Tag Archives: AIA Trials

The America Invents Act (AIA) of 2011 authorized the creation of a set of administrative trials (AIA Trials), including Inter Partes Review (IPR) proceedings, Post Grant Review (PGR) proceedings and transitional Covered Business Method Review (CBM) proceedings. In each of these proceedings, anyone can file a petition to challenge an issued patent, and, after instituting the trial, the Patent Trial and Appeal Board (PTAB) will decide whether the challenged claims should be confirmed or cancelled.

Institut Pasteur: Federal Circuit Takes Hard Look at USPTO Board Factual Conclusions

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By Dennis Crouch

Institut Pasteur v. Focarino and Precision BioSciences, Reexam No. 95,000,443 (Fed. Cir. 2013)

The French non-profit Institut Pasteur holds several patents covering site-directed insertion of genes into eukaryotic chromosomes. See U.S. Patent Nos. 7,309,605, 6,610,545, and 6,833,252. Basically, Pasteur discovered that a set of naturally occurring enzymes that could cleave chromosomal DNA at particular recognition sites and also discovered that cells will naturally repair the cleavage through homologous recombination even when an additional gene sequence is added, so long as a proper recombinatory DNA template is also added. It turns out that this sequence of events occurs in mitochondrial DNA but Pasteur was able to make it work on chromosomal DNA as well. The patents all relate to creating the enzymes and method of using those enzymes to insert DNA.

This is old stuff and all happened in the early 1990’s The three patents all expired in 2012 while the case was pending appeal to the Federal Circuit, but companies may still be on the hook for past damages for what has become a basic tool of genetic engineering.

In 2009, Precision BioSciences filed for inter partes reexamination of the three patents. The examiner found the claimed invention obvious and that decision was affirmed by the USPTO’s administrative patent appeal board. On appeal, the Federal Circuit has come-out with three interesting rulings:

Hard Deadline on Amendments: First, for the ‘605 patent, the claims were amended during the reexamination (and prior to the patent expiration date). For those claims, the court dismissed Pasteur’s appeal as moot because “[substantially] amended claims cannot be entered now that the patent has expired.” This result is obviously important for gamesmanship because it rewards delay tactics on the part of would-be infringers and also encourages patentees to work toward concluding any post-grant reviews.

No Substantial Evidence: Second, the Federal Circuit determined that the Board lacked Substantial Evidence for its factual conclusions that led to its obviousness decision of the challenged claims of the ‘545 patent. The question of obviousness is a matter of law predicated upon a set of factual conclusions. A factual conclusion must itself be based upon evidence presented to the Court. Here, after reviewing the two key prior art references (the evidence), the USPTO Board concluded that the prior art showed that the claimed enzyme “cleaved yeast chromosomal DNA when expressed in yeast cells.” On appeal, the Federal Circuit rejected that factual conclusion after failing to find such a disclosure in either reference. One factor making the Federal Circuit’s decision easier was that the Board based its conclusion upon the text of the prior art references rather than relying upon factual or expert testimony that could have offered stronger conclusory evidence.

Motivation to Combine: Finally, with regard to the ‘252 patent, the Federal Circuit found that the Board had failed to identify the “motivation, if any, a skilled artisan at the relevant time would have had to pursue the claimed invention.”

Opinion by Judge Taranto

Constitutional Challenge to Administrative Patent Review – Part IV

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By Dennis Crouch

Although the parties are ostensibly focused on whether WARF’s “replicating in vitro cell culture of human embryonic stem cells” constitutes patentable subject matter, the Federal Circuit is instead directing its attention to the issue of whether the patent challenger – Consumer Watchdog – has standing to file its patent appeal.

Consumer Watchdog v. Wisconsin Alumni Research Foundation (WARF) (Fed. Cir. 2013)

The Patent Act allows any party to file a post-grant administrative challenge and, if “dissatisfied” the results of the change, to appeal an adverse PTO ruling. Despite the statutory promise of appeal-rights, in Part I, I raised a concern as to whether a third-party challenger who loses at the PTO would necessarily have Article III standing. Within days, of that posting, the Federal Circuit ordered that Consumer Watchdog and WARF brief the issue of whether Consumer Watchdog has standing under Article III.

In Monday’s oral arguments, the court focused entirely on the issue of standing and would hear no arguments regarding the substantive appeal. Dan Ravicher (for Consumer Watchdog) and Kara Stoll (for WARF) both handled themselves very well, but Ravicher noted that the PTO should be at the table since Consumer Watchdog’s complaint is with the PTO for wrongfully issuing the patent and then wrongfully confirming patentability in the reexamination. Chief Judge Rader, Judge Prost and newly enrobed Judge Hughes participated fully in the questioning, although each of indicated some difficulty buying into Ravicher’s argument that Congress created a potential injury-in-fact with its “dissatisfied” language and that the injury was realized when the PTO rejected Watchdog’s case.

However, following Ravicher’s suggestion, the Court has now requested that “the United States Patent and Trademark Office and the United States” provide briefs in the case and particularly brief “whether Consumer Watchdog has standing to pursue its appeal to this court.” Recognizing the recent tension in briefing between the USPTO and the DOJ, the court wrote that “The PTO and the United States may submit a joint brief, if they so choose.”

Although the court does not explicitly welcome other amicus briefs, I am confident that several will be forthcoming. Briefs are due January 6, 2014.

Constitutional Challenge to Administrative Patent Challenges – Part III

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By Dennis Crouch

Consumer Watchdog v. Wisconsin Alumni Research Foundation (WARF) (Fed. Cir. 2013)

A major limitation on judicial power comes from the doctrine of standing. A U.S. court has no power to hear a dispute between parties unless the plaintiff has or imminently will suffer injury-in-fact caused by the challenged action of the defendant that is redressable by a favorable court decision. This limitation has been derived from Article III of the U.S. Constitution that states "The Judicial Power shall extend to all Cases . . .[and] to Controversies . . ." To be clear, this limitation on power is placed on Article III courts at the district, appellate, and supreme court level. However, the limitation has not been applied to adjudicative processes that take place within administrative agencies since the government's authority to perform those activities is not seated in Article III. The conflicting approach to standing between these two adjudicative regimes regularly comes into conflict when parties appeal adverse agency decisions to an Article III court. The general rule for resolving this conflict is Constitutional supremacy – i.e., an Article III court cannot hear a case unless the standing requirement is met.

In the patent world, this issue is most focused in the area of post-issuance administrative patent challenges, particularly including inter partes review, post-grant review, covered-business-method review, and inter partes reexamination. In those regimes, any third party can administratively challenge a patent. Under the statute, the third-party then has a right to appeal an adverse decision to the Court of Appeals for the Federal Circuit. One question on appeal in the Consumer Watchdog case is whether there is standing for the appeal. Here, Consumer Watchdog is a public interest group that has not claimed any direct impact due to the WARF stem-cell patent, but certainly had standing to file its inter partes reexamination. I discussed this issue in some detail here:

The parties have now briefed the issue of standing and the court holds oral arguments on Monday, December 2.

Consumer Watchdog's brief does a nice job of drawing a parallel between the post-issuance challenges and Freedom-of-Information-Act (FOIA) requests. In each case, the relevant statute has no standing requirement but authorizes appeal to Federal Courts.

