Tag Archives: Affirmed Without Opinion

The Federal Circuit decides a substantial number of its cases without opinion, but rather simply issues a judgment of “affirmed without opinion.” This procedure began in the late 1980’s and has been relatively noncontroversial. Lately, however, the patent statute has been reconsidered and the process appears to violate Section 144 of the Patent Act.

Federal Circuit Unanimously Affirms Inequitable Conduct, Teaching that Curing False Statements Needs to be Done Clearly

Ethics, ,

In Intellect Wireless, Inc. v. HTC Corp., the court affirmed the district court's conclusion of inequitable conduct.  Boiled down, the applicant filed a Rule 131 affidavit stating that it had actually reduced the invention to practice when, in fact, it had not.  In a later affidavit, references to "actual reduction to practice" were removed, but the affidavit still contained references to a prototype–that had never been made, among other things.  The court held that the affidavits were material, relying upon Therasense's statement that false affidavits were so by their nature.  It held there was intent to deceive based upon the first affidavit alone, confirmed by the filing of the second without clearing matters up coupled with similar misconduct in other related cases.

The case does not appear to break new ground, but it does reinforce the fact that inequitable conduct is not a dead letter.

Fascinating Split Decision on Impact of a Rule 36 Affirmance that May have Significant Consequences

Ethics, , ,

Wow, this one — Tecsec, Inc. v. IBM (Fed. Cir. 2013) — may have huge repercussions for appellate strategy, and also for the legal impact of hundreds of existing judgments. It deserves a read in full.  Judge Reyna's dissent captures what happened:

The majority concludes that the district court misconstrued various claim terms from three TecSec, Inc. patents. It reaches this conclusion notwithstanding that the same claim terms, same constructions, same arguments, and same summary judgment order were previously before this court and reviewed on January 9, 2012. See TecSec, Inc. v. Int’l Bus. Mach. Corp. (“TecSec I”), 466 Fed. App’x 882 (Fed. Cir. 2012). In TecSec I, this court summarily affirmed the district court’s grant of summary judgment of noninfringement pursuant to Rule 36. Id. After TecSec lost its case against IBM, and without offering any additional evidence against the other defendants now before us, TecSec stipulated to noninfringement and has once again appealed the same district court’s claim constructions to this court. I respectfully dissent because I believe that entertaining this appeal gives TecSec a second bite at the apple and undermines the utility of Rule 36. 

The key paragraph to the majority's basis for reaching a different result is this:

The Rule 36 judgment in the IBM appeal summarily affirmed the district court’s judgment that IBM did not directly or indirectly infringe TecSec’s patents. The district court’s judgment was based on two independent grounds. The district court first ruled as a matter of law that TecSec’s direct and indirect infringement claims failed for failure of proof that IBM itself or any of its customers performed every claimed step or made, used, sold, offered for sale, or imported any system containing all of the limitations of the asserted claims. As the dis- trict court stated in its opinion, without questioning TecSec’s construction of the terms now at issue, “TecSec has utterly failed to come forward with any evidence that IBM itself performed any of the steps of the method claims,” and “even if some user-implemented system were to meet all of the asserted claim limitations—which, as explained below it cannot . . . —TecSec has provided no evidence that IBM ever made, used, sold, offered to sell, or imported that entire claimed system . . . .” Summary Judgment Order, 769 F. Supp. 2d at 1010, 1012 (first emphasis added). The district court drew a similar conclusion regarding indirect infringement, as to which it found, as well, insufficient proof of the required intent. Given the absence of evidence that any steps were per- formed by IBM or that an entire claimed hard- ware/software system was ever made, used, sold, offered to sell, or imported by IBM or its customers, the district court was compelled to find no direct or indirect infringe- ment. Pennwalt Corp. v. Durand-Wayland, Inc., 833 F.2d 931, 949–50 (Fed. Cir. 1987) (en banc) (“Every Supreme Court decision which has addressed the issue of infringe- ment of a patent claim, beginning with Prouty v. Draper, 41 U.S. (16 Pet.) 335, 10 L.Ed. 985 (1842)—and the prece- dent is voluminous—has held that where a part of the claimed invention, that is, a limitation of the claim, is lacking in the accused device exactly or equivalently, there is no infringement.”) The district court, in finding a complete failure of proof regarding any act of infringe- ment by IBM or its customers, did not rely on any rejec- tion of TecSec’s constructions of the terms at issue here. Indeed, IBM represented to the court that we could affirm the district court’s judgment solely based on TecSec’s “complete failure of proof” and did not “need to get to claim construction.” TecSec, Inc. v. Int’l Bus. Machs. Corp., No. 2011-1303, Oral Arg. at 19:30–24:55, available at http://oralarguments.cafc.uscourts.gov/default.aspx?fl=20 11-1303.mp3. While the district court also ruled in the alternative that TecSec failed to show that IBM’s software met various claim limitations, as construed, our Rule 36 decision does not articulate a basis for affirmance, let alone an explication on claim construction. On this record, it cannot be concluded simply on the basis of this court’s summary affirmance that we expressly or by necessary implication decided the claim construction issues in the IBM appeal .

The majority later reasoned:  "Had claim construction been the only issue in the IBM appeal, and had that claim construction been essential to sustaining the judgment of noninfringement, the preclu- sive effect of our Rule 36 judgment would have been undeniable. But that was not the case."

I have a lot of questions.  If infringement can be found, or not, only after claim construction (I think that's right, absent marginal odd-ball cases), then claim construction was necessary to the judgment.  I also wonder how this fits in with the general rules about the impact of an affirmance of a judgment on alternate grounds, which the court does not discuss (perhaps the defendants did not appreciate these obscure doctrines; I don't know).  

If the panel decision is correct, doesn't it mean that a lot of appealable judgments that were "affirmed" on appeal have no impact, even on the parties to that appeal?  Suppose the district court clearly construes the claims, and based on that finds the patent both invalid and non-infringed. The case is Rule 36'd.  Is nothing decided except claim construction?  Isn't the patent, once again, "valid" because there is no binding judgment of invalidity?  I may be missing something… 

I bet there are an enormous number of fact patterns that might be implicated by this.  I am trying to get my head around how a district court's order, which is binding on the parties, becomes non-binding when affirmed on appeal?

I know that this may have huge impact on Rule 36; if a panel's decision does not resolve claim construction, unless it is somehow more "necessary" than it was here, then perhaps a panel should not use Rule 36 very often?  Interesting case with lots of systemic ripples, perhaps.

 

 

Judge Rader’s Obviousness Tutorial: Including the Conclusion that Older Prior Art is Less Credible and a Restatement that Objective Indicia of Nonobviousness Play a Critical Role

Obviousness, Patent, , , , , ,

By Dennis Crouch

Leo Pharmaceutical Products, Ltd. v. Rea, 2013 WL 4054937 (Fed. Cir. 2013)

In a pre-AIA filing, Galderma challenged Leo’s U.S. Patent No. 6,753,013 in an inter partes reexamination before the USPTO’s now renamed Board of Patent Appeals. The patent claims a “storage stable and non-aqueous” pharmaceutical composition used to treat skin conditions such as psoriasis. Prior to the invention, it was well known that a combination of Vitamin-D along with a corticosteroid could form the basis of an effective treatment. However, no one had been able to manufacture a storage stable form of the combination. This was especially challenging because the stable forms of the active ingredients prefer different pH levels. To achieve the storage stable results, Leo added a solvent to the mixture. The claim identifies the solvent in a markush group that likely includes thousands of potential compounds. During the reexamination, Leo also added the particular limitation that “said pharmaceutical composition is storage stable and non-aqueous.”

In reviewing the case, the Board first construed these new terms “storage stable” and “non-aqueous” and then found the patent invalid as obvious over the prior art. On appeal, the Federal Circuit has reversed.

Claim Construction: The Federal Circuit continues, for the time being, to give no deference to PTO claim construction decisions. Here, the term “storage stable” was difficult to construe because it was never used during prosecution of the original patent application and only added during reexamination. However, the patent does discuss the composition’s “ability to resist degradation” according to test results presented in the specification and the PTO accepted that definition as proper. Noting that one of ordinary skill “would have reasonably looked to the described stability test as defining what was meant by ‘storage stable.'” On appeal, the Federal Circuit rejected that definition as impermissibly narrow and that instead allowed a broader definition. Although not elucidated by the opinion, the patentee is walking a fine line with this amendment between (1) having a sufficiently broad patent and (2) improperly adding new matter to the claims in violation of the written description requirement.

Obviousness: This decision may become a somewhat important obviousness case for patentees. The Board found the patent claims obvious in light of a combination of three prior art references. The Board basically found that it would have been obvious for someone of skill in the art to take the prior art combination of Vitamin-D and corticosteroids and add in the claimed solvent in order to achieve storage stability.

On appeal, the Federal Circuit faulted the Board for failing to give credence to the patentee’s identification of the problem (that a stable form should be designed). The prior art did not particularly recognize the problem but rather “either discouraged combining vitamin D analogs and corticosteroids … or attempted the combination without recognizing or solving the storage stability problems.” Leo also presented evidence that, at the time of the invention, researchers were being “warned that vitamin D should not be combined with other drugs requiring a low pH ( e.g., corticosteroids).”

[T]he record shows no reason for one of ordinary skill in the art to attempt to improve upon either Dikstein or Serup using Turi. The ordinary artisan would first have needed to recognize the problem, i.e., that the formulations disclosed in Dikstein and Serup were not storage stable. To discover this problem, the ordinary artisan would have needed to spend several months running storage stability tests Only after recognizing the existence of the problem would an artisan then turn to the prior art and attempt to develop a new formulation for storage stability. If these discoveries and advances were routine and relatively easy, the record would undoubtedly have shown that some ordinary artisan would have achieved this invention within months of Dikstein or Serup. Instead this invention does not appear for more than a decade.

Now, the Federal Circuit’s language here obviously includes some amount of doublespeak or could perhaps be described as slicing the bologna awfully thin since according to the court, researchers (1) recognized that vitamin D could not be stably combined with low pH drugs such as corticosteroids but (2) did not recognize that vitamin-D could not be stably combined with corticosteroids.

Old Prior Art: In the discussion, Judge Rader uses an interesting between-the-lines or perhaps behind-the-scenes analysis of the prior art:

First, the Board found motivation to combine Dikstein or Serup with Turi because one of ordinary skill would have used vitamin D to solve the well-known side effects of steroid treatment. However, combining Turi and vitamin D to address the side effects of a steroid treatment is only straightforward in hindsight. Turi was publicly available in the prior art for twenty-two years before the ′013 patent was filed, yet there is no evidence that anyone sought to improve Turi with vitamin D. According to the record, even when Serup published the well-known side effects of steroid-induced atrophy in 1994, no one—including Serup—sought to improve Turi by adding vitamin D to Turi’s corticosteroid composition. Serup even targeted the precise side effects that the Board believed would have motivated the addition of a vitamin D analog to Turi’s corticosteroid composition, yet Serup did not seek to improve Turi by adding vitamin D. . . .

The elapsed time between the prior art and the ′013 patent’s filing date evinces that the ′013 patent’s claimed invention was not obvious to try. Indeed this considerable time lapse suggests instead that the Board only traverses the obstacles to this inventive enterprise with a resort to hindsight. It took over a decade—after Dikstein’s disclosure of the benefits of combining vitamin D and corticosteroid treatments into one formulation—for Dikstein’s formulations to be tested for storage stability. And, until the advancement made by the inventors of the ′013 patent, no one had proposed a new formulation that would be storage stable. The problem was not known, the possible approaches to solving the problem were not known or finite, and the solution was not predictable. Therefore, the claimed invention would not have been obvious to try to one of ordinary skill in the art. Indeed ordinary artisans would not have thought to try at all because they would not have recognized the problem.

Under Judge Rader’s point of view here, older prior art should be seen as less credible in the obviousness analysis. The logic obvious improvements would have happened quickly and the long time span between improvements suggest that the improvement was not an obvious one. This logic is bolstered in cases such as this where research is ongoing in the area and a market has already developed.

Although the patentee claimed a wide variety of solvents, the Federal Circuit also found that there were many more potential solvents available to try and the PTO did not offer specific reasons why the ones selected would have been particularly obvious to try.

In addition, the Board found that a person of ordinary skill in the art would have been capable of selecting the correct formulation from available alternatives. Specifically, the Board found more than eight different classes of additives ( e.g., diluents, buffers, thickeners, lubricants). The Board also found more than ten different categories of composition forms ( e.g., liniments, lotions, applicants, oil-in-water or water-in-oil emulsions such as creams, ointments, pastes, or gels). “Based on these broad and general disclosures,” the Board reasoned that an artisan would have been able to “mak[e] choices about what ingredients to include, and which to exclude” in formulating a composition with a vitamin D analog and steroid. To the contrary, the breadth of these choices and the numerous combinations indicate that these disclosures would not have rendered the claimed invention obvious to try. See Rolls–Royce PLC v. United Techs. Corp., 603 F.3d 1325, 1339 (Fed.Cir.2010) (claimed invention was not obvious to try because the prior art disclosed a “broad selection of choices for further investigation”). . . . .

This court and obviousness law in general recognizes an important distinction between combining known options into “a finite number of identified, predictable solutions,” KSR, and ” ‘merely throwing metaphorical darts at a board’ in hopes of arriving at a successful result,” Cyclobenzaprine, quoting Kubin. While the record shows that, as early as 1995, the prior art indicated that both vitamin D analogs and corticosteroids were effective treatments for psoriasis, that same prior art gave no direction as to which of the many possible combination choices were likely to be successful. Instead, the prior art consistently taught away from combining vitamin D analogs and corticosteroids.

One important feature of PTO decision making is that Board conclusions of fact only require substantial evidence to be affirmed on appeal. Here, the Federal Circuit avoided that issue by indicating that all of its decisions were based upon the Board failure to properly apply the law to those facts. “In this case, however, with no material factual disputes, this court cannot share the Board’s analysis and application of the law to those facts.”

Objective Indicia of Non-Obviousness: Judge Rader writes:

The court now turns to the Board’s analysis of the objective indicia of nonobviousness. The Board reasoned that “the strong case of obviousness outweighs the experimental evidence and testimony about the advantages of the claimed composition.” Contrary to the Board’s conclusion, this court finds the objective indicia, in concert with the entire obviousness analysis, present a compelling case of nonobviousness. In fact, the objective indicia of nonobviousness highlight that the Board’s analysis regarding the combination of Serup or Dikstein with Turi was colored by hindsight.

Whether before the Board or a court, this court has emphasized that consideration of the objective indicia is part of the whole obviousness analysis, not just an afterthought. … When an applicant appeals an examiner’s objection to the patentability of an application’s claims for obviousness, the PTO necessarily has the burden to establish a prima facie case of obviousness which the applicant then rebuts. However, during inter partes reexamination, the Board is reviewing evidence of obviousness—including objective indicia—submitted by two adversarial parties for the claims of an issued patent. Thus, the Board should give the objective indicia its proper weight and place in the obviousness analysis, and not treat objective indicia of nonobviousness as an afterthought.

Objective indicia of nonobviousness play a critical role in the obviousness analysis. They are “not just a cumulative or confirmatory part of the obviousness calculus but constitute[ ] independent evidence of nonobviousness.” Ortho–McNeil Pharm., Inc. v. Mylan Labs., Inc., 520 F.3d 1358, 1365 (Fed.Cir.2008). This case illustrates a good reason for considering objective indicia as a critical piece of the obviousness analysis: Objective indicia “can be the most probative evidence of nonobviousness in the record, and enables the court to avert the trap of hindsight.” Crocs, Inc. v. Int’l Trade Comm’n, 598 F.3d 1294, 1310 (Fed.Cir.2010) (internal quotation marks omitted). Here, the objective indicia of nonobviousness are crucial in avoiding the trap of hindsight when reviewing, what otherwise seems like, a combination of known elements.

Unexpected results are useful to show the “improved properties provided by the claimed compositions are much greater than would have been predicted.” See In re Soni, 54 F.3d 746, 751 (Fed.Cir.1995) (internal quotation marks omitted). This record shows “extensive experimental evidence” of unexpected results that contradict the Board’s obviousness finding. J.A. 14. The Board concluded that the “unexpected results” claimed by Leo Pharmaceuticals were not surprising or unexpected. J.A. 19. However, substantial evidence does not support the Board’s conclusion.

During reexamination, the inventors of the ′013 patent submitted test results that analyzed the Dikstein and Serup formulations. The inventors found that the formulations disclosed by Dikstein and Serup result in significant degradation of the vitamin D analog and corticosteroid. See J.A. 1041–46 (testing formulations in Serup); J.A. 1625–27, 2152–2154 (testing formulations in Dikstein). The inventors also tested an improvement of Serup using Turi, by replacing Serup’s solvent with POP–15–SE, and still found significant degradation of the corticosteroid component. See J.A. 1045–46. These test results are a strong indication that the ′013 patent’s combination of known elements yields more than just predictable results.

In addition to evidence of unexpected results, Leo Pharmaceuticals provided other objective indicia of non-obviousness. For example, the commercial success of Leo Pharmaceutical’s Taclonex® ointment is a testament to the improved properties of the ′013 patent’s claimed invention. Taclonex® is the first FDA-approved drug to combine vitamin D and corticosteroids into a single formulation for topical application. While FDA approval is not determinative of nonobviousness, it can be relevant in evaluating the objective indicia of nonobviousness. See Knoll Pharm. Co., Inc. v. Teva. Pharm. USA, Inc., 367 F.3d 1381, 1385 (Fed.Cir.2004). Here, FDA approval highlights that Leo Pharmaceutical’s formulation is truly storage stable, something that the prior art formulations did not achieve.

The record also shows evidence of long felt but unsolved need, i.e., the need for a single formulation to treat psoriasis. The length of the intervening time between the publication dates of the prior art and the claimed invention can also qualify as an objective indicator of nonobviousness. See Ecolochem, Inc. v. S. Cal. Edison Co., 227 F.3d 1361, 1376–77 (Fed.Cir.2000). Here, the researchers were aware of the benefits of using both vitamin D and corticosteroids in the treatment of psoriasis as early as 1986. See, e.g., Dikstein col. 1, ll. 9–16. And Turi, upon which the Board relied to make its case, issued in 1978. Yet, it was not until the ′013 patent’s filing in 2000— twenty-two years after Turi and fourteen years after Dikstein-that the solution to the long felt but unsolved need for a combined treatment of vitamin D and corticosteroid was created. The intervening time between the prior art’s teaching of the components and the eventual preparation of a successful composition speaks volumes to the nonobviousness of the ′013 patent.

Here, the objective indicia—taken in sum—are the most “probative evidence of nonobviousness … enabl[ing] the court to avert the trap of hindsight.” Crocs, Inc., 598 F.3d at 1310. Viewed through the lens of the objective indicia, as opposed to the hindsight lens used by the Board, the ′013 patent would not have been not obvious over Turi in combination with Dikstein or Serup. Therefore, this court reverses the Board’s obviousness determination.

SkinMedica v. Histogen

Patent, , ,

By Jason Rantanen

SkinMedica Inc. v. Histogen Inc. (Fed. Cir. 2013) Download SkinMedica v Histogen
Panel: Rader (dissenting), Clevenger, Prost (author)

SkinMedica owns Patents No. 6,372,494 and 7,118,746, which relate to methods for producing pharmaceutical compositions containing "novel conditioned cell culture medium compositions,…[and] uses for the[m]."  A conditioned cell culture medium is an artificial environment that supplies the components necessary to meet the nutritional needs of the growing cells.  The conditioned medium at issue here also included extracellular proteins that, according to the patentees, may be useful for treating skin conditions such as wrinkles, frown lines, etc. 

The written descriptions of the '494 and '746 patents explain that a novel and important aspect of their invention is the difference between growing cells in two-dimensions and growing cells in three-dimensions. 

Claim 1 of the '494 patent:

1. A method of making a composition comprising:

(a) culturing fibroblast cells in three-dimensions in a cell culture medium sufficient to meet the nutritional needs required to grow the cells in vitro until the cell culture medium contains a desired level of extracellular products so that a conditioned medium is formed;

(b) removing the conditioned medium from the cultured cells; and

(c) combining the conditioned medium with a pharmaceutically acceptable carrier to form the composition.

(emphasis added by court).  At issue was the phrase "culturing…cells in three-dimensions."  The district court construed this phrase to mean "growing…cells in three dimensions (excluding growing in monolayers or on microcarrier beads."  Following claim construction, the district courted summary judgment of noninfringement for Histogen as it was undisputed that Histogen grew its cells on microcarrier beads. 

Limits on Ordinary Meaning: On appeal, the Federal Circuit affirmed the district court's claim construction. The court first agreed with SkinMedica that "the ordinary meaning of “culturing . . . cells in three-dimensions” would reach the use of beads."  However,

If the specification reveals “a special definition given to a claim term by the patentee that differs from the meaning it would otherwise possess[,] . . . the inventor’s lexicography governs.”…. And if the specification reveals “an intentional disclaimer, or disavowal, of claim scope by the inventor,” the scope of the claim, “as expressed in the specification, is regarded as dispositive.”
Slip Op. at 13 (citations omitted).  An  high hurdle applies when dealing with implied rather than express redefinition, as an "implied redefinition must be so clear that it equates to an explicit one."  Id. at 29, quoting Thorner v. Sony Computer, 669 F.3d 1362, 1368 (Fed. Cir. 2012).  Here, according to the majority, the inventors did precisely that for "culturing…cells in three dimenations":

In the written description, the patentees plainly and repeatedly distinguished culturing with beads from culturing in three-dimensions. They expressly defined the use of beads as culturing in two-dimensions. And they avoided anticipatory prior art during prosecution by asserting that the conditioned medium produced by two-dimensional cultures was inferior and chemically distinct from the conditioned medium produced by three-dimensional cultures. Because none of the evidence called to our attention by SkinMedica would reasonably lead to a different reading of the intrinsic evidence, we find that the inventors clearly redefined the scope of “culturing . . . cells in three dimensions” by disclaiming the use of beads—which would otherwise be included in the ordi- nary meaning of that phrase.

Id. at 15.  In support of this conclusion, the majority opinion walks through a lengthy discussion of the text of the specification and prosecution history, addressing language such as "beads, as opposed to cells grown in three dimensions and the use of "i.e."  The result was a disavowal of beads from the scope of the claim term at issue:

"In sum, although the inventors never explicitly redefined three-dimensional cultures to exclude the use of beads, their implicit disclaimer of culturing with beads here was even “so clear that it equates to an explicit one. Without fail, each time the inventors referenced culturing with beads in the specification, they unambiguously distinguished that culture method from culturing in three-dimensions."

Id. at 27. 

Incorporation by Reference: One of SkinMedica's counter arguments was that the written description incorporated a voluminous technical treatise, Cell & Tissue Culture: Laboratory Procedures ("Doyle") in its entirety and that Doyle describes three-dimensional culturing with beads.  Among the majority's bases for rejecting SkinMedica's argument was the lack of any specific reference to Doyle:

Third, even if we assume that the passage from Doyle discusses what one of ordinary skill in the art might understand to be three-dimensional culturing with beads, the inventors’ general citation of Doyle does not indicate any reliance on that particular passage to define “culturing in three-dimensions” and to abandon the otherwise clear disclaimer of beads in the specification. When discussing cell culture methods, the patentees make the following reference to Doyle:

The cells may be cultured in any manner known in the art including in monolayer, beads or in three-dimensions and by any means . . . . Methods of cell and tissue culturing are well known in the art, and are described, for example, in [Doyle], supra; Freshney (1987), Culture of Animal Cells: A Manual of Basic Techniques, infra.

’494 patent col. 10 ll. 2–6.

It is clear from that passage that the inventors did not refer to Doyle in order to define what they meant by “three-dimensional culturing” in their patent. They did not indicate their reference to Doyle was for that purpose; nor did they even refer with any detailed particularity to the passages in Doyle that, according to SkinMedica, may have discussed three-dimensional culturing with beads. When the inventors wanted to use Doyle to explain the potential scope of terms they used, they did so specifically….We see no reason for such a non-specific reference to trump the clear disclaimer in the specification of culturing with beads.

Slip Op. at 35-36. 

Judge Rader's Dissent: Writing in dissent, Judge Rader disagreed that the patentee had met the "heavy presumption" in favor of the ordinary meaning of claim language.  Central to Judge Rader's opinion was the distinction between growing cells "on beads" and growing cells in three-dimensions using beads.  

