Erik Brunetti’s “FUCT” line of apparel doesn’t have much appeal to my sense of style, but the clothing certainly seem to make a statement. The USPTO refused to grant Brunetti’s application to register the mark — finding that the mark “comprises immoral * * * or scandalous matter” and thus cannot be registered under Section 2(a) of the Lanham Act.
On appeal, the Federal Circuit sided with Brunetti — holding the statute unconstitutional as contrary to the Free Speech provision of the First Amendment. In its decision, the court followed the Supreme Court’s lead in Matal v. Tam, 137 S. Ct. 1744 (2017). In Tam, the Supreme Court addressed disparaging marks — also prohibited under Section 2(a) — finding that the prohibition on registration to be contrary to free speech rights. The Government then petitioned the Supreme Court to review the case, and the court has now granted certiorari with the direct question:
Whether Section 1052(a)’s prohibition on the federal registration of “immoral” or “scandalous” marks is facially invalid under the Free Speech Clause of the First Amendment.
In an unusual turn of events, Brunetti did not oppose the petition, but instead agreed that the Supreme Court should weigh-in — and additionally address the following additional question:
Whether Section 1052(a)’s prohibition on the federal registration of “immoral” or “scandalous” marks is unconstitutionally vague under the First and Fifth Amendments.
In granting certiorari, the Supreme Court did not indicate whether the court is addressing both questions, or only the one proposed by the the Government. Since Tam, the Supreme Court has changes somewhat — Justice Kennedy is gone and Justices Gorsuch and Kavanaugh are now on the court.
The USPTO has released pair of examiner guidance documents for (1) examination of patent eligibility and (2) examination for definiteness of functional claim limitations (with a focus on software patents).
Although these guides do not have the force of law, they are quite important because they direct the bureaucratic process — telling examiners how to examine patent applications for these issues. Examiner performance will be adjudged based upon their ability to comply with the guidance. In general, I would expect that examiners will be more quickly swayed by citations to the guidelines rather than to citations to particular court decisions. Examiners will be trained in the upcoming weeks and training materials will be available at the PTO website.
Here, I will focus on the eligibility guidelines and leave definiteness for a separate post.
Prior iterations of eligibility guidelines focused on a listing of post-Alice cases as examples for examiners to follow. Examiners are typically not attorneys and are not expected to read cases — that makes this case-focused approach problematic in the long-term. In the new 2019 iteration, the PTO has attempted to synthesize case law in a way that is practical for examiners. The PTO is also suggesting that this approach will be more reliable and more predictable. The USPTO does not have the power to shift the legal definition of eligibility. However, the Agency is given discretionary authority to design a practical administrative mechanism for implementing the law as given. That is how I see the PTO’s approach here. Now lets look at two of the important changes from prior guidance documents: .
Categories of Abstract Ideas: The inquiry of Alice/Mayo Step 1 is whether the patent claim is “directed to” an “abstract idea” or other excluded area. The first important guidance change here is to create three of categories or “groupings” of abstract ideas:
Mathematical Concepts
Methods of Organizing Human Activity
Mental Processes
Under the guidance, claims that do not recite matter within one of these three groups “should not [ordinarily] be treated as reciting abstract ideas.” The guidance does note a “rare circumstance” where an abstract idea might fall outside these categories. While this approach does not settle the ongoing question of what counts as abstract, it does go a long way toward helping examiners decide when to reject claims.
“Directed To” an Ineligible Concept: The PTO guidance has also focused-in on the Supreme Court’s “directed to” requirement that finds claims problematic only if “directed to” the ineligible concept. For that element, the PTO asks examiners to consider whether the ineligible concept is “integrated into a practical application.”
A claim is not “directed to” a judicial exception, and thus is patent eligible, if the claim as a whole integrates the recited judicial exception into a practical application of that exception.
The guidance for analyzing this issue focuses on whether keywords of whether the claim uses the ineligible subject matter in a way “that imposes a meaningful limit on the judicial exception, such that the claim is more than a drafting effort designed to monopolize the judicial exception.”
Although the document is written primarily as examiner guidance, it is also being applied to PTAB judges and is being seen as a statement of PTO policy.
Although the PTO is permitted to spend its already collected fees. It isn’t actually able to spend fees collected since the shutdown. My understanding is that the Office is in cost-cutting mode based upon President Trump’s statement that the shutdown could last for “weeks or even years.”
Once funds run out, the PTO is looking for ways to keep the doors open enough to continue to accept new application filings — while shutting down examination and PTAB activities. It is likely that a special PTO funding bill would receive bipartisan support — keeping the patent office rolling while other government services are shut-down.
ZUP, LLC, Petitioner v. Nash Manufacturing, Inc. is a nice teaching case because the invention is so simple. Zup’s patent covers a wake-board with a particular handle configuration and a method of riding the board — using the handles to change positions. U.S. Patent No. 8,292,681.
