Tag Archives: anticipation

Sequenom: A great discovery should be worth something!

Patent,

Sequenom v. Ariosa (on petition for writ of certiorari 2016)

Sequenom’s petition for writ of certiorari argues that the Federal Circuit and the lower courts have “dangerously overextended Mayo” and its bar to patent eligibility and that clarification is needed from the U.S. Supreme Court.   The science at issue is fascinating and stems from the problem of running dangerous fetal DNA tests.  The discovery here was that fetal DNA can be found floating around the blood of the pregnant mother and that the fetal DNA can be selectively amplified by focusing on the paternally inherited portion of its DNA (rather than the maternally inherited).  Sequenom’s patent claims two simple steps: (1) amplifying paternally inherited DNA from a plasma sample taken from a pregnant female and then (2) detecting the presence of the DNA.  Of course, the technology for these two steps was already known in the art at the time of the invention, and these two steps were (and are) the fundamental steps generally used to detect particular DNA molecules.  The Federal Circuit found these claims unpatentable under Mayo v. Prometheus because they effectively claim the unpatentable natural phenomenon: the existence of paternally-inherited cell-free fetal DNA (cffDNA) in the maternal bloodstream.

The petition for writ of certiorari asks the patent eligibility, but does so in a way that attempts to also lead the court to the answer:

Whether a novel method is patent-eligible where: (1) a researcher is the first to discover a natural phenomenon; (2) that unique knowledge motivates him to apply a new combination of known techniques to that discovery; and (3) he thereby achieves a previously impossible result without preempting other uses of the discovery?

The brief here does a good job of attempting to set-up some dividing lines for the Court – if it wishes to draw them.  The petition will have strong support from industry as well as many in academia.  However, it is unclear whether a ‘win’ here for the patentee would translate to support those seeking to patent software inventions.

[SequenomCertPetition]

Battle over Secret Sales and Secret Commercialization under the AIA

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by Dennis Crouch

Helsinn v. Dr. Reddy’s and Teva (D.N.J. 2016)

The America Invents Act of 2011 (AIA) amended the definitions of prior art under 35 U.S.C. § 102 – up for grabs in this case is whether the changes included a narrowing of the ‘on-sale bar.’  Prior to the AIA, the ‘on sale’ bar blocked patenting of inventions that had been “on sale in this country.”  Although not specific in the statute, courts interpreted the on-sale bar to include secret sales or offers-to-sell.  These typically include closed-door business-to-business and custom sales rather than retail sales.[1]  The AIA amended the statute in a number of ways – most pertinent here is addition of the ‘otherwise available to the public’ clause to Section 102(a)(1).[2]  The provision now reads:

Novelty; Prior Art.—A person shall be entitled to a patent unless—(1) the claimed invention was patented, described in a printed publication, or in public use, on sale, or otherwise available to the public before the effective filing date of the claimed invention; or

The question in this case is how to interpret the statutory phrase “on sale, or otherwise available to the public.”  The otherwise available to the public language suggests that the ‘on sale’ activity is also available to the public.  That reading, however, conflicts with the history of the on sale bar.  Which construction is correct?

The district court in Helsinn sided with the USPTO’s interpretation of the statute – that the AIA modified the definition of on-sale so that it now only includes publicly available sales activity.  This allowed the patentee in the case to avoid an invalidity finding based upon its own prior sales of the patented drug. On appeal, Teva offers its set of arguments to retain the old-meaning:

  1. In ordinary usage, an item is “on sale” whether sold privately or publicly.
  2. Courts have treated “on sale” as a term of art for almost two centuries for sound policy reasons grounded in the Constitution.
  3. Congress did not change the settled meaning of “on sale” by adding the phrase “otherwise available to the public.”
  4. The district court’s reading of “on sale” would render meaningless the crucial word “public” in [102(b)(1)(B)].
  5. A Committee Report and floor statements of two senators cannot accomplish what they failed to accomplish in the statute itself.
  6. The PTO’s interpretation is not entitled to deference.

[TevaSecretSaleBrief]

Professors Mark Lemley (Stanford) and Robert Merges (Berkeley) along with 39 other law professors have filed a brief in support of Teva’s arguments here – arguing that the new interpretation “would radically rewrite the law of prior art.”

The key legal question in the case is simple: did Congress mean to sweep away scores of established cases under the 1952 Act even though it reenacted language unchanged since 1870, merely because it added the phrase “or otherwise available to the public” to the list of prior art categories in the new AIA section 102? We think not. We have three primary reasons. First, the district court’s reading is inconsistent with the language and structure of the AIA. Second, it is inconsistent with Congressional intent in readopting the “on sale” and “public use” language in section 102. Finally, it would sweep away scores of cases decided over two centuries and radically rewrite a host of patent doctrines.

[TevaProfAmicusBrief] Moving forward, Helsinn’s responsive brief will be due April 21.

Of course, the issues here have been substantially debated already with commentators coming out on both sides of the debate:

= = = = =

AIA expanded the scope of prior art in a number of ways. This is one area, however, where it potentially shrunk the body of potential prior art.  Innovative entities with a robust business involving private-transactions and those who rely upon third-party manufacturers are the most likely to benefit by a changed-law.

An important policy question (that could also influence is the construction) is whether eliminating secret sales as prior art would actually allow an innovator secretly commercialize its patent for years and then subsequently obtaining patent rights.

= = = = = =

 

[1] The Federal Circuit has also include a manufacture-supply agreement. (E.g., a supplier seeking for to manufacture and supply your custom inventory).  This issue is currently being reconsidered by the Federal Circuit in the en banc case of Medicines Co. v. Hospira.

[2] The statute also eliminating the ‘in this country’ limitation for on-sale prior art and limited the one-year grace period associated with the on sale bar.

Trolls vs Pirates: Halo/Stryker Oral Arguments

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Today the Supreme Court heard combined oral arguments in the willful infringement cases of:

  • Halo Electronics, Inc. v. Pulse Electronics, Inc., et al. (14-1513); and
  • Stryker Corporation, et al. v. Zimmer, Inc., et al. (14-1520)
  • Read the transcript.

Jeffrey Wall argued on behalf of the patentee-petitioners who argued that the Federal Circuit’s limits on awarding enhanced damages is unduly rigid – especially following the Supreme Court’s Octane Fitness determination.  The U.S. Government has supported the petitioners in this case and presented Assistant to the Solicitor Roman Martinez to argue as amicus curiae.  Carter Phillips argued on behalf of the defendant-respondents.

Wall’s approach was to highlight the general nature of the the statute, which merely states that “the court may increase the damages up to three times the amount found or assessed.” That general statute should be contrasted with the Federal Circuit’s rule that requires separate proof of both objective and subjective willful behavior.  Rather, Wall argued that we should “go back to doing a totality [of the circumstances] inquiry . . . [applying] the principles that historically guided your exercise of discretion.”  Wall also pointed to the what he sees as an important factor in the analysis: that “a patent lawyer can virtually always come up with some non-frivolous defense in litigation” and, that fact makes is virtually impossible to prove that the infringement was objectively reckless.  The U.S. Government agreed that the objectively reasonable defense “creates an arbitrary loophole that allows some of the most egregious infringers to escape enhanced damages.”

MR. MARTINEZ: So recklessness, everyone agrees, is an objective inquiry. And in every other area of law where courts are conducting an objective inquiry, what you ­­ what you’re supposed to do is you’re supposed to take a reasonable man, and you put him in the ­­ the actual person who is accused of wrongdoing, in his shoes. And you take what that actual person knew, and you figure out whether a reasonable man in that person’s shoes would have thought that there was a very high risk that the conduct at issue was unlawful.

And what the Federal Circuit does is not that. What they are essentially doing is taking the reasonable man and giving him the benefit of omniscience, giving him the benefit of hindsight and saying, what facts do we know at the time of trial? And now that we know these facts at the time of trial, . . .

JUSTICE BREYER: I didn’t think they were doing that. I thought what they were doing was saying, we are not going to allow punitive damages in a case where the patent is so weak.

. . . .

MR. MARTINEZ: I think it’s possible to imagine ­­let me ­­ let me make it concrete.

Imagine a case in which there’s intentional violation or a reckless violation based on the facts known at the time. And later the ­… infringer is sued, and he hires a law firm that scours the world, and they find the library in Germany that has a Ph.D. dissertation that has some [publication] that arguably anticipated the invention at issue. So that’s a new fact. It wasn’t in anyone’s head. No one was aware of it at the time the infringement occurred. And maybe that law firm then puts together a reasonable but wrong theory under which the patent is invalid in light of that prior art. We think that’s a case in which the ­­ the conduct was culpable at the time of ­­ of infringement, and we think that’s a case that would warrant enhanced damages.

. . .

MR. PHILLIPS: We’re not talking about a situation here where it’s obvious when something is infringed. There are thousands of patents, hundreds of thousands of patents. There are lots of entities creating new products every day, new services,

. . . .

MR. WALL: [W]e and the PTO and many of Respondents’ amici recognize, the system as it currently stands is out of balance. And we have tried, and I believe we have succeeded, in crafting an approach that balances the Court’s concerns with the need to respect the rights of patentees, including small companies like Halo.

Justice Breyer offered some concern for software companies being accused of infringing weak patents:

MR. WALL: Justice Breyer, the sky didn’t fall for a century and a half, and it’s not going to fall if you reverse the Federal Circuit’s framework, just as it didn’t fall after Octane and Highmark in the fees context.

JUSTICE BREYER: It hasn’t fallen? Go look at the market shares of the different companies that are seriously involved in software. . . . I think it’s unfortunate that Congress hasn’t passed a special regime for those kinds of patents, but they haven’t.

. . .

MR. PHILLIPS: This is not a classic copying case. I mean, in a lot of ways this case comes down to sort of trolls versus pirates in terms of how you want to analyze it.

. . . .

