Tag Archives: Claim Construction

Broadening and Narrowing Claims Post Issuance

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There is some amount of tension between the Federal Circuit’s 2012 en banc decision in Marine Polymer Tech. v. HemCon (Fed. Cir. 2012) and the court’s recent finding in ArcelorMittal v. AK Steel (Fed. Cir. 2015). Both cases involved post-issuance proceedings where a claim’s scope had changed even though the claim itself had not been amended.

The underlying issue in Marine Polymer was whether a would-be infringer could claim have intervening rights under 35 U.S.C. §§ 252 and 307(b) if the scope of an non-amended claim was substantially changed during a reexamination.  The en banc Federal Circuit held that the a claim whose scope is narrowed-by-argument during a reexamination did not impact statutory intervening rights because the language of 307(b) focused the intervening rights only on a “amended or new claim.”  Because the claim was not actually amended, the law was not triggered.

In ArcelorMittal, we had a similar framework – in reissue the patentee expanded the scope of its non-amended independent claim based upon an a change to a dependent claim.  In its decision, the Federal Circuit found that the changed scope should be seen as a broadening of the original claim — triggering the prohibition against a broadened reissue (more than two years after the original patent issuance).

The difference between these two cases seems to primarily stem from the statutory language — the reissue statute and broadening doctrine seemingly do not require an “amendment” in order to be triggered while the intervening rights statute does. (I should note that this distinction is on somewhat shaky grounds).

The new inter partes review statute appears to closely follow that of the reexamination statute — indicating that intervening rights will stem from an “amended or new claim.”  The statute also provides that amendments “may not enlarge the scope of the claims of the patent.” 35 U.S.C. § 316.  The one question left unclear is the impact of broadening-through-claim-construction during the inter partes review.

Federal Circuit Finds Scope of Non-Amended Reissue Claims Improperly Broadened

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by Dennis Crouch

ArcelorMittal v. AK Steel (Fed. Cir. 2015)

This case provides an important discussion of the “law of the case” doctrine and “mandate rule” as they apply to ongoing parallel patent-office administrative proceedings and in-court infringement proceedings. In particular, the appellate panel holds that the district court is bound by a prior Fed.Cir. claim construction in the same case – despite intervening decisions by the USPTO that the Fed.Cir. construction was too narrow.

The case is also important because of its finding that a claim whose scope is expanded during reissue based upon prosecution history (rather than amendment) will be seen as broadened – and thus may be invalid if the broadening misses the two-year deadline.

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Here, the patentee (ArcelorMittal) lost its first round of infringement litigation based upon a narrow claim construction of the claimed steel sheet having a “very high mechanical resistance.”  Meanwhile, the patentee filed a reissue application with the USPTO that added a set of new dependent claims, including one that would seemingly expand the scope of the previously defined term.  In particular, the Federal Circuit originally ruled that the “very high mechanical resistance” is defined as having a resistance >1500 MPa, but the reissue application added a new dependent claim stating that the resistance is “in excess of 1000 MPa.”  That amendment seems to have implicitly increased the scope of claim 1 without actually amending any of the language in claim 1.  As the court writes:

The only relevant change is the addition of a dependent claim which has the practical effect of expanding the scope of claim 1 to cover claim scope expressly rejected by a previous claim construction ruling.

With the original litigation was still pending in district court, the patentee added the Reissued patent to the infringement complaint.  Siding with the defendant, the district court found that the broadened scope was improper because the Reissue application had been filed more than two years after the original patent issuance. On appeal, the Federal Circuit has affirmed, finding that – at least for this case – that the reissue claims are invalid. Here is the court’s logic:

The law-of-the-case doctrine “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.” Banks v. U.S., 741 F.3d 1268, 1276 (Fed. Cir. 2014) (‘an inferior court has no power or authority to deviate from the mandate issued by an appellate court.’). Under the mandate rule and the broader law-of-the-case doctrine, a court may only deviate from a decision in a prior appeal if “extraordinary circumstances” exist. . . .

The successful prosecution of the [reissue] patent is not “new evidence” sufficient to trigger the extraordinary circumstances exception to the mandate rule and the law-of-the-case doctrine. Permitting a reissue patent to disturb a previous claim construction of the original claims would turn the [broadening] analysis under 35 U.S.C. § 251 on its head. . . . If the reissue claim itself could be used to redefine the scope of the original claim, this comparison would be meaningless.

Thus, the court found that the proper analysis for broadening reissue is whether the scope of claims in the reissued patent (as construed now) are broader than those same claims as found in the original patent (as previously construed).  I should note that the court did not particularly address the fact that the broadened claim was not amended. However, this practical approach to scope is in line with the Court’s prior decision in Marine Polymer Tech. v. Hemcon, Inc. (Fed. Cir. 2011) that created intervening rights (i.e., no past infringement) based upon a narrowed construction during reexamination.  [Update] Of course, that decision was reversed by the court sitting en banc.

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The law-of-the-case doctrine was not necessary here because the court also found that, when considering whether scope was improperly broadenend, the reissue’s prosecution cannot impact the scope of the original claims.

Going forward, there will be substantial pressure on law-of-the-case doctrine; the mandate rule; and the final judgment rule in managing the new multi-venue reality of patent enforcement/challenge.