In its decision, the Federal Circuit sided with the accused infringer Nash — affirming that the asserted claims are invalid as obvious. In particular, the Federal Circuit agreed with the lower court ruling that Zup had simply combined well-known elements (handles & foot bindings, e.g.) to solve a longstanding watersport goal. Zup presented evidence of secondary considerations of both long-felt but unresolved need and copying. Zup explains its position:
Here, the defendant Nash had been in the field for over 50 years, obtaining numerous patents on water recreation devices similar to the ZUP Board. Nash had tried, but failed, to create a device that would allow broader participation in watersports like waterskiing. Nash praised the ZUP Board. Nash attempted to do business with ZUP, obtaining a ZUP Board from ZUP to analyze. Instead of partnering with ZUP, however, Nash decided to copy ZUP. The ZUP Board is nonobvious if Nash tried and failed to invent it for over 50 years and then copied it
after failing to partner with ZUP.
The appellate majority rejected Zup’s arguments and instead ruled that “The weak evidence of secondary considerations presented here simply cannot overcome the strong showing of obviousness.” The majority was penned by Chief Judge Prost and joined by Judge Lourie. Writing in Dissent, Judge Newman argued that the majority improperly treated secondary considerations as a rebuttal factor rather than an integral aspect of the obviousness analysis.
Now, Zup has petitioned the Supreme Court for writ of certiorari — asking whether secondary considerations are properly relegated to rebuttal evidence.
Hikma has petitioned the Supreme Court for review of this important eligibility case. In its decision, the Federal Circuit drew a fine line between Vanda’s personalized medical treatment claims (adjudged eligible) and the methods found in Mayo and Ariosa (adjudged ineligible). Question presented (long form):
This Court has repeatedly held that “natural phenomena[] and abstract ideas are not patentable” under Section 101 of the Patent Act. E.g., Alice Corp. Pty. Ltd. v. CLS Bank, Int’l, 573 U.S. 208, 216 (2014). Thus, “a process that focuses upon the use of a natural law” must also contain other elements or a combination of elements, sometimes referred to as an ‘inventive concept,’ sufficient to ensure that the patent in practice amounts to significantly more than a patent upon the natural law itself.” Mayo Collaborative Servs. v. Prometheus Labs., Inc., 566 U.S. 66, 72-73 (2012). Mayo, for example, invalidated a medical diagnosis method patent that was just “an instruction to doctors to apply the applicable laws when treating their patients.” Id. at 79.
In the decision below, a divided Federal Circuit panel did exactly what Mayo forbids: it exempted all patent claims that are drafted as reciting a method of medically treating patients from this analysis. Citing the ruling, the Patent and Trademark Office has directed its examiners that “(1) ‘method of treatment’ claims that practically apply natural relationships should be considered patent eligible under * * * the USPTO’s subject matter eligibility guidance; and (2) it is not necessary for ‘method of treatment’ claims that practically apply natural relationships to include nonroutine or unconventional steps to be considered patent eligible under [Section 101].”
The question presented is whether patents that claim a method of medically treating a patient automatically satisfy Section 101 of the Patent Act, even if they apply a natural law using only routine and conventional steps.
Guldenaar is is seeking to patent his method of playing a dice game using specially marked dice. U.S. App. No. 13/078,196. The PTAB denied his patent on eligibility grounds and the Federal Circuit has now affirmed — holding that the method of game play is an abstract idea and the special markings on the dice represent unpatentable printed matter. The decision here falls in line with In re Smith, 815 F.3d 816 (Fed. Cir. 2016) where the court held that the claimed method of playing and wagering-on a card game was an abstract idea. The patented method in Smith used a standard deck of cards, and the Federal Circuit noted that “shuffling and dealing a standard deck of cards are “purely conventional” activities. Citing Alice.
Guldenaar’s claim 1 is directed to a “method of playing a dice game” that begins with the provision of a set of three dice — each die having either one, two, or three identical marks. (See the figures above). Someone then bets on whether or not the marks will appear face-up on the next role, and, after the roll, the bet is settled. Pretty simple game. (Claim text below).
In applying Alice Step 1, the court found that the claims here are directed to the “rules for playing a dice game,” which is an abstract idea. In the process, the court warned the PTO that its generalized approach to labeling “methods of organizing human activities” as abstract ideas, but found that this particular method fit the bill.
Under Alice Step 2, claims directed to an abstract idea can be patentable if the claims also include an “inventive concept” sufficient to transform the claimed abstract idea into a patent-eligible application.” Here, one particular inventive concept appears to be the claimed set of dice that is arguably inventive, and at least not purely conventional. On appeal, however, the Federal Circuit ruled that the die markings “constitute printed matter [that] fall outside the scope of § 101.”