JUSTICE SOTOMAYOR: Mr. Phillips, there’s a whole lot of worry articulated by Justice Breyer and reflected in your briefs about protecting innovation.But there’s not a whole lot of worry about protecting the patent owner. I can’t  forget that historically enhanced damages were automatic, and they were automatic because of a policy judgment that owning a patent entitled you to not have  people infringe willfully or not willfully. And I accept that at some point there was a different judgment made that ­­ that good­faith infringers should be treated differently than other infringers, willful infringers.

But I don’t know that that swung things so far the other way that it can only be that, if you come up with something, any defense whatsoever in the litigation that’s not frivolous, that that gets you out of enhanced damages.

Some of the conversation focused on the replacement test:

JUSTICE SOTOMAYOR: It can’t be that they can give enhanced penalties on whim.

MR. WALL: That’s right.

JUSTICE SOTOMAYOR: All right? So if it’s not whim, what is it? How do we articulate a test that protects what Justice Breyer is concerned about, which I think is a legitimate concern, but doesn’t entrench a position that just favors you?

MR. WALL: We think the statute was invoked for various purposes, not just to punish infringement. . . . [W]hat the parties are really debating is the nature of the infringement. That needs to be intentional or reckless based on the facts as they were known to the infringer. . . . the strength of the notice . . . Reed factors . . .

JUSTICE SOTOMAYOR: I Don’t want to adopt that test. How do I articulate this in a more generalized way?

MR. WALL: I think what you would say is that in judging whether a reasonable person would have thought that there was a really high risk, you’ve got to take account of both the strength of the notice, what kind of notice were they on of the patent, and what would have been commercially reasonable in the industry as it exists. And I think that ­­ those factors and those limitations are going to take account of the vast bulk of what Justice Breyer and what Respondents are are concerned about.

. . . .

MR. PHILLIPS: [Good luck finding] tort cases in which the eggshell plaintiff gets punitive damages because the defendant overreacted.

In addition to the elements of the test, the court is also addressing the standards of proof and review.

JUSTICE GINSBURG: Can we at least peel off the clear and convincing evidence that seems to come out of nowhere and the standard of de novo review rather than abuse of discretion?

MR. PHILLIPS: I would desperately ask you not to take out de novo review because we’re talking about an objective standard; it’s really almost ­­ it’s essentially a question of law. The issue is, is there an objectively reasonable basis for what’s been done here? [and clear and convincing evidence standard is dicta to this case]

. . . .

JUSTICE GINSBURG: You ­­ care about de novo review in the Federal Circuit rather than testing the district court’s determination for abuse of discretion.

A substantial amount of example-time focused on “copying”, which Mr. Wall identified as the “typical” case and the extent that enhanced damages should be limited to “willful” behavior.

For this case, it appears likely that the majority will overrule Seagate but the question remains open as to what will be the replacement rule.

 

 

 

Federal Circuit Again Revives Zoltek Case: Who Invented Stealth Technology

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By Dennis Crouch

Zoltek Corp. v. US (Fed. Cir. 2016)

The interesting and long-running Zoltek case has received another decision from the Federal Circuit – this time reversing the Court of Federal Claims ruling that Zoltek’s stealthy patent claims are invalid.

Zoltek is the owner of US Reissue Patent No. Re 34,162[1] issued January 19, 1993.  In 1996, Zoltek sued the U.S. government for infringing the patent – in particular, the patentee argued that the B-2 Bomber and F-22 Fighter both used carbon fiber sheets that infringed the patent rights.

As a starting point for most claims against a government is with sovereign immunity. The U.S. Government claims sovereign immunity against suits except where waived.  In the patent context, the U.S. government has waived its immunity, but limits the procedure and form of recovery. In particular, 28 U.S.C. § 1498(a) provides that “the owner’s remedy shall be by action against the United States in the United States Court of Federal Claims for the recovery of his reasonable and entire compensation for such use and manufacture.”  The statute also provides cover for contractors or other non-government-entities who infringe the patent “with the authorization or consent of the Government” so that those actions must also be pursued against the U.S. Government.  The Court of Federal Claims is located in the same Madison Place building as the Court of Appeals for the Federal Circuit.

In its prior en banc decision from the case, the Federal Circuit ruled that Section 1498(a)’s infringement statute should be broadly read to encompass Section 271(g) infringement.

Following that decision, the Court of Federal Claims held a trial on validity and found that the asserted claims were invalid as obvious and/or lacking written description.  The court has reversed that holding and remanded.

Omitted Elements:  During reissue prosecution of the manufacturing process claims, the applicant deleted the initial step of “oxidizing and stabilizing the carbonizable fiber starting material at an elevated temperature.”  That deletion clearly broadened the patent claim – however, a broadening reissue was proper because it had been filed within two years of the grant of the original patent.  The CFC found, however, that the new breadth went beyond the original written description and thus rendered the claim invalid – holding that “the preparation of the known starting material must be included in the claim” even if known in the prior art.  On appeal, the US Government argued for affimance since “the specification does not state that these steps need not be performed by the same entity.”

On appeal, the Federal Circuit completely rejected this analysis: “The question of who performs steps of a fully described invention, including preparation of a known starting material, is not a matter of the written description requirement.”

The original specification plainly, and without dispute, describes that the starting material is an oxidized and stabilized fiber, cites references showing this known material, and describes its preparation. That a previously oxidized and stabilized starting material was known to a person of ordinary skill in the field was recognized [as well] . . . . The question of who performs steps of a fully described invention, including preparation of a known starting material, is not a matter of the written description requirement.

The purpose of the written description requirement is to assure that the public receives sufficient knowledge of the patented technology, and to demonstrate that the patentee is in possession of the invention claimed. . . . The written description need not include information that is already known and available to the experienced public. . . .

The CFC stated its concern that the reissue patent claims could be infringed by an entity that did not itself make the starting material, but purchased the known starting material from a commercial source. . . . A validly obtained reissue does not violate the written description requirement if the patentee can reach an enlarged scope of possible infringement. It is not an improper broadening amendment when a reissue applicant, with the considered agreement of the reissue Examiner, substitutes a preparatory step known to those skilled in the art at the time of the invention with a requirement to start with the product of that known preparatory step. The CFC’s emphasis on who might infringe the broadened reissue claims is an issue of infringement, not written description. We conclude that the CFC erred in holding reissue claims 1–22 and 33–38 invalid for failure to meet the written description requirement of section 112. That ruling is reversed.

The issue here is definitely interesting – in particular, I see the question of whether the starting-material is available as prior art to be a total red-herring since its manufacture was sufficiently described in the specification.  The question is whether the patentee described an invention that began by “obtaining” rather than “making” the starting material.  The Federal Circuit didn’t really answer that question. I will note that none of the parties cited Gentry Gallery, Inc. v. Berkline Corp., 134 F.3d 1473 (Fed. Cir. 1998) ([not announcing] an omitted essential elements test).

On Obviousness, the Federal Circuit took the government to task as well – finding substantial errors in the Government’s expert testimony and noting the admitted novelty of the fiber sheets created by the inventors. “Instead, the government’s argument appears to be that since [its expert] Dr. Sullivan is a renowned scientist in this field, and since Dr. Sullivan was able to reproduce the Figure 4 graph, it was obvious to do so. This was error.”[2]

Section 101 – The government had also argued that the patented “method of manufacturing . . . carbon fiber sheets” lacked subject matter eligibility under Section 101 as effectively claiming a law of nature.  From the CFC Decision rejecting the eligibility argument:

The Government argues that the claims are invalid because they embody nothing more than a law of nature. For example, the Government points to Figure 4 of the patent to support its contention. It argues that Figure 4, which charts a relationship between heat treatment temperature and surface resistance, demonstrates the ineligibility of the ‘162 Patent claims by showing that the claims embody nothing more than a natural law that links temperature to resistance. Relying upon the testimony of its expert, Dr. Brian Sullivan, the Government argues that the independent claims at issue (claims 1 and 33) consist of three parts: (1) the manufacture of carbon fibers using conventional carbonization equipment and techniques; (2) the manufacture of a sheet product using conventional techniques and processes; and (3) “the concept that if you control the fibers’ volume electrical resistivity it gives you the ability to control the sheet or surface resistivity of the final carbon mat productThe Government argues that these three parts render the ‘162 Patent’s claims similar to those found ineligible in Flook and Mayo. . . . The Court agrees with Zoltek [and disagrees with the Government]. The Government’s comparisons to the ineligible claims in Flook and Mayo are much less apt than comparison to Diehr.

The CFC did reject that argument and the Government did not appeal that issue.

= = = =

[1] The ‘162 Reissue Patent originally issued in 1988 as U.S. Patent No. 4,728,395 and then reissued in 1993. Zoltek obtained the patent rights when it bought Stackpole Fibers in 1988.

[2] See Uniroyal, Inc. v. Rudkin-Wiley Corp., 837 F.2d 1044, 1051 (Fed. Cir. 1988) (“[t]hat which may be made clear and thus ‘obvious’ to a court, with the invention fully diagrammed and aided . . . by experts in the field, may have been a break-through of substantial dimension when first unveiled.”); see also KSR (“A factfinder should be aware, of course, of the distortion caused by hindsight bias and must be cautious of arguments reliant upon ex post reasoning”); W.L. Gore, 721 F.2d at 1553 (“It is difficult but necessary that the decisionmaker forget what he or she has been taught at trial about the claimed invention and cast the mind back to the time the invention was made (often as here many years), to occupy the mind of one skilled in the art who is presented only with the references, and who is normally guided by the then-accepted wisdom in the art.”).

Strategic Decision Making in Dual PTAB and District Court Proceedings

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By Jason Rantanen

Saurabh Vishnubhakat (Texas A&M), Arti Rai (Duke) and Jay Kesan (Illinois) recently released a draft of their empirical study of Patent Trial and Appeal Board proceedings, Strategic Decision Making in Dual PTAB and District Court Proceedings.  Their study takes a close look at the relationship between IPR and CBM proceedings and district court proceedings to assess the “substitution hypothesis”: the claim that post-grant review is “an efficient, accessible and accurate substitute for Article III litigation over patent validity.”

