Tag Archives: Claim Construction

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

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By Dennis Crouch

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

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

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

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

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

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

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

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

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

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

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

Notes:

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

Technology Patents LLC. v. T-Mobile (UK) Ltd.

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By Jason Rantanen

Technology Patents LLC. v. T-Mobile (UK) Ltd. (Fed. Cir. 2012) Download 11-1581
Panel: Bryson (author), Prost, Reyna

This case involves a suit brought by prolific inventor Aris Mardirossian's company Technology Patents LLC against more than 100 domestic and foreign defendants that TPL accused of infringing US Reissue Patent No. RE39870.  While the primary subjects addressed by the court are those of claim construction and infringement , there are several additional noteworthy issues discussed at the end of the post.

The '870 patent relates to a global paging system.  According to the patent, the prior art was deficient because "it did not fulfill the need for a cheap and efficient global paging system that allows users who expect to receive messages or pages abroad to 'remotely input country designations in which they are to be paged.'"  Slip Op. at 13, quoting '870 patent.  The '870 patent sought to cure the deficiencies of the prior art: "The ’870 Patent solved this problem by claiming a system which allows for paging of the receiving user (“RU”) in countries where the RU “may be located,” as per a list input by the RU." Id., quoting district court.  Claim 4, the primary claim addressed on appeal, recites  (claim terms at issue in the appeal are in bold):

4. A system for paging a receiving user in a country-selective paging system, comprising:

a paging system spanning a plurality of different countries of the world, the paging system including a plurality of servers, and wireless transmitters in different countries for transmitting paging messages to receiving users;

interconnecting servers so as to permit digital communication of signals between the plurality of servers via at least the packet-switched digital data network;

a first website or server located in a first country for allowing an originating user to page the receiving user who may be located in a second country different from the first country, the originating user not necessarily knowing what country the receiving user is located in;

wherein the paging system determines if the second country is currently designated by the receiving user as a designated country in which the paging system is to attempt to page the receiving user;

when the paging system determines that the second country has been designated by the receiving user, means for sending a paging communication via at least the packet-switched digital data network to a second website or server, the second website or server being in communication with a wireless transmitter located in the second country, and wherein the paging communication causes the second website or server to initiate paging the receiving user via the wireless transmitter in the second country; and

when the paging system determines that the second country has not been designated by the receiving user, the paging system initiates paging operations in another country in a predetermined order in an attempt to page the receiving user.

The over 100 companies companies that TPL sued roughly fell into three categories: (1) domestic carriers and handset companies, (2) software providers, and (3) foreign carriers.  Following claim construction, the district court granted summary judgment of noninfringement to the domestic carriers.  On appeal, TPL challenged the district court's claim construction and noninfringement rulings. 

Claim Construction: Much of the claim construction dispute revolved around the meaning of "receiving user."  The district court construed this term to mean a "person or party," while TPL contended that it means "the combination of the person and the handset."

Applying what has often been described as a holistic approach to claim construction, the Federal Circuit affirmed the district court's construction.  In other words, the court applied a flexible, relatively unstructured approach to construing the claim terms as opposed to a rigid rules-based approach.  In this particular case, that meant looking closely at the intrinsic evidence.  "The text of the patent makes clear that the term “receiving user” does not refer to a person-pager combination."  Slip Op. at 19. The court applied a similar approach to the two remaining claim terms.

Holistic Infringement Analysis: TPL also argued that, even if the CAFC affirmed the district court's claim constructions, it nevertheless erred in its grant of summary judgment of noninfringement.  On this point, too, the Federal Circuit affirmed.  While much of the CAFC's conclusion was based on the "receiving user" limitation, the court's overall approach bore many similarities to its holistic claim construction: the court made frequent reference back to the specification even as it assessed the question of infringement, rather than rigidly applying its claim construction. 

For example, in responding to TPL's argument that because the accused systems permitted users to select the carrier when traveling abroad, some of which contained country information (see below figure), the court pointed out that "The specification and the claims make clear that the invention is concerned with the country in which the receiving user is located, not with the receiving user’s carrier." Slip Op. at 29.  This carried through to the assessment of infringement under the doctrine of equivalents, as the court concluded that "the distinction betwen selecting a carrier and selecting a country is not insignificant in the context of the patent….That is a fundamental difference between the accused systems and the claimed invention that goes to the heart of the claimed invention."  Slip Op. at 34.  Figure 1

 

Additional notes:

  • This lawsuit was filed in 2007 – well before the September 16, 2011 enactment of the America Invents Act, which substantially altered the rules for joining multiple unrelated defendants within a single infringement lawsuit. 
  • The district court granted summary judgment of noninfringement to the software providers as well, in part on the ground that it concluded that certain claims required mutiple actors and TPL failed to show that the defendants have discretion or control over the end users.  The Federal Circuit concluded that it was unnecessary to consider the recent en banc decision in Akamai Technologies v. Limelight addressing divided infringement because the claimed software system could be "used" by a single actor even if the user did not have physical control over all elements of a system. Slip Op. at 36 (citing Centillion Data Sys. v. Qwest Communications, 631 F.3d 1279, 1284 (Fed. Cir. 2011).
  • The district court found that it lacked jurisdiction over the foreign carriers.  On appeal, the Federal Circuit did not address the jurisdictional question, instead concluding that "Our ruling sustaining the district court’s decision in favor of the domestic carriers thus dooms TPL’s claim of infringement against the foreign carriers as well. For that reason, it is unnecessary for us to decide whether the district court was correct in dismissing the case against the foreign carriers for lack of personal jurisdiction."  Slip Op. at 39.

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

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By Dennis Crouch

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

At paragraph 78.

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

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

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

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

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

Notes:

Apple v. Samsung: Adding Elements to Avoid Infringement

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By Dennis Crouch

Apple Inc. v. Samsung Electronics Co., Ltd., — F.3d —, 2012 WL 4820601, App. No. 2012-1507 (Fed. Cir. 2012) (N.D.Ill. 12-CV-0630) (APPLE II)

This is my second post on the appellate decision that I term Apple II. [Read the First Apple II Post.] In Apple II, the Court of Appeals for the Federal Circuit vacated N.D. California District Court Judge Koh’s preliminary injunction order that would have forced Samsung’s Galaxy Nexus smartphone off the market pending conclusion of the infringement lawsuit. The appellate court provided two independent reasons for vacating the preliminary injunction order: (1) that Apple had failed to provide proof of irreparable harm due to Samsung’s continued use of the particular invention covered by the patent; and (2) that a finding of infringement is unlikely based upon the claim construction as corrected by the Federal Circuit. This post focuses on the claim construction issue.

The patent at issue in this case is U.S. Patent No. 8,086,604. That patent issued in December 2011 but stems from upon an application originally filed in January 2000 and appears to be largely directed to aspects of Apple’s Siri application (although the original invention is not tied to a mobile device). After construing claim 6 of the patent, the district court found that Samsung’s product likely infringes. On appeal, the Federal Circuit has reversed that claim construction in a way that substantially narrows claim scope and thus negates any likelihood that Samsung infringes. Although the claim-at-issue uses open-ended “comprising” language, the appellate panel held that an apparatus that includes additional similar (but non-infringing) elements would not be covered by the patent.

Claim 6 is directed to an “apparatus for locating information in a network” comprising various software elements. The basic idea is that the system has a set of heuristic modules corresponding to different search areas. We all use heuristics for searching. For example, if you want to find prior art relating to a chemical compound, you might hire an expert chemistry searcher. On the other hand, if your search area is airplane seat design, you might hire someone else. Under the language of the patent, these search strategies could be defined as two different heuristic modules each corresponding to their respective search area. In the lawsuit itself, Apple identified the three heuristic modules as (1) a Google Search Module; (2) a Module that allows for Search of Internet Browsing History; and (3) a Search of a user’s Contacts List. One difficulty with considering this case is that this invention appears in hindsight to be ridiculously obvious. However, obviousness is not the topic of the appeal.

The patent claim requires “a plurality of heuristic modules … wherein: each heuristic module corresponds to a respective area of search and employs a different, predetermined heuristic algorithm corresponding to said respective area.” Samsung’s product allegedly uses a plurality of heuristic modules corresponding to different search areas. However, the accused product does not use “different, predetermined heuristic algorithm” for each and every different search area. I have modeled this below with a diagram of the Galaxy Nexus Search System associated with five different Search Areas (A,B,C,D,E) but only three different Heuristic Modules (X,Y,Z). Although some of the Heuristic Modules are re-used by the system, Apple argues that the system still infringes under standard patent law that would find the addition of non-infringing elements to an infringing core does not negate infringement. See CIAS, Inc. v. Alliance Gaming Corp., 504 F.3d 1356, 1360 (Fed. Cir. 2007) (infringing device may include additional, unrecited elements).

Writing for the unanimous panel, Judge Prost (joined by Judge Moore and Reyna) rejected Apple’s argument and instead agreed with Samsung that the claim “requires that [each and] every heuristic module within the accused device use a unique heuristic algorithm.”

[D]espite the use of “comprising,” claim 6 is not amenable to the addition of other modules that do not use different heuristic algorithms because such addition would impermissibly wipe out the express limitation that requires every module to have a unique heuristic algorithm.

It appears from the court’s remarks that a simple claim amendment might have saved Apple’s case:

  • Original: “a plurality of heuristic modules … wherein: each heuristic module corresponds to a respective area of search and employs a different, predetermined heuristic algorithm …”
  • Proposed: “a plurality of heuristic modules … wherein: each of the plurality of heuristic module corresponds to a respective area of search and employs a different, predetermined heuristic algorithm …”

However, Apple might not have been able to obtain patent protection if it had clarified that the system might use the same heuristic algorithm for a variety of search areas. In particular, during prosecution Apple used the limitation in question to avoid prior art. The company argued “Andreoli does not describe … that each of the local and remote search operations employs a different heuristic algorithm.” Although the appellate panel based its decision on what I see as odd linguistics, this prosecution history argument is probably the most damning evidence.

Apple has at least one continuation application pending and thus has the opportunity to further shape its claims in a way that captures the market while avoiding prior art. See U.S. Patent Application Pub. No. 2012-0166477. The USPTO is also in the early stages of conducting an inter partes reexamination that was filed in August 2012 by Motorola Mobility (Google). See Inter Partes Reexamination No. 95/000,685.

THOSITA: Obvious to a Team Having Ordinary Skill in the Art

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By Dennis Crouch

Inventors Per Patent: The number of inventors per patent has risen fairly steadily for the past 40 years. Today, most patents are directed toward inventions created by teams of two or more inventors working in a collaborative environment. When done well, teamwork can add tremendous value to the creative process and can also provide a combined depth of knowledge beyond most individuals.

