury since their professed intentions to return to project sites at some indefinite time were insufficient. The Court also held that plaintiffs could not establish standing based solely on a “procedural injury” from violation of the consultation procedure, absent showing impairment of a separate concrete interest. Compare to Allgenesis. Specifically, Allgenesis did not show: 

• An injury-in-fact based on potential infringement liability from its plans to develop a nintedanib product, because its plans were not sufficiently concrete. 
• An injury-in-fact from the PTAB’s priority date determination, because any preclusive effect was speculative and Allgenesis did not sufficiently articulate how it impaired its own patent rights. 

Allgenesis argued it had standing based on potential infringement liability from developing nintedanib treatments for pterygium. The court found Allgenesis failed to show concrete plans creating a substantial risk of future infringement as Allgenesis’ VP of Finance declaration did not identify specific plans beyond a Phase II trial years ago, nor any current plans for Phase III trials or any efforts to seek FDA approval for their own nintedanib product. Likewise, settlement talks related to the IPR petition were insufficient to show its activities would likely cause Cloudbreak to assert infringement. 

Allgenesis also argued injury because the Board found the ‘820 patent claims were entitled to a June 2015 priority date, making Allgenesis’ PCT with a June 2015 filing date not prior art. Allgenesis asserted this would have a preclusive effect on its pending application claiming priority to its PCT. However, the court found Allgenesis did not establish any preclusive effect. Importantly, collateral estoppel will not attach to a non-appealable determination like the Board’s determination of priority. Therefore, if an examiner would find that Cloudbreak’s application served as prior art to Allgenesis’ pending application, Allgenesis would be able to challenge that on a separate appeal. For standing, any potential injury that may result from a future examiner’s action is too speculative.  

The precise line for what consists of “concrete plans” seems to be especially uncertain in a highly uncertain business like the life sciences and pharmaceutical business here. Prospectively applying the Court’s position, to even reach the merits, drug development companies that act as challengers in IPR proceedings will need to develop more factual support for standing, including clinical trials, timelines for future events, pending information regarding company target dates with regulatory agencies, economic data, or even sensitive company business data. These disclosure requirements may face resistance for business, competitive advantage, or any number of reasons but should be a relevant factor in determining whether to proceed with IPR petitions. 

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Note from Crouch: One key importance here is that the Federal Circuit demanded evidence of concrete injury.  At oral arguments, Allgenesis attorney Don Mizerk stated plainly that its client was practicing the invention, but that attorney statement was insufficient.

• Court: I was curious as to what do you think is your best argument for why you have Article III standing?
• Mizerk: Well, Your Honor, I think it’s a pretty clear case that we have standing. We are practicing the method that is claimed.
• Court: Where is the evidence? … [W]here’s the proof that you’re doing that?

Although the court did not get into this issue, the Phase II trials conducted by Allgenesis would not likely create infringement liability because of the 271(e) safe harbor.

By Chris Holman

Purdue Pharma L.P. v. Collegium Pharm., Inc., 2023 WL8043047 (Fed. Cir. Nov. 21, 2023)

Section 326(a)(11) of Title 35 (the Patent Act) provides that the PTO “shall prescribe regulations… requiring that the final determination in any post-grant review be issued not later than 1 year after [institution],” and that the time can be extended by up to six months for good cause or in the case of joinder (emphasis added).  On its face, the statute seems to establish a statutory deadline of 18 months from institution (one year plus the six-month extension) for the PTAB to issue its Final Written Decision in a post-grant review (“PGR”) proceeding.  In Purdue Pharma L.P. v. Collegium Pharm., Inc., the Federal Circuit answered a question that the court characterized as one of first impression, i.e., what recourse do the parties have if the PTAB fails to meet the statutory deadline? The Federal Circuit concluded that, because the statute does not specify any means for enforcing the PTAB’s compliance with the statutory deadline, the only recourse lies in a petition for a writ of mandamus.

The PTAB’s apparently unprecedented failure to issue its Final Written Decision within 18 months arose out of some unusual circumstances, including Purdue’s filing of a Notice of Bankruptcy Filing and Imposition of Automatic Stay and the Board’s resulting decision to stay the PGR, as well as some turnover on the panel that heard the case. In any event, after the PTAB issued its Final Written Decision finding Purdue’s claims to be unpatentable, Purdue appealed to the Federal Circuit, arguing that the Board lacked the authority to issue a Final Written Decision because it had failed to meet the 18 month deadline.