Deference battle? Judge Rader's dissent also relied on testimony by SkinMedica's technical expert, Dr. Salomon.  The majority agreed with district court's decision to give Dr. Salomon's testimony "no weight"; in Judge Rader's eyes, "Dr. Salomon's testimony, when viewed as a whole, deserves great weight and respect."  Slip Op. at 47. 

Federal Circuit Rejects Supreme Court Original and Exclusive Jurisdiction over State-vs-State Inventorship Disputes

Patent, , , , , ,

By Dennis Crouch

A highlight of this opinion is Footnote 1 of Judge Moore’s dissenting opinion that states “The majority baldly asserts that issues of patent ownership and inventorship are not sufficiently grand for the Supreme Court to resolve in the first instance. That is not our decision to make. It is for the Supreme Court to itself decide.”

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University of Utah v. Max-Planck-Gesellschaft (Fed. Cir. 2013)

In 2011, University of Utah (UUtah) filed a federal lawsuit under 35 U.S.C. § 256 to correct the inventorship of U.S. Patent No 7,078,196. That patent is directed to Small Interfering RNAs (siRNAs) and methods of creating those molecules that are the current study of intensive genetic therapy research.

According to USPTO records, the patent is owned collectively by the Max-Planck Institute as well as MIT, the Whitehead Institute and the University of Massachusetts. Dr. Brenda Bass – a UUtah professor – alleges that Dr. Thomas Tuschl – a UMass Professor – incorporated her ideas into his patent but then did not name her as an inventor. All of these assignees were named as defendants in the complaint filed in Federal District Court.

The appeal raises interesting issues of civil procedure, federalism, and sovereign immunity. The 11th Amendment to the U.S. Constitution generally provides sovereign immunity to state governments from any cause of action in Federal Court brought by citizens of another state or country. However, the 11th Amendment does not provide for immunity in state-vs-state actions. Rather, the U.S. Constitution provides that “In all [Federal] Cases . . . in which a State shall be Party, the supreme Court shall have original Jurisdiction.” Art III, §2, cl. 2. Following the constitutional guidance, the jurisdictional statutory code provides that the “Supreme Court shall have original and exclusive jurisdiction of all controversies between two or more States.”

Rather than fighting the battle in District Court, UMass (a state institution) argued that the case brought by UUtah (another state institution) should be seen as a state-vs-state conflict that should go directly to the Supreme Court in the matter of first instance.

In order to avoid that result (but still reach the same result), UUtah dropped UMass as a defendant and instead list the leaders of UMass (including its president Robert Caret) as the defendants. Based upon that change, District Court Judge Saris held that the case should no longer be seen as a state-vs-state case and that, as a consequence, the Supreme Court did not have exclusive original jurisdiction. Judge Saris also found that correction of inventorship was not a “core sovereign interest sufficient to make this a dispute between States,” but that the case could proceed against the named officials under the Ex parte Young doctrine. Particular to this case is that the remedy demanded was an order directing the USPTO to correct inventorship rather than calling for any monetary or injunctive relief against the state.

Although the district court case is not final, the Federal Circuit took an immediate appeal under the Collateral Order Doctrine.

On appeal, the Federal Circuit has affirmed – finding that “UMass is not a real party in interest under the Supreme Court’s caselaw.” Although both the Constitution and Statute appear clear, the US Supreme Court has been reluctant to take cases such as this and has thus added requirements that the case be “serious,” “dignified,” and raising “important” federalism concerns. In addition, the Supreme Court has considered whether there are other avenues for relief. And, both of the competing states must be indispensable parties to the lawsuit.

On this notion, UMass argues that UUtah is seeking the property of UMass (i.e., its patent) and that is sufficient to make UMass a real party that cannot be “plead around.”

Agreeing with UMass, the Federal Circuit instead held that the case is about “inventorship” and the identity of the individual inventor of a patent is not a “core sovereign interest” that need be raised directly to the Supreme Court. In addition, the Federal Circuit agreed that the formal shift from suing the University to suing the University President in his Official Capacity was sufficient to evade the state-vs-state setup. Finally, the appellate panel found that UMass (a patent owner) is not an indispensable party to the case since its interests are being adequately protected by the other co-owners and its named officials.

In reality, UUtah UMass [Updated] likely does not want the Supreme Court to directly hear the case. Rather, the strategy here is that the University is largely betting on the likelihood that the Supreme Court would decline to exercise jurisdiction – effectively ending the case.

= = = = =

Writing in Dissent, Judge Moore vigorously disagreed with the majority’s holding.

The majority erroneously holds that a patent-ownership dispute between two state universities is not a “controversy between two or more States.” It then compounds this error and holds that a patent owner is not an indispensable party to an action that seeks to reassign title to the patents-in-suit. I respectfully dissent.

I. Subject Matter Jurisdiction

The district court lacks jurisdiction over UUtah’s claims against the UMass Officials because those claims raise a dispute between two States, Utah and Massachusetts. Article III of the U.S. Constitution vests the Supreme Court with original jurisdiction over cases in which a State is a party. As § 1251(a) expressly states: “The Supreme Court shall have original and exclusive jurisdiction of all controversies between two or more States.” There is no dispute that UUtah and UMass are instruments of Utah and Massachusetts, respectively, and that a suit between those institutions could only be brought in the Supreme Court. The majority, however, concludes that § 1251(a) does not apply here because UUtah elected to sue the UMass Officials rather than UMass. That conclusion is incorrect.

To determine if a suit implicates the Supreme Court’s exclusive original jurisdiction, we look “behind and beyond the legal form” of the claim and determine “whether the State is indeed the real party in interest.” Arkansas v. Texas, 346 U.S. at 371. The majority agrees with this general proposition but holds that the UMass Officials, not UMass, are the real parties in interest. I disagree.

This case involves a dispute between UMass and UUtah over who owns the rights to the Tuschl II patents. UMass is the assignee of the Tuschl II patents and UUtah “wants to own the patents.” UUtah is pursuing that interest through a correction of inventorship claim under 35 U.S.C. § 256 and a corresponding request for an order that UUtah owns the patents. … UUtah also alleges in its complaint that it “should be the sole owner or an owner” of the Tuschl II patents. It specifically requests that the court “order assignment of all right title and interest” in the patents to UUtah. Indeed, the majority recognizes (1) that UUtah specifically requested that the court assign it all rights to the Tuschl II patents and (2) that UUtah will obtain the rights to the patents if it prevails on its correction of inventorship claims. This is a dispute about ownership, plain and simple.

UUtah cannot recast the nature of this dispute by suing the UMass Officials as stand-ins for UMass. Indeed, the majority never holds that the UMass Officials have any interest in this proceeding. Nowhere does the majority suggest that the UMass Officials are “parties concerned” that may be subject to a correction of inventorship action under § 256(b). . . .

Section 1251(a) contains “uncompromising language”: the Supreme Court has original and exclusive jurisdiction over “all controversies between two or more States.” Mississippi v. Louisiana, 506 U.S. 73, 77, 113 S.Ct. 549, 121 L.Ed.2d 466 (1992). The majority errs when it concludes that § 1251(a) does not apply to this dispute because the “State has no core sovereign interest” in inventorship or patent ownership. Maj. Op. at 13–15. The majority’s “core sovereign interests” test is at odds with the plain language of the statute, which contemplates “all controversies” between states fall within 1251, not just those involving core sovereign interests. There is simply no basis to limit the statute in such a way.

Moreover, requiring a core sovereign interest to implicate the Supreme Court’s exclusive jurisdiction erodes the Court’s discretion to decide which controversies it will hear. The existence of the Supreme Court’s exclusive jurisdiction and its discretion to exercise that jurisdiction are separate concepts. The Court’s exclusive original jurisdiction extends to “all controversies between two or more States.” 28 U.S.C. § 1251(a). The Court, however, is not required to exercise its jurisdiction over every controversy. The Court tends to exercise its jurisdiction sparingly, depending upon the nature of the interest of the complaining State, the seriousness and dignity of the claim, and the availability of another original forum to resolve the dispute. Mississippi v. Louisiana, 506 U.S. at 76–77. The concept of a “core sovereign interest” has roots in opinions that address whether the Supreme Court will decide to exercise its jurisdiction over a dispute, not whether the Court’s exclusive original jurisdiction over the controversy exists. See id. at 77; Texas v. New Mexico, 462 U.S. 554, 570, 571 n. 18, 103 S.Ct. 2558, 77 L.Ed.2d 1 (1983); Connecticut ex rel. Blumenthal v. Cahill, 217 F.3d 93, 109 (2d Cir.2000) (collecting cases). The majority’s conflation of those two concepts strips the Supreme Court of its discretion to decide if a case is sufficiently serious to exercise jurisdiction over it. It reallocates that power to the lower courts—who will decide which subset of cases—those implicating core sovereign interest—will be presented to the Supreme Court. FN1

The majority finds support for its decision in the Second Circuit’s split decision in Cahill. With all due respect, even if we adopt the flawed logic of the majority in Cahill, this case would still fall within the Supreme Court’s exclusive jurisdiction in § 1251. The majority correctly recognizes that, generally, a State is the real party in interest if ” the effect of the judgment would be to restrain the Government from acting, or compel it to act.” Maj. Op. at 14 (quoting Cahill, 217 F.3d at 106). But the majority nevertheless concludes that UMass is not the real party in interest because a judgment to correct inventorship “will not require or restrain UMass from acting.” Id. at 13. This is not correct.

A judgment in UUtah’s favor will restrain UMass’s ability to act. If successful, UUtah will be declared sole owner of the Tuschl II patents and UMass will have no interest in them. UMass will not be able to license or assign the patents. And UUtah will be able to exclude UMass from practicing the inventions claimed in the patents. Patent rights are the quintessential right to restrain. The effect of this judgment will be to prevent UMass from exploiting the Tuschl II patents or the technologies they cover. This certainly “restrain[s] the Government from acting.”

UUtah alternatively requests that Dr. Bass be found to be a co-inventor. A finding that Dr. Bass is a co-inventor of the Tuschl II patents will result in UUtah co-owning those patents. The effect of the judgment would be that UUtah could practice or license the patents without UMass’s consent and without having to account to UMass. See 35 U.S.C. § 262. The judgment would thus restrain UMass from asserting its rights in the Tuschl II patents against UUtah or any of UUtah’s licensees. Again, this restrains UMass from acting.

The majority ignores these effects on UMass. Without explanation, the majority asserts that UMass will only be “more or less affected by the decision” and that transfer of the Tuschl II patents to UUtah will “not deplete the state treasury.” Maj. Op. at 15. This is incorrect. A correction of inventorship by the PTO will give UUtah an ownership interest in the Tuschl II patents by operation of law and dilute or revoke UMass’s property interest. Indeed, as the majority also recognizes, UUtah expressly asks the court to order the reassignment of the patents to UUtah. The central effect of a judgment in UUtah’s favor will be to deplete the assets of the current owners of the Tuschl II patents, one of whom is UMass. UMass is thus the real party in interest in this case.

This is a dispute between two state universities over who owns a valuable patent portfolio—a dispute over property ownership. As undesirable as it may be, we are bound to follow the plain language of § 1251(a): “The Supreme Court shall have original and exclusive jurisdiction of all controversies between two or more States.” It is up to the Supreme Court to decide if it wants to exercise its exclusive jurisdiction over this controversy. We should not contort the statute to avoid a perceived injustice FN2 that would result if the Court declined to exercise jurisdiction over UUtah’s claims.

UUtah initiated an action that seeks to obtain UMass’s interest in the Tuschl II patents. That is a controversy between two States and can only be brought in the Supreme Court. Accordingly, we should reverse the district court’s decision that it had jurisdiction over UUtah’s claims against the UMass Officials.

II. Indispensable Party

The majority’s holding that UMass is not an indispensable party to this action is incorrect. We have held that when a plaintiff brings a declaratory judgment action seeking to invalidate a patent or hold it not infringed, the patentee is both a necessary and indispensable defendant in that action. A123 Sys., Inc. v. Hydro–Quebec, 626 F.3d 1213, 1217–19, 1220–22 (Fed.Cir.2010); Enzo APA & Son, Inc. v. Geapag A.G., 134 F.3d 1090, 1094 (Fed.Cir.1998). It would be nonsensical to suggest that all patent owners must be joined in a suit seeking to invalidate the patent, but they need not be joined in a suit over patent ownership. Indeed, § 256(b) requires a court, before it orders a correction of inventorship, to provide “notice and hearing of all parties concerned,” i.e., those with an “economic stake” in the patent. Chou, 254 F.3d at 1359–60. We should apply our general rule that all co-owners must be joined in an action that affects their patent. See Ethicon, Inc. v. U.S. Surgical Corp., 135 F.3d 1456, 1467 (Fed.Cir.1998).

The majority instead holds that UMass is not an indispensable party because UUtah joined “all of the Tuschl Patent owners except UMass,” each of whom are “jointly represented by legal counsel.” Maj. Op. at 21. It is not enough that UMass and the named defendants “share the same overarching goal” of defeating UUtah’s inventorship and ownership claims. A123 Sys., 626 F.3d at 1221 (holding that absent patentee was an indispensable party when the named party had “overlapping” but not “identical” interests).

The majority deviates from our longstanding requirement that all patent owners be joined, citing an exception created in Dainippon Screen Manufacturing Co. v. CFMT, Inc., 142 F.3d 1266 (Fed.Cir.1998). It is true that, like Dainippon Screen, the named defendants here are represented by common counsel. But the majority omits the “highly relevant” facts from Dainippon Screen—the absent party was a wholly-owned subsidiary of the named party and was created by the named party to enforce the patents-in-suit. 142 F.3d at 1267–68, 1272–73. We allowed the suit to go forward because “the parties’ interests in the asserted patents were not just common, but identical.” A123 Sys., 626 F.3d at 1221 (discussing Dainippoin Screen ).

There is no party in this suit which represents UMass’s interest in the Tuschl II patents. Other defendants also have an interest in the patents, but they do not represent UMass’s interest. Indeed, their interests may well diverge. For example, the non-UMass defendants may choose to settle with UUtah in a way that diminishes UMass’s rights, such as stipulating that Dr. Bass is the sole inventor of the Tuschl II patents in exchange for ownership interests in the patents. That risks extinguishing UMass’s rights to the patents without UMass participating in the lawsuit.

The majority further claims that defendant Alnylam can represent UMass’s interest because UMass “handed sole and exclusive control of this suit over to Alnylam.” Maj. Op. at 21. That right, however, is conditional. If there is a conflict of interest, Alnylam loses its right to control UMass’s defense. Id. The agreement thus contemplates that Alnylam and UMass may not have identical interests. Because UMass does not have identical interests with any of the named defendants, it is an indispensable party in this case. I dissent from the majority’s contrary holding.

Working out the Kinks in Post-Issuance Reviews: Versata v. SAP

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By Dennis Crouch

The Versata saga provides an important case history showing the power of the new post-grant review procedures before the USPTO and the Office’s seeming new power to operate without fear of judicial review. However, over the next year the Federal Circuit will have its opportunity to review the PTAB’s controversial decisions.

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Versata’s hierarchical pricing engine software had strong sales in the mid 1990’s, that ended when SAP and others added the component to their product line – an extra add-on was no longer needed. SAP indicated that its software replaced the need for Versata’s add-on and actively discouraged customers from using Versata.

Versata’s In-Court Victories: Versata eventually sued SAP in 2007 and won a first jury verdict and then a second jury verdict (finding that SAP’s “patch” did not cure the infringement) with a $300 million + damage award. That final decision was later affirmed on appeal.

Petition for Post-Grant Review of Covered Business Method: Meanwhile, following the district court’s second finding of infringement (but prior conclusion of the aforementioned appeal), SAP filed a petition for Post Grant Review available to “Covered Business Methods” as part of the America Invents Act. SAP had clearly been anxious to use this approach and filed the PGR petition at its first opportunity on September 16, 2012 (the first day such petitions were allowed). CBM2012-0001.

If you remember, post-grant review (including CBM review) allows for challenge on “any ground that could be raised under paragraph (2) or (3) of section 282 (b) (relating to invalidity of the patent or any claim).” This has been interpreted by the PTO to include validity challenges raised under 35 U.S.C. § 101, 102, 103, or 112. But see Can a Third Party Challenge Section 101 Subject Matter Eligibility in the USPTO’s new Post-Grant Review Procedure?

SAP’s petition challenged the patent claims as (1) directed toward unpatentable subject matter under §101; (2) lacking written description; (3) indefinite; and anticipated.

USPTO Grants Petition for Post Grant Review: In a January 2013 order, the USPTO’s Patent Trial & Appeal Board (PTAB) granted the petition after finding that the challenged claims are “more likely than not unpatentable.” In particular, the PTAB allowed the challenge to move forward on the Section 101 and 102 grounds.

The PTAB made two additional important rulings:

What is a Covered Business Method?: First, the Board ruled that the ‘350 patent claims qualified as covered-business-methods because the claims are directed to a method for the “management of a financial product or service” and are not “technological inventions.” The PTO’s working definition of “technological” is rather unhelpful in that it simply asks whether the claim recites a new “technological feature” or “solves a technical problem using a technical solution.” Relevant claims of the patent (U.S. Patent No. 6,553,350) are shown below (claims 17 and 26). And, you will note that the method claim 17 does not recite any steps that could not be done with pencil and paper.

Issue Preclusion / Collateral Estoppel Does Not Apply: The ordinary rule in federal courts is that preclusion applies following final judgment by a district court. The fact that an appeal is pending does not impact the finality of the district court judgment unless & until the appellate court takes some action. In Pharmacia, the Federal Circuit wrote that the “vast weight of case law” supports the notion that a judgment should be given its full preclusive effect even when an appeal is pending. Pharmacia & Upjohn Co. v. Mylan Pharm., 170 F.3d 1373 (Fed. Cir. 1999). Here, Versata argued that the PTO should follow that general rule and since SAP already had a full and fair opportunity to challenge the patent validity and had lost its federal lawsuit resulting in final judgment. The PTAB rejected Versata’s argument finding instead that it would would not respect any final judgment subject to a pending appeal to the Federal Circuit.

As the final judgment in the related Versata v. SAP litigation is currently on appeal to the Federal Circuit, we hold that the district court’s judgment is not sufficiently firm to be accorded conclusive effect for purposes of 37 C.F.R. 42.302 as it is still subject to reversal or amendment.

On this issue, it is interesting to note that the appeal brief filed by SAP did not challenge district court’s validity finding. Thus, although the district court decision in general could have been rejected on appeal (it wasn’t), there was simple no chance even in January 2013 that the appellate panel was going to opine on patent validity issues.

At this point, in January 2013, the PTAB was beginning its review of the ‘350 patent’s validity and, in parallel the Federal Circuit was considering SAP’s appeal that focused on noninfringement and remedy arguments.

No Challenge to PTO Decision to Grant Post-Issuance Review Petition: Versata also opened a third-front – filing suit in Virginia district court to overturn the PTO’s decision to grant the post-issuance review petition. In a recent decision, the Virginia court rejected that request in Versata Development v. Rea (as Director of USPTO) and SAP AG, 2013 WL 4014649 (E.D. Va. 2013) (no subject matter jurisdiction). The AIA indicates that the PTO’s determination of whether or not to institute post-grant proceedings are “final and nonappealable.” 35 U.S.C. 324. Versata argued that “nonappealable” in the statute should be seen as merely limiting direct appeals to the Federal Circuit and that its request for review was akin to a “civil action” under 35 U.S.C. 145 and not an “appeal.” Bolstering that argument is the language of 35 U.S.C. 329 and 141 that define appeal in post-issuance proceedings as appeals to the Federal Circuit. However, the district court rejected Versata’s argument and held that the court lacked jurisdiction under the statute and that, in any case, the decision to grant the review was only an interlocutory decision. It is unclear, but Versata may appeal this decision soon. [As an aside, the language of the district court opinion suggests that petition is denied

Federal Circuit Decision (Largely) Affirms Lower Court: The next event in this long saga came in May 2013 when the Federal Circuit affirmed the district court’s determination of infringement and the damages award. The only modification of the judgment was to ask the lower court to be more particular in injoining infringement without injoining sales of SAP products in general.

PTAB Final Judgment: The following month in June 2013, the PTAB came out with its final ruling holding that the patent claims are invalid under 35 U.S.C. §101 as unpatentably abstract. This decision obviously temporally follows both the district court decision and that of the Federal Circuit. Yet, the PTAB found itself to differ on both claim construction and validity.

In particular, the PTAB determined that it would apply the “broadest reasonable interpretation” (BRI) standard to claim construction during post-issuance proceedings even though the terms had already been construed by the district court in a final judgment. The PTO’s rational is that (1) it is not bound by the district court judgment since “appeals from this proceeding are exclusively the Federal Circuit rather than to district courts” and that (2) the patentee’s ability to amend claims during review suggests that BRI should apply.

In the 101 analysis, the panel found that the claimed method of determining a price using product group hierarchies was a “disembodied concept” capable of being performed mentally, on paper, or on a general purpose computer. The PTO final judgment did not substantially revisit the issues of preclusion or whether the PTO has standing to challenge the patent under Section 101.

At the PTAB, the current status is that the Board is considering a rehearing request by Versata with the primary new focus being on the Federal Circuit’s Ultramercial decision. Versata again raised the contention that §101 is not a permissible ground for post grant review. Versata writes “Because § 101 is not a condition for patentability, much less specified as such as required by 35 U.S.C. § 282(b)(2), it is not reviewable in a post-grant review (or CBM review).”

All these issues are likely to come to a head as the case is appealed to the Federal Circuit over the next year.

= = = = =

Claims at Issue:

17. A method for determining a price of a product offered to a purchasing organization comprising: arranging a hierarchy of organizational groups comprising a plurality of branches such that an organizational group below a higher organizational group in each of the branches is a subset of the higher organizational group; arranging a hierarchy of product groups comprising a plurality of branches such that a product group below a higher product group in each of the branches in a subset of the higher product group; storing pricing information in a data source, wherein the pricing information is associated, with (i) a pricing type, (ii) the organizational groups, and (iii) the product groups; retrieving applicable pricing information corresponding to the product, the purchasing organization, each product group above the product group in each branch of the hierarchy of product groups in which the product is a member, and each organizational group above the purchasing organization in each branch of the hierarchy of organizational groups in which the purchasing organization is a member; sorting the pricing information according to the pricing types, the product, the purchasing organization, the hierarchy of product groups, and the hierarchy of organizational groups; eliminating any of the pricing information that is less restrictive; and determining the product price using the sorted pricing information.

26. A computer readable storage media comprising: computer instructions to implement the method of claim 17.

Federal Circuit gets Technical with PTAB Failures

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By Dennis Crouch

In re Guiffrida (Fed. Cir. 2013) (non-precedential)

Great Lakes NeuroTechnologies is a spin-off of Cleveland Medical Devices (CMDI) and focuses on therapy systems for movement disorders. The new company took control of a handful of CMDI patents when it was formed back in 2011. However, the patent application in question would be their first post-formation patent issuance, and the company’s first patent issued listing its president (Joe Guiffrida) as an inventor.

The preamble of Guiffrida’s first claim is directed toward a “portable therapy system,” although the claims body does not provide any further portability related limitation. In its decision, the PTAB had rejected the claim as anticipated over a single prior art reference (Shields). Shields does not make any remarks regarding portability, but the PTAB found the limitation disclosed because Shields does “not appear to contain any structure confining it to a particular location.” On appeal, the Federal Circuit rejected that analysis – finding that the prior art’s failure to disclose non-portability is not the equivalent of disclosing portability.

An anticipating reference must disclose every claim limitation, either expressly or inherently [and i]nherent disclosure requires that the prior-art reference necessarily include the unstated limitation. . . .

The Board found that Shields inherently discloses a portable system because Shields does “not appear to contain any structure confining it to a particular location.” But that observation does not indicate that Shields “necessarily” includes a portability limitation, or even that Shields must necessarily be free from “confin[ement] to a particular location.” On the contrary, a finding that Shields does not say that its system is not portable—which is all that the Board’s statement implies—is just a restatement of the fact that Shields does not expressly disclose a portability limitation. It does not suggest anything about what Shields inherently discloses that would suffice to shift the burden to Giuffrida to disprove inherency.

A confusing aspect of patent claims is that a claim preamble is often seen as non-limiting. Here, any confusion was eliminated because the PTO and the applicant agreed that the portability limitation is limiting. In the appeal, the Federal Circuit accepted that interpretation without comment.