Individual PHOSITA: From its inception, the 1952 Patent Act allowed for joint inventors. However, the question of obviousness focuses on a single hypothetical individual: "a person having ordinary skill in the art to which said subject matter pertains." 35 U.S.C. § 103. The AIA slightly amends this portion of Section 103 to clarify that the "said subject matter" is "the claimed invention." This is a change made throughout the statute and puts-to-rest ongoing arguments for identification of a "core" invention for each patent.

PHOSITA as a Team: In its most recent decision, the UK Royal Court of Justice appellate panel took a different path – finding that question of obviousness should be judged from the viewpoint of a "skilled team." MedImmune v. Novartis, [2012] EWCA Civ 1234 (Kitchen, LJ). For the case in question, the court found that the "patent is addressed to a team of scientists with differing backgrounds in areas such as immunology, in particular antibody structural biology, molecular biology and protein chemistry, but with a common interest in antibody engineering."

The skilled team construct is not entirely new to UK case law. See, for example, Schlumberger Holdings Ltd v Electromagnetic Geoservices AS, [2010] EWCA Civ 819 (Jacob LJ), and Halliburton Energy Services, Inc. v. Smith International (North Sea) Limited, [2006] EWCA Civ 1715 (Jacob LJ). The starting point for these UK courts is essentially identical to that of US courts. In particular, the UK Patents Act 1977 defines "inventive step" as being "not obvious to a person skilled in the art." The corresponding language is found in Article 56 of the European Patent Convention (defining inventive step with reference to being obvious to a person skilled in the art). In building the notional teams, the UK courts have been somewhat careful to avoid hindsight bias in the process. Dyson Appliances Ltd v Hoover Ltd [2001] EWCA Civ 1440. Despite the progress, it is clear to me that the UK courts are still working out what it means to be obvious to a team as opposed to obvious to an individual person.

What is added by a Team Analysis?: In 2011, I questioned whether obviousness analysis should reflect some nuances of teamwork:

As compared to a solo worker, teams often have an overall broader depth of knowledge, but are often plagued by communication difficulties. In the obviousness analysis, this shift could be reflected in a broader scope of potential prior art but a more rigorous analysis of whether the ordinary team would make leaps of analysis necessary to combine disparate prior art.

Despite providing arguments on both-sides, I suspect that a notional team would tend to make an obviousness conclusion more likely. The knowledge of those of skill in the art is considered in other areas of patent law such as claim construction, enablement, and definiteness.

THOSITA under US Law: One statutory question moving forward is whether a section 103 "person" can be interpreted to encompass a team of persons. The answer is almost certainly yes. Perhaps the greatest driving factor for this conclusion is found in Section 102 that begins with the statement that "A person shall be entitled to a patent unless…" For that statute, the term person certainly apply to teams of joint inventors.

One major problem with my starting point of increased-team-size is the reality that the obviousness question is not designed around a "skilled inventor" threshold but that of a skilled craftsman of "ordinary skill." This means that there is not really any statutory hook for pushing the obviousness analysis to track the culture of innovation and creative experimentation. Rather, the focus is merely on ordinary craftsmen and what would have been common sense at the time. By design, this creates a low inventiveness threshold intentionally does not consider the particular inventive path taken. "Patentability shall not be negated by the manner in which the invention was made." 35 U.C.C. 103 (post-AIA).

See:

  • Dennis Crouch, Person(s) Skilled in the Art: Should the Now Established Model of Team-Based Inventing Impact the Obviousness Analysis?, Patently-O (2011)
  • Jonathan J. Darrow, The Neglected Dimension of Patent Law's PHOSITA Standard, 23 Harvard JOLT 227 (2009)

Appellate Review of Patent Claim Construction: The Reality and Wisdom of a “Mongrel” Standard

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Guest Post by Professors J. Jonas Anderson (American University) and Peter S. Menell (Berkeley)

Patent scope plays a central role in the operation of the patent system, making patent claim construction a critical aspect of nearly every patent litigation.  With the resurgence of patent jury trials in the 1980s, the allocation of responsibility for interpreting patent claims between trial judge and jury emerged as a salient issue.  While the Supreme Court’s Markman decision usefully removed claim construction from the black box of jury deliberations notwithstanding its "mongrel" (mixed fact/law) character, the Federal Circuit’s adherence to the view that claim construction is a pure question of law subject to de novo appellate review produced an unusually high reversal rate. The high rate of reversal distorted the evidentiary foundation of claim construction determinations, delayed settlement of patent cases, ran up litigation costs, and turned appellate review of nearly every patent case into re-litigation of patent claim terms.

In 2004, the Federal Circuit undertook to reassess this regime in the Phillips case.  On its face, the majority en banc opinion largely stayed the course.  Indeed, the studies to have emerged since Phillips suggest that not much has changed, finding that the reversal rate remained high and that the Federal Circuit’s analytical framework remained largely unchanged.

Our recent article reports the results of a longer term, comprehensive, empirical analysis of the Federal Circuit’s claim construction jurisprudence from 2000 through 2011.  See “From de novo Review to Informal Deference: An Historical, Empirical, and Normative Analysis of the Standard of Appellate Review for Patent Claim Construction,” available at http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2150360.  In contrast to prior analyses, we find that the claim construction reversal rate has dropped precipitously since the Phillips decision.

 

Pre-Phillips

Post-Phillips

Percentage of terms reversed

37.6%

23.8%

Percentage of cases with at least one reversed claim term

40.7%

29.9%

Percentage of cases resulting in remand, reversal, or vacation due to claim construction error

35%

24.1%

The following figure shows the term-by-term reversal rate as a rolling average over 100 terms.  The blue line indicates the date that the Federal Circuit granted en banc review in Phillips.  The green line indicates the date of the oral argument.  The red line indicates the date that the decision issued.

Reversal Rate

As our article explains, although a majority of the Federal Circuit declined to overturn the de novo standard, just about all members of the Federal Circuit apparently concluded at or around the time of the Phillips argument that they should lighten up on their scrutiny of district court decisions.  The immediate drop in reversals that occurs following the Phillips argument suggests that the change in reversal rates cannot simply be explained by district courts having changed their practices in response to the Phillips decision.  If the real benefit of Phillips was the opinion’s value in instructing district court judges, we would expect to see a delayed and gradual drop in reversals followed by a later increase as litigants began selecting only the strongest cases for appeal.  Instead, we see an immediate and sustained drop in reversals.

As the following chart indicates, affirmance rates for all members of the Federal Circuit rose after Phillips.

Affirmance Votes

In addition, use of summary affirmances increased significantly following the Phillips decision and has remained higher than the pre-Phillips period.

SJ

Reversal rates have fallen across all technology fields except business methods. 

Technology Fields

During 2011, the average reversal rate dipped to 17%.  In the two years prior to Phillips, the rate was in the mid-40s.

This does not mean, however, that the problems of de novo review have been adequately resolved.  So long as the Federal Circuit subscribes to the view that claim construction is a question of law subject to de novo review, district courts will downplay their resort to experts and fact-finding in managing claim construction in an effort to avoid reversal.  This will undermine the quality of adjudication and appellate review by failing to elicit relevant evidence and perpetuating opaque analysis and reasoning.  We propose a “mongrel” standard of appellate review of claim construction decisions that better reflects the comparative strengths of trial judges in determining how skilled artisans understand patent claim terms. 

The proper standard integrates fact-finding based on experts who can illuminate the perspective of skilled artisans and claim draftpersons with careful review of the intrinsic record.  Lower courts’ assessments of such evidence should be upheld if not clearly erroneous or clearly contradicted by the specification or prosecution history.  The Federal Circuit would review the intrinsic record on a more independent basis, but with due regard for the district court’s deliberations, proximity to the full record, and integration of the skilled artisan perspective.  Were the Federal Circuit to embrace such a standard, lower courts would openly exercise their discretion to receive such evidence and build a forthright record supporting their interpretation.  Such a “mongrel” appellate standard would foster better development of the basis for claim construction analysis while promoting earlier settlement of patent litigation and lower litigation cost.  Where the disputed claim term is particularly susceptible to skilled artisan construction, the district court’s ruling would carry great weight.  But where the term is set forth or substantially constrained by the specification or prosecution history, then the intrinsic record would control.  But even in the latter circumstance, we believe that the Federal Circuit should apply a heightened standard – a showing by the appellant of unambiguous evidence in the intrinsic record supporting an alternative construction – so as to promote settlement and reduce litigation costs and uncertainty.

Recognizing this more limited role for appellate review of claim construction should not be viewed as abandoning the effort to improve the clarity of patent claims.  That remains a critical component of improving the efficacy of the patent system.  What our analysis shows is that achieving that goal through de novo review of patent claim construction misapprehends comparative institutional analysis at a heavy cost.  Claim clarity can and should be handled through the claim indefiniteness doctrine and through greater efforts by the Patent Office to ensure that patent claims are clear at the front end of patent protection.

The Supreme Court is currently considering whether to grant a writ of certiorari in a case presenting the standard of appellate review for claim construction decisions in Retractable Technologies, Inc. v. Becton, Dickinson and Co.  We believe that the time is ripe to formalize a “mongrel” standard.

Outside the Box Innovations v. Travel Caddy

Patent, , , , , , ,

By Jason Rantanen and Dennis Crouch

Outside the Box Innovations LLC (Union Rich) v. Travel Caddy  (Fed. Cir. 2012) Download 09-1171
Panel: Newman (concurring in part and dissenting in part), Prost, O'Malley (opinion for the court Per Curiam)

A major criticism of the inequitable conduct doctrine has been that patents could be held unenforceable based upon even "minor and inadvertent errors" that occurred during prosecution of a patent.  A major purpose of the Supplemental Examination provision of the America Invents Act was to provide an avenue for correcting the potential unenforceability of patent rights due to those errors. While the AIA was percolating through Congress, however, the Federal Circuit issued its en banc opinion in Therasense v. Becton Dickinson.  Under the revised legal framework for inequitable conduct articulated in Therasense, it is highly questionable whether these "minor" violations continue to meet the materiality requirement of inequitable conduct. 

Unsurprisingly, post-Therasense, the Federal Circuit has been skeptical of these types of claims.  Last fall, in Powell v. Home Depot, 663 F.3d 1221, the Federal Circuit affirmed a district court determination that the patentee did not commit inequitable conduct by failing to update a Petition to Make Special as this was "not the type of unequivocal act, 'such as the filing of an unmistakably false affidavit,' that would rise to the level of affirmative egregious misconduct.'" (PatentlyO discussion here). In Outside the Box Innovations v. Travel Caddy, the Federal Circuit continues in the direction set by Powell, although it does not appear to be ready to completely abandon the notion that certain "minor" violations can constitute inequitable conduct – perhaps maintaining a bit of the "bark" of inequitable conduct despite curtailing its "bite." 

Small Entity Fees and Inequitable Conduct

The USPTO offers a major price-break for “small entities” – a 50% reduction in fees if the patent owner qualifies for “small entity status.”  In practice, small entities can actually be quite large. The usual rule is that the organizational structure be less than 500 employees.   Small entities can lose their status, however, by inter alia licensing the patent to a non-small entity.  See Ulead Systems, Inc. v. Lex Computer & Management Corp., 351 F.3d 1139, 1142 (Fed. Cir. 2003).  (It's worth noting that the America Invents Act offers an even more aggressive price reduction of 75% for "micro entities," which the USPTO plans to implement in early 2013.)