But the Federal Circuit sided with Collegium Pharma and the PTO, holding that the PTAB has authority to issue a Final Written Decision even after the deadline proscribed in the statute has passed.  The court cited Supreme Court precedent for the proposition that “if a statute does not specify a consequence for non-compliance with statutory timing provisions, the federal courts will not in the ordinary course impose their own coercive sanction.” Responding to Purdue’s argument that the use of “shall” and “requiring” in section 326(a)(11) deprives the Board of authority to issue a Final Written Decision after the deadline, the Federal Circuit noted that in Brock v. Pierce Cnty. the Supreme Court held the “requirement that the Secretary ‘shall’ take action within 120 days does not, standing alone, divest the Secretary of jurisdiction to act after that time.”

The court found it significant that other provisions of the AIA use quite different language to bar action after the passage of a deadline. Section 315(b), for example, contains explicit language denying agency power after a time deadline, saying “[a]n inter partes review may not be instituted if the petition requesting the proceeding is filed more than 1 year after the date on which the petitioner … is served with a complaint alleging infringement of the patent.” (emphasis added).  See also section 321(c) (“A petition for a postgrant review may only be filed not later than the date that is 9 months after the date of the grant of the patent or of the issuance of a reissue patent” (emphasis added)). The Federal Circuit concluded that “[h]ad Congress meant to deprive the agency of power in section 326(a)(11), it knew how to do it, and, significantly, it did not use language in section 326(a)(11) similar to that used in other sections.”

The court found further support in the AIA’s legislative history, noting that “[i]f the Board could not issue a Final Written Decision, the parties would be forced to pursue the issue in district court litigation. This is the exact opposite of the purpose of the AIA, which is meant to create a more efficient alternative to district court litigation.”

The Federal Circuit goes on to state that Purdue’s appropriate remedy would have been a petition for writ of mandamus, which “is available immediately upon the deadline’s expiring, assuming that the other requirements for issuance of the writ are satisfied. There is no requirement to show unreasonable delay in the issuance of the decision—only that the deadline has passed.”

It remains to be seen whether the Federal Circuit’s decision will result in more Final Written Decisions being issued after the expiration of the 18 month statutory deadline, and whether mandamus will prove an effective remedy.

by Dennis Crouch

The Patent Trial and Appeal Board recently designated as precedential a portion of its Penumbra v. RapidPulse decision in that provides important guidance on the use of a provisional patent application’s filing date for 102(a)(2) prior art under the America Invents Act. Penumbra, Inc. v. RapidPulse, Inc., IPR2021-01466, Paper 34 (March 10, 2023) (made precedential as to section II.E.3 on November 15, 2023).  This is a pretty long post, but key takeaways are: (1) the PTAB expressly rejected the Federal Circuit’s pre-AIA Dynamic Drinkware rule (we’ll see how it goes on appeal); (2) when using a patent/publication as prior art based on an earlier provisional filing date, a petitioner now only needs to show the provisional describes the relied upon subject matter instead of requiring claims supported under §112; (3) this lowers the bar for leveraging provisionals as invalidating prior art before the PTAB (i.e., makes it easier to invalidate patents); however, (4) it remains unclear whether the courts will adopt the PTAB’s interpretation given the fairly minor statutory distinction underlying the decision. Toward the end of the post, I note that the ultimate questions on appeal may focus on the purposes and policy goals of the 102(a)(2) prior art provision and recognition of the provision’s potential unfairness.  These may push the Federal Circuit toward rejecting the USPTO approach and instead extending Dynamic Drinkware to AIA patents.

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The language of 35 U.S.C. 102(a)(2) is a bit clunky, but its effect is to codify the first-to-file regime created by the America Invents Act of 2011.  The provision recognizes that a prior-filed patent application will typically serve as prior art against another later-application filed by a different inventor and assignee.  The provision does have some important caveats.  Notably, in order to be prior art under 102(a)(2), the application must first either (a) issue as a US patent (under 35 U.S.C. 151) or (2) be published as a US patent application publication (under 35 U.S.C. 122(b)).  Although a PCT application is not actually published under Section 122(b), it is “deemed a publication under section 122(b)” so long as it designates the US.  35 U.S.C. 374.