The Supreme Court has described FOIA as a "judicially enforceable public right" (EPA v. Mink, 410 U.S. 73, 80 (1973)) and made clear that no injury is required of a person who seeks to enforce that right. NLRB v. Robbins Tire & Rubber Co., 437 U.S. 214, 221 (1978).

The essential idea here that the statute goes a long way toward creating standing by (1) creating a right to petition and then (2) granting a right to appeal to unsuccessful petitioners. And then, the injury-in-fact or "concrete injury" is completed at least when the PTO finds against the petitioner. At that point, the only party with a right of appeal is the petitioner. This particularization before getting to court helps to distinguish the present case from the leading Supreme Court case of Lujan where a statute provided that "any person" could file suit in federal court.

Idea of a patent challenge as a "judicially enforceable public right" also has precedential support. See Lear v. Adkins, 395 U.S. 653 (1969)

Consumer Watchdog also makes an important point here, that the PTO should be a party to the appeal and that the Federal Circuit should at least invite briefing from the US Government on the issue of standing.

For its part WARF relies heavily on Lujan:

To satisfy Article III standing, Watchdog, a nonprofit taxpayer and consumer-rights organization, must establish an injury in fact—i.e., an actual and imminent, concrete and particularized invasion of a legally protected interest—caused by WARF. Lujan v. Defenders of Wildlife, 504 U.S. 555, 560 (1992). But Watchdog does not and has not claimed to make, use, or sell the patented invention; has not and could not be threatened with suit; and has not named another real party in interest, either in this appeal or before the PTO. Watchdog therefore cannot establish standing, and Watchdog's appeal should be dismissed.

The result then is that WARF here is inherently arguing that the statute providing for a right to appeal is unconstitutionally broad. The question then is the extent that this crumbles the regime even further. [Updated to clarify that WARF does not explicitly argue the statute is unconstitutional.]

Recent Posts on Patently-O

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We have published a number of important essays this week. Here is a breakdown:

Independent Justification for Appellate Standing over Administrative Patent Challenges – Part II

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By Dennis Crouch

Earlier this week, I suggested that the Federal Circuit should independently be considering whether parties involved in administrative patent challenges (such as an inter partes review) have standing to appeal as required by Article III of the US Constitution. Now, the court has taken the first step and demanded that the public interest group Consumer Watchdog justify its standing to appeal in the inter partes review case against WARF's stem cell patent.

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Consumer Watchdog v. Wisconsin Alumni Research Foundation (WARF) (Fed. Cir. 2013)

Back in 2006 Dan Ravicher filed an inter partes reexamination request of WARF's U.S. Patent No. 7,029,913 on behalf of Consumer Watchdog (then known as the Foundation for Taxpayer and Consumer Rights). The patent contains only three claims and broadly directed toward human embryonic stem cells being grown in vitro. After WARF amended its claims, added one new claim, and worked through several rounds of prosecution and rejection, the Board finally agreed that the claims are patentable.

Now Consumer Watchdog has appealed, arguing that "an in vitro culture of human embryonic stem cells is [not] patent eligible under 35 U.S.C. § 101" and also that the claims are invalid based upon prior art known at the time of filing. Of course, one problem with the § 101 argument is that § 101 is not a cognizable ground for deciding an inter partes reexamination. The challenger here argues that subject matter eligibility is a fundamental and threshold issue that the court can and should address, and "[d]oing so is especially appropriate here given recent developments in the law of patent eligible subject matter."

Standing on Appeal: One issue that neither party raised was whether Consumer Watchdog has standing to appeal. In an essay earlier this week, I noted that this is generally an issue that is ripe for consideration at the Federal Circuit. Although the statute allows for appeals of adverse PTO decisions to the Federal Circuit, the US Constitution separately limits the court's power to hear cases where there is no "case or controversy" between the parties. Although I do not know for sure, it appears that Consumer Watchdog does not have any anything at stake in the case in terms of being directly (or even indirectly) impacted by the outcome of the lawsuit.

In an order issued today, the Federal Circuit ordered that the parties brief this particular issue – "whether Consumer Watchdog has standing to pursue this appeal." Briefs are due by November 25, 2013. Although I don't know, Consumer Watchdog may be able to argue that it has standing based upon the actual facts on the ground. Alternatively, it is possible that a party with standing (such as a stem-cell-researcher being blocked by the patent) may be able to join the case at the 11th hour. Another possibility is that Consumer Watchdog may be able to argue that a patent challenge at the PTO is essentially a public service action akin to a qui tam action. Under this last theory, would really be the general public or government that has standing to challenge a 'bad' patent and Consumer Watchdog is merely acting on behalf of us all.

More here on the case from Antoinette Konski: http://www.personalizedmedicinebulletin.com/2013/09/15/update-on-warf-stem-cell-patent-challenge/

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In recent weeks several non-practicing "patent killers" have filed inter partes review requests including RPX and Unified Patents. It will be interesting to see whether they file amicus briefs here.

A First IPR Decision on the Merits

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Garmin v. Cuozzo Speed Tech, IPR2012-00001 (PTAB 2013)  Download Final decision-59

In its first full merits decision in an inter partes review case, the Patent Trial and Appeal Board (PTAB) has sided fully with the petitioner Garmin and ordered the three challenged claims cancelled. As you may discern from the docket number, this case was also the first IPR case filed on September 16, 2012 (the first day that such filings were allowed). The patent at issue is No. 6,778,074 and a parallel infringement lawsuit between Garmin & Cuozzo is pending in New Jersey District Court. Although the district court did not stay that case, Magistrate Judge Dickson has slowed the process to avoid making substantive decisions until the PTAB decision. In particular, the claim construction arguments have been delayed.

The patent itself is directed toward a speed-limit indicator tied to a GPS system that provides a signal to the driver when the care is moving faster than the speed-limit. Couzzo has accused several device makers (such as Garmin) as well as automobile manufacturers (such as Chrysler) of infringing the patent.

Garmin's IPR request actually challenged 17 claims of the '074 patent, but the PTAB only instituted the review for claims 10, 14, and 17 as such, it likely that Cuozzo will continue to pursue the litigation with a focus on the remaining claims. Those three claims were all found obvious by the PTAB. Based upon my quick read of the claims, independent claim 10 was the broadest in the patent and its elimination may give Garmin the opportunity to avoid infringement by pushing for a narrow construction of the remaining claims.

Four Reference Rejection: Patent attorneys regularly see obviousness rejections that hinge on the combination of four references.  However, the conventional wisdom is that those complex factual arguments are much less likely to fly in disctrict court litigation.  Here, the PTAB took on the challenge and found the patent obvious based upon four prior art references.  The take-away here is that the PTAB is ready and willing to handle complex invalidity arguments that might not work at the district court level. 

 

Claim Construction: One interesting aspect of the case is the way that the pending parallel litigation is clearly in the forefront of each decision by the parties. One limitation found in each claim of the patent is that a speedometer be "integrally attached" to a speeding-indicator. Couzzo that the proper construction of that term would require that the speedometer and speeding-indicator both be part of the same single component (i.e., shown on the same screen). On that point, the Board sided with Garmin – finding instead that the broadest reasonable interpretation of the claim scope required two separate components. In addition to making the claim more subject to prior art, the seeming result is also that a single Garmin device GPS cannot infringe unless somehow integrated with and integrally attached to a separate vehicle speedometer. Moving forward it will be interesting to see what level of respect the district court gives the PTO decision. I suspect that it will be given a great deal of respect.