In Smith, the claims were directed to a standard deck of cards and the court indicated that claims using an original deck of cards could survive Alice. “We could envisage, for example, claims directed to conducting a game using a new or original deck of cards potentially surviving step two of Alice.” The panel here appears to reject that notion — holding instead that the the original set of dice cannot be seen as transformative since the original aspects
Judge Chen authored the majority opinion that was joined by Judge Bryson. Judge Mayer filed a concurring opinion channeling Justice Stevens concurring opinion in Bilski. In Bilski, Justice Stevens (joined by Justices Ginsburg, Breyer, and Sotomayor) argued for a categorical exclusion of business method patents. Here, Judge Mayer argues for a categorical exclusion to the patenting of games — “claims directed to dice, card, and board games can never meet the section 101 threshold because they endeavor to influence human behavior rather than effect technological change.”
= = = =
Claim 1:
1. A method of playing a dice game comprising:
placing at least one wager on at least one of the following: that the first die marking on the first die will appear face up, that the second die marking on the second die will appear face up, that the third die marking on the third die will appear face up, or any combination thereof;
rolling the set of dice; and
paying a payout amount if the at least one wager occurs.
The also PTO continues to save the world from claims to pure information by asking applicants to limit information storage to non-transitory storage mechanisms.
The USPTO has indicated that it “remains in normal operating status” despite the Federal Government funding crisis.
The USPTO remains open for business as normal. This is possible because the agency has access to prior-year fee collections, which enables the USPTO to continue normal operations for a few weeks. Should the USPTO exhaust these funds before a partial government shutdown comes to an end, the agency would have to shut down at that time, although a small staff would continue to work to accept new applications and maintain IT infrastructure, among other functions.
The patent system may be helping with the Border Wall. Consider the following:
U.S. Pub. No. 20180273288 — directed toward border wall or fence is constructed from a plurality of existing ISO steel shipping containers which are connected together both horizontally and vertically at their corners using conventional corner locks so as to present a continuous physical barrier of any selected length. (Note the 4th floor golf cart).
U.S. Pub. No. 20180313200 — directed toward an underground wall that also detects “enemy” tunnels.
Glasswall Solutions v. ClearSwift (Fed. Cir. 2018) (non-precedential)
Glasswall’s patent claims are directed to a process of regenerating electronic files in a way that cuts-out non-conforming data. The approach here could be used as a virus filter. U.S. Patent Nos. 8,869,283 and 9,516,045. Although the generalized approach here is a nice goal, the Federal Circuit noted that the claims themselves did not actually claim how to achieve the goal.
The claims at issue … do not purport to claim how the invention receives an electronic file, how it determines the file type, how it determines allowable content, how it extracts all the allowable data, how it creates a substitute file, how it parses the content according to predetermined rules into allowable and nonconforming data, or how it determines authorization to receive the nonconforming data. Instead, the claims are framed in wholly functional terms, with no indication that any of these steps are implemented in anything but a conventional way.
So, taking this conclusion about these “wholly functional” terms, the next step is to ask whether that conclusion implicates any particular patent doctrine.
In O’Reilly v. Morse, 56 U.S. 62 (1853), the Supreme Court invalidated the broadest of Morse’s telegraph claims — claim 8 that had broadly claimed the process of sending messages at a distance without being limited to any particular machinery. In Morse, the court held that the claim consisting of a single functional limitation was “too broad and cover[ed] too much ground.” Later, in Halliburton Oil Well Cementing Co. v. Walker, 329 U.S. 1 (1946), the Supreme Court was faced with a situation closer to Glasswall‘s. In that decision, the Supreme Court found that the claimed oil-well measuring apparatus included a wholly functional element at the invention’s point of novelty. That lack of specificity led the court invalidate the claim as indefinite. The Halliburton Oil court wrote that it is improper for a claim to describe its “most crucial element . . . in terms of what it will do, rather than in terms of its own physical characteristics or its arrangement in the new combination apparatus.” Congress however rejected Halliburton in the 1952 Patent Act by adding the provision that elements of a combination claim may be drafted in functional form. 35 U.S.C. 112 p 6 (now 112(f)).
Back to the present case. in Glasswall, the court did not touch definiteness but rather focused its attention on eligibility under 35 U.S.C. 101 (as expanded by judicial decisions). Here, the “wholly functional” language of the claims led the court to finding them directed to an unpatentable abstract idea.
The Patent Office, which processes over half-a-million patent applications a year, routinely faces budgetary shortfalls, high patent examiner turnover, and a crushing backlog of patent applications. Given this challenging environment, it is not surprising that the patent examination process generates some degree of error, including errors that culminate in the issuance of a significant number of invalid patents. Given that invalid patents impose substantial harms on society, the question is what should we do about them?