Broadest Reasonable Interpretation Requires Consideration of Specification: The parties did not wholly agree on the meaning of portability. For its part, the PTO applied its wrong-headed “broadest reasonable interpretation” to suggest that a portable device is one that “can be carried.” Although irrelevant for this case, the Federal Circuit took the PTO to task for applying that “dictionary definition” of the claim term rather than construing the term “in light of the specification as it would be interpreted by one of ordinary skill in the art.” Quoting Phillips v. AWH. According to the appellate panel, the specification provides that a portable system is one that is “capable of being transported relatively easily.” In fact, the specification states that “By portable it is meant among other things that the device is capable of being transported relatively easily.” The Federal Circuit seems to have skipped over the wiggle-words “among other things” that were certainly inserted in order to open the term to a much wider variety of definitions.

Cryptic PTAB Decisions: In an earlier essay, I wrote about the Board’s new approach of writing shorter opinions. Here, the Federal Circuit gave some credence to that approach. Noting that cryptic obviousness rejections can be upheld where the analysis can be “reasonably discerned.” Here, the court noted that the board can rely upon the examiner’s brief in its decision.

Board made a number of obviousness rejections and those were affirmed on appeal except for claim 24 that I will discuss below. On remand, the PTO may also replace the reversed anticipation rejections (discussed above) with obviousness rejections – especially since the result of this case is that many of the here-adjudged novel claims have dependent claims that are here-adjudged as obvious.

Claim 24 in the patent application adds a limitation that some of the system components communicate using “a two-way RF link.” I don’t think that anyone (even a Federal Circuit judge) believes that a two-way RF communication limitation would normally transform an unpatentable system into one that is non-obvious (without something more). But, here the Federal Circuit reversed the rejection – finding that the PTO had failed to prove-up its burden.

[The proffered prior art’ uses ultrasound transducers that communicate with a compact unit, which, in turn, communicates with a computer. Those communications are twice referred to as “wireless,” but the document says little else about them. It does not mention a radio frequency (RF) link, a two-way or bidirectional link, the retransmission of data over such a link, or any benefits from such retransmissions. We have been pointed to no substantial evidence that Zheng teaches such features.

Nor has the Director persuasively explained why Zheng [the prior art] renders those limitations from claim 24 obvious. On the contrary, the reasoning within the PTO has been inconsistent and conclusory in this matter. In stating that it “fail[ed] to see how a system that can both receive signals from sensors and deliver them to, for example, FES systems, could operate absent a two-way link,” the Board cited a paragraph in Zheng that mentions a wireless link between units embedded in the body and an “outside control unit.” The Examiner invoked different paragraphs from Zheng to find that a two-way link is “implied” or “required.” Broad-brush statements based on Zheng’s generic references to a “wireless” link are insufficient to support the conclusion that Zheng renders obvious a claim calling for the “wireless[ ] retransmi[ssion] [of sensor signals] over a two-way RF link.” We therefore reverse the rejection of claim 24.

On remand, the PTO should be able to find some prior art that shows wireless RF two-way communication that fits this case.

Federal Circuit Begins its Campaign for Patent Clarity

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By Dennis Crouch

Wyeth v. Abbot Labs (Fed. Cir. 2013)

In a unanimous opinion, the Federal Circuit has affirmed a summary judgment holding that Wyeth’s patents are invalid as lacking enablement under 35 U.S.C. 112. Wyeth’s patents cover the use of rapamycin antibiotic to treat and prevent restenosis following arterial balloon catheterization. See U.S. Patent Nos. 5,516,781 and 5,563,146. The claimed invention is simple and basically says, administer an “antirestenosis effective amount of rapamycin.” Claim 1 of the ‘781 patent reads as follows:

1. A method of treating restenosis in a mammal resulting from said mammal undergoing a percutaneous transluminal coronary angioplasty procedure which comprises administering an antirestenosis effective amount of rapamycin to said mammal orally, parenterally, intravascularly, intranasally, intrabronchially, transdermally, rectally, or via a vascular stent impregnated with rapamycin.

One requirement of patent law is that the patent application (at the time of its filing) must sufficiently enable a person skilled in the relevant art to make and use the full scope of the claimed invention without undue experimentation. This “enablement requirement” is codified in Section 112(a) of the Patent Act (Formerly known as Section 112¶1).

Here, it is the “full scope” requirement that kills the patent. In particular, Wyeth requested and received a broad construction of the claim term rapamycin to in a way that includes a large number of molecules that are structurally analogous to one another. However, the specification only discloses a single species along with a number of assays that could be useful to ascertain whether potential compounds exhibit the requisite effect.

In the appeal, the Federal Circuit aligned itself to the rule that broad claim scope requires broad disclosure. Here, the court noted that the rapamycin definition includes “tens of thousands” of candidate molecules and the specification “is silent about how to structurally modify sirolimus.

Undue experimentation: For its part, Wyeth argued that a lab tech with the usual skill and little creativity could systematically work through the various potential candidates to find which ones actually work. Citing to Johns Hopkins Univ. v. CellPro, Inc., 152 F.3d 1342, 1360–61 (Fed. Cir. 1998), Wyeth argued that a large pile of merely routine experimentation does rise to the level of impermissible undue experimentation.

The Federal Circuit disagreed – finding that the trial-and-error process of tens-of-thousands of candidates moves the project well into the range of undue experimentation.

[T]here is no genuine dispute that it would be necessary to first synthesize and then screen each candidate compound using the assays disclosed in the specification to determine whether it has immunosuppressive and antirestenotic effects. There is no evidence in the record that any particular substitutions outside of the macrocyclic ring are preferable. Indeed, a Wyeth scientist confirmed the unpredictability of the art and the ensuing need to assay each candidate by testifying that, “until you test [compounds], you really can’t tell whether they work or not [i.e., have antirestenotic effects].” J.A. 6929. In sum, there is no genuine dispute that practicing the full scope of the claims would require synthesizing and screening each of at least tens of thousands of compounds. . . .

Even putting the challenges of synthesis aside, one of ordinary skill would need to assay each of at least tens of thousands of candidates. Wyeth’s expert conceded that it would take technicians weeks to complete each of these assays. The specification offers no guidance or predictions about particular substitutions that might preserve the immunosuppressive and antirestenotic effects observed in sirolimus. The resulting need to engage in a systematic screening process for each of the many rapamycin candidate compounds is excessive experimentation. We thus hold that there is no genuine dispute that practicing the full scope of the claims, measured at the filing date, required undue experimentation.

The take-away legal points here are (1) broad claims must do more to satisfy the enablement requirement than narrow claims; and (2) when excessive, routine non-creative efforts to recreate the invention can constitute undue experimentation.

The case is also interesting because it comes at a time where policymakers are looking to tighten the requirements of Section 112. As it did during the debate over the AIA, the Federal Circuit appears poised to make its mark on the current debate over patent scope and clarity.

Guest Post: Monopoly Without Apology

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By Shubha Ghosh

Without any surprise, even to those who wrote amici in support of the farmer in Bowman v. Monsanto, the Supreme Court ruled in favor of Monsanto last week. During oral arguments in February, the Court made it clear that it would find against Bowman because he had made an unauthorized copy of Monsanto’s patented seed. Since oral argument, the focus has been on how the Court would rule in favor of Monsanto. The final ruling, while narrow in its language, is a potentially confusing one. In this post, I write about the implications of Bowman for the future.

Towards the end of her opinion for a unanimous court, Justice Kagan states that the ruling applies only to the facts at hand. The Court leaves open how the exhaustion doctrine applies to other self-replicating technologies. As a co-author of an amicus for the American Antitrust Institute on behalf of Bowman, I was relieved to read Justice Kagan’s rejection of the broad exception to the exhaustion doctrine for self-replicating technologies adopted by the Federal Circuit. Such a broad holding would mean that first sale and other applications of exhaustion would have no place in biotechnology or digital technologies. Contrary to the Federal Circuit, and citing treatment of software under copyright, the Court acknowledges that patent rights may not extend to necessary, but incidental copying, or to situations where copying occurs outside the control of the purchaser. Similar limitations may exist for making under patent law in the exhaustion doctrine.

What is more troubling, and somewhat confusing, is the Court’s treatment of making under the patent act. Bowman’s act of infringement was simply the act of planting the seed for another generation. This broad construal of infringement expands the scope of patent infringement to include the sort of incidental infringement that the Court acknowledges as possibly protected by exhaustion. During oral argument, the Court asked Monsanto’s counsel about inadvertent infringement, but there was no engagement. Whether inadvertent or not, it appears from the Court’s decision is that planting by itself is infringement. That conclusion is inconsistent with precedent and with previous cases.

The Court cites its 1962 decision, Wilbur-Ellis Co. v. Kuther, for the proposition that a purchaser cannot make another version of the patented item under the exhaustion doctrine. However, the Court did not mention that Kuther involved a situation in which the purchaser was not found liable for patent infringement. Specifically, the purchaser retrofitted a patented sardine-canning machine so that it could handle larger sizes of cans. Although the patent owner claimed this retrofitting to be an unauthorized reconstruction of the patented machine, the Court held that in adjusting and putting together the unpatented parts the purchaser was engaging in authorized repair.

Bowman argued that by planting the seed, he was harnessing the unpatented reproductive capacity of the seed. The Court dismissed this argument as the “blame the bean defense.” Admittedly, the argument might mean a broad exhaustion doctrine for self-replicating technologies, a conclusion that is equally troubling as the Federal Circuit’s broad exemption from exhaustion for such technologies. But the Court dismissed this argument too quickly. By concluding that planting is by its very nature reconstruction, the Court ignores the unpatented natural processes that are embodied in the act of planting. The use of the unpatented natural processes is discounted completely. In ruling against Bowman, the Court relied on a precedent that in some of its elements favored the purchaser.

The Court also relied on its 1882 decision, Cotton-Tie Company v. Simmons. In this case, the patentee distributed its patented tie for bundles for free with the cotton bales it sold under the express licensing term that the ties be used only once. The defendant collected the used ties and reconstructed them. The Court held that the defendant infringed the patent. The facts of Bowman are similar to that of Simmons. Both bought used versions of the patented product and reused them. But there are key differences. The Court’s finding of infringement in Simmons rested on a clear application of the claims of the patent which covered precisely the reconstruction of the patented ties. In Bowman, however, the Court relies on a dictionary definition of the work make to conclude that since the patented gene was part of the next generation of seeds grown by Bowman, the farmer had made the patented invention. The Court does not consult the language of the claims. Instead the Court concludes that planting is making and, under the Patent Act, any making is an infringement.

But the Bowman Court seems to be confused on when exactly making is infringement. In footnote 3, the Court considers the hypothetical of a farmer buying the patented seeds from Monsanto without an express licensing term that allowed the farmer to plant the seeds. The Court says that in such a scenario, the farmer would have an implied license to plant the seed once. But if planting is infringement, from where does this implied license arise? The Court seems to be saying that the implied license is inherent to the transaction. Why else would a sane farmer buy the seed from Monsanto except to plant?, the Court implicitly asks. The Court, of course, gives an answer to this question when it acknowledges that there are uses of the seed that would be protected from infringement under patent exhaustion: as feed for livestock or even for personal consumption. The Court’s hypothetical raises the question of when the license to plant is implied and when it is not. This confusion raises the question of the legal basis for determining when a planting of a seed is a making of the patented gene.

The Court’s legal basis ultimately rests in policy. It states that its concern is with the unlimited reproduction of the patented gene which would prevent Monsanto from developing a meaningful business model for the distribution of its seed after the first sale. But exhaustion does not remove all remedies for patent owners. Breach of contractual restrictions can give rise to contract remedies, ones that may be less draconian than a patent injunction or treble damages. During oral arguments, the Court characterized this argument as having contract substitute for patent. That is a mischaracterization. Contract remedies can supplement patent remedies, particularly in cases of exhaustion. Contract remedies do not eviscerate a patent, and they do not serve as a poor substitute for a patent. Instead, contract remedies in the case of exhaustion serve to balance the rights of patent owners with those of consumers, business people, and inventors that make use of patented articles. The Court affirmed this notion in footnote 7 of its 2008 Quanta decision, which remains good law after Bowman.

What is the most revealing about the Court’s opinion is its frequent reference to the “patent monopoly.” When I first read that phrase, which appears four times in a ten page opinion, I kept thinking of the bad old days of Justice Douglas, who viewed patents as inherently anti-competitive. The Court in Bowman, however, uses the term of patent monopoly to refer to the patentee’s exclusive rights in the specific patented article that is sold. According to the Court, the monopoly in that particular article is broad and is compromised if unauthorized making is allowed. The Court sees that threat in Bowman. Unfortunately, in reaching its decision the Court based its decision almost exclusively on the interests of the patent monopolist without thorough consideration of its own precedent, the analysis of the underlying unpatented natural processes, and the relationship among planting, making, and implied license. With the patent at issue about to expire, perhaps the impact of the decision is minimal. However, with the next generation of Round Up Ready and genetically modified seed currently under review in the USPTO, the impact of the decision will undoubtedly be felt by the next generation of inventions and users.

Shubha Ghosh is The Vilas Research Fellow & Professor of Law at the University of Wisconsin Law School.

Supreme Court: Patent Rights Block Farmers from Saving and Re-Planting Patented Seeds

Patent, , , , , ,

by Dennis Crouch

Bowman v. Monsanto Company (Supreme Court 2013)

In a short opinion a unanimous Supreme Court has sided with Monsanto in holding that the doctrine of patent exhaustion “does not permit a farmer to reproduce patented seeds through planting and harvesting without the patent holder’s permission.” 

Read the decision below:

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Bowman v. Monsanto Company, 569 U. S. ____ (2013)

JUSTICE KAGAN delivered the opinion of the Court

Under the doctrine of patent exhaustion, the authorized sale of a patented article gives the purchaser, or any subsequent owner, a right to use or resell that article. Such a sale, however, does not allow the purchaser to make new copies of the patented invention. The question in this case is whether a farmer who buys patented seeds may reproduce them through planting and harvesting without the patent holder’s permission. We hold that he may not.< ?xml:namespace prefix ="" o />

I

Respondent Monsanto invented a genetic modification that enables soybean plants to survive exposure to glyphosate, the active ingredient in many herbicides (including Monsanto’s own Roundup). Monsanto markets soybean seed containing this altered genetic material as Roundup Ready seed. Farmers planting that seed can use a glyphosate based herbicide to kill weeds without damaging their crops. Two patents issued to Monsanto cover various aspects of its Roundup Ready technology, including a seed incorporating the genetic alteration. See Supp. App. SA1–21 (U. S. Patent Nos. 5,352,605 and RE39,247E); see also 657 F. 3d 1341, 1343–1344 (CA Fed. 2011).

Monsanto sells, and allows other companies to sell, Roundup Ready soybean seeds to growers who assent to a special licensing agreement. See App. 27a. That agreement permits a grower to plant the purchased seeds in one (and only one) season. He can then consume the resulting crop or sell it as a commodity, usually to a grain elevator or agricultural processor. See 657 F. 3d, at 1344–1345. But under the agreement, the farmer may not save any of the harvested soybeans for replanting, nor may he supply them to anyone else for that purpose. These restrictions reflect the ease of producing new generations of Roundup Ready seed. Because glyphosate resistance comes from the seed’s genetic material, that trait is passed on from the planted seed to the harvested soybeans: Indeed, a single Roundup Ready seed can grow a plant containing dozens of genetically identical beans, each of which, if replanted, can grow another such plant—and so on and so on. See App. 100a. The agreement’s terms prevent the farmer from co-opting that process to produce his own Roundup Ready seeds, forcing him instead to buy from Monsanto each season.

Petitioner Vernon Bowman is a farmer in Indiana who, it is fair to say, appreciates Roundup Ready soybean seed. He purchased Roundup Ready each year, from a company affiliated with Monsanto, for his first crop of the season. In accord with the agreement just described, he used all ofthat seed for planting, and sold his entire crop to a grain elevator (which typically would resell it to an agricultural processor for human or animal consumption).

Bowman, however, devised a less orthodox approach for his second crop of each season. Because he thought such late-season planting “risky,” he did not want to pay the premium price that Monsanto charges for Roundup Ready seed. Id., at 78a; see Brief for Petitioner 6. He therefore went to a grain elevator; purchased “commodity soybeans” intended for human or animal consumption; and planted them in his fields.[1] Those soybeans came from prior harvests of other local farmers. And because most of those farmers also used Roundup Ready seed, Bowman could anticipate that many of the purchased soybeans would contain Monsanto’s patented technology. When he applied a glyphosate-based herbicide to his fields, he confirmed that this was so; a significant proportion of the new plants survived the treatment, and produced in their turn a new crop of soybeans with the Roundup Ready trait. Bowman saved seed from that crop to use in his late-season planting the next year—and then the next, and the next, until he had harvested eight crops in that way. Each year, that is, he planted saved seed from the year before (sometimes adding more soybeans bought from the grain elevator),sprayed his fields with glyphosate to kill weeds (and any non-resistant plants), and produced a new crop of glyphosate resistant—i.e., Roundup Ready—soybeans.

After discovering this practice, Monsanto sued Bowman for infringing its patents on Roundup Ready seed. Bowman raised patent exhaustion as a defense, arguing that Monsanto could not control his use of the soybeans because they were the subject of a prior authorized sale (from local farmers to the grain elevator). The District Court rejected that argument, and awarded damages to Monsanto of $84,456. The Federal Circuit affirmed. It reasoned that patent exhaustion did not protect Bowman because he had “created a newly infringing article.” 657 F. 3d, at 1348. The “right to use” a patented article following an authorized sale, the court explained, “does not include the right to construct an essentially new article on the template of the original, for the right to make the article remains with the patentee.” Ibid. (brackets and internal quotation marks omitted). Accordingly, Bowman could not “‘replicate’ Monsanto’s patented technology by planting it in the ground to create newly infringing genetic material, seeds, and plants.” Ibid.

We granted certiorari to consider the important question of patent law raised in this case, 568 U. S. ___ (2012), and now affirm.

II

The doctrine of patent exhaustion limits a patentee’s right to control what others can do with an article embodying or containing an invention.[2] Under the doctrine, “the initial authorized sale of a patented item terminates all patent rights to that item.” Quanta Computer, Inc. v. LG Electronics, Inc., 553 U. S. 617, 625 (2008). And by “exhaust[ing] the [patentee’s] monopoly” in that item, the sale confers on the purchaser, or any subsequent owner, “the right to use [or] sell” the thing as he sees fit. United States v. Univis Lens Co., 316 U. S. 241, 249–250 (1942). We have explained the basis for the doctrine as follows:“[T]he purpose of the patent law is fulfilled with respect to any particular article when the patentee has received his reward . . . by the sale of the article”; once that “purpose is realized the patent law affords no basis for restraining the use and enjoyment of the thing sold.” Id., at 251. Consistent with that rationale, the doctrine restricts a patentee’s rights only as to the “particular article” sold, ibid.; it leaves untouched the patentee’s ability to prevent a buyer from making new copies of the patented item. “[T]he purchaser of the [patented] machine . . . does not acquire any right to construct another machine either forhis own use or to be vended to another.” Mitchell v. Hawley, 16 Wall. 544, 548 (1873); see Wilbur-Ellis Co. v. Kuther, 377 U. S. 422, 424 (1964) (holding that a purchaser’s “reconstruction” of a patented machine “would impinge on the patentee’s right ‘to exclude others from making’ . . . the article” (quoting 35 U. S. C. §154 (1964 ed.))). Rather, “a second creation” of the patented item “call[s] the monopoly, conferred by the patent grant, into play for a second time.” Aro Mfg. Co. v. Convertible Top Replacement Co., 365 U. S. 336, 346 (1961). That is because the patent holder has “received his reward” only for the actual article sold, and not for subsequent recreations of it. Univis, 316 U. S., at 251. If the purchaser of that article could make and sell endless copies, the patent would effectively protect the invention for just a single sale. Bowman himself disputes none of this analysis as a general matter: He forthrightly acknowledges the “well settled” principle “that the exhaustion doctrine does not extend to the right to ‘make’ a new product.” Brief for Petitioner 37 (citing Aro, 365 U. S., at 346).

Unfortunately for Bowman, that principle decides this case against him. Under the patent exhaustion doctrine, Bowman could resell the patented soybeans he purchased from the grain elevator; so too he could consume the beans himself or feed them to his animals. Monsanto, although the patent holder, would have no business interfering in those uses of Roundup Ready beans. But the exhaustion doctrine does not enable Bowman to make additional patented soybeans without Monsanto’s permission (either express or implied). And that is precisely what Bowman did. He took the soybeans he purchased home; planted them in his fields at the time he thought best; applied glyphosate to kill weeds (as well as any soy plants lacking the Roundup Ready trait); and finally harvested more (many more) beans than he started with. That is how “to ‘make’ a new product,” to use Bowman’s words, when the original product is a seed. Brief for Petitioner 37; see Webster’s Third New International Dictionary 1363 (1961) (“make” means “cause to exist, occur, or appear,” or more specifically, “plant and raise (a crop)”). Because Bowman thus reproduced Monsanto’s patented invention, the exhaustion doctrine does not protect him.[3]

Were the matter otherwise, Monsanto’s patent would provide scant benefit. After inventing the Roundup Ready trait, Monsanto would, to be sure, “receiv[e] [its] reward” for the first seeds it sells. Univis, 316 U. S., at 251. But in short order, other seed companies could reproduce the product and market it to growers, thus depriving Monsanto of its monopoly. And farmers themselves need only buy the seed once, whether from Monsanto, a competitor, or (as here) a grain elevator. The grower could multiply his initial purchase, and then multiply that new creation, ad infinitum—each time profiting from the patented seed without compensating its inventor. Bowman’s late-season plantings offer a prime illustration. After buying beans for a single harvest, Bowman saved enough seed each year to reduce or eliminate the need for additional purchases.

Monsanto still held its patent, but received no gain from Bowman’s annual production and sale of Roundup Ready soybeans. The exhaustion doctrine is limited to the “particular item” sold to avoid just such a mismatch between invention and reward.

Our holding today also follows from J. E. M. Ag Supply, Inc. v. Pioneer Hi-Bred Int’l, Inc., 534 U. S. 124 (2001). We considered there whether an inventor could get a patent on a seed or plant, or only a certificate issued under the Plant Variety Protection Act (PVPA), 7 U. S. C. §2321 et seq. We decided a patent was available, rejecting the claim that the PVPA implicitly repealed the Patent Act’s coverage of seeds and plants. On our view, the two statutes established different, but not conflicting schemes: The requirements for getting a patent “are more stringent than those for obtaining a PVP certificate, and the protections afforded” by a patent are correspondingly greater.

J. E. M., 534 U. S., at 142. Most notable here, we explained that only a patent holder (not a certificate holder) could prohibit “[a] farmer who legally purchases and plants” a protected seed from saving harvested seed “for replanting.” Id., at 140; see id., at 143 (noting that the Patent Act, unlike the PVPA, contains “no exemptio[n]” for “saving seed”). That statement is inconsistent with applying exhaustion to protect conduct like Bowman’s. If a sale cut off the right to control a patented seed’s progeny, then (contrary to J. E. M.) the patentee could not prevent the buyer from saving harvested seed. Indeed, the patentee could not stop the buyer from selling such seed, which even a PVP certificate owner (who, recall, is supposed to have fewer rights) can usually accomplish. See 7 U. S. C. §§2541, 2543. Those limitations would turn upside-down the statutory scheme J. E. M. described.

Bowman principally argues that exhaustion should apply here because seeds are meant to be planted. The exhaustion doctrine, he reminds us, typically prevents a patentee from controlling the use of a patented product following an authorized sale. And in planting Roundup Ready seeds, Bowman continues, he is merely using them in the normal way farmers do. Bowman thus concludes that allowing Monsanto to interfere with that use would “creat[e] an impermissible exception to the exhaustion doctrine” for patented seeds and other “self-replicating technologies.” Brief for Petitioner 16.

But it is really Bowman who is asking for an unprecedented exception—to what he concedes is the “well settled” rule that “the exhaustion doctrine does not extend to the right to ‘make’ a new product.” See supra, at 5. Reproducing a patented article no doubt “uses” it after a fashion. But as already explained, we have always drawn the boundaries of the exhaustion doctrine to exclude that activity, so that the patentee retains an undiminished right to prohibit others from making the thing his patent protects. See, e.g., Cotton-Tie Co. v. Simmons, 106 U. S. 89, 93–94 (1882) (holding that a purchaser could not “use” the buckle from a patented cotton-bale tie to “make” a new tie). That is because, once again, if simple copying were a protected use, a patent would plummet in value after the first sale of the first item containing the invention. The undiluted patent monopoly, it might be said, would extend not for 20 years (as the Patent Act promises), but for only one transaction. And that would result in less incentive for innovation than Congress wanted. Hence our repeated insistence that exhaustion applies only to the particular item sold, and not to reproductions.