Unable to Prove Early Conception  or Diligence: Two of the important prior art references used by the board presumptively qualify as 102(e) prior art in that the references are published US patent applications that were filed prior to Couzzo's application. Under the old first-to-invent rules, the law allows Couzzo prove a prior invention date. Here, Couzzo's proof failed because (1) his conception evidence was based solely on inventor testimony which is never sufficient without corroboration; and (2) his evidence of submission to the "Invention Submission Corporation" was insufficient because the date of submission was not corroborated by any testimony. Thus, the PTAB found that the earliest provable date of conception was December 2000 when the ISC patent attorney sent a letter to Couzzo referencing Couzzo's invention disclosure. Because Couzzo had not yet reduced his invention to practice as of that December 2000 date, the law also requires that he act with "reasonable diligence." Here, Couzzo received a search report from the patent attorney in January 2001; did not respond until March 2001; and did not explain why it took two months to provide comments or his daily progress on the matter. Then, later in March 2001 he received a new favorable patentability report from the patent attorney who stated he would begin work once Couzzo paid a $3,500 fee. However, he did not pay that fee until August 2001. Couzzo stated that he did not have the money at the time, but did not provide any daily progress reports showing what he was doing to get the money. The PTAB found that each of these gaps showed failure of diligence. As such, his attempt to antedate the references was rejected. The unfortunate problem here is that it looks like it was the complexity and tricks of the system that failed Couzzo and that, had he been blessed with more cash-on-hand and more sophisticated patent counsel then he would have avoided these key prior art references either by filing the patent application earlier or by ensuring documentation of conception and diligence. Soon after Couzzo's case was filed, the USPTO went after the Invention Submission Corporation as a scam. My understanding is that InventHelp is the successor-in-interest to ISC.

 

Independent Justification for Appellate Standing over Inter Partes Reviews

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By Dennis Crouch

The recent Supreme Court decision in Already v. Nike revolves around the question of when a trademark-challenger has declaratory judgment standing to challenge a mark's validity. That particular case revolved around the impact of a covenant-not-to-sue. However, at oral arguments, Justice Kennedy turned his attention to administrative challenges before the TTAB (the trademark-equivalent of the PTAB) and asked whether a challenger who loses an opposition through that administrative body would have standing to ask the Federal Circuit to review the decision. Now, the statute is clear that any party to an opposition has a right to appeal to the Federal Circuit. 15 U.S.C. §1071. Justice Kennedy's question, however, focused on whether the case and controversy requirements of the constitution allows an Article III court to hear the case absent a stronger showing of conflict between the parties. Nike's counsel (Tom Goldstein) surprisingly answered (seemingly against his interest in this case) that Article III standing for the appellate court would not be satisfied simply by virtue of being involved with the trademark opposition.

JUSTICE KENNEDY: Is the standing burden any less after there is a — an administrative adjudication and you go to court for judicial review?

MR. GOLDSTEIN: … We've looked at the cases. We think that it's a point in their favor, Justice Kennedy, that while you can go to the TTAB, they wouldn't be able to appeal to an Article III court. I think that's a point in their favor.

The point here is that, (1) an administrative agency (such as the PTO) can be empowered (under the Constitution) to decide cases between two parties without any showing of injury or standing by the petitioner. However, (2) if that administrative decision is appealed to an Article III court (such as the Federal Circuit), case must satisfy the ripe controversy requirements of the Constitution. At the Already oral arguments, the attorney for the US Government (Ms. Anders) attempted to cut-through some of this by arguing that, in some circumstances an adverse decision from the PTO would create the injury-in-fact that is sufficient to establish Article III standing for appeal. See Megan La Belle, Summary of Oral Argument in Already, LLC d/b/a Yums v. Nike, Inc. (November 8, 2012).

Although not an intellectual property case, the D.C. Circuit very recently decided a somewhat parallel issue in the case of Americans for Safe Access v. DEA, 706 F.3d 438 (D.C. Cir. 2013). The appellants in that case include Safe Access, is a marijuana legalization advocacy group, and several individuals who petitioned the US Drug Enforcement Administration (DEA) to reschedule marijuana as a Schedule III, IV, or V drug rather than a Schedule I drug. In the subsequent appeal to the D.C. Circuit, the DEA argued that the appellants had no Article III standing. Although the D.C. Circuit found standing, it agreed with the DEA that Article III standing continues to be a requirement and that participating an administrative hearing is not sufficient to create standing. Here, standing was based upon the fact that one of the appellants (Michael Krawitz) was a disabled veteran eligible for medical care through the Department of Veterans Affairs but was denied marijuana treatment and instead had to purchase his own through the Oregon Medical Marijuana Program.

Similarly, in Sierra Club v. EPA, 292 F.3d 895, 899 (D.C. Cir. 2002), the D.C. Circuit wrote:

An administrative agency is not subject to Article III of the Constitution of the United States [and] so the petitioner would have had no need to establish its standing to participate in the proceedings before the agency. When the petitioner later seeks judicial review, the constitutional requirement that it have standing kicks in, and that requirement is the same, of course, as it would be if such review were conduct in the first instance by the district court.

The point here is simply, that standing is a requirement at the appellate level and an adversarial administrative process itself does not necessarily create standing.

Post-Grant and Inter Partes Review: All of this is relevant to the USPTO's new administrative review procedures that allow third-parties to initiate an administrative patentability review without any showing of standing or interest in the outcome of the review. Under the statute, the third-party requester also has a right to appeal an adverse PTO decision directly to the Court of Appeals for the Federal Circuit.

Manufacturing Appellate Standing through Administrative Review: Although the statute provides for a right-to-appeal, the balance of the law (as exemplified above) requires that the parties will also need to satisfy the Constitutional standing requirement. One basic legal question then will focus on whether the government's suggestion in Already is correct – that a case and controversy can be manufactured by the administrative review itself. Of course, following Already, a covenant-not-to-sue given by the patentee to the review requestor would eliminate any possibility of injury-in-fact. And, if the requestor is a public-interest organization (such as PubPat) such a covenant would be essentially cost-free for the patentee.

Manufacturing Declaratory Judgment Standing through Administrative Review: An important twist on this then is that – if the administrative review serves as a bootstrapping mechanism for generating Article III standing for challenging patentability on appeal, then it should also serve to generate Article III standing for challenging patent validity in a district court declaratory judgment action.

Now, the reality is that this issue will only arise in limited circumstances because the high-cost of post-grant reviews serves as a major filter to post grant and inter partes review filings. We can expect that it will be primarily parties with genuine controversies that request the reviews and only a much smaller percentage will be folks without a genuine controversy. 

Thanks to James Dabney, Megan Labelle, Michael Burstein, and Erin Hawley for helping me to think through this issue. Of course, as you might expect, these folks don't entirely agree with my perspective.

Patent Reform 2013: Pending Bills

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By Dennis Crouch

I wrote earlier about the pending Innovation Act (H.R. 3309) as proposed by a bipartisan set of Congressional leaders led by Rep. Bob Goodlatte. A host of other patent related bills are also pending in the House and Senate. The following is a rundown of some:

Manufacturing Innovation in America Act of 2013 (H.R. 2605)

Tax deduction carryover for patent development expenditures where profit is made years later.

Patent Abuse Reduction Act of 2013 (S. 1013) (Senators Cornyn and Grassley)

Smaller version of Goodlatte's Innovation Act that would focus on (1) raising pleading requirements (2) limiting discovery costs (especially pre-claim-construction); and (3) awarding attorney fees for the prevailing party.

