Tag Archives: Claim Construction

Third Circuit Revives “Exclusive Generic” Contract Claim

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By Dennis Crouch

Mylan Inc. v. SmithKline Beecham Corp., — F.3d —-, 2013 WL 3780163 (3rd Cir. 2013)

GSK holds a patent and FDA rights to market and sell AG paroxetine and it does so under the brand name Paxil CR. In a 2007 settlement contract GSK licensed Mylan as a limited generic manufacturer. In 2010, GSK began manufacturing its own generic version that was distributed and sold by Apotex. Mylan then filed suit, arguing that the GSK-Apotex generics violate the 2007 GSK-Mylan contract.

The 2007 contract particularly promised Mylan exclusive rights to market and sell generic paroxetine for the remaining life of the GSK’s patent. In response to FTC review, the license was amended to allow “GSK or its Affiliate” to market and sell its own generic version beginning in 2010.

In the lawsuit, Mylan argued that the contract limitation of “GSK or its affiliate” did not include a third-party generic competitor. The district court sided with GSK in finding that the contract language was clear in permitting the GSK-Apotex sales. However, on appeal, the Third Circuit reversed and remanded finding that “latent ambiguity” in the contract language as to whether Apotex is an “affiliate” or a “third party” under the contract.

[T]he alternative reading of the contested language suggested by Mylan [is] both reasonable and supported by objective evidence of the parties’ intentions. This demonstrates latent ambiguity in the contractual language. Hence summary judgment was not appropriate on Mylan’s breach-of-contract cause of action. “The construction of a written contract is usually a legal question for the court, but where there is uncertainty, ambiguity or the need for parol evidence in aid of interpretation, then the doubtful provision should be left to the jury.” Schor v. FMS Fin. Corp., 357 N.J.Super. 185(N.J.Super.Ct.App.Div.2002).

On remand, the court is instructed to proceed to trial.

No Federal Court Jurisdiction?: [Note Update Below] Ordinarily this type of state-law contract lawsuit would be handled in state law court. In the complaint, Mylan alleges both federal question jurisdiction under 28 U.S.C. §1331 and diversity-of-citizenship jurisdiction under 28 U.S.C. §1332. GSK agreed that the case should be heard by the Federal Courts. However, a federal court’s subject matter jurisdiction is not subject to agreement by the parties. Rather, the federal courts are of constitutionally limited jurisdiction and the court has an independent duty to determine in each case whether it has proper jurisdiction. And, in this case, it appears that the district court failed in that duty. First, there is no allegation of any violation of federal law. In Gunn v. Minton (2013), the Supreme Court again restated that the mere involvement of a patent law issue is insufficient to create a federal question. Second, the case appears to lack the required complete diversity of citizenship as require under §1332 since both the plaintiff (Mylan Inc.) and a named defendant (SmithKline Beecham Corporation) have their principal places of business in Pennsylvania. See Strawbridge v.. Curtiss, 7 U.S. 267 (1806). Finally, the 2007 contract between the parties indicates that any lawsuit arising from the contract will be brought in the New Jersey Federal District Court. However, once again, consent to jurisdiction of the Federal Court does not provide that court with subject matter jurisdiction over the case.

On remand, district court Judge Pisano and Magistrate Judge Goodman should request briefing on subject matter jurisdiction to determine whether the case should be dismissed.

UPDATE – A reader sent over a case-on-point directly on-point decided two weeks ago by the Third Circuit. Lucier v. SmithKline Beecham Corp., — F.3d —-, 2013 WL 2456043 (3rd Cir. 2013). Lucier was a thalidomide case against GSK, SmithKline Beecham, Sanofi-Aventis, Grunethal, and others and was originally filed in Pennsylvania state court. Defendants removed the case to Federal Court based on diversity allegation. The plaintiffs challenged diversity by arguing that SKB was a Pennsylvania entity. The Third Circuit sided with the defendants – finding that SmithKline Beecham is not a Pennsylvania entity. It turns out that in 2009, SKB officially changed its name to GSK LLC and converted from a Pennsylvania corporation to a Delaware LLC in order to obtain certain tax benefits. In the conversion, the GSK LLC’s headquarters and seeming principal place of business remained in Pennsylvania.

When considering diversity of citizenship, the rule for corporations is that a corporation is a citizen of both its state of incorporation and the state of its principal place of business. However, in Lucier, the Third Circuit determined that the rule is different for limited liability corporations and that the principal place of business is irrelevant. Rather, for LLC’s the rule is that the LLC’s citizenship is determined by the location of its members (owners). GSK LLC’s only member is GSK Holding Company and, since GSK Holding is incorporated and operates from Delaware, both it and its wholly owned LLC are Delaware citizens. In its decision, the Third Circuit admitted the formality of its rule, but said tough.

 

Guest Post by Christopher Cotropia on Existing Deference in Patent Claim Interpretation

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Christopher Cotropia is a Professor of Law and the Austin Owen Research Fellow at the University of Richmond School of Law.  Below he highlights a few important conclusions from an empirical study on patent claim construction that he recently completed.  The full study is available here.



Is Patent Claim Interpretation Review Deference or Correction Driven?

Christopher A. Cotropia

The Federal Circuit’s now fifteen-year practice of reviewing lower court claim interpretation de novo is being reconsidered en banc in Lighting Ballast Control LLC v. Philips Electronics North America Corporation. Although the question of whether review should be de novo can be answered under a number of criteria, in patent cases it is commonly viewed as a tradeoff between certainty and correctness.  

With regards to certainty, the current belief is that de novo review results in great uncertainty in patent cases because litigants cannot predict the controlling claim construction in a case until the Federal Circuit makes its independent determination on appeal.  Giving district courts greater deference would, in turn, allow certainty as to claim construction to come earlier in patent cases.

In contrast, appellate review is in place, at least in part, to correct mistakes made by lower courts and ensure the “correct” result is reached in a given case. The more deference provided to lower courts, the less opportunity the Federal Circuit has to correct (or incorrect, depending on your view of the Federal Circuit) the decision.  Standard of review presents the question of who—that is which tribunal—is more likely to reach the correct answer regarding claim interpretation and, given claim meaning’s central nature to the patent dispute, the ultimate question of who should win the case.   

While many aspects of these issues need to be explored to determine the optimum standard of review (how much is greater certainty worth?, who is more likely to reach the correct answer?, and what is the correct answer we want to achieve?), there is value in establishing a baseline on both issues. Assuming the Federal Circuit’s claim construction is correct, it follows that de novo review results in greater correctness, albeit at the expense of possible increased uncertainty.  But both of these assumptions rest on the belief that the Federal Circuit currently engages in de novo review, currently provides no deference in practice, and arrives at the “correct” result in appealed cases, at least more often than district courts do on first pass.

In a new paper, I try to establish this baseline by collecting and analyzing Federal Circuit claim construction reviews over the last three-plus years.

At first blush, the results show there is a high level of certainty in claim construction appeals. The rate of affirmance of district court claim interpretations has been increasing since 2010.  And, in the first quarter of 2013, the affirmance rate has reached over 75%.   This data confirms that observed by Jonas Anderson and Peter Menell in 2011 for an earlier period.   

