Tag Archives: Claim Construction

Inducing Infringement: Procedural Limits on the Reasonable Non-Infringement Belief

by Dennis Crouch

On remand from the Supreme Court vacatur, the Federal Circuit has reaffirmed its prior NuVasive decision and – in the process limited the reach of the Supreme Court’s 2015 decision of Commil USA, LLC v. Cisco Systems, Inc., 135 S. Ct. 1920 (2015).

Opinion: Warsaw Orthopedic, Inc. v. NuVasive, Inc. (Fed. Cir. 2016)

The primary holding of Commil is that belief-of-patent-invalidity is not a defense to allegations of inducing infringement.  In Commil, the Supreme Court also indicated that inducement requires proof that the accused inducer knew or was willfully blind to the fact that the actions being induced would constitute patent infringement. (clarifying a potential ambiguity of Global Tech).

Here, the adjudged infringers gave instructions to doctors on how to use its surgical tools in a way infringed NuVasive’s patent.  However, the companies argue that the evidence presented to the jury was insufficient to find that they “it knew (or was willfully blind to the fact) that it was instructing doctors to infringe” the asserted patent (even after being sued for infringement).

Medtronic’s explanation of its ‘belief‘ was that it had constructed a reasonable claim construction argument under which its activities would not infringe.  To resolve this, the Federal Circuit delved deep into the claim construction argument and found “no support in the language of claim 1 of the ’236 patent or its prosecution history to support MSD’s [claim construction] position.”

An oddity of the decision is that the Court suggests (but seemingly does not hold) that Medtronic waived its claim construction argument by failing to seek a revised claim construction.

In any event, MSD’s effort at this late stage amounts to a request for a revised claim construction that it never sought. That is improper, as we previously ruled in our earlier opinion. Warsaw, 778 F.3d at 1373 (citing Hewlett-Packard Co. v. Mustek Sys., Inc., 340 F.3d 1314, 1321 (Fed. Cir. 2003)). Moreover, claim construction is, of course, ultimately a question of law that must be left to the court, not the jury. Teva Pharm. USA, Inc. v. Sandoz, Inc., 135 S. Ct. 831, 837 (2015). We have previously held that it is improper for juries to hear conflicting expert testimony on the correctness of a claim construction, given the risk of confusion. CytoLogix Corp. v. Ventana Med. Sys., Inc., 424 F.3d 1168, 1172 (Fed. Cir. 2005).

Thus, it is unclear hear what the outcome would be if Medtronic had presented a reasonable non-infringement argument based upon an alternative claim construction.

The opinion of the court was filed by Judge Dyk.  Judge Reyna also filed a concurring opinion. One aspect of Judge Reyna’s concern is that the lower courts will latch upon the “no support” language of the majority opinion as the test for whether an alternative claim construction is reasonable. Rather, Judge Reyna would propose procedural limits:

While the Supreme Court in Commil stated that a defendant lacks the intent for induced infringement where his reading of the claims is both different from the plaintiff’s and reasonable, I do not believe Commil opens the door for this court to assess the reasonableness of a defendant’s non-infringement position that is based on a claim construction that a defendant failed to raise, or that was not before the jury. In this case, MSD proposed no construction for the “stopping” limitation, arguing that the limitation has a plain meaning to one of ordinary skill in the art. I would resolve this case on this basis. Where a defendant proposes no construction of a claim term, this court is speculating to determine what the defendant’s reading of the claims is. We should not be in the business of creating claim constructions for defendants in induced infringement actions so that we may then assess whether the claim constructions are reasonable.

At the same time, Judge Reyna also faulted the majority for failing to actually consider whether evidence of knowledge was presented.

In Global-Tech, the evidence demonstrated the defendant’s willful blindness. The opinion here cites no similar evidence. The opinion’s analysis suggests that any time a defendant’s products are found to directly infringe, the plaintiff has sufficiently established the defendant’s intent to induce infringement. This proposition conflicts with Global-Tech, Commil, and our caselaw.

Comment: The procedural approach here seems interesting and useful. The suggestion is a rule that an inducement defendant who is arguing that it had a reasonable non-infringement belief must actually present that argument to prove no underlying direct-infringement.  That approach require the judge/jury to first determine the merits of the argument before then determining whether it was at least reasonable.

 

 

Supreme Court Patent Update: 271(e) Safe Harbor

by Dennis Crouch

Look for opinions in Halo/Stryker and Cuozzo by the end June 2016.

Post Grant Admin: While we await Cuozzo, a set of follow-on cases continue to pile-up.  My speculation is that the Supreme Court will delay any decision in those cases until it finalizes the outcome of Cuozzo. With a host of new friend-of-the-court briefs and interesting constitutional questions, MCM v. HP is perhaps best positioned for certiorari.  Additional pending cases include Versata v. SAP (scope of CBM review); Cooper v. Lee (whether IPRs violate Separation of Powers); Click-to-Call Tech, LP v. Oracle Corp., (Same questions as Cuozzo and now-dismissed Achates v. Apple); GEA Process Engineering, Inc. v. Steuben Foods, Inc. (Flip-side of Cuozzo: Appeal when PTAB exceeds its authority by terminating an instituted IPR proceeding?); Interval Licensing LLC v. Lee (Same as Cuozzo); and Stephenson v. Game Show Network, LLC (Same as Cuozzo)

Design Patent Damages: Samsung has filed its opening merits briefs in the design patent damages case against Apple.  Design patent infringement leads to profit disgorgment, but the question is what profits? [More from Patently-O].

Versus Cisco: There are a couple of newly filed petitions. Interestingly, both filed by Michael Heim’s firm with Miranda Jones on both briefs representing plaintiff-petitioners.  In both cases Cisco is respondent.

  • CSIRO v. CISCO (fact-law divide in proving infringement damages under 35 U.S.C. § 284).
  • COMMIL v. CISCO (appellate disregard of factual evidence).

Of course, Commil was the subject to a 2015 Supreme Court decision that rejected the Federal Circuit’s original opinion favoring Cisco.  On remand, the Federal Circuit completely changed its decision but again sided with Cisco and rejected the jury verdict — holding “that substantial evidence does not support the jury’s finding that Cisco’s devices, when used, perform the “running” step of the asserted claims.”

Safe Harbor for Federal Submissions: In the newly filed Amphastar Pharma case, the Supreme Court has already requested a response from Momenta. The question presented focuses on the safe-harbor provision of 35 U.S.C. § 271(e)(1) and asks: Whether the safe harbor protects a generic drug manufacturer’s bioequivalence testing that is performed only as a condition of maintaining FDA approval and is documented in records that must be submitted to the FDA upon request.  The federal circuit held that Amphastar’s activity in this case was not protected by the safe harbor because it involved information “routinely reported” to the FDA post-approval. [Amphastar Petition]

The big list:

(more…)

Wegner’s Top Ten Pending Patent Cases

Hal Wegner has updated his top-ten list of pending cases:

  1. Impression Products v. Lexmark (cert petition pending) (post-sale and international exhaustion)
  2. Sequenom v. Ariosa Diagnostics (cert petition pending) (patent eligibility)
  3. Samsung v. Apple (cert granted) (design patent damages)
  4. Cuozzo Speed v. Lee (awaiting Supreme Court decision) (claim construction at the PTAB)
  5. Halo Electronics v. Pulse and Stryker v. Zimmer (awaiting Supreme Court decision) (requirements to prove willful infringement)
  6. SCA Hygiene v. First Quality Baby Prods (cert granted) (when does laches apply in patent cases)
  7. Life v. Promega (cert petition pending) (active inducement for export of component)
  8. Cooper v. Lee (cert petition pending) (direct challenge to PTAB administrative review)
  9. MCM Portfolio v. Hewlett-Packard (cert petition pending) (direct challenge to PTAB administrative review)
  10. Helsinn Healthcare v. Teva Pharm. (Federal Circuit case) (whether Metallizing Engineering was overruled by statute – i.e., what is the prior art impact of secret pre-filing commercialization by patentee).

Read Wegner’s Writings published by the Los Angeles Intellectual Property Law Association.  A full list of pending Supreme Court patent cases is available on Patently-O.

 

Pending Supreme Court Patent Cases 2016 (May 18 Update)

by Dennis Crouch

It is now time to begin looking for an opinion in the Halo/Stryker regarding whether the Federal Circuit’s test for willful infringement is too rigid. Those cases were argued in February 2016.  We can also expect a decision in Cuozzo prior to the end June 2016.

Supplying Components Abroad: The Solicitor General has finally filed its brief in Life Tech v. Promega. The brief supports certiorari — but only for one of the two questions presented: namely,

whether a supplier can be held liable for providing ‘all or a substantial portion of the components of a patented invention’ from the United States when the supplier ships for combination abroad only a single commodity component of a multi-component invention

The patent in the case involves a DNA amplification kit used for personal identification.  And, although the allegedly infringing kids were made in the UK, one commodity-component (the Taq polymerase) was supplied from the U.S.  Focusing on the language of the statute, the Solicitor Generals argues that liability for export of a single component of a multi-component invention “is contrary to Section 271(f)’s text and structure, and it is inconsistent with the presumption against extraterritoriality.”  Separately, the brief argues that the Federal Circuit was correct in its holding that a party can actively induce itself – thus 271(f)(1) inducement does not require a third party to be induced. [USPromega CVSG Petition].

Post Grant Admin: I previously discussed GEA Process Engineering. That case involves the Flip-side of Cuozzo and asks whether an appeal can follow when the PTAB exceeds its authority by terminating an already instituted IPR proceeding?  The respondent (Steuben Foods) had previously waived its right to respond, but the Supreme Court has now requested a response.  That move makes certiorari more likely, but the result will depend upon the outcome in Cuozzo.

Attorney Fees: Newegg Inc. v. MacroSolve, Inc., No. 15-1369.  Professor Mark Lemley’s brief on behalf of Newegg asks that the attorney-fee framework of Octane Fitness actually be implemented. [NewEggPetition].  Although Octane Fitness gives district courts discretion in determining whether to award fees, Newegg argues that the E.D. Texas court improperly applied “a special, heightened burden of proof.”  The Supreme Court is currently considering the Kirtsaeng attorney fee case for copyright law. That decision may shed some light on the patent cases as well.

A new petition in Automotive Body Parts, No. 15-1314,  focuses on a question of civil procedure regarding a clerk’s transfer of a design patent case out of E.D.Tx in a manner that violated the local rules.  Here, the clerk transferred the case immediately after the judge ordered transfer even though the local rules call for a 21 day delay.  The case is rising through a petition for mandamus, but my view is that the petition fails to show why transfer is so harmful (except for the reality that patent plaintiffs are usually given more respect in E.D.Tx.).

The court was scheduled to discuss Cooper v. Lee at its May 12 conference. No action was taken following that conference – lightly suggesting to me that the court is holding judgment until it resolves Cuozzo.  Apart from the AIA Trial challenges, most potential life changing case on the docket for patent attorneys is Cubist v. Hospira that focuses on the role of secondary indicia of non-obviousness. As with most Supreme Court patent cases over the past decade, Cubist argues that the Federal Circuit’s rules are too restrictive and should instead follow a looser factor-based analysis when considering the issue.  In the next couple of weeks, the court will consider the Cubist petition as well as that of Dow v. NOVA  (appellate review standard); Vehicle Intelligence (abstract idea); and WesternGeco (damages calculation for 271(f) infringement by exporting components).

Secret Offers to Sell: The Federal Circuit is not slowing down its patent jurisprudence in any way – except for the rash of R.36 affirmances. An important case is Helsinn that focuses on whether the AIA abrogated the rule in Metallizing Engineering.

The big list: (more…)

Precedent and Process in the Patent Trial and Appeal Board

Guest post by Saurabh Vishnubhakat, Associate Professor of Law at the Texas A&M University School of Law.  Prof. Vishnubhakat was an advisor at the USPTO until June, 2015, although his arguments here should not be imputed to the USPTO or to any other organization.