At first glance, the solution seems straightforward: the Patent Office needs to do more to ensure it awards patents only to those inventions that deserve them. A seemingly promising start is to give patent examiners more time to evaluate applications. On average, a U.S. patent examiner spends only nineteen hours reviewing an application, including reading the application, searching for prior art, comparing the prior art with the application, writing a rejection, responding to the patent applicant’s arguments, and often conducting an interview with the applicant’s attorney. If examiners are not given enough time to evaluate applications, they may not be able to reject applications by identifying and articulating justifications with appropriate underlying legal validity. Offering validation for these concerns, our prior empirical work tested the extent to which patent examiner time allocations are causing examiners to grant invalid patents and found that examiners were indeed allowing patents of dubious quality because they are not given sufficient time.
Even in the face of this compelling evidence, however, it is not immediately clear that the solution to the patent quality crisis is to give patent examiners more time. While increasing examiner time allocations will decrease the number of invalid patents issued by the Patent Office, it is possible that the Patent Office is, as Mark Lemley famously wrote, “rationally ignorant.” That is, it may be rational for the Patent Office not to screen patent applications too rigorously because there is another institutional player that could weed out bad patents: the courts. More specifically, Lemley argued that because so few patents are litigated or licensed, it is better to rely upon litigation to make detailed validity determinations in those rare instances rather than increasing the resources to the Patent Office to provide more thorough review of all patent applications. Lemley supports his thesis with a cost-benefit analysis wherein he concludes that the costs associated with doubling the Patent Office’s hours to review patent applications outweighs the benefits gained by the resulting decrease in the number of invalid patents the Patent Office would issue. Although some of the numbers in his analysis reflect hard data, the dearth of empirical evidence available to the time forced him to make several critical assumptions, including assuming (rather than estimating) how many fewer patents the Patent Office would issue if examiner time allocations were doubled.
Although it has been over fifteen years since Professor Lemley wrote his influential and widely-cited article, the debate on how to best rid ourselves of bad patents continues to rage on. In 2011, Congress enacted the most comprehensive reform bill to the patent system in decades, and arguably favored the ex-post approach by creating a new adjudicatory tribunal at the Patent Office wherein third parties can challenge the validity of issued patents. In 2016, for the first time in forty years, the Patent Office began a comprehensive reevaluation of examiner time allocations, arguably favoring an ex-ante approach.
The time is ripe to revisit whether the Patent Office is, in fact, “rationally ignorant.” Should we increase the resources at the Patent Office in an effort to increase the quality of issued patents or should we forego those marginal investments and reserve a larger residual role for the courts? Our Article, begins to answer this question by employing new and rich sources of data along with sophisticated empirical techniques to form novel empirically driven estimates of the relationships that Lemley was forced to guess in his own analysis.
Armed with these new estimates, our Article demonstrates that the savings in future litigation costs and prosecution expenses associated with giving examiners additional time per application outweighs the costs of increasing examiner time allocations. More specifically, we estimate that doubling examiner time allocations would cost the Patent Office approximately $660 million dollars in additional personnel expenses. We also estimate that doubling the amount of hours allocated to review applications would result in $301 million in savings in prosecution expenses to the patent applicant driven by decreased rounds of review at the Patent Office. Finally, we estimate federal litigation-related savings of $491 million and PTAB litigation savings of $112 million. Though the $660 million increase in costs is significant, this amount is still exceeded by the $904 million that may be saved annually in (i) expenses covering litigation in federal court, (ii) PTAB-related legal expenses and (iii) potential savings in prosecution costs. The efficiency gains from marginal investments at the Patent Office are even greater when considering a range of additional harms that may ensue from the issuance of invalid patents by the Agency, such as diminishing cumulative innovation, dead-weight loss, etc. Thus, we conclude the opposite of Lemley: society would be better off investing more resources in the Agency to improve patent quality than relying upon ex-post litigation to weed out invalid patents. Given its current level of resources, the Patent Office is not being “rationally ignorant” but, instead, irrationally ignorant.
The current draft of our article is available on SSRN here. It’s forthcoming in the Vanderbilt Law Review in 2019, so there’s plenty of time for us to incorporate any comments you may have.
Stephen Yelderman is a Professor of Law at the University of Notre Dame Law School.
Continuing our study of prior art in the district court, in this post we’ll take a closer look at printed publications. As I discussed in my original post, around 13% of anticipation invalidations and 34% of obviousness invalidations rely on art in this category. (The numbers may be a touch higher than that, as a result of invalidations for which we could not determine the prior art supporting the court’s conclusion). For more background on this project, you can find the full paper here.
The potential sweep of this prior art category is breathtaking. By the terms of the statute—both before and after the America Invents Act—a printed publication found anywhere in the world can qualify as prior art. Moreover, under Federal Circuit precedent, this category includes a number of things that would seem to stretch the colloquial meaning of “publication.” For example, a single copy of a doctoral thesis stored in a university library, a drawing available only by travelling to another country’s patent office, and a posterboard displayed for several days at a conference have all been held to constitute “printed publications.” In dicta, the Federal Circuit has even suggested that a transient display of slides, or a billboard (!?) could, on certain facts, count as a printed publication.