An important question not addressed here for reissue applications is whether the PTO erred allowing the reissue claims to issue in their non-amended but broadened form? Was the PTO also bound by the prior Federal Circuit judgment regarding claim construction? What would have happened if the reissue was asserted in a second lawsuit or against a different party? …

Eon v. AT&T and the role of “Pure Functional Claiming”

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by Dennis Crouch

In a major 2014 decision, the Supreme Court raised the standard of definiteness under 35 U.S.C. 112(b) – now requiring that the scope of patent claims be “reasonably certain” to one of skill in the art. Nautilus v. Biosig. Historically, “reasonably certain” is a high standard and has been linked with the beyond-a-reasonable-doubt standard in criminal law. I.e., claim scope that is reasonably certain may also be seen as having its scope defined beyond a reasonable doubt.  The higher standard can also be contrasted with the prior Federal Circuit that only invalidated ambiguous claims that were both insolubly ambiguous and not amenable to construction.

Despite the dramatic potential of Nautilus, the Federal Circuit has largely muted its impact.

The one area where patent-challengers see continued success is when means-plus-function claims lack appropriate structural support in the underlying patent document.  35 U.S.C. 112(f) allows a patentee to claim a “means” for accomplishing a specified function without reciting the actual structure of the mechanism or material used to accomplish the function.  However, as a rule of construction, the statute indicates that the “means” will be construed to “cover the corresponding structure, material, or acts described in the specification and equivalents thereof.”  The impact is that, although the claim appears to broadly cover a “function” it will be construed to be much more limited.  When an applicant follows this claiming approach, but fails to specify any corresponding structure within the specification then the claim is deemed invalid as indefinite.

In Eon Corp v. AT&T (Fed. Cir. 2015), the Federal Circuit has affirmed that Eon’s asserted patent claims are invalid for failing to specify the structure associated with a purely functional claim element.

Eon’s U.S. Patent No. 5,663,757 covers a data processing station that facilitates instant purchases while watching a television program.  The patent was written back when the wort “means” was still popular among patent drafters.  Here, the district court found that eight separate “means” claims were directed to “complex” computer software such as “causing selected themes to automatically display a second menu.”  Based upon that undisturbed complexity fact-finding, the appellate court found that a structure in the form of the software algorithm should have been disclosed.  Because no software algrithms were disclosed, the software means claims failed and were properly held invalid as indefinite.

Of interest here, the Federal Circuit reasoned that the algorithm is necessary to “avoid pure functional claiming.”  Quoting Aristocrat Techs. Austl. Pty Ltd. v. Int’l Game Tech., 521 F.3d 1328 (Fed. Cir. 2008).

A general purpose computer is flexible—it can do anything it is programmed to do. Therefore, the disclosure of a general purpose computer or a microprocessor as corresponding structure for a software function does nothing to limit the scope of the claim and “avoid pure functional claiming.” Aristocrat. As such, when a patentee invokes means-plus-function claiming to recite a software function, it accedes to the reciprocal obligation of disclosing a sufficient algorithm as corresponding structure.

Although the court here highlights the doctrinal point of “pure” functional claiming — claiming function with no limiting structure — the actual facts are that the disclosed microprocessor and does provide some amount of structure.  As with abstract-idea analysis, it seems here that the question is not so black-and-white, but rather whether some magical threshold has been crossed.

The case also offers some hints to the ongoing debate over subject matter eligibility of computer implemented inventions.  In particular, the court reiterated its prior statements that a “the general purpose computer becomes a special purpose computer when loaded with the special programming.”

Biosig v. Nautilus: Indefiniteness on Remand

Patent,

By Jason Rantanen

Biosig Instruments, Inc. v. Nautilus, Inc. (Fed. Cir. 2015) (on remand from the Supreme Court) [2015 WL 1883265]  Download Opinion
Panel: Newman, Schall, Wallach (author)

About a month ago, I wrote an essay entitled “Teva, Nautilus and Change without Change.”  To the extent that anyone still harbored doubts about that premise in the context of Nautilus, the Federal Circuit’s opinion on remand should dispel them.  (Caveat: As I discussed in the essay, means-plus-function claims, such as the claims in Eon that Dennis will post about shortly, are a whole different ball of wax.  To me one of the most fascinating issues in patent law right now is whether the court will expand that framework to function-claiming more broadly.  The revised Nautilus opinion leaves that door a little more open than the original opinion.)

This dispute is well-known, so I’ll just summarize the procedural posture.  The district court granted summary judgment that the claims were indefinite.  On appeal, the Federal Circuit reversed, holding the claims not indefinite.  The Supreme Court granted certiorari to address the legal standard the Federal Circuit referenced on indefiniteness: that a claim is indefinite “only when it is ‘not amenable to construction’ or ‘insolubly ambiguous.'” 715 F.3d 891, 898 (2013).  In Nautilus, the Supreme Court rejected this standard:

Those formulations can breed lower court confusion, for they lack the precision § 112, ¶ 2 demands. 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. To tolerate imprecision just short of that rendering a claim “insolubly ambiguous” would diminish the definiteness requirement’s public-notice function and foster the innovation-discouraging “zone of uncertainty,” United Carbon, 317 U.S., at 236, 63 S.Ct. 165, against which this Court has warned.

Nautilus, 134 S.Ct. at 2130 (2014).  The Court did not, however, resolve the overall dispute, instead returning the appeal to the Federal Circuit.