On May 9, the USPTO Patent Trial and Appeal Board (PTAB) designated five opinions as “precedential”—the most significant of the four labels that the agency attaches to its administrative decisions.  This action is itself a milestone, as the USPTO has designated only three other opinions as precedential over the last 22 months.  So this is a useful moment to examine the process by which PTAB opinions become precedential and to consider what this new body of administrative precedent means for the patent validity review procedures created by the AIA.

What the Current Precedential Opinions Say

The eight PTAB precedential opinions themselves are as follow:

Designated as Precedential in May 2016

Designated as Precedential in January 2016

Designated as Precedential in July 2014

What the PTAB Designations Mean

PTAB opinions come in four varieties—until recently, it was three—and each serves a different function.  The most difficult to designate and so the rarest are precedential opinions, which are binding in all future cases before the PTAB unless and until they are superseded by later binding authority.  Two particularly strong motivations for designating an opinion as precedential is to resolve a conflict among multiple PTAB decisions and to address novel questions.

By contrast, the largest and least significant set of opinions are routine; all opinions are routine by default, and some further action is necessary to elevate an opinion’s status.  Routine opinions are still binding as to the particular case, but should generally not be cited as persuasive authority except as to their particular facts.

In the middle are two more types of non-binding opinions: informative and representative.  Informative opinions articulate the PTAB’s norms on recurring issues and offer guidance both on issues of first impression and on PTAB rules and practices.  Representative opinions offer a sample of typical decisional outcomes on a given matter.  Until recently, the only middle category was informative opinions, which presented guidance on the rules and practices of the PTAB, representative samples of opinion types, or representative samples of outcomes. On September 22, 2014, the PTAB created a new category for representative opinions—ranked below informative opinions.

In short, representative opinions are a descriptive curation of routine opinions.  Informative opinions go beyond merely surveying an issue and synthesize some further normative guidance.  Precedential opinions go further still and make the synthesis binding.

How the PTAB Designates Opinions

The process for designating opinions resides in the PTAB’s Standard Operating Procedure No. 2 (Rev. 9, Sept. 22, 2014).  Any member of the PTAB may nominate an opinion to be designated as representative, informative, or precedential.  This includes the Director and Deputy Director of the USPTO and the Commissioners for Patents and Trademarks as ex officio members.  Interested parties and members of the public may nominate an opinion within 60 days of its issuance to be designated as precedential.  Nominations are received and referred by the Chief Judge of the PTAB.

Upon a nomination to make an opinion precedential, members of the PTAB discuss the proposal for a prescribed period (usually 10 business days) and then vote.  Approval by a majority sends the opinion to the Director, whose approval is also necessary.  Upon approval by the Director, the opinion is designated as precedential and published (with appropriate notice and opportunity for written objection where confidentiality applies under 37 C.F.R. § 1.14).

For opinions already designated as precedential, any member of the PTAB may suggest that later authority has overcome the opinion’s precedential value.  If first the Chief Judge and then the Director both agree, then the opinion loses its precedential force, and a notice of the change is posted in its place among the list of precedential PTAB opinions.

The Chief Judge of the PTAB may designate any opinion as informative or representative so long as it is not already precedential.

Why the PTAB’s Precedents (and Process) Matter

Both the content of the PTAB’s body of precedential opinions and the PTAB’s process have important implications for ex post administrative review of patent validity.

As to content, it is telling that all eight precedential opinions pertain to the procedural structure of IPR and CBM proceedings, particularly insofar as that procedural structure interacts with the structure of patent litigation in the federal courts.  The separation of patent powers between the executive and the judiciary is now before the Supreme Court in multiple cases, and this body of precedential opinions should be understood as a signal of the USPTO’s strong interest in shoring up its regime of administrative adjudication.

The opinions in SecureBuy, LG Electronics, and Oracle address when earlier civil actions do and do not bar a petition for PTAB review.  Westlake Services addresses estoppel in future CBM review, and there is good reason to expect that the same reasoning will apply to the parallel statutory language that governs IPR estoppel.  Lumentum Holdings rejects a jurisdictional view of certain procedural requirements, preserving the PTAB’s broad authority to choose its cases.  MasterImage 3D frames a patent owner’s ability to amend claims during review.  And Bloomberg and Garmin Int’l address limits on trial-type discovery in both the IPR and the CBM/PGR contexts.  Making these procedural and structural decisions into binding authority is, by definition, intended to bring uniformity to the PTAB’s large and increasing body of case law.

The need for such uniformity is particularly strong right now.  The Supreme Court in Cuozzo v. Lee is evaluating whether the PTAB’s authority in instituting petitions is truly nonreviewable.  The Court in Cuozzo is also considering whether the PTAB’s claim construction standard can properly remain unaligned with federal court standards, a question that turns significantly on the ability of patent owners to amend their claims during review.  The trial-like nature of PTAB proceedings is more generally under attack as to whether IPR and CBM review violate the separation of powers doctrine and the Seventh Amendment jury trial right, as the recent cert petition in MCM Portfolio LLC, Petitioner v. Hewlett-Packard Company (No. 15-1330) suggests.  In this environment of Supreme Court scrutiny, a persuasive argument that PTAB practice is proceeding with institutional coherence may do much to influence the USPTO’s autonomy in administering the validity and scope of patent rights.

Automatic Assignment of Future Inventions: A Serious Error of Federal Law that Requires Supreme Court Review

Guest post by Dr. Shubha Ghosh, Crandall Melvin Professor of Law and Director of the Technology Commercialization Law Program at Syracuse University College of Law

In Stanford v Roche, 563 U.S. 776 (2011), the Supreme Court ruled that the Bayh-Dole Act did not create special rules of patent ownership for universities and other recipients of federal research funding.  Traditional rules of inventor ownership and assignment, developed for for-profit entities applied to research institutes. Nothing in the language of the Bayh-Dole changed the basic rules and created a statutory automatic assignment (one analogous to work made for hire under the Copyright Act).

But what are the traditional rules for patent assignment? One issue the majority ignored in Stanford is the future interest assignment rule created by the Federal Circuit in Filmtec Corp. v. Allied Signal, 939 F.2d 1568 (Fed. Cir. 1991).  By containing the phrase “hereby assigns,” the Federal Circuit stated in Filmtec, an assignment would have priority over another that only contained the word “assigns.” An assignor stating that he “assigns” a future interest is simply conveying a promise to assign in the future. However, the magic phrase “hereby assigns” is a present assignment of a future interest.  Stanford University’s failure to include the word “hereby” in its assignment agreement lost patent rights to Roche, a competing assignee that showed the wisdom to include the word “hereby” in its agreement.

Justices Breyer and Ginsburg in dissent sharply criticized the Filmtec rule of “automatic assignment” through agreement in the Stanford case. This sentiment was echoed in Justice Sotomayor’s concurrence. All three justices, however, recognized that the assignment interpretation issue was not properly before the Court.  Dr. Alexander Shukh, a computer hardware engineer, signed an assignment to his former employer Seagate.  The assignment contained the “hereby” language sanctioned by the Filmtec decision.  Seagate, and the Federal Circuit, reads the hereby language as creating an automatic assignment of Shukh’s rights to his inventions and resulting patents. The Shukh decision does not involve priority of assignments and  goes beyond the Filmtec decision criticized by Justices Breyer, Ginsburg, and Sotomayor.  Under Shukh, the magic words “ hereby assigns” extinguishes all rights of employees in their inventions.

The Court should grant Shukh’s certiori petition. This post demonstrates that there is a serious error of federal law that requires Supreme Court review. It also shows how the Court might correct the misapplication of federal law.

The Federal Circuit created the rule of automatic assignment through agreement without any basis in the Patent Act or in the common law of assignment. Acting from its institutional law as patent law expert, the Federal Circuit seemingly adopted the Filmtec rule as one of patent assignment. But, as Professor Ted Hagelin pointed out in a 2013 article in the AIPLA Law Quarterly, the automatic assignment rule has no foundation in the Patent Act.  Section 261 speaks to writing requirements and priority rules arising from filing.  There is no mention of the magic word “hereby” as a marker between promises to assign in the future and present assignments of future interests.  Professor Hagelin recommended that Congress correct the error by amending Section 261.

But the Federal Circuit’s error is deeper than one of statutory misconstruction. Its decision confuses the relationship between patent law and contract law. The error is in the same category as the controversy over the conditional sale doctrine, a court created rule from Mallinckrodt v. Medipart, 976 F.2d 700 (Fed. Cir. 1992).  In Mallinckrodt, the Federal Circuit examined a patent owner’s power to impose conditions on its grant of rights to a licensee. Through announcing the conditional sale doctrine, the Federal Circuit ruled that a violation of such conditions constituted patent infringement rather than contract breach.  By so ruling, the Federal Circuit expanded its own jurisdiction by transforming questions of state contract law into those of patent law. A similar move occurs in Filmtec.

The usurpation of contract law by patent law is the subject of my 2014 article in the Journal of the Patent and Trademark Office Society.  My argument in that paper is grounded, in part, in Judge Pauline Newman’s criticism of Filmtec in her dissent from denial of en banc review in Abraxis v. Navinta. 672 F.2d 1239 (Fed. Cir. 2011). According to Justice Newman, patent assignments are a matter of contract law, which is in the jurisdiction of the states. Therefore, the Federal Circuit should look more closely at state law in deciding cases about patent assignments.

The judge’s point is particularly salient when one remembers that the Federal Circuit was created as an expert patent court.  It was given jurisdiction to hear some non-patent matters when these matters are related to patent cases.  Patent assignments are one obvious example of when the Federal Circuit has jurisdiction to consider state matters.  But, as Judge Newman points out, jurisdiction to hear a case does not mean authority to create new law, as the Federal Circuit arguably did in Filmtec and in Stanford. Instead, the Federal Circuit should look to other authorities to address non-patent law matters. For contract law matters, what state courts and legislatures have said about assignments generally would be relevant.  Furthermore, state law provides a stable and predictable source of authority for actors engaged in the business practice of negotiating patent assignments and other contracts.

The core problem is that the court has ignored the Erie doctrine. Under the Supreme Court’s 1937 decision in Erie v. Tompkins, a federal court ruling on a matter of state law under its diversity jurisdiction must apply the law of the state from which the dispute arose.  Which state law to apply is a matter of choice of law principles.  What the federal court cannot do is create its own federal common law in lieu of the state statutory or common law. As the Court affirmed in Butner v. United States, 440 U.S. 48 (1979),  the Erie doctrine applies to a court’s supplemental jurisdiction over state law claims attendant to a federal question. By creating its own federal common law of contracts, the Federal Circuit reveals a fundamental error in its understanding of the federal court system.

State law offers a different analysis of patent assignments from what the Federal Circuit adopts. Justice Breyer, in his Stanford dissent, cited a treatise on patent law by George Ticknor Curtis from 1873 that discusses patent assignments.  Curtis addresses how state law treats assignments and cites a Massachusetts case from 1841 dealing with patent assignments.  Relevant to the issues in Stanford, the assignment involved the present assignment of an invention that had not been made yet.  The court analyzed the assignment as it would any contract, identifying the terms of the document as a key to the expectations of the parties. State law precedents perhaps offer an alternative to the questionable Federal Circuit jurisprudence, at least with respect to patent assignments.

One related area in state law is that of security interests, a part of debtor-creditor law.  In entering into credit agreements, creditors ask for security in the form of collateral for a loan. The collateral may be a legal interest that is not in existence at the time of the loan.  An example would be the future sales or proceeds from a debtor’s business. Another example would be inventory remaining at the end of an accounting period.  These future interests are analogous to the future inventions or patents that I have been discussing.  Rights can be claimed in these properties that are nonexistent at the time of the contract formation between creditor and debtor.