End Anonymous Patents Act (H.R. 2024)

Requirement that the patent owner regularly update ownership information in the public record, including the "ultimate parent entity."

Patent Litigation and Innovation Act of 2013 (H.R. 2639)

Includes many provisions in parallel to the Goodlatte Innovation Act, but also includes a "sanction for abusive litigation" with mandatory review of each case by the court to ensure that no Rule 11(b) violations occurred.

MODDERN Cures Act of 2013 (H.R. 3091)

Extension of patent term for four to seven years for diagnostic medical tests. The program would be run through the FDA.

PATENT Jobs Act (H.R. 2582)

Proposed elimination of the PTO from the sequestration rules.

STOP Act (H.R. 2766)

Expanding the covered-business-method post-grant-review to also cover non-financial business methods and removal of the sunset provision. This is roughly parallel to the Patent Quality Improvement Act of 2013 (S. 866)

PACES Act (S. 1478) (Senator Cardin)

The Bill would remove certain patent infringement actions from Federal District Courts to the Court of Federal Claims. In particular, the bill focuses on causes of action against the unlicensed use patented inventions in the provision of 9-1-1, enhanced 9-1-1, or other emergency services. The CFC tends to favor the accused infringer both in terms of procedure and remedies available.

PARTS Act (S.780)

Act would prevent design patent owners from using those patents to prevent the use unauthorized spare-parts in the auto industry.

Medical Innovation Prize Fund Act (S. 627) (S. Sanders)

The bill would seemingly end drug patents with the text "no person shall have the right to exclusively manufacture, distribute, sell, or use a drug, a biological product, or a manufacturing process for a drug or biological product in interstate commerce."

Challenging the PTO’s NonAppealable Decisions to Grant or Deny Petitions for Inter Partes Review

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By Dennis Crouch

In re MCM Portfolios LLC (Fed. Cir. 2013) (pending on petition for writ of mandamus)

In a recent post, I wrote briefly about statutory bar against appealing PTO decisions to grant or deny a request for inter partes review. In particular, 35 U.S.C. § 314(d) reads as follows: No Appeal.— The determination by the Director whether to institute an inter partes review under this section shall be final and nonappealable. MCM has now filed a somewhat direct challenge to the substance of that provision with a writ of mandamus to the Federal Circuit. Of course, a petition for writ of mandamus is not an appeal but instead a request for a particular order. By filing a writ (rather than an "appeal"), MCM avoids the statutory bar against appeals and also avoids the parallel problem arising from the lack of statutory support for a direct appeal. As I explain below, MCM would also argue that the statutory bar on appeals would not apply in its context because its petition challenges a PTO decision under § 315(b), not § 314.

MCM's Patent No. 7,162,549 covers a mechanism for controlling Flash storage devices that uses firmware error correction. According to the patentee, many Digital Picture Frames make use of the invention in their mode-of-operation. On September 21, 2011, MCM served PanDigital with a complaint for infringing the patent. Later, on March 28, 2012, MCM also sued HP for infringement. Now, the two lawsuits are largely the same because HP picture frames are actually made by PanDigital. MCM has provided expert testimony that HP DPFs are actually the PanDigital frames that have simply been re-branded with HPs name (with PanDigital's permission). Furthering the connection, HP publicly identifies PanDigital as its supplier; directs its customers to PanDigital for customer support; and sells its HP products on Amazon with an indication that they are also PanDigital products. Later, on March 28, 2013 HP filed its request for inter partes review. The date is important because it is just shy of one year after the March 28, 2012 date when HP was sued for infringement. It is, however, well over a year after PanDigital was sued.

35 U.S.C. § 315(b) creates a one-year statute of limitations for filing a request for inter partes review. The deadline is triggered when "the petitioner, real party in interest, or privy of the petitioner is served with a complaint alleging infringement of the patent." Here, HP is the petitioners and filed within one-year of being served a complaint. However, as foreshadowed above, MCM argues that, for this action, PanDigital should also be considered a "privy of the petitioner."

In its decision, the PTAB sided with HP – writing that "[MCM] provides no persuasive evidence that HP could have exercised control over Pandigital's participation in the Texas Action. Thus, § 315(b) does not bar institution of inter partes review based on HP's Petition."

In the mandamus action, MCM argues that statute-of-limitations here is essentially a time-delayed res judicata action and, as such, it makes sense to interpret "privy" in the same manner as is done by the Supreme Court in those preclusion cases. In particular, MCM relies heavily on Taylor v. Sturgell, 553 U.S. 890 (2008) to argue that the grounds for binding related parties is much broader than the "control" grounds suggested by the USPTO. The PTO's approach consequently "systematically misconstrue[es] Taylor to allow late IPRs." Of note here, the PTO seemingly agrees that Taylor controls, but reads Taylor differently than MCM.

Because Mandamus is an extraordinary writ, the petitioner must do more than simply indicate that the Board was wrong in its decision. Rather, the petitioner must also convince that this is a case that needs to be heard immediately. MCM offers three key reasons:

  • The Board's interpretation of §315(b) privity is incorrect as a matter of law.
  • The systematic denial of Taylor's second ground for establishing privity justifies this Court's exercising its supervisory role to resolve important issues of first impression that involve alleged usurpation of power. Schlagenhauf v. Holder, 379 U.S. 104 (1964).
  • The order of institution of an IPR cannot be remedied by a reversal on appeal.

Edward P. Heller is representing MCM in this appeal.

Download InreMCMPortfolioLLCWrit

New Patent Legislation: Innovation Act of 2013

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By Dennis Crouch

Representative Bob Goodlatte (R-VA) with the bipartisan support of ten other members of the House has introduced a new set of proposed patent reforms currently tiled the “Innovation Act.” (H.R. 3309) The proposed bill includes a number of provisions disparate provisions that would have a substantial impact on patent enforcement, procurement, and ownership. Some of the changes include severe increases in the requirements associated with filing a patent infringement complaint; Major statutory limitations on discovery; Elimination of the patent applicant option of filing a civil action to obtain a patent under Section 145; Forcing the USPTO to use standard claim construction (rather than BRI) in post-grant proceedings; Introduction of a new Double-Patenting rule; etc. the 50+ page bill is somewhat complex and, as Hal Wegner wrote, “[e]very organization impacted by patents must carefully study the Goodlatte bill for hidden features or suffer the consequences.” [Text][Sectional-Analysis]

Major Proposed Changes include the Following:

  1. A heightened pleading requirement for filing patent infringement claims, including a particularized statement “with detailed specificity” as to “how the terms in each [asserted] claim … correspond to the functionality of [each] accused instrumentality.” A brand-generic infringement action under § 271(e)(2) need not comply with the heightened pleading requirements. In addition, the Judicial Conference would be ordered to modify the form complaint for patent infringement to reflect the heightened pleading.
  2. An assumption that attorney-fees will be awarded to a prevailing party. The new provision would require an award of fees “unless the court finds that the position of the nonprevailing party . . . was substantially justified or that special circumstances make an award unjust.” On its face the provision is largely party-neutral with two caveats. First, the provision allows prevailing-accused-infringers to collect fees from non-plaintiffs who have a substantial interest in the patent-at-issue in the case. Second, the provision indicates that a patentee who extends a covenant-not-to-sue to the other party will be deemed a non-prevailing party and thus subject to attorney fees.
  3. Discovery will be limited until after a ruling on claim construction. In addition, the US Judicial Conference would be ordered to develop rules “to address the asymmetries in discovery burdens and costs in any civil action [relating to patents].”
  4. Transparency of Ownership. As a new required disclosure, the patentee in an infringement litigation must disclose anyone with a financial interest in either the patents at issue or the patentee and must additionally disclose the “ultimate parent entity” of the patentee. In the appropriate Federal Regulations, an ultimate parent entity is ethereally defined as “entity which is not controlled by any other entity.”
  5. Stay for Customer Suits. When both a manufacturer and its customer are sued for infringing the same patent, customer suit would be stayed so long as the customer agrees to be bound by the results of that case.
  6. IP in Bankruptcy. Under the new law, when a foreign company goes bankrupt, its trustee would no longer have the power to cancel licenses associated with US patent rights.
  7. No Civil Action to Challenge PTO. The new law would eliminated the civil action option found in 35 U.S.C. § 145. Patent applicants refused by the patentee would rather only have the option of appealing directly to the Federal Circuit.
  8. Shrinking Post-Grant-Review Estoppel. Under the current law, a post-grant review proceeding creates an estoppel against the petitioner later arguing in other forums “any ground that the petitioner raised or reasonably could have raised during that post-grant review.” 35 U.S.C. § 325(e). The new law would narrow that estoppel only to grounds actually raised.
  9. Patent Office Claim Construction. During Post-Grant Reviews and Inter Partes Reviews, the new law would require the patent office to use the ordinary “district court claim construction” law, that is, “construing each claim of the patent in accordance with the ordinary and customary meaning of such claim as understood by one of ordinary skill in the art and the prosecution history pertaining to the patent.”
  10. Double Patenting. There is some potential that the judicially created obviousness-type double patenting doctrine was eliminated by the recently implemented first-to-file regime. The new law would codify that doctrine.
  11. Covered Business Method Patent Review. The AIA creates an option for third parties to attack patents covering non-technological “covered business method” innovations through the use of a new post-grant review proceeding. The new law would somewhat restrict the scope of CBM review to only cover first-to-invent patents (rather than pre-AIA patents) as defined in Section 3(n)(1) of the AIA. The new law would also, inter alia, codify the USPTO’s somewhat broad definition of “financial product or service” described in the Versata case.
  12. Patent Term Adjustment. The new law would eliminate any patent term adjustment for “B delay” occurring after an applicant files a request for continued examination. This change would have a significant impact on the patent term of a large number of issued patents. The amendment proposes to be effective with regards to any “patent application or patent” pending on the Act’s date of enactment. (Note – it is unclear what it means for a “patent” to be “pending” in this context.)
  13. Federal Jurisdiction over Patent Cases. Although not a statutory change, the new law would make the “clarifying” statement that: “The Federal interest in preventing inconsistent final judicial determinations as to the legal force or effect of the claims in a patent presents a substantial Federal issue that is important to the Federal system as a whole.”

Interpreting the IPR Deadline; Conflicting PTAB Decisions; and Appealing Nonappealable Decisions

Patent, ,

By Dennis Crouch

St. Jude Medical v. Volcano Corp. (PTAB 2013)

This PTAB decision is important for a number of reasons. First, as a rule of substantive law, the decision announces a new interpretation of the statute-of-limitations for filing an IPR under 35 U.S.C. § 315(b). Second, the decision highlights (without directly addressing) the need for a better understanding of the role of precedent within PTAB decisions for cases such as this where a second PTAB panel rejects the legal analysis of a first PTAB panel. Finally, the case is important because it highlights problems with the statutory rule that the PTAB's determination "whether to institute an inter partes review [is] final and nonappealable." 35 U.S.C. § 314(d).

The Patent Trial and Appeal Board (PTAB) continues to see a growing docket of inter partes reviews (IPR) and post-grant reviews of covered-business-method patents (PGR-CBM). Of importance, the PTAB appears to be scrutinizing review requests and has denied several – finding that the requester had failed to meet the "reasonable likelihood" standard of 35 U.S.C. § 315 or the "more likely than not" standard of 35 U.S.C. § 324.

Here, however, an expanded panel of five administrative patent judges has denied St. Jude's IPR petition based upon the one-year statute of limitations triggered by service of "a complaint alleging infringement" under 35 U.S.C. § 315(b). That statute provides:

An inter partes review may not be instituted if the petition requesting the proceeding is filed more than 1 year after the date on which the petitioner, real party in interest, or privy of the petitioner is served with a complaint alleging infringement of the patent.

This is seemingly a pretty straightforward and easy to adjudicate rule. However, St. Jude raised an interesting question of law because it was never served with a complaint per se.  Rather, St. Jude sued Volcano for infringement and Volcano served an answer and counterclaim of infringement. The counterclaim was served more than one-year before the IPR request. Leaving the legal question of whether the filing of an answer with a counterclaim alleging infringement counts under the statute as a "complaint alleging infringement." There does not appear to be any direct legislative history from the AIA on point other than the general conception that the deadline is intended to prevent repeated "repeated litigation and administrative attacks." H.R. Rep. No. 112-98 at 48 (2011). As is often true of the Congressional record, that statement is general enough to be read in support of either side. And, certainly a counterclaim is often thought of as more of a defensive tact rather than being offensive harassment.

St. Jude's legal argument stems from Rule 7 of the Federal Rules of Civil Procedure that define pleadings in civil cases as follows:

Only these pleadings are allowed:

(1) a complaint;

(2) an answer to a complaint;

(3) an answer to a counterclaim designated as a counterclaim;

(4) an answer to a crossclaim;

(5) a third-party complaint;

(6) an answer to a third-party complaint; and

(7) if the court orders one, a reply to an answer.

You'll notice from the allowed pleadings that a counterclaim (No. 3) is separately defined from a complaint (No. 1). That listing coupled with the statement indicating that these are the "only" pleadings allowed suggests that the differentiation in the list is also important. Similarly, St. Jude points to FRCP R. 3 that states "A civil action is commenced by filing a complaint with the court." Finally, St. Jude highlights that the statute in question (§315) particularly mentions counterclaims in a different section of the provision and that linguistic distinction suggests that Congress thought that a counterclaim was different from a complaint.

The Board rejected St. Jude's argument – finding instead that a counterclaim is the functional and legal equivalent of a complaint and consequently that the request for IPR was untimely. The Board writes:

The Federal Rules of Civil Procedure neither define the term "complaint" in Rule 3 nor use it to refer only to the filing that commences a civil action. Rule 3 states, as amended in 2007: "A civil action is commenced by filing a complaint with the court." The rule specifies merely which filing commences a civil action—a complaint—but does not limit a "complaint" to be that filing and nothing else. Moreover, the term is used elsewhere in the Rules to refer to a pleading that does not commence a civil action. For example, Rule 14(a)(1) states, in pertinent part: "A defending party may, as third-party plaintiff, serve a summons and complaint on a nonparty who is or may be liable to it for all or part of the claim against it." A complaint against a third party does not commence a civil action; rather, it joins the third party to an existing civil action. The Rules, therefore, do not define or use the term "complaint" in the exclusive manner St. Jude argues.