In addition to an array of descriptive statistics on post-grant proceedings at the PTO, the authors find that:

  • “Although IPR petitions may challenge patent claims as to either novelty or nonobviousness, nonobviousness challenges predominate across all major technology areas.” (p. 18)
  • During the period studied (September 16, 2011 to June 30, 2015), “a total of 14,218 patents were either challenged in an IPR or CBM petition, asserted in litigation, or both. A subset of 11,787 patents were involved in litigation alone; 324 patents were involved in a USPTO proceeding alone; and 2,107 patents were involved in both. Accordingly, about 15.2% of litigated patents are also being challenged in the PTAB, and about 86.7% of IPR- or CBM-challenged patents are also being litigated in the federal courts.” (p. 20) [edited on Feb. 12, 2016]
  • Overall, most CBM and IPR petitions are filed by those with a direct self-interest flowing from infringement litigation.  78% of CBM petitioners, and 70% of IPR petitioners, “have previously been defendants in district court litigations involving the patents they later challenge in CBM [or IPR] review.” (p. 23)  By this the authors simply mean that the petitioners showed up as defendants in an infringement proceeding on a given patent before filing for IPR or CBM review on that patent.  They likely continued to be infringement defendants during the pendency of the IPR or CBM (the authors did not track that).

Vishnubhakat et. al’s third finding has two implications.  First, a substantial number of CBM and IPR petitions are filed by parties who are not concurrently defendants in litigation involving those patents.  The existence of this group merits further study. The authors suggest a range of motivations driving these petitions.

Second, notwithstanding that group, the vast majority of CBM and IPR petitions are filed by parties that are in all likelihood simultaneously litigating the patents in district court.  Given the substantial amount of overlap, and the potential for strategic behavior by accused infringers, the authors suggest that the same claim construction standard should be applied by both forums–a point with implications for Cuozzo Speed Technologies v. Lee.

Read the article here: http://ssrn.com/abstract=2731002

 

On Appeal, Abuse-Deterrent OxyContin Patents are Invalid

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By Dennis Crouch

Purdue Pharma v. Epic Pharma (Fed. Cir. 2016)[1]

In an important Hatch-Waxman related decision, the Federal Circuit has affirmed the lower court’s holding that Purdue Pharma’s abuse deterrent OxyContin patent claims are invalid as anticipated and/or obvious over the prior art.[2]

Of interest, it appears that the patentee was harmed here by the Patent Act’s objective approach to obviousness that, according to the statute, must be considered without regard to the actual “manner in which the invention was made.”  In particular, during the process of creating its low-ABUK oxycodone, the innovators first discovered an 8α impurity isomer created during drug manufacture that led to a problematic 14-hydroxy compound.  The claimed invention was a product having a reduced 14-hydroxy  level.  In the appeal, the Federal Circuit noted that, while the 8α impurity may have been a new discovery, it was not necessary to achieve the claimed low-ABUK results.  In particular, the court noted that reduction of both the 8α and 8β impurities would also achieve the same result without having to distinguish between the two — affirming that “a skilled artisan would recognize that hydrogenation could be used to remove the remaining 14-hydroxy, regardless of the source of the 14-hydroxy.”

Of course, the claims did expressly require that the impurity being reduced be “derived from 8α.”  That limitation, however, was deemed an illusory product-by-process limitation.

We also conclude that, because “derived from 8α[]” is a process limitation, the district court did not err in disregarding the limitation in its obviousness analysis. We have clearly stated that “‘[i]n determining validity of a product-by-process claim, the focus is on the product and not the process of making it.’” Greenliant Sys., Inc. v. Xicor LLC, 692 F.3d 1261 (Fed. Cir. 2012) (quoting Amgen Inc. v. F. Hoffman-La Roche Ltd., 580 F.3d 1340 (Fed. Cir. 2009)). “That is because of the . . . longstanding rule that an old product is not patentable even if it is made by a new process.” Id.; see also SmithKline Beecham Corp. v. Apotex Corp., 439 F.3d 1312, 1317 (Fed. Cir. 2006) (“It has long been established that one cannot avoid anticipation by an earlier product disclosure by claiming . . . the product as produced by a particular process.”); In re Thorpe, 777 F.2d 695, 697 (Fed. Cir. 1985) (“If the product in a product-by-process claim is the same as or obvious from a product of the prior art, the claim is unpatentable even though the prior product was made by a different process.”).

In Amgen, the Federal Circuit did find that the particular claimed process will be relevant if it imparts distinguishing structural differences on the resulting product.  Here, however, the court found that the fact that the negative 14-hydroxy byproduct was derived from 8α “imparts no structural or functional differences” over the prior art that already included low-ABUK product achieved without focusing on the 8α isomer.

Generic OxyContin has been on the market for the past year – following the district court judgment that has now been affirmed – and so this decision should not have a major market impact.

This case here is one part of a complex web of battles that Purdue appears to be fighting to protect its exclusive rights to sell OxyContin – or at least delay competition. Although these asserted claims have been found invalid, Purdue is asserting a set of new patents, including U.S. Patent Nos. 8,309,060, 8,337,888, 8,808,741, 8,894,987, 8,894,988, 9,060,976, 9,034,376 and 9,073,933.

= = = = =

[1] App. No. 2014-1294 (Fed. Cir. 2016); on appeal from In re OxyContin Antitrust Litig., 994 F. Supp. 2d 367 (S.D.N.Y. 2014).

[2] Asserted patents include U.S. Patent No. 7,674,799 (“’799 patent”), U.S. Patent No. 7,674,800 (“’800 patent”), U.S. Patent No. 7,683,072 (“’072 patent”) (collectively, “the low-ABUK patents”), and U.S. Patent No. 8,114,383 patent (“’383 patent”).

Due Process and Separating Powers Within an Agency

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by Dennis Crouch

In this decision, the Federal Circuit has affirmed that the IPR procedure allowing the same PTAB panel to both institute an IPR and issue the final decision cancelling the claims is proper. In the process, the divided court rejected both a constitutional and statutory challenge. 

In Ethicon Endo-Surgery v. Covidien (Fed. Cir. 2016)[1], a divided Federal Circuit has affirmed the PTAB’s final judgment that all of Ethicon’s challenged patent claims are invalid as obvious.  The court also confirmed that the PTAB’s procedure of having the same panel decide both the IPR initiation petition and the final decision is proper. “Neither the statute nor the Constitution precludes the same panel of the Board that made the decision to institute inter partes review from making the final determination.”

Ethicon’s U.S. Patent No. 8,317,070 is directed to a surgical stapling device used in endoscopic surgery.  The purported novelty of the stapler is that it uses (a) two sets of staples (with different heights) and (b) staples with non-parallel legs.  The prior art included surgical staplers with each of these features, but no prior art teaches the combination of the two. “Thus, the purported inventive aspect of the ’070 patent is the combination of these two features in a surgical stapler.”

From the majority’s perspective, the case involves a straightforward application of KSR’s holding that a “combination of familiar elements according to known methods is likely to be obvious when it does no more than yield predictable results.”  Here, the court noted that the patent itself “discloses no particular synergy resulting from the combination.”  Ethicon did present evidence of commercial success of Covidien’s infringing product. However, that argument failed because, according to the court, Ethicon provided no evidence of nexus between the particular inventive combination of features and the proven commercial success.

Nowhere does Ethicon demonstrate, or even argue, that the commercial success of the Covidien products is attributable to the combination of the two prior art features—varied staple heights and non-parallel staple legs—that is the purportedly inventive aspect of the ’070 patent.

I’ll pause here to note that that the court’s nexus requirement here appears to be doctrinally different than the more traditional requirement that the commercial-success be linked to the claimed invention (as a whole) rather than the clearly more stringent inventive features of the claimed invention.  See Wyers v. Master Lock Co., 616 F.3d 1231, 1246 (Fed. Cir. 2010) (“the patentee must establish a nexus between the evidence of commercial success and the patented invention.”).

= = = = =

Ethicon also argued (unsuccessfully) that the PTAB’s procedure violated Ethicon’s procedural due process rights. In particular, Ethicon argued that the final decision was invalid because it was “made by the same panel that instituted the inter partes review.”   The appellate panel rejected that argument- finding that “[t]he inter partes review procedure is directly analogous to a district court determining whether there is ‘a likelihood of success on the merits’ and then later deciding the merits of a case” and that the initial decision to grant a petition did not create any presumption of prejudice or bias against the patentee.

Ethicon’s best (but still weak) argument was that the AIA does not permit the PTAB to make the institution determination.  In particular, the statute gives the PTAB power and authority to make final determinations regarding an IPR, but assigns the USPTO Director the power to institute IPRs.  The statutory scheme, according to Ethicon, requires separation of these two functions.   On appeal, the Federal Circuit rejected that argument as well – finding that the USPTO director has implicit authority to delegate her authority to officials within the agency.

Ethicon argues that because Congress (1) specifically gave the Director the power to institute, see, e.g., 35 U.S.C. § 314(a), (2) did not explicitly give the Director authority to delegate the institution decision to the Board, and (3) gave the Board the power to make the final determination, Congress intended to keep the functions of institution and final decision separate.

= = = = =

The majority opinion was penned by Judge Dyk and joined by Judge Taranto.  Judge Newman wrote in dissent arguing that the statutory scheme created a clear distinction:

At the first stage, the Director determines whether the review is to be instituted. 35 U.S.C. § 314(a) (“The Director may not authorize an inter partes review to be instituted unless the Director determines that the information presented in the petition . . . and any response . . . shows that there is a reasonable likelihood that the petitioner would prevail with respect to at least one of the claims challenged in the petition.”). (Of course, the Director may designate an examiner or solicitor to conduct this initial review.)

If instituted by the Director, the Board then conducts a trial on the merits. 35 U.S.C. § 316(c). . . .