On remand the parties disputed “whether the Supreme Court articulated a new, stricter standard or whether, in rejecting the phrases ‘insolubly ambiguous’ and ‘amenable to construction,’ the Court was primarily clarifying that a patent’s claims must inform those skilled in the art with “reasonable certainty” of what is claimed.”  Slip Op. at 7-8.  The Federal Circuit did not directly answer this question, but suggested the latter through a nautical metaphor: “The Court has accordingly 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. at 9. The implication of this metaphor, combined with the passage preceding it, is that the problem the Court perceived was not that the insolubly ambiguous standard allowed too much imprecision in patent claims; the problem was that the insolubly ambiguous standard itself was too imprecise: “The Court found too imprecise our “insolubly ambiguous” standard,” Id. at 8.  The implication that Nautilus simply clarified, rather than raised, the standard for indefiniteness is further supported by an extensively-footnoted discussion of “reasonably certainty” as a “familiar standard,” one that “In the wake of Nautilus II, judges have had not problem operating under.”  Id. at 12.  The takeaway is that Nautilus offers a more precise standard, but not one that moves the target.

With this clarification in place, the panel concluded that its prior decision was correct: Biosig’s claims inform those skilled in the art with reasonable certainty about the scope of the invention.”  Id. at 14.  The court’s revised analysis turns entirely on the intrinsic evidence (“We revisit the intrinsic evidence here to make clear that a skilled artisan would understand with reasonable certainty the scope of the invention.”)  Notably missing from this discussion is any mention of Halliburton, which the court distinguished at length in the original opinion.  To the contrary: the description of the indefiniteness standard at the beginning of the opinion expressly quotes from that case: “Moreover, when a claim limitation is defined in ‘purely functional terms,’ a determination of whether the limitation is sufficiently definite is ‘highly dependent on context (e.g., the disclosure in the specification and the knowledge of a person of ordinary skill in the relevant art area).’ Halliburton Energy Servs., Inc. v. M-I LLC, 514 F.3d 1244, 1255 (Fed. Cir. 2008).”  Function-claiming remains an area to watch.

Of Printer Cartridges and Patent Exhaustion: The En Banc Federal Circuit is Poised to Clarify Quanta

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Guest post by Samuel F. Ernst, Assistant Professor of Law at the Chapman University Dale E. Fowler School of Law.

Lexmark International, Inc. sells its patented printer cartridges directly to customers and indirectly through authorized resellers.  Ordinarily these authorized “first sales” would exhaust Lexmark’s patent rights in the cartridges, such that Lexmark could not sue third parties, such as Impression Products, Inc., for patent infringement when they refill and resell the spent cartridges at a reduced price.  However, after Lexmark’s authorized and indiscriminate first sale occurs, the end user finds that Lexmark has printed a proposed license agreement on the outside packaging providing that by opening his or her printer cartridge, the customer “agree[s] to return the empty cartridge only to Lexmark for recycling.  If you don’t accept these terms, return the unopened package to your point of purchase.  A regular price cartridge without these terms is available.”  In patent parlance, this provision is known as a “post-sale restriction” – an attempt to restrict the use of a patented item for its intended purpose after the patent holder has authorized a first sale.  The Federal Circuit has granted en banc review in the case of Lexmark v. Impression Products to settle once and for all whether such post-sale restrictions are effective to prevent patent exhaustion, allowing the patent holder to pursue the patented item down the stream of commerce to prevent resale price competition or collect infringement damages above and beyond the monopoly price it earned at the first sale.[1]

One would have thought the question settled by the Supreme Court long ago.  In 1917 the Court decided in Motion Picture Patents Co. v. Universal Film Manufacturing Co. that such post-sale restrictions are ineffective to prevent patent exhaustion.[2]  In that case Motion Picture Patents held a patent on film projectors and granted a license to a third party authorizing the manufacture and sale of the projectors.  The licensee was required to affix a plate to the projectors it sold purporting to impose a post-sale restriction very similar to the restriction Lexmark affixes to its printer cartridge packaging: “The sale and purchase of this machine gives only the right to use it solely with moving pictures containing the invention of reissued patent No. 12,192, leased by a licensee of the Motion Picture Patents Company…. The removal or defacement of this plate terminates the right to use this machine.”[3]  Despite authorizing the sale of its patented projectors and collecting a full monopoly price for its invention, Motion Pictures Patent Company sought to restrict end users from using the projectors with film reels other than those licensed under its separate patent on film reels, just as Lexmark seeks to use the patent law to prevent the reuse and resale of its spent cartridges with unauthorized ink.  When Universal Film supplied end users of the projectors with film reels that were not authorized for use with the machines, Motion Pictures Patent Company sued for infringement.[4]  The Court held that the post-sale restriction was invalid and did not prevent the exhaustion of Motion Picture Patent Company’s rights in the machine.  The Court held that “the right to vend is exhausted by a single, unconditional sale, the article sold being thereby carried outside the monopoly of the patent law and rendered free of every restriction which the vendor may attempt to put upon it.”[5]

The Supreme Court grounded its holding in two policies that are central to the exhaustion doctrine.  First, because the patent law attempts a delicate balance between encouraging innovation and allowing free market competition, the patent holder should not be overcompensated for a license to its intellectual property beyond the free market value of the invention as determined by the free market at the first sale.  “[T]he primary purpose of our patent laws is not the creation of private fortunes for the owners of patents, but is ‘to promote the progress of science and the useful arts.’”[6]  Accordingly, a right to exclude, exercised and exhausted with a single sale or license of a patented product on the open market is the appropriate compensation to reward the value of the invention; nothing more should be given:

This construction gives to the inventor the exclusive use of just what his inventive genius has discovered.  It is all that the statute provides shall be given to him and it is all that he should receive, for it is the fair as well as the statutory measure of his reward for his contribution to the public stock of knowledge.  If his discovery is an important one, his reward under such a construction of the law will be large, as experience has abundantly proved; and if it be unimportant, he should not be permitted by legal devices to impose an unjust charge upon the public in return for the use of it.  For more than a century this plain meaning of the statute was accepted as its technical meaning, and that it afforded ample incentive to exertion by inventive genius is proved by the fact that, under it, the greatest inventions of our time, teeming with inventions, were made.[7]

Hence, the exhaustion doctrine and the invalidity of post-sale restrictions prevent overcompensation, or “double recovery,” for patent holders.