Prior to Therasense, the Federal Circuit had held that inequitable conduct could arise when a large entity pays only the small entity fees.  See Nilssen v. Osram Sylvania, Inc., 504 F.3d 1223, 1231-33 (Fed. Cir. 2007).  Here, the patentee (Travel Caddy) paid the small entity fee when it should have paid the large entity fee (based upon licensing affiliates). The district court held the patents unenforceable. On appeal, the Federal Circuit reversed not on the ground of materiality, but on the basis of a lack of intent.  The court thus deferred to another day the question of whether the false statement associated with the small entity fee payment could rise to the level of "affirmative egregious misconduct," leaving it intact, if somewhat dinged up:

[A] false affidavit or declaration is per se material. Although on its face, it appears that a false declaration of small entity status would fall within the definition of an “unmistakably false affidavit,” particularly since a party that claims entitlement to small entity status does so in a sworn written declaration, we need not decide that question.[] Even if a false assertion of small entity status were per se material, the requirements of Therasense are not met here because there was no clear and convincing evidence of intent to deceive the PTO.  Specifically, there was no evidence that anyone involved in the patent prosecution knew that a patent license had been granted to a large entity and deliberately withheld that information in order to pay small entity fees.

Slip Op. at 13. 

Writing in dissent, Judge Newman argued that the majority did not go far enough in its reversal because the filing of the small entity statement by affidavit should not render the incorrect statement “per se material.”  Judge Newman also argued that a contingent patent license to a distributor should not necessarily defeat the small entity status.

Failure to Inform Patent Office of Pending Litigation

Manual of Patent Examining Procedure §2001.06(c) states that "Where the subject matter for which a patent is being sought is or has been involved in litigation, the existence of such litigation and any other material information arising therefrom must be brought to the attention of the U.S. Patent and Trademark Office."  The application leading to Patent No. 6,991,104 was a continuation of the application that led to Patent No. 6,823,992.  On September 23, 2005, a declaratory judgment was filed seeking a declaration of noninfringement of the '992 patent; Travel Caddy did not inform the patent examiner of the existence of this litigation prior to the '104 patent's issuance on January 31, 2006. 

The Federal Circuit reversed the district court's pre-Therasense finding of both materiality and intent on this theory of inequitable conduct as well. On materiality, the Federal Circuit ruled that the failure to disclose the existence of a litigation "when there was no citation of prior art, nor any pleading of invalidity or unpatentability in the ’992 complaint as it existed during pendency of the ’104 application" did not constitute "clear and convincing evidence" of materiality.  Slip Op. at 7.  On intent, "the record contains no suggestion of how the withholding of the information concerning the ’992 litigation could have deceived the examiner and no suggestion of deliberate action to withhold it in order to deceive the examiner."  Id. at 8. 

Experts Need Not Be Lawyers: In a somewhat bizzare ruling, the district court excluded an expert offered by one of the parties on the ground that he was not a lawyer.  "To be sure, many lawyers have technical training, but it is technological experience in the field of the invention that guides the determination of obviousness, not the rhetorical skill or nuanced advocacy of the lawyer."  Slip Op. at 19.  The Federal Circuit concluded that this constituted an abuse of discretion, and that the error had a "substantial influence" on the outcome of the case.

Claim Construction: The opinion also includes a detailed discussion of claim construction procedure in the context of a prior interpretation by a CAFC panel reviewing a denial of a preliminary injunction (although no final resolution of the issue is reached), and addresses issues of claim construction generally.  Judge Newman dissented from the opinion on these issues as well.

Who Decides Obviousness: Judge or Jury?

Obviousness, Patent, , ,

By Dennis Crouch

Kinetic Concepts and Wake Forest University v. Smith & Nephew (Fed. Cir. 2012)

Wake Forest’s asserted patents cover a medical technique that uses suction to close a gaping wound.  In certain situations, the suction method – also called Negative Pressure Wound Therapy – is apparently better than stitches or – my personal favorite – super glue.  Smith & Nephew’s product has become popular – thus the lawsuit. My wife is an MD, so my usual wound therapy involves me saying “go see your momma.”

The issue in the Kinetic appeal involves the question of obviousness and whether the ultimate question of obviousness should be decided by a judge or by the jury.  The Supreme Court has repeatedly stated that obviousness is a question of law based upon a set of underlying facts.  However, most district court judges allow the jury to decide the legal question of obvious. Further, few judges pose interrogatory questions to the jury regarding the factual underpinnings of their legal determination.

Here, S&N proposed that the jury only be asked to resolve the disputed questions of fact outlined in the Supreme Court’s landmark 1966 decision Graham v. John Deere — questions such as the level of skill in the art and the scope and content of the prior art.  Under S&N’s proposal, the judge would then take those answers and form a conclusion on the ultimate legal question of obviousness.  The patentees responsive brief identified this process as “one of the worst suggestions of all time.” Here, the district court took a somewhat middle ground – deciding to give the legal issue to the jury, but also ask the jury to identify the underlying factual Graham factors.  In addition, the district court indicated that it would see the jury’s obviousness conclusion “as advisory.”  

The court wanted some factual guidance from the jury, but was also wary of asking the jury to write its response in narrative form. (Why?) In the end, the jury was asked several yes/no questions about the scope of the prior art; the differences between the prior art and the claimed invention; and whether secondary indicia of non-obviousness existed. After eight days of deliberation, the jury returned its verdict. Samples from the verdict form are shown below.

 

In its verdict, the jury concluded that the defendant had failed to prove the asserted claims to be obvious.

On JMOL, the district court rejected the jury verdict and held instead that the differences between the prior art and the claimed invention were so minimal as to be obvious to anyone of skill in the art. This holding thus left the asserted claims invalid. On appeal, the Federal Circuit has reinstated the jury verdict upholding the patent and held that the “district court committed error by failing to defer to the jury’s factual findings and granting JMOL on obviousness.” Professor Jason Rantanen wrote on this earlier:

Wake Forest, the patent holder, appealed a district court grant of JMOL of invalidity for obviousness of a claimed invention for treating difficult-to-heal wounds by applying suction (negative pressure). The CAFC reversed, holding that (1) the jury’s “advisory” opinion on the ultimate issue obviousness gave rise to implied findings of facts that the district court was required to accept provided that they were supported by substantial evidence, despite the presence of special interrogatories on the verdict form; (2) the jury’s implied findings of facts on the Graham factors were supported by substantial evidence; and (3) the ultimate conclusion of obviousness was that the claims were not obvious.

In arriving at the ultimate (legal) conclusion of nonobvious, the Federal Circuit focused its discussion on the lack of a reason to combine the prior art references (itself a factual finding), referencing concerns about hindsight reconstruction. In a statement suggesting a technology-based limitation on the use of common sense, the court held that “although expert testimony regarding motivation to combine is not always required, the technology at issue here is not the type of technology where common sense would provide the motivation to combine these references.”

The court’s usual approach to jury obviousness decisions typically begins with the jury’s ultimate conclusion of obviousness/nonobviousness and then works back to the factual determinations necessary to reach that conclusion. In the absence of a special verdict spelling out the factual determinations, the court presumes that the jury made those necessary factual determinations and will affirm the jury verdict so long as those facts were supported by substantial evidence at the trial. In Kinetic, there was a special verdict where the jury particularly identified some of its factual conclusions. However, even here, there were a number of factual determinations necessary to reach the nonobviousness verdict – and those are typically implied into the jury verdict. The basic conclusion of the Federal Circuit in this case was that Smith & Nephew’s obviousness argument was – at base – an attempt to challenge those underlying assumed factual determinations and, that challenge must fail because those determinations were supported by substantial evidence presented at trial.

Smith & Nephew challenged this working-back approach as wrong on (at least) two levels. First, since obviousness is a conclusion of law, the adjudged infringer argued that it couldn’t be the basis for presuming particular factual conclusions that were not expressly decided by the jury. This is even further bolstered by the fact that the district court judge identified the jury’s conclusion on obviousness as ‘advisory.’ The appellate court rejected those arguments by relying on its own precedent supporting the working-back approach and by determining that the district court’s reference to the ‘advisory’ nature of the jury verdict had no meaning.

The court went on to specifically indicate that it is proper to submit legal arguments to a jury:

[I]t is neither error nor dangerous to justice to submit legal issues to juries, the submission being accompanied by appropriate instructions on the law from the trial judge. The rules relating to interrogatories, jury instructions, motions for directed verdict, JNOV, and new trial, and the rules governing appeals following jury trials, are fully adequate to provide for interposition of the judge as guardian of the law at the proper point and when necessary. There is no question that the judge must remain the ultimate arbiter on the question of obviousness. He or she exercises that role first in exercising the judge’s duty of giving proper instructions on the law to the jury before it considers its verdict. The judge exercises control on the question again when presented with a motion for JNOV or new trial. In no sense need the judge abdicate the guardianship role.

R.R. Dynamics, Inc. v. A. Stucki Co., 727 F.2d 1506 (Fed. Cir. 1984).

En Banc Rehearing: Now, Smith & Nephew is preparing to ask the Court of Appeals for the Federal Circuit to rehear the case en banc asking the Federal Circuit to give meaning to the legal nature of an obviousness conclusion and ensure that an accused infringer has a right to an independent determination by a judge on the ultimate question of obviousness.

Notes

Supplemental Examination: Inequitable Conduct Amnesty and Beyond

Patent, , , , , ,

By Dennis Crouch

Introduction to Supplemental Examination: The new supplemental examination procedure is a creation of the America Invents Act (AIA) and is effective as of September 16, 2012. At its most basic, the new procedure allows a patent owner to seek a low-level review of an issued patent to make sure that it was properly issued based upon some newly submitted information. If – on initial review – PTO agrees that the patent is still viable despite the new information the USPTO will conclude the review and issue a certificate indicating that the information presented in the request does not raise a substantial new question of patentability. On the other hand, if the USPTO finds a substantial new question of patentability, then the USPTO will order a full (ex parte) reexamination.

Inoculating Against Inequitable Conduct: Supplemental examination is often tied to inequitable conduct because the new statute indicates that a patent cannot be held unenforceable for failure-to-disclose (or mis-disclosure of) information during a prior examination once that information is considered in a supplemental examination. Professors Jason Rantanen and Lee Petherbridge have identified supplemental examination as an "amnesty program." They write in the Michigan Law Review that:

New § 257 is thus a patent amnesty program. It encourages patent applicants to use any number of strategies that would never have been countenanced under pre-AIA law to obtain patents, and it offers to cure all but the most extreme through filing a supplemental examination request. For example, potential descriptions of a claimed invention in a prior art printed publication, or possible instances of prior patenting of the claimed invention by another, that are known to a patent applicant, and that might have a high probability of barring a patent or limiting claim scope, may not be disclosed during the initial examination. Similarly, sales and public uses that are known to a patent applicant and that may have a high probability of barring the patentability of a claimed invention may be withheld at least until supplemental examination if the applicant likes (and perhaps longer depending on an applicant's risk tolerance). Even the use of false data to obtain the patent in the initial examination can be exonerated by filing a supplemental examination request, which by the statutorily required process can be expected to produce a director's certificate within three months.