 

Cotropia Table 1

TABLE 1

 

However, a closer look as to which claim interpretations are affirmed and which are reversed shows little certainty at the Federal Circuit for particular types of cases.  Lower court decisions where the patentee ultimately wins are more likely to be subject to a claim construction reversal that, in turn, causes the alleged infringer to ultimately win (or at least gives them another shot on remand).

Cotropia Table 2

TABLE 2

And these claim construction reversals are even more likely in appeals of cases involving electronic, information technology, or business method patents where the patentee won below. The opposite is true in cases involving patentee wins in the biological and chemical technologies—the Federal Circuit affirms these constructions, and results, more often. 

 

Cotropia Table 3

TABLE 3

 

What appears to be certainty in all claim construction reviews is much more complex, with the Federal Circuit performing corrections in specific categories of cases.  And given that claim constructions are appealed in patentee wins and patentee loses at about the same rate, 46.67% to 45.94%, these findings about claim construction review are not likely driven by selection bias. Put simply, the Federal Circuit’s claim interpretation review is not driven solely, or perhaps at all, by deference, but instead is correction focused.

What does this data mean for Lighting Ballast Control?  A change in standard of review would have an impact—greater certainty, and less change on appeal, for particular types of cases.  This certainty would come at a cost—losing the current correction going on.  Answering whether this is truly a cost, specifically one that outweighs any certainty gained by changing the standard of review, is left for others, as is the meta-question of what the “correct” answer is in any patent claim construction case. 

This data also describes a Federal Circuit that is very different then commonly portrayed.  The Federal Circuit, when reviewing a district court’s claim interpretation, is not as patent-friendly as some would think.

A full version of the paper this post is based upon can be found here.

Federal Circuit gets Technical with PTAB Failures

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By Dennis Crouch

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

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

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

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

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

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

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

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

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

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

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

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

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

A few recent Section 101 cases at the PTAB

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By Dennis Crouch

Patenting Software: Ex Parte Betts [Computer Associates], 2013 WL 3327142, Appeal 2010-004256, Application 11/132,649 (PTAB 2013) (“[W]e conclude claims 14-26 encompass software without physical embodiment, i.e., software per se, which is an abstract idea and not a “process, machine, manufacture, or composition of matter,” as required by § 101.”)

Patenting Software: Ex Parte Krause [HEWLETT-PACKARD], 2013 WL 3246398, Appeal 2010-012129, Application 10/442,401 (PTAB 2013) (Claims directed to an “end station” within a network having an “aggressive timer.” “Appellant contends that the Examiner erred in rejecting [the] claims … under 35 U.S.C §101 because the claims recite an “end station,” which is defined as hardware. Appellant’s argument does not cite evidence to rebut the Examiner’s interpretation that the claim encompasses either hardware or software. Accordingly, we decline to reverse the rejection.”)

Patenting Software: Ex Parte Barsness [IBM], 2013 WL 3362954, Appeal 2010-011009, Application 11/316,285 (PTAB 2013) (Claim directed to “computer-executable instructions tangibly recorded on a computer-readable media” construed to include “non-statutory, transitory embodiments.” “[W]e find the Specification states the invention is capable of being distributed in the form of a wireless signal when exchanged from one signal-bearing medium to another. This falls within a propagating electromagnetic signal per se and thus, is not directed to one of the statutory categories.”)

Patenting Software: Ex Parte Svendsen [Concert Tech], 2013 WL 3363110, Appeal 2011-001873, Application 11/837,876 (PTAB 2013) (Claimed media “control system” could be implemented as software. “As such, we are not persuaded by Appellants’ argument that the mere recitation of a “control system” (even if the Specification describes it as being associated with a memory) is sufficient to make the claims patent-eligible under 35 U.S.C. § 101 . . . as it does not play a significant part in the performance of the claimed steps.” In short, the broadest reasonable interpretation of the claim language leads us to construe the “control system” as being directed to a computer program per se, which, as drafted, renders the claimed subject matter not patentable under 35 U.S.C. § 101. See Gottschalk v. Benson, 409 U.S. 63, 72 (1972).”

Patenting Method that Could be Performed by a Human: Ex Parte Xu [HEWLETT-PACKARD], 213 WL 3363011, Appeal 2010-009107, Application 10/767,075 (PTAB 2013) (“[C]laim 1 as a whole is directed to a sequence of steps that can be performed by a person. Accordingly, claim 1 is drawn to patent-ineligible subject matter and invalid under § 101.”)

Patenting Device Attached to a Human is OK: Ex Parte Robert S. Bray, 2013 WL 3293616, Appeal 2011-013427, Application 11/686,054 (PTAB 2013) (“The claims recite a device positioned between two vertebrae not, for example, a human comprising a positioned device. The claims relate only to the correct placement of the device in the human patient, and as a whole, do not encompass a human organism. There is nothing in the statute, and we are unaware of any case, that categorically excludes such devices.”)

Federal Circuit Begins its Campaign for Patent Clarity

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By Dennis Crouch

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

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

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

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

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

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

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

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

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

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

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

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

Did the Federal Circuit Just Adopt Functional Claiming Through the Back Door?

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Guest Post by Mark Lemley. Professor Lemley is the William H. Neukom Professor at Stanford Law School and a founding partner of the successful law firm of Durie Tangri where he litigates intellectual property cases.

In Ultramercial v. Hulu, decided on Friday, the Federal Circuit held that a series of steps for serving ads to customers over the Internet, phrased at a high level of abstraction, was patent-eligible subject matter under section 101.  Chief Judge Rader wrote the opinion, which Judge O'Malley joined.  Perhaps more surprising, Judge Lourie, who wrote the plurality opinion in CLS Bank, found the requirements of that test satisfied by these claims despite the lack of evident tie to any particular hardware device or limitation to any particular software algorithm.

Part of the explanation for the result in Ultramercial stems from the procedural posture of the case.  The district court had granted a motion to dismiss, reasoning that patentable subject matter is a pure question of law and so not dependent on factual conclusions.  The district court's position was defensible, given that every prior Federal Circuit opinion has called patentable subject matter a pure question of law.  But the majority goes out of its way to suggest that factual questions are likely to predominate in a section 101 inquiry, though the court is a bit vague on just what those factual disputes might be.  The court also suggests that claim construction will normally be required before resolving a 101 issue, but that here, the court was opting to construe the patent in the way most favorable to the patentee (that is, in the narrowest way possible) to evaluate 101 on a motion to dismiss.  Curiously, however, the court never explicitly tells us what that narrow construction is.

Then the majority does something very odd: it proceeds to discuss in great detail the technology disclosed in the specification but not mentioned in the claims.  The court clearly viewed Ultramercial's claims as patent-eligible because the specification contained detailed technical implementations and a complex flow-chart, even though none of those were included as limitations in the claim.

What is going on here? One possibility is that three of the most experienced patent judges in the country have forgotten the single most fundamental rule of patent law — that as Judge Rich put it, the name of the game is the claim.  But I doubt it. If a lawyer arguing before the court tried to read in limitations from the specification in claim construction or for infringement or validity, these judges would (quite properly) tear that lawyer apart for violating this fundamental rule and ignoring the language of the claim.  It seems unlikely that each of them simply forgot that it is the claims that define the invention.