When I teach patent law, our discussion of the printed publications category tends to dwell on these extreme possibilities. But how often do these non-traditional publications actually invalidate patents in practice?
To get a handle on this question, we further classified printed publication prior art into several sub-categories:
This chart illustrates the percentage of invalidations relying on printed publications in each sub-category, as a share of invalidations relying on printed publications at all. Encouragingly, the majority of invalidations based on printed publications relied on traditional reference publications. Just over half of anticipating publications were categorized as regularly published books and journals. Among obviousness invalidations citing a printed publication, 68% cited at least one regularly published book or journal. (The percentages of obviousness invalidations sum to more than 100% because of invalidations citing publications in multiple sub-categories.) Though some of these regularly published books and journals may have come from obscure outlets, they are at least the kind of documents that a library might collect and an interested researcher might access.
The next sub-category—catalogs, manuals, and brochures—consists of documents distributed to teach the public about the features or availability of a product. This category is conceptually interesting for two reasons. First, though catalogs and manuals are typically mass-produced and widely disseminated, they are not usually collected in research libraries. By their nature, many publications in this category are intended to be transient. These characteristics suggest that publications in this sub-category would likely be much more difficult for a hypothetical prior art searcher to find than a regularly published book or journal.
The second reason that the catalog, manuals, and brochures category is conceptually interesting is that these documents are often evidence of a different kind of prior art entirely—that is, prior uses and sales. In fact, in a few cases we found it unclear whether a product manual was coming in as a distinct prior art reference, or as evidence about the features present in a prior sale. The fact that district courts sometimes rely on publications in this category suggests that activity prior art may be even more important than our top-level analysis suggested.
That said, catalog, manuals, and brochures were fairly insignificant in the larger scheme of things. About a quarter of anticipating printed publications fell into this sub-category. But since only 13% of anticipation events cited a printed publication, that means only about 3% of anticipation events overall relied on a catalog, manual, or brochure. Likewise, though 15% of obviousness events citing a printed publication relied on a catalog, manual, or brochure, that comes out to only about 5% of obviousness events overall. So whether one conceives of these cases as invalidity by prior sale or invalidity by printed publication, the high-level picture of prior art does not change very much.
The next sub-category—“other”—includes all identifiable printed publications not falling into the other two sub-categories. For example, we found patents that had been invalidated by poster board displays, industry whitepapers, proposals circulated at working group meetings of technical standards bodies, doctoral dissertations, and postings on Internet discussion forums. (We did not, for the record, find any cases of patents invalidated by billboards.) The good news was that reliance on potentially obscure or idiosyncratic documents like these appeared to be rare. About 19% of anticipating printed publications fell into this sub-category, amounting to just about 2% of anticipation events overall. A little more than a quarter of obviousness invalidations citing a printed publication included one in the “other” category. These constituted about 9% of obviousness invalidations overall.
There were, however, some publications that defied further classification—usually because sealed court records prevented us from finding more than a shorthand reference to the relevant document. For anticipation, this was rare enough that it could not change our results very much. But this happened frequently enough in cases of obviousness that we must acknowledge some potential uncertainty. If all of the unidentifiable publications turned out to be non-traditional publications, it’s possible that up to 16% of obviousness invalidations may have relied on a publication in the “other” category.
Finally, it’s important to remember that this data only tells us how district courts invalidate patents—not how many or why patents might be invalid in general. It is possible that cases involving non-traditional publications are more likely to settle than other cases, or, for that matter, that they’re less likely to settle. There is a significant possibility of selection effects here, which prevents us from making any inferences about patent quality overall. So, in the end, I’ll have to keep teaching those cases about slide presentations and unpublished college theses, even if “publications” like those only rarely invalidate patents in court.
HP Inc. v. Berkheimer, 2018 WL 6445985 (On petition at the Supreme Court)
Steven Berkheimer has filed his brief in opposition in this pending case before the U.S. Supreme Court. As is a current theme in Supreme Court briefing, the parties have proposed alternative stories within their questions presented. HP’s original petition asks whether eligibility is “a question of law for the court based on the scope of the claims or a question of fact for the jury based on the state of the art at the time of the patent.” In its responsive brief, the patentee Berkheimer focuses more on the procedural aspect:
Whether the Federal Circuit correctly held that additional fact-finding was necessary to resolve whether patent claim limitations such as “storing a reconciled object structure in the archive without substantial redundancy,” and “selectively editing an object structure, linked to other structures to thereby effect a one-to-many change in a plurality of archived items,” constituted “well-understood, routine, conventional activity” under Mayo Collaborative Services v. Prometheus Laboratories, Inc., 566 U.S. 66, 79 (2012)?