Foreign patent applications and provisional applications typically do not publish under Section 122(b) or issue as US patents — and therefore do not directly qualify as prior art as of their filing dates.  Here though there is an important caveat — the 102(a)(2) designates the US patent/publication prior art as of its effective filing date.   Section 102(d) then stretches the prior art date back to the earliest priority filing date so long as the US patent/publication “is entitled to claim a right of priority … or to claim the benefit of an earlier filing date.”  By its terms, the Section 102(d) reach-back does not apply to the patent  or published application as a whole. Rather, the statute indicates that the earliest effective filing date for prior art purposes is determined based whether “subject matter described in the patent or application” that is being used as prior art is also described in the priority document.

(d) Patents and Published Applications Effective as Prior Art.—For purposes of determining whether a patent or application for patent is prior art to a claimed invention under subsection (a)(2), such patent or application shall be considered to have been effectively filed, with respect to any subject matter described in the patent or application … (2) if the patent or application for patent is entitled to claim a right of priority … or to claim the benefit of an earlier filing date …, as of the filing date of the earliest such application that describes the subject matter.

35 U.S.C. 102(d).  Thus, for a U.S. patent or published application to be considered effectively filed as of the filing date of an earlier priority application under Section 102(d), (1) the patent or published application must be entitled to claim priority to the earlier application, and (2) the earlier priority application must describe the particular subject matter relied upon in the patent or published application being used as prior art against the claimed invention.  I term these two requirements as “entitlement” and “description” respectively.  As you’ll learn below, the USPTO recently adopted this approach — further delineating the entitlement portion as “ministerial entitlement.”

102(a)(2) serves an important role in post-AIA law because it codifies the rules of the first-inventor-to-file regime.  This was an important change from pre-AIA that, at times, allowed patentees to claim priority back to their provable date of invention. At the same time, 102(a)(2) prior art smarts of some fundamental unfairness because the references are kept secret for (typically) 18 months only to spring forth with a back-dating to the filing date.  Even the most careful and contentious inventors and applicants have no way of organizing their affairs to avoid unintentional duplication or minor extension because the references are kept secret.  This is one reason why in Europe, the parallel prior art is only available for novelty purposes, not for obviousness.

A key question post-AIA has been the extent that this new law changes the rules developed under the old parallel statute previously codified at 35 U.S.C. 102(e).  The main point of contention is the interpretation of the the two requirements  of entitlement and description.

The Federal Circuit faced a parallel issue in its Dynamic Drinkware case, albeit under pre-AIA law. Dynamic Drinkware, LLC v. National Graphics, Inc., 800 F.3d 1375 (Fed. Cir. 2015).  In Dynamic Drinkware, the Federal Circuit held that for a reference patent to receive the earlier filing date of its provisional application under pre-AIA 35 U.S.C § 102(e), the disclosure of the provisional “must provide adequate written description support for at least one claim of the issued [reference] patent” under 35 U.S.C. § 112, ¶ 1 (2006). In other words, it was not sufficient under the pre-AIA framework for the provisional application to merely disclose the subject matter relied upon in the reference patent to show obviousness of the claimed invention. Instead, Dynamic Drinkware required that the claims in the reference patent itself must also be fully supported by the written description of the priority provisional application under § 112, ¶ 1 in order to reach back to its earlier filing date for prior art purposes.  Without full written description support, the priority filing does not serve as a proper anchor sufficient to justify the priority prior art date.

But, Dynamic Drinkware struck some folks as wrong because it focuses on what was claimed rather than what was disclosed. As I wrote back then:

Anyone who works with prior art knows that this setup is an oddball way to address the situation.  A patent’s disclosure for prior art purposes should not depend upon what was claimed or not claimed but instead should focus on what was disclosed. . . .

Raymond came up with idea at issue first and disclosed it in a provisional patent application that eventually resulted in an issued patent.  But, since Raymond’s non-provisional application included [and claimed] additional subject matter, the provisional disclosure no longer counts as effective prior art.