Jason Rantanen and Lee Petherbridge, Toward a System of Invention Registration: The Leahy-Smith America Invents Act, 110 Mich. L. Rev. First Impressions 24 (2011).

To be clear, the strategies identified by Rantanen and Petherbridge would violate the professional ethics of a patent attorney or patent agent who deliberately chose that strategy. The argument here is that the supplemental examination rules (coupled with Theresense, Excergen, and their progeny) provide a marginal incentive to applicants to avoid fully complying with the duties of candor and good faith in all dealings with the USPTO. They write "the analysis provided here relates to the marginal effects of a supplemental examination system." In the end, however, it is unclear whether the new incentive will actually change any behavior. I.e., will the availability of supplemental examination mean that some important evidence will now be buried that would have otherwise been disclosed?

There are two statutory exceptions to the inoculation and both relate to times where the patentee waited too long to request the supplemental examination. The statute labels these prior enforcement allegations and prior allegations. Basically, the supplemental examination (and any subsequent reexamination) must be completed prior to the filing of a lawsuit where inequitable conduct may be raised as a defense. In addition, the supplemental examination must be filed prior to the inequitable conduct being alleged in a pleading or Paragraph IV certification. If the patentee fails either prong then the amnesty fails and a court will have power to adjudge the inequitable conduct.

Timing of Declaratory Judgment Actions: The distinction between the two exceptions can be seen in the context of declaratory judgment (DJ) actions. DJ actions are regularly filed in cases where would-be accused infringers take the preemptive measure of asking a court to declare a patent not-infringed, invalid, or unenforceable. Most (but certainly not all) DJ actions filed in the past few years are primarily venue contests and are filed shortly after the original complementary infringement action.

In thinking about supplemental examination amnesty in the context of DJ actions, it is easiest to begin with the understanding that, with two exceptions, the patent cannot be held unenforceable due to inequitable conduct once the patent properly passes through the supplemental examination amnesty program. In the ordinary infringement litigation filed by the patentee, one of the exceptions block the inoculation in cases where the litigation if filed prior to completion of the supplemental examination. This conclusion is based upon the statutory provision explaining that the inoculation "shall not apply to any defense raised [in infringement litigation] unless the supplemental examination, and any reexamination ordered pursuant to the request, are concluded before the date on which the action is brought." Notice here that the exception to inoculation specifically applies to "any defense." In the declaratory judgment context, the inequitable conduct allegation is not filed as a "defense" but rather as part of the complaint. This means that the § 257(c)(2)(B) exception does not apply to declaratory judgment actions. However, the § 257(c)(2)(A) exception will apply to declaratory judgment actions – leading to the conclusion that supplemental examination will provide amnesty against DJ inequitable conduct actions so long as the request for supplemental examination is filed prior to the filing of a DJ pleading that particularly alleges the inequitable conduct. Here, it appears that to satisfy the filing trigger, the request must meet the requirements set forth in the USPTO's implementation regulations. The USPTO will not grant a filing date to applications that fail to follow those guidelines.

Timing of Supplemental Examinations. In the paragraphs above, I identified instances where the inequitable conduct amnesty is triggered by either the filing of a supplemental examination request or else the completing of the supplemental examination. In many cases, the difference between those two will be minimal. The USPTO has announced its intention to complete all supplemental examination reviews within three months. That interpretation follows the statutory guidance that "Within 3 months after the date a request for supplemental examination meeting the requirements of this section is received, the Director shall conduct the supplemental examination and shall conclude such examination by issuing a certificate indicating whether the information presented in the request raises a substantial new question of patentability." This three-month deadline means that the USPTO will likely be sticklers for the filing requirements and may also mean that the USPTO will frequently order reexamination. The major exception to this quick timeline is that the supplemental examination will not be considered complete for amnesty purposes if a SNQ is raised in a way that triggers the automatic reexamination.

Statutory Provision Section 257: The new supplemental exam procedure is codified at 35 U.S.C. § 257 and reads as follows:

§ 257. Supplemental examinations to consider, reconsider, or correct information

(a) REQUEST FOR SUPPLEMENTAL EXAMINATION.—A patent owner may request supplemental examination of a patent in the Office to consider, reconsider, or correct information believed to be relevant to the patent, in accordance with such requirements as the Director may establish. Within 3 months after the date a request for supplemental examination meeting the requirements of this section is received, the Director shall conduct the supplemental examination and shall conclude such examination by issuing a certificate indicating whether the information presented in the request raises a substantial new question of patentability.

(b) REEXAMINATION ORDERED.—If the certificate issued under subsection (a) indicates that a substantial new question of patentability is raised by 1 or more items of information in the request, the Director shall order reexamination of the patent. The reexamination shall be conducted according to procedures established by chapter 30, except that the patent owner shall not have the right to file a statement pursuant to section 304. During the reexamination, the Director shall address each substantial new question of patentability identified during the supplemental examination, notwithstanding the limitations in chapter 30 relating to patents and printed publication or any other provision of such chapter.

(c) EFFECT.—

(1) IN GENERAL.—A patent shall not be held unenforceable on the basis of conduct relating to information that had not been considered, was inadequately considered, or was incorrect in a prior examination of the patent if the information was considered, reconsidered, or corrected during a supplemental examination of the patent. The making of a request under subsection (a), or the absence thereof, shall not be relevant to enforceability of the patent under section 282.

(2) EXCEPTIONS.—

(A) PRIOR ALLEGATIONS.—Paragraph (1) shall not apply to an allegation pled with particularity in a civil action, or set forth with particularity in a notice received by the patent owner under section 505(j)(2)(B)(iv)(II) of the Federal Food, Drug, and Cosmetic Act (21 U.S.C. 355(j)(2)(B)(iv)(II)), before the date of a supplemental examination request under subsection (a) to consider, reconsider, or correct information forming the basis for the allegation.

(B) PATENT ENFORCEMENT ACTIONS.—In an action brought under section 337(a) of the Tariff Act of 1930 (19 U.S.C. 1337(a)), or section 281 of this title, paragraph (1) shall not apply to any defense raised in the action that is based upon information that was considered, reconsidered, or corrected pursuant to a supplemental examination request under subsection (a), unless the supplemental examination, and any reexamination ordered pursuant to the request, are concluded before the date on which the action is brought.

(d) FEES AND REGULATIONS.—

(1) FEES.—The Director shall, by regulation, establish fees for the submission of a request for supplemental examination of a patent, and to consider each item of information submitted in the request. If reexamination is ordered under subsection (b), fees established and applicable to ex parte reexamination proceedings under chapter 30 shall be paid, in addition to fees applicable to supplemental examination.

(2) REGULATIONS.—The Director shall issue regulations governing the form, content, and other requirements of requests for supplemental examination, and establishing procedures for reviewing information submitted in such requests.

(e) FRAUD.—If the Director becomes aware, during the course of a supplemental examination or reexamination proceeding ordered under this section, that a material fraud on the Office may have been committed in connection with the patent that is the subject of the supplemental examination, then in addition to any other actions the Director is authorized to take, including the cancellation of any claims found to be invalid under section 307 as a result of a reexamination ordered under this section, the Director shall also refer the matter to the Attorney General for such further action as the Attorney General may deem appropriate. Any such referral shall be treated as confidential, shall not be included in the file of the patent, and shall not be disclosed to the public unless the United States charges a person with a criminal offense in connection with such referral.

(f) RULE OF CONSTRUCTION.—Nothing in this section shall be construed—

(1) to preclude the imposition of sanctions based upon criminal or antitrust laws (including section 1001(a) of title 18, the first section of the Clayton Act, and section 5 of the Federal Trade Commission Act to the extent that section relates to unfair methods of competition);

(2) to limit the authority of the Director to investigate issues of possible misconduct and impose sanctions for misconduct in connection with matters or proceedings before the Office; or

(3) to limit the authority of the Director to issue regulations under chapter 3 relating to sanctions for misconduct by representatives practicing before the Office.

As mentioned above, the effective date of the new supplementary examination procedure is September 16, 2012 and applies to all patents.

Costs and Fees for Supplemental Examination: The USPTO has indicated that its plans are to – for the most part – charge a fee for supplemental examination that is roughly equivalent to its expected cost for conducting the supplemental examination. In a prior post, Professor Rantanen explained: "The cost for filing a supplemental examination request remains steep: $5,140 for the initial request plus $16,120 for the ex parte re-examination fee. Both must be paid at the time of initial request, and the $16,120 will be refunded if no re-examination is ordered." In a proposed change in the fee structure, the USPTO has suggested that it lower the costs by a small amount and also allow for a 50% and 75% reduction in fees for small-entity and micro-entity patent owners. Those new fees will not be effective until early 2013.

Regulatory Process: As instructed by the statute, the USPTO has promulgated a set of rules that more fully govern the process of supplemental examination.

Other Purposes of Supplemental Examination: There are strong suggestions that supplemental examination may be useful outside of the inequitable conduct situation. In particular, patentees may want to ensure that defendants can't argue in court that the best references were never seen by the USPTO. Other patentees may rely on supplemental examination as a mechanism for entering reexamination without having to first admit that something is wrong with the patent. I'll save consideration of these strategies for a later post.

The America Invents Act: One Year Later (Pt. 5)

Patent, , , , , ,

By Jason Rantanen

Liveblogging the America Invents Act: One Year Later conference at the Indiana University Mauer School of Law. Warning and disclaimer: Quality may vary and these don't necessary reflect my opinions.

 

Panel 3: What did the AIA accomplish? What did it omit?

Mark Chandler (Cisco) – Not a patent lawyer; instead offers a high level perspective from tech industry. 

Issues from his perspective: Predictability is a key, but certainty means different things to different people.  Uncertainty in his industry is uncertainty about damages.  Ranges of outcome that lead to total unpredictability about valuation. The patent system is an industrial policy; it needs to be pared with a good commercial law system where the court decisions are defined by good predictability of result.  But parties aren't willing to have fruitful negotiations because of uncertainty as to damages.

Bad patents – very hard to overturn validity patents in court; estoppel provisions in inter partes reexamination made them a hard tool to use.  Also, backlog of patents. 

Effect of these issues was an increase value of litigation gamesmanship over the value of innovation. This was the context in which they came to the table.  For his industry, uncertainty as to scope of rights/quality of rights was not as important as uncertainty over damages.  But this is not something that he believes can be fixed legislatively.  From the point of view of the technology industry, the AIA accomplished very little in terms of the uncertainty they care about.