The brief follows a toned-down approach – arguing that in some cases there will be an underlying factual dispute on eligibility issues. For Berkheimer, his patent involves one such case:
Whether a claim limitation consists of “well-understood, routine, and conventional activity” bears no resemblance to a question of law. In this case, for instance, the dependent claims recited: “storing a reconciled object structure in the archive without substantial redundancy,” and “selectively editing an object structure, linked to other structures to thereby effect a one-to-many change in a plurality of archived items.” . . . No statute, case, or deductive legal reasoning can resolve whether this “specific method of archiving,” constitutes “well-understood, routine, conventional activity, previously engaged in by those in the field.” Mayo. That is a quintessential factual question.
One question for the Supreme Court to consider is whether patent eligibility shifts as technology advances. I.e., as some particular machine becomes “conventional,” are advances using that machine more likely to be abstract? Berkheimer says “yes,” and that makes the underlying facts relevant to the question of eligibility.
I expect a number of briefs supporting Berkheimer’s position will be filed over the next fortnight.
Spineology, Inc. v. Wright Medical Tech, Inc. (Fed. Cir. 2018)
Spineology owns U.S. Reissue Patent No. RE42,757 — covering a surgical tool known as an “expandable reamer.” In 2015 Spineology sued Wright Medical for infringement — accusing its X-REAM product. Basically, these are used to hollow-out marrow from inside the femur head. Below, I have included images from the asserted patent as well as the accused product. The similarity is striking and there is some evidence suggesting that Wright Medical copied core aspects of Spineology’s approach. The problem for the patentee though, is that Wright Medical’s approach was not actually encompassed by the patented claims.
The patented claims all require an elongated hollow “body” that contains particular mechanisms. However, the “body” term was added to the claims after filing — i.e,. the specification does not use the term “body.” In a prior appeal, the Federal Circuit affirmed that “body” included both the shaft and the barrel near the handle. Under that construction, the patentee admitted that X-REAM would not infringe.
After successfully defending its lawsuit, Wright then asked to be compensated for its expenditures on the case — i.e., attorney fees under 35 U.S.C. 285.
Standard U.S. practice is that each side pays its own attorneys and experts. Thus, a successful defendant may still walk away owing more than a million dollars in legal fees. Here, Wright Medical argues that it has spent more than $1.4 million to defend the case simply to win on a claim construction summary judgment.
Under Section 285, “the court in exceptional cases may award reasonable attorney fees to the prevailing party.” Here, however, the district court declined to find an exceptional case. On appeal, the Federal Circuit has issued a deferential ruling — holding that “the district court did not abuse its discretion in denying Wright’s motion for attorney fees under section 285.”
[W]hile Spineology’s proposed construction of “body” was ultimately rejected at summary judgment, “[t]he attempt was not so meritless as to render the case exceptional.” DCT Op. . . . And Wright cannot fairly criticize Spineology for continuing to pursue a construction not adopted by the district court in the claim construction order, since the district court declined to adopt Wright’s proposed construction as well. We see no abuse of discretion here.
In the briefing, Wright argued that Spineology’s “belief that a product has been copied is not legal justification for filing a frivolous patent infringement case.” In its opinion, the Federal Circuit did not address the copying-belief aspect — but instead focused on the conclusion that the case was not frivolous or even exceptional.
= = = =
A portion of Wright Medical’s expenses were in preparing to counter against Spineology’s lost profits damages theories. The district court never determined whether those theories held water since the case was dismissed at this early stage. Still, Wright Medical argued that the wild damages claims should make the case exceptional.
On appeal, the Federal Circuit refused to enter into a case-within-a-case analysis to determine whether the proffered damages theory was problematic.
Wright asks this court to basically decide the damages issues mooted by summary judgment in order to determine whether it ought to obtain attorney fees for the entire litigation. This we will not do. We will not force the district court, on a motion for attorney fees, to conduct the trial it never had by requiring it to evaluate Mr. Nantell’s “but for” calculations or royalty rates, and we—an appellate court—will certainly not conduct that trial in the first instance.
A district court need not, as Wright seems to urge, litigate to resolution every issue mooted by summary judgment to rule on a motion for attorney fees. And we need not, as Wright requests, get into the weeds on issues the district court never reached.
Although it did not say so explicitly, the Federal Circuit appears to suggest that the frivolous arguments in this case are found within the appeal itself. The court concluded its decision by awarding costs to Spineology and issuing a “reminder” to the appellant that fee awards are not to be used ‘as a penalty for failure to win a patent infringement suit.’” Quoting Checkpoint Sys., Inc. v. All-Tag Sec. S.A., 858 F.3d 1371 (Fed. Cir. 2017).