We disagree also with St. Jude's contention that Rule 7 distinguishes a counterclaim from a complaint in a way that is meaningful for our determination. Rule 7 lists pleadings allowed in a civil action. The mere listing of items separately, however, does not, by itself, draw distinctions among the items in the list insofar as their legal equivalence. We discern in Rule 7 no such comparison or distinction between a complaint and a counterclaim.

A complaint and a counterclaim instead bear marked similarities. A counterclaim imposes the same burdens on the parties as does a complaint. A counterclaim alleges a cause of action, just like a complaint; confirming that equivalence, Wright and Miller explains that a counterclaim "basically is a defendant's complaint." 5 FED. PRAC. & PROC. CIV. § 1184 (3d ed.). …

St. Jude argues next that a counterclaim should be distinguished from a complaint in § 315(b) because that distinction is made in § 315(a). Pet. 3. St. Jude observes that 35 U.S.C. § 315(a)(3) excludes a counterclaim challenging validity from constituting a complaint challenging validity in § 315(a)(1). This argument is unpersuasive. Section 315(a)(3) states specifically that the exclusion applies to, and is made for purposes of, subsection § 315(a) only. The inapplicability of such an exclusion to § 315(b) indicates, to the contrary of St. Jude's position, that no similar exclusion exists, or was intended, with regard to a complaint and a counterclaim for infringement in respect of § 315(b). . . .

One interesting element of the decision here is that it differs with a prior decision made by the PTAB in Macauto USA v. Bos GmbH, IPR2012-00004. There, a three-member PTAB board found that the statute-of-limitations was tolled in cases where the complainant then voluntarily dismissed its case with prejudice. Citing Wright, Miller, Kane, and Marcus, 9 Federal Prac. & Proc. Civ. § 2367 (3d. ed.) ("[A]s numerous federal courts have made clear, a voluntary dismissal without prejudice under Rule 41(a) leaves the situation as if the action never had been filed.") It is not surprising that there are no overlapping judges between the St. Jude decision and Macauto.

The general standard operating procedure at the PTAB is that a Board decision is binding precedent "only if the opinion has been made Precedential" under the PTAB's operating procedure. See http://www.uspto.gov/ip/boards/bpai/procedures/sop2.pdf. Thus, at this point, neither opinion is precedential and so the next panel is also open to re-decide the case as it sees fit according to the law.

Certainly, the Federal Circuit would ordinarily be ready-willing-and-able to quickly resolve the split of opinion on the meaning of the law here. However, the statute indicates that this particular decision is both final and nonappealable. 35 U.S.C. § 314(d). Of course, the statute does not indicate that the decision cannot be attacked through a mandamus action or through a separate collateral attack on the final judgment, neither of which are ordinarily considered an appeal.

New Lawsuits: Gillette and P&G

Patent,

By Dennis Crouch

Two interesting consumer products lawsuits filed this week:

  • Gillette Company v. BK Gifts, Docket No. 13-cv-02241 (N.D. Ohio); and
  • Procter & Gamble Company v. Conopco, Inc. and Unilever United States, Inc., Docket No., 13-cv-00732 (S.D. Ohio).

Gillette sued BK Gifts for selling generic knock-off versions of the popular Gillette MACH3 and Proglide razor blades. The defendant has not been selling these as counterfeit goods but rather as goods offering the same functionality at a substantially lower price. Their website stated: “STOP OVERPAYING FOR RAZOR BLADES . . . If you like Gillette® MACH3®, MACH3® SENSITIVE or M3 Power you’ll love our Classic Razor Blades.” Now, the website states “WE No Longer Sell Razors Due to a Pending Lawsuit With Gillette.”

In the lawsuit, Gillette does not suggest that it invented any new technology or useful good but rather asserted six design patents that cover the ornamental design of its razors. US Design Patent Nos. D415315, D422751, D430023, D440874, D531518, and D575454. Of interest, the D’315 should expire on October 12, 2013 and several others will expire in 2014.

P&G’s lawsuit against Unilever involves three shampoo concoctions that are useful for dandruff: US Patent Nos. 6,451,300, 6,649,155, and 6,974,569. Although the patent makes some claims regarding the effective treatment of dandruff, I don’t see any file history information where the PTO asked for any proof to back-up those claims. An interesting aspect of the dispute is that P&G and Unilever have an ongoing contractual process for resolving patent disputes that involve a tiered approach that begins with good faith negotiations, then moves to mediation, and finally to non-binding arbitration. If that process fails, then the case can file in court. The complaint in this case indicates that the process has been successful in that the parties have settled five different patent disputes over the past five years without having to file a civil action. However, P&G alleges that Unilever has refused to arbitrate the case and instead filed inter partes review petitions with the PTO and filed a declaratory judgment action in the UK challenging the patent there. See IPR Nos. 2013-0505, 2013-0509, 2013-0510.

==

The twin patent-term-adjustment cases of Exelixis, Inc. v. Rea and Novartis AG v. Rea are now scheduled for oral arguments at the PTO.

PTO Post-Issuance Filings

Patent, , ,

By Jason Rantanen

This afternoon my frequent collaborator Lee Petherbridge will be presenting Unenforceability (which we wrote with Polk Wagner) at the Houston Intellectual Property Law Association's annual IP Institute.  As we were talking about the presentation, our conversation turned to the subject of the AIA's impact on post-grant proceedings at the PTO (particularly supplemental examination).  I was able to assemble the following charts based on data from the PTO's website (specifically, from this page and this page).

Ex Parte ReexamInter Partes
Note that the inter partes review data points are my estimates based on graphical data from the PTO; practically speaking, however, any deviations from the "true" values are going to barely show up here due the scale of this graph. 

Unsurprisingly, there was a large jump in both ex parte and inter partes filings in Q4 of 2012.  These spikes corresponded with the approximately 5-fold fee increase for filing an ex parte reexamination request, and the transition to inter partes review coupled with a similarly high fee structure on September 16, 2012.  Since then, ex parte reexamination requests have remained low while inter partes review filings have been on the rise, eclipsing even pre-September 16 inter partes reexamination levels (for just the first two months of Q4 of FY 2013, there have already been more than 130, which constitutes more inter partes filings than any previous 3-month quarter except for Q4 2012). 

What about supplemental examination requests?  In the past I've expressed skepticism that supplemental examination will be a widely used mechanism.  To date, the actual filing data appears to have born that skepticism out: the PTO's supplemental examination final rules predicted about 1,430 requests anually; as of August 30, 2013 there were 40. 

 

Monthly_se20130830

Source: http://www.uspto.gov/aia_implementation/statistics.jsp

 

What surprised me the most about this data is that supplemental examination was widely believed to be the new path to ex parte reexamination for patent owners (i.e.: rather than file an ex parte reexamination request, just file a supplemental examination request), including by the PTO itself.  See 77 Fed. Reg. 48828, 48847 (Aug. 14, 2012) ("In view of the benefits to patent owners afforded by supplemental examination under 35 U.S.C. 257(c), the Office is estimating that all 110 requests for ex parte reexamination that would have been filed annually by patent owners will instead be filed as requests for supplemental examination.").  So  far, however, traditional ex parte reexamination requests are an order of magnitude greater than supplemental examination filings.  Of course, this can all change with time – inter partes post grant proceedings started off slow but now have eclipsed ex parte reexamination.

One last chart, again from the PTO's website: pre-issuance submissions are becoming a relatively common, although by no means ubiquitous, type of filing. 