In terms of bad patents, he sees the mechanisms as positive.   On backlog, the funding provisions are excellent.

Looking forward, he is skeptical of having Congress dive into the damages issues.  Change is coming from the courts.  Judge Rader is a major mover here.  Clean up the Georgia-Pacific factors is something he sees as coming. 

Joinder provision – some judges, when confronted with the anti-joineder rule, are now consoldiating cases.  Work needs to be done here. 

Rocelle Dreyfuss (NYU) – Act focuses with laser like attention on getting a patent, but largely ignores what is being done with the patents.  Her focus is on research exemptions.  Long been two exemptions: Common law exemption and limited statutory Hatch-Waxman exemptions.  Common law exemption has largely been undermined by CAFC, especially in Madey v. Duke and Embrex v. Service Engineering; most recently, Judge Lourie's opinion in AMP v. USPTO (Myriad). 

Absence of such exception has become more worrisome over time.  Earlier studies indicated that scientists largely ignored patents.  More recent work has undermined this conclusion however.  Studies shown that less research conducted in areas where things are patented.

Every foreign country has a substantial research exception.  Japan is a good example. 

Can't you always do your research off shore?  But she'd like to see a strong research industry in the United States. 

Overall effect of a lack of research exception has been to distort other patent law doctrines – examples: Supreme Court/Federal Circuit subject matter cases.  All these cases are based on the view that patents can impact future research.  To some extent, the Supreme Court's exhaustion and injunctive reliefs are based on a concern about what's going on down stream.  A well drafted research exception is better served than twisting these doctrines around to allow downstream research.

Some believe (ex. Hal Wegner) that the common law will correct itself.  Judge Newman's language in this vein was been picked up by Chief Judge Rader in a recent opinion.  Wegner also argues that the fix would be relatively easy to accomplish with judge made law – drawing a distinction between research "on" versus research "with" a patented invention.  Other commentators would go back to the commercial/noncommercial distinction. She's doubtful these will work, however.  Rader's statement was part of a blistering dissent on an expansion of the statutory exemption; Judge Lourie's statement in Myriad was made just a month ago.  In addition, the fix isn't as simple as distinguishing between research "on" and "with"; actual research is actually far more complex – consider the use of diagnostic patents, which could be classified as either research on or research with. 

Copyright law has long had a fair use defense; it could work in patent law.  But complex, so better done as a statute than as a common law rule. 

John Duffy (UVA) – Likes: the new priority rule.  Never been a fan of first-to-file.  But this is not first to file – it's first-to-file or first-to-publicly disclose, which is a great change.  Best argument for first-to-file was administrative convenience.  Best argument for first-to-invent is that the lawyer shouldn't be part of the invention process.  New system takes the best of both: administrative ease (have to have publicly disclosed it) and you don't have to get a lawyer to do this.  Just have to get the rest of the world to follow us…

A partial accomplishment: ending asymmetric judicial review.  Historically, applicants could obtain immediate judicial review of rejections, but competitors could not obtain immediate judicial review of grants.  This was not good.  AIA helps here, with its post-grant processes.  But it still leaves significant holes in the availability of judicial review.  Proposes that the PTO be subject to standard agency review – points to Exela v. Kappos, E.D. Va. (Aug. 22, 2012).  May be a supreme court opinion.  If the country goes to symmetric judicial review, that would be a very good thing.

A partial accomplishment: curbing claim numerosity.  Patents have too many claims. Partial AIA solution: agency has power to set its own fees and thus could charge more for excessive claims. But sometimes there's a legitimate reason for large numbers of claims: legal uncertainty as to how claims will be interpreted.  Ultimate problem here: departed too far from traditional principles of claim construction.  We should instead focus on the invention – the contribution to the art – in interpreting claims.  261 U.S. 45, 63 (1923)

AIA's worst blemish: fueling bureacratic inflation. 

Gary Grisold (Senior Policy Advisory for the Coalition for 21st Century Patent Reform and former Chief IP Counsel at 3M) – AIA presented a great opportunity to improve the speed and efficiency of the patent system.  The playbook for improving the AIA was largely derived from the 2004 NAS Report.  Most of the recommendations of the 2004 report were put into play in the AIA.

Goals: effective, global patent protection efficiently obtained, maintained and enforced encouraging innovation and commercialization of innovation.  Showed us some of the charts that they used when building support for the patent law. A lot of progress from 2007-2011.

Process error – in the post-grant review, it allows the public to come in and be heard just after a patent is granted.  At some point, someone inserted "reasonably could have raised" judicial estoppel in PGR. Shouldn't be there.  Didn't realize that this happened, though.  Needs to be a technical correction to fix this.

Patent claim construction – For PGR/IPR, should patent claims should be construed the same as in validity challenges under 35 USC 282(b) rather than broadest reasonable construction?

What else might happen in the future?  Best mode – still there as an obligation; this creates a weird tension for the attorney and client.  Inequitable conduct – he believes that supplemental examination will have a lot of utility because firms will do extensive pre-litigation analysis.  Could go further with inequitable conduct, and lessen the effect even more, for the reason that it brings so much inefficiency into the process.  Experimental use exception – needs to be expanded.  Could expand prior user right.  Doctrine of equivalents is another opportunity for change.  Funding issues are always a concern – could be more secure. 

Doug Norman (Eli Lilly) – Going to talk about how in-house counsel deal with specific issues.

Move to first to file – won't preciptate a lot of change in their context, because for the past 40 years they've been living in a first-inventor-to-file world.  So their proceses have not had to change.  The change they feel is when they look at competitors' patents, they can better evaluate patent estates that they want to do a due dilligence study on. 

Grace period and international harmonization – Europeans aren't necessarily ready to accept a grace period. Have a grace period in the US that is clear, crisp and objective.  And very simple.

Fees  – important to point out that after a longrunning diversion of funds away from the PTO, the PTO has feesetting authority to move forward and build a new infrastructure.  It will cost users more, but if it leads to higher quality and faster service, it'll be worth it.

IPR/PGR considerations – A huge unknown right now.  Hopes that patent judges really will be conservative on the issue of discovery.  Is a technical amendment over the "could have raised" estoppel in PGR possible?  He hopes so; otherwise, it will greatly constrain the use of PGR. 

Inequitable conduct/supplemental examination – high point of the bill.  Thinks it will be used quite extensively, if for no other reason to have their own patents drawn into supplemental [think he means reexam] examination.  Plans on doing extensive due dilligence on patent estates they intend to acquire.  (comment – I suspect that in the pharmaceutical industry, there may be strong incentive to conduct extensive due dilligence.  I'm much less convinced this is the case in pretty much every other industry.).  He believes supplemental examination will be revolutionary, at least in the pharma/biological field.

Favors statutory research exemptions and full repeal of best mode requirement.  Related a story that OED is going to take best mode very seriously. 

John Vaughn (AAU): Universities and patent reform – University technology transfer plays an important role in technology innovation in this country.  Univerisity organizations worked together to present the view of the universities.  Two basic objectives: wanted to support those proposals that would enhance the US patent systems' ability to produce innovation, and wanted to support those proposals that would enhance the ability to licensed.  Very much shaped by 2004 NAS report. 

First to invent to first inventor to file – three conditions: (1) effective grace period; (2) continuation of provisional applications; (3) strong inventor declaration (?)  Worked with Congress on these. 

Patent certainty – university inventions inherently have uncertainty because of their early stage nature; adding other uncertainty further complicates that uncertainty.  Problem with statutory instructions on damages is that they would become a cost of doing business rather than something else. 

Strongly supported the new post-grant proceedure.  Agrees with others about the estoppel provision.  Concern that with the estoppel provision, the procedure won't be used. But very concerned about proposals for second window, additional post-grant challenge that would allow a broad capacity to challenge patents throughout their life.  This was viewed as making patents more uncertain, which would make them harder to license.  Compromise: revised and changed inter partes.

Debate over prior user rights.  Pre-AIA, only applied to business methods.  University community hated prior user rights – viewed it as a circumvention of the patent quid-pro-quo.  But at the end of patent reform, prior user rights was one of the primary obstacles at the end.  They worked out a compromise – a substantial expansion of prior user rights that sufficiently protect universities. 

Viewed as accomplishments: FtF – will be helpful to everyone.  Post-grant review – great, problem with estoppel.  Third party submisison of prior art – very helpful.  Enhanced fee setting – very helpful, wished better anti-fee diversion language.  Supplemental examination – very helpful, better to get rid of inequitable conduct altogether.  Scope of grace period – concern over how it will actually be interpreted. 

The America Invents Act: One Year Later (Pt. 3)

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By Jason Rantanen

Liveblogging the America Invents Act: One Year Later conference at the Indiana University Mauer School of Law. Warning and disclaimer: Quality may vary and these don't necessary reflect my opinions.

Panel 2: Administrative Trials

Michael Tierney (Lead judge of BPAI) – New Patent Trial and Appeal Board eFile system will go live at 12:01 am on Sunday, September 16.  They will also have folks available to answer calls starting on Sunday. 

AIA trial proceedings will be a hybrid examination/trial-like process.  Relatively straightforward, step-by-step proceedings.  Trials will be completed within one year. 

Who can practice: also a hybrid.  Lead counsel must be a practitioner registered with the PTO, but the board may recognize pro had vice counsel during a proceeding upon a showing of good cause.  A pro hac counsel is subject to the Office's Code of Professional Responsibility.  Requests should explain why there's good cause. 

Proceedings are streamlined so as to make it possible to complete proceeding in one-year.  In addition, page limits have been imposed on the petition and arguments, but not the evidence.  Claim charts can be included as single-spaced. 

Threshold standards for initiation:
IPR: "reasonably likelihood" that petitioner would prevail as to at least one claim challenged.  This means >50% chance. 
PGR/CBM: petition must demonstrate that it is "more likely than not" that at least one of the claims challenged is unpatentable.  This just means that it has to be a "close call" that one of the claims is unpatentable.  This does not mean that all non-frivolous arguments will result in a PGR/CBM proceeding.

Inter partes review: discovery- allow parties to agree to discovery between themselves.  Also, mandatory initial disclosures, routine discovery, and additional discovery. In general, discovery will function ilke infringement proceedings – i.e.: parties exchange among themselves, then choose what to provide to the board.   

Recommends starting with the practice guide if you want to understand the rules.  

Jay Kesan (University of Illinois) – Examined post-grant review in Japan and compared to US.

JPO has invalidation trial.  JPO does not have a threshold standard; grounds are very broad.  Anytimeime during the life of the patent. No estoppel under JPO proceeding.  Third parties that are not involved in the challenge can file another challenge on the same facts and evidence.  Scope in terms of the number of claims is not all that different.  Parties can file anonymously.  Takes about 8.7 months. Patent can be amended after the trial decision before the appeal – lots of opportunities to tweak the patent.  Just about anyone can request. 

