Nautilus v. Biosig (Supreme Court 2015) (SCOTUS ROUND II)
In Nautilus (2014), the Supreme Court significantly heightened the standard for definiteness in patent cases – now requiring that claim scope be delineated with “reasonable certainty.” Previously, the Federal Circuit had only invalidated claims that were both “insolubly ambiguous” and not amenable to construction.
On remand, the Federal Circuit took-in the new standard, but again ruled that the “spaced relationship” limitation in Biosig’s patent was not problematic. That decision (and a series of others) have suggested that, despite the Supreme Court decision, indefiniteness is still a very tough-sell in infringement litigation.
Now, the case again has been petitioned to the Supreme Court. Nautilus asks two questions:
… To perform [its] public-notice function, a patent claim must be clear the day it issues. This Court accordingly rejected the Federal Circuit’s post hoc “amenable to construction” standard: “It cannot be sufficient that a court can ascribe some meaning to a patent’s claims; the definiteness inquiry trains on the understanding of a skilled artisan at the time of the patent application, not that of a court viewing matters post hoc.” But, the remand panel again did the opposite. It copied and pasted much of its opinion this Court had vacated. It did not even mention the original prosecution history. Instead, it again viewed the claim post hoc in view of statements made in Patent Office proceedings 15 years after the patent issued. And, it again relied upon a purely functional distinction over a structurally identical prior-art design as supposedly providing sufficient clarity. The questions presented are:
1. Is a patent claim invalid for indefiniteness if its scope is not reasonably certain the day the patent issues, even if statements in later Patent Office proceedings clarify it?
2. Is a patent claim invalid for indefiniteness if its scope is distinguished from prior art solely by a functional requirement, rather than by any structural difference?
The petition has been supported by two amici filings. The first filed by a group of operating companies – including Garmin and SAS – all of whom have been accused of infringing what they allege are indefinite patents. The second amicus brief was filed by a joint effort of the Electronic Frontier Foundation (EFF) and Public Knowledge.
Following a 6-5 split by the Federal Circuit, Cuozzo filed a petition for writ of certiorari – asking two important questions (as paraphrased by me):
During a post-issuance inter partes review (IPR) proceeding, is it proper for the Patent Trial & Appeal Board (PTAB) to construe claims according to their “broadest reasonable interpretation” rather than their proper construction being applied in court?
Is the PTAB’s decision whether to institute an IPR proceeding judicially unreviewable even if the PTAB exceeds its statutory authority in instituting the IPR?
Eight different friend-of-the-court briefs have now been filed and the U.S. Government’s responsive brief is due December 9, 2015.
The majority of the briefs focus solely on the claim construction issue and make three basic arguments:
Policy: IPRs are designed as validity judgments rather than a new examination of the patent; and claim amendments are almost always prohibited. Because IPRs are acting in parallel with court proceedings, the different standards create instability and uncertainty while using the same claim construction as an infringement-court would promote efficiency. All this undermines the PTO’s reasons justifying application of BRI construction rather than standard construction.
Deference: Congress did not give the PTO rulemaking authority to decide to implement BRI in these Inter Partes Review proceedings and as a result, the agency’s interpretation should not be given administrative law deference.
Conflict: The broad standard effectively negates the presumption of validity associated with each and every patent right. The broad standard subtly justifies the PTO to avoid the preclusive effect of prior court decisions.
One amicus brief (NYIPLA) also argued that the Federal Circuit should be able to review whether the PTO exceeded its authority in instituting an IPR, despite statutory language stating that the decision is not appealable. NYIPLA argues that the statute simply bars interlocutory appeals, but that the statute does not “narrow the issues that can be raised in an appeal” of a final written decision under §319.
= = = = =
I’ll note here that none of the briefs at the petition stage raise the MCM/Cooper/Affinity arguments that the whole IPR proceedings are unlawful because “a patent, upon issuance, is not subject to revocation or cancellation by any executive agent, including by any part of the USPTO.” Citing McCormick Harvesting Mach. Co. v. Aultman, 169 U.S. 606 (1898). In McCormick, the Supreme Court wrote:
[W]hen a patent has … had affixed to it the seal of the Patent Office, it has passed beyond the control and jurisdiction of that office, and is not subject to be revoked or cancelled by the President, or any other officer of the Government. It has become the property of the patentee, and as such is entitled to the same legal protection as other property. . . . The only authority competent to set a patent aside, or to annul it, or to correct it for any reason whatever [without the patentee’s consent], is vested in the courts of the United States, and not in the department which issued the patent.
I would expect that, if the petition here is successful, some parties will file briefs that collaterally attach the IPR framework and to soften the Supreme Court for the eventual petitions.
Later today here at the University of Missouri School of Law, we are hosting the Fifth Annual Patent Law Moot Court sponsored by McKool Smith and part of the activities of our Center for Intellectual Property and Entrepreneurship (CIPE). (Tonight’s winner gets $1,000).
The setup this year is a revival of the LightingBallast case that we argued a few years ago. Earlier this year, the Federal Circuit again changed course in that case — finding that the patentee’s claimed “voltage source means” connotes structure to one skilled in the art (based upon expert testimony) and therefore is not interpreted under 112(f) [112,p6] (and therefore is not automatically invalid for failing to provide any structure description of the claimed means in the written description).
In the moot-court world, the Federal Circuit has granted en banc rehearing by the defendant on the following three questions:
Should claim limitations using the term “means” be presumed to fall under the purview of 35 U.S.C. Section 112¶6 and, if so, what level of presumption should apply?
Should a district court’s fact finding regarding commonly understood terms be entitled to deference on appeal?
Did the district court correctly construe “voltage source means” as used in claim 1 of U.S. Patent No. 5,436,529?
What do you think?
@MizzouLaw Today's Patent Law Moot Court Question: If a Patentee claims a "means", do we presumptively apply 112(f)?
The following is a post from Under Secretary of Commerce for Intellectual Property and Director of the USPTO Michelle K. Lee and was published on the PTO Director’s blog.
Patent quality is central to fulfilling a core mission of the USPTO, which as stated in the Constitution, is to “promote the Progress of Science and useful Arts.” It is critically important that the USPTO issue patents that are both correctandclear. Historically, our primary focus has been on correctness, but the evolving patent landscape has challenged us to increase our focus on clarity.
Patents of the highest quality can help to stimulate and promote efficient licensing, research and development, and future innovation without resorting to needless high-cost court proceedings. Through correctness and clarity, such patents better enable potential users of patented technologies to make informed decisions on how to avoid infringement, whether to seek a license, and/or when to settle or litigate a patent dispute. Patent owners also benefit from having clear notice on the boundaries of their patent rights. After and after successfully reducing the backlog of unexamined patent applications, our agency is redoubling its focus on quality.
We asked for your help on how we can best improve quality—and you responded. Since announcing the Enhanced Patent Quality Initiative earlier this year, we received over 1,200 comments and extensive feedback during our first-ever Patent Quality Summit and roadshows, as well as invaluable direct feedback from our examining corps. This feedback has been tremendously helpful in shaping the direction of our efforts. And with this background, I’m pleased to highlight some of our initial programs under the Enhanced Patent Quality Initiative.
First, we are preparing to launch a Clarity of the Record Pilot, under which examiners will include as part of the prosecution record definitions of key terms, important claim constructions, and more detailed reasons for the allowance and rejection of claims. Based on the information we learn from this pilot, we plan to develop best examiner and applicant practices for enhancing the clarity of the record.
We also will be launching a new wave of Clarity of the Record Training in the coming months emphasizing the benefits and importance of making the record clear and how to achieve greater clarity. Recently, we provided examiners with training on functional claiming and putting statements in the record when the examiner invokes 35 U.S.C. 112(f), which interprets claims under the broadest reasonable interpretation standard and secures a complete and enabled disclosure for a claimed invention. Training for the upcoming year includes an assessment of a fully described invention under 35 U.S.C. 112(a) and best practices for explaining indefiniteness rejections under 35 U.S.C. 112(b).