Second, the Motion Picture Patents Court reasoned that the exhaustion doctrine is grounded in the policy against restraints on the alienation of chattels – i.e., servitudes that run with personal property.  Once a patent holder has authorized the sale of its product, downstream purchasers of the item, including competitors in the used resale market, have a reasonable expectation that the product they buy can be used for its intended purpose.  The Supreme Court explained that a ban on post-sale restrictions avoids a situation where a patent holder can:

send its machines forth into the channels of trade of the country subject to conditions as to use or royalty to be paid, to be imposed thereafter at the discretion of such patent owner.  The patent law furnishes no warrant for such a practice, and the cost, inconvenience, and annoyance to the public which the opposite conclusion would occasion forbid it.[8]

The Supreme Court relied on this same policy against restraints on alienation in the recent Kirtsaeng decision, where it decided that the authorized first sale of a copyrighted article overseas exhausts the copyright owner’s right to prevent the used resale of that item.[9]  The Court stated that the exhaustion doctrine is grounded in “the common law’s refusal to permit restraints on the alienation of chattels.”[10]  And the Federal Circuit has recently relied on this policy in support of its decision that giving away a patented product in exchange for no consideration (rather than selling it) can trigger patent exhaustion.  The Circuit reasoned that if patent exhaustion were easily evaded, “consumers’ reasonable expectations regarding their private property would be significantly eroded” and it would “offend against the ordinary and usual freedom of traffic in chattels.”[11]  Nor is the policy against restraints on alienation an outmoded relic of the common law having no justification in the modern economy.  As Professor Molly Shaffer Van Houweling argues in her compelling article, The New Servitudes, personal property servitudes result in notice and information costs for consumers, result in the underuse or inefficient use of resources subject to the restriction (such as the spent printer cartridges at issue here), and waive the limitations built into intellectual property law that are intended to strike the delicate balance between encouraging innovation and allowing for the dissemination of new technology.[12]

In its opening Federal Circuit brief, Lexmark relies heavily on a different Supreme Court case to argue for the validity of its post-sale restriction, the 1938 case General Talking Pictures Corp. v. Western Electronic Co.[13]  But General Talking Pictures does not deal with a post-sale restriction imposed after an authorized first-sale releases a product into the stream of commerce.  Rather, General Talking Pictures recognizes the validity of a pre-sale restriction, whereby a patent holder expressly limits the parties to whom its reseller may sell the patented product in the first place.  In General Talking Pictures, the plaintiff licensed the American Transformer Company to make and sell its patented vacuum tube amplifiers, but stated in the license that American Transformer was only authorized to sell the amplifiers to private consumers “for radio amateur reception, radio experimental reception, and home broadcast.  [American Transformer] had no right to sell the amplifiers for use in theaters as a part of talking picture equipment.”[14]  American Transformer then made an unauthorized sale to the defendant for use in movie houses, even though the defendant “had actual knowledge that [American Transformer] had no license to make such a sale.”[15]  The Court held that the plaintiff could sue for patent infringement because it did not authorize American Transformer to make the sale, and the first requirement of patent exhaustion was therefore not satisfied – there was no authorized first sale: “[t]he Transformer Company could not convey to petitioner what both knew it was not authorized to sell.”[16]  Hence, the Supreme Court drew a distinction between (1) a post-sale restriction, which attempts to impose restrictions on the patented item after an authorized sale; and (2) a pre-sale restriction, which limits the scope of the authority to sell, authorizing sale for only particular uses or to particular customers.  Post-sale restrictions are clearly ineffective to prevent patent exhaustion because the patented item has already passed out of the patent monopoly at the time of sale.  The effectiveness of pre-sale restrictions, and the wisdom of enforcing them, is an interesting and novel question, which I explore in the context of licenses to settle patent litigation in Patent Exhaustion for the Exhausted Defendant: Should Parties be able to Contract Around Exhaustion in Settling Patent Litigation?.[17]  But the adhesion contract Lexmark prints on its cartridge packaging is plainly a post-sale restriction, rendering the General Talking Pictures case inapposite to the Lexmark case.  After Lexmark indiscriminately sells or authorizes the sale of its printer cartridges to all comers, it tries to prevent their resale through the use of a post-sale restriction, but it cannot do so under the patent law because the authorized sale means that the cartridges have already passed out of the patent monopoly.