Costs: Rough estimate is about $200,000 for US proceedings.  In Japan, about $25k to $125k. 

In Japan, about 7-10 times higher to litigate the case in district court.  Roughly about 2% of all patents are being challenged (300 out of 150,000 issued patents) are opposed using JPO invalidation. 

Data over a decade shows that the litigation court decisions tend to be arrived at before the JPO decision.  In a large number of cases, there's an agreement the patent is invalid.  There is some disagreement in cases, however – about 20% of the time the JPO and district court reach opposite conclusions.  This is consistent with the rate of affirmence of the JPO by the high court (around 80%).

Questions:
Joshua Larsen (Barnes & Thornburg) – what parts of the new procedures will be most challenging for the judges to deal with? 

Michael – not a whole lot of judges who had experience with inter partes, but they just hired a large number of people with significant litigation experience as judges. 

Jay K – 60-80 pages is still a lot of stuff to go through.  If 2% of all the issued patents are subject to this process, thats a lot of workload. 

Michael – there's still going to be ex parte reexamination.  There's also going to be full blown proceedings.  He wouldn't expect all 2% to go the reviews. 

Josh – how is claim construction going to be handled?

Michael – no Markman, but there's a requirement that the petitioner must explain what the claim means up front.  Tell us up front what you, as the petitioner, think the claim means and how the prior art meets the claims.  

Jay K – thinks this approach is just fine.

Jay Thomas – Is there a good balance between the litigation and the IPR process?  How are the parties going to figure out what patents will be challenged through post grant review?

Michael – when he looks at the statistics, most inter partes reexaminations had ongoing litigation.  Often there are stays in these cases.  His expectation as they go forward is that they will follow the 1-year timeframe.  If this is the case, the district court judge will know that the PTO is committed to having a decision within that one-year framework.

Jay K – If things were really ideal, if invalidity can be done relatively cheaply in the post grant proceedings, then this might save the parties some money in infringement litigation.    On the nine-month window, this is something that parties are going to need to figure out, maybe using proxies.

Josh – what is the possibility of serial filings on the same evidence?

Michael – I'm going to refer to 325(d).  The office may consider previous determinations in deciding whether to go forward.  If all the party is doing is submitting the same evidence again and again, the likelihood of going forward in low.

Jay K – when he talked to practitioners in Japan, they said that this type of behavior was a waste of time.

Beyond Question: RMail Challenges the Use of Subject Matter Eligibility as an Invalidity Defense

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RMail v. Amazon.com and PayPal (E.D.Tx 2012)

Over the past few weeks we have been having an interesting debate over whether subject matter eligibility under 35 U.S.C. § 101 constitutes as valid defense to patent infringement that may be raised in litigation. Section 282 of the Patent Act defines defenses available to an accused infringer and that statute has been interpreted to limit defenses available only to those that fit the statutory list. Thus, because improper revival of an abandoned patent application does not fit on the list, the Federal Circuit ruled that mistake by the patentee and USPTO could not be used to later invalidate the patent during litigation. One problem with Section 282 is that it is not a simple list of references, but is instead really a pointer to other sections of the Patent Act. Thus, an accused infringer can assert an invalidity defense based upon "any ground specified in [Sections 100-188] as a condition for patentability" as well as "any requirement of section 112, except that the failure to disclose the best mode." Now, we normally think of the doctrines of invalidity deriving from Sections 102 (anticipation); 103 (obviousness); 112 (written description; enablement; indefiniteness); and 101 (utility and subject matter eligibility). Now, Section 112 is clearly identified as a defense, and the patent act particularly identifies section 102 and 103 as creating the "conditions for patentability" required under Section 282. The lone outsider then is Section 101 whose status as creating conditions for patentability has not been established. Professor Hricik introduced this argument and began the statutory analysis in a post titled Are the Courts Correct in Their Assumption that a Patent Issued on Non-patentable Subject Matter is Invalid?. I continued the argument by considering its application to the new post grant review program in a post titled Can a Third Party Challenge Section 101 Subject Matter Eligibility in the USPTO's new Post-Grant Review Procedure?. Now, in RMail, lawyers are asking Judge Gilstrap (E.D.Tx.) to decide the issue.

RMail's asserted patents are directed to a new way to authenticate service of electronic messages – i.e., to prove that an e-mail was actually sent and received without relying upon key encryption. U.S. Patent Nos. 6,182,219 and 6,571,334. Many of the claims are not limited to any particular "technology" except for various simple data structures. Instead, the claims simply focus on the sending and receiving of the various data elements in ways that could all seemingly be done offline using pencil and paper.

After being sued, PayPal filed a motion for partial summary judgment – asking the court to rule those claims invalid under 35 U.S.C. § 101 as lacking subject matter eligibility.

In response, RMail has argued that subject matter eligibility is not a proper invalidity defense permitted to be raised under Section 282 (in addition to providing arguments on the merits).

VI. CONGRESS DID NOT PERMIT SECTION 101 TO SUPPLY A LITIGATION DEFENSE

Rmail closes by asking the Court to recognize and apply all appropriate statutory barriers against entertaining Defendants' Section 101 defense. The entire jurisprudential "murky morass" of subject matter eligibility need not arise again in any litigation. Myspace, 672 F.3d at 1260 (using "murky morass" label). Rmail acknowledges that this argument is for the good faith extension or modification of existing caselaw. Courts until now have uniformly overlooked Congressional will on this question.

Namely, while Section 101 analyses are appropriate in Patent Office application proceedings, this Court lacks any statutory basis for analyzing Section 101 issues as a litigation defense. Patent defenses are statutory. Under the Patent Act of 1952, only enumerated patent defenses exist. Aristocrat Tech. v. Int'l Game Tech., 543 F.3d 657, 661-63 (Fed. Cir. 2008). If an issue is not denominated an infringement defense within the Patent Act, then the Court lacks jurisdiction to address it. Id.

. . . .

It does not matter that the statutory misinterpretation has lasted so long, or so pervades conventional thinking. Even a long-term statutory misconstruction will not bar restoring the patent system to its statutory limits. See Central Bank of Denver v. First Interstate Bank of Denver, 511 U.S. 164, 177, 191 (1994). . . . Four recent Supreme Court cases arose in the USPTO administrative context, and are thus consistent with Rmail's argument: Benson, Flook, Diehr, Bilski. A fifth, Prometheus, admittedly arose within an infringement defense context. However, no one seems to have pointed out to the Supreme Court this important threshold issue of statutory construction, and statutory limitations on the powers of the federal courts. Prometheus thus does not bar this Court from issuing a correct ruling in the present adversarial context.

PayPal's response is fairly weak – that the dicta of Aristocrat identifies Section 101 as a condition for patentability. (To be clear, the PayPal briefs are quite good – they just lightly treat this particular issue).

The landmark 1996 Supreme Court case of Graham v. John Deere is interesting and sends somewhat mixed signals in its dicta describing the patent act. In that case, the court wrote that "The [Patent] Act sets out the conditions of patentability in three sections. An analysis of the structure of these three sections indicates that patentability is dependent upon three explicit conditions: novelty and utility as articulated and defined in § 101 and § 102, and nonobviousness, the new statutory formulation, as set out in § 103." The odd element of the Supreme Court statement is that it does not identify subject matter eligibility as a defense created by § 101. In Aristocrat, the Federal Circuit explained away the gap by noting "it is beyond question that section 101's other requirement, that the invention be directed to patentable subject matter, is also a condition for patentability." I guess that question is no longer unaskable.

Docs:


MPEP 2106 Patent Subject Matter Eligibility [R-9]

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

I.   THE FOUR CATEGORIES OF STATUTORY SUBJECT MATTER

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

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

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

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

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

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

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

    II.   JUDICIAL EXCEPTIONS TO THE FOUR CATEGORIES

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

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

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

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

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

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

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

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

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

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

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

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

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

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

    B.   Practical Application of Processes (Methods)

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

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

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

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

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

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

    Specifically, the Court explains:

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

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

    1. A method of marketing a product, comprising:

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

    Where a transformation occurs, the following factors are relevant:

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

    2.   Making the Determination of Eligibility

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

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

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

    III.   Establish on the Record a Prima Facie Case

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

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

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

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

    I.   SUMMARY

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

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

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

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

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

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

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

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

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

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

    III.   DETAILED GUIDANCE FOR USING THE INQUIRIES

    A.   

    Determining What Applicant Invented and the Broadest Reasonable Interpretation

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

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

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

    B.   

    INQUIRY 1: Process

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

    C.   

    INQUIRY 2: Natural Principle

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

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

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

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

    D.   

    INQUIRY 3: Practical Application and Preemption

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

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

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

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

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

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

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

    E.   

    RELEVANT FACTORS USEFUL FOR INQUIRY 3

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

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

    IV.   

    SAMPLE ANALYSIS

    A.   

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

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

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

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

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

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

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

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

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

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

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

    B.   

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

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

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

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

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

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

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

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

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

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

    C.   

    Making a Rejection

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

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

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

    Analysis:

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

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

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

    The rejection:

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

    D.   

    Evaluating a Response

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

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

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

Woodrow Woods v. DeAngelo: Make a Meaningful Supplementation of Your Contention Rog Responses

Patent, , ,

By Jason Rantanen

Woodrow Woods v. DeAngelo Marine Exhaust, Inc. (Fed. Cir. 2012) Download 10-1478
Panel: Linn (author), Dyk, Reyna

Woodrow Woods, the owner of two patents relating to water jacketed marine vessel exhaust systems, and Marine Exhaust Systems, his exclusive licensee, sued DeAngelo Marine Exhaust for infringement.  During the discovery phase of the case, MES propounded an interrogatory that read "“State with specificity all prior art that anticipates such claims of one or more of the patents at issue or renders them obvious. In doing so, specify the particular claim being referred to and identify why such prior art anticipates such claims or renders them obvious.”  (emphasis added by court).  DeAngelo responded with the following statement:

“[the] interrogatory seeks attorney work-product information, and is not discoverable. DeAngelo has not yet decided which prior art references it will use to challenge the validity of the patents in suit . . . [they] shall be disclosed as required by 35 U.S.C. § 282.”

On February 8, 2010, the day before the close of discovery, DeAngelo located several old engineering drawings, which it immediately forwarded to MES, accompanied by a letter stating that "[t]hese documents arguably may anticipate the Woods invention(s), or may be relied upon as showing the state of the art in the early 1990’s," and asked whether MES would object to their use should trial begin before March 10 because otherwise DeAngelos' disclosure would violate 35 U.S.C. § 282 (requiring the disclosure of certain information relating to an accused infringer's defenses at least 30 days before trial).  MES did not immediately respond, and trial began on April 5, 2010.

During trial, MES moved under FRCP 26 and 37 to strike the drawings DeAngelo had disclosed on February 8.  The district court granted the motion, finding the disclosure and supplementation of the interrogatory response (in the form of the letter) to be untimely.  After a jury found the patents valid and infringed, the district court denied DeAngelo's renewed motions for JMOL and DeAngelo appealed.