A second possibility is that the court thinks that the rule that the claims define the invention simply doesn't apply to patentable subject matter: that as long as you have a specific idea somewhere in your specification we don't care what you claim.  But that seems equally unlikely.  To begin, it directly contradicts controlling Supreme Court precedent such as O'Reilly v. Morse, where the court held narrow claims patent-eligible but a broader claim ineligible.  Beyond that, it simply makes no sense.  The patentable subject matter rule is against patenting abstract ideas.  A claim that covers only an abstract idea doesn't somehow become less abstract simply because the patentee could have claimed a narrower, more tangible invention.  

There is a third possibility: that the court is implicitly construing the broad, functional elements of Ultramercial's method claim as means-plus-function claims under section 112(f), with the result that they are accordingly limited to the particular implementations in the specification.  Doing so would be consistent with approach I suggested in my article "Software Patents and the Return of Functional Claiming".  It would explain why the court said it was adopting the narrowest construction of Ultramercial's claims but then never told us what that narrow construction was.  And it is the only reasonable explanation for why the Federal Circuit would suddenly drop its focus on the language of the claims and start to talk about whether the algorithms in the specification were patent-eligible subject matter.

The court didn't explicitly say what it was doing.  I hope that its focus on the specification signals a narrowing construction that saved the claim from ineligibility.  That would be a major step forward for both patentable subject matter law and for reining in overbroad software patents.  And the alternative — that the court has decided that the scope of the claim doesn't matter anymore — would represent a major step backward.

Patent Abuse Reduction Act of 2013 (S.1013)

Patent

By Dennis Crouch

If it exists, the patent heat in Congress right now is focused on “curbing abusive patent litigation.” A variety of bills have been introduced, including the SHIELD Act that would introduce a one-way fee shifting system that would require losing plaintiffs to pay the attorney fees of successful defendants. H.R. 845. The Bill also requires that the patentee plaintiff (or DJ Defendant) post a bond early in the lawsuit to ensure that the fees will be paid. Under its current structure, the bill is limited to cases where (1) the party asserting the patent is not the original inventor or original assignee; (2) the party asserting the patent is not exploiting the patent “through production or sale of an item covered by the patent” and (3) the party asserting the patent is not a University or the US Government. If the patentee meets any one of those prongs then they escape the fee shifting. At the conclusion of the case if the patentee loses then the court must award the prevailing party “full costs … including reasonable attorney’s fees.”

Senator Cornyn this week introduced another bill – the Patent Abuse Reduction Act of 2013 (S.1013). According to Cornyn’s press release, the bill “would require plaintiffs to disclose the substance of their claim and reveal their identities when they file their lawsuit; allow defendants to hale into court interested parties; bring fairness to the discovery process; and shift responsibility for the cost of litigation to the losing party.”

Transparency In Enforcement: S.1013 proposes that the initial complaint must also “the identity of any person with a direct financial interest in the outcome of the action, including a right to receive proceeds, or any fixed or variable portion thereof; and a description of any agreement or other legal basis for [the] financial interest.”

Presumption of Attorney Fees: As with the SHIELD Act, S.1013 would more readily shift attorney fees. This time, however, the fees would be balanced and awarded to the prevailing parties regardless of whether that be a plaintiff or defendant. However, no attorney fees would be awarded when the non-prevailing party’s “position and conduct … were objectively reasonable and substantially justified” or where the exceptional circumstances make the award unjust. If the patent plaintiff cannot pay the attorney fees, the bill would allow for those fees to be paid by others with an interest in the litigation. Defendants would also be permitted to join interested parties into the litigation.

Heightened Pleading Requirements: S.1013 proposes that a complaint must draw a link between particular asserted patent claims and any accused products if such a link “is known.” In addition, the bill would require a complaint to include “detailed specificity” as to “how the terms in each asserted claim[s] … correspond to the functionality of the accused instrumentality.” The Bill would also require the Supreme Court to review model complaint Form 18 to ensure that it conforms with the law.

Discovery After Claim Construction: S.1013 proposes to limit discovery until after claim construction has been complete.

Additional Major Limits on Discovery: Perhaps the most dramatic changes proposed in the bill would be statutory limits on discovery and a cost-shifting regime.

It will be interesting to see how these develop moving forward.

Guest Post: Monopoly Without Apology

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By Shubha Ghosh

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

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

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

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

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

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

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

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

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

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

Forrester v. Wheelabrator: No Federal Subject Matter Jurisdiction Over Tortious Interference Claims Involving Prospect of Claim Construction

Patent,

By Jason Rantanen

This case is significant because even as it applies the Supreme Court's recent ruling in Gunn v. Minton to find a lack of subject matter jurisdiction over state law tortious interference claims involving patent issues it also expressly suggests that there are limits to the effects of the Court's ruling.  This issue is particularly important to be cognizant of because, as here, a lack of subject matter jurisdiction can instantly reset a lawsuit regardless of how far along it has proceeded. 

Forrester Envtl. Servs., Inc. v. Wheelabrator Techs., Inc. (Fed. Cir. 2013) Download Forrester v Wheelabrator (2013)
Panel: Newman, Bryson, Dyk (author)

Forrester, a player in the market for industrial and municipal waste treatment systems, sued competitor Wheelabrator in New Hampshire state court for a violation of the New Hampshire Consumer Protection Act, tortious interference with a contractual relationship, tortious interference with Forrester's prospective advantage, and trade secret misappropriation.  Forrester's claims were based on the allegation that in 2007, Wheelabrator met with Kobrin, a Taiwanese company that Forrester had a business arrangement with, telling Korbin that Wheelabrator's US patents covered the technology provided to Kobin by Forrester.  Forrester contended that this statement was false and that as a result of the false statement Korbin ended its arrangement with Forrester.

After Forrester filed its suit in state court, Wheelabrator removed the action to federal district court.  The district court summarily denied Forrester's remand motion and subesequently ruled in Wheelabrator's favor on all of Forrester's substantive claims.  Forrester appealed.

Recap of Section 1338 Requirements: Under 28 U.S.C. § 1338, federal district courts have original jurisdiction over "any civil action arising under any Act of Congress relating to patents."  While this applies on its face to standard patent infringement suits, "a cause of action created by state law may 'aris[e] under' federal patent law within the meaning of 28 U.S.C. § 1338 if it involves a patent law issue that is '(1) necessarily raised, (2) actually disputed, (3) substantial, and (4) capable of resolution in federal court without disrupting the federal-state balance approved by Congress.' Gunn v. Minton, 568 U.S. ___, ___, 133 S. Ct. 1059, 1065 (2013)."  Slip Op. at 6-7.

Patent law issue here not "substantial": The central issue on appeal was whether Forrester's state law claims necessarily raise a substantive issue of patent law because Forrester's allegations "necessarily require the trial court to construe the claims of the patent in order to determine whether the alleged statements were [] false."  Slip Op. at 8, quoting Wheelabrator's brief.  The Federal Circuit held that this did not raise a substantial issue of patent law here because, as in Gunn, there is "no prospect of future conflict between inconsistent judgments in state and federal courts."  Id. at 10.  Due to the  circumstances of this case, "there is no prospect of a future U.S. infringement suit arising out of Kobin's [operations in Taiwan]" and because the patents have all expired, there is "no prospect that future conduct in the U.S. could lead to an infringement suit regarding those patents."  Id.