Second, we are Transforming Our Review Data Capture Process to ensure that reviews of an examiner’s work product by someone in the USPTO will follow the same process and access the same facets of examination. Historically, we have had many different types of quality reviews including supervisory patent examiner reviews of junior examiners and quality assurance team reviews of randomly selected examiner work product. Sometimes the factors reviewed by each differed, and the degree to which the review results were recorded. With only a portion of these review results recorded and different criteria captured in those recordings, the data gathered was not as complete, useful, or voluminous as it could have been. As a result, the USPTO has been able to identify statistically significant trends only on a corps-wide basis, but not at the technology center, art unit, or examiner levels. We are working to unify the review process for all reviewers and systematically record the same and all review results through an online form, called the “master review form,” which we intend to share with the public.
What are the implications of this new process and new form? This new process will give us the ability to collect and analyze a much greater volume of data from reviews that we were already doing, but that were not previously captured in a centralized, unified way. As we roll out this new review process the amount of data we collect will significantly increase anywhere from three to five times. This will allow us to use big data analytic techniques to identify more detailed trends across the agency based upon statistically significant data including at the technology center, art unit, and even examiner levels. Also, this new process will give us better insight into not just whether the law was applied correctly, but whether the reasons for an examiner’s actions were spelled out in the record clearly and whether there is an omission of a certain type of rejection. For example, for an obvious rejection we are considering not only whether a proper obvious rejection was made, but whether the elements identified in the prior art were mapped onto the claims, whether there are statements in the record explaining the rejection, and whether those statements are clear.
The end result will be the (1) ability to provide more targeted and relevant training to our examiners with much greater precision, (2) increased consistency in work product across the entire examination corps, and (3) greater transparency in how the USPTO evaluates examiners’ work product. You can read more about these and our many other initiatives, such as our Automated Pre-examination Search pilot and Post Grant Outcomes, which incorporates insight from our Patent Trial and Appeal Board and other proceedings back into the examination process on our new Enhanced Patent Quality Initiative page on our website.
Finally, let me close by emphasizing that our Enhanced Patent Quality Initiative is not a “one-and-done” effort. Coming from the private sector, I know that any company that produces a truly top quality product has focused on quality for years, if not decades. The USPTO is committed to no less. The programs presented here are just a start. My goal in establishing a brand new department within the USPTO was to focus exclusively on patent quality and the newly created executive level position of Deputy Commissioner for Patent Quality will ensure enhanced quality now, and into the future. With your input we intend to identify additional ways we can enhance patent quality as defined by our patent quality pillars of excellence in work products, excellence in measuring patent quality, and excellence in customer service.
To that end, we will continue our stakeholder outreach and feedback collection efforts in various ways, such as our monthly Patent Quality Chat webinars. The next Patent Quality Chat webinar on November 10 will focus on the programs presented in this blog and our other quality initiatives. I encourage you to join in regularly to our Patent Quality Chats and visit the Enhanced Patent Quality Initiative page on our website for more information. The website provides recordings of previous Quality Chats as well as upcoming topics for discussion. We are eager to hear from you about our Enhanced Patent Quality Initiative, so please continue to provide your feedback to WorldClassPatentQuality@uspto.gov(link sends e-mail). Thank you for collaborating with us on this exciting and important initiative!
Integrated Tech Corp (ITC) v. Rudolph Tech (Fed. Cir. 2015)
Rudolph and ITC both make testers to test semiconductor chip testers (yes, layers of testing here). Basically, their equipment looks for bent and damaged probe wires that are used in the testing process. In 2006, ITC sued Rudolph for infringing its U.S. Patent No. 6,118,894 covering testing systems and methods.
At some point after being sued, Rudolph updated its software with a redesign. However, the trial court found that both the original and the redesign infringed and awarded both enhanced damages for willful infringement (on the re-design) and attorney fees. The fees were at least partially based upon changes in Rudolph’s CEO’s testimony and the eventual revelation that he knew Rudolph’s original design was infringing but continued to argue non-infringement. In an original appeal, the Federal Circuit altered the claim construction and found that the redesign did not infringe and, as a result vacated the willfulness and attorney fee issues.
On remand, the district court then reinstated the attorney fees – finding that:
[T]he record establishes the following: Rudolph hid its infringement for years, provided false discovery responses, filed summary judgment papers even though it knew its product infringed, argued a never fully explained theory that ITC did not own the underlying patent, and during and after trial played semantic games regarding what its machines did and what functions were important to it and its customers. . . . The striking weakness of Rudolph’s position regarding its pre-2007 PRVX machines, as well as the unreasonable manner in which it litigated the case through trial and post-trial motions, satisfy the Supreme Court’s standard under § 285 for awarding fees. In fact, either the substantive strength of many of Rudolph’s litigating positions or the “unreasonable manner in which the case was litigated” make this case stand out from others. An award of fees is appropriate. The parties previously stipulated to the amount of fees [as $3.25 million].
On appeal for the second time, the Federal Circuit has now affirmed that a fee award was proper – holding that the district court did not abuse its discretion in awarding fees – particularly citing Rudolph’s CEO (Ronald Seubert’s “inconsistent deposition and trial testimony”).
Stipulating the Amount of Fees: The bulk of the Federal Circuit’s opinion focused on the stipulation — Prior to the first appeal, the parties had stipulated to the amount of attorney fees as $3.25 million. The parties agreed particularly that “Rudolph will not contest the reasonableness of ITC’s request for fees in the amount of $3,252,228.” On appeal here, however, the Federal Circuit ruled Rudolph can (despite the stipulation) still challenge the amount of fees.
The Federal Circuit implicitly agreed that the stipulated fee contract is binding, but found that it inapposite to the challenge here since the stipulation occurred prior to the first appeal and the first appeal resulted in Rudolph winning on a number of important issues (e.g., the re-design is no longer considered infringing). In particular, Rudolph is not challenging the “reasonableness” of the fees that was stipulated-to but rather whether the fee award can properly be tied to the new – much more limited – scope of liability. The Federal Circuit relied upon its contractual analysis to reach its conclusion, which suggests that a well drafted contract could have fully settled the issue. However, the court also indicated that fee award must “bear some relation to the extent of the misconduct” – thus indicating that even a well drafted fee agreement stipulation would not be enforceable if not tied to the misconduct.
A general take-away here is to also take-care with regard to contractual agreements with a party in the midst of an ongoing bet-your-business litigation – it is likely to be parsed fairly tightly and given de novo review by the Federal Circuit.
As we sit here today, there are no pending patent cases before the Supreme Court where the court has granted certiorari. That said, there are a large number of pending petitions. These include Cuozzo & Pulse that I have previously discussed. WilmerHale has been covering these, but is a few months behind.
The following are a few recently filed petitions:
Teva Follow-On: FiveTech v. SouthCo: (1) Can the Federal Circuit limit the role of the intrinsic evidence in construing patent claims under the exacting “lexicography and disavowal” standard; (2) Does the “lexicography and disavowal” standard improperly circumscribe the objective standard of the person of ordinary skill in the art in construing claim terms.
Teva Follow-On: Chunghwa Picture Tubes v. Eidos: Whether a district court’s factual finding(s) underlying its construction of a patent claim term must be reviewed for clear error under Rule 52(a)(6) as this Court held in Teva, or is an exception created to clear error review where the appellate court finds the intrinsic record clear after a de novo review of that record, as the Federal Circuit held in this case.
Attorney Fees in Copyright:
Kirtsaeng v. John Wiley (Kirtsaeng II): What is the appropriate standard for awarding attorneys’ fees to a prevailing party under § 505 of the Copyright Act?
Omega v. Costco (Costco II): (1) Can Copyright attorney fees be based on a finding that petitioner engaged in copyright misuse when the issue of misuse was appealed but left undecided on appeal? (2) Can the pursuit of a claim of copyright infringement constitute “copyright misuse” when the allegedly infringing copy is a “pictorial, graphic, or sculptural work” that is reproduced in a “useful” article.
Inter Partes Review Challenges:
Automated Merchandising v. Michelle Lee: (1) Must the federal judiciary await the substantive conclusion of an agency proceeding before it can evaluate whether an express statutory limitation on that agency’s jurisdiction requires that agency to terminate its proceeding? (2) Did the Federal Circuit err in refusing to order the USPTO to terminate the subject inter partes reexaminations under 35 U.S.C. § 317(b)?