 On appeal, the Federal Circuit rejected DeAngelo's contention that the district court had abused its discretion. While the CAFC agreed with DeAngelo that the documents in question were timely produced (they were disclosed before the close of discovery and before the thirty-day outer limit set by § 282), it disagreed that the supplementation of the interrogatory response was inadequate.  DeAngelo's communication of February 8, 2010, stated that the documents "may anticipate the Woods inventions, or may be relied upon as showing the state of the art in the early 1990’s," but this did not suffice to comply with the portion of the contention interrogatory in italics prior to the discovery deadline.  Emphasizing the important role contention interrogatories play in "helping to discover facts supporting the theories of the parties" and that they "also serve to narrow and sharpen the issues thereby confining discovery and simplifying trial preparation," Slip Op. at 11, the CAFC concluded that the district court was well within its discretion in excluding the drawings as a discovery sanction.

Additional Rulings: The Federal Circuit also rejected each of DeAngelo's other arguments (claim construction, obviousness, noninfringement, and Rule 11 sanctions).  On obviousness, the court disagreed with DeAngelo that Woods' amendment in response to an examiner rejection for anticipation qualifies as an admission that all limitations in the initial claims, existed in the prior art.  "A patent applicant is not presumed to have conceded the presence in the prior art of every claim limitation he had no reason to dispute."  Slip Op. at 25. 

The CAFC also agreed with the district court that MES and Woods had conducted an adequate pre-suit investigation, as required by FRCP 11(b).  "Here, the record is replete with evidence supporting the district court’s conclusion that MES conducted a sufficient prefiling investigation including photographing and studying photographs of DeAngelo’s accused products," slip op. at 27.  The court distinguished the inadequate investigation in Judin v. United States, 110 F.3d 780 (Fed. Cir. 1997), on the ground that MES also sought access to the products by making a direct request to DeAngelo (DeAngelo did not provide the requested information prior to the lawsuit).   

Amkor v. ITC

Patent, , , ,

By Jason Rantanen

Amkor Technology, Inc. v. International Trade Commission (Fed. Cir. 2012) Download 10-1550
Panel: Newman, Plager, and Linn (author)

Although soon to be eliminated as prior art for new patents, 35 U.S.C. § 102(g) will continue to be a potentially important category of prior art for the near future as pre-AIA patents will remain the prevailing type of patent in infringement suits for at least the next decade.  In Amkor, the Federal Circuit answered an important question about 102(g): whether an oral disclosure of an invention to the United States is sufficient to constitute prior art.  It answered in the affirmative, with a key caveat.

The version of 102(g) involved in this appeal states that:

A person shall be entitled to a patent unless:

…

(g)(1) during the course of an interference conducted under section 135 or section 291, another inventor involved therein establishes . . . that before such person’s invention thereof the invention was made by such other inventor and not abandoned, suppressed, or concealed, or (2) before such person’s invention thereof, the invention was made in this country by another inventor who had not abandoned, suppressed, or concealed it. . . .

35 U.S.C. § 102(g) (2006) (emphasis added). The appeal turned on the interpretation of "made in this country": specifically, whether it encompassed an oral disclosure to a person in the United States of an invention conceived of abroad.

In concluding that an oral communication was sufficient, the CAFC issued several notable holdings.  First, it extended the holding in Scott v. Koyama, 281 F.3d 1243 (Fed. Cir. 2001), that interpreted a previous version of 102(g) to allow the inventor of an invention of foreign origin to "rely on the date that the invention was disclosed in the United States as a conception date for priority purposes" to apply to the current version of 102(g)(2).

Second, the CAFC held that an oral communication could be a sufficient disclosure for 102(g) purposes.  "While this court’s limited precedent on this issue establishes that writings can satisfy the full domestic disclosure requirement, the cases do not establish any per se requirement that such disclosure must be in writing."  Slip Op. at 12.  However, the "content of the domestic disclosure must be specific enough to encompass the "complete and operative invention…and an inventor's oral testimony to this extent is a question of proof."  Slip Op. at 13 (emphasis in original). Thus, corroboration of the testimony is necessary. 

The CAFC did not reach the issue of corroboration of the specificity of the disclosure, instead rejecting the accused infringer's argument based on the burden of persuasion and evidence necessary to invalidate an issued patent.  The accused infringer could only show a range of dates of possible U.S. disclosure that overlapped with the patent holder's possible conception dates.  "Such a showing, at best, establishes that the ASAT inventor might have conceived of the invention first. Evidence establishing that there might have been a prior conception is not sufficient to meet the clear and convincing burden needed to invalidate a patent."  Slip Op. at 16 (emphasis in original).

Obviousness: The court also affirmed the Commission's claim constructions and rejected anticipation and obviousness arguments based on another prior art reference.  In reaching this conclusion, the court pointed to a lack of any evidence of a motivation to combine or reason to modify the prior art:

Because the fused lead attached to the die pad in JP-456 prevents the lip from extending “fully around the circumference of a die pad” or “fully around the die pad” as required by the claims, Carsem was required to present evidence that one of ordinary skill in the art at the time of the invention would have been motivated or found reason to remove the fused lead from the JP-456 reference, or that common sense would have led one of skill in the art to remove the fused lead based on a known problem, design need, or market pressure. KSR Int’l v. Teleflex, 550 U.S. 398, 418-20 (2007).

Slip Op. at 21.  While this language could be interpreted as limiting "common sense" to the three specific scenarios identified in KSR v. Teleflex, a better interpretation in my view is that Carsem simply failed to provide any explanation as to why a person of ordinary skill in the art would have modified the prior art, including the three specified examples.  Anything more rigid would be inconsistent with the flexible approach to obviousness mandated by KSR.

Recent Federal Circuit Nonobviousness Opinions: Kinetic Concepts

Obviousness, Patent, ,

By Jason Rantanen

Kinetic Concepts, Inc. v. Smith & Nephew, Inc. (Fed. Cir. 2012)  Panel: Bryson, Dyk (concurring in the result), O'Malley (author) Download 11-1105

Dennis will be writing about the advisory jury issue in Kinetic Concepts in more detail, so I'll provide only a brief summary here.  Wake Forest, the patent holder, appealed a district court grant of JMOL of invalidity for obviousness of a claimed invention for treating difficult-to-heal wounds by applying suction (negative pressure).  The CAFC reversed, holding that (1) the jury's "advisory" opinion on the ultimate issue obviousness gave rise to implied findings of facts that the district court was required to accept provided that they were supported by substantial evidence, despite the presence of special interrogatories on the verdict form; (2) the jury's implied findings of facts on the Graham factors were supported by substantial evidence; and (3) the ultimate conclusion of obviousness was that the claims were not obvious. 

In arriving at the ultimate (legal) conclusion of nonobvious, the Federal Circuit focused its discussion on the lack of a reason to combine the prior art references (itself a factual finding), referencing concerns about hindsight reconstruction.  In a statement suggesting a technology-based limitation on the use of common sense, the court held that "although expert testimony regarding motivation to combine is not always required, the technology at issue here is not the type of technology where common sense would provide the motivation to combine these references."  Slip Op. at 45.

Federal Circuit Panel Splits on Standard of Review for Litigation Misconduct

Ethics,

In Highmark, Inc. v. Allcare Health Mgmt. Sys., Inc., __ F.3d __ (Fed. Cir. Aug. 7, 2012), a divided panel remanded for further proceedings the district court's award of attorneys' fees against an unsucessful patentee based upon assertion of frivolous infringement claims and litigation misconduct.  The case is noteworthy for a few reasons.

First, the facts.

The patentee asserted infringement of several claims out of the 102 claims in the '105 patent, including claims 52, 53, and 102.  The patent generally related to a method of determining whether a review of proposed treatment as part of health care reimbursement by an insurer was needed, and a way to preven tpayment until the treatment has been approved.  The district court granted the accused infringer's motion for summary judgment of non-infringement as to all three claims, and in fact the accused infringer did not oppose summary judgment on claim 102.  

While that decision was on appeal (and before it was affirmed under Fed. Cir. R. 36), the accused infringer moved the court to find the case exceptional, and also moved for Rule 11 sanctions.  The district court found it exceptional and found violations of Rule 11, and awarded about $5.2 million in fees and expenses.  The lawyers then withdrew from representing the patentee, based upon conflicts of interest, and moved seperately to reconsider the Rule 11 sanctions; the district court heard additional evidence from those attorneys, and then vacated the Rule 11 sanctions against the attorneys. Meanwhile, the patentee sought reconsideration of the exceptional case finding against it, but that was denied.  (The appellate court decision does not specify what the conflict was, but reading between the lines it may have been that the attorneys believed the client had not disclosed information to them.  From the opinion, it appears that Rule 11 sanctions had been imposed solely on the attorneys, not the client.)

On appeal, the Federal Circuit split, 2-1. The majority opinion by Judge Dyk (with Judge Newman, dissenting in part was Judge Mayer) stated that for a patentee's suit to be frivolous in terms of Section 285, both (1) the litigation had to have been brought in bad faith and (2) the litigation had to have been objectively baseless.  Both prongs had to be satisfied as to each asserted claim, and so determination of an exceptional case finding was made on a claim-by-claim basis.

With respect to the subjective bad faith prong, the court was in apparent agreement that it required proof of clear and convincing evidence of subject bad faith, which were reviewed for clear error.

With respect to the second prong, the disagreement between Judge Mayer and the panel majority centered on the standard of review for the second prong.  The panel majority emphasized that objective baselessness was a question of law based on underlying mixed questions of law and fact, and so was subject to de novo review, citing Bard Peripheral Vascular, Inc. v. W.L. Gore & Assocs., Inc., __ F.3d __ , 2012 WL 2149495 (Fed. Cir. June 14, 2012).   Judge Mayer, in contrast, argued that Bard had incorrectly applied the de novo standard of review to this question, when it had in fact been subject to the highly deferential "clear error" standard.  He wrote that "Bard was simply wrong…."   In its response to his argument, the panel majority viewed Judge Mayer's reading of Bard as inconsistent with Supreme Court precedent interpreting the sham litigation exception to the First Amendment, including Professional Real Estate Investors, Inc. v. Columbia Pictures Indus., Inc., 508 US 49 (1993), and that deference was otherwise unwarranted due to policy reasons.

With respect to the merits, the focus of the appellate court decision was the assertion of claim 102.  In full, that claim provided (with the key language in the preamble emphasized):

A method of managing an integrated health care management system having input means, payment means and memory storage comprising:

(a) storing through said input means into said memory storage personal health profile data for each of a predetermined plurality of persons;

(b)storing into said memory storage symptoms and treatment data for each of a predetermined plurality of health profiles and problems;

(c) storing in said memory storage criteria for identifying treatments requiring utilization review;

(d) storing in said memory storage criteria for identifying treatments requiring second opinions;

(e) entering into said system information iden- tifying a proposed medical treatment for one of said plurality of persons;

(f)identifying whether or not said pro- posed medical treatment requires utilization review; and

(g) preventing said system from approving payment for said proposed medical treatment if said proposed medical treatment requires utilization review until such utilization review has been conducted.