Crouch, Federal Circuit Backtracks (A bit) on Prior Art Status of Provisional Applications and Gives us a Disturbing Result, Patently-O (Sept. 8, 2015).   I went on

Here comes the new decision.  The USPTO recently designated a PTAB decision as precedential that rejects Dynamic Drinkware as applied to post-AIA patents. Penumbra, Inc. v. RapidPulse, Inc., IPR2021-01466, Paper 34 (March 10, 2023) (made precedential as to section II.E.3 on November 15, 2023).  Although the USPTO does not have authority to overrule Federal Circuit decisions regarding the law of patents and what counts as prior art, it skirted the issue here by noting that the statute was substantially rewritten in the AIA.

IPR2021-01466 involves RapidPulse’s U.S. Patent No. 10,531,883 B1 which relates to an aspiration thrombectomy system used to treat ischemic strokes by removing blood clots. The petitioner, Penumbra, challenged the validity of claims 1-18 of the ’883 patent as obvious over prior art references including Teigen et al. (U.S. Patent No. 11,096,712).

But, Teigen only counts as prior art if it can reach back to its provisional application under 102(d).  RapidPulse argued that Teigen did not qualify as prior art because the petitioner failed to establish written description support in Teigen’s provisional applications for claimed subject matter as required under Dynamic Drinkware.

In the precedential section of the Penumbra decision, the PTAB rejected the application of Dynamic Drinkware for determining whether a patent is entitled to claim priority to provisional applications for prior art purposes under §§ 102(a)(2)/(d) of the AIA.  Under Penumbra, the PTAB identified the two  statutory requiements:

1. Entitlement: The patent or published application must meet the ministerial/procedural requirements to be entitled to claim priority to the provisional application under 35 U.S.C. §119 or §120. This does not require actually showing the claims are fully supported under §112, but only that the patent document need meets the “‘ministerial requirements’ of §§119 and 120.”
2. Disclosure: The provisional application must describe the particular subject matter from the patent or published application that is relied upon as prior art against the challenged patent claims.

In other words, under the  AIA statutory framework, a petitioner must show: (1) the reference patent meets certain formalities to claim priority to the provisional, and (2) the provisional application describes the specific portions of the reference patent that are asserted as prior art, even if other portions are not described in the provisional and even if no claims in the prior art patent are fully supported by the provisional.

The PTAB expressly rejects “extending” pre-AIA law, including the Federal Circuit’s Dynamic Drinkware decision, to require establishing §112 support for the claims of the reference patent itself. Only the subject matter relied upon to show obviousness needs written description support in the priority application to reach back to its earlier filing date.

This precedential PTAB decision thus begins to settle the question of whether Dynamic Drinkware applies under the AIA for the effective date of prior art patents and published applications.  The holding particularly lowers the burden for petitioners seeking to rely on provisional and foreign filing dates for asserted references because the challenger no longer needs to show § 112 support for a reference patent’s claim, but rather only needs to show that the subject matter at issue is described in the provisional.

This case will certainly be appealed, and it is not entirely clear that the Federal Circuit will agree with the USPTO’s rejection of its precedent. Although the statutory framework is different, the statutory differences do not clearly indicate a shift in precedent. Thus, there is a good chance that this case will also be reversed on appeal.

The ultimate questions here may focus on the purposes and policy goals of the 102(a)(2) prior art provision and the recognition of the provision’s potential unfairness. Namely, is the provision primarily focused on enforcing the first-inventor-to-file aspects of the law? Or, is the provision’s primary purpose simply to expand the scope of invalidating prior art references?

If the main thrust of 102(a)(2) is to codify a first-inventor-to-file system, then the Dynamic Drinkware approach of requiring full written description support for the claims of a reference patent makes more sense. The claims dictate what has been invented first and claimed first. Provisional support for subject matter disclosed but unclaimed in the prior art patent does not establish first-inventor status.

However, if 102(a)(2) is intended principally to expand prior art, then the PTAB’s focus on merely requiring that the provisional describe the relied upon subject matter is more in line with that goal. Expansion of invalidating art takes priority over only allowing first-claiming inventors to rely on early priority dates.