If the Supreme Court decided this question in the 1917 Motion Picture Patents case, then why is this even an issue for en banc review?  It is because a panel of the Federal Circuit, in Mallinckrodt v. Medipart, held that post-sale restrictions similar to Lexmark’s adhesion contracts can, in fact, prevent patent exhaustion.[18]  In that case Mallinckrodt sold its patented aerosol mist delivery devices to hospitals, stamped with the legend, “Single Use Only,” and a package insert “instruct[ing] that the entire contaminated apparatus be disposed of in accordance with procedures for the disposal of biohazardous waste.”[19]  Many hospitals did not heed the restriction, however.  Instead, they sold the spent devices to the defendant Medipart, who refurbished them and returned them to the hospitals for additional use.[20]  Mallinckrodt sued Medipart for patent infringement and indirect patent infringement, and the Federal Circuit held that the “single use” restriction prevented patent exhaustion.  The court achieved this by cabining the holding of Motion Pictures Patents to circumstances where patent holders attempt to enlarge the scope of their monopoly by tying the use of their patent to the use of unpatented or separately patented items, in violation of antitrust laws or constituting patent misuse.  Hence, the court distinguished Motion Picture Patents and other Supreme Court exhaustion precedent on the basis that “[t]hese cases established that price-fixing and tying restrictions accompanying the sale of patented goods were per se illegal.  These cases did not hold, and it did not follow, that all restrictions accompanying the sale of patented goods were deemed illegal.”[21]  The Federal Circuit then limited the ineffectiveness of post-sale restrictions to circumstances where the patent holder causes anticompetitive effects under the antitrust laws:

Unless the [post-sale restriction] violates some other law or policy (in the patent field, notably the misuse or antitrust law) private parties retain the freedom to contract concerning conditions of sale.  The appropriate criterion is whether Mallinckrodt’s restriction is reasonably within the patent grant, or whether the patentee has ventured beyond the patent grant and into behavior having an anticompetitive effect not justifiable under the rule of reason.[22]

But why should the patent laws be relegated to the shadows of antitrust policy? Intellectual property law is not solely concerned with preventing supra competitive prices or keeping licensing practices within the “rule of reason,” like some shambling poor relation to antitrust law.  Rather, intellectual property laws promote wholly different policies in wholly different ways, such as by balancing the incentive to innovate against the harm of a limited monopoly.  That is why the policies supporting patent exhaustion enunciated by the Supreme Court in Motion Pictures Patent Company were not limited to preventing illegal patent tying (although the Court did mention as one of the supports for its decision a concern with patent holders enlarging the effective scope of their patent claims beyond the claimed invention).  As discussed above, the Court also invoked the policy against servitudes running with personal property and the need to ensure that the exclusionary right is narrowly tailored to achieve the incentive to innovate.  And these policies in support of patent exhaustion have been repeated by the Court in Kirtsaeng and by the Federal Circuit in cases such as LifeScan.  Hence, under Supreme Court precedent, a post-sale restriction is ineffective to prevent patent exhaustion whether or not it has “anti-competitive effects” or the patent holder has “market power.”

If there were any doubt as to this proposition, it should have been settled by the Supreme Court’s 2008 decision in Quanta Computer Inc. v. LG Electronics, Inc.  In Quanta, LG granted Intel the unconditional right to manufacture and sell its patented microprocessors.[23]  But the license also had a provision in which LG “disclaimed” that it granted a license to downstream purchasers of the microprocessors allowing them to combine the devices with non-Intel parts and resell them.[24]  And by separate agreement, Intel was required to notify purchasers of the microprocessors that they were not authorized to combine the microprocessors with non-Intel parts for resale,[25] similar to the notice Lexmark gives its customers that they are not authorized to return the spent printer cartridges to anyone other than Lexmark.  Intel made the patented processors and sold them to Quanta, which then practiced LG’s patent claims by inserting them into computers and reselling them to customers.[26]  And so LG sued Quanta for patent infringement.  The Federal Circuit held that LG had not exhausted its patent rights, because “[a]lthough Intel was free to sell its microprocessors and chipsets, those sales were conditional, and Intel’s customers were expressly prohibited from infringing LG’s combination patents.”[27]

The Supreme Court reversed the Federal Circuit, holding that LG unconditionally authorized the sale of the chips, despite the contract’s language disclaiming a license to third parties and the notice Intel gave purchasers that they could not combine the chips with non-Intel parts.[28]  Although the contract purported to put restrictions on what Intel’s customers could do with the chips once they bought them, these restrictions came only after an authorized sale, and “[n]othing in the License Agreement restricts Intel’s right to sell its microprocessors and chip sets to purchasers who intend to combine them with non-Intel parts.  It broadly permits Intel to ‘make, use, [or] sell’ products free of LGE’s patent claims.”[29]  The Court dispensed with LG’s language disclaiming an implied license by holding that “the question whether third parties received implied licenses is irrelevant because Quanta asserts its right to practice the patents based not on implied license but on exhaustion.  And exhaustion turns only on Intel’s own license to sell products practicing the LGE patents.”[30]  In other words, once LG authorized Intel to sell the chips to third parties, the patent rights were exhausted, and LG had no more patent rights to license or refrain from licensing.  Quanta could use the microprocessors without a license.  Similarly, once Lexmark sold directly or authorized the sale of its cartridges to customers, its patent rights in the cartridges were exhausted, and Lexmark retained no patent rights in the cartridges to license or refrain from licensing beyond the single use.  Significantly, the Supreme Court makes no mention of market power, the “rule of reason,” or any other antitrust policy as the basis for its decision in Quanta.  Patent exhaustion is not merely a reiteration of antitrust law.