The court reasoned that the preamble was limiting because the limitations in the claim body (such as "said system" in elements (e) and (g) could derive their antecedent basis solely from the preamble.  It further noted statements in the prosecution history that supported this construction, and noted that the patentee had agreed with this construction in litigation.

However, there was no plausible argument that this claim was infringed, and that fact seemed undisputed.  As a result, the court found the assertion objectively baseless.

With respect to subjective bad faith, the court concluded that there was no showing that, though it had lost, the "allegations are supportable so as to negate a finding of bad faith."  While "an adequate pre-filing investigation may negate a claim of bad faith," the district court had found that this did not occur; however, the majority stated that because the patentee had engaged in bad faith conduct from the inception, "because it knew or should have known that the allegation of infringement of claim 102 was frivolous — we need not examine the pre-filing investigation."  Further, it rejected the argument that the fact that the district court had vacated the Rule 11 sanctions was inconsistent with the exceptional case finding, stating that "a lack of sanctions against attorneys is not itself a ground for barring sanctions against a client."  Without explanation, the majority stated that the evidence that had led to vacatur of the Rule 11 sanctions "had no bearing on the interpretation of claim 102" or the patentee's knowledge of infringement.

With respect to claim 52, the court reached the opposite conclusion, finding that the patentee's construction, which would have led to infringement, was not "so unreasonable that no reasonable litigant coudl believe it woudl succeed."  Thus, the accused ifnringer failed to show that "under this alternative claim construction, the allegations of accused infringement were objectively unreasonable."

Turning to litigation misconduct as a basis to affirm the award, the court analyzed the three instances relied on by the district court, and found each one insufficient to justify the award because the accused infringer failed to show that any were objectively unreasonable when made.  While two of these are fact-specific, one instance was "shifting claim construction" with respect to one element of claim 52.  The court set out the different constructions proffered by the patentee, but reasoned that they were "linguistic shifts" which did not "differ in substance," and so constituted "minor word variations" that also may have been caused by the intervening Federal Circuit decision in Phillips.

As a result, the district court's finding that assertion of claim 102 rendered the case exceptional, but remanded for the district court "for a calculation of attorneys' fees based on the frivolity of claim 102 allegations only."

What's the case mean?

Clearly, careful consideration of infringement is required.  Assertion of even one non-infringed claim can result in some fee-shifting.  A party who drops infringement claims late in a case, such as here when faced with a motion for summary judgment, will likely face a motion to shift some fees, for example.

The case also illustrates the need for careful documentation of pre-suit investigation. While the award here did not turn on pre-filing investigation, the attorneys were able to avoid the Rule 11 sanctions based upon their presentation of evidence concerning pre-suit investigation.

Finally, with respect to the issue on which the panel divided — the standard of review and the question of whether objective reasonableness was reviewed for clear error or under the de novo standard — there are lessons for both sides.  On appeal, the victor in a fee shifting case must be prepared to withstand de novo review, and to do so on a claim-by-claim basis.  This renders appeals more expensive, and when a fee award is part of the merits on appeal, makes it difficult as a matter of space and writing to effectively address all issues.  

As for who was right about the standard of review, stay tuned.

 

Monsanto wins $1b verdict on RoundUp Ready Seed Patent

Patent, , ,

Dr. EvilBy Dennis Crouch

The PACER entry is compelling:

JURY VERDICT For: Plaintiffs Against: Defendants In the Amount of: One Billion Dollars. (Entered: 08/02/2012)

In his August 6 order, Judge Webber confirmed the jury verdict that DuPont/Pioneer willfully infringe Monsanto's GMO roundup-ready seed patent. The jury rejected the defendants' claims that the asserted patent was invalid; that the patent had been finally obtained through inequitable conduct; and that the reissue patent improperly expanded the scope of the original claims. The judge also confirmed the jury's reasonable royalty damage award of "One Billion Dollars ($1,000,000,000)."

The asserted patent was Monsanto's reissue No. RE 39,247 and the accused product was DuPont's Optimum GAT soybean line that has never been released to the public. Rather, thus far DuPont's use of the patent has been for research purposes. No matter – the US has only a de minimis research defense that certainly does not apply here. See Madey v. Duke. Thus, unlicensed use of the Monsanto genetically modified soybean seed counts as infringement, even if that use was only for the development of a commercial product.

There is no question that this innovation was groundbreaking and has transformed the landscape of American agriculture. The genetic modification makes crops tolerant to the herbicide glyphosate. Although far from organic, glyphosate (RoundUp) has a much smaller negative environmental impact than other herbicides. In addition, the use of glyphosate has allowed for no-till farming that greatly reduces topsoil runoff and energy demands. In his press release, Monsanto's General Counsel David Snively wrote that the verdict "highlights that all companies that make early and substantial investments in developing cutting edge technology will have their intellectual property rights upheld and fairly valued." Snively's remarks are perhaps overstated, but at least have some kernels of truth.

The damages theory was interesting. Since the accused product was not yet on the market, Monsanto did not seek any lost profit. Rather, Monsanto demanded a reasonable royalty for the research-use made by the defendants. Monsanto argued that the use of Monsanto's invention in DuPont's labs and Pioneer's test fields gave those companies an "improper head start" in making the GM seeds. The judge and jury agreed – if those companies wanted to build upon the invention then they should have first obtained a license. In the pharmaceutical world, 35 U.S.C. § 271(e) offers a research exemption for this type of activity. However, that exception does not apply here because of the low level of regulation over genetically modified food-products. The patent is set to expire in 2014. The patentee's right-to-exclusive-research supported by this case means that the 2014 date offers a starting-date for follow-on competitive research. Any actual products building directly upon the patented invention will arrive on the market sometime later.

I sat-in on one day of the jury trial that was held in St. Louis, Missouri. The eight-member jury were largely attentive as they listened to DuPont's technical expert explain DNA and problems with the patent. I smiled at seeing the jury members walk in wearing t-shirts and carrying notepads. Their attitude and attire was a severe contrast to the room full of two-dozen attorneys and experts (each charging hourly). Although I'm sure that Judge Webber could have ably decided the case himself, the jury of individual citizens gave me a bit more confidence in our system and, in my mind, offers the ultimate reality check for this type of case. At least some of the jury members appear to be fans of Dr. Evil.

The level of damages, claim construction, and other issues will be the subject of an appeal the Court of Appeals for the Federal Circuit.

Federal Circuit Again Supports USITC Jurisdiction for Pure-Enforcement NPEs; Court Again Splits on Claim Construction

Patent, ,

by Dennis Crouch

InterDigital v. USITC and Nokia (Fed. Cir. 2012)

InterDigital is a publicly traded company whose primary revenue comes from patent licenses.  The majority of 3G mobile handset manufacturers pay royalties to the company.  After conducting its investigation, the US International Trade Commission (USITC) found that Nokia did not infringe InterDigital’s patents.  On appeal, the Federal Circuit has reversed based upon the USITC’s improper and unduly narrow construction of the claim terms “code” and “increased power level.”

The USITC was designed to protect US industry from “unfair” foreign competition.  Thus, the staute includes a “domestic industry” requirement that must be satisfied as a precondition of enforcing patent rights through the USITC.  In the appeal, Nokia argued that InterDigital could not satisfy the domestic industry requirement.  That argument was rejected by the USITC and on appeal as well.  The Federal Circuit held particularly that “patent licensing alone” can be sufficient to satisfy the US industry requirement and that the statute does not require that any actual articles covered by the patent be manufactured in this country. “That is, the domestic industry requirement is satisfied if there is a domestic industry based on substantial investment in the patent’s exploitation where the exploitation is achieved by various means, including licensing.” (internal formatting removed).

Writing in dissent, Judge Newman would have sided with the accused infringer and held the patent not-infringed.  Newman writes:

The panel majority’s enlargement beyond the invention described in the patents, in disregard of the protocols of claim construction, simply adds uncertainty to the patent grant. In today’s technology-based commerce, rational economics requires that the patent provide a reliable basis for investment. The patentee is in control of the specification that describes the invention. The panel majority’s theory that “the inventors’ failure to include a reference to the alternative embodiment in the specification does not justify excluding that embodiment from the coverage of the claims” is a departure from routine rules of the meaning of legal documents, and in negation of the notice purpose of the patent claim. From this unsound approach to claim construction, and its incorrect conclusion on the facts of this case, I respectfully dissent.

Judge Newman’s suggestion here is to give claim terms a narrow definition when the patentee uses an ambiguous term and does not provide any limiting definition to that term. 

Prosecution Disclaimer: Another Reexamination Trap

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by Dennis Crouch

Grober v. Mako Products (Fed. Cir. 2012)

In 2006, David Grober won an academy award for the best technical achievement of the year for his “perfect horizon” camera stabilization head.  The camera head is designed to compensate for motion during land, air, and sea operations of a camera.  Grober’s patent No. 6,611,662 covers the camera head and is the subject of this appeal.

This case is like many that involve parallel legal proceedings.  Grober filed an infringement action in 2004, Mako then filed an inter partes reexamination request – asking the USPTO to take a fresh look at the patent.  The district court stayed the litigation until 2006. At that time, the court became antsy and reopened the case.  After claim construction, the district court ruled that the accused products did not infringe the asserted claims and dismissed. Later, during the course of the appeal, the USPTO finally decided the reexamination by confirming the patentability of the asserted claims.

The primary issue on appeal is the construction of the claim term “payload platform.”  The district court narrowly construed the term as limited to a “horizontal surface” and that consequently led to a non-infringement holding.   To reach its conclusion, the district court highlighted Grober’s statements made to the PTO in the pending reexamination.

In reviewing the claim construction de novo, the appellate panel agreed that statements made in an ongoing, pending reeexamination were relevant to the claim construction.  See Krippelz v. Ford (Fed. Cir. 2012). In this case, however, the Federal Circuit held that the reexamination statements were not direct enough to constitute prosecution disclaimer.

Grober’s statements were not an unambiguous disavowal that clearly and unmistakably disclaims claim scope or meaning. In this instance, the reexamination history did not define or limit, let alone clearly and unmistakably disclaim, claim scope.

The appellate court’s approach here looked particularly to the words used by to the patentee in the reexamination to identify any actual limitations or disclaimers and refused to read-between-the-lines to find implied disclaimers.  In this sense, the decision supports the long-held prosecution strategy of keeping the prosecution history file thin. 

The Federal Circuit then offered its own broader construction of the term and remanded the case for reconsideration.

Comment: Although Grober may have escaped, this case highlights one of many ways that a parallel reexamination can serve as a trap for a plaintiff-patentee.  These traps go well beyond the straightforward risk of having claims cancelled or narrowed.