The Federal Circuit also rejected Wheelabrator's specific argument that resolution of the claim construction issues necessarily would have potential preclusive effects in future litigation involving the patents.  "[T]he Supreme Court rejected a related argument in Gunn, concluding that any such collateral estoppel effect “would be limited to the parties and patents that had been before the state court,” and that '[s]uch ‘fact-bound and situation-specific’ effects are not sufficient to establish federal arising under jurisdiction.'"  Id., quoting Gunn. 

Limits on Gunn: Even while concluding that here the district court did not have jurisdiction, Forrester recognizes some potential limits when applying Gunn to state law claims:

In the past, we have concluded that similar state law claims premised on allegedly false statements about patents raised a substantial question of federal patent law. For example, in Additive Controls & Measurement Systems, Inc. v. Flowdata, Inc., we concluded that the plaintiff’s state law business disparagement claims arose under patent law for the purposes of 28 U.S.C. § 1338. [] We noted that under state law, “a business disparagement claim requires [the] plaintiff to prove . . . the falsity of [the] defendant’s allegedly disparaging statements.” []  There, the allegedly disparaging statement was an accusation of patent infringement; thus, we concluded that in order to prove the falsity of that statement, the plaintiff would have to “show that its product does not infringe the . . . patent.” [] Reasoning that the infringement issue presented a substantial question of patent law, we concluded that the claims arose under federal patent law for the purposes of § 1338. [CAFC also discusses Hunter Douglas]

Those cases may well have survived the Supreme Court’s decision in Gunn. Unlike the purely “backward looking” legal malpractice claim in Gunn, [], permitting state courts to adjudicate disparagement cases (involving alleged false statements about U.S. patent rights) could result in inconsistent judgments between state and federal courts. For example, a federal court could conclude that certain conduct constituted infringement of a patent while a state court addressing the same infringement question could conclude that the accusation of infringement was false and the patentee could be enjoined from making future public claims about the full scope of its patent as construed in federal court. 

Slip Op. at 8-9 (internal citations omitted and emphasis added).

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

Patent, , , , , ,

by Dennis Crouch

Bowman v. Monsanto Company (Supreme Court 2013)

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

Read the decision below:

= = = =

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

JUSTICE KAGAN delivered the opinion of the Court

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

I

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

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

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

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

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

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

II

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

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

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

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

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

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

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

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

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

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

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

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

 

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

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

Allergan v. Sandoz: The Thin Line of Nonobviousness

Obviousness, Patent, , , ,

By Jason Rantanen

Allergan, Inc. v. Sandoz Inc. (Fed. Cir. 2013) Download Allergan v Sandoz
Panel: Dyk (dissenting-in-part), Prost (author), O'Malley

Allergan illustrates how thin the line between obvious and nonobvious can sometimes be.  Allergan owns several patents relating to its COMBIGAN combination ophthalmic drug treatment: Patent Nos. 7,323,463, 7,642,258, 7,320,976, and 7,030,149.  Representative claim 1 of the '463 patent states:

1. A composition comprising about 0.2% timolol by weight and about 0.5% brimonidine by weight as the sole active agents, in a single composition.

Sandoz sought to market a generic version of COMBIGAN, triggering Allergan to file suit under 35 U.S.C. § 271(e)(2)(A) alleging infringement of its four patents.  Sandoz stipulated to infringement of most of the asserted claims following claim construction and the district court subsequently found that all of the remaining asserted claims were not invalid after a bench trial.  Sandoz's appeal focused primarily on the district court's nonobviousness ruling. For purposes of the appeal, the asserted claims of the '463, 258, and '976 patents were treated as a single group (I'll refer to these collectively as the '463 claims, since that's how the court refers to them) with claim 4 of the '149 patent treated separately.

The '463 claims – obvious: On appeal, the court unanimously reversed the district court's determination that the claims of the '463 patent were nonobvious.  Both timolol (a beta blocker) and brimodine (an alpha2-agonist) were commercially available in their claimed concentrations at the time of the invention and were used to treat opthalmic conditions.  The primary prior art reference, DeSantis, expressly taught serially administering both a beta blocker, such as timolol, with a brimodine in a fixed combination.  It also provided "an express motivation to combine alpha2-agonists and beta blockers in order to increase patient compliance."  Slip Op. at 8.

So where did the district court go wrong?  First, the Federal Circuit held that it committed clear error by finding that "“while patient compliance may have created a need for fixed combination products, it did not motivate a person of skill in the art to develop fixed combinations with a reasonable expectation of success, because the FDA did not consider improving patient compliance as a factor in its approval decision.” Id. at 9, quoting district court.  While FDA approval may be relevant to the motivation inquiry:

There is no requirement in patent law that the person of ordinary skill be motivated to develop the claimed invention based on a rationale that forms the basis for FDA approval. Motivation to combine may be found in many different places and forms; it cannot be limited to those reasons the FDA sees fit to consider in approving drug applications.

The CAFC also concluded that the district court erred by over-relying on the recognized unpredictability in the formulation carts.  While unpredictablity is also relevant to the obviousness inquiry, it can be overcome simply by establishing that there was a reasonable probability of success.  Furthermore, Allergan's challenges in developing its commercial COMBIGAN product were not particularly probative of the obviousness inquiry because the relevant inquiry is whether a person of ordinary skill in the art would have a reasonable expectation of success in developing the claimed invention, not COMBIGAN (which contains many elements in addition to those embodied in the claims). 

In addition, the Federal Circuit concluded that the district court's factual findings on teaching away were insufficient to overcome the motivation provided by DeSantis and that the secondary considerations of nonobviousness did not weigh heavily in this analysis. 

Claim 4 of the '149 patent – nonobvious: While the full panel agreed on the obviousness of the '463 claims, it split over claim 4 of the '149 patent. Claim 4 states:

4. A method of reducing the number of daily topical ophthalmic doses of brimondine administered topically to an eye of a person in need thereof for the treatment of glaucoma or ocular hypertension from 3 to 2 times a day without loss of efficacy, wherein the concentration of brimonidine is 0.2% by weight, said method comprising administering said 0.2% brimonidine by weight and 0.5% timolol by weight in a single composition.

The underlined language is essentially the same as claim 1 of the '463 patent.  Central to the majority's conclusions was thus its treatment of the italicised language as a claim limitation: even though the creation of a single composition of 0.2% brimonidine by weight and 0.5% timolol by weight was obvious, administering it twice a day instead of three times a day without loss of efficacy was not.

The majority reached this because it was understood at the time of the invention that when brimonidine is dosed twice per day as opposed three times per day there is a loss of efficacy in the afternoon (the "afternoon trough") and Sandoz did not identify any "evidence in the prior art that would allow us to conclude that the addition of timolol to brimonidine dosed twice per day would eliminate the afternoon trough issue."   Slip Op. at 13.  Furthermore, even though it was "true that the prior art shows concomitant administration of brimonidine and timolol was dosed twice per day," that was insufficient to establish the obviousness of claim 4 because "this art does not show that there was no loss of efficacy associated with that treatment, let alone an elimination of the afternoon trough."  Id. at 14.

Judge Dyk's dissent:   Writing in dissent, Judge Dyk would have found Claim 4 invalid.  Judge Dyk's disagreement highlights the issue of whether a claim can nonobvious if it is drawn to an unknown – but inherent – property of an obvious invention.  "While a new and nonobvious method of using an existing (or obvious) composition may itself be patentable, [] a newly-discovered result or property of an existing (or obvious) method of use is not patentable."  Slip Op. at 18 (internal citations omitted).