Nor do we think that rule will prevent farmers from making appropriate use of the Roundup Ready seed they buy. Bowman himself stands in a peculiarly poor position to assert such a claim. As noted earlier, the commodity soybeans he purchased were intended not for planting, but for consumption. See supra, at 2–3. Indeed, Bowman conceded in deposition testimony that he knew of no other farmer who employed beans bought from a grain elevator to grow a new crop. See App. 84a. So a non-replicating use of the commodity beans at issue here was not just available, but standard fare. And in the more ordinary case, when a farmer purchases Roundup Ready seed qua seed—that is, seed intended to grow a crop—he will be able to plant it. Monsanto, to be sure, conditions the farmer’s ability to reproduce Roundup Ready; but it does not—could not realistically—preclude all planting. No sane farmer, after all, would buy the product without some ability to grow soybeans from it. And so Monsanto, predictably enough, sells Roundup Ready seed to farmers with a license to use it to make a crop. See supra, at 2, 6, n. 3. Applying our usual rule in this context therefore will allow farmers to benefit from Roundup Ready, even as it rewards Monsanto for its innovation.

Still, Bowman has another seeds-are-special argument: that soybeans naturally “self-replicate or ‘sprout’ unless stored in a controlled manner,” and thus “it was the planted soybean, not Bowman” himself, that made replicas of Monsanto’s patented invention. Brief for Petitioner 42; see Tr. of Oral Arg. 14 (“[F]armers, when they plant seeds, they don’t exercise any control . . . over their crop” or “over the creative process”). But we think that blame-the-bean defense tough to credit. Bowman was not a passive observer of his soybeans’ multiplication; or put another way, the seeds he purchased (miraculous though they might be in other respects) did not spontaneously create eight successive soybean crops. As we have explained, supra at 2–3, Bowman devised and executed a novel way to harvest crops from Roundup Ready seeds without paying the usual premium. He purchased beans from a grain elevator anticipating that many would be Roundup Ready; applied a glyphosate-based herbicide in a way that culled any plants without the patented trait; and saved beans from the rest for the next season. He then planted those Roundup Ready beans at a chosen time; tended and treated them, including by exploiting their patented glyphosate resistance; and harvested many more seeds, which he either marketed or saved to begin the next cycle. In all this, the bean surely figured. But it was Bowman, and not the bean, who controlled the reproduction (unto the eighth generation) of Monsanto’s patented invention.

Our holding today is limited—addressing the situation before us, rather than every one involving a self replicating product. We recognize that such inventions are becoming ever more prevalent, complex, and diverse. In another case, the article’s self-replication might occur outside the purchaser’s control. Or it might be a necessary but incidental step in using the item for another purpose. Cf. 17 U. S. C. §117(a)(1) (“[I]t is not [a copyright] infringement for the owner of a copy of a computer program to make . . . another copy or adaptation of that computer program provide[d] that such a new copy or adaptation is created as an essential step in the utilization of the computer program”). We need not address here whether or how the doctrine of patent exhaustion would apply in such circumstances. In the case at hand, Bowman planted Monsanto’s patented soybeans solely to make and market replicas of them, thus depriving the company of the reward patent law provides for the sale of each article. Patent exhaustion provides no haven for that conduct. We accordingly affirm the judgment of the Court of Appeals for the Federal Circuit.

[1] Grain elevators, as indicated above, purchase grain from farmers and sell it for consumption; under federal and state law, they generally cannot package or market their grain for use as agricultural seed. See 7 U. S. C. §1571; Ind. Code §15–15–1–32 (2012). But because soybeans are themselves seeds, nothing (except, as we shall see, the law) prevented Bowman from planting, rather than consuming, the product he bought from the grain elevator.

 

[2] 2The Patent Act grants a patentee the “right to exclude others from making, using, offering for sale, or selling the invention.” 35 U. S. C. §154(a)(1); see §271(a) (“[W]hoever without authority makes, uses, offers to sell, or sells any patented invention . . . infringes the patent”).

[3] This conclusion applies however Bowman acquired Roundup Readyseed: The doctrine of patent exhaustion no more protected Bowman’sreproduction of the seed he purchased for his first crop (from a Monsantoaffiliated seed company) than the beans he bought for his second (from a grain elevator). The difference between the two purchases wasthat the first—but not the second—came with a license from Monsanto to plant the seed and then harvest and market one crop of beans. We do not here confront a case in which Monsanto (or an affiliated seed company) sold Roundup Ready to a farmer without an express license agreement. For reasons we explain below, we think that case unlikely to arise. See infra, at 9. And in the event it did, the farmer might reasonably claim that the sale came with an implied license to plantand harvest one soybean crop.

Double Patenting Problems when Inventors Move to a New Employer

Patent, , ,

By Dennis Crouch

In re Hubbell (Fed. Cir. 2013)

Hubbell is the third element of a trio of recent decisions that remind-us that conception and inventorship will remain critically important even after the US patent system fully-shifts to the first-to-file regime. See Dawson v. Dawson and Rubin v. General Hospital Corp. In thinking about these cases, innovative companies may want to consider their employment agreements and their rights to patents associated with post-employment developments.

US Patent law has always recognized inventors as the original patent owners. Conception of the invention imbues the inventor with an inchoate patent right that can then be fully realized by successfully completing the patenting process. As Judge Reyna writes “Inventorship is perhaps the most fundamental question in patent law. The instant an inventor conceives her invention is the moment in which vests her right to a patent, thus perfecting her constitutional right to exclude.” (Judge Reyna in Dawson writing in dissent). Ownership of that inchoate right is usually transferred to the inventor’s employer as required by the individual employment contract. Without such a contract, the inventor retains ownership rights. Although the America Invents Act shifts some weight away from the primacy-of-invention, it does nothing to change this fundamental precept that rights are created at conception and held by the inventor until transferred.

As was the case in Dawson, Hubbell involves a situation where the inventor moved from one employer (Caltech) to another (ETH Zürich). His first-filed patent application (as a joint-inventor) is owned by Caltech and the second-filed application (as a joint-inventor with different joint inventors) is owned by ETH Zürich. It turns out that ETH Zürich did a better job of getting a patent and that patent issued in 2002. The Caltech patent application is still pending and is the subject of this appeal.

Of the two applications, the Caltech application was both the first invented and first filed. That means that the later ETH Zürich cannot serve as prior art. However, the PTO rejected the Caltech application under the doctrine of obviousness-type double patenting. The doctrine of obviousness-type double patenting is not statutory but instead a judicially created equitable doctrine Normally, this type of rejection is not fatal because the patentee can file a paper known as a terminal disclaimer that both (1) disclaims any term of enforcement that extends beyond the other patent and (2) agrees to that both patents will be co-owned throughout their lifespan. The problem here is that the patents are not co-owned and Caltech cannot make that promise.

Caltech argued that the double patenting rejection should not apply because the two applications have different owners and different inventors. As an alternative, the university argued that the equitable solution is to allow it to file the terminal disclaimer without the co-ownership promise.

On appeal, however, the Federal Circuit affirmed the PTO’s decision – holding that obviousness type double patenting applies and that Caltech cannot receive its patent without linking ownership. Writing for the 2-1 majority, Judge O’Malley highlighted multiple-suit harassment problem that served as the originating policy concerns for the limiting doctrine – writing that “the MPEP standard is consistent with the rationale we have used to support application of obviousness-type double patenting rejections.”

Judge Newman dissented – arguing that obviousness type double patenting is not available when a patent has different owners, different inventorship, and no joint development agreement. And here, Newman argues, that we have different inventorship because the lists of joint inventors are not identical.

The court today not only finds “double patenting” when there is neither common inventorship nor common ownership, but having so found withholds the standard remedy of the terminal disclaimer, and simply denies the application. This novel ruling is contrary to statute and precedent, with no policy justification for changing the law.

Under Judge Newman’s theory the patent should issue on its merits or perhaps be subject to an interference or derivation proceeding.

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The panel notes that the reason Caltech’s application took so because the university was playing games with continuation practice and claims that are almost identical to those at issue now were allowed back in 2003. Instead of taking that patent, Caltech filed a continuation and abandoned that allowed application.

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We do have a (slightly) open question moving forward as to whether obviousness type double patenting remains as a viable doctrine following the AIA.

In re Owens (Guest Post by Prof. Sarah Burstein)

Patent, , ,

Guest post by Sarah Burstein, Associate Professor of Law at the University of Oklahoma College of Law.  Professor Burstein will be speaking at Stanford's conference on Design Patents in the Modern World next week. – Jason

In re Owens (Fed. Cir. Mar. 26, 2013) Download 12-1261
Panel:  Prost (author), Moore, Wallach

Earlier this week, the Federal Circuit issued its opinion in In re Owens. (For prior Patently-O coverage of this case, see here.)

In this case, the Federal Circuit affirmed the PTO’s rejection of U.S. Design Patent Application No. 29/253,172. The ’172 application claimed the following design:

Owens 1

The ’172 application was a continuation of—and claimed priority based on—U.S. Design Patent Application No. 29/219,709 (which issued as U.S. Des. Patent No. 531,515). The ’709 application claimed the following design:

Owens 2

In design patents, broken lines can be used to show: (1) unclaimed “environmental” matter (often, though not always, shown with dotted lines); or (2) unclaimed boundaries (often shown using dot-dashed lines). According to the MPEP, an “[a]pplicant may choose to define the bounds of a claimed design with broken lines when the boundary does not exist in reality in the article embodying the design. It would be understood that the claimed design extends to the boundary but does not include the boundary.”

So, essentially, the ’172 application broadened the original claim by changing a number of solid lines to dotted lines. Importantly, though, this was not the problem in Owens. (Indeed, the Federal Circuit went so far as to say in dicta that these types of dotted disclaimer lines “do not implicate § 120.” Whether that blanket statement really fits with the logic of the rest of the opinion is an issue for another day.)

The problem was the addition of the dot-dashed boundary line on the front panel. The examiner found no evidence that Owens possessed that “trapezoidal region” (as the Federal Circuit called it) at the time of the original application. Therefore, the application was rejected for failure to comply with 35 U.S.C. § 112, ¶ 1 and as “obvious in view of the earlier-sold bottles.” The Board affirmed.

On appeal, Owens argued, among other things, that the continuation application did not add new matter because all of the portions of the claimed partial design (including the trapezoidal area on the front panel) were “clearly visible” in the parent application. In support of this argument, Owens relied on In re Daniels.

In Daniels, the Federal Circuit held that a continuation application that claimed the design shown below on the right was entitled to the priority date of its parent application, which claimed the design shown below on the left:

Owens 3

But the Federal Circuit distinguished Daniels, stating that:

The patentee in Daniels did not introduce any new unclaimed lines, he removed an entire design element. It does not follow from Daniels that an applicant, having been granted a claim to a particular design element, may proceed to subdivide that element in subsequent continuations however he pleases.

According to the court, “the question for written description purposes [in this case] is whether a skilled artisan would recognize upon reading the parent’s disclosure that the trapezoidal top portion of the front panel might be claimed separately from the remainder of that area.” The Federal Circuit concluded that the Board’s finding on that factual issue was “supported by substantial evidence because the parent disclosure does not distinguish the now-claimed top trapezoidal portion of the panel from the rest of the pentagon in any way.”

The court did not stop there, though. It went on to answer “a question raised implicitly in Owens’s appeal and explicitly in amicus briefing—whether, and under what circumstances, Owens could introduce an unclaimed boundary line on his center-front panel” without running afoul of the written description requirement. Section § 1503.02 of the MPEP currently provides that:

Where no boundary line is shown in a design application as originally filed, but it is clear from the design specification that the boundary of the claimed design is a straight broken line connecting the ends of existing full lines defining the claimed design, applicant may amend the drawing(s) to add a straight broken line connecting the ends of existing full lines defining the claimed subject matter. Any broken line boundary other than a straight broken line may constitute new matter . . . .

The Federal Circuit rejected this rule, noting that if Owens had simply placed the boundary line at the widest point of the front panel, “the resulting claim would suffer from the same written description problems as the ’172 application.”

So what are applicants supposed to do going forward? According to the Federal Circuit, “the best advice for future applicants was presented in the PTO’s brief, which argued that unclaimed boundary lines typically should satisfy the written description requirement only if they make explicit a boundary that already exists, but was unclaimed, in the original disclosure.”

Notably, this rule is—as the PTO admitted at oral argument—a break from (at least some) past PTO practice. For example, as Method Products, Inc. pointed out in its amicus brief, the PTO allowed all of the following claims for a humidifier design:

Owens 4

If nothing else, this case makes it clear that the PTO needs to provide greater guidance on the written description requirement and, in particular, on the use of unclaimed boundary lines. Hopefully, the PTO will do so soon.

 

 

No Federal Cause of Action against Inventor’s Attempt to Derrogate Patent in Violation of Assignor Estoppel Doctrine

Patent

By Dennis Crouch

Semiconductor Energy Labs v. Nagata (Fed. Cir. 2013)

SEL is a Japanese “research company” owned by mega-inventor Shunpei Yamazaki who is named as inventor of more than 750 U.S. patents. Dr. Nagata is a co-inventor on SEL’s U.S. Patent No. 6,900,463. When SEL sued Samsung for infringing the ‘463 patent the company learned that Samsung had hired Nagata. In that litigation Nagata testified on behalf of Samsung that his signature on the assignment and declaration was forged. The parties eventually settled that lawsuit, but SEL later argued that the settlement value was substantially decreased by Nagata’s testimony.

SEL then sued Dr. Nagata in the N.D. California federal court alleging several state law causes of action (breach of contract, slander, quiet title) as well as “violation of federal patent law.” The patent law claim was premised on the patent common law doctrine of assignor estoppel that, in certain circumstances, prevents an assignor from later challenging the validity of an assigned patent in court. In Diamond Scientific Co. v. Ambico, Inc., 848 F.2d 1220 (Fed. Cir. 1988), the court wrote that the doctrine “embodies fundamental principles of federal patent law and policy” and imposes a “duty of fair dealing . . . on an inventor who assigns intellectual property rights that are protected by the Constitution.”

The district court dismissed the lawsuit against Nagata – finding that no federal cause of action is created by violation of the assignor estoppel doctrine and then declining to exercise supplementary jurisdiction over the state law claims.

On appeal, the Federal Circuit has affirmed – holding that assignor estoppel is an equitable shield that cannot be wielded as the basis for a declaratory judgment action.

[W]e are not inclined to transform the shield into a sword. The relief requested by SEL is akin to seeking a declaratory judgment of patent validity, which is not a viable cause of action. As the district court fittingly noted, “it simply makes no sense to use a doctrine intended to estop a party from advancing a particular claim or defense in a legal case as a way to sue a non-party who has made no claim or defense in a legal case.”

The conclusion here is that the only federal remedy available for SEL is to block certain testimony at trial. And, even then, assignor estoppel may well fail to block testimony. The court writes:

Moreover, we have routinely rejected the proposition that assignors should be prohibited from testifying as fact witnesses in cases where they are neither a party to a case nor in privity with the defendant, and we will not now devise a cause of action to preclude such testimony. See, e.g., Verizon Servs. Corp. v. Cox Fibernet Va., Inc., 602 F.3d 1325, 1339–40 (Fed. Cir. 2010) (holding no error by district court in allowing inventors to testify about patents they invented and declining to address argument that assignor estoppel barred such testimony); Checkpoint Sys., 412 F.3d at 1337 (rejecting argument that non-party assignor should be barred from submitting testimony regarding failure to name inventors under doctrine of assignor estoppel).

SEL argued in the alternative that its state law claims also raise substantial federal patent issues and thus “arise under” the patent laws. In Christianson v. Colt Indus. Operating Corp., 486 U.S. 800 (1988), the Supreme Court indicated that state law claims can create a federal law cause of action if “plaintiff’s right to relief necessarily depends on resolution of a substantial question of federal patent law, in that patent law is a necessary element of one of the well-pleaded claims.” Although not directed at patent law, the Supreme Court muted Christianson’s power in Grable & Sons Metal Prods., Inc. v. Darue Eng’g & Mfg., 545 U.S. 308, 312 (2005) by requiring a consideration of state interest in resolving the dispute. Here, SEL suggests that its state law causes of action all stem from violation of the federal common law doctrine of assignor estoppel – thus creating a substantial question of patent law. The appellate court rejected that notion – holding instead that “the asserted federal issue was insubstantial, implausible, and without merit.”

Dismissal affirmed.

This case would likely have been a Rule 36 affirmance without opinion but for the fact that the US Supreme Court is currently considering the case of Gunn v. Minton. That case focuses on whether a state law attorney malpractice case raises a Federal Cause of Action under 28 U.S.C. 1338(b). In Gunn, the Texas Supreme court dismissed the case for lack of subject matter jurisdiction – holding that Section 1338 preempted its usual power of general jurisdiction. See Minton v. Gunn, 55 Tex. Sup. Ct. J. 196 (2011).

The decision here along with DeRosa v. J.P. Walsh & J.L. Marmo Enterprises (Marmo) (Fed. Cir. 2013) (no jurisdiction over contract dispute) are likely intended as signals to the Supreme Court that the Federal Circuit is acting responsibly and carefully in this field.

In re Rosuvastatin Calcium Patent Litigation

Patent, ,

By Jason Rantanen

In re Rosuvastatin Calcium Patent Litigation (Fed. Cir. 2012) Download 10-1460
Panel: Newman (author), Plager (concurring), Mayer (dissenting)

This appeal arises in the context of the patent war over rosuvastatin, a multi-billion dollar pharmaceutical product sold by Astrazeneca under the name CRESTOR.  At issue on appeal was the central component of Astrazeneca's protection for rosuvastatin: the composition patent (RE 37,314).  The short version is that Astrazeneca has won for the time being: the Federal Circuit ruled in favor of Astrazeneca on all issues.  However, the composition patent is set to expire in 2016, and Astrazeneca previously failed in its bid to enforce its later-expiring method-of-use patents against the generic manufacturers.

Reissue: The '314 patent is a reissue of Patent No. 5,260,440, whose specification describes rosuvastatin as the preferred embodiment.  During the prosecution of the '440 patent, the prosecuting attorney became aware of two potentially relevant prior art references through an internal search report.  The prosecuting attorney did not disclose the references to the PTO, however (no IDS was filed at all), and when the '440 patent issued the patent contained a broad genus claim that overlapped with one of the references.

Several years after the patent issued, it was discovered during licensing negotiations that no IDS had been filed during prosecution of the '440 application and that the examiner had not cited the two references.  The patent holder initiated reissue proceedings, which ultimately resulted in the patent being limited to the specific compound rosuvastatin and its salts. 

In addition to raising an inequitable conduct argument (which the court rejected on lack of intent grounds), the defendants argued that reissue was improper because there was no error and because there was deceptive intent.  While the AIA removed the statutory requirement that the error providing the basis of the reissue occur "without any deceptive intention," this opinion is significant for its broad interpretation of what constitutes "error" in the context of a reissue, an issue that will have ongoing importance:

Precedent establishes that for reissue purposes “error is established where there is no evidence that the appellant intentionally omitted or abandoned the claimed subject matter.” Ball Corp. v. United States, 729 F.2d 1429, 1435–36 (Fed. Cir. 1984). Here, the district court found as fact that Shionogi erred by failing to file an IDS citing the Sandoz and Bayer references, and by omitting a specific claim to the preferred species. However, the court found no evidence of a deliberate choice to omit or abandon the rosuvastatin species, which was described in the specification as the most effective product. 

Slip Op. at 21.  The court further noted that past precedent supports the practice of narrowing claims through reissue. 

On deceptive intent (which will still be relevant for any reissue proceedings initiated prior to September 16, 2012), the majority held that deceptive intent for reissue purposes applies the same standard as deceptive intent in the inequitable conduct context.

Judge Mayer, writing in dissent, disagreed that reissue was proper.  "A patentee cannot establish correctible "error" under section 251 simply by demonstrating that his original patent contains a defect…Instead, reissue is warranted only where a patentee "supplies…facts indicating how…ignorance," accident, or mistake caused an error in his claims." Dissent at 6-7.  He also expressed concern about the consequences of the majority's broad reading of "error":

The claims of a validly-issued patent serve an important notice function, alerting the public of the metes and bounds of an inventor’s discovery. [] This public notice function will be subverted if the “error” requirement is read out of the reissue statute and patentees are given free reign to rewrite their claims whenever they find it expedient to do so. []

Dissent at 13 (citations omitted).

ANDA Filing by a US Subsidiary "On Behalf Of": One of the generic manufacturers, Apotex, raised a creative theory of noninfringement.  Apotex Corp. is a United States affiliate of the Canadian Company Apotex Inc.  The Abbreviated New Drug Application that triggered the infringement suit was signed and filed by the US affiliate on behalf of the Canadian company.  Given this arrangement, Apotex raised a number of arguments supporting the theory that the US affiliate did not "submit" the ANDA within the meaning of the infringement statute, 35 U.S.C. §271(e)(2)(A), and thus it could not infringe the patent.  (The Canadian company was not a party to the suit).

Judge Newman, writing for the majority, affirmed the district court's rejection of this theory without substantial analysis.  Slip Op. at 31.  Judge Plager's concurrence, however, provides a detailed analysis of why Apotex's arguments fail to preclude liability for infringement.  One key bit: 

More directly, however, in this case Apotex U.S. clearly intends to engage in, and presumably submitted the ANDA for the purpose of, selling the approved drug in the United States. The statute speaks not only in terms of engaging in commercial manufacture, but, disjunctively, in terms of engaging in the drug’s “use or sale.” As an acknowledged sales agent for the primary applicant, Apotex U.S. can be treated as simply having “submit[ted]” an application for an ANDA for the purpose of “engag[ing] in the commercial . . . sale of [the] drug . . . claimed in a patent.”  

Concurrence at 6.

Nonobviousness and No Inequitable Conduct: The Federal Circuit also affirmed the district court's ruling that the '314 patent was nonobvious and that it was not unenforceable due to inequitable conduct.  On obviousness, the defendants used a "lead compound" theory, arguing that a prior art patent publication suggested that a particular compound ("Compound 1b") would be a good "lead compound" for further research and that there was a motivation to modify that compound to arrive at the claimed invention.  The Federal Circuit affirmed the district court's conclusion that the defendants failed to demonstrate that there was a motivation for selecting Compound 1b as a lead compound or making the relevant modification.  It further agreed that the idea that it might be "obvious to try" making and testing this compound was negated by evidence of skepticism in the field. 

On inequitable conduct, the Federal Circuit affirmed the district court's finding of lack of deceptive intent.  It declined to disturb the court's finding that the withheld references were material.

Patenting Animals Produced through Selective Breeding

Patent,

By Dennis Crouch

In re Ditto (Fed. Cir. 2012)

In a non-precedential opinion, the Federal Circuit has done it again (ditto) and affirmed the PTO Patent Board decision rejecting patentability. Here, the court affirmed that Mr. Ditto’s claimed cross between a bobcat and a domestic cat is anticipated by the prior art. In particular, the Pixie-Bob has been around for some time.

In the appeal, the USPTO solicitor also argued that the cat claims were all “patent-ineligible because they encompass a product of nature.” Here, the “product of nature” argument is based upon the fact that a domestic cat and bobcat can and will “naturally” mate without further human intervention. However, the Solicitor did distinguish this case from the patenting of animals with particular traits developed through a selective breeding process. An example of this is U.S. Patent No. 5,602,302 (Mikami) that claims a bronchial hypersensitive guinea pig created by brother-sister mating of guinea pigs identified as hypersensitive. In distinguishing the ‘302 patent, the Solicitor wrote that:

the claims of the Ditto application do not demonstrate how the claimed cat breed is a product of human intervention. The claims include no detail regarding how the cats are bred, what traits are desired for breeding, or what results are expected. All that is required is that a “purebred cat” is produced by mating a bobcat, lynx, or bobcat lynx with a domestic cat. Id. Moreover, … the specification fails to provide detail regarding what kind of characteristics or traits are required in the claimed “purebred” cat. While Ditto argues that there is no difference between the [patented] guinea pig … and Ditto’s cat, the Mikami patent is different from Ditto’s application in significant ways: Mikami discloses a specific breeding process used to prepare guinea pigs with a particular trait, while the Ditto application requires “[n]o specific amount or type of breeding” and “the breeding program may terminate upon identification of any desired effect.” In short, unlike Ditto’s application, Mikami’s claims recite a specific desired trait and Mikami’s patent discloses a specific method of breeding used to obtain that trait, distinguishing Mikami’s claimed guinea pigs from those in nature.