Luv N’ Care v. Munchkin: Did the Federal Circuit err by affirming a PTAB administrative judgment based on new issues raised sua sponte by the PTAB at the Final Hearing, thus depriving the patent owner of notice and a meaningful opportunity to respond?
ANDA Loophole Cases:
Mylan v. Apotex: (1) Whether Article III’s case or controversy requirement can be satisfied by a suit which seeks a judgment of non-infringement of a disclaimed patent. (2) Whether Congress can create Article III jurisdiction by imposing statutory consequences that turn on obtaining a judgment of non-infringement of a disclaimed patent.
Daiichi Sankyo v. Apotex: Whether an action seeking a declaration judgment of non-infringement presents a justiciable case or controversy under Article III of the Constitution where the patent at issue was previously disclaimed and thus cannot be enforced.
Design Patent Summary Judgment:Butler v. Balkamp: Is summary judgement proper in a District Court when a factual dispute exists in a Design Patent action and the District Court substitutes its own opinion for that of the ordinary observer?
Reasons to Combine and Obviousness:Arthrex v. KFX Medical: (1) Is the “reason to combine” inquiry a subsidiary question of fact, subject to deferential review on appeal, or a legal question for the court, and reviewed de novo. (2) Should the ultimate legal issue of obviousness be resolved by the court rather than submitted to the jury for resolution.
Cuozzo lost its petition for en banc rehearing in a 6-5 split of Federal Circuit judges. Now, the patentee has raised is challenge to the IPR process to the Supreme Court – asking two questions:
Whether the [Federal Circuit] erred in holding that, in IPR proceedings, the Board may construe claims in an issued patent according to their broadest reasonable interpretation rather than their plain and ordinary meaning.
Whether the [Federal Circuit] erred in holding that, even if the Board exceeds its statutory authority in instituting an IPR proceeding, the Board’s decision whether to institute an IPR proceeding is judicially unreviewable.
Answers to these questions will fundamentally alter the inter partes review system. The petition does a good job of walking through the importance of the case and then separately explaining their legal argument.
The Cuozzo petition was filed by a rising star in Supreme Court practice – Jeffrey Wall, who is partner at Sullivan & Cromwell. Wall was a clerk for Justice Thomas and was an Assistant to the Solicitor General for five years. He also has the distinguishing mark of being my law school classmate (as well as Prof. Rantanen).
As part of my standard preparation for teaching a given doctrine in my patent law class, I like to review the relevant section of the Manual of Patent Examination and Procedure (MPEP). The MPEP typically offers a relatively well-organized description of the doctrine, with critical cases referenced. But my review leaves me frustrated almost every time.
The reason for my frustration is that the MPEP, while doing a terrific job with legal issues on which there is clear precedent, frequently elides over the doctrinal fractures and fault lines that are at the heart of contemporary patent law disputes. Or worse, it simply does not acknowledge their existence at all. The result is a resource that, in presenting patent law as clear and determinate on its face, masks the existence of sharp tensions and breakpoints in patent law.
For example, today I’ll be covering § 102 “public use” and “on sale.” A glance through the MPEP’s sections on public use under the First-to-File regieme reveals a landscape that seems dry and barren, with the only major feature being the question of whether pre- or post-AIA § 102 applies. From reading MPEP § 2152, one gets the sense that post-AIA, the only issue once the question of regime is resolved is whether the activity was “accessible to the public.” Secret sales or offers for sale, for example, do not place the invention “on sale”:
“AIA 35 U.S.C. 102(a)(1) does not cover secret sales does not cover secret sales or offers for sale. For example, an activity (such as a sale, offer for sale, or other commercial activity) is secret (non-public) if it is among individuals having an obligation of confidentiality to the inventor.”
MPEP § 2152.02(d). Experimental use has been entirely dropped from the MPEP’s discussions of post-AIA public uses and sales. It’s as if it never existed.
Yet, these are far from resolved issues. There are plausible arguments that Congress legislatively changed the meaning of “public use” through the AIA; there are at least equally plausible arguments that Congress did not. The PTO’s position on secret commercial activity is on even weaker footing. Inevitably, the Federal Circuit, and likely the Supreme Court, will weigh in on this issue of statutory construction. But the MPEP’s characterization of this issue as settled hides a very real tension in patent law, one that will really matter to inventors and patent attorneys. It’s not difficult to imagine a hypothetical situation in which someone relies on the MPEP’s language about secret commercial activity not constituting sales for purposes of § 102(a)(1), only to be placed in a very bad position should the Federal Circuit or Supreme Court conclude otherwise.
These issues are only the most obvious fault lines hidden under the MPEP’s seemingly solid description of patent law doctrine. But there are others, and creative, knowledgeable attorneys likely know many of them already. One that has always fascinated me is the question of what constitutes a “use” for purposes of § 102 “public use.” The casebook I use for patent law, Craig Nard’s The Law of Patents, does a good job of setting up this issue through Motionless Keyboard Co. v. Microsoft Corp., 486 F.3d 1376 (Fed. Cir. 2007). The issue is whether just showing, or perhaps even demonstrating, an embodiment of the invention constitutes a public use. Motionless Keyboard suggests that sometimes not, at least if the invention is not used for its intended purpose. But in other cases, the Federal Circuit brushes aside the “intended purpose” language of Motionless Keyboard. See, e.g. Pronova Biopharma Norge AS v. Teva Pharmaceuticals USA, Inc., 549 Fed. Appx. 934, 939-943 (Fed. Cir. 2013) (nonprecedential). This question of what constitutes a use is a substantial fracture point where the law is indeterminate, but one gets no hint of this potential tension from the MPEP. See § 2133, 2152. Other fracture points and fault lines are apparent if one digs into the recent cases: the question of what constitutes an offer for sale versus an assignment or license is another fracture point within the § 102 space on which disputes ultimately get resolved, See, e.g. Elan Corp. v. Andrx Pharmaceuticals, Inc., 366 F.3d 1336 (Fed. Cir. 2004), but which one gets no hint of from the MPEP. Likewise, while there is an extensive discussion in the MPEP of whether an invention is “ready for patenting,” see § 2133.03(c), there is no discussion about a fundamental important question: what is the invention for purposes of a product claim? Is it just an embodiment of the invention or is it the technical know-how (i.e.: what we usually think of as “the invention” when talking about patents)?
My point is not that the MPEP should definitely include extensive discussions of fault lines and fracture points within the caselaw. Indeed, the MPEP isn’t much worse than most treatises, which similarly elide or ignore all but the most well-recognized tension points in the law. And “on sale” and “public use” issues, which typically involve information within the inventors’ own possession rather than information that is easily found by the examiner, are perhaps not the most efficient places for the MPEP to offer substantial guidance. Whether or not the MPEP would benefit from greater detail is a normative question that I’d be curious to hear folks’ thoughts on. I do note, though, that on some issues, such as experimental use prior to the AIA, the MPEP goes into substantial detail already, so it’s treatment is more inconsistent than uniformly thin.
My point is simply that the MPEP’s presentation of patent law doctrine inherently implies a patent law that is far more determinate and clear than it really is. There are hard questions in patent law, but reading the MPEP gives the impression that they are just complicated questions with definite answers. The caselaw suggests otherwise.
Guest Post by Kate S. Gaudry, Ph.D and Thomas D. Franklin, Kilpatrick Townsend & Stockton LLP. The opinions expressed in this article are those of the authors and do not necessarily reflect the views of Kilpatrick Townsend & Stockton LLP or its clients. This article is not intended to be and should not be viewed as legal advice.
An increasing number of statistics are available on trends in patent application filings and prosecution outcomes. However, it is uncommon to see the data segregated based on type of application. Specifically, how frequently are continuation applications filed? And does previous prosecution experience with a parent application result in favorable prosecution outcomes?
Answers to these questions may be pertinent when developing strategies as to whether to file a continuation application. Frequent continuation filings may indicate that competitors consider it important to have the claiming flexibility of keeping a family alive or a trend toward filing omnibus applications (disclosing multiple ideas or idea aspects per specification). Meanwhile, any advantage of a continuation must be considered in view of its cost, which depend in part on prosecution expectations.