In Judge Dyk's view, claim 4 includes only a single limitation (in this case, a step): "applying a fixed combination of 0.2% brimonidine and 0.5% timolol twice a day."  Given the prior art, [t]he method of applying a fixed combination of 0.2% brimonidine and 0.5% timolol twice a day would therefore have been obvious over the prior art." Id. at 19. 

This did not end the nonobviousness inquiry for the majority, however.  "The majority’s outcome appears to rest, therefore, on the notion that claim 4 was not obvious because it claims the result of twice-a-day dosing—avoiding “a loss of efficacy in the afternoon.”  Id., quoting Maj. Op. 13.  This is not a limitation: "[a]voiding a “loss of efficacy” is not a separate step, but rather a result of the claimed method. []. We should recognize in this case, as we did in Bristol-Myers Squibb, that '[n]ewly discovered results of known processes directed to the same purpose are not patentable.' Bristol-Myers Squibb, 246 F.3d at 1376."  Slip Op. at 19 (internal citations omitted).  

Consequences: It's worth noting that even though it prevailed in establishing the obviousness of the asserted claims of the '463 patent, Sandoz still cannot market its generic version of COMBIGAN: "The ’258, ’976, and ’149 patents each expire on April 19, 2022. Because we concludd that claim 4 of the ’149 patent is not invalid, the Appellants will be unable to enter the market until that date. Accordingly, we find it unnecessary to address the claims of the ’258 and ’976 patents."  Slip Op. at 15.

Lazare Kaplan v. Photoscribe: Make Sure to Always File a Cross-Appeal (Except When You Shouldn’t)

Patent

By Jason Rantanen

Lazare Kaplan Int'l. v. Photoscribe Technologies, Inc. (Fed. Cir. 2013) Download Lazare Kaplan v Photoscribe
Panel: Lourie (author), Dyk (dissent), Reyna

Deciding which issues to appeal can sometimes be a challenging process.  One quirky rule of appealing patent judgments is that when a district court has entered a judgment of invalidity on all asserted claims, it is improper to file a cross-appeal based on either (1) additional claims for invalidity or (2) claims of noninfringement, and doing so can potentially subject the cross-appellant to sanctions.  As Lazare Kaplan illustrates, however, when a district court has entered a judgment that the claims are not infringed and not invalid and the patent holder appeals noninfringement, the patent challenger must file a cross-appeal challenging the no invalidity judgment.  Failing to do so in this situation terminates the patent challenger's ability to raise invalidity arguments, even on remand following a broadening claim construction by the Federal Circuit. 

Background: Lazare Kaplan is the owner of Patent No. 6,476,351.  In 2006, Lazare Kaplan sued Photoscribe for infringement of the '351 patent; Photoscribe responded by filing invalidity counterclaims.  After the district court construed a key claim term, Photoscribe obtained summary judgment of no literal infringement and prevailed at jury trial on the doctrine of equivalents.  The jury also found that the claims were not invalid under the court's construction. The district court entered judgment that the claims were not infringed and not invalid. Lazare Kaplan appealed the judgment of noninfringement but Photoscribe did not appeal the judgment that the claims were not invalid.  On appeal, the Federal Circuit broadened the district court's construction and remanded for further proceedings on infringement.

Following remand, the district court agreed with Photoscribe that both infringement and validity should be retried "because the validity decision of the jury in the first trial was on the basis for a claim construction which the Court of Appeals has reversed."  Slip Op. at 4 (quoting district court).  The district court granted Photoscribe's motion for relief from the prior judgment under Rule 60(b) and its motion for summary judgment of invalidity. Lazare Kaplan appealed. 

Rule 60(b) relief:  While the majority's analysis technically involves determining whether the district court abused its discretion in granting Photoscribe's Rule 60(b) motion, because the majority concludes that the issue before it is unique to patent law, it reviews that decision without deference to either the district court or the law of the regional circuit in which the district court sits (although it does find Second Circuit decisions to be persuasive).  To the majority, the issue is simply "whether, on remand, a district court may reopen a prior final judgment as to patent validity, not appealed by either party, based on a claim construction modified by" the Federal Circuit, a pure question of patent law.  Slip Op. at 6. Framed in those terms, the majority concludes that the answer is no.

Judgment of Validity Must Be Appealed: "It is well-settled that a party must file a cross-appeal if, although successful in the overall outcome in the district court, the party seeks, on appeal, to lessen the rights of its adversary or to enlarge its own rights."  Slip Op. at 6.  An offshoot of this requirement is that "“[A] party will not be permitted to argue before us an issue on which it has lost and on which it has not appealed, where the result of acceptance of its argument would be reversal or modification of the judgment rather than affirmance.”  Id., quoting Radio Steel & Manufacturing Co. v. MTD Products, Inc., 731 F.2d 840, 844 (Fed. Cir. 1984).  In  Odetics, Inc. v. Storage Technology Corp., 185 F.3d 1259 (Fed. Cir. 1999), the Federal Circuit drew on this foundation to affirm a district court's decision that the challenger's invalidity arguments were barred in procedural circumstances similar to here.

Lazare Kaplan goes a step further, holding that a district court cannot address validity on remand where the challenger failed to appeal the judgment that the claims were not invalid, irrespective of the modified claim construction.  In reaching this conclusion, the majority expressly rejects the argument that separate appeal of validity and infringement was not necessary because the issues of validity and infringement were closely interrelated.  "Whether or not the concepts of invalidity and infringement are “closely interrelated” is irrelevant; the relevant issue is whether a ruling reversing the validity holding would expand Photoscribe’s rights or lessen Lazare Kaplan’s rights."  Slip Op. at 9.  Ultimately, regardless of the district court's view that it "makes no sense" not to entertain validity challenge on remand following a new claim construction that potentially raises new validity issues, "rules are rules, and the cross-appeal rule is firmly established in our law."  Id. at 14. 

Judge Dyk: Judge Dyk's dissent criticizes the majority for failing to adhere to the fundamental principle of patent law that “claims must be interpreted and given the same meaning for purposes of both validity and infringement analyses.”  Slip Op. at 17, quoting Amazon.com, Inc. v. Barnesandnoble.com, Inc., 239 F.3d 1343, 1351 (Fed. Cir. 2001).  Here, the district court attempted to eliminate the inconsistency of allowing the patent holder "to assert infringement on a broad claim construction while permitting it to defend against invalidity using a different and far narrower claim construction" by applying Rule 60(b)(5).  Slip Op. at 17-18. 

Judge Dyk's argument focuses on the majority's lack of any support for its conclusion that "failure to file a contingent cross-appeal bars Rule 60(b) relief." Id. at 20.  This is "not a situation governed by the traditional “cross-appeal rule”—that is, the rule that “a party must file a cross-appeal if . . . [it] seeks, on appeal, to lessen the rights of its adversary or to enlarge its own rights.” Maj. Op. 6 (citing El Paso Natural Gas Co. v. Neztsosie, 526 U.S. 473, 479 (1999)) (emphasis added). Here, Photoscribe sought on appeal not to modify the rights established by the district court judgment but to preserve them."  Id.