In its decision, the Federal Circuit refused to decide the subject matter eligibility question and instead affirmed on grounds of anticipation. The court simply wrote that ” we do not reach its section 101 rejection.” In this case, the court followed the course that Professor Merges and I suggested in or 2010 article on the avoidance doctrine. Some on the court have argued instead that Section 101 questions should be treated as antecedent questions that cannot be avoided.

Related articles

Patents Encompassing a Human Organism

Should we Move Toward More Fee Shifting in Patent Cases?

Attorney Fees, Fee Shifting, Patent, , , , , ,

By Dennis Crouch

Icon Health & Fitness v. Octane Fitness (Fed. Cir. 2012)

Following claim construction, the district court ruled on summary judgment that Octane’s elliptical machines did not infringe Icon’s U.S. Patent No. 6,019,710. However, the district court refused to find the case “exceptional” under 35 U.S.C. § 285. Under the statute, a “court in exceptional cases may award reasonable attorney fees to the prevailing party.” And, without that exceptional case ruling, the defendant had no opportunity to recoup the money spent defending the case.

U.S. patent cases follow the “American rule” that largely forbids fee shifting except in “exceptional” cases. In Cybor, the Federal Circuit described the adjudication process as involving two steps: First determining whether the case is “exceptional” and then determining the scope of fee shifting that is appropriate (if any). The court wrote:

The determination of whether a case is exceptional and, thus, eligible for an award of attorney fees under § 285 is a two-step process. First, the district court must determine whether a case is exceptional, a factual determination reviewed for clear error. After determining that a case is exceptional, the district court must determine whether attorney fees are appropriate, a determination that we review for an abuse of discretion. A district court abuses its discretion when its decision is based on clearly erroneous findings of fact, is based on erroneous interpretations of the law, or is clearly unreasonable, arbitrary or fanciful.

Cybor Corp. v. FAS Techs., Inc., 138 F.3d 1448 (Fed.Cir.1998) (en banc) (citations omitted). This process is akin to that used for enhanced damages where the court first considers whether the infringement was willful and then determines the scope of damage enhancement (if any). One key difference is that Section 285 provides the “exceptional” standard while the “willful infringement” requirement for enhanced damages was created by the court without any statutory key.

We call this the “American rule” of fee shifting because there is an alternate “British rule” that regularly awards fees to the prevailing party regardless of exceptionality of the case.

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In a short nonprecedential opinion, the Federal Circuit affirmed the denial of Octane’s exceptional case motion. Its opinion confirms the traditional stance that an exceptional case award requires significant evidence of misconduct and that denial of a motion for attorney fees is within the discretion of the trial court. “[W]e have reviewed the record and conclude that the court did not err in denying Octane’s motion to find the case exceptional.”

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Of most interest, Octane requested that the court revisit (i.e., lower) the standard for determining whether a case is exceptional. As it must, the panel here rejected that request because it is bound by prior Federal Circuit precedent. However, an en banc request on this point may garner some traction with the court.

Traditionally, there has been something of a bias relatively in favor of exceptional case findings for prevailing plaintiffs but not for prevailing defendants. The bias comes about because a prevailing plaintiff can typically include out-of-court activities such as willful infringement as part of its proof of exceptional case while a prevailing defendant can typically only prove an exceptional case based upon a patent plaintiffs activities during litigation or when securing patent rights.

I like to divide the “bad” plaintiff activities leading to an exceptional case finding into three categories: (1) inequitable conduct during prosecution; (2) litigation misconduct (such as discovery violations or destroying evidence); and (3) bringing a subjectively and objectively baseless lawsuit. Brooks Furniture Mfg., Inc. v. Dutailer International, Inc., 393 F.3d 1378 (Fed. Cir. 2005). Thus, if a prevailing defendant seeks an “exceptional case” award based upon the filing of a worthless lawsuit, the plaintiff must provide clear and convincing evidence that the infringement claims were subjectively and objectively baseless. Globetrotter Software, Inc. v. Elan Computer Group, Inc., 362 F.3d 1367 (Fed. Cir. 2004); see also Reactive Metals & Alloys Corp. v. ESM, Inc., 769 F.2d 1578 (Fed. Cir. 1985) (The person seeking attorney fees must establish the facts showing exceptionality by clear and convincing evidence.)

In its brief, Octane argued that the “subjectively and objectively baseless” requirement is unduly limiting and should be reduced to a standard that considers whether the claim was “objectively unreasonable.” Octane writes:

Patent litigation is expensive. According to a survey published in 2009 by the American Intellectual Property Law Association (“AIPLA”) the median cost for a patent litigation in which the amount in controversy is from $1-25 million, through the end of discovery, is $2.5 million (inclusive of all costs). Unscrupulous large companies know this, and, unfortunately, can use patent litigation as a weapon against competitors, especially smaller competitors. Many smaller competitors simply do not have the financial resources or wherewithal to defend a patent infringement case, no matter how spurious the contentions. Judge Story once wrote that patent litigation is the “sport of kings.” Larger companies can exploit this fact to the detriment of their smaller competitors.

Complicating matters, there is almost no economical or expeditious way for an accused infringer to extract itself from baseless litigation. Unlike certain forms of litigation ( e.g., securities litigation or antitrust litigation) rarely is a patent infringement action dismissed at the pleading stage. Rather, before a defendant accused of infringement has any hope of extricating itself from a litigation, often-times (as here) substantial discovery (both fact and expert), Markman briefing and hearing, and summary judgment briefing and hearing, must occur. By the time summary judgment is granted, substantial time is invested in the case not only by the parties, but by the district court, as well.

For their part, district court judges–who, in many instances, have no technical background and little familiarity with the patent system–are often faced with complex technology, difficult-to-read patent language and a body of case law that is both robust and nuanced. No matter how preposterous the merits of the infringement position may be, in order to reach a resolution on the merits, the district court judge must invest significant time and energy, to decipher the claim scope and understand the defendant’s position. For these reasons, no matter how unreasonable the patentee’s contentions, it is a rare district court judge who will have the courage to call a patentee’s claims “frivolous” after the investment of time and effort necessitated by these cases.

For these reasons, and because of the inconsistent application of the “exceptional case” findings by district courts, Octane proposes that in the context of a prevailing accused-infringer, the legal standard for exceptional case should be re-evaluated. Octane respectfully proposes that a case should be deemed “exceptional” if the infringement claims asserted by the patentee were objectively unreasonable. If they were objectively unreasonable (as here), then the case should be deemed exceptional, and, unless equitable considerations counsel otherwise in the context of the particular case, fees awarded. Octane’s rationale for this proposal are set forth below, as well as factors this Court might articulate to better assist district courts in identifying objectively unreasonable cases.

1. The Rationale for Fee Shifting Where a Patentee Asserts an Objectively Unreasonable Claim of Infringement Against a Competitor.

A patent grants to its holder a legalized monopoly. See Zenith Radio Corp. v. Hazeltine Research, Inc., 395 U.S. 100, 135 (1969) (“The heart of [the patentee’s] legal monopoly is the right to invoke the State’s power to prevent others from utilizing his discovery without consent”); see also Precision Instrument Mfg. Co. v. Auto. Maint. Mack Co., 324 U.S. 806, 816 (1945) (“a patent is an exception to the general rule against monopolies and to the right of access to a free and open market.”) This is permitted because the overall good of encouraging innovation and promoting disclosure is thought to outweigh the anticompetitive effects of a time-limited monopoly. See generally Bilski v. Kappos, 130 S.Ct. 3218, 3255 (2010) (“even when patents encourage innovation and disclosure, ‘too much patent protection can impede rather than ‘promote the Progress of … useful Arts’.’ “). But a patent is, nevertheless, by its nature anticompetitive, and for this reason, the ways in which a patentee may have granted, utilize and leverage a patent are not without limit and are often carefully scrutinized. See In re Ciprofloxacin Hydrochloride Antitrust Litig., 544 F.3d 1323, 1333 (Fed. Cir. 2008) (noting that patents are by nature anticompetitive and examining whether agreements improperly restricted competition beyond the exclusionary zone of the patent); see also Bilski, 130 S.Ct. at 3229 (noting “the tension, ever present in patent law, between stimulating innovation by protecting inventors and impeding progress by granting patents when not justified by the statutory design.”)

Title 35 of the United States Code, § 285 authorizes such scrutiny in the context of infringement litigation and specifically authorizes an award of attorney fees in “exceptional” cases. But what is an “exceptional” case? This Court has endeavored to provide guidance to district courts as to the meaning of an “exceptional” case. This Court has indicated that fees are properly awarded in a variety of contexts, including “vexatious or unjustified litigation” or “frivolous filings.” See, e.g., Takeda, 549 F.3d at 1388; Eon-Net LP, 653 F.3d at 1324; Waner v. Ford Motor Co., 331 F.3d 851, 857 (Fed. Cir. 2003); Bayer AG v. Duphar Int’l Research B.V., 738 F.2d 1237, 1242 (Fed. Cir. 1984). However, this Court has also indicated that absent litigation misconduct or fraud in securing a patent, a district court can award attorney fees only if the litigation is both: (1) brought in subjective bad faith and (2) objectively baseless. See, e.g., Eon-Net LP, 653 F.3d at 1324. These differing statements of the standard and other factors noted below, have led to inconsistent application of the exceptional case designation by district courts, particularly in the case of a prevailing alleged infringer.

Octane respectfully submits that commencement and maintenance of objectively unreasonable infringement contentions should be sufficient, standing alone, to deem a case exceptional. This standard is, in many ways, consistent with this Court’s cases holding that unjustified or frivolous suits may be deemed “exceptional.” Octane, however, advocates for reconsideration of the case precedent that indicates litigation misconduct or subjective bad faith should be required – in addition to baseless contentions – before finding a case exceptional.

Additionally, Octane proposes use of the words “objectively unreasonable” rather than “frivolous” or “baseless.” As explained in more detail below, the words “frivolous” or “baseless” often imply misconduct by counsel, and perhaps even violation of Rule 11. Octane respectfully suggests that an action should not have to rise to the level of a Rule 11 violation, before a case could be deemed exceptional; else the remedies are duplicative.

Rather, patentees (including non-practicing patentees) asserting their legal monopoly should at least have to assert objectively reasonable causes of action, or else the risk of paying for the litigation should shift to the patentee, regardless of counsel’s conduct. This is fair and consistent with the overarching goals of the patent system. The alternative–leaving patentees unchecked to assert thin-beyond-reason causes of action–has a huge anticompetitive impact on society and constitutes a gross injustice to innocent defendants.

As any defendant accused of patent infringement could attest, the mere existence of litigation typically has a detrimental impact on business, as customers become nervous about buying a product accused of infringement. This translates into higher costs for end customers as the patentee is able to prevent competition (often legitimate competition) and maintain monopoly prices. Meanwhile, the only recourse for a wrongfully accused infringer, apart from recouping fees under the present standard, is to bring a separate tort cause of action after conclusion of the Federal patent case in state court (which has even less experience with patent law than most district courts), or advance a cost-prohibitive antitrust action, if market share and other elements can be established. For these reasons, district courts need to know that they can find a case exceptional when a patentee fails to assert its legal monopoly responsibly and asserts and maintains objectively unreasonable causes of action.

Considerations a district court might consider when evaluating whether the patentee’s contentions were objectively unreasonable include: (1) more than one claim element was missing in the accused device, (2) the case was resolved on summary judgment, (3) the patentee was not practicing the claimed invention, (4) the patentee’s claim of infringement was based on a claim construction position that: (a) contradicted the prosecution history, or (b) read a limitation out of the claim entirely, or (c) was not rationally related to what was actually invented, (5) the patentee ignored or reargued the court’s claims construction, (6) the accused device incorporated technology that pre-dated the asserted patent, in lieu of the technology disclosed in the patent-in-suit, and (7) the accused infringer communicated to the patentee near the start of the case an alleged design around or element(s) not present in the accused product; the patentee proceeds forward unreasonably; and the defendant ultimately prevails on that issue.

Octane submits that the above factors are examples of factors a district court may consider when determining if a case was objectively unreasonable. These factors encourage early candid discussions between the parties and potentially fosters early settlement, which has been recognized as a laudable goal of the judicial system. Foster v. Hallco Mfg. Co., Inc., 947 F.2d 469, 477 (Fed. Cir. 1991). Moreover, the standard appropriately shifts the risk of fees to a patentee that proceeds forward with weak claims having no reasonable chance of success. Accused infringers should not have to bear the heavy cost of patent litigation where patent owners proceed forward with no more than a scintilla of hope or a desire that the accused infringer will collapse when confronted with a weak claim.

To be clear Octane is not proposing that “exceptional case” means any case in which an alleged infringer prevails. But cases that are objectively unreasonable should be “exceptional”, and not the norm. The cost of spurious infringement claims should be borne by the patentee, not the alleged infringer trying to compete fairly in the marketplace. In those instances (instances which would be even less frequent under this standard than at present), fee shifting is appropriate.

2. Exceptional Case Status Should Not Require Proof of a Rule 11 Violation.

By calling for a standard that allows for the award of fees in “objectively unreasonable” cases Octane is not necessarily arguing for a departure from the line of cases that would allow an award of fees in “frivolous” or “baseless” cases. However, Octane is proposing that the “exceptional” case standard of 35 U.S.C. § 285 should not be commensurate with a Rule 11 violation.

To begin, Rule 11 already includes provisions for sanctions, which would render Section 285 unnecessary if they require proof of the same conduct. Fed. R. Civ. P. 11. Beyond this, labeling a case “frivolous” such that it constitutes a violation of Rule 11 is not a step that most courts take lightly, not only because of the time and money investment in these cases, but also because labeling a case “frivolous” such that it constitutes a violation of Rule 11 requires condemnation of litigation counsel’s conduct. Rule 11 provides, among other things, that by signing all materials submitted to the Court an attorney is representing that “the claims, defenses, and other legal contentions are warranted by existing law or by a non-frivolous argument for extending, modifying, or reversing existing law or for establishing new law. . .” If a case is “frivolous” under Rule 11, then a patentee’s counsel must have acted inappropriately, a conclusion that most courts are loathe to reach.

A case should not have to rise to the level of a Rule 11 violation before it is deemed “exceptional.” Pursuing objectively unreasonable claims (though perhaps not rising to the level of a Rule 11 violation), should not be the norm for patentees, and when it does occur and the patentee is unsuccessful, the case should bear the moniker of an “exceptional case.”

3. Exceptional Case Status Should Not Require Litigation Misconduct Apart from Asserting an Objectively Unreasonable Claim.

Asserting an objectively unreasonable claim is a form of litigation misconduct. Nevertheless, no separate requirement for litigation misconduct should be necessary to establish an exceptional case. A patentee that pursues an objectively unreasonable claim but otherwise responds to discovery in a timely manner, does not destroy relevant documents, shows up to depositions, etc… should still bear the cost of its competitor’s fees, when the unreasonably maintained cause of action fails. No additional litigation misconduct should be necessary.

Moreover, the Federal Rules provide for sanctions for specific litigation misconduct as it occurs. See e.g., Fed. R. Civ. P. 26(g)(3) (authorizing sanctions for improper certification of disclosures and discovery responses); Fed. R. Civ. P. 30 (providing for sanctions for failure to attend a deposition); Fed. R. Civ. P. 37 (authorizing motions and sanctions if a party fails to respond or make appropriate disclosure to discovery requests); see also 28 U.S.C. § 1927 (“any attorney. . . who so multiplies the proceedings in any case unreasonably and vexatiously may be required by the court to satisfy personally the excess costs, expenses, and attorneys’ fees reasonably incurred because of such conduct”). To the extent a patentee (or its counsel) takes some action in litigation that is wrongful, drives up costs, or otherwise violates litigation rules, then the alleged-infringer may bring that conduct to the district court’s attention at the appropriate time, and the district court should order appropriate sanctions, including fines. Encouraging district courts to deal with litigation misconduct in this manner, promotes professionalism and civility and better addresses the specific issues in a timely manner.

Though litigation misconduct could, of course, also be a factor in deeming a case “exceptional”, Octane propose that it should not be a requirement for finding a case exceptional in the face of objectively unreasonable claims.

4. Exceptional Case Status Should Not Require Proof of Bad Faith.

In a patent case, the most an accused infringer can ever hope for is recoupment of attorney’s fees and costs. Even in the rare cases where this is awarded, however, the accused infringer is not made whole. That party is still out the hundreds of hours dedicated by company personnel to the defense of the case (hours that could have been spent on research and development, sales efforts and other endeavors), not to mention the often-significant cost that the suit may have had on the accused infringer in the marketplace. Unlike on the patentee side, where the plaintiff may get treble damages against a willful infringer, the wrongfully-accused infringer has no such remedy against a patentee. The accused infringer is entitled to, at most, recoupment of reasonable fees.

Why is this significant? It is significant because under the law, subjective bad faith ( i.e., the willful, wonton or reprehensible nature of a party’s conduct), while the critical factor in an award of punitive damages (which an alleged infringer cannot recover), is not a pre-requisite, in most statutory schemes, to an award of reasonable attorney fees. See, e.g., 42 U.S.C. § 1988 (allowing court, in its discretion, to award attorney fees to the prevailing party in civil rights actions); 15 U.S.C. § 15 (mandating the award of reasonable attorney fees for any person injured by violation of the antitrust laws); 42 U.S.C. § 3613 (allowing court, in its discretion, to award attorney fees to the prevailing party in fair housing actions). In this instance, the statute merely requires that the court find the case “exceptional” before awarding fees. It says nothing about requiring a showing of subjective bad faith. Octane submits that in view of the differences between punitive damages and reasonable attorney fees and the ways in which these are typically dealt with in statutes and by the courts, an alleged infringer should not have to make a showing of subjective bad faith in order to show that an objectively unreasonable case is “exceptional.”

Regardless of intent (which is inevitably almost impossible to prove), a patentee that asserts an objectively unreasonable cause of action against its competitor should bear the risk of paying that competitors fees if it is unsuccessful.

This is an interesting problem. At the end of the case, a prevailing party has generally proven that the losing party’s case is without merit (i.e., it lost). In that sense, at the end of the case, the position is subjectively, reasonably, and objectively baseless. The question is, however, at the beginning of the case (and to some extent throughout the case) did the position have some merit?

At first cut the proposed fee shifting appears to be a good mechanism for shifting risk onto plaintiffs who, in turn, will avoid filing baseless claims. A benefit of the current rule (objectively baseless) is that it is fairly clear and so the self-weeding is easy. Octane’s multi-factor proposal makes this a much more difficult if not impossible task – meaning that the new rule would also end up discouraging some amount of valid patent claims.

Notes:

  • Octane is represented by Rudy Telscher and Kara Fussner of Harness Dickey’s St. Louis office. Larry Laycock and his team at Workman Nydegger in Salt Lake represent Iconn.
  • There is a good chance that Octane won’t push this case any further since it won the underlying decision (non-infringement) and that decision was affirmed on appeal.

Reviewing PTO Claim Construction: Calls for De Novo Review of Proper Standard

Patent, , , , ,

By Dennis Crouch

Flo Healthcare v. Kappos and Rioux Vision (Fed. Cir. 2012), Inter Partes Reexamination No. 95/000,251.

In an interesting three-way opinion, the Federal Circuit has affirmed the USPTO’s rejection of Flo’s reexamined patent claims. In the process, however, the court provided significant additional guidance for the PTO on when claim elements that do not include the magical word “means” should nevertheless be interpreted as means-plus-function elements. See 35 U.S.C. 112(6). Here, the court found that the claim term “height adjustment mechanism” as used in the context of the patent specification should not be interpreted as a means-plus-function element.

Senior Judge Plager wrote the unanimous majority opinion and also filed a concurring opinion with “additional views” regarding appellate review of PTO claim construction Judge Plager argued that Federal Circuit precedent is unclear:

[W]e now appear to have two contradictory lines of authority on the question of how this court reviews Board claim constructions—a deferential “reasonable” (arbitrary/capricious-type) review, and a no-deference “pure” law type review. [Compare In re Morris, 127 F.3d 1048 (Fed. Cir. 1997) with In re Baker Hughes, 215 F.3d 1297 (Fed. Cir. 2000).] The fact that the APA now governs our review of PTO decisions does not provide guidance on which is the right standard. This is because the APA itself provides one standard for “pure” questions of law—which are reviewed without deference—and different, more deferential, standards for questions of fact and for mixed questions of fact and law.

The question then becomes whether claim construction by the Board is to be considered a question of “pure” law—the way this court treats claim construction in district court litigation under Cybor—and thus to be reviewed without deference; or whether it is something else, a blend of law and fact and judgment—as the Supreme Court said in Markman, a “mongrel practice”—in which case it is at least arguably subject to the “arbitrary and capricious” standard of APA § 706. Interestingly, none of the cases applying the Baker Hughes no-deference standard has paused to explain why that is the preferable standard as a matter of law or policy, or how it relates to the review standard that the Board uses.

Three additional factors weigh relatively in favor of deference toward PTO claim construction decisions even if court claim construction decisions continue to be reviewed de novo. First, claim construction at the PTO is decided initially by technical fact finders (patent examiners) and then by mixed fact/law specialists (PTAB judges). Second, the PTO’s form of claim construction “broadest reasonable construction” is a factual standard as is (virtually) any reasonableness judgment. Finally, the Supreme Court’s placement of decision making authority with a judge rather than a jury (Markman) that led to the Cybor no deference standard is tangential to the PTO’s role in claim construction. The decision makers in patent prosecution are defined by statute and codified rules rather than by the Supreme Court.

Judge Plager does not here suggest that one approach is correct, but does argue in favor of en banc rehearing to provide clear guidance to patentees and others concerned with patent rights. Judge Plager also offers an apology for the confusion since he authored the Morris opinion and was on the Baker Hughes panel.

This case involves a direct challenge to PTO claim construction decisions. The next step removed will involve collateral challenges during infringement litigation. In that case, what deference should be given to PTO conclusions at the time of the patent grant?

Judge Newman also agreed with the majority decision and provided her own additional views on the topic of the “broadest reasonable interpretation” standard used in patent prosecution. Judge Newman argues that the PTO should conduct claim construction applying the same standard as a court would later in litigation. The problem, according to Judge Newman is that the “broadest reasonable interpretation” is being applied as a standard of claim construction whereas it is actually merely an “examination protocol, not a rule of law.”

In its implementation, the examiner starts with a blank slate on which the applicant has described the subject matter he wishes to patent. The examiner is charged with searching the entire world knowledge, and to decide what the applicant is entitled to claim, as a matter of law. See Manual of Patent Examining Procedure §706 (“After the application has been read and the claimed invention understood, a prior art search for the claimed invention is made.”). In this demanding process, the examiner views the applicant’s presentation broadly, in order to assure that all possibly relevant prior art is explored. That is the role of “broadest reasonable interpretation”: it is an examination tool whereby the applicant and the examiner work together to determine and define the “invention” to be claimed.

Regardless of the path used to get there, Judge Newman argues, the claim construction is either correct or it is incorrect and it is the Federal Circuit’s role to make that determination accurately and uniformly. Thus, Judge Newman sees an acute problem in situations such as this case “where the same issue can be finally adjudicated to different appellate outcomes, depending on the tribunal from which it came.” An en banc hearing is also requested to remedy this “pernicious” conflict.

Notes:

  • The infringement lawsuit between these parties was filed in 2007 (the same year as the inter partes reexamination request). That litigation settled in 2010, but there is not a clear mechanism for settling inter partes reexaminations once they get rolling. The new inter partes reviews can be settled.

UK Appellate Court Confirms Pan-European Win for Samsung on iPad Community Design Charges

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By Dennis Crouch

Samsung Electronics v. Apple, [2012] EWCA Civ 1339

The English (and Wales) court of appeals has issued a new decision in the ongoing global intellectual property battle between smartphone competitors Apple and Samsung. This case focused on Apple's Community Design No. 000181607-0001 and affirms the trial court ruling by the High Court Judge Colin Birss that the three accused Samsung Galaxy models do not infringe. The court has also affirmed Judge Birss's equitable order forcing Apple to advertise its loss (in order to partially correct damage done to Samsung's reputation).

Apple's iPad registered community design being asserted here is the simple design shown below.