Accordingly, we requested data from the USPTO that identified, for each fiscal year and technology center (TC), the number of new applications filed (excluding RCEs) that were: (1) a continuation application; (2) a divisional application; (3) a continuation-in-part application; or (4) none of the above. Further, we requested, for each of these application types: (1) the number of patents issued and number of abandonments between July 1, 2014 and July 8, 2015 (to generate a final-disposal allowance rate for this time period); and (2) the average number of office actions issued for each application that received a notice of allowance during this time.
Continuation Applications: Increasingly Common
Overall, in fiscal year 2015, 20% of the filed applications were continuation applications. Divisionals comprised 6% of the data set, and continuation-in-part applications accounted for 3% of the applications. The remaining 72% lacked a priority claim to another non-provisional U.S. application. (FIG. 1)
FIG. 1
FIGs. 2A and 2B respectively show the unnormalized and normalized distributions of filing types per fiscal year. The percentage of applications that were continuations doubled from 9% in 2005 to 18% in 2015.
FIG. 2
The increased popularity of continuation applications is observed across all TCs. (FIG. 3.) The most substantial increases is observed in TCs 2100 (Computer Architecture, Software, and Information Security) and 2600 (Communications), where the contribution of continuation applications to total filings increased by 142% and 132%, respectively, between 2005 and 2015.
FIG. 3
Continuation applications were most common in TCs 1600 (Biotechnology and Organic Chemistry), 2100 (Computer Architecture, Software, and Information Security) and 2400 (Computer Networks, Multiplex Communication, Video Distribution and Security), where continuation applications accounted for 29%, 28% and 30% of the applications, respectively. Continuation applications were least common in TC 3600 (Transportation, Construction, Electronic Commerce, Agriculture, National Security and License & Review), accounting for only 14% of the applications. The infrequency of TC 3600 continuation applications may be due, in part, to the rarity of allowances in the business-method art units.[1]
Continuation and Original Applications have Similar Prosecution Statistics
Potentially, experience with a parent application (and, typically, a same examiner) may guide claiming strategy for a continuation. Thus, perhaps, continuations represent a two-fold cost-savings opportunity: a savings in drafting and in prosecution costs. Assessing the latter potential savings requires evaluating allowance rates and office-action counts of continuation applications. Accordingly, we evaluated prosecution statistics from a recent time period (July 2014-July 2015) for each of the application types.
Overall, the final-disposal allowance rate for continuations is slightly higher than that for original applications (80% versus 74%). (FIG. 4A.) The average office-action count per patent is slightly lower for continuation applications (1.85 versus 1.96). (FIG. 4B.)
FIG. 4
Discussion: Why and How to File Continuations
Continuation applications provide a variety of advantages, including an opportunity to seek a new scope of protection in view of business priorities and to strategically draft claims in view of ongoing or threatened challenges to a patent. This latter upside is becoming increasingly significant as the number of post-grant challenges continues to grow.
Should an applicant decide that the advantages of keeping a family alive are sufficiently important, claiming strategy for the child application must then be identified. Slightly tweaking an allowed claim may result in minimal prosecution costs. However, a fast allowance will lead to an overall cost of the family exploding (assuming repeated continuation filings). Seeking substantially broader protection, meanwhile, may lead to extended and frustrating prosecution. Our data showing that continuation and original applications have similar prosecution statistics suggest that applicants are not consistently choosing an easy or hard continuation-claiming path, though it may be explained by split uses of these types of claim-drafting techniques.
Another approach to continuations is to seek protection of a completely different idea in the specification. This could allow a resulting patent family to provide diverse protections towards different elements of an applicant’s technology. However, a new focus requires that the new idea be supported and enabled by the original specification. In an era where flat fees and legal bidding wars are common, it is our hypothesis that few applicants are willing to pay the higher drafting fees for preparation of such enhanced applications. However, we believe that this is a strategic approach and should be more frequently used.
Consider a case where an applicant is seeking patent protection of two ideas. A traditional approach is that separate patent applications be drafted for each idea. Another approach is to draft a single “omnibus” patent application that describes both ideas. One idea can be the focus of an original filing, and another the focus of a continuation filing. Then, by investing in keeping a single family alive (via the original and continuation filings and/or additional continuation applications), claiming flexibility for each idea is preserved. Further, if ideas within an omnibus application are related, drafting fees may be less than preparing two independent applications. The application may also illuminate synergies and interactions between the ideas, which may further expand claiming possibilities.
Concluding Thoughts
Our data shows that continuation-application filings are becoming increasingly common. Filing continuation applications offers many advantages, particularly now that patents are frequently challenged. However, blindly filing continuation applications will lead to an explosion in costs. Strategic filing of omnibus continuation applications, however, will offer long-term cost savings and prosecution advantages. Therefore, applicants should consider intelligently identifying and organizing sets of ideas into omnibus applications.
[1] Gaudry KS. 2015. Post-Alice, Allowances are a Rare Sighting in Business-Method Art Units. IPWatchDog. <http://www.ipwatchdog.com/2014/12/16/post-alice-allowances-rare-in-business-method/id=52675/>
R+L then petitioned for ex parte reexamination of its asserted patent, and that filing resulted in the asserted claims being amended and then confirmed as patentable;
And, before the reexam was completed, Qualcomm stopped its allegedly infringing activity.
The in the case then is whether the amendment during reexamination allows Qualcomm to entirely avoid liability for pre-reexamination acts through a doctrine known as “intervening right.”
Substantially Identical: The Patent Act provides that back-damages for pre-reexamination infringement is only available if the reexamined claims are “substantially identical” to the original claims. This rule stems from the reissue statute, 35 U.S.C. § 252 (a reissued patent shall have the same effect as the original patent “in so far as the claims of the original and reissued patents are substantially identical”) coupled with the reexamination provision, 35 U.S.C. § 307(b) (“a reexamination proceeding will have the same effect as that specified in section 252 for reissued patents”).
The Substantially Identical test is pretty tough standard. Although it does allow for some amendment, an amended claim will basically fail if the scope of covereage is not identical. As interpreted by the courts, the “substantially identical” standard is judged objectively and it is irrelevant as to whether the patentee thought the change was substantial or not.
The changes: The patent here is directed toward a method of “transferring shipping documentation data … from a transporting vehicle to a remote processing center.” In the original patent, R+L had failed to include the word “comprising” and instead just put a colon following the method claim preamble. In addition, the original claims included a final step of preparing “a loading manifest . . . for further transport of the package on another transporting vehicle.” During reexamination, the patentee added the limitations that it is an “advance” loading manifest “document” for “another transport vehicle.” In issuing the reexamination certificate, the USPTO relied upon this last change because the prior art did not include preparing “an advance loading manifest document for another transporting vehicle.”
The Federal Circuit relied upon the examiner’s statements here to interpret the claims – finding that the amendment did change the claim scope:
The examiner expressly stated he was allowing amended claim 1 because “the manifest discussed by [the prior art] is a manifest for the current shipping vehicle and not an advance loading manifest document for another transporting vehicle.” In other words, the examiner’s focus in allowing the claims was … on the additional limitation that the advance loading manifest be “for another transporting vehicle.” … [T]he examiner’s commentary reveals a method that would be covered by original claim 1 but not amended claim 1: the process of preparing a loading manifest “for the current shipping vehicle.”
In its briefing, R+L acknowledges that the claims were allowed over the prior art because it agreed to add the “for another transporting vehicle” limitation. As R+L stated in its interview summary during reexamination, addition of “loading manifest document for another transportation vehicle” resulted in a tentative agreement that the amendment would overcome the rejections over the prior art. … R+L clearly understood that it was limiting the scope of its claims in another way to get around the prior art.
Thus, amended claim 1 is not “substantially identical” to original claim 1 because original claim 1 encompassed scope that amended claim 1 does not. Accordingly, we conclude that amended claim 1 is not “substantially identical” to original claim 1.