Biogen v. Glaxosmithkline: Prosecution History Disclaimer and Claim Construction

Patent,

By Jason Rantanen

Biogen Idec, Inc. v. Glxosmithkline (Fed. Cir. 2013) Download Biogen v GSK
Panel: Dyk, Plager (dissenting), Reyna (author)

By the mid-1990's, it was well known that rituximab, an anti-CD20 antibody, could be used to treat certain cancers of the lymph nodes such as non-Hodgkins lymphoma.  The anti-CD20 antibody binds to a portion of the CD20 antigen protein exposed on the cell surface and destroys the cell.  Scientists from Biogen discovered that patients with another type of cancer, Chronic Lymphocytic Leukemia (CLL), could also be treated using anti-CD20 antibodies.  Based on this discovery, Biogen obtained Patent No. 7,682,612.  Claim 1 of the '612 patent reads:

1. A method of treating chronic lymphocytic leukemia in a human patient, comprising administering an anti-CD20 antibody to the patient in an amount effective to treat the chronic lymphocytic leukemia, wherein the method does not include treatment with a radiolabeled anti-CD20 antibody.

Biogen filed the application leading to the '612 patent in the late 1990s.  At the time, scientists believed that only one large loop, or epitope, of the CD20 antigen was exposed on the cancerous cell's surface and that this was the only site that for an anti-CD20 antigen to bind to.  Rituximab binds to this epitope. After Biogen filed its application, other scientists discovered that the CD20 antigen had a second small loop (originally thought to be hidden inside the cell) to which other, different anti-CD20 antibodies could bind.  In 2002, Glaxosmithkline (GSK) developed a new anti-CD20 antigen that binds to the small loop.  Because it binds to a different epitope, GSK's anti-CD20 antibody has different specificity and affinity characteristics than rituximab. 

Biogen sued GSK for infringement of the '612 patent in 2010.  The district court construed anti-CD20 antibody to mean "rituximab and antibodies that bind to the same epitope of the CD20 antigen with similar affinity and specificity as rituximab."  Based on this construction, Biogen stiplated to noninfringement and appealed. 

Prosecution History Disclaimer: The issue on appeal involved the the doctrine of prosecution history disclaimer.  Prosecution history disclaimer applies when a "patentee unequivocally and unambiguously disavows a certain meaning to obtain a patent."  Slip Op. at 8.  In this circumstance, the doctrine "narrows the meaning of the claim consistent with the scope of the claim being surrendered," id. overcoming even the term's ordinary and customary meaning.  Application of the doctrine helps serve a public notice function by allowing the public and competitors rely on definitive statements made during prosecution when launching a new product or designing-around a patented invention.

During an early stage of the prosecution of the '612 patent, the examiner rejected the presented claims on enablement grounds:

Claims 1 and 12 are broadly drawn to ‘. . . an anti-CD20 antibody or fragment thereof’. This is
broadly interpreted for examination purposes to be any and all anti-CD20 antibodies, no matter
the specificity or affinity for the specific epitope on the circulating tumor cells. While the specification is enabling for the application of RITUXAN®, RITUXIMAB® and 2B8-MX-DTPA in the treatment of hematologic malignancies, the specification is not enabling in the application of all other anti-CD20 antibodies, which may have different structural and functional properties.

In response, the applicant wrote:

Applicants respectfully submit that even though antibodies directed to the same antigen might have different affinities and functional characteristics, one of skill in the art could readily identify an antibody that binds to CD20 with similar affinity and specificity as does RITUXAN® using techniques that are well known in the art. . . . With that knowledge in hand, the skilled artisan could readily produce anti-CD20 antibodies using similar techniques, and screen such antibodies for those having an affinity and functional activity similar to Rituxan®

Based on this exchange in the context of the prosecution history read as a whole, the majority agreed with the district court that prosecution disclaimer applied to limit the scope of "anti-CD20 antibody."  "[R]ather than challenging the examiner’s understanding of the crucial terms, the applicants argued that the specification was enabling for anti-CD20 antibodies with similar affinity and specificity as Rituxan®."  Slip Op. at 10.  Nor was exact recitation of the examiner's own words necessary: "While disavowing statements must be “so clear as to show reasonable clarity and deliberateness,” Omega, 334 F.3d at 1325, this requirement does not require the applicant to parrot back language used by the examiner when clearly and deliberately responding to a particular grounds for rejection. If an applicant chooses, she can challenge an examiner’s characterization in order to avoid any chance for disclaimer, but the applicants in this case did not directly challenge the examiner’s characterization."  Slip Op. at 11. 

Hierarchy of canons of claim construction: In the hierarchy of canons of claim construction, prosecution history disclaimer trumps the presumption of claim differentiation: "Our cases make clear [] that where found, prosecution history disclaimer can overcome the presumption of claim differentiation."  Id. at 12 (note that the court said "can overcome," leaving open a door for cirucumstances in which it might not). 

Dissent: Writing in dissent, Judge Plager disagreed that this was an instance of prosecution history disclaimer.  "[T]he give-and-take that is often part of the process of negotiation between an examiner and an applicant may result in less-than-clear understandings, as happened here. Making too much of such ambiguous statements 'does not advance the patent’s notice function or justify public reliance.'"  Slip Op. at 16.  For Judge Plager, the question is thus "whether the prosecution history makes it clear that using RITUXAN® [Biogen's branded version of rituximab]-like antibodies is the only way to practice the claimed invention, and that no other antibodies can be used."  Id.  In his view, the above quoted statements fail to meet the "clear and unmistakable" standard required for prosecution history estoppel.  

The avoided question: By affirming the district court's claim construction, the CAFC avoided a battle over an extremely challenging issue: enablement in the context of after arising technologies and knowledge.  Biogen's proposed construction was "an antibody that binds to a cell surface CD20 antigen."  This construction would presumably encompass methods using antibodies that bind to the larger epitope (which Biogen discovered) as well as antibodies that bind to the smaller epitope (which Biogen did not).  Since enablement is determined as of the filing date, this presents the classic patent law hypothetical: Inventor X invents one way of curing a type of cancer and then claims simply "a cure for cancer."  Should inventor X be entitled to the claim?  She's cured cancer, after all.    

PatCon 3: Posner/Epstein Debate on the Patent System

Patent, , , , , ,

Continuing to liveblog from PatCon 3.  I'll continue updating this post throughout the debate. 

A Debate About the Patent System

The Honorable Judge Richard Posner of the United States Court of Appeals for the Seventh Circuit
Professor Richard Epstein, Laurence A. Tisch Professor of Law, New York University School of Law, and James Parker Hall Distinguished Service Professor Emeritus of Law and Senior Lecturer, University of Chicago Law School

Moderated by Olivia Luk of Niro, Haller & Niro

For another perspective on this debate, check out Lisa Larrimore Ouellette's post over at Written Description.

(more…)

Liveblogging PatCon 3: A Conversation with Industry

Patent, , , ,

By Jason Rantanen

Today I'll be liveblogging from PatCon 3.  For those who are interested, the substance will be after the break.  I'm told that video recordings will be available for the plenary presentations.