A registered European Community Design is roughly equivalent to a US Design Patent. However, the Europeans have done away with the examination process and replaced it with registration without considering whether the design is actually novel. Thus, while the European law requires that a registered community design be novel (a lower standard than nonobvious), that issue is not raised in the initial registration process. The US continues to examine design patents for novelty and nonobviousness. However, the USPTO's examination of design patent novelty can best be described as a farce. In a 2010 study, I found that the vast majority of design patent applications do not receive even a single rejection during the examination process and only 1.2% are the subject of an obviousness or novelty rejection. In that essay I identified our system as that of de facto registration. Because of the in-expense and ease of registration, Community Designs have been quite popular.

Up to now, the process of obtaining Community Designs has been largely separate from that of US design patent rights. This will change, however, if the US finalizes legislation implementing the Hague Agreement. Earlier this year the US Senate passed the "Patent Law Treaties Implementation Act of 2012" (S. 3486) that would implement the Hague Agreement (as well as the procedural Patent Law Treaty PLT). If there is no major objection, the House of Representatives is likely to pass its version of the Act in the lame duck session of Congress following the November presidential election.

The opinion in the present case is written by Lord Justice Robin Jacob who has retired from the bench but is regularly called back to hear intellectual property cases. As you will find with virtually all of Lord Justice Jacob's decisions, the case is well written, layered, and informative. Lord Justice David Kitchin (another IP focused jurist) joined the panel. In addition to the related design patent litigation in the U.S., this particular community design is being litigated in Germany, the Netherlands, and Spain.

Infringement of a community design is defined in Article 10 of the Community Design Regulation EC 6/2002 and asks whether the accused design "does not produce on the informed user a different overall impression" after taking into consideration "the degree of freedom of the designer in developing his design." Although worded somewhat differently, this standard is on track with U.S. design patent infringement law that considers whether an "ordinary observer, familiar with the prior art designs, would be deceived into believing that the accused product is the same as the patented design." In both situations, the "most important things [to be considered for infringement] are the registered design, the accused object and the prior art and the most important thing about each of these is what they look like."

Jacob, LJ, begins his opinion with a statement about copying—notably that copying is irrelevant to the infringement analysis:

3. Because this case (and parallel cases in other countries) has generated much publicity, it will avoid confusion to say what this case is about and not about. It is not about whether Samsung copied Apple's iPad. Infringement of a registered design does not involve any question of whether there was copying: the issue is simply whether the accused design is too close to the registered design according to the tests laid down in the law. Whether or not Apple could have sued in England and Wales for copying is utterly irrelevant to this case. If they could, they did not. Likewise there is no issue about infringement of any patent for an invention.

4. So this case is all about, and only about, Apple's registered design and the Samsung products. The registered design is not the same as the design of the iPad. It is quite a lot different. For instance the iPad is a lot thinner, and has noticeably different curves on its sides. There may be other differences – even though I own one, I have not made a detailed comparison. Whether the iPad would fall within the scope of protection of the registered design is completely irrelevant. We are not deciding that one way or the other. This case must be decided as if the iPad never existed.

The appellate opinion fully supported Judge Birss's initial determination that substantial differences led to a rejection of the infringement contention. In particular, when compared with the registered design, Samsung devices are thinner and have substantial surface ornamentation. Other features – such as a flat rectangular screen – the court found to so "banal" as to not contribute to the infringement analysis. The court found the rounded corners also unremarkable and of obvious function for a handheld device. Normally, an accused infringer cannot avoid infringement with use of its distinctive trademark on the product. In this case, however, the court found that Samsung's trademark name on its device helped to distinguish the device from the Apple registered design because of the label was additional ornamentation that contradicted Apple's approach of substantially lacking surface ornamentation.

Taking all this as a whole, Judge Birss could not see any infringement. In the appeal, Jacob, LJ, agreed noting that "Overall I cannot begin to see any material error by the Judge."

54.    I would add that even if I were forming my own view of the matter, I would have come to the same conclusion and for the same reasons. If the registered design has a scope as wide as Apple contends it would foreclose much of the market for tablet computers. Alterations in thickness, curvature of the sides, embellishment and so on would not escape its grasp. Legitimate competition by different designs would be stifled.

European-wide declaration of non-infringement affirmed. Now, in all likelihood Apple will take its appeal to the EU Court of Justice (CJEU) who is the final arbiter of EU community design law.

Parallel Pan-European Preliminary Injunction by German Courts: Prior to Judge Birss's final decision, Apple applied ex parte for a preliminary injunction in a German court that was granted "without Samsung having an opportunity of being heard." In July 2012 (a few weeks after Judge Birss's decision) the German Court of Appeal (Oberlandesgericht) granted a pan-European preliminary injunction (interim injunction) against the Galaxy 7.7. Under community design litigation rules, Judge Birss's decision takes precedent and lifts that preliminary injunction. In his opinion, Lord Justice Jacob was highly critical of the German courts for taking that approach while the case was pending before Judge Birss sitting as a community design judge.

56. Firstly I cannot understand on what basis the [German] Court thought it had jurisdiction to grant interim relief. I do not think it did [have jurisdiction] for several reasons.

At minimum, a national court associated where interim relief is sought loses jurisdiction as soon as the court seized of the substance of the case (according to community design law) issues its decision.

In addition to wrongly hearing the case, Jacob, LJ also argues that the German Court wrongly decided the case.

61. … I regret to say that I find the Oberlandesgericht's reasoning on the merits sparse in the extreme….

62. What the Oberlandesgericht did not do was to consider Judge Birss's decision in detail. It gave only meagre reasons for saying "The Court cannot concur with the interpretation of the High Court". I regret that. …

63. … If courts around Europe simply say they do not agree with each other and give inconsistent decisions, Europe will be the poorer.

There are probably three ways to see this conflict: (1) as a lack of effort on the German court's part (unlikely); (2) as a lack of respect for UK courts (more likely); or (3) as an indication that German's support stronger design rights than do the UK courts (most likely).

The decision also suggests that the German court should force Apple to compensate Samsung for the trouble it has caused with its approach to obtaining a preliminary injunction:

Whether or not Samsung has any claim in the German courts for all the losses it has suffered as a result of preliminary measures which proved to be unjustified is obviously not a matter for us. I hope it does. If the position were the other way round, that the unjustified preliminary measures had been granted by the English and Welsh courts, the "injured" party would have a remedy under the cross-undertaking in damages which the English court normally requires as a condition of granting a preliminary measure which is not ultimately vindicated in a main trial.

At paragraph 78.

Ghost Lines in Design Patents: Although minor in the context of this appeal, Lord Justice Jacob has an interesting comment on the dotted "ghost" lines that have become common in US design patent drafting. According to the MPEP, those lines are allowed as "Environmental structure" so long as "clearly designated as environment in the specification." MPEP § 1503. The Apple registration included a dotted line frame showing the boundary of the operational portion of its screen. Samsung unsuccessfully argued that dotted line should not be given any patentable weight based upon what Jacob, LJ calls "a complicated point based on the guidelines for examination."

21. There is one other point about how the informed user would assess the registered design, a point decided by the Judge adversely to Samsung. Views 0001.1 and 0001.3 show the front of the tablet. There is a rectangular dotted line shown. Apple submitted, and the Judge accepted, that the dotted line indicated a frame below a glass face – of the kind now familiar on all sorts of touch-screen devices. Samsung ran a complicated point based on the guidelines for examination. It submitted these would lead the informed user to conclude that the dotted lines were there to indicate that a feature was not protected: thus the fact that the Samsung device does have a "frame" is to be disregarded.

22. This is faintly absurd: a bit like the notice-board reading "Ignore this notice." For if there were no dotted rectangular line, the front face of the design as registered would be entirely plain. So it would then be for the informed user to form a judgment as to whether a tablet with a frame created a different overall impression. In short, on Samsung's contention if there were no dotted lines the position would the same as if they were there.

This development if applied broadly could actually become a major source of contention and difficulty in implementing the global design rights system suggested by the Hague Agreement.

As an aside on the ghost line point, I briefly reviewed the prosecution history file of the US design patent that serves as the priority filing for the community design in this case. See U.S. Design Patent D504,889. In my review, I did not find any applicant remarks indicating that the dotted line in the frame is merely an environmental structure or indicating that the dotted line should not be considered as an element of the design patent. Judge Koh considered this issue during the US litigation of the '889 patent and agreed in dicta that "A reasonable interpretation of the dotted lines in the D′889 patent … is that the dotted lines are intended to show the inset screen below the glass-like surface. At this point, without the aid of prosecution history, evidence regarding drafting principles, or argument from the parties, the Court considers the dotted lines to most likely indicate an inset screen and are likely part of the claimed design." Apple, Inc. v. Samsung Electronics Co., Ltd., 2011 WL 7036077 (N.D.Cal. December 02, 2011). For its decision, the court cited Bernardo Footwear, L.L.C. v. Fortune Dynamics, Inc., 2007 WL 4561476 (S.D.Tex. Dec.24, 2007). In that case the court held that broken lines in a design patent were part of the claimed design because the drafter had failed to explain the significance (or significance) of the broken lines.

Notes:

MPEP 2106 Patent Subject Matter Eligibility [R-9]

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There are two criteria for determining subject matter eligibility and both must be satisfied. The claimed invention (1) must be directed to one of the four statutory categories, and (2) must not be wholly directed to subject matter encompassing a judicially recognized exception, as defined below. The following two step analysis is used to evaluate these criteria.

I.   THE FOUR CATEGORIES OF STATUTORY SUBJECT MATTER

Step 1: Is the claim directed to one of the four patent-eligible subject matter categories: process, machine, manufacture, or composition of matter? The subject matter of the claim must be directed to one of the four subject matter categories. If it is not, the claim is not eligible for patent protection and should be rejected under 35 U.S.C. 101 , for at least this reason. A summary of the four categories of invention, as they have been defined by the courts, are:

  • i. Process – an act, or a series of acts or steps. See Gottschalk v. Benson, 409 U.S. 63, 70, 175 USPQ 673, ___ (1972) ("A process is a mode of treatment of certain materials to produce a given result. It is an act, or a series of acts, performed upon the subject-matter to be transformed and reduced to a different state or thing." (emphasis added) (quotingCochrane v. Deener, 94 U.S. 780, 788, 24 L. Ed. 139, 1877 Dec. Comm'r Pat. 242 (1876)); NTP, Inc. v. Research in Motion, Ltd., 418 F.3d 1282, 1316, 75 USPQ2d 1763, ___(Fed. Cir. 2005) ("A process is a series of acts." (quoting Minton v. Natl. Ass'n. of Securities Dealers, 336 F.3d 1373, , 336 F.3d 1373, 1378, 67 USPQ2d 1614, ___ (Fed. Cir. 2003))). See also 35 U.S.C. 100(b); Bilski v. Kappos, 130 S. Ct. 3218, 95 USPQ2d 1001 (2010).
  • ii. Machine – a concrete thing, consisting of parts, or of certain devices and combination of devices. Burr v. Duryee, 68 U.S. (1 Wall.) 531, 570, 17 L. Ed. 650 (1863). This includes every mechanical device or combination of mechanical powers and devices to perform some function and produce a certain effect or result. Corning v. Burden, 56 U.S. 252, 267, 14 L. Ed. 683 (1854).
  • iii. Manufacture – an article produced from raw or prepared materials by giving to these materials new forms, qualities, properties, or combinations, whether by handlabor or by machinery. Diamond v. Chakrabarty, 447 U.S. 303, 308, 206 USPQ 193, ___ (1980) (emphasis added) (quoting Am. Fruit Growers, Inc. v. Brogdex Co., 283 U.S. 1, 11, 51 S. Ct. 328, 75 L. Ed. 801, 1931 (Dec. Comm'r Pat. 711 (1931))).
  • iv. Composition of matter – all compositions of two or more substances and all composite articles, whether they be the results of chemical union, or of mechanical mixture, or whether they be gases, fluids, powders or solids, for example. Chakrabarty, 447 U.S. at 308.

    Non-limiting examples of claims that are not directed to one of the statutory categories:

  • i. transitory forms of signal transmission (for example, a propagating electrical or electromagnetic signal per se), In re Nuijten, 500 F.3d 1346, 1357, 84 USPQ2d 1495, ___ (Fed. Cir. 2007);
  • ii. a naturally occurring organism, Chakrabarty, 447 U.S. at 308;
  • iii. a human per se, The Leahy-Smith America Invents Act (AIA), Public Law 112-29, sec. 33, 125 Stat. 284 (September 16, 2011);
  • iv. a legal contractual agreement between two parties, see In re Ferguson, 558 F.3d 1359, 1364, 90 USPQ2d 1035, ___ (Fed. Cir. 2009) (cert. denied);
  • v. a game defined as a set of rules;
  • vi. a computer program per se, Gottschalk v. Benson, 409 U.S. at 72;
  • vii. a company, Ferguson, 558 F.3d at 1366; and
  • viii. a mere arrangement of printed matter, In re Miller, 418 F.2d 1392, 1396, 164 USPQ 46, ___ (CCPA 1969).

    A claim that covers both statutory and non-statutory embodiments (under the broadest reasonable interpretation of the claim when read in light of the specification and in view of one skilled in the art) embraces subject matter that is not eligible for patent protection and therefore is directed to non-statutory subject matter. Such claims fail the first step and should be rejected under 35 U.S.C. 101 , for at least this reason.

    For example, machine readable media can encompass non-statutory transitory forms of signal transmission, such as, a propagating electrical or electromagnetic signal per se. See In re Nuijten, 500 F.3d 1346, 84 USPQ2d 1495 (Fed. Cir. 2007). When the broadest reasonable interpretation of machine readable media in light of the specification as it would be interpreted by one of ordinary skill in the art encompasses transitory forms of signal transmission, a rejection under 35 U.S.C. 101 as failing to claim statutory subject matter would be appropriate. Thus, a claim to a computer readable medium that can be a compact disc or a carrier wave covers a non-statutory embodiment and therefore should be rejected under 35 U.S.C. 101 as being directed to non-statutory subject matter.

    If the claimed invention is clearly not within one of the four categories, it is not patent eligible. However, when the claim fails under Step 1 and it appears from applicant's disclosure that the claim could be amended to be directed to a statutory category, Step 2 below should still be conducted.

    II.   JUDICIAL EXCEPTIONS TO THE FOUR CATEGORIES

    Step 2: Does the claim wholly embrace a judicially recognized exception, which includes laws of nature, physical phenomena, and abstract ideas, or is it a particular practical application of a judicial exception? See Bilski v. Kappos, 561 U.S. ___, 130 S. Ct. 3218, 3225, 95 USPQ2d 1001 (2010) (stating "The Court's precedents provide three specific exceptions to § 101's broad patent-eligibility principles: 'laws of nature, physical phenomena, and abstract ideas.'") (quoting Diamond v. Chakrabarty, 447 U.S. 303, 309, 206 USPQ 193, ___ (1980)).

    Determining whether the claim falls within one of the four enumerated categories of patentable subject matter recited in 35 U.S.C. 101 (i.e., process, machine, manufacture, or composition of matter) does not end the analysis because claims directed to nothing more than abstract ideas (such as mathematical algorithms), natural phenomena, and laws of nature are not eligible for patent protection. Diamond v. Diehr, 450 U.S. 175, 185, 209 USPQ 1, 7 (1981); accord, e.g., Chakrabarty, 447 U.S. at 309, 206 USPQ at 197; Parker v. Flook, 437 U.S. 584, 589, 198 USPQ 193, 197 (1978); Benson, 409 U.S. at 67-68 , 175 USPQ at 675. "A principle, in the abstract, is a fundamental truth; an original cause; a motive; these cannot be patented, as no one can claim in either of them an exclusive right." Le Roy v. Tatham,, 55 U.S. (14 How.) 156, 175 (1852). Instead, such "manifestations of laws of nature" are "part of the storehouse of knowledge," "free to all men and reserved exclusively to none." Funk Bros. Seed Co. v. Kalo Inoculant Co., 333 U.S. 127, 130, 76 USPQ 280, 281 (1948).

    Thus, "a new mineral discovered in the earth or a new plant found in the wild is not patentable subject matter" under Section 101. Chakrabarty, 447 U.S. at 309, 206 USPQ at 197. "Likewise, Einstein could not patent his celebrated law that E=mc2; nor could Newton have patented the law of gravity." Ibid. Nor can one patent "a novel and useful mathematical formula," Flook, 437 U.S. at 585, 198 USPQ at 195; electromagnetism or steam power, O'Reilly v. Morse, 56 U.S. (15 How.) 62, 113-114 (1853); or "[t]he qualities of … bacteria, … the heat of the sun, electricity, or the qualities of metals," Funk, 333 U.S. at 130, 76 USPQ at 281; see Le Roy, 55 U.S. (14 How.) at 175.

    While abstract ideas, physical phenomena, and laws of nature are not eligible for patenting, methods and products employing abstract ideas, physical phenomena, and laws of nature to perform a real-world function may well be. In evaluating whether a claim meets the requirements of 35 U.S.C. 101 , the claim must be considered as a whole to determine whether it is for a particular application of an abstract idea, physical phenomenon, or law of nature, and not for the abstract idea, physical phenomenon, or law of nature itself. Diehr, 450 U.S. at 188-178.

    In addition to the terms laws of nature, physical phenomena, and abstract ideas, judicially recognized exceptions have been described using various other terms, including natural phenomena, scientific principles, systems that depend on human intelligence alone, disembodied concepts, mental processes and disembodied mathematical algorithms and formulas, for example. The exceptions reflect the courts' view that the basic tools of scientific and technological work are not patentable.

    The claimed subject matter must not be wholly directed to a judicially recognized exception. If it is, the claim is not eligible for patent protection and should be rejected under 35 U.S.C. 101 . However, a claim that is limited to a particular practical application of a judicially recognized exception is eligible for patent protection. A "practical application" relates to how a judicially recognized exception is applied in a real world product or a process, and not merely to the result achieved by the invention. When subject matter has been reduced to a particular practical application having a real world use, the claimed practical application is evidence that the subject matter is not abstract (e.g., not purely mental) and does not encompass substantially all uses (preemption) of a law of nature or a physical phenomenon. See, e.g., Ultramercial v. Hulu, 657 F.3d 1323, 1329, 100 USPQ2d 1140,1145 (Fed. Cir. 2011)(stating that the patent "does not claim a mathematical algorithm, a series of purely mental steps, or any similarly abstract concept. It claims a particular method . . . a practical application of the general concept.").

    A.   Practical Application of Machines, Manufactures, and Compositions of Matter (Products)

    If the claimed product falls within one of the three product categories of invention and does not recite judicially excepted subject matter, e.g., a law of nature, a physical phenomenon, or an abstract idea, it qualifies as eligible subject matter. If a judicial exception is recited in the claim, it must be determined if the judicially excepted subject matter has been practically applied in the product.

    Eligible machines, manufactures, and compositions of matter are non-naturally occurring products typically formed of tangible elements or parts that embody a particular or specific, tangible practical application of the invention. Thus, for these product categories, a particular practical application is often self-evident based on the claim limitations that define the tangible embodiment. This is because an idea that is tangibly applied to a structure is no longer abstract, and a law of nature or physical phenomenon that is practically applied to a structure is limited to that particular application of the concept. For example, a cup is the tangible application of the abstract idea of containing a liquid and is one limited embodiment of that idea (which is no longer abstract). As another example, a magnetic door latch is the tangible application of the concept of magnetism and does not wholly embrace the concept of magnetism but, rather, is one limited application of the concept.

    A claim that includes terms that imply that the invention is directed to a product, for instance by reciting "a machine comprising…", but fails to include tangible limitations in accordance with its broadest reasonable interpretation is not limited to a practical application, but rather wholly embraces or encompasses the concept upon which the invention is based. This is impermissible as such claim coverage would extend to every way of applying the abstract idea, law of nature or physical phenomenon.

    A claim that includes judicially excepted subject matter and whose broadest reasonable interpretation is directed to a man-made tangible embodiment (i.e., structure) with a real world use is limited to a practical application (the subject matter has been practically applied). The reason is that the claim as a whole must be evaluated for eligibility in the same manner that a claim as a whole is evaluated for patentability under 35 U.S.C. 102, 103 and 112.

    Once a practical application has been established, the limited occurrence of preemption must be evaluated to determine whether the claim impermissibly covers substantially all practical applications of the judicially excepted subject matter. If so, the claim is not patent-eligible. If the claim covers only a particular practical application of the judicially excepted subject matter, it is patent eligible.

    The following examples show the difference between a tangible embodiment that is evidence of a particular practical application and an abstract concept that has no practical application.

  • (a) A claim that is directed to a machine comprising a plurality of structural elements that work together in a defined combination based on a mathematical relationship, such as a series of gears, pulleys and belts, possesses structural limitations that show that it is a tangible embodiment, providing evidence that the mathematical relationship has been applied (a practical application). Additionally, that tangible embodiment is limited by the claimed structure and would not cover all substantial practical uses of the mathematical relationship. The claim would be eligible for patent protection.
  • (b) On the other hand, a claim that is directed to a machine ("What is claimed is a machine that operates in accordance with F=ma.") and includes no tangible structural elements under the broadest reasonable interpretation, covers the operating principle based on a mathematical relationship with no limits on the claim scope. Thus, as no tangible embodiment is claimed, there would be no evidence of a practical application. The claim would wholly embrace the mathematical concept of F=ma and would not be eligible subject matter.
  • (c) As another example, a claim to a non-transitory, tangible computer readable storage medium per se that possesses structural limitations under the broadest reasonable interpretation standard to qualify as a manufacture would be patent-eligible subject matter. Adding additional claim limitations to the medium, such as executable instructions or stored data, to such a statutory eligible claim would not render the medium non-statutory, so long as the claim as a whole has a real world use and the medium does not cover substantially all practical uses of a judicial exception. The claim as a whole remains a tangible embodiment and qualifies as a manufacture. As explained above, the additional claim limitations would be evaluated in terms of whether they distinguish over the prior art.

    B.   Practical Application of Processes (Methods)

    The Supreme Court in Bilski v. Kappos, 561 U.S. ___, 130 S. Ct. 3218, 95 USPQ2d 1001 (2010), clarified the requirements for a claim to be a statutory process. Not every claimed method qualifies as a statutory process. A process claim, to be statutory under 35 U.S.C. 101 , must be limited to a particular practical application. This ensures that the process is not simply claiming an abstract idea, or substantially all practical uses of (preempting) a law of nature, or a physical phenomenon. See MPEP § 2106.01 for further guidance regarding subject matter eligibility determinations during examination of process claims that involve laws of nature/natural correlations.

    A claim that attempts to patent an abstract idea is ineligible subject matter under 35 U.S.C. 101 . See Bilski, 130 S. Ct. at 3230 (''[A]ll members of the Court agree that the patent application at issue here falls outside of § 101 because it claims an abstract idea.''). The abstract idea exception has deep roots in the Supreme Court's jurisprudence. See Bilski, 130 S. Ct. at 3225 (citing Le Roy v. Tatham, 55 U.S. (14 How.) 156, 174–175 (1853)).

    Bilski reaffirmed Diehr's holding that ''while an abstract idea, law of nature, or mathematical formula could not be patented, 'an application of a law of nature or mathematical formula to a known structure or process may well be deserving of patent protection.''' See Bilski, 130 S. Ct. at 3230 (quoting Diamond v. Diehr, 450 U.S. 175, 187 (1981)) (emphasis in original). The recitation of some structure, such as a machine, or the recitation of some transformative component will in most cases limit the claim to such an application. However, not all such recitations necessarily save the claim: ''Flook established that limiting an abstract idea to one field of use or adding token postsolution components did not make the concept patentable.'' See Bilski, 130 S. Ct. at 3231. Moreover, the fact that the steps of a claim might occur in the ''real world'' does not necessarily save it from a 35 U.S.C. 101 rejection. Thus, the Bilski claims were said to be drawn to an ''abstract idea'' despite the fact that they included steps drawn to initiating transactions. The ''abstractness'' is in the sense that there are no limitations as to the mechanism for entering into the transactions.

    Consistent with the foregoing, Bilski holds that the following claim is abstract:

    1. A method for managing the consumption risk costs of a commodity sold by a commodity provider at a fixed price comprising the steps of:

    • (a) Initiating a series of transactions between said commodity provider and consumers of said commodity wherein said consumers purchase said commodity at a fixed rate based upon historical averages, said fixed rate corresponding to a risk position of said consumer;
    • (b) Identifying market participants for said commodity having a counter-risk position to said consumers; and
    • (c) Initiating a series of transactions between said commodity provider and said market participants at a second fixed rate such that said series of market participant transactions balances the risk position of said series of consumer transactions.