Security interests provide the most common situation in which conflicting obligations arise.  Debtors often take multiple mortgages, hypothetic future proceeds to multiple creditors, and take multiple loans out on the same collateral.  As long as the value of the collateral can cover all the debts, then there is no problem in general.  However, if not all creditors can be satisfied, priority rules are necessary.  In the case of future interests, the law does not fall back on simple rules like first in time because there are multiple interests involved.  A creditor does not want to run the risk of not receiving any return on the debt.  The legal rules of priority allow the creditor to investigate the collateral and through such due diligence identify competing claimants on the collateral.  Priority rules, consequently, depend not only on the timing of the contract, but also on recording and notice requirements.

The case of conflicting patent assignments bears some similarity to the law on intangible future interests in creditor-debtor law.  Both entail rights in property that has yet to come into being.  The main lesson from creditor-debtor law, which is largely a matter of state law, is that many interests are implicated and therefore simple rules are not satisfactory.  The Federal Circuit has arguably adopted too simple and misguided a rule in the Filmtec.  The Supreme Court has confounded the error in the Stanford decision by ignoring the issue of automatic assignments. One way to correct course is by granting Shukh’s petition for certiori and restore the proper balance between federal patent law and state commercial law.

Guest Post: The AIA, Inter Partes Review, and Takings Law

In a provocative new article called “Taking Patents,” 72 Wash & Lee L. Rev. (forthcoming 2016), Gregory Dolin (Baltimore) and Irina Manta (Hofstra) argue that the Federal Government effectuated a taking through its creation and implementation of the inter partes review mechanism.  Below, Camilla Hrdy and Ben Picozzi summarize the main points of their recent response to Dolin and Manta, “The AIA Is Not a Taking: A Response to Dolin & Manta,” 72 Wash. & Lee L. Rev. Online 472 (2016).

Gregory Dolin and Irina Manta argue in a forthcoming article that the Leahy-Smith America Invents Act (AIA) effectuated a Fifth Amendment “taking” by enhancing the mechanisms for challenging issued patents in administrative proceedings. Initial data do indicate that patents are more likely to be found invalid in the new inter partes review (IPR) and covered business method review (CBMR) proceedings than in district court actions or through the IPR and CBMR’s administrative predecessors. Patentees’ have even complained that the filing of individual IPR petitions has affected their stock prices.

Has the AIA made it too easy to invalidate a patent? Have patentees been treated unfairly? Maybe. Maybe not. But one things is clear: Dolin and Manta’s argument that the AIA is a taking faces serious legal hurdles.

First, Dolin and Manta’s premise that patents are property rights protected by the Takings Clause is far less clear than they contend. While the Supreme Court has recently suggested that patents, like land, “cannot be appropriated or used by the government itself, without just compensation,” see Horne v. Department of Agriculture, 135 S. Ct. 2419 (2015) (quoting James v. Campbell, 104 U.S. 356, 358 (1882)), both that statement, and the statement it quotes, are dicta. More recent decisions express greater ambivalence regarding patents’ status under the Takings Clause.

In contrast with trade secrets, the Supreme Court has never held that patents are property under the Takings Clause. In Florida Prepaid Postsecondary Education Expense Board v. College Savings Bank, 527 U.S. 627 (1999), the Court held that Congress can’t abrogate states’ sovereign immunity from patent infringement claims. In reaching this conclusion, the Court stated that patents are “surely included within the ‘property’ of which no person may be deprived by a State without due process of law.” Id. at 642. But the Court declined to rule on patents’ status under the Takings Clause. See id. at 642.

Most recently, in Zoltek Corp. v. United States, 442 F.3d 1345 (Fed. Cir. 2006) (per curiam), vacated on other grounds, 672 F.3d 1309, 1314–22 (Fed. Cir. 2012) (en banc), the Federal Circuit held (rightly or wrongly) that 28 U.S.C. § 1498 is the only means of recovery for patentees whose patents are infringed by the U.S. government. Patentees can’t bring claims for compensation under the Takings Clause. Although the court eventually vacated that decision, the court never repudiated the reasoning behind its constitutional holding.

Dolin and Manta try to get around Zoltek by arguing that, unlike government infringement—which is like a forced permit and leaves all the rights of a patent intact—the AIA “changed the scope of patent rights themselves” by subjecting issued patents to more stringent post-issuance review. However, courts have not endorsed that argument, and analogs are difficult to find.

Second, even if we accept the argument that government can potentially take patents by altering their scope retroactively, courts are unlikely to view post-issuance review proceedings as the kinds of government actions regulated by the Takings Clause. Courts assessing constitutional challenges under the Fifth or Fourteenth Amendment tend to distinguish actions intended to “cure” defects in government administrative systems from incursions on property rights. In Patlex Corp. v. Mossinghoff, 758 F.2d 594 (Fed. Cir. 1985), the Federal Circuit rejected a very similar challenge to IPR’s predecessor based partly on this distinction, noting that reexamination statute belonged to “the class of ‘curative’ statutes, designed to cure defects in an administrative system[,]” and that such statutes are treated more favorably for Fifth Amendment purposes even when they devalue property rights. We see little reason that a court would reach a different conclusion today.

Lastly, even if a court decides it is possible for the government to take patents by subjecting them to more stringent post-issuance review, Dolin and Manta’s argument almost certainly loses as a matter of takings doctrine. To determine whether a particular governmental action effectuates a taking, courts assess “the character of the governmental action, its economic impact, and its interference with reasonable investment-backed expectations.” See Penn. Cent. Transp. Co. v. City of New York, 438 U.S. 104, 124 (1978). Thus, even assuming we accept that the AIA significantly devalued all patents (a big “if”), whether this constitutes a taking depends on whether patentees should have anticipated that Congress would amp up administrative review, given the existing regulatory background.

Dolin and Manta argue the AIA’s enhanced IPR and CBMR proceedings interfered with patentees’ “reasonable investment-backed expectations” by increasing the likelihood that their patents would be found invalid in administrative proceedings utilizing patentee-unfriendly rules such as “preponderance of the evidence” standard for invalidation and “broadest reasonable construction” with limited opportunity to amend. But, as Dolin and Manta concede, the AIA was enacted against a background of federal statutes and regulations that authorize challenges to patent validity. IPR and CBMR review are only the latest in a series of administrative procedures authorizing parties to offensively challenge the validity of issued patents. To us, it seems highly unlikely that the question of whether the Takings Clause applies to the creation of new IPR and CBMR review could turn on such small differences as whether or not patentees have a full opportunity to amend their claims during review.

Also, it is worth noting that beyond third party challenges to patent validity, numerous federal regulatory statutes limit patentees’ ability to exploit their inventions for purposes of health and safety. For example, various regulatory review statutes, such as the Food, Drug, and Cosmetic Act (FDCA), the Federal Insecticide, Fungicide, and Rodenticide Act (FIFRA), and the Toxic Substances Control Act (TSCA), practically reduce effective patent lifetimes by prohibiting patentees from commercially marketing or using protected products prior to regulatory approval. Yet none of these statutes fully compensate patentees for their losses.

Are these actions all takings as well? This conclusion has troubling consequences. Does Congress really need to compensate patentees every time it passes a statute that significantly affects the value of issued patents? Could Congress pass regulations for the purpose of restraining bad-faith enforcement of patents that have already been granted? What about judicial actions that reduce the value of patents? Do they intend for Congress to compensate patentees in these cases or to take fewer actions limiting patent rights, simply due to the fear of effectuating a taking? This seems like a dangerous basis on which to formulate patent policy.

In any case, we think that, given this regulatory backdrop and the existence of administrative review proceedings for over thirty years, patentees could foresee—or reasonably should have foreseen—that the government would continue to actively regulate patent rights without “just compensation.”

Together, these arguments persuade us that the AIA is not a taking. Nevertheless, the authors’ article is a thought-provoking and educational analysis of the constitutional implications of Congress’s recent efforts to reform the patent system. We thank them for reopening the door on this area of scholarship.

Pending Supreme Court Patent Cases 2016 (May 3 Update)

by Dennis Crouch

Laches: The Supreme Court granted SCA’s writ of certiorari on the question of whether laches defense applies to block back-damages in patent cases. The Federal Circuit says “yes” while the Supreme Court recently said “no” in a parallel copyright case (Patrella).  The Supreme Court decided Patrella 6-3 with Justice Scalia in the majority offering the potential of a tight-split in this case.  The court looks to be sitting-on the parallel case of Medinol v. Cordis until SCA is decided.

CheerCopyrightCopyright on Useful Articles: Although not a patent case, the court also decided to hear a “useful article” copyright case.  Star Athletica v. Varsity Brands.  The case asks whether the stripes and chevrons found in a cheerleader uniform are sufficiently “separable” from the uniform in order to be copyrightable.  The useful article doctrine is generally considered to be setting up a boundary line between the domains of copyright and patent.

More Challenges to USPTO Authority: MCM filed its petition for writ of certiorari directly challenging USPTO authority to conduct inter partes review proceedings with two easy questions:

  1. Does IPR violate Article III of the Constitution?
  2. Does IPR violate the Seventh Amendment to the Constitution?

[MCM Petition and Appendix] MCM’s brief was filed Tom Goldstein along with Ned Heller.  The question for the Supreme Court is whether to extend or contract from its position in Stern v. Marshall, 131 S. Ct. 2594 (2011) where the court held that Article III of the U.S. Constitution prohibits Congress from withdrawing “from judicial
cognizance any matter which, from its nature, is the subject of a suit at the common law, or in equity, or admiralty.” Quoting Murray’s Lessee v. Hoboken Land & Improvement Co., 59 U.S. 272  (1856)).

The brief raises a set of interesting old cases focusing both on the separation of powers and the tradition that patent-revocation for invalidity requires a jury to decide disputed facts.

  • Ex Parte Wood & Brundage, 22 U.S. 603 (1824)
  • McCormick Harvesting Mach. Co. v. C. Aultman & Co., 169 U.S. 606 (1898)
  • Mowry v. Whitney, 81 U.S. 434 (1871)
  • Murray’s Lessee v. Hoboken Land & Improvement Co., 59 U.S. 272 (1856)
  • Neilson v. Harford, Webster’s Patent Cases 295 (1841)
  • Pennock v. Dialogue, 27 U.S. 1 (1829)
  • United States v. Am. Bell Tel. Co., 128 U.S. 315 (1888)

Cooper v. Lee raises some parallel issues. Its petition will be considered by the Court in its May 12. [Update: The court has “rescheduled” consideration of Cooper’s brief – perhaps awaiting its own determination in Cuozzo.]

Hereby Assign Future Inventions: In Shukh v. Seagate, the petitioner raises the long-brewing question involving the Federal Circuit’s interpretation of patent assignments.  In particular, the Federal Circuit has ruled – as a matter of federal patent law – that patent rights are assignable before their invention is even contemplated. The petition asks:

[W]hether FilmTec’s “automatic assignment” rule should be overruled because it extinguishes inventors’ constitutional and statutory rights to inventorship and ownership.

In Stanford v. Roche, Justices Breyer, Ginsburg and Sotomayor criticized the Federal Circuit’s rule and suggested that the issue should be presented in a future case. The majority expressly noted that its opinion did not decide the issue. [Shukh v. Seagate – Redacted Public Petition]

Disparaging Trademarks: A pair of disparaging trademark cases have also been petitioned: Lee v. Tam (“Slants”) and  Pro-Football v. Blackhorse (“Redskins”).   The Federal Circuit previously held the limit on registering disparaging marks to be an unconstitutional abrogation of the freedom of speech.

The big list: (more…)

Implementing and Interpreting the Defend Trade Secrets Act

By Dennis Crouch

With today’s 410-2 House vote, the Defend Trade Secrets Act (DTSA) has now passed both the House and Senate and is headed to President Obama for his expected signature.[1]  The DTSA amends the Economic Espionage Act to create a private civil cause of action for trade secret misappropriation based upon the Congressional sense that trade secret theft exists and is harmful.[2]  Trade secret misappropriation (as a civil matter) has previously been purely a matter of state law.  Although there is substantial uniformity between the states,[3] there are also a number of differences and perceived procedural weaknesses.[4]  The DTSA would not eliminate or preempt the various state trade secret rights but rather would operate as an additional layer of potential protection.[5] The law is designed to go into effect on its day of enactment and apply to any misappropriation that occurs on or after that date.