The bifurcated design of post-grant review is clear not only from the language of §§ 314(a) and 316(c), but pervades the structure of these post-grant proceedings. Congress unambiguously placed these separate determinations in different decision-makers, applying different criteria. The majority’s endorsement of the PTO’s statutory violation departs not only from the statute, but also from the due process guarantee of a “fair and impartial decision-maker.”

= = = = =

Phil Johnson (President of the Intellectual Property Owners Association) argued the case on behalf of Ethicon while Kathleen Daley of Finnegan argued for Covidien and Katherine Twomey Allen of the DOJ represented the USPTO as an intervenor.

The parties relied upon Supreme Court for support and the case has some chance of heading up.

= = = = =

[1] Federal Circuit Appeal No. 14-1771, appeal of PTAB IPR 2013-00209. [EthiconDecision]

Wi-Lan v. Apple: “Clarification” or “reconstruction”?

Patent, , ,

By Jason Rantanen

Wi-Lan, Inc v. Apple Inc. (Fed. Cir. 2016) Download Opinion
Panel: Reyna (author), Wallach, Hughes

Although precedential, this case doesn’t really break new patent-law ground.  Instead, it offers a data point in the tricky issue of whether a post-verdict modification to the construction of a claim constitutes a permissible “clarification” or an impermissible “reconstruction.”    The opinion also provides an example of how claim construction can operate at multiple levels, in this case by applying to both the meaning of a given term and the meaning of that term in the broader context of the claim.

Wi-Lan, the owner of RE37,802, a patent relating to wireless data communication, sued Apple and others for infringement based on their manufacture and sale of standards-compliant products. Claim 1 of the ‘802 patent reads:

1. A transceiver for transmitting a first stream of data symbols, the transceiver comprising:

a converter for converting the first stream of data symbols into plural sets of N data symbols each;

first computing means for operating on the plural sets of N data symbols to produce modulated data symbols corresponding to an invertible randomized spreading of the first stream of data symbols; and

means to combine the modulated data symbols for transmission.

(emphasis added).  The critical claim constructions related to “modulated data symbols,” which the district court construed to mean “data symbols that have been spread apart by spreading code” and “first computing means,” which the district court construed to be a means-plus-function element linked to particular structure disclosed in the specification.   Applying these constructions, a jury found that Apple did not infringe and that the ‘802 patent was invalid as anticipated.  Following trial, the district judge denied Wi-Lan’s request for judgment as a matter of law (JMOL) on infringement but granted its request for JMOL of no invalidity based on a modified construction of the structure to which “first computing means” corresponded.

The Interdependent Text and Claim Construction

On appeal, Wi-Lan challenged the district court’s denial of JMOL on infringement (effectively challenging the jury verdict of no infringement).  This issue largely turned on an issue of claim construction: whether the district court’s constructions precluded Apple’s noninfringement defense, a defense premised on the argument that the claims required that data symbols be randomized before combining them, while Apple’s products combined the symbols before randomizing them.

On appeal, the Federal Circuit agreed with Apple.  The text of the claim indicated that the modulated data symbols had to be randomized before combining them.  The “first computing means” produces “modulated data symbols corresponding to an invertible randomized spreading of the first stream of data symbols.'”  The second means then combines “the modulated data symbols for transmission.”  Since “[s]ubsequent uses of the definite articles ‘the’ or ‘said’ in a claim refers back to the same term recited earlier in the claim,” slip op. at 10, quoting Baldwin Graphic Sys., Inc. v. Siebert, Inc., 512 F.3d 1338, 1342 (Fed. Cir. 2008), the term “the modulated symbols” in the second means element referred back to the randomized modulated symbols produced by the first means element, thus requiring randomization-before-combination.  This construction was consistent with the specification.

Wi-Lan’s principal contention was that during its pre-trial construction of  “modulated data symbols,” the district court rejected Apple’s argument that the term requires randomization.   But, the Federal Circuit held, the district court’s construction only involved the unmodified, generic term “modulated data symbols.”   Apple’s argument involved the intersection of the full language in the first means element with the use of “modulated data symbols” in the second means element:  “Even though generic ‘modulated data symbols’ do not have to be randomized, the recited ‘modulated data symbols corresponding to an invertible randomized spreading‘ do have to be randomized.”  Slip Op. at 11.  Through its use of “the,” the  second means element referred back to those randomized data symbols.  Since Apple’s products combined then randomized, there was no direct infringement.  (The Federal Circuit also disposed of Wi-Lan’s argument of infringement under the doctrine of equivalents.)

Post-verdict claim construction

Prior to trial, the district court construed the means-plus-function element “first computing means” as “element 12 of Figures 1 and 4, columns 2:6–10, 2:36–40, 2:58–62, 4:2–12, and 4:35–44, and equivalents thereof.”  Using this construction, the jury found the claims to be anticipated by a prior art reference that used real multipliers to randomize the “modulated data symbols” rather than complex multipliers.  In granting Wi-Lan’s motion for JMOL of no invalidity, however, the district court “determined that, although its construction of computing means ‘does
not specifically provide for a complex multiplier,’ a complex multiplier was nevertheless necessary because ‘expert witnesses from both sides agreed that complex multipliers are part of the structure of the ‘first computing means’ as taught by the ’802 patent.'”  Slip Op. at 8.

On appeal, the Federal Circuit concluded that this was an instance of impermissible post-verdict reconstruction.  “‘[I]t is too late at the JMOL stage to argue for or
adopt a new and more detailed interpretation of the claim language and test the jury verdict by that new and more detailed interpretation.’ Hewlett-Packard Co. v. Mustek Sys., Inc., 340 F.3d 1314, 1321 (Fed. Cir. 2003).”  Slip Op. at 16.  None of the corresponding structure in the court’s pre-trial construction mentioned complex multipliers or referred to the patent figure involving complex multipliers.

While a district judge may “adjust constructions post-trial if the court merely elaborates on a meaning inherent in the previous construction,” Mformation
Techs., Inc. v. Research in Motion Ltd., 764 F.3d 1392, 1397 (Fed. Cir. 2014), this was not such a case.  Such “clarification” is allowed because it only makes “plain . . . what should have been obvious to the jury.”  Slip Op. at 17, quoting Cordis Corp. v. Boston Scientific, 658 F.3d 1347, 1355–57 (Fed. Cir. 2011).  Here, the implicit requirement of a complex randomizers was not obvious to the jury, particularly given conflicting testimony over whether the claims actually did require the use of a complex randomizer.  The result was that the district court did not simply elaborate on the meaning of its prior claim construction in the post-verdict opinion, but altered that construction, something that it could not do.

Federal Circuit: Testing Vehicle Operators for Impairment is an Unpatentable Abstract Idea

Patent, , , ,

Vehicle Intelligence v. Mercedes-Benz (Fed. Cir. 2015) (Non-precedential opinion)

Vehicle Intelligence and Safety LLC is the owner of United States Patent Number 7,394,392 vehicle safety improvements. In particular, the patent claims systems and methods for testing vehicle operators and then taking control of the vehicle if the operator is deemed impaired. Senior Judge Hart of the Northern District of Illinois ruled on the pleadings (12(c)) that the asserted claims were invalid as being drawn to patent-ineligible subject matter under Section 101 of the Patent Act. On appeal, the Federal Circuit here affirms – holding that “the disputed claims cover only abstract ideas coupled with routine data-gathering steps and conventional computer activity.” An early potential strike against the patent that the inventor, Kevin Roe, is also the patent attorney who prosecuted the case and the litigator who filed the appellate briefs.

Claim 16 reads as follows:

A system to screen an equipment operator, comprising:

a screening module to screen and selectively test an equipment operator when said screening indicates potential impairment of said equipment operator, wherein said screening module utilizes one or more expert system modules in screening said equipment operator; and

a control module to control operation of said equipment if said selective testing of said equipment operator indicates said impairment of said equipment operator, wherein said screening module includes one or more expert system modules that utilize at least a portion of one or more equipment modules selected from the group of equipment modules consisting of: an operations module, an audio module, a navigation module, an anti-theft module, and a climate control module.

In applying Alice Corp., Federal Circuit began with step one – is the claim drawn to ineligible subject matter? Answer: Yes. Here, the court found the claims directed toward “the abstract idea of testing operators of any kind of moving equipment for any kind of physical or mental impairment.”

Although the court did not explain particularly how the testing of operators for impairment fits within the definition of an abstract idea, the court made clear that one element of its decision was based upon the fact that the claims were broadly written and not limited to particular impairments, particular screening or testing methods, the method of programming the claimed “expert system,” or the “nature” of the control.

[C]ritically absent from the entire patent is how the existing vehicle equipment can be used to measure these characteristics; assuming these measurements can be made, how the decision module determines if an operator is impaired based on these measurements; assuming this determination can be made, how the decision module decides which control response to make; and assuming the control response decision can be made, how the “expert system” effectuates the chosen control response. At best, the ‘392 patent answers the question of how to provide faster, more accurate and reliable impairment testing by simply stating “use an expert system.” Thus, in the absence of any details about how the “expert system” works, the claims at issue are drawn to a patent ineligible abstract idea, satisfying Mayo/Alice step one.

An important take-away from this analysis is that the concept of an abstract-idea is closely tied-in with the novelty of the claims themselves – even at step-one of Alice. Thus, contrary to what many patent attorneys continue to believe, whether a concept is an “abstract idea” will depend upon the invention’s priority dates. However, on that same point, the Court rejected Vehicle Intelligence’s argument that its claim did not embody that broad concept of “testing-operators and taking control” since prior patents held by other companies already disclosed and claimed other methods of achieving those same results. The court rejected that notion since full-preemption is not a requirement of the Alice test.

Readers will also notice the linkage between the court’s analysis for eligibility and the doctrines of written description and indefiniteness. The suggestion in this case appears to be that the same claim could have been eligible if the patentee had provided (in the specification) a full explanation of how to implement its system.