A conversation with industry

Jim Trusell – Chief IP counsel at BP
Karen Nelson – attorney at AbbVie 
Jon Wood – Chief IP Counsel at Bridgestone
Paul Rodriguez – Chief IP Counsel at RR Donnelly
Stephen Auten – Cozen O'Conner (moderator)

(more…)

Stent Patent Cannot Heal Divided Claim Construction: Four Judges = Four Different Claim Constructions

Patent

By Dennis Crouch

Bruce Saffran v. Johnson & Johnson (Fed. Cir. 2013)

Claim construction has become the most highly contentious issue in patent litigation.  A difficulty with claim construction is that the question does not involve a yes/no answer.  Rather there are a wide variety of possible constructions for any claim element.  Thus, the likelihood of a court randomly picking the correct construction is quite low. And, as it turns out under the rules of de novo review, even when the lower court applies reason and evidence to the problem it it often arrives at the wrong answer. That wrong answer leads to a reversal of the claim construction on appeal.  To be clear, claim construction falls in line with the normal plaintiff/defendant divide. Plaintiffs (patentees) tend to prefer no construction and just let the jury figure out whether the claims are infringed.  Defendants (accused infringers) see claim construction as a mechanism for removing the case from the jury based on the technicality.  Thus, most serious claim construction arguments are designed around the prospect that a favorable decision will lead to summary judgment for the defendant.  Although we often hear of "overly broad" patent claims, the reality is that some defendants ask for a narrow construction in order to build their non-infringement argument while other defendants ask for a broad construction in order to build their invalidity argument.  Of course, the high burden associated with proving invalidity tends to make the first approach a better strategy. In addition to the myriad potential constructions for each term, a typical patent claim has dozens of potentially disputed claims – making the combinatory possibilities quite large.

Background: This case involves Dr. Bruce Saffran's U.S. Patent No. 5,653,760 that claims the treatment of damaged living tissue by covering the tissue with a selectively permeable barrier that could be wholly introduced or applied as a spray. As designed, the device could then allow for the release of a treatment drug that would be able to pass through the membrane while larger molecules would be blocked. The specification explains that the selectively permeable membrane would be useful in the stent market in order to protect blood vessel cells as they regenerate. Saffran previously settled with Boston Scientific for $50 million. In this case he won a $500 million verdict (plus interest) against J&J for its infringing stents.

In a divided opinion, the Federal Circuit has flipped the verdict — finding that the lower court had erred in claim construction and that under the proper construction J&J's stents do not infringe.

The decision is interesting because it includes three opinions that all agree in the judgment reversal, but each disagrees as to the correct construction. In all, four judges have considered the claim construction and have come out with four different claim constructions. The basic dispute is over two claim terms:

  • "Device": Whether that term should be interpreted to require a sheet.
  • "Means for release of … treating material": Whether the means can generally include chemical bonds and linkages or only hydrolyzable bonds.

The four judges outcome on these two questions is shown in the two-by-two table below.

   

Claimed means limited to hydrolyzable bonds

Claimed means includes chemical bonds and linkages

"Device" requires sheet

Judge Lourie –

No Infringement

Judge Moore –

No Infringement

"Device" does not require sheet

Judge O'Malley –

No Infringement

Judge Ward –

Infringement

Whither Cybor: The Federal Circuit is currently reconsidering whether Cybor was correctly decided – i.e., whether deference should be given to the lower court claim construction ruling. If deference had been given, it may well be that Judge Ward's opinion would have carried the day – with the resulting conclusion that the $500m verdict should be upheld. As others have written, that result does not actually solve real problems — only masks them.

The Sedona Conference’s new regional patent litigation programs

Patent,

By Jason Rantanen

For those who aren't familiar with The Sedona Conference, it's a law and policy think tank that organizes programs that bring together judges, lawyers, experts and academics to discuss issues in antitrust law, intellectual property, and other forms of complex litigation. The organization offers a variety of programs from regional CLE programs to national conferences to small working groups that develop practical guidelines and reports on particular areas of the law.  Past working groups have discussed and developed reports on subjects such as claim construction, eDiscovery, and the intersection of patent and antitrust laws.  One unique aspect of The Sedona Conference is that its conferences use a dialogue-based, as opposed to debate-based, approach to understanding important issues in the law. 

The folks at The Sedona Conference recently asked me to share the announcement that they are expanding their programing on patent litigation to include regional conferences.  The first regional conferences on patent litigation will take place in New York, NY on Thursday, May 2 and in Washington, D.C. on Thursday, May 9.  Both programs are entitled “In Search of Best Practices for Patent Litigation Case Management Post-AIA” and will be part of The Sedona Conference's development of a working group on case management issues post-AIA.

The faculty for the New York program on May 2 includes:

  • Hon. Loretta Preska, Chief Judge for the Southern District of New York
  • Hon. John Koeltl, US District Judge for the Southern District of New York
  • Hon. Faith Hochberg, US District Judge for the District of New Jersey
  • David Kappos, former director of the USPTO, now of Cravath

The New York program will be held on Thursday, May 2, 2013, at the Cardozo School of Law.  For additional details, faculty bios, and to register for the NY program, visit the program page.

The faculty for the DC program on May 9 includes:

  • Hon. Paul R. Michel (ret.), formerly Chief Judge of the Federal Circuit
  • Robert G. Sterne, founding director of Sterne, Kessler, Goldstein & Fox, P.L.L.C.
  • Hon. Joy Flowers Conti, US District Judge for the Western District of Pennsylvania
  • Hon. Marvin Garbis, US District Judge for the District of Maryland
  • Teresa Stanek Rea, acting director of the USPTO

The Washington, DC program will be held on Thursday, May 9, 2013, at the offices of Sterne, Kessler, Goldstein & Fox, P.L.L.C.  For additional details, faculty bios, and to register for the DC program, please visit the program page.

PatentlyO readers will receive a $100 discount:  You will need to enter a coupon code to receive the discount.  Contact The Sedona Conference at info@sedonaconference.org and let them know you are a PatentlyO reader to obtain the coupon code.  

Federal Circuit to Reconsider De Novo Review of Claim Construction

Patent,

By Jason Rantanen

In a per curium order issued a short time ago, the current sitting judges of the Federal Circuit (Chief Judge Rader and Judges Newman, Lourie, Dyk, Prost, Moore, O'Malley, Reyna, and Wallach) have granted Lighting Ballast Control's petition for rehearing en banc.  As Hal Wegner has pointed out, this comes just hours before Judge Taranto's swearing in. 

The parties have been instructed to address of deference in reviewing district court claim constructions:

a. Should this court overrule Cybor Corp. v. FAS Technologies, Inc., 138 F.3d 1448 (Fed. Cir. 1998)?
b. Should this court afford deference to any aspect of a district court’s claim construction?
c. If so, which aspects should be afforded deference?

It goes without saying that these questions have tremendous significance for patent law.  One peripheral thought – will the court hold all appeals involving issues of claim construction in abeyance until it issues its en banc opinion?

The order: Download Lighting ballast 2012-1014 3 15 13 final en banc grant order

Previous PatentlyO coverage of the petition:

Aristocrat Technologies v. Int’l Game Technology

Patent,

By Jason Rantanen

Aristocrat Technologies Australia PTY Limited v. International Game Technology (Fed. Cir. 2012) Download 10-1426.Opinion.3-11-2013.1
Panel: O'Malley (author), Bryson and Linn

Aristocrat and IGT compete in the casino gaming machine industry; Aristocrat was the patent holder here.  After construing the claims, the district court granted summary judgment of noninfringement under Muniauction v. Thomson, 532 F.3d 1318 (Fed. Cir. 2008), because no single actor performed all of the claimed steps.  On appeal, the Federal Circuit affirmed the district court's claim construction and summary judgment of no direct infringement but remanded for further proceedings on inducement of infringement in light of its intervening en banc decision in Akamai Technologies, Inc. v. Limelight Networks, Inc., 692 F.3d 1301 (Fed. Cir. 2012).  This is the second case this month to address the issue of joint/divided infringement.