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I would be remiss to post this without harping on one of my pet notions that provisional patent applications should all be considered prior art as soon as their file is open to the public.  The USPTO needs to do a better job of making provisional applications publicly available — many include details and descriptions that are not found in the later non-provisional. But, as far as I am aware, there is no searchable database of US provisional applications.

by Dennis Crouch

In August 2023, the Federal Circuit decided an important case questioning how  obviousness-type double patenting (OTDP) is impacted when the terms of two family-member patents that would otherwise expire on the same day are separated by patent term adjustment (PTA) added to the term of one of the patents.  In re Cellect, LLC, 81 F.4th 1216 (Fed. Cir. 2023).  One of Cellect’s patents passed through the PTO quickly, but the other was delayed and thus received extra term as required by the statutory “patent term guarantee” codified in 35 U.S.C. 154(b).  In its panel decision, the Federal Circuit held that Cellect should have filed a terminal disclaimer to disclaim the portion added by the statutory term adjustment.  And, since the patentee did not file the disclaimer, the USPTO properly found the claims invalid under the non-statutory doctrine of OTDP. As Cellect’s attorney Paul Andre stated at oral aguments: “The point of this appeal really comes down to whether a statutory extension or adjustment in it by itself enough to invalidate patents.”  The Federal Circuit found the answer to be “Yes.”  The USPTO has argued that the situation creates an unjustified advantage for the patentee: “As this court has already explained in Boehringer, by failing to terminally disclaim a later patent prior to the expiration of an earlier patent, Cellect enjoyed an unjustified advantage, a purported time extension of the right to exclude from the date of the earlier patent.” USPTO attorney Kakoli Caprihan at oral arguments.

Cellect has now petitioned for en banc rehearing and has received support from several amici, including IPO, NYIPLA, and Bob Armitage.  Cellect’s rehearing petition asserts the panel wrongly treated PTA differently than patent term extension (PTE) under 35 U.S.C. §156 for OTDP purposes. In Novartis AG v. Ezra Ventures LLC, 909 F.3d 1367 (Fed. Cir. 2018), the Federal Circuit held PTE for one family member is not invalidating for OTDP. Cellect contends PTA deserves identical treatment, with OTDP assessing pre-PTA expiration dates. The petition argues the panel misapplied precedent and failed to honor Congressional intent for these “technical term adjustment provisions.”

The statute indicates that the term “shall be extended for 1 day for each day” of USPTO delay. But, it also includes a special caveat for disclaimers: “No patent the term of which has been disclaimed beyond a specified date may be adjusted under this section beyond the expiration date specified in the disclaimer.” 35 U.S.C. § 154(b)(2)(B) (emphasis added). As mentioned above, however, the patentee did not file a disclaimer in this case, and so argues that that this disclaimer provision is not applicable.

Three amicus briefs support Cellect’s petition. I’ll include a few interesting notes from each.  Amicus curiae Bob Armitage proposes rethinking OTDP entirely, suggesting res judicata could address any harassment from enforcing indistinct patents. The NYIPLA argues the panel and Board applied the wrong OTDP test by using a one-way analysis instead of the two-way test required for PTO-delay. It further contends the panel improperly ignored the doctrine’s equitable underpinnings by rigidly applying OTDP without assessing misconduct or gamesmanship. The IPO brief echoes Cellect’s arguments that the panel’s interpretation improperly overrides express statutory language that PTA “shall” issue. IPO contends this formalistic use of ODP to invalidate PTA-adjusted patents is unsound policy that will deter innovation.

The USPTO has been asked to file a responsive brief that was originally due November 30, 2023.  The Solicitor’s office has requested an extension to December 14, 2023 “due to the unusually heavy workload in the Solicitor’s Office.” Nothing in the public record indicates whether the request has been granted or denied.

This case is a bit of an unusual situation because the patentee was never asked to file a terminal disclaimer during prosecution — based upon the briefing this was an oversight by the patent examining corps. However, if Cellect wins, then the USPTO will likely receive substantial pressure to allow terminal disclaimers that include an exception for PTA.

• Cellect Decision
• Cellect Rehearing Petition
• Cellect Armitage Brief
• Cellect IPO Brief
• Cellect NYIPLA Brief
• Daniel Kazhdan, Obviousness-Type Double Patenting: Why it Exists and When it Applies, Akron Law Review (2019)
• N. Scott Pierce, Inventorship, Double Patenting, and the America Invents Act, Berkeley Technology Law Journal, Vol. 30, No. 2 (Fall 2015).