On March 10, 2017, the University of Missouri’s Center for Intellectual Property and Entrepreneurship (CIPE) along with our new Business, Entrepreneurship, and Tax Law Review (BETR) will host a symposium on Implementing and Interpreting the Defend Trade Secrets Act.  I expect that we will live-stream the event and will also publish speaker articles in BETR.  There is a lot to figure out. Contact me if you are interested in sponsorship opportunities (dcrouch@patentlyo.com).

The central provision of the DTSA will be codified as 18 U.S.C. § 1836(b) and reads:

An owner of a trade secret that is misappropriated may bring a civil action under this subsection if the trade secret is related to a product or service used in, or intended for use in, interstate or foreign commerce.

Defining Trade Secret: The DTSA broadly defines the term “trade secret” to mean “all forms and types of financial, business, scientific, technical, economic, or engineering information, including patterns, plans, compilations, program devices, formulas, designs, prototypes, methods, techniques, processes, procedures, programs, or codes, whether tangible or intangible, and whether or how stored, compiled, or memorialized physically, electronically, graphically, photographically, or in writing if—(A) the owner thereof has taken reasonable measures to keep such information secret; and (B) the information derives independent economic value, actual or potential, from not being generally known to, and not being readily ascertainable through proper means by, the another person who can obtain economic value from the disclosure or use of the information.”  Although this definition is broad and certainly includes abstract ideas and laws of nature, it might not encompass information that is only stored in the human mind.[6]

Defining Misappropriation of a Trade Secret:  The statute also defines “misappropriation” in detail.  My rough approximation is as follows: without permission (A) obtaining a trade secret that was knowingly obtained through improper means or (B) disclosing or using a trade secret without knowing either (1) that it is a trade secret or (2) that it was obtained through improper means.  These “improper means” include “theft, bribery, misrepresentation, breach or inducement of a breach of a duty to maintain secrecy, or espionage through electronic or other means.” However, misappropriation does not include “reverse engineering, independent derivation, or any other lawful means of acquisition.”  The DTSA does not otherwise include a more general fair-use or news-reporting exception.  However, the First Amendment will certainly serve as a backstop.  Further, these definitions do not include any express territorial limit – it will be very interesting to see the extent that these limits will be implied into the law.  Thus, if a U.S. company is holding trade-secrets in India that are stolen in India, could the U.S. company bring action against the Indian entity that caused the injury (presuming personal jurisdiction over the defendant)?

Remedies Civil Seizure: A key procedural benefit of the DTSA is to offer a mechanism for Civil Seizure ordered by courts and enforced by Federal, State, and/or local law enforcement as a preventive measure (akin to a temporary restraining order).

Remedies: Once misappropriation is found, the court will be authorized to grant injunctive relief as “reasonable.”  If “exceptional circumstances” render injunctive relief is “inequitable” then a court may order a reasonable royalty for the misappropriator’s continued use of the trade secret.  Depending upon how the statute is interpreted, this setup appears to create a presumption of injunctive relief – a stark difference from contemporary patent law doctrine under eBay v. MercExcange.  The statute also provides for compensatory damages for either (i): (I) “actual loss of the trade secret” and, in addition (II) “any unjust enrichment” not compensated in (I); or (ii) a reasonable royalty for the use.  Willful misappropriation can double damages.[7] In these calculations, I suspect that courts will take into account both the market-value of the trade secret as well as the “expenses for research and design and other costs of reproducing the trade secret” that were avoided by the misappropriation. The provision also includes an attorney fee shifting provision limited to cases involving bad-faith or willful-misappropriation.

Remedy against Former Employees: Most trade secret cases involve former employees moving (or starting-up) to a competitor.  A major concern raised against early versions of the bill was that the DTSA would empower employers to prevent such movement.  As amended, the bill now indicates that injunctive relief that would “prevent (or place conditions on) a person from entering into an employment relationship” must be “based on evidence of threatened misappropriation and not merely on the information the person knows.”[8]  Of course, such “threat” does not necessarily mean that the employee expressly threatened misappropriation but rather will likely be based upon circumstantial evidence regarding likelihood of misappropriation (i.e., ‘threat level’).[9]  In addition, the injunction preventing or limiting employment cannot “otherwise conflict with an applicable State law prohibiting restraints on the practice of a lawful profession, trade, or business.”  This bit appears to be directed toward giving credence to non-compete and other limits in various states. However, of key importance is that it only limits injunctive relief and does not appear to limit any cause of action against former employees.  As a consequence, this sets the likelihood of a fight between certain state employment laws that favor employee rights against the new federal trade secret law.

Whistle Blowers: Professor Peter Menell was instrumental in proposing a public policy immunity provision that is included in the DTSA.  The provision would offer immunity from liability (whistle blower protection) for confidential disclosure of a trade secret to the Government or in a Court Filing (made under seal).  The provision includes a notification requirement that employers should immediately implement.

= = = = =

Notes:

[1] Defend Trade Secrets Act of 2016, S. 1890.

[2] Although trade secret rights are thought of as a form of intellectual property, the bill is clear that the DTSA “shall not be construed to be a law pertaining to intellectual property.”  The result of this could, for example, mean that the intellectual property licensee exception in bankruptcy law would not apply to licenses of trade secret information.  See 11 U.S.C. § 365(n).  [In Bankruptcy Law, Trade Secrets are defined as a form of IP, but it is unclear to me at this point which statute would prevail.]  Because the DTSA is an amendment to the Economic Espionage Act – a criminal law – it will also be codified in Title 18 of the United States Code that is generally directed to “crimes and criminal procedure.”  Although I don’t know exactly, there may be aspects of Title 18 (such as general definitions) that will shape the interpretation of federal trade secret law.  As an example, 18 U.S.C. § 2(b) offers a “general principle” of respondeat superior that “[w]hoever willfully causes an act to be done which if directly performed by him or another would be an offense against the United States, is punishable as a principal.”

[3] Consider the popularity of the Uniform Trade Secrets Act in the various states.

[4] Jury trial should still apply to the extent it has in state cases.

[5] The Economic Espionage Act already includes a rule of construction that the statute “shall not be construed to preempt or displace any other remedies, whether civil or criminal, provided by United States Federal, State, commonwealth, possession, or territory law for the misappropriation of a trade secret, or to affect the otherwise lawful disclosure of information by any Government employee under section 552 of title 5(commonly known as the Freedom of Information Act).”  The DTSA reaffirms this principle by stating that “[n]othing in the amendments made by this section shall be construed to modify the rule of construction under section 1838 of title 18, United States Code, or to preempt any other provision of law.”  The bill provides for original jurisdiction of these trade secret cases in federal district court. However, it does not create exclusive jurisdiction – as such it would be proper for a party to bring such a claim in state court (when permitted by the state court). However, in that case, the other party may attempt to remove the case to Federal Court.  You might also query as to whether the federal claim is a ‘compulsory claim’ under the law such that if someone brings a state-law claim and loses they would later be estopped from bringing the federal claim.

[6] There may also be constitutional limitations on a company owning and controlling that information.

[7] This provision suggests by implication that misappropriation may be non-willful despite the fact that the misappropriation definition includes a mens rea element.

[8] My understanding is that Jim Pooley and Mark Lemley were instrumental in suggesting the addition of this provision that has now put the Bill in form where it is broadly supported by the politicians.

[9] Improperly obtaining a trade secret is a form of misappropriation – this creates some potential confusing situations in the interpretation of the provision.

Design Patent Claim Construction: More from the Federal Circuit

Guest post by Sarah Burstein, Associate Professor of Law at the University of Oklahoma College of Law.

Sport Dimension, Inc. v. Coleman Co., Inc. (Fed. Cir. April 19, 2016) Download Opinion

Panel: Moore, Hughes, Stoll (author)

Coleman accused Sport Dimension of infringing U.S. Patent No. D623,714 (the “D’714 patent”), which claims the following design for a “Personal Flotation Device”:

Coleman1

The district court construed the claim as: “The ornamental design for a personal flotation device, as shown and described in Figures 1–8, except the left and right armband, and the side torso tapering, which are functional and not ornamental.” The court, like many other courts and a number of commentators, interpreted the Federal Circuit’s 2010 decision in Richardson v. Stanley Works as requiring courts to “factor out” functional parts of claimed designs. Coleman moved for entry of judgment of noninfringement and appealed the claim construction (along with another issue not relevant to this discussion).

After Coleman’s appeal was docketed, the Federal Circuit disavowed the “factoring out” rule that many had read in Richardson. As discussed previously on this blog, in Apple v. Samsung and again in Ethicon v. Covidien, the court insisted that Richardson did not, in fact, require the elimination of functional elements from design patent claims.

Following this new interpretation of Richardson, the Federal Circuit reversed the district court’s construction of Coleman’s claim. The court stated, for the third time in a year, that district courts should not eliminate portions of claimed designs during claim construction. So it seems that the Federal Circuit’s retreat from Richardson is complete—if that weren’t clear already.

And, for the first time I’m aware of, the court actually explained how it determined whether something is “functional” for the purposes of claim construction. It’s been clear for a while that the court was using a more expansive concept of “functionality” in the context of claim construction than it was using for validity. (For more on this issue, see this recent LANDSLIDE article by Chris Carani.) However, the court hasn’t seemed to acknowledge that disconnect or explain how courts should analyze functionality in the claim construction context. In this case, the court did both. The Federal Circuit stated that the Berry Sterling factors, although “introduced…to assist courts in determining whether a claimed design was dictated by function and thus invalid, may serve as a useful guide for claim construction functionality as well.” (Those factors, discussed here, are very similar to the factors used by courts to determine whether a design is invalid as functional in the trademark context. For more on the trademark test and how it differs from the current design patent test for validity, see here.) Applying the Berry Sterling factors to the facts of this case, the court affirmed the district court’s conclusion that the armbands and tapering were functional.

So in Sport Dimension, it is clear that the Federal Circuit thinks it is important to determine whether an “element” or “aspect” (the court uses those words as synonyms) of a design is functional. And it is very clear that courts are not supposed to completely remove functional “elements” or “aspects” from design patent claims as a part of claim construction. But what are courts supposed to do? Here is what the court said:

We thus look to the overall design of Coleman’s personal flotation device disclosed in the D’714 patent to determine the proper claim construction. The design includes the appearance of three interconnected rectangles, as seen in Figure 2. It is minimalist, with little ornamentation. And the design includes the shape of the armbands and side torso tapering, to the extent that they contribute to the overall ornamentation of the design. As we discussed above, however, the armbands and side torso tapering serve a functional purpose, so the fact finder should not focus on the particular designs of these elements when determining infringement, but rather focus on what these elements contribute to the design’s overall ornamentation.

It’s not at all clear what the court is trying to say here, especially in the highlighted portion (emphasis mine). It seems that perhaps the court is trying to say that, in analyzing infringement, the factfinder should focus on the overall appearance of the claimed design. But if that is what the court meant, then this “claim construction” frolic adds nothing—the infringement test already requires the factfinder to look at the actual claimed design, as opposed to the general design concept.

This portion of the decision also seems to be in some conflict with the court’s decision in Ethicon. In Ethicon, as here, the district court eliminated all the functional portions of the claimed design. Unlike this case, the district court in Ethicon said that all the elements were functional and, thus, the claim had no scope. The Federal Circuit reversed, stating:

[A]lthough the Design Patents do not protect the general design concept of an open trigger, torque knob, and activation button in a particular configuration, they nevertheless have some scope—the particular ornamental designs of those underlying elements.

So Ethicon says that factfinders must look at the “particular ornamental designs” of functional elements. Sport Dimension says they “should not focus on the particular designs of [functional] elements.” These statements could potentially be reconciled by drawing a distinction between the “particular design” of an element/feature and the “particular ornamental design.” But it’s not at all clear what that distinction might be—or whether it makes sense to draw such a distinction at all.