On step two of Alice, the court found that “nothing” in the claims disclosed “any inventive concept sufficient to transform the abstract idea of testing operators of any kind of moving equipment for any kind of physical or mental impairment into a patent-eligible application of that idea.” On this point, the patentee argued that its claims were tied to particular device (one of “an operations module, an audio module, a navigation module, an anti-theft module, and a climate control module.”). However, the court found that the patent did not include enough of an explanation of “how the methods at issue can be embedded into these existing modules.”

The court also notes that being “tied to particular machines” is not “sufficient to confer eligibility.”

Although non-precedential, the case will certainly reverberate – especially the court’s refusal to limit the definition of ‘abstract idea’ and its continued acceptance of judgment-on-the-pleadings as the proper method for dismissing cases on Section 101.

Joe Herndon at Patent Docs has more.

Two-Step Printed Matter Doctrine: (1) Is it Printed Matter?; (2) Do we give it patentable weight?

Patent, , , ,

By Dennis Crouch

The printed matter doctrine probably arises less than it should as its contours are likely integral to an understanding of the patentability of software related inventions.  Like the abstract idea test the doctrine barring the patentability of certain “printed matter” is nonstatutory and judicially created.

In the recent DeStefano case, the Federal Circuit vacated a PTAB anticipation decision that was based upon the printed matter doctrine — holding that the Board erred in its understanding of the test.

Distefano claims a user-directed method of designing an electronic document.[1] The PTAB found that all of the elements of the claim were anticipated by a prior art reference except for the claimed requirement of “selecting a first element from a database including web assets authored by third party authors and web assets provided to the user interface from outside the user interface by the user.”  Rather than finding that element in the prior art, the Board ruled that it should be given no patentable weight under the printed matter doctrine.

The printed matter doctrine has a long history and generally stands for the principle that no patentable weight should be given to the content of information recorded in a substrate.[2]  leading case in the area continues to be 1931 Russell decision.[3] In Russell, the CCPA ruled that a “mere arrangement of printed matter on a sheet or sheets of paper, in book form or otherwise, does not constitute any new and useful art.”

The Federal Circuit has ruled on several printed matter cases — holding that the content labels providing dosage instructions, instructions for performing tests, and numbers printed on a wristband were all printed matter.[4] on the other side, the Federal Circuit ruled in Lowry that data structures themselves should not be considered printed matter if they include “information regarding physical interrelationships within a memory.”[5]

To be clear, the question of whether or not a claim element is printed matter represents just the first step in the process. Once an element is determined to be printed matter the court must take the next step of determining whether or not it should be given patentable weight.  Regarding the second step, the court writes here that the “common thread amongst all of these cases is that printed matter must be matter claimed for what it communicates.”  Thus, information content can be given patentable weight if it “has a functional or structural relation to the substrate.”

Coming back to DiStefano’s case, the appellate panel here ruled that the claimed “selecting a first element” step failed the threshold question and was not itself a claim directed toward printed matter. The court writes:

Although the selected web assets can and likely do communicate some information, the content of the information is not claimed. And where the information came from, its “origin,” is not part of the informational content at all. Nothing in the claim calls for origin identification to be inserted into the content of the web asset.

Thus the case was vacated and remanded back to the patent office for another go-round.  I’ll note here that this is the second time the Federal Circuit has reached a decision in this case. In its 2014 unpublished decision the Federal Circuit also rejected the board’s attempt at an anticipation rejection-that time finding that the rejection was an “new ground of rejection” that required a remand.[6]

The claim itself appears fairly simple and straightforward, and one that is, in my guesstimate, likely directed to an idea already known.[7] Of course, so far the patent office has been unable to find the right references and unfortunately had to really stretch the law in this one.

On remand, it will be interesting to see whether the patent office follows its usual procedure of allowing a case after a successful appeal by the applicant, or will a new search and new rejection be submitted?

My understanding is that Mr. DiStefano continues to own the patent via his Patent Trust LLC.  Patents in his portfolio include US Patent Numbers 6,331,400, 6,771,291, 7,353,199, 7,996,259, 8,335,713, 8,412,570, 8,417,567, 8,423,399, 8,442,860, 8,589,222, 8,650,076, 8,768,760, 8,781,890 and 8,996,398.[8]

= = = = =

[1] US patent Application No. 10/868,312, claim number 24.

[2] See 1 Chisum on Patents section 1.02.

[3] In re Russell, 48 F.2d 668, 669 (CCPA 1931)(indexing the names in directories and dictionaries).

[4] AstraZeneca LP v. Apotex, Inc., 633 F.3d 1042, 1048 (Fed. Cir. 2010); King Pharm., Inc. v. Eon Labs, Inc., 616 F.3d 1267, 1279 (Fed. Cir. 2010); In re Ngai, 367 F.3d 1336, 1337–38 (Fed. Cir. 2004); and In re Gulack, 703 F.2d 1381, 1385 (Fed. Cir. 1983).

[5] In re Lowry, 32 F.3d 1579 (Fed. Cir. 1994).

[6] In re DiStefano, 562 F. App’x 984, 984 (Fed. Cir. 2014).

[7] The text of the claim is as follows:

A method of designing, by a user in a user interface having first and second display regions each capable of displaying a plurality of element, an electronic document, comprising:

selecting a first element from a database including web assets authored by third party authors and web assets provided to the user interface or outside the user interface by the user;

displaying the first element in the second display region;

interactively displaying the electronic document in the first display region;

modifying the first element displayed in the second display region upon receiving a first command to modify the first element in the second display region; and

displaying the modified first element in the first display region, wherein the modified first element forms at least part of the electronic document.

[8] Thomas L DeStefano III, LinkedIn biography available at https://www.linkedin.com/in/thomas-l-distefano-iii-a538811.

IPR: Proving Patentability before Amendment

Patent, , , , , ,

By Dennis Crouch

In Prolitec, Inc. v. ScentAir Technologies,[1] the Federal Circuit has affirmed a USPTO inter partes review (IPR) decision cancelling Prolitec’s air-freshener diffuser claims.  The patent at issue[2] is the subject of a co-pending lawsuit between the parties that was stayed in 2013 — awaiting the IPR outcome.[3]

Here, the patent included a claim limitation requiring a diffusion head “mounted to” a reservoir.  The patentee wanted that term to be limited to require permanent joining of the head to the reservoir.

Too Clever Specification Drafting?: To achieve that permanent-joining result, the patentee first argued for a narrow claim construction of the “mounted term.”  That approach failed at the PTAB and has been affirmed on appeal.  The failure is to the ordinary patent drafting strategy, employed by the patentee, of using non-definite and non-limiting terms such as “may” to describe the role of various embodiments in the specification so as to not unduly limit claim scope. Here, in particular, the specification had indicated the possibility of a permanent joining in a disposable fashion, but, by clever specification drafting, had not foreclosed the potential for non-permanent mounting.  Thus, that narrowing argument was foreclosed by the patentee’s own prior actions.

No Amendment without Major Proof: As an alternative approach, the patentee also requested permission to amend its claims to replace “mounted” term with “permanently joined.”  As per its usual modus operandi, the Patent Trial and Appeal Board (PTAB) denied the motion to amend.  In particular, the PTAB found that Prolitec had failed to prove that its proposal was patentable over the prior art of record.  On appeal, the Federal Circuit affirmed – first reiterating its prior statement in Microsoft Corp. v. Proxyconn, Inc.[4] that the Board can require a patentee to establish patentability before allowing an amendment.  Here, the Federal Circuit extended that doctrine to affirm the PTAB rule that, prior to amendment, patentability must be established over all prior art of record (in both the IPR and prosecution history). That rule, according to the Federal Circuit, is not contrary to any statute and is also “reasonable.”  Further, the court held that the requirement of “establishing patentability” includes both novelty and nonobviousness.  On the merits, the court affirmed that the patentee had failed to show that its amended claims were non-obvious over the combination of references cited in the IPR petition and found in the prosecution history file.

The majority opinion was written by Chief Judge Prost and joined by Judge Taranto.

Writing in dissent, Judge Newman argued that the refusal to allow an amendment was “contrary to both the purpose and the text of the America Invents Act. . . . [E]ntry of a compliant amendment is [a] statutory right, and patentability of the amended claim is properly determined by the PTAB during the IPR trial, not for the first time at the Federal Circuit.”

= = = =

[1] Prolitec, Inc. v. ScentAir Technologies, App. No. 15-1020, (Fed. Cir. Dec. 4, 2015) (slip opinion available at http://www.cafc.uscourts.gov/sites/default/files/opinions-orders/15-1020.Opinion.12-1-2015.1.PDF)

[2] U.S. Patent No. 7,712,683.

[3] Prolitec, Inc. v. ScentAir Technologies, Civil Action #: 2:12-cv-00483-RTR, Docket No. 62 (E.D. Wisc., May 17, 2013).  The IPR petition was filed in May 2013 but not instituted until August 2013. See IPR2013-00179. The claims of a second patent in the lawsuit were also largely been cancelled and was the subject of a separate appeal. That PTAB decision was affirmed without opinion in June 2015. See Prolitec, Inc. v. ScentAir Technologies, App. No. 15-1017 (Fed. Cir. June 9, 2015) (R. 36 affirmance without opinion).

[4] 789 F.3d 1292 (Fed. Cir. 2015).

First AIA Lawsuits

Patent, ,

by Dennis Crouch

In one of the first lawsuits involving an AIA patent is Tinnus Enterprises, LLC et al v. Telebrands Corporation et al., 15-cv-00551 (E.D.Tex. 2015).  In that case, Tinnus alleges that Telebrands’ Baloon Bonanza infringes its U.S. Patent No. 9,051,066 – covering a “system and method for filling containers with fluids.” Bed Bath & Beyond is also a defendant.

The utility application was filed in September 2014 (claiming priority to a pair of February 2014 provisional applications) and issued in June 2015.  As part of the Track-One filing, the PTO issued the first office action within three months of filing of the non-provisional application.