In a R.36 judgment-without-opinion, the Federal Circuit has affirmed Stryker’s $250 million willful-infringement verdict against Zimmer. In the case, the jury found the asserted claims valid and infringed and awarded $70+ million in compensatory damages. The jury also found that the infringement was willful.
After receiving the jury verdict, W.D. Mich Judge Jonker awarded treble damages for the willful behavior — “Given the onesidedness of the case and the flagrancy and scope of Zimmer’s infringement, the Court concludes that treble damages are appropriate here.”
The district court’s opinion carefully walked through the determination of whether or not to enhance damages. Writing that “in this case, all nine Read factors favor substantial enhancement of the jury’s award.” However, the district court did not really explain its choice to award 3x compensation rather than 2x or 2.5x.
On appeal, the Zimmer focused on the 3x-limit and argued that treble damages should be “reserved for the most egregious cases” and that the level of damage enhancement must be proportional to the egregiousness of the intentional misbehavior. In oral arguments, Chief Judge Prost offered skepticism as to the role of the appellate court to re-evaluate the level of enhancement:
You’re saying you’re agreeing there is going to be enhancement, and now we are talking about whether it should be three times, or two and a half times, or one and a quarter times. . . . It is really hard at the appellate level for us to start scrutinizing what percentage the district court should have applied. Even if . . . [the district court] went too far . . . what are we supposed to do with that?
[Oral arguments]. In its judgment, the Federal Circuit affirmed the lower court ruling without providing any reasoning. Thus, it is unclear whether the Federal Circuit (1) disagrees with the need for porportionality or instead (2) found sufficient evidence proportionality in this case to affirm. I’ll note here that, although Chief Judge Prost suggested the difference between 3x and 2.5x is splitting hairs, the difference is about $40 million. We must be talking here about splitting the golden hairs of the Norse goddess Sif.
Note – this case is a continuation of Stryker Corp. v. Zimmer Inc. decided by the Supreme Court in 2016. The procedural history here is that the district court’s original judgment of enhanced damages was reversed by the Federal Circuit in its 2014 decision. The Supreme Court then took-up the case and ruled, inter alia, that an objectively reasonable defense does not excuse willfulness. On remand, the District Court again awarded treble damages — and that award has now been affirmed.
Capitol Records v. ReDigi (2nd Cir. 2018) [16-2321_opn]
ReDigi designed its business to take advantage of the first sale doctrine of copyright law — particularly creating a market for resale of lawfully purchased digital music files. In the system, ReDigi first verifies that a song was lawfully purchased (e.g., via iTunes) and then migrates the digital file from the user to ReDigi servers. In the process, ReDigi first locks the song from use on the user’s system; then breaks the song into packets; deletes the song on the user’s computer; transfers the packets to the ReDigi system (copy + delete); and finally reassemble the packets on the ReDigi server. Each packet is deleted immediately upon transfer — and so results in an unrecoverable failure if some of the packets don’t arrive at the destination. (In that case ReDigi compensates the seller). The seller can keep using the song until it is sold — at that point the system effectively transfers possession to the new party. Note here, that this is how the system is designed. Some folks have hacked around these precautions and so some duplicates are getting through — allowing the seller to keep listening to the music.
Recording companies sued and won. On appeal now, the 2nd Circuit has sided with the copyright owners — holding that the first sale doctrine does not apply here because DeRigi is making copies (first sale only applies to the actual copy sold).
In the course of transferring a digital music file from an original purchaser’s computer, through ReDigi, to a new purchaser, the digital file is first received and stored on ReDigi’s server . . . At each of these steps, the digital file is fixed in a new material object “for a period of more than transitory duration.” Cartoon Network. The fixing of the digital file in ReDigi’s server, as well as in the new purchaser’s device, creates a new phonorecord, which is a reproduction. ReDigi version 1.0’s process for enabling the resale of digital files thus inevitably involves the creation of new phonorecords by reproduction. . . .
We conclude that the operation of ReDigi version 1.0 in effectuating a resale results in the making of at least one unauthorized reproduction. Unauthorized reproduction is not protected by § 109(a).
The court then went on to hold that the use is also not a “fair use.” In the analysis, the court correctly concluded that the ReDigi secondary market is likely to undermine the marketplace for new digital files from the Record Company. However, I believe the court used the wrong baseline — the focus here should have been on whether the copy+move resale is a fair-use extension of the first-sale doctrine.
Despite the text of the 4th Amendment of the U.S. Constitution, our government has determined that US Citizens who want the privilege of travel-by-flight implicitly give up their rights of privacy. I used to travel with a lock on my luggage. Of course these days, that lock will likely be broken by Transportation Safety (TSA) officials in the search for bombs (and incidentally uncovering other contraband).
Tropp’s patent application is focused on a special set of luggage locks that help the TSA by providing a master key. The application here is part of a portfolio that claims priority back to 2003-2004. The 2003 application was followed by a continuation-in-part in 2004 that was then followed in 2012 by the present continuation-application.