More importantly, it’s not clear what, exactly, the Federal Circuit hopes to gain by making district courts go through this rigmarole. In this case, the accused product looks nothing like the claimed design, as can be seen from these representative images:

Claimed Design

Claimed Design

Accused Product

Accused Product

Yes, they both have armbands with somewhat similar shapes and some tapering at the torso. But the overall composition of design elements is strikingly different. You don’t need to “factor out” anything or “narrow” the claim to reach the conclusion that these designs are plainly dissimilar. (The same was true, by the way, of the facts in Richardson.) Even for designs that are not plainly dissimilar, the Egyptian Goddess test for infringement should serve to narrow claims appropriately where elements are truly functional because one would expect those elements to appear in the prior art. So once again, one is forced to ask what the Federal Circuit is trying to accomplish with these “claim construction functionality” rules—and whether the game is worth the candle.

Pending Supreme Court Patent Cases 2016 (April 18 Update)

by Dennis Crouch

Cuozzo: Prof Mann provides his preview of the April 25 oral arguments in Cuozzo v. Lee; and Cuozzo has filed its reply brief. Neither document address my the mootness concern regarding Cuozzo’s demand for an ordinary construction of claim terms rather than their broadest reasonable interpretation.  As far as I have seen, nothing in the record suggests that a change in claim interpretation standard would alter the PTO’s determination.

Following its April 15 Conference, the Supreme Court denied certiorari in a set of cases, including Vermont v. MPHJLimelight v. Akamai; Hemopet v. Hill’s Pet Nutrition; and Tas v. Beachy. In its April 1 Conference, the Court denied cert in Retirement Capital v. US Bancorp. That case had questioned whether subject matter eligibility under 35 U.S.C. § 101 is a ground specified as a condition for patentability under 35 U.S.C. § 282(b)(2).

The only patent cases surviving the April 15 conference are (1) Interval Licensing v. Lee that asks the same question as Cuozzo: Can the Patent and Trademark Office appropriately apply the “broadest reasonable interpretation” standard in construing patent claims in post-grant validity challenges?; and (2) Medinol v. Cordis that focuses on whether “the equitable defense of laches [may be used to] bar legal claims for damages that are timely under the express terms of the Patent Act.”   Medinol is conceptually linked to the SCA Hygiene case that also raises the laches issue. The court will consider both cases in its April 22 conference and may likely couple the decision to grant/deny.  The court is also scheduled to consider Cloud Satchel (abstract idea eligibility) and Globus Medical (appellate jurisdiction) at Friday’s conference. Neither of these cases offer much hope for the respective petitioner.

In Cooper v. Lee, the US Government filed its brief opposing certiorari. The government argues that Cooper’s Article III challenge to the IPR system “lack’s merit.”

[P]atents are quintessential “public rights” whose issuance and cancellation Congress may permissible entrust to a non-Article III tribunal. . . . Pursuant to its constitutional authority to “promote the Progress of Science and useful Arts” by establishing a patent system, Congress created the PTO – an agency with “special expertise in evaluating patent applications.” Kappos v. Hyatt, 132 S. Ct. 1690 (2012). It directed that agency to issue a patent if “it appears that the applicant is entitled to a patent” under standards set by federal law, 35 U.S.C. 131. Patents are accordingly rights that “exist only by virtue of statute.” Sears, Roebuck & Co. v. Stiffel Co., 376 U.S. 225, 229 n.5 (1964). They “dispose of public rights held by the government on behalf of the people.” Teva Pharm. USA, Inc. v. Sandoz, Inc., 135 S. Ct. 831, 849 n.2 (2015) (Thomas, J., dissenting).

The government also argues that the posture of the case lacks merits – in particular that Cooper’s collateral challenge to the procedures doesn’t work.  Cooper has argued that “inter partes review violates Article III of the Constitution by authorizing an Executive Branch agency, rather than a court, to invalidate a previously issued patent.”

Daniel Bohnen has filed a brief on behalf of UK’s Chartered Institute of Patent Attorneys (CIPA) in support of the Sequenom v. Ariosa petition.   The brief argues that the court should look to “maintain international harmonisation in the law of patent-eligibility.”[AriosaCIPA].  More briefs in support of the petitioner are expected this week as is Ariosa’s opposition brief (if any).

Finally, Nova has filed its opposition in Dow v. Nova and is attempting to refocus attention on the merits of the indefiniteness decision rather than the procedure for reaching that decision.  The difference in question presented is interesting:

Dow: Whether factual findings underlying a district court’s determination on the definiteness of a patent claim under the Patent Act, 35 U.S.C. 112, like a district court’s factual findings underlying construction of a patent claim, are subject to appellate review only for clear error or substantial evidence rather than de novo review.

Nova: Whether the court of appeals correctly invalidated Dow’s patent claims as indefinite under 35 U.S.C. § 112.

Explaining its shift of the question, Nova argues that “Dow’s petition rests on a false premise that the Federal Circuit refuses to give deference to factual findings” that underlie the definiteness determination.  Nova is correct as to the Federal Circuit’s position — the only question here is whether the Supreme Court will order the appellate court to follow its own law in this case. [DowPetition][NovaOpposition]

The big list: (more…)

Pending Supreme Court Patent Cases 2016 (April 1 Update)

by Dennis Crouch

Design Patent Damages: The Supreme Court has granted Samsung’s petition for writ of certiorari on the issue of design patent damages under 35 U.S.C. 289.  The statute allows for disgorgment of the infringer’s “total profit,” but the question is total-profit-as-to-what? Certainly not the entire company. The Federal Circuit has ruled that the total profit applies to the article of manufacture (here a mobile phone) while Samsung argues that the profit should be reduced to the profits associated with the component at issue (the screen). The Supreme Court rejected the second proposed issue of design patent scope.

No Standing for Cuozzo?: I wrote some about the standing and appellate jurisdiction issue in Cuozzo earlier this week.  [Link].  Up to now, Cuozzo has not explained how a Phillips claim construction would impact the outcome of its inter partes review.  Cuozzo’s reply brief may address that issue – either way they almost have to come-up at oral arguments under questioning from Justice Breyer or Justice Sotomayor.

Post Sale Restraints: A key new petition was filed in Impression Products v. Lexmark on the issue of patent exhaustion and the extent that a manufacturer can rely upon patent rights to create post-sale use requirements and restrictions and limits on international trade. [Link]. In Sequenom, v. Ariosa, the court is subtly asked to reconsider and scale-back the language of Mayo v. Prometheus.  The petition actually asks the court to stop mis-interpreting Mayo. [Link].  Vehicle Intelligence and Safety as well as Cloud Satchel also raise Section 101 challenges, but those cases are battling long odds.

Reviewing a Jury Verdict of Definiteness: New petition Dow v. Nova raises the interesting question regarding the standard for appellate review of factual findings that serve as the underlying basis for a definiteness determination. Based upon a logical extension of Teva v. Sandoz, those factual findings should be given deference even though the ultimate determination of definiteness is a question of law.  An important distinction from pure claim construction is that (as here) juries may be tasked with the job of ruling whether a claim is indefinite.  In that situation, the juries do not separate their factual conclusions from legal conclusions creating some amount of confusion.  The original Federal Circuit opinion cited to Teva, but not for its holding regarding deference. I would not be surprised by a GVR order from the Supreme Court asking the Federal Circuit to reconsider based upon that holding. [DowPetition].

Flexible Obviousness Test Does Not Apply to Secondary Indicia of Nonobviousness: In Cubist Pharma v. Hospira, the petitioner-patentee challenges the Federal Circuit’s increasingly bright line limits on secondary indicia of nonobviousness.  How do those limits mesh with the flexible doctrine outlined in Section 103 and explained by Deere and KSR.  [CubistPetition].

Did the AIA Shrink Federal Circuit Appellate Jurisdiction?: Finally, in Globus Medical, the question focuses on Federal Circuit jurisdiction over appeals in former-patent-cases, but where the only issue appealed is a non-patent issue.  This same issue was previously decided in favor of Federal Circuit jurisdiction. However, the AIA modified the language of the Federal Circuit appellate jurisdiction statute and opened the door to a re-visitation.  28 U.S.C. 1292.  However, the argument barely carries the weight of its linguistics if that.

Previously, the Federal Circuit had appellate jurisdiction over cases if the district court’s jurisdiction could at least in-part be traced to 28 U.S.C. 1338 (giving district court’s jurisdiction over patent cases). The AIA amended the statute to give appellate jurisdiction to the Federal Circuit in any “civil action arising under” the patent laws.  Since appellate jurisdiction ordinarily attaches at the notice-of-appeal filing stage, Globus Medical argues that former patent cases no longer “arise under” the patent laws once final judgment is issued and no patent questions are appealed.

Denials: Cert was denied in Daiichi Sankyo v Lee (term adjustment); ParkerVision (standard for setting aside jury verdict based upon errors in expert testimony); Biogen (district court jurisdiction over interferences post-AIA); Morales v. Square (eligibility); Joao Bock v. Jack Henry (eligibility); and BriarTek v. DeLorme (USITC preclusion issue).

The big list:

1. Petitions Granted:

2. Petitions Granted with immediate Vacatur and Remand (GVR)

3. Petitions for Writ of Certiorari Pending:

  • IndefinitenessThe Dow Chemical Company v. Nova Chemicals Corporation (Canada), et al., No. 15-1160 (standard for appellate review of jury verdict of definiteness that is inherently based upon the jury’s factual findings) [DowPetition]
  • Exhaustion: Impression Products, Inc. v. Lexmark International, Inc., No. 15-1189 (unreasonable restraints on downstream uses)
  • Obviousness: Cubist Pharmaceuticals, Inc. v. Hospira, Inc., No. 15-1210 (bright line limits on secondary indicia of nonobviousness) [CubistPetition]
  • Infringement by Joint EnterpriseLimelight Networks, Inc. v. Akamai Technologies, Inc., et al., No. 15-993 (can a defendant be held liable for the collective performance of method steps by multiple independent parties?)
  • Post Grant Admin: Versata v. SAP, No. 15-1145 (scope of CBM review)
  • Post Grant AdminCooper v. Lee, No. 15-955 (whether IPRs violate Separation of Powers; two amici now filed in support)
  • Post Grant AdminClick-to-Call Tech, LP v. Oracale Corp., No. 15-1014 (Same questions as Cuozzo and now-dismissed Achates v. Apple)
  • Post Grant Admin: GEA Process Engineering, Inc. v. Steuben Foods, Inc., No. 15-1075 (Flip-side of Cuozzo: Can there be no appeal when the PTAB exceeds its authority by terminating an instituted IPR proceeding?)
  • Post Grant AdminInterval Licensing LLC v. Michelle K. Lee, No. 15-716 (Can the Patent and Trademark Office appropriately apply the “broadest reasonable interpretation” standard in construing patent claims in post-grant validity challenges?)
  • Post Grant Admin: Stephenson v. Game Show Network, LLC, et al., No. 15-1187 (is BRI proper for IPR validity challenges?; Same as Cuozzo) [GameShowNetworkPetition]
  • LachesMedinol Ltd. v. Cordis Corporation, et al., No. 15-998
  • LachesSCA Hygiene Products Aktiebolag, et al. v. First Quality Baby Products, LLC, et al., No. 15-927 (three amici filed in support)
  • Biologics Notice of Commercial Marketing: Sandoz Inc. v. Amgen Inc., et al., No. 15-1039 (Does the notice requirement of the BPCIA create an effective six-month exclusivity post-FDA approval?) (cross-petition asks for recourse on failure to dance).
  • Design Patents: Systems, Inc. v. Nordock, Inc., No. 15-978 (design patent damage calculations – similar issues as Samsung v. Apple)
  • InducementLife Technologies Corporation, et al. v. Promega Corporation, No. 14-1538 (whether an entity can “induce itself” under 271(f)(1))(CVSG, awaiting government brief)
  • Preclusion or JurisdictionVermont v. MPHJ Technology Investments, LLC, No. 15-838 (Federal court jurisdiction in anti-troll consumer protection case)
  • Preclusion or JurisdictionGlobus Medical, Inc. v. Sabatino Bianco, No. 15-1203 (Appellate jurisdiction of the Federal Circuit) [GlobusMedicalPetition]
  • Eligibility Challenges: Sequenom, Inc. v. Ariosa Diagnostics, Inc., et al., No. 15-1182 (scope of the natural phenomenon eligibility exclusion)
  • Eligibility ChallengesRetirement Capital Access Management Company, LLC v. U.S. Bancorp, et al., No. 15-591 (Whether subject matter eligibility under 35 U.S.C. § 101 is a ground specified as a condition for patentability under 35 U.S.C. § 282(b)(2))
  • Eligibility Challenges: Hemopet v. Hill’s Pet Nutrition, Inc., No. 15-1062 (natural phenom case of tailoring a diet to a pet’s genomic characteristics)
  • Eligibility Challenges: Cloud Satchel, LLC v. Barnes & Noble, Inc., et al., No. 15-1161 (abstract idea eligibility) [CloudSatchelPetition]
  • Eligibility Challenges: Vehicle Intelligence and Safety LLC v. Mercedes-Benz USA, LLC, et al., No. 15-1201 (abstract idea eligibility) [VehicleIntelligencePetition]
  • Damages: Innovention Toys, LLC v. MGA Entertainment, Inc., et al., No. 15-635 (Stryker/Halo follow-on – potential wait-and-see)
  • DamagesWesternGeco LLC v. ION Geophysical Corporation, No. 15-1085 (consequential lost-profit damages for infringement under Section 271(f))
  • Written DescriptionTas v. Beach, No. 15-1089 (written description requirement for new drug treatments)