Guest post by Jonathan Stroud and Sam Korte.  Mr. Stroud is the General Counsel of Unified Patents and Mr. Korte is Senior Principal Counsel – IP at Garmin.

An exotic insurance product has recently taken the litigation world by storm.  Judgment preservation insurance, or JPI, was neither offered nor widely discussed, at least publicly, as recently as five years ago.[1]  Now, it’s hard to avoid; a brief Internet search will turn up hundreds of hits and dozens of explainer articles by insurance brokers, law firms, and litigation funders extolling the benefits and pitching such policies to appellants. In IP lit, panels, presentations, and brand-new conferences, insurers and lawyers extol the virtues of these “bespoke” policies.  They now undergird some of the biggest eye-popping judgments on appeal to the Federal Circuit.

Briefly, JPI is a when a civil litigant (or funder) who has won a money judgment—let’s say, $100m—purchases an insurance policy guaranteeing some percentage of the judgment.[2]  In this example—taken from a pitch—a $12.5m policy premium might offer a guarantee of 80% recovery, or $80m, if the appeal results in a settlement, or if full recovery is otherwise stymied—remand, lack of collectability, or another adverse intervening event.  Here the plaintiff-appellant, while out the immediate $12.5m, now has a policy worth at least $80m, against which they can borrow or otherwise book the judgment at some predictable gain; perhaps to continue the appeal or offset recovery costs.  Sellers promote policies alongside litigation financing portfolios to de-risk and otherwise encourage litigation.  And litigation financiers are bundling these verdicts (with their other litigations) and selling shares in the result.  Thus, JPI provides them a floor for these bundled “securities” and allows them a way to assure gains.

Developer Appian secured a $2 billion judgment in a trade secret case, and publicly disclosed to the Wall Street Journal they insured it, including the terms. There, the $47.5m policy ($57.3m including fees) guaranteed 25% (at least $500m) of the judgment. A policy that large held by a publicly traded company whose total revenue in 2022 was, by comparison, $468 million, turned heads.  It has been explained as a smart (if expensive) way to hedge against the high risk of reversal of these supersized judgments.

The policies themselves, at the guaranteed rates currently offered, seem terribly risky. We have heard experienced insurers complain of competing brokers offering guarantees of 50%-80%, and in one case, 96%; clearly, actuarial tables don’t exist for judgment collection, but the reversal rate in appeals from the District Courts was 57% in 2022—and there can be remands and other appeals.

Now, to spread risk and reduce the harm when policies are called, insurance underwriters employ tranches and towers—multiple insurers—and will often sell off insurance liability. But the incentive to compete to sell policies and earn premiums is likely driving these guarantees higher than reasonable.  Given reversal and recovery rates, maybe a 25% policy is sensibly balanced in the patent context based on known reversal rates and settlements; case-specific issues, like preexisting judgments or bad facts, might push it higher.  But anything much higher than that seems, to most in the field, foolish.  Perhaps there’s a sales volume that justifies that risk, and many more policies than estimated are being written; or perhaps we are riding an insurance bubble in this niche market.  Either way, if JPI insurers write policies for Federal Circuit damages appeals at higher rates, plaintiff-appellants will take them—if offered at such eye-catching terms, they have rational attraction.

In-house counsel told us that within hours of receiving patent mega-judgments—which we arbitrarily peg as above $100m—multiple insurance brokers reached out, some directly by phone within hours, to discuss JPI policies.  We have been told by many that the $2.2 billion Intel v. VLSI judgment was insured, though for how much and by who hasn’t been publicly disclosed, as far as we know.

Federal Circuit district court reversal rates and recovery being what they are—as high as 43%, depending on the year—if insurers are willing to offer 80% (or more) at reasonable premiums, why wouldn’t most plaintiff-appellants take them?  Even cash-rich plaintiff-appellants could likely further monetize the guarantee.  Plaintiff-appellants could borrow against that policy, calm investors, or incentivize holding out through the length of an appeal, which currently average 418 days.[3]

But are JPIs good policies for the insurers?  The math suggests not, at least at these high rates of guarantee.  To be sure, insurers and underwriters are not generally reckless.  It’s likely at least some of the risks have been analyzed and justified or accounted for.  There are many ways insurers de-risk alternative insurance products—through “insurance towers,” by drafting agreements that give them some control over the appeal, or to include terms to continue incentives for the appealing party not to settle at a loss to the insurer.  One would imagine that insurers in some appeals can and might need to subrogate, stepping into the shoes of the appellant when necessary to defend their risk—or writing policies that set a settlement floor to collect.