As I mentioned earlier, the reasons for the amendment do not directly impact whether the amendment is substantial or not. However, the above quotation from the opinion shows how those reasons do impact the claim construction which will then impact whether the amendment is substantial.
What’s Important about This Case: The intervening rights doctrine discussed here is not new and the results are not surprising once the claims were construed. The real element of importance of this case seems to be claim construction – and particularly, the heavy reliance placed upon the examiner’s statements during prosecution regarding the claim coverage.
= = = =
Although reexaminations are on the decline, the PTAB trials are on the rise. Under the AIA, intervening rights will also be generated whenever a patent claim is amended in an inter partes or post grant (including CBM) review. See 35 U.S.C. § 318(c) and 328(c).
The Dickstein Shapiro firm was retained by Encyclopaedia Britannica, Inc. (EB) in 1993 to file a patent application. The patent issued, and in 2006 EB sued several companies for infringing it. The patent was held invalid due to “an unnoticed defect” in the 1993 application. The basis for invalidity was not 101, however.
EB then sued the law firm for malpractice in prosecuting the 1993 application. EB contended that, but for the firm’s negligence, it would have made a lot of money in the infringement suit.
After the malpractice suit was filed, Alice was decided. The firm then argued that, as a result, the claims were ineligible and so any malpractice by it in 1993 could not have been the but-for cause of harm. The claims would have been “invalid” under 101 even had it not botched the 1993 application, and so there was no harm caused by any error it made.
To put this in context: Because of a 2014 Supreme Court decision, the 2006 case would have been lost anyway because, in 1993, the claims were not eligible for patenting.
And the argument worked. The district court granted a motion to dismiss for failure to state a claim, finding the subject matter ineligible on the face of the patent.
I’ll leave the merits of that to others.
What is interesting is the court’s approach to retroactive application of Alice. The issue was whether in the 2006 case, even had the firm’s alleged malpractice not caused the invalidity judgment, the claims were “invalid” under 101 then. The district court held that Alice did not change the law, but merely stated what it had always been. Specifically, the district court stated:
When the Supreme Court construes a federal statute… that construction is an authoritative statement of what the statute has always meant that applies retroactively. Alice represents the Supreme Court’s definitive statement on what 101 means — and always meant. Because the underlying case is governed by 101, it is appropriate for this Court to apply the Supreme Court’s construction of 101 as set forth in Alice.
(Citations omitted).
For this and other reasons, the court reasoned that “the only rule that makes sense in this context is to apply the objectively correct legal standard as enunciated by the Supreme Court in Alice, rather than an incorrect legal standard that the [district court in the 2006 infringement case] may have applied prior to July 2015 [when the court was deciding the motion.]” The court then applied Alice and found the claims “invalid” under 101.
There’s a lot to unpack here.
First, the retroactivity of Alice bodes ill for lawyers who obtained patents now being held “invalid” under 101. If the law “always” was this way, why did you advise your clients to spend so much money on a patent so clearly invalid that a judge could decide it by looking at it? But keep reading, because you and I know Alice and the rest changed the law. (Indeed, the USPTO changed its examination procedures to adjust to it!)
Second, there could be enormous consequences if Alice changedthe Court’s prior interpretations of 101.
While as a matter of statutory construction the retroactivity principle relied upon by the district court is correct, retroactivity does not ordinarily apply when an interpretation is changed. (This perhaps explains why the Supreme Court is careful to avoid saying it is changing an interpretation, because changes to interpretations of a statute are prospective, only, as a general rule. In that regard, think about Therasense for a moment.) So, if Alice changed the law, then the district court was likely wrong to apply it retroactively.
More broadly, however, if Alice (and the rest) changed the meaning of 101, then it means many patents now being held “invalid” should not be judged under Alice.
I’ve been waiting for someone to make the retroactivity argument (as with Therasense, which clearly changed the CAFC’s interpretation of “unenforceability”). It would be fun to try to see someone use Alice and apply it to the Supreme Court line of cases and make them all fall in a line.
The Dow Chemical Company v. Nova Chemicals Corporation (Fed. Cir. 2015) Download Opinion Panel: Prost, Dyk (author), Wallach
Earlier this year in the opinion on remand in Biosig v. Nautilus, Judge Wallach rejected the argument that the Supreme Court’s opinion on the indefiniteness doctrine “articulated a new, stricter standard.” 783 F.3d 1374, 1379 (Fed. Cir. 2015). Instead, the Court “modified the standard by which lower courts examine allegedly ambiguous claims; we may now steer by the bright star of ‘reasonable certainty,’ rather than the unreliable compass of ‘insoluble ambiguity.’” Id. The thrust of Judge Wallach’s opinion was that the problem the Supreme Court saw with the Federal Circuit’s previous indefiniteness doctrine was not with the standard that the Federal Circuit was actually applying; it was that the words the Federal Circuit had been using could lead district courts astray.
Dow v. Nova presents a dramatic contrast, one that (in my view) goes a long way towards righting the boat. Here, Judge Dyk reiterates in the strongest words since Nautilus that the Court’s opinion clearly changed the standard for indefiniteness. There is no hint of mere Supreme clarification in this opinion, as the outcome turns entirely on whether the pre- or post-Nautilus standard applies. Under the old standard, the result at the Federal Circuit was that the claims were definite; under the new standard, the result was that they are indefinite. And given the purely nondeferential review applied in both cases, this pair of cases provides possibly one of the neatest examples of how a legal standard can be outcome determinative.
Background: In 2010, Dow obtained an infringement judgment against NOVA, with a jury rejecting NOVA’s indefiniteness argument. The Federal Circuit affirmed in 2012, holding that the patents were not indefinite under its pre-Nautilus precedent. On remand, the district court held a bench trial on supplemental damages for the period after the judgment through expiration of the patents (October 2011). While NOVA’s appeal was pending, the Supreme Court issued Nautilus. NOVA argued that this intervening decision required the supplemental damages award to be vacated because the patents are invalid for indefiniteness.
Bars to re-litigation of indefiniteness: Nova’s challenge faced a substantial procedural hurdle, however. Because it had litigated, and lost, its indefiniteness challenge, it would ordinarily be barred from re-litigating that issue under the doctrine of issue preclusion or law of the case. (Claim preclusion does not apply under Federal Circuit precedent because a claim based on continuing conduct constitutes a separate claim.) “[T]he doctrine [of law of the case] posits that when a court decides upon a rule of law, that decision should continue to govern the same issues in subsequent stages in the same case.”….Issue preclusion “bars ‘successive litigation of an issue of fact or law already litigated and resolved in a valid court determination essential to the prior judgment.’” Slip Op. at 11 (citations omitted). However, “when governing law is changed by a later authoritative decision,” these two doctrines do not apply. Id. at 12.
Nautilus and change in law: There are three requirements for the change in law exception to apply: (1) “the governing law must have been altered;” (2) “the decision sought to be reopened must have applied the old law;” and (3) “the change in law must compel a different result under the facts of the particular case.” Slip Op. at 14-15. Here, the court held, those requirements were met by the Nautilus opinion. “First, there can be no serious question that Nautilus changed the law of indefiniteness. This was indeed the very purpose of the Nautilus decision.” Slip Op. at 16. Second, the earlier decision in Dow applied the old law:
Dow argues that our opinion in the previous appeal was not inconsistent with
Nautilus and that we did not apply the “amenable to construction” or “insolubly ambiguous standard.” But the fact that we did not include that particular language does not mean that we were not applying the prevailing legal standard. We cited Exxon, seeDow, 458 F. App’x at 917, which Nautilus specifically cited as exemplary of the rejected Federal Circuit standard…..We also explained that “the test for indefiniteness is not whether the scope of the patent claims is easy to
determine, but whether ‘the meaning of the claim is discernible, even though the task may be formidable and the conclusion may be one over which reasonable persons will disagree.’” Id. at 920 (quoting Exxon, 265 F.3d at 1375). This language corresponds exactly to the “amenable to construction” or “insolubly ambiguous” standard rejected in Nautilus.
Slip Op. at 17-18.