During prosecution, Tropp rewrote his patent claims in this case to focus on “a set of locks” that each have dials for a traveler to use and a master key portion for TSA. The claims require some differences among the set — splitting them into two subsets with different number of dials for locks in each subset.
During prosecution, the USPTO rejected the claims — finding that they lacked written description support. Although the specification does describe embodiments with different numbers of dials, the PTAB held that the specification does not describe a “set of locks” that include both sets of embodiments. This case fits within the line of written description cases where all of the elements of a claimed invention are described, but where the specification does not describe how to fit those various elements together.
On appeal, the Federal Circuit vacated-and-remanded — holding that the PTAB had failed to fully consider the additional specification provided by the continuation-in-part. Here, the CIP did add some info, but only obliquely — indicating that a single master-key could “include special locks having a multiplicity of sub-types, such as different sizes, different manufacturing designs or styles, etc.”
In its decision, the PTAB had seemly incorrectly refused to consider the added disclosure from the CIP — calling it “new matter.” Of course, the whole point of filing a Continuation-in-Part application is to add new matter — totally permissible. Waldemar Link v. Osteonics Corp., 32 F.3d 556, 558 (Fed. Cir. 1994) (“Claims containing any matter introduced in the CIP are accorded the filing date of the CIP application. However, matter disclosed in the parent application is entitled to the benefit of the filing date of the parent application.”).
Written description is a question of fact an so PTAB determination is ordinarily given deference on appeal. Here, however, the appellate panel identified the error as “failure to consider the totality of the record in assessing written description” — which is an error of law reviewed de novo on appeal.
On remand, the Board will reconsider the issue of written description — looking particularly to whether the new disclosure found in the CIP is sufficient to prove possession of the claimed “set of locks” invention.
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I wonder whether Tropp will have a trademark problem. His patents are assigned to his small Brooklyn company “Iowa Hawkeyes LLC.”
The PTAB sided with Apple in the underlying IPR proceedings, finding that VirnetX patent claims were obvious. U.S. Patent No. 8,504,696 (claims 1–11, 14–25, and 28–30). On appeal, the Federal Circuit has refused to consider the patentability merits — rather holding that the appeal is barred by issue preclusion (collateral estoppel).
Issue preclusion involves two separate legal actions — and operates to bar a party from relitigating an issue of law or fact already decided in a separate case involving the same party. Elements:
A prior action presents an identical issue to an issue in the later action;
The prior action actually litigated and adjudged that issue;
The judgment in that prior action necessarily required determination of the identical issue; and
the prior action featured full representation of the estopped party.
The case here started in December 2015 when Apple filed two separate IPR challenges to VirnetX’s ‘696 patent — both relied upon a 1998 Request for Comments from the Internet Engineering Task Force (IETF) – RFC 2401 – as a key prior art reference. The PTAB followed Apple’s suggestions and determined that RFC 2401 was a prior art printed publication that rendered the claims unpatentable (when combined with other references).
Meanwhile, the RFC 2401 had already been used by the PTAB to cancel several other VirnetX patents. In March 2018, the Federal Circuit affirmed those decisions in a R.36 No-Opinion Judgment.
Often, a R.36 Judgment (without opinion) cannot be used for issue preclusion purposes because it is impossible to tell whether the issue-at-issue was the reason for the judgment. However, the court has ruled that “a Rule 36 judgment may serve as a basis for collateral estoppel so long as … the resolution of the issue was essential or
necessary to the Rule 36 judgment.” Citing Phil-Insul Corp. v. Airlite Plastics Co., 854 F.3d 1344 (Fed. Cir. 2017).
Here, collateral estoppel works since – in the prior appeal – each ground of unpatentability relied upon RFC 2401. Thus, the court’s affirmance required an implicit rejection of VirnetX’s argument that the reference was not prior art. The court explains:
Indeed, in three of the seven final written decisions appealed in VirnetX I, the only issue raised was whether RFC 2401 was a printed publication. Accordingly, by affirming all
seven of the Board’s decisions, this court in VirnetX I necessarily found that RFC 2401 was a printed publication.
I’ll note here that the court particularly focused on this issue at oral arguments in the second case and the litigating attorney was forced to admit that the issue was necessary to the decision.
Other Federal Circuit decisions make clear that a R.36 judgment cannot be used for issue preclusion when there are alternative explanations for the judgment.
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As an interesting inside-issue. Oral arguments in this case were heard in September 2018. On November 28, 2018, VirnetX filed a motion with the Federal Circuit asking the appeal to be dismissed — expressly admitting that the Rule 36 judgment had collateral estoppel effect. By then, the court had already written its almost-final-draft opinion and so denied the motion. In this circumstance, is the decision only advisory (and thus not precedential?)