There may be interesting issues raised in the case. My understanding is that the utility application includes some amount of disclosure and claim structure not found identically in the original provisional applications.  After the provisional was filed but before the non-provisional filing, the patentee admittedly (1) “began taking steps to manufacture the Bunch O Balloons product using certain Chinese contractors. The first batch of product was manufactured [and sales began] in June 2014.”  In addition, the patentee publicly launched a successful Kickstarter campaign prior to the non-provisional filing.  A number of questions arise if we assume (or it turns out) that those disclosures included information different from the provisional application.  Will the Chinese-contracting, delivery, and sales count as prior art under 102(a)(1); and are the disclosures covered by the grace period found in 35 U.S.C. 102(b)(1)?

= = = = =

35 U.S.C. 102

(a) NOVELTY; PRIOR ART.–A person shall be entitled to a patent unless– (1) the claimed invention was patented, described in a printed publication, or in public use, on sale, or otherwise available to the public before the effective filing date of the claimed invention …

(b) EXCEPTIONS.– (1) DISCLOSURES MADE 1 YEAR OR LESS BEFORE THE EFFECTIVE FILING DATE OF THE CLAIMED INVENTION.–A disclosure made 1 year or less before the effective filing date of a claimed invention shall not be prior art to the claimed invention under subsection (a)(1) if– (A) the disclosure was made by the inventor or joint inventor or by another who obtained the subject matter disclosed directly or indirectly from the inventor or a joint inventor; or (B) the subject matter disclosed had, before such disclosure, been publicly disclosed by the inventor or a joint inventor or another who obtained the subject matter disclosed directly or indirectly from the inventor or a joint inventor.

= = = = =

Another AIA-patent case captioned Likwid Concepts v. Linzer (D.N.J.) was voluntarily dismissed without prejudice.  (U.S. Patent No. 9,084,474).

Federal Circuit: Prior Art Enabled by Applicant Admissions in his Patent Application

Patent, , ,

by Dennis Crouch

In re Steve Morsa (Fed. Cir. 2015) (Morsa II)

This is the return-appeal, a divided panel has now agreed with the patent office that its cited prior art is sufficiently enabling to serve as an anticipating reference.

In its 2013 Morsa decision (Morsa I) involving the same issues, the Federal Circuit ruled the PTO had applied the incorrect prior-art-enablement procedure and remanded.  The disclosure in question is a short press-release from Peter Martin Associates that announces a product known as “HelpWorks” that allows folks to “use the Web to screen themselves for benefits, services, health risks, or anything else an agency wishes to implement via its eligibility library.”  Morsa’s claim in question – Claim Number 271 – is directed toward a “benefit information match mechanism” that requires (1) storing benefit registrations; (2) receiving a benefit request; (3) determining whether the request matches a registration; and (4) providing a benefit results — all “at least in part via a computer compatible network.”

Enabling Prior Art: A prior art reference being used for anticipation must be enabling.  To be anticipating, the prior art must “teach a skilled artisan … to make or carry out what it discloses in relation to the claimed invention without undue experimentation.”  However, during patent prosecution prior art cited by the USPTO is presumed to be enabling unless that issue is directly challenged by the patent applicant.  In Morsa I, the Federal Circuit ruled that an applicant’s direct challenge shift’s the burden to the PTO if it is a “non-frivolous argument that cited prior art is not enabling.”

While an applicant must generally do more than state an unsupported belief that a reference is not enabling, and may proffer affidavits or declarations in support of his position, we see no reason to require such submissions in all cases. When a reference appears to not be enabling on its face, a challenge may be lodged without resort to expert assistance. Here, Morsa identified specific, concrete reasons why he believed the short press release at issue was not enabling, and the Board and the examiner failed to address these arguments.

On remand following Morsa I, the PTO particularly addressed Morsa’s enablement argument and ruled that the anticipating reference was enabled — finding that the reference taught everything that person with ordinary computing kills needed to know in order to make and use Morsa’s claimed invention.  Now on appeal, the Federal Circuit has affirmed.

In the process, the court made a set of important findings. First, the starting point of this analysis is the level of knowledge of a skilled artisan as of Morsa’s critical date — and the question is whether the prior art reference enables that skilled artisan to create Morsa’s invention.  Building upon this starting point, the court included a number of admissions from Morsa’s application. In particular, Morsa had indicated in his background section that several different aspects of the invention (processors, memory, search routines, etc.) were  “within the knowledge of those of ordinary skill in the art.”  The court next focused a bit on Morsa’s claimed invention — finding that in includes only four basic claim limitations and that “each of those limitations can be mapped directly onto the [prior art] reference.”

Writing in dissent, Judge Newman offers the following:

The Board recognized that some of the claim steps are not described in the press release. The Board solved this dilemma by taking what it called “Official Notice” of the missing subject matter. And my colleagues solve this dilemma by finding the missing subject matter in the Morsa specification by stating that since the specification states that a person skilled in the art would know how to “implement” the claimed system, that person would have “knowledge” to fill the gaps in the prior art. However, we are directed to no disclosure in the prior art of all the claim elements and steps. “Anticipation” is not established in accordance with law.

“Official Notice” is not anticipation. . . The applicant’s specification is not prior art . . . [Rather] Enablement of the prior art must come from prior art.

= = = = =

I have pasted below the entirety of the 1999 press release being used as prior art.

CHICAGO–(BUSINESS WIRE)–Sept. 28, 1999–

Peter Martin Associates is moving eligibility screening one step closer to public availability with the announcement that its expert screening solution, HelpWorks(TM) is now Web enabled.

The launch of HelpWorks Web Edition(TM) took place today at the APHSA-ISM (American Public Human Services Association – Information Systems Management Conference) in Columbus, Ohio. The talk at the conference was the Government’s migration to e-commerce empowering the public to avoid long lines and seemingly endless forms to secure government services.

HelpWorks(TM) is a state-of-the-art software program designed to help maximize the benefits and services that consumers receive from Government agencies. It can be configured to evaluate any or all benefits and programs required – Federal, State and/or local.

HelpWorks Web Edition(TM) supports both a professionally-directed deployment model – in which end users are professional caseworkers – or as stated above, a self-service model in which consumers use the Web to screen themselves for benefits, services, health risks, or anything else an agency wishes to implement via its eligibility library.

The power behind this unprecedented flexibility in application and access is PMA’s newly released Expert Eligibility Server(TM) (EES) technology. The EES engine allows an agency to utilize HelpWorks Web Edition(TM) as well as other applications that will leverage this dynamic technology. With EES as the backbone, agencies can rapidly deploy eligibility solutions for touch-screen kiosks, interactive voice response systems, the Web and many other platforms.

Peter Martin Associates is the premier provider of software designed to support public and private social service agencies, focusing on family centered case management, information and referral, and eligibility screening. Information about Peter Martin Associates may be found on the web at www.petermartin.com.

Patent Trolls and Great Inventors

Patent,

ScreenShot168

The announcement to my upcoming Mizzou event with Prof Holte is exciting, but so is our topic.  Discussion will center around Holte’s case-study article: Trolls or Great Inventors: Case Studies of Patent Assertion Entities.

Holte’s abstract:

There has been much debate about the economic harms caused by patent infringement lawsuits filed by patent holders who do not make or sell products covered by their own patents — entities pejoratively referred to as “patent trolls.” This debate has thus far been largely theoretical or based on broad industry-wide data. The purpose of this Article is to present a focused empirical report that has previously been lacking — detailed information regarding the inventors themselves, the patent assertion entities (PAEs) that represent them, and the stories behind their patents. The research for this Article centers on two instructive case studies: (1) MercExchange, L.L.C., the prominent PAE whose seminal patent infringement action against eBay continued to the Supreme Court in eBay Inc. v. MercExchange, L.L.C., 547
U.S. 388 (2006); and (2) Capital Security Systems, Inc., a lesser-known PAE that has sued some of the largest banks in the world on its patented electronic check processing technology. This Article explores the stories behind the inventors, the patented inventions, and the entities asserting the patents in order to develop a more complete contextualized picture of PAEs and their economic impact. Based on this more complete picture, the Article then assesses whether these patent holders warrant the “patent troll” moniker, lurking under the bridge of innovation waiting to harass and extort innovators attempting to pass, or whether they instead resemble the great American vision of a Horatio Alger novel protagonist, laboring to build that bridge of innovation brick-by-brick and eventually reaping a reward for their hard effort. The Article concludes that, while additional studies are needed, the two PAEs studied herein fall squarely into the latter honest laborer category.

 

Is it Appropriate Prosecute Patents for Direct Competitors on Inventions on Similar Technology without Disclosure and Waivers?

Ethics, Patent, ,

by Dennis Crouch

[Prof  Hricik may have more to say on this conflict-of-interest case, but I believe it is an interesting one and important for discussion.]

Maling v. Finnegan, Henderson, Farabow, Garrett & Dunner, LLP, SJC-11800.

A patent law malpractice case is pending before the Massachusetts Supreme Court that has major implications for patent prosecution practice.  Many patent patent attorneys and law firms develop technology-specific specialties as a marketing strategy.  The professional responsibility problem arises when the strategy is successful enough to attract multiple clients with substantial technological crossover.  Of course, this likelihood is intensified in larger law firms where more lawyers means more clients and more (potentially overlapping) invention disclosures.

Back in 2003, Maling hired Finnegan Henderson to prosecute a set of patent applications relating to screwless eyeglass hinges.  According to the allegations, it turns out that Finnegan was also representing a competitor (Masunaga) with a similar invention in the same screwless eyeglass hinge field.  Finnegan says that these were “attorneys in different offices.”  Neither client was informed or gave consent to this alleged conflict of interest and Maling argues that Finnegan’s “independent professional judgement” was impaired by the conflicting representation in violation of the Massachusetts Rules of Professional Conduct.  Among the various harms Maling alleges a delay in filing his application and wasted efforts on technology not sufficiently protected by patent.

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The state trial court dismissed on failure-to-state-a-claim for the civil action with the court finding no direct adversity of interests and no nexus between the conflicting representation and the claimed harm.  The Supreme Judicial Court of Massachusetts (MA’s highest court), is now focused on the question of whether an actionable conflict arises when a single law firm files and prosecutes patent applications for similar inventions on behalf of two existing clients.