The patents-in-suit relate to a gaming system in which an additional prize is awarded to a player through a secondary feature game appearing after the main game is completed.  Most of the claim limitations relate to steps that would performed by the casino itself, such as "initiating a first main game at said particular gaming machine" and "awarding said one progressive prize from said plurality of progressive prizes that has been won." 

One limitation, however, requires "making a wager at a particular gaming machine in the network of gaming machines."  The district court interpreted this limitation to mean "betting, which is an act performed by the player."  Aristocrat challenged this construction on appeal, contending that "making a wager" is merely "carrying out a bet" (and thus could be performed by the same actor that carried out the other steps).  The Federal Circuit disagreed, noting the overwhelming support for the district court's construction.  It rejected Aristocrat's other claim construction challenge based on similarly overwhelming amounts of contrary evidence.  This opinion is a great example of what happens when a party tries to twist the meaning of a claim term far beyond what is reasonable or supportable. 

Divided infringement (direct): Turning to the divided infringement problem the construed claims raised, the Federal Circuit began by affirming summary judgment of no direct infringement.  The court first noted that Akamai expressly did not revisit the law of divided infringement as it applies to 271(a); to be liable for direct infringement of a method claim, a party must perform "all the steps of the claimed method, either personally or through another acting under his direction or control."  Slip op. at 25, quoting Akamai.  Under Muniauction, “the control or direction standard is satisfied in situations where the law would traditionally hold the accused direct infringer vicariously liable for the acts committed by another party that are required to complete performance of a claimed method.”  Here, no single actor performed all the claimed steps and the Federal Circuit declined to conclude that the alleged conduct satisfied the "direction or control requirement.  In doing so, it expressly rejected Aristocrat's argument that this requirement was satisfied due to the player's actions being "the 'natural, ordinary, and reasonable consequences of' IGT's conduct."  Slip op. at 27.

Divided infringement (indirect): Applying Akamai, the Federal Circuit vacated the district court's summary judgment with regard to indirect infringement, an issue that neither the parties nor the district court expended significant time on.  The Federal Circuit's opinion provides no substantive discussion on this issue but does highlight two key parts of Akamai that nicely sum it up: 

As we stated in Akamai, “[r]equiring proof that there has been direct infringement as a predicate for induced infringement is not the same as requiring proof that a single party would be liable as a direct infringer.” Akamai, 692 F.3d at 1308-09 (emphasis in original). Thus, “[a] party who knowingly induces others to engage in acts that collectively practice the steps of the patented method—and those others perform those acts—has had precisely the same impact on the patentee as a party who induces the same infringement by a single direct infringer; there is no reason, either in the text of the statute or in the policy underlying it, to treat the two inducers differently.” Id. at 1309.

Slip op. at 28. Here, Aristocrat deserved the opportunity to argue its indirect infringement theory with the benefit of the Federal Circuit's clarification regarding inducement. 

Update on petitions for certiorari in Akamai and Epic v. McKesson: As noted by Dennis earlier this month, petitions for certiorari were filed in both Akamai and Epic v. McKesson.  However, Epic and McKesson recently settled and Epic has withdrawn its cert petition. (Thanks to Tim Holbrook for pointing this out). Clarification: Both Limelight's petition and Akamai's conditional cross-petition remain pending.

When a Functional Claim Limitation is the “Essence of the Invention”

Patent, ,

by Dennis Crouch

In re Jasinski (Fed. Cir. 2013)

Jasinski’s patent application is owned by IBM and directed to a method of testing computer memory devices. Application No. 10/906,508.  The USPTO examiner rejected the claims as anticipated and that rejected was affirmed by the USPTO’s internal review board.  On appeal here, the Federal Circuit reversed based upon a claim construction issue.

I have reproduced claim 1 below:

A method for verifying the accuracy of logical-to-physical mapping software designed for testing memory devices, said method comprising:

[a] providing a built-in self test (BIST) fail control function to generate multiple simulated memory fails at various predetermined locations within a
memory array of a memory device;

[b] testing said memory array via a memory tester;

[c] generating a bit fail map by said logical-to physical mapping software based on all memory fails indicated by said memory tester, wherein
said bit fail map indicates physical locations of all fail memory locations derived by said logical-to-physical mapping software; and

[d] comparing said fail memory locations derived by said logical-to-physical mapping software to said various predetermined memory locations to verify the accuracy of said logical-to-physical mapping software.

The USPTO refused to give patentable weight to either the preamble statement of purpose “verifying the accuracy” or the final functional clause indicating that the purpose of the final comparing step is “to verify the accuracy.”  Rather, the USPTO argued that those statements of intended purpose of a step rather than placing any actual limitation on the step itself. According to the USPTO, if the patentee wanted to include a verifying step then it could have done so by positively reciting that step. See Minton v. Nat’l Ass’n of Securities Dealers, Inc., 336 F.3d 1373 (Fed. Cir. 2003) (a whereby “clause in a method claim is not given weight when it simply expresses the intended result of a process step positively recited.”)

On appeal, the Federal Circuit agreed with the notion that a clause that merely indicate the purpose of a limitation does not add patentable weight.  However, the court disagreed the USPTO’s conclusion that the “to verify the accuracy” clause merely indicated the purpose of the step.  Rather, the court found that the “to verify the accuracy” clause refers to the “essence of the invention” and “provides the criteria by which the previously-recited comparing limitation is analyzed.” For this point, the court cited Vizio, Inc. v. Int’l Trade Comm’n, 605 F.3d 1330 (Fed. Cir. 2010) (“[T]he ‘for decoding’ language . . . is properly construed as a limitation, and not merely a statement of purpose or intended use for the invention, because ‘decoding’ is the essence or a fundamental characteristic of the claimed invention.”).

The decision by Judge Moore is important on several fronts:

1) Judge Moore is may well be the most claim-focused member of the Federal Circuit.  Yet, the opinion relies upon the “essence of the invention” to lead to its result rather than merely focusing on the claim language. At least on the academic side we continue to have a broad debate over whether the “cult of the claim” is appropriate.

2) From a practical perspective, this decision places additional power in the hands of patent applicants who reject the USPTO’s broadest reasonable interpretation of its patent claims.  Here, the PTO’s motivation was really that the applicant amend its claims to avoid ambiguity, but its approach was blocked by the court. Moving forward we will likely see continued growth in the use of functional claim language.

3) Functional claim language has been under attack since the Supreme Court rejected Samuel Morse’s broad Claim 8.  The patent act particularly allows for functional claim limitations under 35 U.S.C. 112(f), but that provision includes strict limits on the scope given to such limitations.  More recently, we have seen increased calls to take steps to limit the use of functional claim language.  As Prof Rantanen discussed yesterday, Mark Lemley has proposed that the court should begin interpreting functionally claimed elements as also being bound by 112(f).