Nonetheless, analysts, insurers, and reinsurers may not truly understand how volatile and persnickety patent appellate recovery can be—particularly given the trend of nuclear judgments being reversed on appeal.  Maybe they do; maybe they don’t care; maybe this is such a (relatively) small slice of the alternative insurance market, and it’s been analyzed and de-risked so well, that it won’t matter.  It is a brand-new “bespoke” insurance product with a brand-new market, no oversight, and is yet little understood.  While we’re not sure those broker incentives mentioned earlier don’t naturally tilt toward overselling of risky policies unlikely to pay off in the long run, we’re also not sure it matters, if the policies have been de-risked.  But they remain, on their face, incredibly risky.

And then there is the disclosure gap problem. Since the 1970s, all Federal litigants have been required to disclose insurance agreements under Federal Rule of Civil Procedure 26, for myriad compelling reasons explained in the comment to the rule.[4]  (One reason being that it is possible both sides are insured by the same or related insurers, and the parties might be unaware of the obvious conflict.)   No similar rule exists in the Federal Rules of Appellate Procedure—understandable given insurance purchased after judgment and targeting appeals—JPI—did not exist at the time.  There’s an argument that those policies must be disclosed on any remand, though docket searches suggest that’s not happening.

The disclosure gap affects other rules, too—for instance, FRAP and local Federal Circuit Rule 33 address the Federal Circuit’s Mediation Program (link).  While the Federal Circuit loosened its language earlier this year and no longer requires mandatory settlement discussions between the parties (link to this year’s amendments), JPI certainly changes, and in some cases may frustrate or eliminate entirely, the possibility of settlement, contrary to the intent of those rules. It may also change the real party in interest on appeal, if the insurance company holding the policy subrogates the claim or the policy is written such that they are the real appellant.  And it could introduce conflicts if related insurers are on both sides of a dispute.  At a minimum, FCR 33 should be amended to require disclosure of JPI and to include insurers in the mediation program.

Regardless of whether the Court and the Judicial Conference yet realize it, though, JPI is here in force, and is being offered widely, at terms both attractive and likely to alter settlement dynamics.  It is affecting appeals.  And while it seems likely that at least some of these policies are riding an insurance bubble and will pop, that moment has yet to come. Perhaps we are entering a phase where available insurance coverage is the rule, and not the exception.  It would be a shame if premature overselling of risky policies or settlement disputes led to a bubble popping and a painful contraction.

[1] See Aviva Will & David M. Perla, United States: Litigation Funding Comparative Guide, Burford Capital, March  23, 2023 (noting that “in recent years” the “legal finance market has witnessed “the growth of a new finance-adjacent product: litigation insurance policies on affirmative recoveries by companies and law firms.”);

[2] For a general explainer, see Certum Group, Judgment Preservation Insurance (video), available at https://www.youtube.com/watch?v=J3tF7d50_-E (last accessed Nov. 14, 2023).

[3] Morrison Forrester offers a rather useful instant tool that can show you the current pendency rates for Federal Circuit appeals.  For patent cases originating from district court, it’s currently an average of 418 days from filing of the notice of appeal to decision.  See Statistics, Federal Circuitry, Morrison Forrester (interactive tableau tool), available at https://federalcircuitry.mofo.com/statistics (accessed and tabulated Nov. 14, 2023).

[4] The comment to the 1970 FRCP amendment:

“Disclosure of insurance coverage will enable counsel for both sides to make the same realistic appraisal of the case, so that settlement and litigation strategy are based on knowledge and not speculation. It will conduce to settlement and avoid protracted litigation in some cases, though in others it may have an opposite effect. The amendment is limited to insurance coverage, which should be distinguished from any other facts concerning defendant’s financial status (1) because insurance is an asset created specifically to satisfy the claim; (2) because the insurance company ordinarily controls the litigation; (3) because information about coverage is available only from defendant or his insurer; and (4) because disclosure does not involve a significant invasion of privacy.