Third, the outcome was different under the Nautilus standard than under the pre-Nautilus caselaw. Here, the issue was a measurement problem: which methodology should be applied to determine the “slope of strain hardening.” “Three methods existed to determine the maximum slope, each providing, as Dow admits, “simply a different way of determining the maximum slope.” Slip Op. at 21 (emphasis added). None of these methods were taught in the patent, nor did it provide “any guidance as to which method should be used or even whether the possible universe of methods is limited to these four methods.” Id. at 23. And Dow’s expert used a fourth method, which he used after applying “only his judgment of what a person of ordinary skill would believe.” He did not testify that one of ordinary skill in the art would choose his method over the three known methods.
Under the previous indefiniteness standard, the court observed, that Dr. Hsaio had developed a method for measuring maximum slope was sufficient. But under the Nautilus standard, “this is no longer sufficient:
The question is whether the existence of multiple methods leading to different results without guidance in the patent or the prosecution history as to which method should be used renders the claims indefinite. Before Nautilus, a claim was not indefinite if someone skilled in the art could arrive at a method and practice that method. Exxon, 265 F.3d at 1379. In our previous opinion, relying on this standard, we held that the claims were not indefinite, holding that “the mere fact that the slope may be measured in more than one way does not make the claims of the patent invalid.” Dow, 458 F. App’x at 920. This was so because Dow’s expert Dr. Hsiao, a person skilled in the art, had developed a method for measuring maximum slope. See id. at 919–20.
Under Nautilus this is no longer sufficient. “[A] patent is invalid for indefiniteness if its claims, read in light of the specification delineating the patent, and the prosecution history, fail to inform, with reasonable certainty, those skilled in the art about the scope of the invention.” 134 S. Ct. at 2124; see also id. at 2129 (“[W]e read § 112, ¶ 2 to require that a patent’s claims, viewed in light of the specification and prosecution history, inform those skilled in the art about the scope of the invention with reasonable certainty.”). Here the required guidance is not provided by the claims, specification, and prosecution history.
Slip Op. at 23-24. That an expert chooses to use a particular measurement technique is insufficient for meeting the requirements of indefiniteness. “As we held in Interval Licensing, a claim term is indefinite if it “leave[s] the skilled artisan to consult the ‘unpredictable vagaries of any one person’s opinion.’” Slip Op. at 25. Perhaps this could have been satisfied by expert testimony as to which methodology a person of ordinary skill in the art would have used, but that will be a question for another day.
Some more thoughts on the opinion:
The opinion takes pains to distinguish Biosig v.Nautilus. In Biosig, the question was how one of ordinary skill in the art would determine what “spaced relationship” meant. There, “we held that the prosecution history, the language of the claims, and the knowledge of one skilled in the art demonstrated that “a skilled artisan would understand the inherent parameters of the invention as provided in the intrinsic evidence” and that the claim term at issue “informs a skilled artisan with reasonable certainty of the scope of the claim.” Dow at 25, n. 10. One way to think about Nautilus is that it’s really about figuring out the meaning of words in the claim, whereas this case and Teva are really about how to determine whether those words, with their meaning understood, are met.
The weird tension about indefiniteness being a question of law but involving factual determinations remains. Here, the issue was originally tried to a jury (probably erroneously as the Federal Circuit implied in the original Dow opinion), and the Federal Circuit’s analysis here focuses less on interpreting the text of the claims and more on identifying which measurement methodology a PHOSITA would have picked (which sounds like a factual question to me). Regardless of this tension, I’d expect that in future cases knowledgeable counsel will make sure that there’s good support for the particular measurement methodology used by their experts, with the experts also providing support for the proposition that their methodology is the one that a PHOSITA would have used.
Another way to think about this case is in tandem with Wiliamson v. Citrix, in which the Federal Circuit relaxed the difficulty of invoking § 112, para. 6 when the words “means” or “step” aren’t used in the claim. The effect of that decision was to make it riskier to use functional language in a claim when no corresponding structure is disclosed in the specification. Dow moves in a similar direction: when no measurement methodology is described or suggested in the specification, functional limitations such as the one here may render the claim indefinite, at least when a PHOSITA would not know which of several possible methods to use.
Lisa Larrimore Ouellette discusses the decision on the Written Description blog as well.
In this claim construction case, the Federal Circuit has reversed in favor of the patentee – finding that the district court improperly limited the claims to a specific embodiment. Here, the patents at issue are directed toward tamper-resistant food packaging. The idea behind the invention is easy to see from the drawings. A plastic lid connected to the plastic base by a perforated strip. The claims identify this perforated portion as a “frangible section” and the district court interpreted that language to mean “a removable tear strip, delimited by at least two severable score lines.” The result of that construction was that the accused EasyPak containers didn’t infringe.
On appeal, the Federal Circuit held that the lower court improperly narrowed the construction. The district court had offered the prosecution history as a reason for limiting the definition to the particular embodiment. However, the appellate court (reviewing this intrinsic evidence de novo) found the district court’s conclusions of the file wrapper “inaccurate” and noted that the specification included an embodiment with a single score line.
Judge Newman offered the Federal Circuit’s opinion that leads me to the conclusion that nothing-much has changed in the area of claim construction following Teva v. Sandoz, 135 S.Ct. 831 (2015).
In its pending petition for writ of certiorari in MobileMedia Ideas v. Apple, MobleMedia asks a number of follow-on questions:
1. Did the … Federal Circuit violate due process by summarily reversing a patent infringement judgment based upon a new and unprompted claim construction without remand to the district court in denial of Petitioner’s right to present evidence at trial and fully and fairly litigate the matter of infringement for the first time based on the new construction?
2. What standard should apply to denying remand for trial on a new claim construction used by the Federal Circuit to summarily reverse a patent infringement judgment?
3. Has the Federal Circuit effectively rendered Markman hearings and rulings meaningless by creating an unworkable, burdensome and judicially inefficient precedent that will require plaintiffs to present evidence at trial of every imaginable claim construction?
Progressive Insurance v. Liberty Mutual Insurance (Fed. Cir. 2015)
This case stems from a set of seven overlapping post-grant-review proceedings (CBM PGR) before the Patent Trial and Appeal Board (PTAB) that Liberty Mutual filed against Progressive’s “business method” patents. The patents relate to auto-insurance pricing based upon customer vehicle use patterns – such as the number of sudden stops over a given period of time – as well as online insurance policy adjustments. See U.S. Patent No. 8,140,358 as an example.
In the Covered-Business-Method Review, the PTAB found a number of Progressive’s claims invalid as either anticipated or obvious. On appeal, the Federal Circuit affirms in all respects.
Two different proceedings for the same patent: Liberty Mutual filed two different CBM proceedings against the ‘358 patent. In one, the Board invalidated all claims except for 1, 19, and 20 while in the other the second the Board invalidated all claims of the patent. These two decisions were released about 1-hour apart.
The first challenge on appeal was that the second judgment was improper because – according to Progressive’s theory – the Board lost jurisdiction once it issued the first decision. That theory stems from Section 325(e)(1) that prohibits a petitioner from “maintain[ing] a proceeding before the Office” on issues that “reasonably could have” been raised during a post-grant review that has already reached a final written decision. The argument here is that, once the PTO reached the first final judgment that the second case should immediately disappear. On appeal, the Federal Circuit rejected that approach finding (1) that the statute does not prevent the PTO from maintaining the proceeding and in any event (2) the PTAB indicated that the two decisions were “concurrent” even though actually made public about 1-hour apart. Finally, the Court noted that the PTO has statutory authority to decide how to deal with multiple related proceedings.
Written Description and Claiming Priority: On the merits, a substantial amount of the problem here dealt with patent families and the difficulty in understanding whether a later claim can properly claim priority to an earlier filed application. The PTO typically (except in Hyatt’s case) does not require a patentee to expressly connect each patent claim with its effective priority date. As a result, those arguments are typically saved until later in litigation (thus, the benefit of filing a CIP . . . )
Here, the claims in question included an interface module that produce a “driver safety score” – construed by the PTAB to mean a “calculated insurance risk value associated with driver safety.” The priority application disclosed “rating factors” that might include safety factors, but did not expressly disclose a risk value associated only with driver safety. (Note the seeming subtle shift in construction by the Federal Circuit). In any event, the ruling is that the priority application disclosed the genus but not the later claimed species – as such it does not meet the written description requirement. In this situation, the result is that the priority filing date for the particular patent at issue here is pushed back to the later filing and that date was predated by the intervening prior art disclosures.