4. Petitions for Writ of Certiorari Denied or Dismissed:

  • Daiichi Sankyo Company, Ltd. v. Michelle K. Lee, No. 15-652 (Patent Term Adjustment – whether the 180 day deadline applies; could bleed into admin law issues)
  • Parkervision, Inc. v. Qualcomm Incorporated, No. 15-1092 (“Whether and under what circumstances an inconsistency in expert testimony permits a court to set aside a jury verdict and grant the losing party judgment as a matter of law.”)
  • Joao Bock Transaction Systems, LLC v. Jack Henry & Associates, Inc., No. 15-974 (defining an abstract idea)
  • Biogen MA, Inc. v. Japanese Foundation for Cancer Research, et al., No. 15-607 (Whether AIA eliminated federal district courts’ jurisdiction over patent interference actions under 35 U.S.C. § 146.)
  • BriarTek IP, Inc. v. DeLorme Publishing Company, Inc., et al., No. 15-1025 (Preclusive impact of ITC consent judgment).
  • Morales v. Square, No. 15-896 (eligibility under Alice)
  • ePlus, Inc. v. Lawson Software, Inc., No. 15-639 (what happens with a finally-determined permanent injunction after PTO cancels the patent claim?)
  • Media Rights Technologies, Inc. v. Capital One Financial Corporation, et al., No. 15-725 (Claim Construction: whether there a strong presumption against construing terms as subject to 35 U.S.C. § 112p6 that do not recite the term “means.”)
  • Alexsam, Inc. v. The Gap, Inc., No. 15-736 (appellate jurisdiction over patents that were dropped from case pre-trial)
  • Universal Lighting Technologies, Inc., v. Lighting Ballast Control LLC, No. 15-893 (intrinsic vs extrinsic evidence for claim construction).
  • STC, Inc. v. Global Traffic Technologies, No. 15-592 (Whether marking the packaging of a patented article with patent notification satisfies the marking provision of 35 U.S.C. § 287(a) where the patented article itself is undisputedly capable of being marked.)
  • Achates Reference Publishing, Inc. v. Apple Inc., et al., No. 15-842 (IPR institution decisions unreviewable, even when addressed in a final written decision by PTAB) [Note – This case was dismissed after being settled by the parties]
  • Alps South, LLC v. The Ohio Willow Wood Company, No. 15-567
  • Allvoice Developments US, LLC v. Microsoft Corp., No. 15-538
  • OIP Technologies, Inc. v. Amazon.com, Inc., No. 15-642
  • Fivetech Technology Inc. v. Southco, Inc., No. 15-381
  • Tyco Healthcare Group LP, et al. v. Ethicon Endo-Surgery, Inc., No. 15-115
  • Nautilus, Inc. v. Biosig Instruments, Inc., No. 15-561
  • Chunghwa Picture Tubes, Ltd., et al. v. Eidos Display, LLC, et al., No. 15-288
  • Kenneth Butler, Sr. v. Balkamp Inc., et al., No. 15-273
  • Arthrex, Inc. v. KFx Medical Corporation, No. 15-291
  • Arthrex, Inc. v. Smith & Nephew, Inc., et al., No. 15-559 (Commil re-hash – if actions were “not objectively unreasonable” can they constitute inducement?)
  • Daiichi Sankyo, Inc., et al. v. Apotex Inc., No. 15-281
  • Mylan Pharmaceuticals Inc. v. Apotex Inc., No. 15-307
  • Luv N’ Care, Ltd. v. Munchkin, Inc., No. 15-242
  • Automated Merchandising Systems, Inc. v. Michelle K. Lee, Director, United States Patent and Trademark Office, No. 15-326
  • I/P Engine, Inc. v. AOL Inc., et al., No. 14-1358
  • Interval Licensing LLC v. AOL Inc., et al., No. 14-1362
  • Content Extraction and Transmission LLC v. Wells Fargo Bank, National Association, et al., No. 14-1473
  • L. Gore & Associates, Inc. v. Bard Peripheral Vascular, Inc., et al., No. 15-41
  • NetAirus Technologies, LLC v. Apple Inc., No. 14-1353
  • Muffin Faye Anderson v. Kimberly-Clark Corporation, No. 14-10337
  • MobileMedia Ideas LLC v. Apple Inc., No. 15-206
  • SpeedTrack, Inc. v. Office Depot, Inc. et al., No. 15-461 (Kessler doctrine)
  • Rodney K. Morgan, et al. v. Global Traffic Technologies LLC, No. 15-602
  • Lakshmi Arunachalam v. JPMorgan Chase & Co., No. 15-691

5. Prior versions of this report:

Cuozzo v. Lee: The Problem of Standing

The AIA-Trial claim construction issue is important and many of us would like to see the Supreme Court address it in Cuozzo. However, there is one legal matter that has been an elephant-in-the-room since the Cuozzo appeals began several years ago: Standing.

As a general matter, parties do not have standing to raise issues on appeal that have no impact on the underlying dispute.  Likewise, a court has no jurisdiction over issues when the parties have no standing. An important feature of standing is that it is generally non-waivable.  Rather, a court must dismiss a case when one or more parties lack standing — even if (as here) neither party raise the issue.

The standard theory of claim construction is that the USPTO’s “Broadest Reasonable Construction” is broader than the standard Phillips construction used by courts in infringement litigation.  The theory behind this change in standard is that it allows the PTO to serve a gatekeeping role to better in sure that issued patents are valid patents. The particular oddity of the underlying case is that Cuozzo is asking for the Phillips standard to be applied in order to receive a broader claim construction of the term “Integrally Attached.”   Here, on its way to finding the disputed claims obvious, the PTAB construed the term in a way that excluded a described embodiment of the invention and Cuozzo has argued that the proper construction includes that embodiment.  To be clear here, a more broadly construed claim would encompass more prior art and thus are more likely to be invalid as obvious.  Although not strictly impossible, it would indeed be a rare case where the narrower claim is obvious while the broader is nonobvious.  [edited this] Point here is that if Cuozzo gets what it wants from this question on appeal (a broader claim scope), it is no closer to overturning the decision that the claim is obvious – in fact, Cuozzo will be further from that goal.

Although only spending a few pages on the issue, the newly filed Public Knowledge amicus brief roughly outlines case:

[I]n this case, Cuozzo’s patent received a narrow interpretation, and Cuozzo seeks to have the patent read to encompass more subject matter, not less. In other words, Cuozzo is asking for a narrower claim construction standard in order to obtain a broader claim construction. . . . This backwards fact pattern is not just puzzling; it potentially means that Cuozzo has no standing to raise the question, such that this Court lacks jurisdiction over the case.”

[Read the Brief: CuozzoPKAmicus.]

Cuozzo is not run by idiots. Rather, Cuozzo appears to be taking a broader strategy — it wants the term broadly construed in this case so that it will help the enforcement of parallel claims in other cases.  PK explains again:

Why, then, does Cuozzo pursue this case? It cannot be to alter the outcome of the inter partes review, as the district court standard will leave Cuozzo’s patent claims equally invalid—a broader reading of a claim cannot be valid when a narrower one is invalid for obviousness. Instead, the record reveals that Cuozzo seeks a broader claim construction in order to facilitate its infringement arguments in unrelated litigation—a manipulative attempt to commandeer inter partes review to ends
external to the proceeding.

Apart from PK’s snide “manipulative” remark, I am on-board with this analysis.

At this point, it may make the most sense for the Supreme Court to dismiss the claim construction issue as improvidently granted but retain question two regarding the appeal of institution decisions.

 

 

PTO Brief – Looking for Supreme Support for its AIA Trial Regime

Oral arguments in Cuozzo v. Lee are set for April 25, 2016 addressing two particular questions:

  1. Whether the PTO may require that, during an inter partes review, the claims in a patent will be given the “broadest reasonable construction” consistent with the patent’s specification [as opposed to the standard construction for issued patents].
  2. Whether a party may seek to overturn the PTO’s final decision in an inter partes review based on an alleged error in the PTO’s threshold decision to institute the review, which Congress provided “shall be final and nonappealable,” 35 U.S.C. 314(d).

The briefs are available now on ScotusBlog.

The U.S. Government has also filed its responsive merits brief.  The brief appears to be a joint effort of the Solicitor General (DOJ) and the USPTO and does a solid job of justifying its positions:

On BRI:

  1. Historical: The PTO has “long applied the broadest reasonable-construction standard in all agency proceedings in which patent claims may still be amended.”
  2. Statutory: Here, although claim amendments have allowed in only exceedingly rare cases, the IPR statute does suggest that amendments are possible.  (Of course, once the motion to amend is denied, then claims cannot ‘still be amended.’
  3. Deference: The USPTO was given rulemaking authority in this area (AIA procedures) and the BRI standard is a exercise of that delegated authority.  (It is unclear what happens if the court would find this ‘substantive’ rather than ‘procedural’ and what level of deference should apply in either case).

On Appeal of Decision to Institute:

  1. Statutory: “The statute bars all judicial review, not just interlocutory appeals, of the PTO’s decision whether to institute an inter partes review.”  Rather, judicial review is limited to the Agency’s final decision on patentability.
  2. Policy: The no-review approach fits the AIA-Trial purpose of being “an efficient non-judicial alternative for testing the patentability of issued claims.”

The PTO is looking for a strong decision in this case to effectively shut-down the myriad challenges it is currently facing.

 

Patentlyo Bits and Bytes by Anthony McCain

Get a Job doing Patent Law                  

Pending Supreme Court Patent Cases 2016 (March 17 Update)

by Dennis Crouch

President Obama has announced his nomination of Merrick Garland to become the next Supreme Court Justice. Garland is Chief Judge of the D.C. Circuit Court of Appeals and would bring tremendous intellectual firepower to the Court and is clearly more moderate many potential nominees. All indications indicate that President Obama is correct in his appraisal of Garland as “widely recognized not only as one of America’s sharpest legal minds, but someone who brings to his work a spirit of decency, modesty, integrity, even-handedness and excellence.”  That said, there is little chance that Garland will be confirmed except perhaps after the election (assuming that a Democratic contender wins).