Some commentators have noted that the Quanta decision is arguably ambiguous with respect to whether it did away with post-sale restrictions altogether or whether it was simply the particular way in which the LG-Intel license was drafted that failed to overcome patent exhaustion.  Perhaps the post-sale restriction was ineffective simply because it was drafted in the language of a disclaimer of implied license, separate from the unconditional grant to Intel of the right to sell the microprocessors.  The lower courts, including the Federal Circuit, have rejected this unlikely reading of the Quanta case.

In TransCore, LP v. Electronic Transaction Consultants Corp., the Federal Circuit addressed the issue indirectly.  In that case, the patent holder had entered into a settlement agreement with a third party, Mark IV, in which it covenanted not to sue Mark IV for infringement when it sold the licensed products.[31]  Subsequent to the settlement, TransCore sued Mark IV’s downstream customers for infringement after they purchased the licensed products.  The holding of the case is that a covenant not to sue for patent infringement is no different from an affirmative license to practice patents; both trigger patent exhaustion.[32]  There was no express provision in the settlement license purporting to contract around patent exhaustion.  However, TransCore sought to rely on extrinsic evidence to the contract showing “the parties’ intent not to provide downstream rights to Mark IV’s customers….”[33]  The Federal Circuit held that the district court’s exclusion of the extrinsic evidence did not affect a substantial right of TransCore because “[t]he only issue relevant to patent exhaustion is whether Mark IV’s sales were authorized, not whether TransCore and Mark IV intended, expressly or impliedly, for the covenant to extend to Mark IV’s customers.”[34]  In other words, once the sales are authorized, an express or implied provision purporting to limit the effect of patent exhaustion (such as the product label at issue in Lexmark) has no effect.

In Tessera, Inc. v. International Trade Commission, the Federal Circuit held that a licensee’s authorized sale of an item resulted in patent exhaustion, shielding purchasers of the patented product from an ITC exclusion order.[35]  Moreover, the authorized sales did not retroactively lose their authorization due to the licensee’s failure to pay the patentee its royalties.[36]  The Federal Circuit rejected this argument because “[t]hat absurd result would cast a cloud of uncertainty over every sale, and every product in the possession of a customer of the licensee, and would be wholly inconsistent with the fundamental purpose of patent exhaustion – to prohibit post sale restrictions on the use of a patented article.”[37]

Finally, the Eastern District of Kentucky explicitly rejected Lexmark’s post-sale restriction as effective to prevent patent exhaustion in Static Control Components, Inc. v. Lexmark International, Inc.[38]  The court noted that there was a debate among academics as to whether the Supreme Court had broadly rejected post-sale restrictions as sufficient to defeat patent exhaustion, or if “the Quanta holding is limited to the very specific facts, and the very specific license agreement, that confronted the Court.”[39]  The court concluded “that Quanta overruled Mallinckrodt sub silentio.  The Supreme Court’s broad statement of the law of patent exhaustion simply cannot be squared with the position that the Quanta holding is limited to its specific facts.”[40]  One might add that even if one did suppose that the Supreme Court granted certiorari in Quanta to opine on the details of the language of a particular license agreement, it had already ruled that post-sale restrictions are ineffective altogether to avoid patent exhaustion in the 1917 Motion Pictures Patent Co. case.

And so Lexmark’s post-sale notices to customers that they must return their spent printer cartridges to Lexmark are ineffective to prevent patent exhaustion.  This does not mean that Lexmark is without a remedy to quell competition from the used resale market – only a remedy under the Patent Act.  For example, Lexmark spills much ink in its opening Federal Circuit brief arguing that the single-use restriction printed on its product packaging is “an enforceable contract” in the Ninth Circuit.  Accordingly, Lexmark could attempt to sue its customers for their alleged breaches of the adhesion contract (despite the customer relations difficulties this might cause).  As a further example, Lexmark complains in its brief that the used cartridges refilled by third parties are susceptible to malfunctions and poor performance, and that customers often blame Lexmark rather than the supplier of the used cartridge.  If customers are indeed susceptible to such source confusion, then the remedy would appear to sound in trademark law, not patent law.  Finally, Lexmark could pursue non-legal strategies, such as making its prices more competitive with the used resale market, or competing based on quality, which it apparently already does, given the supposed malfunctions of the used cartridges.  It would be a fine world if refilling the ink in one’s printer did not cost nearly so much as the printer itself.

Hence, Lexmark has other avenues to pursue to prevent the resale of its used cartridges.  But patent law has its own requirements and its own remedies, separate from the rules and remedies of contract law and trademark law.  This is appropriate, because patent law promotes different policies than those other branches of law.  These include the rules and policies of patent exhaustion, which prohibit a patent holder from pursuing an item down the stream of commerce once the patent rights in that item have been exhausted.

=====

[1] The Federal Circuit’s en banc order, available here, also asks the parties to brief the separate question of whether the authorized first sale of a patented item overseas gives rise to patent exhaustion, a topic not treated in this post.

[2] 243 U.S. 502 (1917).

[3] Id. at 506-07.

[4] Id. at 508.

[5] Id. at 452.

[6] Id. at 511 (quoting U.S. Const. art. I, § 8).

[7] Id. at 513.

[8] Id. at 518.

[9] Kirtsaeng v. John Wiley Sons, Inc., 133 S. Ct. 1351, 1363 (2013).

[10] Id.

[11] LifeScan Scotland, LTD v. Shasta Techs., 734 F.3d 1361, 1363, 1376 (Fed. Cir. 2013) (internal quotation marks and citation omitted).