= = = =
It does not appear that Section 101 was raised as a challenge:
1. A system that monitors and facilitates a review of data collected from a vehicle that is used to determine a level of safety or cost of insurance comprising:
a processor that collects vehicle data from a vehicle bus that represents aspects of operating the vehicle;
a memory that stores selected vehicle data related to a level of safety or an insurable risk in operating a vehicle;
a wireless transmitter configured to transfer the selected vehicle data retained within the memory to a distributed network and a server;
a database operatively linked to the server to store the selected vehicle data transmitted by the wireless transmitter, the database comprising a storage system remote from the wireless transmitter and the memory comprising records with operations for searching the records and other functions;
where the server is configured to process selected vehicle data that represents one or more aspects of operating the vehicle with data that reflects how the selected vehicle data affects a premium of an insurance policy, safety or level of risk; and
where the server is further configured to generate a rating factor based on the selected vehicle data stored in the database.
Personalized User Model, LLP v. Google Inc. (Fed. Cir. 2015) (Part II).
In Part I, I discussed the aspect of this decision dealing with the statute-of-limitations for dealing with an inventor who had (allegedly) breached his employment agreement by failing to assign patent rights. In Part II here I focus on the second important portion of the decision – a holding that the appellate court has no jurisdiction to address a claim construction appeal unless the result would impact the outcome of the case at hand.
At the district court, Google won the case based upon a finding of invalidity and non-infringement. The patentee (PUP) did not appeal those holdings, but did ask the court to review the lower court’s claim construction – arguing that the district court misconstrued the term “document” and that mis-construction may well impact future litigation of other claims in the patent family in the form of collateral estoppel (issue preclusion)
On appeal, the Federal Circuit refused to consider the claim construction appeal – finding that the appellate panel would be in violation of the US Constitution if it heard the case. In particular, the Federal Circuit panel held that the dispute over claim construction offered no case or controversy as required by Article III of the US Constitution.
Despite PUM’s concerns that the construction might be given preclusive effect in future litigation involving its related patents, we may not provide an advisory opinion on the meaning of a claim term that does not affect the merits of this appeal and thus is not properly before us.
Although it lost the appeal, asking the question may be good strategy on the part of the patentee here since the appellate court’s refusal to hear the appeal is potentially sufficient to negate the presumption that the patentee had a full and fair opportunity to litigate the issue. Thus, the result may be no issue preclusion.
I can’t find it on line, but it’s Milwaukee Electric Tool Corp. v. Hilti, 2015 WL 1898393 (E.D. Wis. Apr. 27, 2015). DLA Piper was representing Snap-on Tools. Another client asked it to sue several potential infringers, one of which was Snap-on. The firm appeared in all of the cases — all of which involved the same patent — against every defendant except Snap-on.
Snap-on moved to disqualify DLA Piper. It contended that, by representing the patentee against the non-clients, it was adverse to Snap-on. Basically, the argument that has been made (in this circumstance in several patent cases, and in other contexts) is that a lawyer should not be a part of building a case against his own client.
The court discussed the three other patent cases on this issue, and some of the other cases, but denied the motion to disqualify. It found that DLA Piper was not adverse to Snap-on, but it noted that it was a very close question.
Here’s my question: obviously, DLA Piper cannot coordinate with those lawyers who are adverse to Snap-on. (I can’t do out of court what I couldn’t do in it.) How can a law firm competently represent a patentee in an infringement suit without coordinating arguments (claim construction, etc.) with other counsel? For a discussion of those issues, see Arrowpac Inc. v. Sea Star Line, LLC, 2013 Wl 5460027 (M.D. Fl. Apr. 30, 2013).
This case is somewhat like the Akin Gump case, discussed below, which resulted in a $500,000 judgment against that firm.
Earlier this year, the USPTO released a set of ‘quick fixes‘ to AIA trial procedures before the Patent Trial and Appeal Board (PTAB) and also promised second package of rule changes. That second package has now been detailed in the USPTO’s Proposed Rule Changes now found in the Federal Register. The proposed rules focus on a number of practical changes to PTAB Trial Procedures:
Testimonial Evidence (Such as Expert Declarations) in Patent Owner’s Preliminary Response (to be considered but viewed in the light most favorable to the petitioner when determining whether to institute an inter partes review proceeding)
Claim construction standards for patents about to expire (use actual construction for patents that “will expire” before final judgment rather than broadest-reasonable-interpretation)
Rule-11 Requirement associated with all papers filed with the PTAB – giving the USPTO “a more robust means with which to police misconduct.”
In her blog-post on the topic, USPTO Director Michelle Lee indicated that the USPTO will also “amend its Office Patent Trial Practice Guide to reflect developments in practice before the Office concerning how the Office handles additional discovery, live testimony, and confidential information.”
As part of the process, Director Lee also offers a “where we stand” set of statistics for the past three years of AIA filings:
3,655 petitions, of which 3,277 are IPRs, 368 are CBMs, and 10 are PGRs.
63% focus on patents from electrical/computer technology centers (TCs) and only 9% in the the bio/pharma TC.
Review Institution: Trials have been instituted on 1,389 of 3,277 IPR petitions, 185 of 368 CBM petitions, and 2 of 10 PGR petitions.
Trial results: 12% of total claims available to be challenged (4,496 of 38,462), were determined by the PTAB to be unpatentable in a final written decision. Other claims were either not challenged, resolved by settlement, cancelled, or upheld as patentable. Of the first IPRs to reach a conclusion, 25% of claims actually challenged (4,496 of 17,675) were found to be unpatentable.
According to Director Lee, the number of petitions is “around three times more” than what were originally expected by Director Kappos.
Comments on the proposed rules go to trialrules2015@uspto.gov and discussions will be held at the upcoming roadshows: August 24, 2015 in Santa Clara, August 26, 2015 in Dallas, and August 28, 2015 at USPTO HQ.
Professor Peter Menell is very much a practical consensus builder and his collaborative Patent Case Management Judicial Guide has gone a long way in seting a gold standard in how a Judge should manage patent cases (and thus how parties should litigate patent cases).
The 1,300 page third edition has just been released and is available for free on SSRN with the following abstract:
This treatise updates and expands upon the second edition of the Patent Case Management Judicial Guide (2012). Since that time, patent litigation has continued to increase in complexity. This edition encompasses implementation of the America Invents Act (“AIA”), the emergence of review proceedings at the Patent Trial and Appeal Board (“PTAB”), the Supreme Court’s many recent patent decisions (patent eligibility, claim construction, claim indefiniteness, infringement analysis (rejecting “joint infringement”), the intent requirement for induced infringement liability (rejecting a defense of good faith belief of a patent’s invalidity), and attorney fees), and the Federal Circuit’s damages jurisprudence (including damage awards for standard essential patents (SEP) licensed pursuant to fair, reasonable, and nondiscriminatory (FRAND) terms. It also includes case management checklists, model case management orders, and other materials developed by district judges and advisory bodies for streamlining patent case management. Finally, this volume adds a chapter on patent litigation at the Court of Federal Claims.
http://ssrn.com/abstract=2637605. Menell’s team of co-authors includes Lynn Pasahow (Fenwick); Jim Pooley (Pooley); Matthew Powers (Tensegrity); Steven Carlson (Kasowitz Benson); Jeffrey Homrig (Latham); George Pappas (Covington); Carolyn Chang (Fenwick); Colette Mayer (Morrison Foerster); and Marc Peters (Morrison Foerster).
Tomorrow I’ll write about the design patent functionality questions in Ethicon Endo-Surgery v. Covidien, Appeal No. 14-1370 (Fed. Cir. 2015) (medical shears). Today, the focus is on the Federal Circuit’s reversal on indefiniteness. Here, the appellate court held that the district court had improperly invalidated the asserted surgical shear claims of Ethicon’s Patent No. 8,182,501.