 

Monthly_preissuance20130830a

Source: http://www.uspto.gov/aia_implementation/statistics.jsp

  

Amending the America Invents Act 2013

Patent, , , , , , , ,

By Dennis Crouch

One aspect of the Goodlatte discussion draft legislation is a series of “Improvements and Technical Corrections to the Leahy-Smith America Invents Act.” The AIA was passed in September 2011 and is gradually being fully implemented across the US patent system. The further changes here are fairly substantial, although buried within the proposed bill itself. The following post offers some explanation of the provisions with only a few comments on the policy implications.

1. REPEAL OF CIVIL ACTION TO OBTAIN A PATENT

For several years, the PTO has been pushing to weaken or eliminate the “civil action” option that is currently available to patent applicants who are refused a patent. The current system allows a patent applicant to file a federal lawsuit that asks a district court to order the PTO to issue a patent covering the claimed invention. The civil action approach allows for extensive presentation of evidence, live witness testimony, and an ultimate decision by a district court judge. And, since the civil action is not an “appeal” per se, substantial deference is not given to prior factual findings by the PTO (as long as the applicant presents its own evidence on point). The civil action approach is not widely used because of the expense of pursuing a district court claim. However, it has been a very successful approach for a number of patent applicants. Under the new provision, the only avenue for challenge an adverse PTO decision on the merits of an application would be through appeal to the Court of Appeals for the Federal Circuit.

2. POST GRANT REVIEW ESTOPPEL SUBSTANTIALLY NARROWED

The current estoppel rules of post-grant review indicate that a petitioner will be estopped from latter asserting in-court that the challenged patent “invalid on any ground that the petitioner raised or reasonably could have raised during that post-grant review.” The amendment would substantially narrow the estoppel to cover only grounds that the petitioner actually raised.

This change would result in Post-Grant review being much more of a parallel option rather than an alternative option to challenging patent validity.

3. CONSTRUING CLAIMS DURING POST-GRANT and INTER-PARTES REVIEW

The proposal would require that the claims under review be construed in the same way that they would be construed by a district court rather than using a “broadest reasonable construction.” The statute as written requires that the PTAB construe “each claim of the patent in accordance with the ordinary and customary meaning of such claim as understood by one of ordinary skill in the art and the prosecution history pertaining to the patent.” However, that method is somewhat different than what has been ruled as the law by the Federal Circuit.

4. CODIFICATION OF DOUBLE PATENTING DOCTRINE

The statute would create a new statutory provision that is intended to codify the obviousness-type double patenting doctrine. This ensures that the doctrine is carried through into the AIA. I have not parsed through the new provision to see if it does what they say it does:

35 U.S.C. §106 that reads as follows:

A claimed invention of a patent issued under section 151 (referred to as the ‘first patent’) that is not prior art to a claimed invention of another patent (referred to as the ‘second patent’) shall be considered prior art to the claimed invention of the second patent for the purpose of determining the non-obviousness of the claimed invention of the second patent under section 103 if—

(1) the claimed invention of the first patent was effectively filed under section 102(d) on or before the effective filing date of the claimed invention of the second patent;

(2) either—

(A) the first patent and second patent name the same inventor; or

(B) the claimed invention of the first patent would constitute prior art to the claimed invention of the second patent under section 102(a)(2) if an exception under section 102(b)(2) did not apply and, if applicable, if the claimed invention of the first patent had not been effectively filed under section 102(d) on (but was effectively filed before) the effective filing date of the claimed invention of the second patent; and

(3) the patentee of the second patent has not disclaimed the rights to enforce the second patent independently from, and beyond the statutory term of, the first patent.

5. EXPANDING THE SCOPE OF COVERED_BUSINESS_METHOD REVIEWS

The AIA creates an option for third parties to attack patents on non-technological “covered business method” innovations through the use of a new post-grant review proceeding. Through the review program, third parties can raise any ground of invalidity and can use this approach to pre-AIA patents. The amended provision would appear to sweep-in virtually all software-type patent claims.

Under the changes, the 7-year sunset provision would be removed; the expansive definition of business methods found in SAP America, Inc. v. Versata Dev. Group, Inc., CBM2012-00001, 12 Paper 36 (January 9, 2013), would be codified; and the “non-technological” requirement would be clarified/expanded to make clear that a claim’s recitation of technological features does not make the claim technological “if it is readily apparent that the recited [technological] feature is anticipated by or obvious in light of the prior art.”

6. SHRINKING PATENT TERM ADJUSTMENT

The bill proposes a clear rule that no PTA can be awarded for any delays that occur following the filing of a Request for Continued Examination (RCE). This would reduce the patent term for a substantial portion of patents and the bill indicates that the recalculation would be retroactive against any patent application still pending at the time of enactment.

7. OVERTURNING OF GUNN V. MINTON

Although not a statutory change, the bill would make the “clarifying” statement that:

CLARIFICATION OF JURISDICTION.—Congress finds that the Federal interest in preventing inconsistent final judicial determinations as to the legal force or effect of the claims in a patent presents a substantial Federal issue that is important to the Federal system as a whole.

This provision has the potential of bringing patent malpractice claims back under Federal Court jurisprudence. And, to the extent that patent licenses depend upon the scope of a patent claim, licensee disputes would also be heard in Federal Courts.

Hricik: Why Section 101 is Neither a “Condition of Patentability” nor an Invalidity Defense

Patent, , ,

By Dennis Crouch

On his side of the blog, Professor David Hricik again raises the question of whether Section 101 can serve as the basis for a defense to patentability.

[https://patentlyo.com/hricik/2013/09/why-section-101-is-neither-a-condition-of-patentability-nor-an-invalidity-defense.html]

The basic notion is that the defenses to charges of patent infringement are listed in 35 U.S.C. § 282 and there is no statutory pathway for recognizing § 101 as such a defense. Hricik also discusses some amount of legislative history in drafting of the 1952 Patent Act that bolsters his conclusion. The Supreme Court approach makes sense then only by ignoring the statutory language and legislative history.

Other Posts:

There are a few potential legal challenges on this question that are rising through the process, including the Versata case (Inter partes (CBM) review on eligibility grounds). In Sinclair-Allison v. Fifth Ave. Physician (2013-1177), the accused infringer is counter-intuitively agreeing with Hricik that subject matter eligibility is not a validity defense but instead is an off-book “eligibility defense.” The point of the line of argument is that the presumption of validity shouldn’t apply to eligibility challenges.

Surprise! The Law of Subject Matter Eligibility Remains Unsettled

Patent, , , ,

By Jason Rantanen

Accenture Global Services, GMBH v. Guidewire Software, Inc. (Fed. Cir. 2013) Download Accenture v. Guidewire
Panel: Rader (dissenting), Lourie (author), Reyna

It is difficult to think of an issue that has more deeply divided the Federal Circuit over the past few years than subject matter eligibility.  Accenture is the latest barrage and counter-barrage in this seemingly endless war.  Unlike Ultramercial v. Hulu, though, in which Judge Rader wrote the majority opinion and Judge Lourie concurred in the result, the forces arguing against subject matter eligibility of computer programs won today's battle. 