    Specifically, the Court explains:

    The concept of hedging, described in claim 1 and reduced to a mathematical formula in claim 4, is an unpatentable abstract idea, just like the algorithms at issue in Bensonand Flook. Allowing petitioners to patent risk hedging would preempt use of this approach in all fields, and would effectively grant a monopoly over an abstract idea.

    Bilski also held that the additional, narrowing, limitations in the dependent claims were mere field of use limitations or insignificant postsolution components, and that adding these limitations did not make the claims patent-eligible. Claims 1–9 in Bilski are examples of claims that run afoul of the abstract idea exception. The day after deciding Bilski, the Supreme Court denied certiorari in Ferguson v. Kappos, U.S. Supreme Court No. 09–1501, while granting, vacating, and remanding two other Federal Circuit 35 U.S.C. 101 cases. The denial of certiorari left intact the rejection of all of Ferguson's claims. Although the Federal Circuit had applied the machine-or-transformation test to reject Ferguson's process claims, the Supreme Court's disposition of Ferguson makes it likely that the Ferguson claims also run afoul of the abstract idea exception. A representative Ferguson claim is:

    1. A method of marketing a product, comprising:

    • Developing a shared marketing force, said shared marketing force including at least marketing channels, which enable marketing a number of related products;
    • Using said shared marketing force to market a plurality of different products that are made by a plurality of different autonomous producing company [sic], so that different autonomous companies, having different ownerships, respectively produce said related products;
    • Obtaining a share of total profits from each of said plurality of different autonomous producing companies in return for said using; and
    • Obtaining an exclusive right to market each of said plurality of products in return for said using.

    The following guidance presents factors that are to be considered when evaluating patent-eligibility of method claims. The factors include inquiries from the machine-or-transformation test, which remains a useful investigative tool, and inquiries gleaned from Supreme Court precedent. See In re Bilski, 545 F.3d 943, 954 (Fed. Cir. 2009) (stating that "[a] claimed process is surely patent-eligible under § 101if: (1) it is tied to a particular machine or apparatus, or (2) it transforms a particular article into a different state or thing."); and Bilski, 130 S. Ct. at 3227 (stating, "This Court's precedents establish that the machine-or-transformation test is a useful and important clue, an investigative tool, for determining whether some claimed inventions are processes under § 101. The machine-or-transformation test is not the sole test for deciding whether an invention is a patent-eligible 'process.'").

    While the Supreme Court in Bilski did not set forth detailed guidance, there are many factors to be considered when determining whether there is sufficient evidence to support a determination that a method claim is directed to an abstract idea. The following factors are intended to be useful examples and are not intended to be exclusive or limiting. It is recognized that new factors may be developed, particularly for emerging technologies. It is anticipated that the factors will be modified and changed to take into account developments in precedential case law and to accommodate prosecution issues that may arise in implementing this new practice.

    Where the claim is written in the form of a method and is potentially a patentable process, as defined in 35 U.S.C. 100(b), the claim is patent-eligible so long as it is not disqualified as one of the exceptions to 35 U.S.C. 101 's broad patent-eligibility principles; i.e., laws of nature, physical phenomena, and abstract ideas.

    Taking into account the following factors, the examiner should determine whether the claimed invention, viewed as a whole, is disqualified as being a claim to an abstract idea. Relevant factors—both those in favor of patent-eligibility and those against such a finding—should be weighed in making the determination. Factors that weigh in favor of patent-eligibility satisfy the criteria of the machine-or-transformation test or provide evidence that the abstract idea has been practically applied. Factors that weigh against patent-eligibility neither satisfy the criteria of the machine-or-transformation test nor provide evidence that the abstract idea has been practically applied. Each case will present different factors, and it is likely that only some of the factors will be present in each application. It would be improper to make a conclusion based on one factor while ignoring other factors.

    With respect to the factors listed below, a "field-of-use" limitation does not impose actual boundaries on the scope of the claimed invention. A field-of-use limitation merely indicates that the method is for use in a particular environment, such as "for use with a machine" or "for transforming an article", which would not require that the machine implement the method or that the steps of the method cause the article to transform. A field-of-use limitation does not impose a meaningful limit on the claimed invention. Insignificant "extra-solution" activity means activity that is not central to the purpose of the method invented by the applicant. For example, gathering data to use in the method when all applications of the method would require some form of data gathering would not impose a meaningful limit on the claim.

    1.   Factors To Be Considered in an Abstract Idea Determination of a Method Claim

    (a)   Whether the method involves or is executed by a particular machine or apparatus

    "The machine-or-transformation test is a useful and important clue, and investigative tool, for determining whether some claimed inventions are processes under § 101." Bilski v. Kappos, 561 U.S. ___, ___, 130 S. Ct. 3218, 3227, 95 USPQ2d 1001, ___ (2010). If so, the claims are less likely to be drawn to an abstract idea; if not, they are more likely to be so drawn. With respect to these factors, a "machine" is a concrete thing, consisting of parts, or of certain devices and combination of devices. This includes every mechanical device or combination of mechanical powers and devices to perform some function and produce a certain effect or result. This definition is interpreted broadly to include electrical, electronic, optical, acoustic, and other such devices that accomplish a function to achieve a certain result. An "apparatus" does not have a significantly different meaning from a machine and can include a machine or group of machines or a totality of means by which a designated function or specific task is executed.

    Where a machine or apparatus is recited or inherent in a patent claim, the following factors are relevant:

    (a) The particularity or generality of the elements of the machine or apparatus; i.e., the degree to which the machine in the claim can be specifically identified (not any and all machines). Incorporation of a particular machine or apparatus into the claimed method steps weighs toward eligibility.

    For computer implemented processes, the "machine" is often disclosed as a general purpose computer. In these cases, the general purpose computer may be sufficiently "particular" when programmed to perform the process steps. Such programming creates a new machine because a general purpose computer, in effect, becomes a special purpose computer once it is programmed to perform particular functions pursuant to instructions from program software. In re Alappat, 33 F.3d 1526, 1545, 31 USPQ 1545, ___ (Fed. Cir. 1994); see alsoUltramercial v. Hulu, 657 F.3d 1323, 1329, 100 USPQ2d 1140, 1145 (Fed. Cir. 2011) (stating "a programmed computer contains circuitry unique to that computer"). However, "adding a 'computer-aided' limitation to a claim covering an abstract concept, without more, is insufficient to render [a] patent claim eligible" where the claims "are silent as to how a computer aids the method, the extent to which a computer aids the method, or the significance of a computer to the performance of the method." DealerTrack v. Huber, ___ F.3d ___, ___, 101 USPQ2d 1325, 1339-40 (Fed. Cir. 2012). To qualify as a particular machine under the test, the claim must clearly convey that the computer is programmed to perform the steps of the method because such programming, in effect, creates a special purpose computer limited to the use of the particularly claimed combination of elements (i.e., the programmed instructions) performing the particularly claimed combination of functions. If the claim is so abstract and sweeping that performing the process as claimed would cover substantially all practical applications of a judicial exception, such as a mathematical algorithm, the claim would not satisfy the test as the machine would not be sufficiently particular.

    (b) Whether the machine or apparatus implements the steps of the method. Integral use of a machine or apparatus to achieve performance of the method weighs toward eligibility, as compared to where the machine or apparatus is merely an object on which the method operates, which weighs against eligibility. See Cybersource v. Retail Decisions, 654 F.3d 1366, 99 USPQ2d 1960 (Fed. Cir. 2011) ("We are not persuaded by the appellant's argument that claimed method is tied to a particular machine because it 'would not be necessary or possible without the Internet.' . . . Regardless of whether "the Internet" can be viewed as a machine, it is clear that the Internet cannot perform the fraud detection steps of the claimed method").

    (c) Whether its involvement is extrasolution activity or a field-of-use, i.e., the extent to which (or how) the machine or apparatus imposes meaningful limits on the execution of the claimed method steps. Use of a machine or apparatus that contributes only nominally or insignificantly to the execution of the claimed method (e.g., in a data gathering step or in a field-of-use limitation) would weigh against eligibility. See Bilski, 138 S. Ct. at 3230 (citing Parker v. Flook, 437 U.S. 584, 590, 198 USPQ 193, ___ (1978)), and Cybersource v. Retail Decisions, 654 F.3d 1366, 99 USPQ2d 1690 (Fed. Cir. 2011) ("while claim 3 requires an infringer to use the Internet to obtain that data . . . [t]he Internet is merely described as the source of the data. We have held that mere '[data-gathering] step[s] cannot make an otherwise nonstatutory claim statutory.'" In re Grams, 888 F.2d 835, 840, 12 USPQ2d 1824, ___ (Fed. Cir. 1989) (quoting In re Meyer, 688 F.2d 789, 794, 215 USPQ 193, ___ (CCPA 1982)))…

    (b)   Whether performance of the claimed method results in or otherwise involves a transformation of a particular article

    "Transformation and reduction of an article 'to a different state or thing' is the clue to patentability of a process claim that does not include particular machines." Bilski v. Kappos, 561 U.S. ___, 130 S. Ct. 3218, 3227, 95 USPQ2d 1001 (2010)(quoting Gottschalk v. Benson, 409 U.S. 63, 70, 175 USPQ 673, ___ (1972). If such a transformation exists, the claims are less likely to be drawn to an abstract idea; if not, they are more likely to be so drawn.

    An "article" includes a physical object or substance. The physical object or substance must be particular, meaning it can be specifically identified. An article can also be electronic data that represents a physical object or substance. For the test, the data should be more than an abstract value. Data can be specifically identified by indicating what the data represents, the particular type or nature of the data, and/or how or from where the data was obtained.

    "Transformation" of an article means that the "article" has changed to a different state or thing. Changing to a different state or thing usually means more than simply using an article or changing the location of an article. A new or different function or use can be evidence that an article has been transformed. Manufactures and compositions of matter are the result of transforming raw materials into something new with a different function or use. Purely mental processes in which thoughts or human based actions are "changed" are not considered an eligible transformation. For data, mere "manipulation of basic mathematical constructs [i.e,] the paradigmatic 'abstract idea'," has not been deemed a transformation. Cybersource v. Retail Decisions, 654 F.3d 1366, 1372 n.2, 99 USPQ2d 1690, 1695 n.2 (Fed. Cir. 2011)(quoting In re Warmerdam, 33 F.3d 1354, 1355, 1360 (Fed. Cir. 1994). However, transformation of electronic data has been found when the nature of the data has been changed such that it has a different function or is suitable for a different use. In re Bilski, 545 F.3d 943, 962-63 (Fed. Cir. 2009)(aff'd sub nom Bilski v. Kappos, 130 S. Ct. 3218 (2010)).

    Where a transformation occurs, the following factors are relevant:

    (a) The particularity or generality of the transformation. The Supreme Court has stated that an invention comprising a process of "'tanning, dyeing, making waterproof cloth, vulcanizing India rubber [or] smelting ores' . . . are instances . . . where the use of chemical substances or physical acts, such as temperature control, changes articles or materials [in such a manner that is] sufficiently definite to confine the patent monopoly within rather definite bounds." Gottschalk v. Benson, 409 U.S. 63, 70, 175 USPQ 673, ___ (1972) (discussing Corning v. Burden, 15 How.(56 U.S.) 252, 267-68). A more particular transformation would weigh in favor of eligibility.

    (b) The degree to which the recited article is particular; i.e., can be specifically identified (not any and all articles). A transformation applied to a generically recited article would weigh against eligibility.

    (c) The nature of the transformation in terms of the type or extent of change in state or thing, for instance by having a different function or use, which would weigh toward eligibility, compared to merely having a different location, which would weigh against eligibility.

    (d) The nature of the article transformed, i.e., whether it is an object or substance, weighing toward eligibility, compared to a concept such as a contractual obligation or mental judgment, which would weigh against eligibility.

    (e) Whether its involvement is extrasolution activity or a field-of-use, i.e., the extent to which (or how) the transformation imposes meaningful limits on the execution of the claimed method steps. A transformation that contributes only nominally or insignificantly to the execution of the claimed method (e.g., in a data gathering step or in a field-of-use limitation) would weigh against eligibility.

    (c)   Whether performance of the claimed method involves an application of a law of nature, even in the absence of a particular machine, apparatus, or transformation

    An application of a law of nature may represent patent-eligible subject matter even in the absence of a particular machine, apparatus, or transformation. See, e.g., Bilski v. Kappos, 561 U.S. ___, 130 S. Ct. 3218, 3227, 95 USPQ2d 1001 (2010)(citing Diamond v. Diehr, 450 U.S. 175, 187, 209 USPQ 1, ___ (1981)) (stating that the Court had previously "explicitly declined to 'hold that no process patent could ever qualify if it did not meet [machine or transformation] requirements.") (quoting Gottschalk v. Benson, 409 U.S. 63, 67, 175 USPQ 673, ___ (1972)). If such an application exists, the claims are less likely to be drawn to an abstract idea; if not, they are more likely to be so drawn. See MPEP § 2106.01 for further guidance regarding subject matter eligibility determinations during examination of process claims that involve laws of nature/natural correlations.

    Where such an application is present, the following factors are relevant:

    (a) The particularity or generality of the application. Application of a law of nature having broad applicability across many fields of endeavor weighs against eligibility, such as where the claim generically recites an effect of the law of nature or claims every mode of accomplishing that effect, such that the claim would monopolize a natural force or patent a scientific fact. See O'Reilly v. Morse, 56 U.S. 62 (1853)(finding unpatentable a claim for "the use of electromagnetism for transmitting signals at a distance"); The Telephone Cases, 126 U.S. 1, 209 (1888)(discussing a method of "transmitting vocal or other sound telepgraphically … by causing electrical undulations, similar in form to the vibrations of the air accompanying the said vocal or other sounds," stating "[Bell] had detected a secret of nature . . . .[H]e proceeded promptly to patent, not only a particular method and apparatus for availing of that law, but also the right to avail of that law by any means whatever. Thus considered he has been able to monopolize a natural force, and patent a scientific fact.").

    (b) Whether the claimed method recites an application of a law of nature solely involving subjective determinations; e.g., ways to think about the law of nature. Application of a law of nature to a particular way of thinking about, or reacting to, a law of nature would weigh against eligibility. See The Telephone Cases, 126 U.S. at 210 (stating "[counsel for defendant] argued, that in all the cases upholding a claim for a process, the process was one capable of being sensually perceived, verified and proved by oath — not as a matter of opinion, but as a matter of fact."), id. at 211 (discussing Tilghman v. Proctor, 102 U.S. 707 (1880) ("[t]here was a process, all of which lay within ordinary means of observation and verification.").

    (c) Whether its involvement is extrasolution activity or a field-of-use, i.e., the extent to which (or how) the application imposes meaningful limits on the execution of the claimed method steps. An application of the law of nature that contributes only nominally or insignificantly to the execution of the claimed method (e.g., in a data gathering step or in a field-of-use limitation) would weigh against eligibility.

    (d)   Whether a general concept (which could also be recognized in such terms as a principle, theory, plan or scheme) is involved in executing the steps of the method

    The presence of such a general concept can be a clue that the claim is drawn to an abstract idea. Where a general concept is present, the following factors are relevant:

    (a) The extent to which use of the concept, as expressed in the method, would preempt its use in other fields; i.e., that the claim would effectively grant a monopoly over the concept.Bilski v. Kappos, 561 U.S. ___, ___, 130 S. Ct. 3218, 3231, 95 USPQ2d 1001, ___ (2010).

    (b) The extent to which the claim is so abstract and sweeping as to cover both known and unknown uses of the concept, and be performed through any existing or future-devised machinery, or even without any apparatus. Gottschalk v. Benson, 409 U.S. 63, 68, 175 USPQ 673, ___ (1972) (stating "[h]ere the process' claim is so abstract and sweeping as to cover both known and unknown uses of the BCD to pure binary conversion. The end use may (1) vary from the operation of a train to verification of drivers' licenses to researching the law books for precedents and (2) be performed through any existing machinery or future-devised machinery or without any apparatus").

    (c) The extent to which the claim would effectively cover all possible solutions to a particular problem; i.e., that the claim is a statement of the problem versus a description of a particular solution to the problem. See The Telephone Cases, 126 U.S. 1, 161-162 (1888) (discussing Tilghman v. Proctor, 102 U.S. 707 (1880)("'The claim of the patent [in Tilghman] is not for a mere principle.' . . . In that case there was a problem. Find a way, if you can, to combine each atom of water with an atom of acid. If you can do that, then you can reach this important result of resolving the neutral fats into glycerine and acids. And Tilghman's solution of it was: Heat the water under such pressure that the water shall not pass into steam. This was his process; and he claimed, and the court justly allowed, great latitude in its application.")).

    (d) Whether the concept is disembodied or whether it is instantiated; i.e., implemented, in some tangible way. A concept that is well-instantiated weighs in favor of eligibility.

    See, e.g., Bilski, 138 S. Ct. at 3230 (stating that the Court in Diehr "concluded that because the claim was not 'an attempt to patent a mathematical formula, but rather [was] an industrial process for the molding of rubber products,' it fell within § 101's patentable subject matter." (citing Diehr, 450 U.S. at 192-193)). Accord Research Corp. Technologies v. Microsoft Corp., 677 F.3d 859, 868-869, 97 USPQ2d 1274, ___ (Fed. Cir. 2010) (stating that the claims here "'do not seek to patent a mathematical formula'" but rather a process of halftoning in computer applications, presenting "functional and palpable applications in the field of computer technology" such that applicant's claimed invention requires instantiation (in some claims) through "a 'high contrast film,' 'a film printer,' 'a memory,' and 'printer and display devices'"); Ultramercial v. Hulu, 657 F.3d 1323, 1328, 100 USPQ2d 1140, 1144(Fed. Cir. 2011)(stating that the patent "does not simply claim the age-old idea that advertising can serve as currency, [but instead] a practical application of this idea.").

    A concept that is not well-instantiated weighs against eligibility. See DealerTrack v. Huber, ___ F.3d ___, 101 USPQ2d 1325 (2012) where in the court stated:

    The claims are silent as to how a computer aids the method, the extent to which a computer aids the method, or the significance of a computer to the performance of the method. The undefined phrase "computer-aided" is no less abstract than the idea of a clearinghouse itself. Because the computer here "can be programmed to perform very different tasks in very different ways," it does not "play a significant part in permitting the claimed method to be performed." Simply adding a "computer aided" limitation to a claim covering an abstract concept, without more, is insufficient to render the claim patent eligible… "In order for the addition of a machine to impose a meaningful limit on the scope of a claim, it must play a significant part in permit-ting the claimed method to be performed, rather than function solely as an obvious mechanism for permitting a solution to be achieved more quickly, i.e., through the utilization of a computer for performing calculations."

    Dealertrack, ___ F.3d at ___, 101 USPQ2d at 1339-40 (citations omitted). Furthermore, limiting an abstract idea to one field of use or adding token postsolution components does not make the concept patentable.

    (e) The mechanism(s) by which the steps are implemented; e.g., whether the performance of the process is observable and verifiable rather than subjective or imperceptible. Steps that are observable and verifiable weigh in favor of eligibility. The Telephone Cases, 126 U.S. at 211 (discussing Tilghman v. Proctor, 102 U.S. 707 (1880) ("[t]here was a process, all of which lay within ordinary means of observation and verification").

    (f) Examples of general concepts include, but are not limited to:

  • • Basic economic practices or theories (e.g., hedging, insurance, financial transactions, marketing);
  • • Basic legal theories (e.g., contracts, dispute resolution, rules of law);
  • • Mathematical concepts (e.g., algorithms, spatial relationships, geometry);
  • • Mental activity (e.g., forming a judgment, observation, evaluation, or opinion);
  • • Interpersonal interactions or relationships (e.g., conversing, dating);
  • • Teaching concepts (e.g., memorization, repetition);
  • • Human behavior (e.g., exercising, wearing clothing, following rules or instructions);
  • • Instructing ''how business should be conducted.''

    See, e.g., Bilski, 138 S. Ct. at 3231 (stating "[t]he concept of hedging, described in claim 1 and reduced to a mathematical formula in claim 4, is an unpatentable abstract idea."), In re Ferguson, 558 F.3d 1359, 90 USPQ2d 1035 (2009) (cert. denied Ferguson v. PTO, June 29, 2010)(finding ineligible "methods . . . directed to organizing business or legal relationships in the structuring of a sales force (or marketing company);" Benson, 409 U.S. at 67 (stating "mental processes, and abstract intellectual concepts are not patentable, as they are the basic tools of scientific and technological work."); Bilski, 130 S. Ct. at 3231 (quoting Le Roy v. Tatham, 14 How. (55 U.S.) 156, 175 ("[a] principle, in the abstract, is a fundamental truth; an original cause; a motive; these cannot be patented, as no one can claim in either of them an exclusive right")). See also Bilski, 130 S. Ct. at 3259 (Breyer, J. concurring).

    2.   Making the Determination of Eligibility

    Each of the factors relevant to the particular patent application should be weighed to determine whether the method is claiming an abstract idea by covering a general concept, or combination of concepts, or whether the method is limited to a particular practical application of the concept. The presence or absence of a single factor will not be determinative as the relevant factors need to be considered and weighed to make a proper determination as to whether the claim as a whole is drawn to an abstract idea such that the claim would effectively grant a monopoly over an abstract idea and be ineligible for patent protection.

    If the factors indicate that the method claim is not merely covering an abstract idea, the claim is eligible for patent protection under 35 U.S.C. 101 and must be further evaluated for patentability under all of the statutory requirements, including utility and double patenting (35 U.S.C. 101 ); novelty (35 U.S.C. 102); non-obviousness ( 35 U.S.C. 103 ); and definiteness and adequate description, enablement, and best mode (35 U.S.C. 112). 35 U.S.C. 101 is merely a coarse filter and thus a determination of eligibility under 35 U.S.C. 101 is only a threshold question for patentability. 35 U.S.C. 102, 103 , and 112 are typically the primary tools for evaluating patentability unless the claim is truly abstract, see, e.g., Bilski v. Kappos, 561 U.S. ___, ___, 130 S. Ct. 3218, 3229, 95 USPQ2d 1001, ___ (2010). (''[S]ome business method patents raise special problems in terms of vagueness and suspect validity.'').

    If the factors indicate that the method claim is attempting to cover an abstract idea, the examiner will reject the claim under 35 U.S.C. 101 , providing clear rationale supporting the determination that an abstract idea has been claimed, such that the examiner establishes a prima facie case of patent-ineligibility. The conclusion made by the examiner must be based on the evidence as a whole. In making a rejection or if presenting reasons for allowance when appropriate, the examiner should specifically point out the factors that are relied upon in making the determination. If a claim is rejected under 35 U.S.C. 101 on the basis that it is drawn to an abstract idea, the applicant then has the opportunity to explain why the claimed method is not drawn to an abstract idea. Specifically identifying the factors used in the analysis will allow the applicant to make specific arguments in response to the rejection if the applicant believes that the conclusion that the claim is directed to an abstract idea is in error.

    III.   Establish on the Record a Prima Facie Case

    USPTO personnel should review the totality of the evidence (e.g., the specification, claims, relevant prior art) before reaching a conclusion with regard to whether the claimed invention sets forth patent eligible subject matter. USPTO personnel must weigh the determinations made above to reach a conclusion as to whether it is more likely than not that the claimed invention as a whole either falls outside of one of the enumerated statutory classes or within one of the exceptions to statutory subject matter. "The examiner bears the initial burden … of presenting a prima facie case of unpatentability." In re Oetiker, 977 F.2d 1443, 1445, 24 USPQ2d 1443, 1444 (Fed. Cir. 1992). If the record as a whole suggests that it is more likely than not that the claimed invention would be considered a practical application of an abstract idea, physical phenomenon, or law of nature, then USPTO personnel should not reject the claim.

    After USPTO personnel identify and explain in the record the reasons why a claim is for an abstract idea, physical phenomenon, or law of nature with no practical application, then the burden shifts to the applicant to either amend the claim or make a showing of why the claim is eligible for patent protection. See, e.g., In re Brana, 51 F.3d 1560, 1566, 34 USPQ2d 1436, 1441 (Fed. Cir. 1995); see generally MPEP § 2107 (Utility Guidelines).

    Under the principles of compact prosecution, each claim should be reviewed for compliance with every statutory requirement for patentability in the initial review of the application, even if one or more claims are found to be deficient with respect to the patent-eligibility requirement of 35 U.S.C. 101 . Thus, Office personnel should state all non-cumulative reasons and bases for rejecting claims in the first Office action.