Before getting into the legal details, I wanted to write about the legal posture. This case involves Ethicon’s infringement allegations against its market competitor Covidien. In a parallel case, Covidien (Tyco Healthcare) sued Ethicon for infringing its shear patents. In that case, Covidien originally won a $177 million judgment that was then vacated by the Federal Circuit who found that the district court erred in its nonobviousness decision. In a recent filing, Covidien has filed a petition for writ of certiorari on the question of whether evidence of prior invention (“102(g)(2) evidence”) is available for the obviousness analysis as the Federal Circuit held? More subtly, the question is actually phrased: “whether a mere conception that was neither known to the public nor reduced to practice at the time a patented invention was made is “prior art” to that invention under the pre-2013 version of 35 U.S.C. § 103.” [102(g) SCOTUS Petition.] This is an interesting if purely historic question since prior-invention are no longer be a legitimate claim against AIA-patents.
Back to the new indefiniteness decision: The ‘501 patented shears at issue claim an ultrasonic blade and a clamping arm that squeezes blood-vessels against the blade. The pad at the end of the clamping arm is designed with a blade-contact-area (“clamping surface area”) “so that the applied clamp force does not exceed a clamping pressure of 210 psi at the clamping surface area.” Finally, the claims also include a “means for limiting a user applied clamping force on the clamping arm creating an average predetermined clamping pressure between and including 60 psi and 210 psi on tissue disposed between the tissue pad and the blade.” In the specification, the patentee does identify a structure for limiting the pressure as a “torque wrench.” So, the indefiniteness problem here is not the ordinary Donaldson no-structure-for-MPF-element problem.
The district court found the claim invalid as indefinite because the specification did not spell-out how the pressure should be calculated. In particular, the district court identified four different ways to calculate the pressure (averaging / non-averaging / location on pad / angle considerations / etc.) that would each render a different pressure reading. And, without knowing how to calculate the “psi limits”, the claim scope lacked definiteness.
In Nautilus (2014) , the Supreme Court lowered-the-bar on indefiniteness — ending the difficult to prove insolubly ambiguous test and replacing it with a broader question of whether the claims provide a skilled artisan with “reasonable certainty” as to the scope of legal right claimed. Although the district court decided its case under the old standard, it still found the claims invalid as indefinite.
On appeal though, the Federal Circuit has reversed that finding — holding that the district court improperly ignored the intrinsic evidence and misinterpreted the expert testimony. Somewhat oddly, on the intrinsic evidence, the appellate panel found that the the pressure calculation limitation in the patent claims all require consideration of the average pressure across the pad — even though only some of the claims include the “average” limitation. Once that bit of claim construction is done (and once you decide to measure the pressure when the blade closed (~0 degree angle), then the various mechanisms of measuring/calculating average pressure all converge because of linearity involved (assuming a straight blade).
Of interest to litigators, it appears here that the Federal Circuit did give deference to the district court’s factual conclusions regarding expert testimony on indefiniteness – still finding that the district court “arrived at several clearly erroneous factual conclusions.”
On remand, the trial court will next need to interpret the scope of the ‘501 means claim terms and determine whether there is any infringement (or some other reason to invalidate) the claims.
As alluded to above, the lawsuit also involves a set of design patents covering the shears. The district court held them invalid as too functional. On appeal, the Federal Circuit also reversed that holding – finding instead that the district court evaluated the design patent claims “using too high a level of abstraction, focusing on the unclaimed utilitarian aspects . . . instead of the claimed ornamental designs.
Although it received a somewhat favorable claim construction ruling and won a summary judgment challenge, the patentee (SFA) dropped its case against Newegg and issued a covenant not to sue the erstwhile defendant based upon what SFA termed “business reasons.” Rather than simply walking away, Newegg demanded attorney fees to compensate for its costs defending against what it termed a “frivolous and abusive lawsuit.”
On appeal here, the Federal Circuit has affirmed the lower court’s denial of fees under Section 285 of the Patent Act. That provision states that a district court “may award reasonable attorney fees to the prevailing party” in “exceptional cases.” In its 2014 Octane Fitness decision, the Supreme Court interpreted an “exceptional case” to be one that:
stands out from others with respect to the substantive strength of a party’s litigating position (considering both the governing law and the facts of the case) or the unreasonable manner in which the case was litigated.
Exceptionality appears to be implicitly linked to reasonableness — at least insofar that a showing that your actions were “reasonable” will avoid an exceptional case award. In practice, the determination of an exceptional case is done on a case-by-case basis, “considering the totality of the circumstances.” Id. In its parallel 2014 Highmark decision, the Supreme Court also held that the district court’s determination regarding exceptional case awards should be given deference on appeal.
Not Reviewing a Double Mistake: As I mentioned, the district court’s claim construction and summary judgment denials both favored the patentee. In arguing that SFA’s case lacked substantive merit, Newegg provided the following logical chain of reasoning: (a) if the district court had not erred in its claim construction, (b) it would have held the claims invalid as indefinite (c) therefore showing that SFA’s case lacked substantive merit. On appeal, the Federal Circuit refused to follow the bait and instead found that a fee-award petition does not open the door to re-litigating all underlying substantive issues decided by the district court. Rather, according to the court, the review of a fee-award petition should focus only on “whether the district court abused its discretion when it found that the party’s litigating position was not so meritless as to ‘stand out’ from the norm and, thus, be exceptional.” Likewise, the Court wrote that district court need not revisit its prior decisions when judging a fee award motion.
Nuisance Fee Litigation Not Necessarily Unreasonable: Following the holding of Eon-Net v. Flagstar, 653 F.3d 1314 (Fed. Cir. 2011), Newegg argued that SFA’s practice was abusive “by exploiting the high cost to defend complex litigation to extract a nuisance value settlement.” (quoting Eon-Net). On appeal, however, the appellate panel found that the district court had not abused its discretion in failing to find unreasonable conduct.
We agree with Newegg … that a pattern of litigation abuses characterized by the repeated filing of patent infringement actions for the sole purpose of forcing settlements, with no intention of testing the merits of one’s claims, is relevant to a district court’s exceptional case determination under § 285. And, we agree with Newegg, moreover, that to the extent the district court’s opinion in this case can be read to discount the motivations behind a patentee’s litigation history, the district court was wrong. The problem with Newegg’s request that we reverse the district court’s exceptional case determination on these grounds, however, is its failure to make a record supporting its characterization of SFA’s improper motivations.
In particular, SFA was able to point to some larger settlements and other cases that it had not (yet) settled.
Here, the Federal Circuit repeated its prior holdings that a repeated pattern of filing lawsuits and then settling for only a “nuisance” amount (<10% of expected litigation costs) provides evidence of exceptionality. The problem was simply that the defendant did not prove-up that pattern in this case. Apparently it is acceptable and reasonable to have some nuisance-settlement cases as long as the patentee is willing to push its case to the merits in other cases.
Totality of Circumstances: Although the appellate court walked-through the two factors of (1) low-merit case and (2) litigation misconduct, it also recognized that the test is a totality-of-the-circumstances test. However, the unstated conclusion from the case is that the case cannot be exceptional unless at least one of the factors shows unreasonable behavior.
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One problem with the current patent system is that valid but low-value patents are fairly worthless, and this decision only exacerbates that problem. Take the example of a valid patent covering an improvement that incrementally adds only $500,000 in value to a product’s entire market. And, assume that market is split among five competitors. The sequential settlements of $100,000 are all “nuisance level,” but they are also all at the correct market level. Now, Despite what you might conclude from the decision’s language, I don’t believe that the court here is trying to say that a patentee would act unreasonble wrong in this situation by filing and settling these cases. However, the language is loose enough to support a defendant who mounts such a case. (And, I recognize that my hypothetical is not exactly parallel to the facts at issue in the SFA case.)
One solution to this problem is to have more focus on potential damage awards early-on in a case in order to form realistic limits that, in turn, should tend to limit reasonable litigation expenditures.
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Mark Lemley argued the case before the Federal Circuit for Newegg, although he was apparently not on the original appellant brief. John Edmonds appeared on behalf of SFA.
Judge O’Malley penned the opinion that was joined by Judges Clevenger and Hughes.
Inline Platics v. EasyPak (