Disclosure is required when the insurer “may be liable” on part or all the judgment. Thus, an insurance company must disclose even when it contests liability under the policy, and such disclosure does not constitute a waiver of its claim. It is immaterial whether the liability is to satisfy the judgment directly or merely to indemnify or reimburse another after he pays the judgment.”

By Chris Holman

I enjoyed reading the recent article by Professors Rantanen and Datzov, and was not surprised by their conclusion that the courts are generally applying the Supreme Court’s patent eligibility precedent in a relatively predictable manner. I have not conducted such a systematic review of patent eligibility decisions, but over the years I have read quite a few of them, and for some time I have felt that I can usually predict which way the court will go in deciding these cases.

The two-part Alice/Mayo framework for assessing the patent eligibility of method claims, which formally involves determining whether a patent claim is “directed towards” one of the judicial exceptions (law of nature, natural phenomenon, or abstract idea), and if so, to determine whether there is “enough” additional “inventive concept” to render the claim a patent eligible “application” of that judicial exception, seems quite indeterminate on its face. But Alice provides some important clarifying language:

[Petitioner’s method claims do not] purport to improve the functioning of the computer itself. Nor do they effect an improvement in any other technology or technical field. Instead, the claims at issue amount to nothing significantly more than an instruction to apply the abstract idea of intermediated settlement using some unspecified, generic computer. Under our precedents, that is not “enough ” to transform an abstract idea into a patent-eligible invention.

The message I have taken from this paragraph is that technological innovations, including software that “improve[s] the functioning of [a] computer,” generally remain patent eligible. And I have found that, when reading judicial decisions addressing the patent eligibility of method claims relating to computers and computer programs , if it looks and feels like the purported innovation is technological in nature, the claim is likely to be upheld. On the other hand, if the claimed method feels less technological, e.g., a method of playing bingo on the Internet, or a “business method,” I expect it to be struck down. Occasionally I am surprised by a decision, but from what I have seen the courts are generally treating the “abstract ideas” exception as a bar to the patenting of non-technological innovations.

The “natural phenomena” and “laws of nature” exceptions tend to be invoked in the context of life science innovations, and it seems to me that most method claims arising out of the life sciences will be deemed patent eligible unless the court deems it to be directed towards a “diagnostic method,” i.e., an analytical method based on the discovery of a correlation between a biomarker and some clinically significant information, e.g., a genetic sequence and the likelihood of developing cancer, or a chemical metabolite and the optimal dosage of a drug.  If a claimed method relating to the life sciences can plausibly be characterized as something other than a diagnostic claim, e.g., a method of preparing some sort of biological product, or treating a disease, etc., it is generally going to be found patent eligible.  But if the court concludes that it is a diagnostic method, it is going down.

In the Federal Circuit’s decision denying en banc rehearing of Athena Diagnostics, all of the judges on the Federal Circuit seemed to agree that, under the court’s current interpretation of Mayo, diagnostic methods are essentially patent ineligible per se. They also seem to agree that this is an unfortunate state of affairs, given the tremendous medical benefits that innovative diagnostic methods can provide, as exemplified by the claims struck down in Athena Diagnostics. The major split revealed by the various opinions dissenting and concurring with the court’s en banc decision to deny rehearing is that a majority of the judges on the Federal Circuit believe that their hands are tied by Supreme Court precedent, particularly Mayo, while a significant number of dissenting judges disagreed, arguing that the Federal Circuit had unnecessarily tied its own hands with respect to diagnostic methods, and that, properly interpreted, Mayo left open the possibility of finding at least some diagnostic methods patent eligible.

Some of the Federal Circuit judges seemed to voice approval for the way in which Alice has been deployed in the abstract idea context to invalidate claims directed towards business methods and other non-technological inventions.  On the other hand, they voiced concern that in the laws of nature/natural phenomena context Mayo was resulting in the invalidation of meritorious diagnostic method claims.  In any event, when it comes to the life sciences and method claims, the Federal Circuit seems inclined to interpret Mayo relatively narrowly, and uphold the eligibility of method claims, so long as the claimed invention can plausibly be characterized as something other than a diagnostic method.