[12] Molly Shaffer Van Houweling, The New Servitudes, 96 Geo. L. J. 885, 932-46 (2008).

[13] 304 U.S. 175 (1938).

[14] Id. at 180.

[15] Id.

[16] Id.

[17] 2014 U. Ill. J.L. Tech. & Pol’y 445 (2014).

[18] 976 F.2d 700, 709 (Fed. Cir. 1992).

[19] Id. at 702.

[20] Id.

[21] 976 F.2d 700, 704 (Fed. Cir. 1992).

[22] Id. at 708.

[23] 553 U.S. 617, 636 (2008).

[24] LG Elecs., Inc. v. Bizcom Elecs., Inc., 453 F.3d 1364, 1370 (Fed. Cir. 2006), rev’d sub nom., Quanta, 553 U.S. at 638.

[25] Id.

[26] Quanta, 553 U.S. at 624.

[27] LG Elecs., 453 F.3d at 1370.

[28] Quanta, 553 U.S. at 635-37.

[29] Id. at 636.

[30] Id. at 637.

[31] 563 F.3d 1271, 1276 (Fed. Cir. 2009).

[32] Id. at 1276-77.

[33] Id. at 1277.

[34] Id. (emphasis added).

[35] 646 F.3d 1357, 1370 (Fed. Cir. 2011).

[36] Id.

[37] Id. (emphasis added).

[38] 615 F. Supp. 2d 575, 585 (E.D. Ky. 2009).

[39] Id.

[40] Id. at 585-86.

At Stanford: PTO and the Courts

Patent,

I’m looking forward to participating in this week’s Stanford Law School conference focusing on the interplay between the USPTO and the Courts. [Event Website]. On April 17 (Friday), I will be introducing the topic with a discussion of the rise of administrative review proceedings under the America Invents Act of 2011. On the 18th (Saturday), I will be discussing my proposals for claim construction within the USPTO as part of Director Lee’s quality initiative.

In general, the 17th is designed as a practical-focused day with a number of practitioners and judges speaking along with a handful of academics and Judge Moore as the Keynote Speaker.  The 18th is the “academic day” and will include presentations from many of the leading patent scholars in the country.

See you there!

Revision of PTAB Policies

Patent,

USPTO Director Michelle Lee is in the process of making a series of changes to the Patent Trial & Appeal Board (PTAB).  In her comments, Director Lee begins with her wry humor: “In recent appearances … I highlighted the popularity (at least based upon number of filings) of our Patent Trial and Appeal Board (PTAB) America Invents Act (AIA) trials.”  PTAB trials have been popular for patent challengers – not so much for patentees.

Although the PTAB is a quasi-judicial body, it also operates at the direction of the USPTO director (who is also a member of the PTAB).  Thus, unlike many courts, the PTAB is not self-directed.

Director Lee has explained a set of changes to PTAB AIA Trial proceedings coming in two packages:

This spring we plan to issue a first rule package containing what we call “quick fixes”—changes of simple scope that will immediately improve the trial proceedings.  Later this summer, we will issue a second proposed-rule package containing more involved changes to our PTAB Trial Rules that govern the conduct of the AIA trial proceedings.

Regarding the quick-fix package, the PTAB is immediately implementing the following changes:

  1. Expanding the short 15-page limit on motions to amend claims (that must also explain why the proposed amendment is patentable).
  2. Expanding the 15-page limit for petitioner’s reply-brief.

In the follow-up rule-package proposal, the PTO is considering:

[F]urther modifications to the motion to amend process; adjustments to the evidence that can be provided in the patent owner preliminary response; and clarification of the claim construction standard as applied to expired patents in AIA proceedings; . . . adjustments to the scope of additional discovery[; . . . joining of] multiple proceedings before the Office involving the same patent; use of live testimony at oral hearings; and [requiring parties to] make a certification with their filings similar to a Rule 11 certification in district court litigation.

Additionally, regarding motions to amend, we are contemplating proposed changes to emphasize that a motion for a substitutionary amendment will always be allowed to come before the Board for consideration (i.e., be “entered”), and for the amendment to result in the issuance (“patenting”) of amended claims, a patent owner will not be required to make a prior art representation as to the patentability of the narrowed amended claims beyond the art of record before the Office.

One issue that has been raised by some (and is part of the proposed “STRONG patent act”) is the perception that PTAB judges who grant the petition-for-review have already come to a conclusion in the case — giving the patentee an undue uphill battle to win on the trial merits (since it is the same judges who hear the merits).  The PTO is going to propose a modified model for a pilot program where a single judge decides the petition and then two additional judges are added for the trial.

 

Teva, Nautilus, and Change without Change

Patent

By Jason Rantanen

Rather than just write short blog posts about the Federal Circuit’s recent claim construction decisions, I put together a longer piece that examines both indefiniteness after Nautilus v. Biosig and claim construction after Teva v. Sandoz.  In the essay, I argue that despite an expectation that Nautilus and Teva would have a substantial impact on the Federal Circuit’s jurisprudence in these areas, very little has actually changed either in outcome or in the court’s formal analytical framework.

Nevertheless, I conclude, the potential for substantial change still remains, both for claim construction and indefiniteness.  In a nutshell, I suggest that Teva’s real effect may be to expose a fundamental crack in the Federal Circuit’s claim construction methodology, one that could ultimately result in meaningful change.  And while indefiniteness might appear frozen, there are cracks beneath the surface on which perceptive advocates will inevitably push.