Massachusetts law:

  1. 1.7(a): “A lawyer shall not represent a client if the representation of that client will be directly adverse to another client.”
  2. 1.7(b) “[A] lawyer shall not represent a client if the representation of that client may be materially limited by the lawyer’s responsibilities to another client or to a third person, or by the lawyer’s own interests.”

 

Finnegan here argues that the allegations of filing and prosecuting a competitor’s “similar” invention is “insufficient” to even suggest a conflict of interest.   Rather, Finnegan argues an ethical conflict only arises if one of the client’s inventions are blocked by patent disclosures made by another client.

The distinction between “similar” and “novel and non-obvious” is well-illustrated by the Maling and Masunaga inventions described in the patents at issue in this case. Both inventions attempt to solve the problem of how to construct an eyeglass frame without utilizing screws. As the PTO concluded, however, each patent claims a novel solution to this problem. . . .
Here, there is no allegation that Maling and Masunaga ever were “directly adverse” to one another, in patent proceedings or otherwise. Maling cites to no case law, nor is Finnegan aware of any, in which a court has held that parties are directly adverse to one another simply because each seeks to patent technology in the same field. Such a standard, moreover, would be inconsistent with the statutory-framework discussed above, which recognizes that multiple patents may be granted in the same field so long as each claims a “new and useful” invention, or a “new and useful improvement thereof.”

Finnegan also explains that conflicting-out large law firms would make it difficult for inventors to find representation — quoting Hricik as saying that “a rule that limits a firm to representing only one client in a particular technical field ‘imposes unnecessary costs on lawyers, clients, and the system.'” Hricik & Meyer, Patent Ethics: Prosecution (2015).

In his brief, the plaintiff-appellant argues that its allegations of violation and harm are sufficient to overcome a motion to dismiss. Their brief does not detail an explanation of how similarity should be treated.

In an amicus filing, a group of major law firms, including Knobbe Martins; Honigman Miller; Nixon Vanderhye, and others arguing that direct conflict issues only arise if the inventions are so close as to lead to an interference (pre-AIA).

The amicus brief suggests that the rules may be different post-AIA because the new law sets up more of a race to the PTO (first-to-file vs first-to-invent).  This, of course, is disingenuous as the pre-AIA system included a large number of adverse impacts caused by delays in filing.

One interesting issue that arises here is that Maling had Finnegan conduct a pre-filing prior art search in 2003.  At that point, the Masunaga patent was on file, but not yet published and so did not turn-up in the search results – even though Finnegan attorneys knew of the reference and knew that it was prior art.

Michael McCabe has more of a discussion of the case on his IP Ethics and Insights Blog.

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Most civil-action malpractice claims fail because of the difficulties of proving harm. At the USPTO and State Bars, mere violation – even without client harm – is actionable as a violation of the rules of professional responsibility. It will be interesting to see how the USPTO treats this case.

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Read the Briefs:

 

In Brief: Amici Provide Reasons to Reconsider Ariosa v. Sequenom

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[This post includes links to the 12 amicus briefs supporting Sequenom’s petition for en banc rehearing in this Subject Matter Eligibility Case.]

by Dennis Crouch

Ariosa Diagnostics, Inc v. Sequenom, Inc. (Fed. Cir. 2015) (en banc petition 2015)

This subject matter eligibility case revolves around an important scientific discovery that a pregnant woman’s blood plasma/serum contains fetal DNA and that the fetal DNA can teased-out by amplifying paternally-inherited sequences from the cell-free fractions of the mother’s blood. Sequenom’s patents focus on methods of prenatal genetic diagnoses that rely upon these discovery by the inventors. U.S. Patent No. 6,258,540.

Invalid: Applying Mayo v. Prometheous, the Federal Circuit held all the claims in-suit to be ineligible. In step one of the Mayo inquiry, the court found that the claims were all directed to a natural phenomenon: the existence of paternally-inherited cell-free fetal DNA (cffDNA) in the maternal bloodstream. In step two, the search for an ‘inventive concept,’ the court found that the practical implementation of the natural phenomenon was insufficient because it merely involved well known methods of amplifying DNA.  (CitingFlook).  Without an inventive concept beyond the excluded subject matter – the claims were left ineligible for patent protection.

In his usual understated approach, Professor Chris Holman identified the Federal Circuit decision “not good news for innovation in the life sciences.”  The USPTO has also seemingly delayed providing examiner’s with guidance on how to implement Ariosa during examination.

En Banc Rehearing Petition: The patentee has now put forward a strong move for rehearing en banc  with a well drafted petition and support from a host of amici. Aptly describing the core issue, Sequenom’s counsel Tom Goldstein explains:

[Under the Federal Circuit’s rule] the person who first discovers a natural phenomenon can never obtain a patent on any practical application of that new knowledge, however surprising or revolutionary the results, unless the steps she teaches to use it are independently novel. . . . that cannot be correct.

Read the Ariosa.Petition.  The petitioner’s main argument here is with the Supreme Court’s broad language used in Mayo that also revitalized Flook.  Of course, those cases conflict with other Supreme historic precedent. In the coming months, the Federal Circuit will decide this en banc request, but the case is very much being set-up for Supreme Court review.

The 12 amicus briefs filed in support of the petition are strong and well written.

My former boss Kevin Noonan is counsel of record for a group of 23 law professors, including Adam Mossoff, Dan Burk, Tim Holbrook, and Richard Epstein. The brief makes two main arguments: (1) the genetic diagnostic tests developed and commercialized here are the type “historically unforeseen invention” that the patent system is designed to promote; and (2) the panel’s approach here of requiring novelty beyond straightforward application of excluded natural phenomenon “would call into question nineteenth century patented innovation the Supreme Court deemed valid.”Read Ariosa.lawprof.  The sentiment of the Law Professor Brief is consistent with the brief filed by Matthew Dowd on behalf of JYANT Tech, explaining that “in Diamond v. Diehr … the [Supreme] Court explained that “a new combination of steps in a process may be patentable even though all the constituents of the combination were well known and in common use before the combination was made.” Read Ariosa.JYANT

As we will discuss in a parallel post, the brief of Professors Lefstin and Menell provide their reading of recent Supreme Court cases of Mayo and Alice — arguing that (1) a close reading shows that inventive application of a law of nature is not required but instead a non-preemptive or non-generic application; and (2) the Flook-type claim dissection is prohibited. Read Ariosa.Leftsin. This analyze-it-as-a-whole sentiment was repeated by the IPO Brief field by Tiege Sheehan as well as the brief from Amarantus filed by Gideon Schor. Read  Ariosa.IPO and Ariosa.Amarantus.

My Fellow Missouri Professor Chris Holman filed a brief on behalf of the major industry organizations BIO and PhRMA making the credible argument that all this is a very big deal in the diagnostic space and that the resulting uncertainty is having a negative impact on research. Read Ariosa.BIO.

Preemption: When the Supreme Court explained its two two-step approach in Mayo andAlice, it noted the purpose was to avoid preemption of any excluded subject matter — that is, to ensure that no single entity could claim exclusive sovereignty over an abstract idea, law of nature, or natural phenomenon.  Rather, those basic fundamentals of society should not be subject to private claims of right.  Although the purpose behind the test is preventing this preemption, the test itself seemingly does not ask whether preemption has occurred. In its brief, the NYIPLA argues that this fundamental question of preemption must be asked and the Mayo/Alice framework does not authorize a court to ignore that inquiry.READ Ariosa.IPLA.  This focus on preemption is repeated by WARF’s brief filed by Dan Bagatell — writing that “the critical question is whether a patent impermissibly claims and prevents others from using a natural phenomenon, law of nature, or abstract idea itself, or instead permissibly claims a practical application of one of those things.”Read Ariosa.WARF.

Myriad‘s counsel Benjamin Jackson filed a brief on behalf of the industry organization21st Century Medicine that challenges the “gist” method of determining whether a claim encompasses excluded subject matter and suggests that the claim here is simply a technological improvement over the prior art.

Sequenom’s patent teaches it was known in the art that fetal cells can pass into the mother’s blood. Diagnostic techniques had been devised to isolate these cells and analyze fetal DNA extracted from them, but these techniques were expensive and time consuming. The phrase “cell-free fetal DNA” was therefore not an attempt to claim a natural phenomenon but instead a key claim limitation to distinguish over the art. Fifteen years ago, back when patent claiming and examination focused on prior art rather than ill-defined “natural phenomena,” Sequenom appropriately emphasized that its methods used cell-free fetal DNA rather than the cell-derived fetal DNA known in the art.

Thus, the claimed invention is a significant technical improvement in the laboratory process for prenatal diagnosis, allowing laboratories to eliminate the costly and labor-intensive step of isolating fetal cells and then fetal DNA. Such an inventive improvement to the technical performance of an existing technological process is precisely what patents are for.

Read Ariosa.21st. The Novartis brief, filed by its in house counsel Corey Salsberg, makes the important point eligibility has become a tougher test that patentability (nonobviousness). Read Ariosa.Novartis.

Taking a more international approach,Paul Cole and Donald Zuhn teamed-up to file a brief indicating, inter alia, that the panel’s approach in Ariosa creates a potential TRIPs Violation. “This case is an example of an internationally discordant, not harmonious, result, contrary to the eligibility requirements of TRIPS Article 27.”  Read Ariosa.COLE. Similarly, the Bioindustry Association (BIA) also argues that the panel’s approach here means that U.S. eligibility is substantially narrower than that of our global trading partners. Read Ariosa.BIA.

The Federal Circuit may take several weeks to decide this en banc petition. This case is a hot potato and the court’s likely reason for ducking the case would be to avoid being scalded.