At issue in the case were claims 1-7 and 8-22 of Patent No. 7,013,284.  Claim 1 read:

A system for generating tasks to be performed in an insurance organization, the system comprising:

an insurance transaction database for storing information related to an insurance transaction, the insurance transaction database comprising a claim folder containing the information related to the insurance transaction decomposed into a plurality of levels from the group comprising a policy level, a claim level, a participant level and a line level, wherein the plurality of levels reflects a policy, the information related to the insurance transaction, claimants and an insured person in a structured
format;

a task library database for storing rules for determining tasks to be completed upon an occurrence of an event;

a client component in communication with the insurance transaction database configured for providing information relating to the insurance transaction, said client component enabling access by an assigned claim handler to a plurality of tasks that achieve an insurance related goal upon completion; and

a server component in communication with the client component, the transaction database and the task library database, the server component including an event processor, a task engine and a task assistant;

wherein the event processor is triggered by application events associated with a change in the information, and sends an event trigger to the task engine; wherein in response to the event trigger, the task engine identifies rules in the task library database associated with the event and applies the information to the identified rules to determine the tasks to be completed, and populates on a task assistant the determined tasks to be completed, wherein the task assistant transmits the determined tasks to the client component.

The district court (Judge Robinson, one of the ) held claims 1-7 (system claims) and claims 8-22 (method claims) invalid under 35 U.S.C. § 101.  Accenture appealed only claims 1-7. 

System Claims Ineligible Subject Matter: In an opinion authored by Judge Lourie, the majority agreed with the district court that the claims were patent ineligible subject matter.  The majority provided two bases for its conclusion.  First, "because the system claims offer no meaningful limitations beyond the method claims that have been held patent-ineligible" and second, "because, when considered on their own, under Mayo and our plurality opinion in CLS Bank, they fail to pass muster." Slip Op. at 10.

The majority first compared the system claims to the method claims that were conclusively invalid because Accenture failed to appeal them.  Relying on the plurality opinion in CLS Bank v. Alice, the majority concluded that the proper approach is to "compare the substantive limitations of the method claim and the system claim to see if the system claim offers a “meaningful limitation” to the abstract method claim, which has already been adjudicated to be patent-ineligible."  Id. Because the court found no additional "meaningful limitation" in the system claims, they were as patent ineligible as the method claims. 

The majority also concluded that the method claims were invalid under Section 101 even standing on their own.  Applying a preemption analysis to the abstract idea at the heart of the system claims, the majority concluded that the additional imitations did not "narrow, confine, or otherwise tie down the claim so that, in practical terms, it does not cover the full abstract idea itself."  Slip Op. at 15.  Furthermore, "simply implementing an abstract concept on a computer, without meaningful limtiations to that concept, does not transform a patent ineligible claim into a patent-eligible one."  Id.

Judge Rader's Dissent: Unsurprisingly, Judge Rader disagreed with the majority.  Central to his disagreement was the belief that the plurality framework relied upon by the majority in this case lacks precedential value.  "[N]o part of CLS Bank, including the plurality opinion, carries the weight of precedent.  The court's focus should be on Supreme Court precedent and precedent from this court."  Slip Op. at 20.  He also disagreed with the basic idea of the comparing the system claims to the invalid method claims, characterizing it as estoppel that will have the effect of "requiring litigants to appeal the invalidity of every claim or else risk the potential for estoppel or waiver of other claims."  Id. And Judge Rader would have concluded that, even on the merits, the claimed systems present patent-eligible subject matter.  "The claims offer “significantly more”  than the purported abstract idea, …, and meaningfully limit the claims’ scope."  Id. at 4, quoting Mayo v. Prometheus, 132 S.Ct. 1289, 1293 (2012).

Judge Rader also once again proclaims his view that the courts' approach to patent law's subject matter eligibility requirement is pure folly:

In conclusion, I note that prior to granting en banc review in CLS Bank, this court commented: “no one understands what makes an idea abstract.” CLS Bank Int’l v. Alice Corp., 685 F.3d 1341, 1349 (Fed. Cir. 2012), opinion vacated, 484 F. App’x 559 (Fed. Cir. 2012) (internal quotations marks omitted). After CLS Bank, nothing has changed. “Our opinions spend page after page revisiting our cases and those of the Supreme Court, and still we continue to disagree vigorously over what is or is not patentable subject matter.” MySpace, Inc. v. GraphOn Corp., 672 F.3d 1250, 1259 (Fed. Cir. 2012); see generally CLS Bank. Indeed, deciding what makes an idea “abstract” is “reminiscent of the oenologists trying to describe a new wine.” MySpace, 672 F.3d at 1259.

I take this opportunity to reiterate my view that “the remedy is the same: consult the statute!” CLS Bank, 717 F.3d at 1335 (additional reflections of Rader, C.J.). The statute offers broad categories of patent-eligible subject matter. The “ineligible” subject matter in these system claims is a further testament to the perversity of a standard without rules—the result of abandoning the statute.

Slip Op. at 23.  That said, Judge Rader's thoughts about indeterminacy should perhaps be taken with a grain of salt: his opinions indicate, after all, that he has very strong views that one side of the subject matter eligibility battle is right and the other wrong.

One other thing of note about this case: Mark Lemley – who has written a great deal about patenting of computer-implemented inventions, including a recent post on PatentlyO – was the lead attorney for the defendant.

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.

Hiring an IP Law Professor at the University of Missouri

Patent,

I wanted to post this hiring announcement for – We are looking to hire a tenure-track or (tenured) professor to teach and research in the field of intellectual property. My Dean Gary Myers and the faculty are looking to expand our intellectual property focus at the law school in several different ways, including through hiring additional faculty.

Job Posting

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Job Description

The University of Missouri School of Law seeks entry-level or lateral candidates for a full-time tenure track position in the area of Intellectual Property. The School of Law is looking for individuals with a strong commitment to scholarship, teaching, and public service. Candidates must have an excellent academic record and either legal practice experience or advanced academic training.

The University of Missouri-Columbia is the flagship campus of the University of Missouri system and is one of only 34 public universities in the country belonging to the American Association of Universities, a group of elite research universities. As both a research and land grant university, we have opportunities for interdisciplinary interaction that are unmatched at all but a handful of other universities. In addition, Columbia is regularly ranked as one of the most livable cities in the country.

Application Procedure

Review of applications will begin immediately and will continue until all available positions are filled. The School of Law will review the Faculty Appointments Registration applications as they are distributed by the AALS. (If you are participating in the Faculty Appointments Register you do not need to mail or email your materials.) Applicants who are not participating in the Faculty Appointments Register must apply by submitting a cover letter and resume at http://hrs.missouri.edu/find-a-job/academic/.

The University of Missouri is an equal opportunity/ADA institution and is particularly interested in applications from women and minorities. Additional information about the School of Law is available at www.law.missouri.edu. To request ADA accommodations, please contact Associate Dean Rigel Oliveri at 573-882-5068.    

Benefit Eligibility

This position is eligible for University benefits. The University offers a comprehensive benefits package, including medical, dental and vision plans, retirement, and educational fee discounts. For additional information on University benefits, please visit the Faculty & Staff Benefits website at http://www.umsystem.edu/totalrewards/benefits

Equal Employment Opportunity

The University of Missouri is an equal access, equal opportunity, affirmative action employer that is fully committed to achieving a diverse faculty and staff. For more information, call the Associate Vice Chancellor of Human Resource Services/Affirmative Action officer at 573-882-4256.

To request ADA accommodations, please call Human Resource Services at 573-882-7976. TTY users, please call through Relay Missouri, 1-800-RELAY (735-2966) or en Español at 1-800-520-7309.

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

Patent, , , , , , , , ,

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.

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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.