Samsung’s design patent case is looking like a strong contender for grant of certiorari. The court will again consider the case this week.  We continue to await the views of the solicitor general in Life Tech v. Promega (whether an entity can “induce itself” under 271(f)(1)) (CVSG requested in October 2015).

The key new petition this fortnight is Versata v. SAP.  Versata raises four questions stemming from the USPTO’s covered business method (CBM) review of its “hierarchical pricing engine” patents.

  1. Whether the phrase “covered business method patent”—and “financial product or service”—encompasses any patent claim that is “incidental to” or “complementary to a financial activity and relates to monetary matters.”
  2. Whether the Federal Circuit’s standard for identifying patents falling within the “technological inventions” exception departs from statutory text by looking to whether the patent is valid, as opposed to whether it is “technological.”
  3. Whether a software-related invention that improves the performance of computer operations is patent eligible subject matter.
  4. Whether, as this Court will decide in Cuozzo Speed Technologies, LLC v. Lee, No. 15-446, the Patent Trial and Appeal Board should give claim terms their broadest reasonable construction in post-grant adjudicatory proceedings, or should instead give them their best construction.

Jeff Lamkin and his MoloLamkin team filed the brief.  [Versata Cert Petition].  SAP is on the hook for a $300+ million verdict if Versata is able to win this appeal.

The second new case is Tas v. Beach (written description requirement for new drug treatments).  Tas is a Turkish researcher representing himself pro se in the interference case against Johns Hopkins.  Interesting issues, but the case has no chance.  No cases have been dismissed or denied.

I pulled up MPHJ’s response to Vermont’s petition (filed by Bryan Farney). The opening paragraph spells out the case:

This “groundbreaking” case, as Petitioner describes it, has been going on, unjustifiably and unconstitutionally, for nearly three years now – all because Petitioner has refused to admit or accept that its state law claims against MPHJ are preempted by federal law, barred by the First Amendment “right to petition” clause, and that Congress has decided that federal preemption questions involving the patent laws must be decided by the federal court system.
 The big list:

1. Petitions Granted:

2. Petitions Granted with immediate Vacatur and Remand (GVR)

3. Petitions for Writ of Certiorari Pending:

  • Infringement by Joint EnterpriseLimelight Networks, Inc. v. Akamai Technologies, Inc., et al., No. 15-993 (can a defendant be held liable for the collective performance of method steps by multiple independent parties?)
  • Post Grant Admin: Versata v. SAP, No. 15-1145 (scope of CBM review)
  • Post Grant AdminCooper v. Lee, No. 15-955 (whether IPRs violate Separation of Powers; two amici now filed in support).
  • Post Grant AdminClick-to-Call Tech, LP v. Oracale Corp., No. 15-1014 (Same questions as Cuozzo and now-dismissed Achates v. Apple)
  • Post Grant Admin: GEA Process Engineering, Inc. v. Steuben Foods, Inc., No. 15-1075 (Flip-side of Cuozzo: Can there be no appeal when the PTAB exceeds its authority by terminating an instituted IPR proceeding?)
  • Post Grant AdminInterval Licensing LLC v. Michelle K. Lee, No. 15-716 (Can the Patent and Trademark Office appropriately apply the “broadest reasonable interpretation” standard in construing patent claims in post-grant validity challenges?)
  • LachesMedinol Ltd. v. Cordis Corporation, et al., No. 15-998
  • LachesSCA Hygiene Products Aktiebolag, et al. v. First Quality Baby Products, LLC, et al., No. 15-927 (three amici filed in support)
  • Biologics Notice of Commercial Marketing: Sandoz Inc. v. Amgen Inc., et al., No. 15-1039 (Does the notice requirement of the BPCIA create an effective six-month exclusivity post-FDA approval?)
  • Design PatentsSamsung Electronics Co. v. Apple Inc., No 15-777 (design patent scope and damages calculation)
  • Design Patents: Systems, Inc. v. Nordock, Inc., No. 15-978 (design patent damage calculations – similar issues as Samsung v. Apple). []
  • InducementLife Technologies Corporation, et al. v. Promega Corporation, No. 14-1538 (whether an entity can “induce itself” under 271(f)(1))(CVSG, awaiting government brief)
  • Preclusion or Jurisdiction: BriarTek IP, Inc. v. DeLorme Publishing Company, Inc., et al., No. 15-1025 (Preclusive impact of ITC consent judgment).
  • Preclusion or JurisdictionVermont v. MPHJ Technology Investments, LLC, No. 15-838 (Federal court jurisdiction in anti-troll consumer protection case)
  • Preclusion or Jurisdiction: Biogen MA, Inc. v. Japanese Foundation for Cancer Research, et al., No. 15-607 (Whether AIA eliminated federal district courts’ jurisdiction over patent interference actions under 35 U.S.C. § 146.)
  • Eligibility ChallengesRetirement Capital Access Management Company, LLC v. U.S. Bancorp, et al., No. 15-591 (Whether subject matter eligibility under 35 U.S.C. § 101 is a ground specified as a condition for patentability under 35 U.S.C. § 282(b)(2))
  • Eligibility Challenges: Hemopet v. Hill’s Pet Nutrition, Inc., No. 15-1062 (natural phenom case of tailoring a diet to a pet’s genomic characteristics)
  • Eligibility ChallengesJoao Bock Transaction Systems, LLC v. Jack Henry & Associates, Inc., No. 15-974 (defining an abstract idea)
  • Patent Term Adjustment Dispute: Daiichi Sankyo Company, Ltd. v. Michelle K. Lee, No. 15-652 (Patent Term Adjustment – whether the 180 day deadline applies; could bleed into admin law issues)
  • Damages: Innovention Toys, LLC v. MGA Entertainment, Inc., et al., No. 15-635 (Stryker/Halo follow-on – potential wait-and-see)
  • DamagesWesternGeco LLC v. ION Geophysical Corporation, No. 15-1085 (consequential lost-profit damages for infringement under Section 271(f))
  • Jury RoleParkervision, Inc. v. Qualcomm Incorporated, No. 15-1092 (“Whether and under what circumstances an inconsistency in expert testimony permits a court to set aside a jury verdict and grant the losing party judgment as a matter of law.”)
  • Written DescriptionTas v. Beach, No. 15-1089 (written description requirement for new drug treatments).
  • Low Quality BriefMorales v. Square, No. 15-896 (eligibility under Alice)

4. Petitions for Writ of Certiorari Denied or Dismissed:

  • ePlus, Inc. v. Lawson Software, Inc., No. 15-639 (what happens with a finally-determined permanent injunction after PTO cancels the patent claim?)
  • Media Rights Technologies, Inc. v. Capital One Financial Corporation, et al., No. 15-725 (Claim Construction: whether there a strong presumption against construing terms as subject to 35 U.S.C. § 112p6 that do not recite the term “means.”)
  • Alexsam, Inc. v. The Gap, Inc., No. 15-736 (appellate jurisdiction over patents that were dropped from case pre-trial)
  • Universal Lighting Technologies, Inc., v. Lighting Ballast Control LLC, No. 15-893 (intrinsic vs extrinsic evidence for claim construction).
  • STC, Inc. v. Global Traffic Technologies, No. 15-592 (Whether marking the packaging of a patented article with patent notification satisfies the marking provision of 35 U.S.C. § 287(a) where the patented article itself is undisputedly capable of being marked.)
  • Achates Reference Publishing, Inc. v. Apple Inc., et al., No. 15-842 (IPR institution decisions unreviewable, even when addressed in a final written decision by PTAB) [Note – This case was dismissed after being settled by the parties]
  • Alps South, LLC v. The Ohio Willow Wood Company, No. 15-567
  • Allvoice Developments US, LLC v. Microsoft Corp., No. 15-538
  • OIP Technologies, Inc. v. Amazon.com, Inc., No. 15-642
  • Fivetech Technology Inc. v. Southco, Inc., No. 15-381
  • Tyco Healthcare Group LP, et al. v. Ethicon Endo-Surgery, Inc., No. 15-115
  • Nautilus, Inc. v. Biosig Instruments, Inc., No. 15-561
  • Chunghwa Picture Tubes, Ltd., et al. v. Eidos Display, LLC, et al., No. 15-288
  • Kenneth Butler, Sr. v. Balkamp Inc., et al., No. 15-273
  • Arthrex, Inc. v. KFx Medical Corporation, No. 15-291
  • Arthrex, Inc. v. Smith & Nephew, Inc., et al., No. 15-559 (Commil re-hash – if actions were “not objectively unreasonable” can they constitute inducement?)
  • Daiichi Sankyo, Inc., et al. v. Apotex Inc., No. 15-281
  • Mylan Pharmaceuticals Inc. v. Apotex Inc., No. 15-307
  • Luv N’ Care, Ltd. v. Munchkin, Inc., No. 15-242
  • Automated Merchandising Systems, Inc. v. Michelle K. Lee, Director, United States Patent and Trademark Office, No. 15-326
  • I/P Engine, Inc. v. AOL Inc., et al., No. 14-1358
  • Interval Licensing LLC v. AOL Inc., et al., No. 14-1362
  • Content Extraction and Transmission LLC v. Wells Fargo Bank, National Association, et al., No. 14-1473
  • L. Gore & Associates, Inc. v. Bard Peripheral Vascular, Inc., et al., No. 15-41
  • NetAirus Technologies, LLC v. Apple Inc., No. 14-1353
  • Muffin Faye Anderson v. Kimberly-Clark Corporation, No. 14-10337
  • MobileMedia Ideas LLC v. Apple Inc., No. 15-206
  • SpeedTrack, Inc. v. Office Depot, Inc. et al., No. 15-461 (Kessler doctrine)
  • Rodney K. Morgan, et al. v. Global Traffic Technologies LLC, No. 15-602
  • Lakshmi Arunachalam v. JPMorgan Chase & Co., No. 15-691

5. Prior versions of this report:

Battle over Secret Sales and Secret Commercialization under the AIA

by Dennis Crouch

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

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

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

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

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

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

[TevaSecretSaleBrief]

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

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

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

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

= = = = =

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

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

= = = = = =

 

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

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

Court: Metallizing Engineering Overruled by Statute

by Dennis Crouch

Helsinn v. Dr. Reddy’s and Teva, Civ. No. 11-cv-03962 (D.N.J. March 3, 2016) [Helsinn Opinion]

The district court decision in this case is focused on the medical marijuana substitute Aloxi (Palonosetron) by Helsinn and its U.S. Patent Nos. 7,947,725, 7,960,424, 8,598,219.  Of these, the district court found that the ‘219 patent is an AIA patent.  As is common in the drug industry, Helsinn carried out a number of clinical trials (working with third parties) prior to filing that included selling the du. And, a primary question for the court was whether the invention was “on sale” prior to the invention and/or filing date.

Under pre-AIA rule, the “on sale” bar included prior secret sales and offers-for-sale. See Metallizing Eng’g Co. v. Kenyon Bearing & Auto Parts Co., 153 F.2d 516 (2d Cir. 1946).  Although the AIA includes the identical “on sale” language, the rewritten Section 102 also includes the additional catchall “otherwise available to the public.”

As the fist decision interpreting the new statute, the court (Judge Cooper) here held that the “otherwise” language modifies and limits the “on sale” provision — indicating that sales and offers for sale only count as prior art if they are also “available to the public.”

§102(a)(1) requires a public sale or offer for sale of the claimed invention. The new requirement that the on-sale bar apply to public sales comports with the plain language meaning of the amended section, the USPTO’s interpretation of the amendment, the AIA Committee Report, and Congress’s overarching goal to modernize and streamline the United States patent system.

The court’s interpretation here is parallel to that of the USPTO in its examination guidelines. Although not the law, the Patent Office’s statements appear to have influenced the court here. It also falls in-line with what Paul Morgan suggested in his 2011 article. Paul Morgan, The Ambiguity in Section 102(a)(1) of the Leahy-Smith America Invents Act, 2011 Patently-O Patent Law Journal 29.  Download Morgan.2011.AIAAmbiguities

Here, because the patentee’s sales were kept secret (“subject to and performed under confidentiality restrictions”), they could not be considered sales under the new statute.