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    2106.01    ** > Subject Matter Eligibility Analysis of Process Claims Involving Laws of Nature [R-9]

    I.   SUMMARY

    The following guidance is intended for use in subject matter eligibility determinations during examination of process claims that involve laws of nature/natural correlations, such as the claims in Mayo Collaborative Services v. Prometheus Laboratories, Inc., 566 U.S. __, 132 S.Ct. 1289, 101 USPQ2d 1961 (2012) (Mayo). Process claims that are directed to abstract ideas, such as the claims in Bilski v. Kappos, 561 U.S. ___, 130 S. Ct. 3218, 95 USPQ2d 1001 (2010), should continue to be examined using the guidance set forth in MPEP § 2106.

    The guidance set forth in this section should be followed for examination of process claims in which a law of nature, a natural phenomenon, or a naturally occurring relation or correlation (collectively referred to as a natural principle in the guidance) is a limiting element or step. In summary, process claims having a natural principle as a limiting element or step should be evaluated by determining whether the claim includes additional elements/steps or a combination of elements/steps that integrate the natural principle into the claimed invention such that the natural principle is practically applied, and are sufficient to ensure that the claim amounts to significantly more than the natural principle itself. If the claim as a whole satisfies this inquiry, the claim is directed to patent-eligible subject matter. If the claim as a whole does not satisfy this inquiry, it should be rejected under 35 U.S.C. 101 as being directed to non-statutory subject matter.

    II.   ESSENTIAL INQUIRIES FOR SUBJECT MATTER ELIGIBILITY UNDER 35 U.S.C. 101

    After determining what applicant invented and establishing the broadest reasonable interpretation of the claimed invention, conduct the following three inquiries on the claim as a whole to determine whether the claim is drawn to patent-eligible subject matter. Further details regarding each inquiry are provided below.

  • 1. Is the claimed invention directed to a process, defined as an act, or a series of acts or steps?

    If no, this analysis is not applicable. For product claims see MPEP § 2106. If yes, proceed to Inquiry 2.

  • 2. Does the claim focus on use of a law of nature, a natural phenomenon, or naturally occurring relation or correlation (collectively referred to as a natural principle herein)? (Is the natural principle a limiting feature of the claim?)

    If no, this analysis is complete, and the claim should be analyzed to determine if an abstract idea is claimed (see MPEP § 2106). If yes, proceed to Inquiry 3.

  • 3. Does the claim include additional elements/steps or a combination of elements/steps that integrate the natural principle into the claimed invention such that the natural principle is practically applied, and are sufficient to ensure that the claim amounts to significantly more than the natural principle itself? (Is it more than a law of nature plus the general instruction to simply "apply it"?)

    If no, the claim is not patent-eligible and should be rejected. If yes, the claim is patent-eligible, and the analysis is complete.

    III.   DETAILED GUIDANCE FOR USING THE INQUIRIES

    A.   

    Determining What Applicant Invented and the Broadest Reasonable Interpretation

    Review the entire specification and claims to determine what applicant believes that he or she invented. Then review the claims to determine the boundaries of patent protection sought by the applicant and to understand how the claims relate to and define what the applicant has indicated is the invention.

    Claim analysis begins by identifying and evaluating each claim limitation and then considering the claim as a whole. It is improper to dissect a claimed invention into discrete elements and then evaluate the elements in isolation because it is the combination of claim limitations functioning together that establish the boundaries of the invention and limit its scope.

    Establish the broadest reasonable interpretation of the claims when read in light of the specification and from the view of one of ordinary skill in the art. This same interpretation must be used to evaluate the compliance with each statutory requirement. SeeMPEP § 2111 and § 2173 et seq. for further details of claim construction and compliance with 35 U.S.C. 112, second paragraph, respectively.

    B.   

    INQUIRY 1: Process

    Under this analysis, the claim must be drawn to a process. A process is defined as an act, or a series of acts or steps. Process claims are sometimes called method claims.

    C.   

    INQUIRY 2: Natural Principle

    Does the claim focus on use of a natural principle, i.e., a law of nature, a natural phenomenon, or naturally occurring relation or correlation? (Is the natural principle a limiting feature of the claim?)

    A natural principle is the handiwork of nature and occurs without the hand of man. For example, the disinfecting property of sunlight is a natural principle. The relationship between blood glucose levels and diabetes is a natural principle. A correlation that occurs naturally when a man-made product, such as a drug, interacts with a naturally occurring substance, such as blood, is also considered a natural principle because, while it takes a human action to trigger a manifestation of the correlation, the correlation exists in principle apart from any human action. These are illustrative examples and are not intended to be limiting or exclusive.

    For this analysis, a claim focuses on a natural principle when the natural principle is a limiting element or step. In that case, the claim must be analyzed (in Inquiry 3) to ensure that the claim is directed to a practical application of the natural principle that amounts to substantially more than the natural principle itself. So, for instance, a claim that recites a correlation used to make a diagnosis focuses on a natural principle and would require further analysis under Inquiry 3.

    If a natural principle is not a limitation of the claim, the claim does not focus on the use of a natural principle and requires no further analysis under this procedure. If the claim focuses on an abstract idea, such as steps that can be performed entirely in one's mind, methods of controlling human activity, or mere plans for performing an action, refer to MPEP § 2106 to evaluate eligibility.

    D.   

    INQUIRY 3: Practical Application and Preemption

    Does the claim include additional elements/steps or a combination of elements/steps that integrate the natural principle into the claimed invention such that the natural principle is practically applied, and are sufficient to ensure that the claim amounts to significantly more than the natural principle itself? (Is it more than a law of nature plus the general instruction to simply "apply it"?)

    A claim that focuses on use of a natural principle must also include additional elements or steps to show that the inventor has practically applied, or added something significant to, the natural principle itself. See Mayo, 101 USPQ2d at 1966. To show integration, the additional elements or steps must relate to the natural principle in a significant way to impose a meaningful limit on the claim scope. The analysis turns on whether the claim has added enough to show a practical application. See id. at 1968. In other words, the claim cannot cover the natural principle itself such that it is effectively standing alone. A bare statement of a naturally occurring correlation, albeit a newly discovered natural correlation or very narrowly confined correlation, would fail this inquiry. See id. at 1965, 1971.

    It is not necessary that every recited element or step integrate or relate to the natural principle as long as it is applied in some practical manner. However, there must be at least one additional element or step that applies, relies on or uses the natural principle so that the claim amounts to significantly more than the natural principle itself. Elements or steps that do not integrate the natural principle and are merely appended to it would not be sufficient. In other words, the additional elements or steps must not simply amount to insignificant extra-solution activity that imposes no meaningful limit on the performance of the claimed invention. See id. at 1966. For example, a claim to diagnosing an infection that recites the step of correlating the presence of a certain bacterium in a person's blood with a particular type of bacterial infection with the additional step of recording the diagnosis on a chart would not be eligible because the step of recording the diagnosis on the chart is extra-solution activity that is unrelated to the correlation and does not integrate the correlation into the invention.

    Along with integration, the additional steps must be sufficient to ensure that the claim amounts to significantly more than the natural principle itself by including one or more elements or steps that limit the scope of the claim and do more than generally describe the natural principle with generalized instructions to "apply it." See id. at 1965, 1968. The additional elements or steps must narrow the scope of the claim such that others are not foreclosed from using the natural principle (a basic tool of scientific and technological work) for future innovation. Elements or steps that are well-understood, purely conventional, and routinely taken by others in order to apply the natural principle, or that only limit the use to a particular technological environment (field-of-use), would not be sufficiently specific. See id. at 1968. A claim with steps that add something of significance to the natural laws themselves would be eligible because it would confine its reach to particular patent-eligible applications of those laws, such as a typical patent on a new drug (including associated method claims) or a new way of using an existing drug. See id. at 1971; see also 35 U.S.C. 100(b). In other words, the claim must be limited so that it does not preempt the natural principle being recited by covering every substantial practical application of that principle. The process must have additional features that provide practical assurance that the process is more than a drafting effort designed to monopolize the law of nature itself. See id. at 1968.

    A claim that would fail this inquiry includes, for example, a claim having a limitation that describes a law of nature and additional steps that must be taken in order to apply the law of nature by establishing the conditions under which the law of nature occurs such as a step of taking a sample recited at a high level of generality to test for a naturally occurring correlation. See id. at 1970. Adding steps to a natural biological process that only recite well-understood, routine, conventional activity previously engaged in by researchers in the field would not be sufficient. See id. at 1966, 1970. A combination of steps that amounts to nothing significantly more than an instruction to doctors to "apply" applicable natural laws when treating their patients would also not be sufficient. See id. at 1970.

    Claims that do not include a natural principle as a limitation do not raise issues of subject matter eligibility under the law of nature exception. For example, a claim directed to simply administering a man-made drug that does not recite other steps or elements directed to use of a natural principle, such as a naturally occurring correlation, would be directed to eligible subject matter. Further, a claim that recites a novel drug or a new use of an existing drug, in combination with a natural principle, would be sufficiently specific to be eligible because the claim would amount to significantly more than the natural principle itself. However, a claim does not have to be novel or non-obvious to qualify as a subject matter eligible claim. Moreover, a claim that is deemed eligible is not necessarily patentable unless it also complies with the other statutory and non-statutory considerations for patentability under 35 U.S.C. 101 (utility and double patenting), 102, 103, 112, and non-statutory double patenting.

    The weighing factors used in MPEP § 2106 are useful tools for assisting in the evaluation. For convenience, these factors and how they may assist in the analysis are summarized below.

    E.   

    RELEVANT FACTORS USEFUL FOR INQUIRY 3

    The following factors can be used to analyze the additional features in the claim to determine whether the claim recites a patent-eligible practical application of a natural principle and assist in answering Inquiry 3 above. Many of these factors originate from past eligibility factors, including the 'Machine-or-Transformation' (M-or-T) test. However, satisfying the M-or-T factors does not ensure eligibility if the claim features that include a particular machine or transformation do not integrate the natural principle into the claimed invention to show that the natural principle is practically applied, and are not sufficient to ensure that the claim amounts to significantly more than the natural principle itself.

  • • Appending conventional steps, specified at a high level of generality, to a natural principle does not make the claim patent-eligible.
  • • Steps that amount to instructions that are well-understood, routine, conventional activity, previously engaged in by those in the field add nothing specific to the natural principle that would render it patent-eligible.
  • • A claim that covers known and unknown uses of a natural principle and can be performed through any existing or future-devised machinery, or even without any apparatus, would lack features that are sufficient for eligibility.
  • • A particular machine or transformation recited in more than general terms may be sufficient to limit the application to just one of several possible machines or just one of several possible changes in state, such that the claim does not cover every substantial practical application of a natural principle. This can be contrasted with only adding features that limit the application to a certain technological environment (e.g., for use in catalytic conversion systems), which would cover every substantial practical application in that field.
  • • Additional limitations that are necessary for all practical applications of the natural principle, such that everyone practicing the natural principle would be required to perform those steps or every product embodying that natural principle would be required to include those features, would not be sufficient.
  • • A particular machine or transformation recited in a claim can show how the natural principle is integrated into a practical application by describing the details of how that machine and its specific parts implement the natural principle (e.g., the parts of an internal combustion engine apply the concept of combustion to produce energy) or how the transformation relates to or implements the natural principle (e.g., using ionization in a manufacturing process).
  • • A machine or transformation that is merely nominally, insignificantly, or tangentially related to the steps or elements, e.g., data gathering or data storage, would not show integration. For example, a machine that is simply incidental to execution of the method (using a computer as a counter balance weight and not as a processing device) rather than an object that implements the method or a transformation that involves only a change of position or location of an object rather than a change in state or thing does not show that these additional features integrate the natural principle into the invention as they are incidental to the claimed invention.
  • • Complete absence of a machine-or-transformation in a claim signals the likelihood that the claim is directed to a natural principle and has not been instantiated (e.g., is disembodied or can be performed entirely in one's mind.)
  • • A mere statement of a general concept (natural principle) would effectively monopolize that concept/principle and would be insufficient. This can be contrasted with a tangible implementation with elements or steps that are recited with specificity such that all substantial applications are not covered. Such specificity may be achieved with observable and verifiable steps, for example, rather than subjective or imperceptible steps.

    IV.   

    SAMPLE ANALYSIS

    A.   

    Sample Claim Drawn to a Patent-Eligible Practical Application - Diamond v. Diehr

    1. A method of operating a rubber-molding press for precision molded compounds with the aid of a digital computer, comprising:

    providing said computer with a data base for said press including at least, natural logarithm conversion data (ln), the activation energy constant (C) unique to each batch of said compound being molded, and a constant (x) dependent upon the geometry of the particular mold of the press,

    initiating an interval timer in said computer upon the closure of the press for monitoring the elapsed time of said closure,

    constantly determining the temperature (Z) of the mold at a location closely adjacent to the mold cavity in the press during molding, constantly providing the computer with the temperature (Z),

    repetitively calculating in the computer, at frequent intervals during each cure, the Arrhenius equation for reaction time during the cure, which is ln v = CZ + x where v is the total required cure time,

    repetitively comparing in the computer at said frequent intervals during the cure each said calculation of the total required cure time calculated with the Arrhenius equation and said elapsed time,

    and opening the press automatically when a said comparison indicates equivalence.

    The above claim was found to be a patent-eligible practical application in Diamond v. Diehr, 450 U.S. 175 (1981). Recently, the Supreme Court looked back to this claim as an example of a patent-eligible practical application as explained in the following excerpt from Mayo:

    The Court pointed out that the basic mathematical equation, like a law of nature, was not patentable. But it found the overall process patent eligible because of the way the additional steps of the process integrated the equation into the process as a whole. Those steps included "installing rubber in a press, closing the mold, constantly determining the temperature of the mold, constantly recalculating the appropriate cure time through the use of the formula and a digital computer, and automatically opening the press at the proper time." [ ] It nowhere suggested that all these steps, or at least the combination of those steps, were in context obvious, already in use, or purely conventional. And so the patentees did not "seek to pre-empt the use of [the] equation," but sought "only to foreclose from others the use of that equation in conjunction with all of the other steps in their claimed process." [ ] These other steps apparently added to the formula something that in terms of patent law's objectives had significance—they transformed the process into an inventive application of the formula. See Mayo at 1969 (emphasis added).

    This claim would pass Inquiries 1-3 in the above analysis as it is a process that includes the Arrhenius equation as a limitation, with additional steps that integrate the Arrhenius equation into the process and are sufficient to narrow the scope of the claim so that others are not foreclosed from using the Arrhenius equation in different applications.

    B.   

    Sample Claim Drawn to Ineligible Subject Matter - Mayo v. Prometheus

    1. A method of optimizing therapeutic efficacy for treatment of an immune-mediated gastrointestinal disorder, comprising:

    (a) administering a drug providing 6-thioguanine to a subject having said immune-mediated gastrointestinal disorder; and

    (b) determining the level of 6-thioguanine in said subject having said immune-mediated gastrointestinal disorder,

    wherein the level of 6-thioguanine less than about 230 pmol per 8×108 red blood cells indicates a need to increase the amount of said drug subsequently administered to said subject and

    wherein the level of 6-thioguanine greater than about 400 pmol per 8×108 red blood cells indicates a need to decrease the amount of said drug subsequently administered to said subject.

    The above claim was found to be ineligible in Mayo. The Supreme Court determined that the claim focused on use of a law of nature that was given weight during prosecution of the claim – specifically the relationships between concentrations of certain metabolites in the blood and the likelihood that a dosage of a thiopurine drug will prove ineffective or cause harm. See id.at 1967. The Court analyzed the claim as follows:

    The question before us is whether the claims do significantly more than simply describe these natural relations. To put the matter more precisely, do the patent claims add enough to their statements of the correlations to allow the processes they describe to qualify as patent-eligible processes that apply natural laws? We believe that the answer to this question is no. See id. at 1968.

    The upshot is that the three steps simply tell doctors to gather data from which they may draw an inference in light of the correlations. To put the matter more succinctly, the claims inform a relevant audience about certain laws of nature; any additional steps consist of well understood, routine, conventional activity already engaged in by the scientific community; and those steps, when viewed as a whole, add nothing significant beyond the sum of their parts taken separately. For these reasons we believe that the steps are not sufficient to transform unpatentable natural correlations into patentable applications of those regularities. See id. at 1968.

    This claim would pass Inquiries 1-2 and fail Inquiry 3. It is a process claim that includes a natural principle that was construed as a limiting feature of a claim during prosecution – the natural principle being the naturally occurring relationships noted above, which are a consequence of the ways in which thiopurine compounds are metabolized by the body. The Court emphasized that while it takes a human action to trigger a manifestation of this relation in a particular person, the relation itself exists in principle apart from any human action. See id. at 1967. The additional steps integrate the relationship into the process as the administering step involves the thiopurine drug, the determining step establishes the thiopurine drug level and the wherein clauses set forth the critical levels. The steps are not sufficient, however, to narrow the application such that others could still make use of the naturally occurring relationship in other practical applications. The claim essentially sets forth a law of nature with generalized instructions to apply it.

    C.   

    Making a Rejection

    After performing the appropriate Inquiries, a claim that fails Inquiry 3 should be rejected under 35 U.S.C. 101 as not being drawn to patent-eligible subject matter. When making the rejection, identify the natural principle, identify that the claim is effectively directed to a natural principle itself, and explain the reason(s) that the additional claim features or combination of features, when the claim is taken as a whole, fail to integrate the natural principle into the claimed invention so that the natural principle is practically applied, and/or fail to be sufficient to ensure that the claim amounts to significantly more than the natural principle itself.

    A sample rejection of the following claim could read as follows:

    Claim 1. A method of determining effective dosage of insulin to a patient, comprising the steps of administering a dose of insulin to a patient, testing the patient's blood for the blood sugar level, and evaluating whether the insulin dosage is effective based on the blood sugar level.

    Analysis:

    The claim passes Inquiry 1 because it is drawn to a process.

    The claim passes Inquiry 2 because a naturally occurring correlation between insulin and blood glucose levels is a limitation of the claim.

    The claim does not pass Inquiry 3 because, although the additional steps integrate or make use of the correlation in the process by administering insulin in one step and testing for the correlation in another step, the steps are not sufficient to ensure that the claim amounts to significantly more than the correlation itself since every application of the correlation would require an administration of insulin and testing of blood to observe the relationship between insulin and blood glucose levels.

    The rejection:

    Claim 1 is rejected under 35 U.S.C. 101 because the claimed invention is directed to non-statutory subject matter because it is not a patent-eligible practical application of a law of nature. The claim is directed to a naturally occurring correlation between insulin and blood glucose levels. The combination of steps recited in the claim taken as a whole, including the steps of administering insulin to a patient and testing blood sugar levels, are not sufficient to qualify as a patent-eligible practical application as the claim covers every substantial practical application of the correlation.

    D.   

    Evaluating a Response

    A proper response to a rejection based on failure to claim patent-eligible subject matter would be an amendment adding additional steps/features or amending existing steps/features that integrate the natural principle into the process (by practically applying or making use of the principle) and are sufficient to limit the application of the natural principle to more than the principle itself + steps that do more than simply "apply it" at a high level of generality. Examples of both eligible and ineligible hypothetical claims follow. It would also be proper for the applicant to present persuasive arguments that the additional steps add something significantly more to the claim than merely describing the natural principle. A showing that the steps are not routine, well-known or conventional could be persuasive.

    For example, a claim that uses the natural disinfecting properties of sunlight would require additional steps beyond exposing an item requiring disinfection to sunlight. The additional steps could involve constructing a sanitizing device that uses ultraviolet light for disinfection with steps that integrate the ultraviolet light into the device and are sufficient to confine the use of the ultraviolet light to a particular application (not so broad as to cover all practical ways of applying ultraviolet light). A claim that sets forth the relationship between blood glucose levels and the incidence of diabetes would require additional steps that do significantly more to apply this principle than conventional blood sample testing or diagnostic activity based on recognizing a threshold blood glucose level. Such additional steps could involve a testing technique or treatment steps that would not be conventional or routine.

    See the 2012 Interim Procedure for Laws of Nature guidance memo issued July 3, 2012 and posted on the USPTO web site (http://www.uspto.gov/patents/law /exam/2012_interim_guidance.pdf) for additional examples. <

Logical Conclusion?: Claimed Open-Ended Ranges Lack Enablement

Patent, ,

By Dennis Crouch

Magsil Corp. and MIT v. Hitachi (Fed. Cir. 2012)

In a unanimous opinion, the Federal Circuit has affirmed a district court summary judgment holding that the asserted claims of MIT's patent are invalid for a lack of enablement. The patent covers read-write sensors for computer hard disk drive storage systems and relies upon quantum tunneling in operation.

The courts have derived an enablement requirement from Section 112 of the patent statute. Under the doctrine, after studying the patent specification, a person of skill in the relevant art should be able to (theoretically) make and use the full scope of the claimed invention without undue experimentation. Patents ordinarily include many different claims that identify various legal rights given to the patentee. Enablement is judged independently on a claim-by-claim basis. Any claim that lacks enablement will be deemed invalid and thus unenforceable.

One of the murkiest areas of the doctrine is determining whether the "full scope" of the claim is enabled. The commonly used open ended "comprising" claim language allows for an infinite number of potential variants to be embodied within the scope of a single claim. In almost every case, it is possible to theoretically define an embodiment that falls within the claim scope but that is not fully enabled by the specification. Obviously, the fact that a particular theoretical covered embodiment is not enabled can't be sufficient to invalidate a claim. The difficult legal issue then is finding when a patent claim crosses the threshold from legitimately having a few non-enabled potential embodiments to illegitimately failing to enable the full scope of the claim.

Unbounded Range: Here, the patent claims that the device switch has a change in resistance of "at least 10%." Although it is desirable to have a device with a greater ΔR, the inventors best pre-filing device only reached 11.8%. The accused infringing devices had a greater ΔR and thus the patentee argued that the "at least 10%" claim scope could cover a ΔR of 100% or even 1,000%." The defendant (Hitachi) was able to prove that those ΔR levels could not have been achieved at the time of the patent filing without undue experimentation. The Federal Circuit found this sufficient to find the claim lacking enablement.

In sum, this field of art has advanced vastly after the filing of the claimed invention. The specification containing these broad claims, however, does not contain sufficient disclosure to present even a remote possibility that an ordinarily skilled artisan could have achieved the modern dimensions of this art. Thus, the specification enabled a marginal advance over the prior art, but did not enable at the time of filing a tunnel junction of resistive changes reaching even up to 20%, let alone the more recent achievements above 600%.

This case follows in re Fisher (CCPA 1970). In that case the court ruled that a claimed potency of "at least 1 International Unit of ACTH per milligram" was invalid as lacking enablement after the patentee attempted to enforce the patent against products with potentials of much greater than the 2.3 IUs disclosed in the specification.

The court particularly addressed the comprising issue discussed above. One key distinction is that the high ΔR range here is an explicit element of the claimed invention rather than being a mere latent vestige of the claim structure.

Not a Groundbreaking Invention: In both Fisher and here, the patentees' actual experiments were at ranges just above that already known in the art. That seeming small advance reflected in claiming a range that barely avoided the prior art at the lower bound but then attempted to claim an infinite range at the upper bound. In this case, the court identifies the advance as "marginal over the prior art." The suggestion from the court is that a marginal advance such as this is deserving of a much narrower scope than would be given a groundbreaking invention. The court is on the right track with this approach however, the language of the opinion can also be read to limit potentially broad scope of even groundbreaking inventions when the accused infringer (or others) have spent significant time and energy on developing a particular embodiment covered by the invention.

Whither Open-Ended Ranges and a Plurality of Members?: The opinion can also be read to eliminate the potential for open-ended ranges. The court writes that "the '922 patent specification only enables an ordinarily skilled artisan to achieve a small subset of the claimed range." Of course, a mathematician will explain that any claim with a range that potentially reaches to infinity (e.g., "a plurality of members") will suffer from this same defect – that only a small subset of the claimed range will be enabled (assuming that infinity is not enabled).

Transformative Research to Avoid Infringement: As mentioned above, the opinion relies somewhat heavily on the fact that extensive post-patent-filing research was conducted; and that the research eventually led to a new state-of-the-art that is much more advanced than that imagined by the inventors (even though still literally covered by the claims). This opens the door to manufacturing companies to offer testimony related to their extensive research and development programs and offer an argument akin to transformative copying in copyright law. If the research is sufficiently transformative (and took sufficient effort) then the patent will be deemed invalid for failing to enable that covered embodiment.

Enablement Doctrine Allows Follow-on Research: The court is straightforward in stating that a strong enablement requirement will help prevent over broad patent claims and thus allow room (and incentives) for "follow-on or improvement inventions."

Invalidity affirmed.