 

PTO Proposed Pilot Program on IPR Initiation

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Inter Partes Review (IPR) Trials have become an effective tool for cancelling invalid patent claims that lack novelty or fail the nonobviousness test. The IPR process has two main stages: Institution and Trial. At the institution stage, the Patent Trial and Appeal Board (PTAB) must determine whether the third-party challenge is sufficient enough to warrant a full trial on the merits of the challenge. The institution test outlined by the statute is a “reasonable likelihood that the petitioner would prevail with respect to at least 1 of the claims challenged in the petition.”

One design choice for IPRs is whether the judges who decide to institute the IPR should be kept-on to decide the ultimate merits of the trial. In its initial design of the process, the PTO determined that keeping the same judges provided for both efficiency and internal consistency. Thus, under the current rules, the same three APJs who decide whether to institute a trial also conduct the trial and ultimately decide the trial outcome.

A number of losing-patentees have argued that the process creates an improper bias or implicit presumption against the patentee during the trial stage. The basic idea is that a judge who sides with the challenger at the institution stage will be mentally locked-in to supporting the petitioner’s case and at trial will improperly give the presumption to the challenger rather.

The USPTO is now requesting comments on a proposed pilot program that would address these concerns. In particular, the PTO’s proposal is that the institution decision would be made by a single judge. If that judge decides to institute then the trial would be held before that single judge along with two additional APJs added to the panel who were not previously involved in the decision to institute.

The statute requires the two-step process and also requires a set of three APJs to decide the trial, but gives the USPTO authority to determine additional process elements. There are a host of alternative designs and structures available, such as an entirely new panel.

The PTO’s proposal benefits the PTO by requiring only one judge at the institution stage – likely allowing it to handle more cases. Right now, the PTO is looking for comments on the proposal. If those seem favorable, the PTO is likely to move ahead with a pilot program. Comments to PTABTrialPilot@uspto.gov by October 26, 2015.

I am personally concerned about the initiation decision by a single APJ.  Generally, you might think that three-judge panels would offer more consistent decisions because more eccentric judges would be outvoted.  However, there are team-project problems that can arise with panel decision making– often one or more panel member can check-out mentally and simply rely upon the decisions by a single judge.  I do not know which of these (if either) is more likely with PTAB judges.

 

Cancellation of Progressive’s Business Method Patents Confirmed on Appeal

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Progressive Insurance v. Liberty Mutual Insurance (Fed. Cir. 2015)

This case stems from a set of seven overlapping post-grant-review proceedings (CBM PGR) before the Patent Trial and Appeal Board (PTAB) that Liberty Mutual filed against Progressive’s “business method” patents. The patents relate to auto-insurance pricing based upon customer vehicle use patterns – such as the number of sudden stops over a given period of time – as well as online insurance policy adjustments. See U.S. Patent No. 8,140,358 as an example.

In the Covered-Business-Method Review, the PTAB found a number of Progressive’s claims invalid as either anticipated or obvious. On appeal, the Federal Circuit affirms in all respects.

Two different proceedings for the same patent: Liberty Mutual filed two different CBM proceedings against the ‘358 patent. In one, the Board invalidated all claims except for 1, 19, and 20 while in the other the second the Board invalidated all claims of the patent. These two decisions were released about 1-hour apart.

The first challenge on appeal was that the second judgment was improper because – according to Progressive’s theory – the Board lost jurisdiction once it issued the first decision. That theory stems from Section 325(e)(1) that prohibits a petitioner from “maintain[ing] a proceeding before the Office” on issues that “reasonably could have” been raised during a post-grant review that has already reached a final written decision. The argument here is that, once the PTO reached the first final judgment that the second case should immediately disappear. On appeal, the Federal Circuit rejected that approach finding (1) that the statute does not prevent the PTO from maintaining the proceeding and in any event (2) the PTAB indicated that the two decisions were “concurrent” even though actually made public about 1-hour apart. Finally, the Court noted that the PTO has statutory authority to decide how to deal with multiple related proceedings.

Written Description and Claiming Priority: On the merits, a substantial amount of the problem here dealt with patent families and the difficulty in understanding whether a later claim can properly claim priority to an earlier filed application. The PTO typically (except in Hyatt’s case) does not require a patentee to expressly connect each patent claim with its effective priority date. As a result, those arguments are typically saved until later in litigation (thus, the benefit of filing a CIP . . . )

Here, the claims in question included an interface module that produce a “driver safety score” – construed by the PTAB to mean a “calculated insurance risk value associated with driver safety.” The priority application disclosed “rating factors” that might include safety factors, but did not expressly disclose a risk value associated only with driver safety. (Note the seeming subtle shift in construction by the Federal Circuit). In any event, the ruling is that the priority application disclosed the genus but not the later claimed species – as such it does not meet the written description requirement. In this situation, the result is that the priority filing date for the particular patent at issue here is pushed back to the later filing and that date was predated by the intervening prior art disclosures.

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It does not appear that Section 101 was raised as a challenge:

1. A system that monitors and facilitates a review of data collected from a vehicle that is used to determine a level of safety or cost of insurance comprising:

a processor that collects vehicle data from a vehicle bus that represents aspects of operating the vehicle;

a memory that stores selected vehicle data related to a level of safety or an insurable risk in operating a vehicle;

a wireless transmitter configured to transfer the selected vehicle data retained within the memory to a distributed network and a server;

a database operatively linked to the server to store the selected vehicle data transmitted by the wireless transmitter, the database comprising a storage system remote from the wireless transmitter and the memory comprising records with operations for searching the records and other functions;

where the server is configured to process selected vehicle data that represents one or more aspects of operating the vehicle with data that reflects how the selected vehicle data affects a premium of an insurance policy, safety or level of risk; and

where the server is further configured to generate a rating factor based on the selected vehicle data stored in the database.

 

Naming the Rule: Anticipating the Patent

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Prior to the America Invents Act of 2011 (AIA), prior art were either (1) prior in time to the invention and thus anticipated the invention (e.g., 102(a), (e), and (g)); or (2) more than one-year prior to the application filing date and thus raised a statutory bar (102(b)). Within this schema, the pre-AIA Section 102 included the title of “Novelty and Loss of Right” where novelty refers to anticipation and loss of right refers to the statutory bar.

The AIA totally rewrote Section 102 and eliminated the notion of anticipating the invention and also altered the notion of the statutory bar. The new rules focus instead on the effective filing date of the invention create what looks a lot like the statutory bar of 102(b) (except for automatic one-year grace period). The rule is not about absolute novelty in terms of invention-date (as that term has always been used in the US) but instead about filing of an application before prior art emerges. Although this seems to fit within what we used to call the statutory bar, Congress included “novelty” within the title of the new Section 102(a) and left-out loss of rights.

Although we understand how the statute is supposed to work, we’re left with the small matter of crystalizing the name for prior art that qualifies under post-AIA 102. It doesn’t necessarily anticipate the invention – and congress appeared intent on moving away from the passive loss-of-rights designation. We could spell-out “qualifies as prior art under Section 102”, but that’s not the kind of identifier that sticks. I propose using the middle ground of “anticipating the patent” or “anticipating the application,” depending upon whether a patent has yet issued. This proposal seems to fit within Congressional intent but also implicitly recognizes that we’re no longer concerned with the invention date but instead the key patent date (i.e., effective filing date). This approach seems to also roughly fits with the language used by European Courts that have long focused on filing dates. Overall, this is not a big deal, but it may end up being important to get the words right.

Kyle Bass’s Response to Motions about Abuse of IPR in IPR2015-01092 

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The response in Coalition for Affordable Drugs v. Celgene (IPR2015-01092) is here.

Here’s the introduction:

Celgene’s motion is littered with references to the Petitioner’s and Real Parties-in-Interest’s (collectively, “CFAD”) “admitted profit motive,” and makes the curious argument that filing IPR petitions with a profit motive constitutes an “abuse of process.” Yet at the heart of nearly every patent and nearly every IPR, the motivation is profit. Celgene files for and acquires patents to profit from the higher drug prices that patents enable. Generic pharmaceutical companies challenge patents to profit from generic sales. Celgene’s argument is in conflict with Supreme Court precedent expressly finding it in the public’s interest for economically motivated actors to challenge patents. See Lear v. Adkins, 395 U.S. 653, 670 (1969) (holding public interest requires permitting licensees to challenge validity because they “may often be the only individuals with enough economic incentive to challenge the patentability” and “[i]f they are muzzled, the public may continually be required to pay tribute to would-be monopolists”). Having an economic motive for petitioning the government simply does not turn the petition into an abuse of process.

CFAD anticipates that fees and costs to complete an IPR for a single drug is approximately $1 million dollars. There are a limited number of entities capable of making that financial commitment. And fewer can make such a commitment without the prospect of profiting from their efforts. The fact is CFAD’s motivations do not change the social value of its activities. Poor quality patents enable pharmaceutical companies to maintain artificially high drug prices and reap unjust monopoly profits paid for by consumers and taxpayers.

Celgene accuses CFAD of motives that are not entirely “altruistic.” That is a truthful irrelevancy. The U.S. economy is based largely on the notion that individual self-interest, properly directed, benefits society writ large. Celgene’s motive is to profit from consumers and taxpayers from drug sales. Celgene’s patent-conferred monopoly results in Revlimid prices that exceed $580 per pill—creating costs in excess of $200,000 per patient year. (See Exs. 1021-23, showing prices for three Celgene drugs protected by challenged patents.) Revlimid sales were nearly $5 billion in 2014. Celgene is not giving Revlimid or its profits away.

CFAD’s IPRs are part of its investment strategy, and it will only succeed by invalidating patents, which would serve the socially valuable purpose of reducing drug prices artificially priced above the socially optimum level. And even if, despite its best efforts, it does not profit—each petition that knocks down a barrier to generic entry benefits the public. It should be axiomatic that people do not undertake socially valuable activity for free—not Celgene, not generics, not shareholders, and not investment funds. Low drug prices will not simply materialize. They must be brought about by agents who will invest significant capital and do the hard work of identifying and challenging weak patents. Generics sometimes serve this function. But the law does not render it “abuse” for others, including CFAD, to also play this important societal role.