Teva filed its Federal Circuit appeal in the case on March 7, but the brief is not yet public. I expect that the Federal Circuit opinion will be interesting — especially if the court reaches this issue.  (The court might not reach the issue depending upon whether the actions are excluded under the upcoming Medicines Co. v. Hospira en banc decision.  In addition, the court did not explain why the patent in question–a continuation from a pre-AIA case–counts as an AIA patent.)

My basic take on the statutory construction issue is that it could legitimately go either way.  My hope is that the issue is resolved to remove the uncertainty and the likelihood that a significant number of patents are wrongly issued.

Pending Supreme Court Patent Cases 2016 (March 4 Update)

by Dennis Crouch

Earlier this week, the University of Missouri Law Review held its annual symposium – this year focusing on the Future of the Administrative State.  That future is a primary front of challenge in the patent system.  Arguments in Cuozzo v. Lee are now scheduled for April 25.  Jeffrey Wall of Sullivan & Cromwell (who also argued Stryker/Halo two weeks ago) is representing Cuozzo along with his colleague Garrard Beeney. On that same day, the Supreme Court will also hear the copyright attorney fee case Kirtsaeng.

Following Justice Scalia’s death, the Supreme Court simplified its docket by denying certiorari to a set of patent cases, including: Arthrex v. Smith & Nephew; STC v. Global Traffic Technologies; ePlus v. Lawson Software, Inc.; Media Rights Technologies v. Capitol One; Alexsam v. The Gap; and ULT v. Lighting Ballast Control.  Achates v. Apple was dismissed after being settled by the parties.

New petitions include Sandoz v. Amgen (BCPIA’s inherent six-month delay following commercial marketing notice); Hemopet v. Hill’s Pet (eligibility of claim directed to tailoring of a pet’s diet based upon genomic characteristics and expression); GEA Process v. Steuben Foods (after instituting, is the PTAB’s termination reviewable?); ParkerVision v. Qualcomm (when should a court reject a jury’s determination that an expert is credible); and WesternGeco v. ION Geophysical (foreign lost profit damages).

  • Petitions Granted:
  1. Petitions Granted with immediate Vacatur and Remand (GVR)
  1. Petitions for Writ of Certiorari Pending:
  • Infringement by Joint EnterpriseLimelight Networks, Inc. v. Akamai Technologies, Inc., et al., No. 15-993 (can a defendant be held liable for the collective performance of method steps by multiple independent parties?)
  • Post Grant AdminCooper v. Lee, No. 15-955 (whether IPRs violate Separation of Powers; two amici now filed in support).
  • Post Grant AdminClick-to-Call Tech, LP v. Oracale Corp., No. 15-1014 (Same questions as Cuozzo and now-dismissed Achates v. Apple)
  • Post Grant Admin: GEA Process Engineering, Inc. v. Steuben Foods, Inc., No. 15-1075 (Flip-side of Cuozzo: Can there be no appeal when the PTAB exceeds its authority by terminating an instituted IPR proceeding?)
  • Post Grant AdminInterval Licensing LLC v. Michelle K. Lee, No. 15-716 (Can the Patent and Trademark Office appropriately apply the “broadest reasonable interpretation” standard in construing patent claims in post-grant validity challenges?)
  • LachesMedinol Ltd. v. Cordis Corporation, et al., No. 15-998
  • LachesSCA Hygiene Products Aktiebolag, et al. v. First Quality Baby Products, LLC, et al., No. 15-927 (three amici filed in support)
  • Biologics Notice of Commercial Marketing: Sandoz Inc. v. Amgen Inc., et al., No. 15-1039 (Does the notice requirement of the BPCIA create an effective six-month exclusivity post-FDA approval?)
  • Design PatentsSamsung Electronics Co. v. Apple Inc., No 15-777 (design patent scope and damages calculation)
  • Design Patents: Systems, Inc. v. Nordock, Inc., No. 15-978 (design patent damage calculations – similar issues as Samsung v. Apple). []
  • InducementLife Technologies Corporation, et al. v. Promega Corporation, No. 14-1538 (whether an entity can “induce itself” under 271(f)(1))(CVSG, awaiting government brief)
  • Preclusion or Jurisdiction: BriarTek IP, Inc. v. DeLorme Publishing Company, Inc., et al., No. 15-1025 (Preclusive impact of ITC consent judgment).
  • Preclusion or JurisdictionVermont v. MPHJ Technology Investments, LLC, No. 15-838 (Federal court jurisdiction in anti-troll consumer protection case)
  • Preclusion or Jurisdiction: Biogen MA, Inc. v. Japanese Foundation for Cancer Research, et al., No. 15-607 (Whether AIA eliminated federal district courts’ jurisdiction over patent interference actions under 35 U.S.C. § 146.)
  • Eligibility ChallengesRetirement Capital Access Management Company, LLC v. U.S. Bancorp, et al., No. 15-591 (Whether subject matter eligibility under 35 U.S.C. § 101 is a ground specified as a condition for patentability under 35 U.S.C. § 282(b)(2))
  • Eligibility Challenges: Hemopet v. Hill’s Pet Nutrition, Inc., No. 15-1062 (natural phenom case of tailoring a diet to a pet’s genomic characteristics).
  • Eligibility ChallengesJoao Bock Transaction Systems, LLC v. Jack Henry & Associates, Inc., No. 15-974 (defining an abstract idea)
  • Patent Term Adjustment Dispute: Daiichi Sankyo Company, Ltd. v. Michelle K. Lee, No. 15-652 (Patent Term Adjustment – whether the 180 day deadline applies; could bleed into admin law issues)
  • Damages: Innovention Toys, LLC v. MGA Entertainment, Inc., et al., No. 15-635 (Stryker/Halo follow-on – potential wait-and-see)
  • DamagesWesternGeco LLC v. ION Geophysical Corporation, No. 15-1085 (consequential lost-profit damages for infringement under Section 271(f))
  • Jury RoleParkervision, Inc. v. Qualcomm Incorporated, No. 15-1092 (“Whether and under what circumstances an inconsistency in expert testimony permits a court to set aside a jury verdict and grant the losing party judgment as a matter of law.”)
  • Low Quality BriefMorales v. Square, No. 15-896 (eligibility under Alice)
  1. Petitions for Writ of Certiorari Denied or Dismissed:
  • ePlus, Inc. v. Lawson Software, Inc., No. 15-639 (what happens with a finally-determined permanent injunction after PTO cancels the patent claim?)
  • Media Rights Technologies, Inc. v. Capital One Financial Corporation, et al., No. 15-725 (Claim Construction: whether there a strong presumption against construing terms as subject to 35 U.S.C. § 112p6 that do not recite the term “means.”)
  • Alexsam, Inc. v. The Gap, Inc., No. 15-736 (appellate jurisdiction over patents that were dropped from case pre-trial)
  • Universal Lighting Technologies, Inc., v. Lighting Ballast Control LLC, No. 15-893 (intrinsic vs extrinsic evidence for claim construction).
  • STC, Inc. v. Global Traffic Technologies, No. 15-592 (Whether marking the packaging of a patented article with patent notification satisfies the marking provision of 35 U.S.C. § 287(a) where the patented article itself is undisputedly capable of being marked.)
  • Achates Reference Publishing, Inc. v. Apple Inc., et al., No. 15-842 (IPR institution decisions unreviewable, even when addressed in a final written decision by PTAB) [Note – This case was dismissed after being settled by the parties]
  • Alps South, LLC v. The Ohio Willow Wood Company, No. 15-567
  • Allvoice Developments US, LLC v. Microsoft Corp., No. 15-538
  • OIP Technologies, Inc. v. Amazon.com, Inc., No. 15-642
  • Fivetech Technology Inc. v. Southco, Inc., No. 15-381
  • Tyco Healthcare Group LP, et al. v. Ethicon Endo-Surgery, Inc., No. 15-115
  • Nautilus, Inc. v. Biosig Instruments, Inc., No. 15-561
  • Chunghwa Picture Tubes, Ltd., et al. v. Eidos Display, LLC, et al., No. 15-288
  • Kenneth Butler, Sr. v. Balkamp Inc., et al., No. 15-273
  • Arthrex, Inc. v. KFx Medical Corporation, No. 15-291
  • Arthrex, Inc. v. Smith & Nephew, Inc., et al., No. 15-559 (Commil re-hash – if actions were “not objectively unreasonable” can they constitute inducement?)
  • Daiichi Sankyo, Inc., et al. v. Apotex Inc., No. 15-281
  • Mylan Pharmaceuticals Inc. v. Apotex Inc., No. 15-307
  • Luv N’ Care, Ltd. v. Munchkin, Inc., No. 15-242
  • Automated Merchandising Systems, Inc. v. Michelle K. Lee, Director, United States Patent and Trademark Office, No. 15-326
  • I/P Engine, Inc. v. AOL Inc., et al., No. 14-1358
  • Interval Licensing LLC v. AOL Inc., et al., No. 14-1362
  • Content Extraction and Transmission LLC v. Wells Fargo Bank, National Association, et al., No. 14-1473
  • L. Gore & Associates, Inc. v. Bard Peripheral Vascular, Inc., et al., No. 15-41
  • NetAirus Technologies, LLC v. Apple Inc., No. 14-1353
  • Muffin Faye Anderson v. Kimberly-Clark Corporation, No. 14-10337
  • MobileMedia Ideas LLC v. Apple Inc., No. 15-206
  • SpeedTrack, Inc. v. Office Depot, Inc. et al., No. 15-461 (Kessler doctrine)
  • Rodney K. Morgan, et al. v. Global Traffic Technologies LLC, No. 15-602
  • Lakshmi Arunachalam v. JPMorgan Chase & Co., No. 15-691
  1. Prior versions of this report:

 

 

Eon Corp. v. Silver Spring: Improperly Delegating Claim Construction to a Jury

by Dennis Crouch

Eon Corp. v. Silver Spring Networks (Fed. Cir. 2016)

In a split decision, the Federal Circuit has again rejected a jury verdict – finding that “no reasonable jury” could have found that Silver Springs networks infringed Eon’s patents.  In particular, a divided panel held that the district court should have construed the claim terms “portable” and “mobile” rather than allowing the jury to take those terms on their face when determining infringement.  The court then went on to hold that under a correct claim construction of those terms, the jury could not have found infringement.

Here, the alleged infringing meters are designed to be bolted down to exterior walls and left in place for years.  Of course, it is fairly easy for an electrician to move these meters and install them, but they are designed to operate in a fixed location once installed.  The majority ruled that the best (and only reasonable) construction of the term involves both of these requirements (portability and non-permanent location).

The majority opinion was written by Chief Judge Prost and joined by Judge Hughes. In his dissent, Judge Bryson suggested that it was acceptable for the district court to refuse to construe these terms and that the jury’s infringement conclusion fit within the definition of those terms (‘capable of being moved’) as it would have been understood by one of skill in the art.

To me, this case exemplifies the longstanding procedural battle of how much of the infringement question should be answered during claim construction — keeping in mind that claim construction is determined by the Judge but the parties have a Seventh Amendment right to have the ultimate question of infringement judged by a jury.

It is not difficult to imagine a claim construction system that particularly focuses on the accused devices and the judge would decide ‘whether the claims are construed so as to cover the accused meter.’  At that point, nothing would be left for the jury to decide unless there is some dispute over exactly how the devices operate. This full infringement analysis in the guise of claim construction is usually disfavored by the courts who instead take a more abstracted approach – perhaps based upon a reticence against usurping the constitutionally guaranteed role of the jury. District court’s also know that a jury verdict is much less likely to be attacked on appeal. And, a jury verdict is much less likely to be attacked on appeal than a judgment as a matter of law.

Jason Mudd (eriseIP) wrote some on this topic for a 2012 Missouri Law Review symposium that I hosted in an article titled To Construe or Not to Construe: At the Interface Between Claim Construction and Infringement in Patent Cases.