The essay is available here.  As this is a draft, I welcome reasonable comments.

http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2585844

Supreme Court: TTAB Decisions Create Issue Preclusion for Later Litigation

Patent, , , , ,

by Dennis Crouch

In B&B Hardware v. Hargis Indus. (2015), the U.S. Supreme Court involved a trademark opposition running in parallel with a trademark infringement lawsuit over the mark SEALTITE/SEALTIGHT.  The general holding is that a final decision by the US Patent & Trademark Office’s Trademark Trial and Appeal Board (TTAB) can serve as issue preclusion to collaterally estop a court from re-judging already-decided issues.  The particular issue being precluded here is the likelihood-of-confusion between the two marks, and the Supreme Court held that the TTAB’s final decision on likelihood-of-confusion could preclude that issue from being later litigated in the collateral action between the parties.

A court should give preclusive effect to TTAB decisions if the ordinary elements of issue preclusion are met.

Here, the “ordinary elements” of issue preclusion are that “[w]hen an issue of fact or law is actually litigated and determined by a valid and final judgment, and the determination is essential to the judgment, the determination is conclusive in a subsequent action between the parties, whether on the same or a different claim.” Restatement (Second) of Judgments §27.

In its decision, the Supreme Court recognized (1) that the TTAB is an administrative agency and not an Article III court; (2) that a right to a jury trial would exist in the infringement action absent preclusion; (3) that the details and procedures associated with the TTAB judging likelihood-of-confusion were somewhat different (but not fundamentally different) than that applied in the 8th Circuit; and (4) that – had the TTAB decision been challenged – it was not appealed.

And it is undisputed that a civil action in district court would entail de novo review of the TTAB’s decision. Ante, at 5.

Going forward, the court is clear that many TTAB decisions will not have preclusive effective — but that is because they fail the ordinary elements of preclusion and not simply because the TTAB is an administrative agency or because the TTAB usually decides cases in a certain way.

The 7-2 decision was penned by Justice Alito with a concurring opinion by Justice Ginsburg.  Justice Thomas wrote in dissent and was joined by Justice Scalia.  The dissent argued that the court should not simply presume that Congress intended agency decision to have preclusive effect.

= = = = =

For patent attorneys, the case will have an obvious impact on the interplay between the Patent Trial and Appeal Board (PTAB) and parallel district court litigation.  The same reasoning that led the Supreme Court to its decision in B&B will apply equally with determinations made during inter partes and post grant review proceedings.  Importantly, issue preclusion applies to individual decisions of fact or law and thus may be important for sub-issues such as claim construction, scope and content of the prior art, level of skill in the art, etc.

Although B&B focused on traditional mutual issue preclusion, there is should also apply to defensive non-mutual issue preclusion that might arise when the defendant in an infringement action was not one of the parties in the IPR/PGR.

An important caveat: The Supreme Court recognized that issue preclusion won’t apply to agency decision when Congress so indicates. Here, there is an argument that the estoppel provisions in the IPR/PGR statutes suggest that Congress has opted out of the issue preclusion arena for these decisions.

= = = = =

One of the most interesting lines from the opinion: “federal law does not create trademarks.” For that line, the court cited Trade-Mark Cases, 100 U. S. 82, 92 (1879) (“This exclusive right was not created by the act of Congress, and does not now depend upon it for its enforcement. The whole system of trade-mark property and the civil remedies for its protection existed long anterior to that act, and have remained in full force since its passage.”).

 

The Strong Patent Act of 2015 from Senator Coons

Patent, , , , ,

by Dennis Crouch

Senator Coons is expected to introduce his competing patent reform bill into the Senate this week under the title Strong Patents Act.  As the name suggests, these provisions here tend to strongly favor patent holders.  With his usual understated tone, Herb Wamsley writes that Coons’ bill “will differ substantially from Rep. GOODLATTE’s bill H.R. 9.”  In the current political state, this provision has no hope of being enacted. However, I suspect that supporters of provision see it as having strong gridlock-creating potential.

The following is a fairly high-level review of the particular proposals as well as a link to the text of the bill.

[STRONG Patents Act of 2015]

Provisions related to PGR/IPR/Reexams: 

Claim Construction during Post-Issuance Review Proceedings shall be according to the “ordinary and customary meaning” and in the same way that a court would construe the claim in an action to invalidate a patent.  This provision would have the beneficial impact of better-linking the parallel court and PTO proceedings.  The provision would also make it more difficult for the PTAB to invalidate patents because the claims would no longer be given their broadest reasonable interpretation.

Amendments to the Claims during Post-Issuance Review Proceedings will be allowed if “reasonable.”

Presumption of Validity will Apply to patents being challenged in post-issuance review proceedings such that unpatentability of a previously issued claim would require clear and convincing evidence.

Standing to File Post-Issuance Review Proceedings will be limited to only entities charged with infringement.

In Response to a Post-Issuance Review Petition, the patentee will be allowed to submit supporting evidence.

Separating the Two Steps of Post-Issuance Review Proceedings: Under the proposed law, a PTAB judge who participates in the decision to grant a PGR/IPR petition will not then be allowed to decide the merits of the case.

Blocking Anonymous Petitions: The proposed law would allow the patentee to discover the real party in interest associated with the filing of either a reexamination or an PGR/IPR petition.

A One Year Deadline will be instituted for filing requests for ex part reexamination triggered by service of a complaint alleging infringement.

Civil Procedure:

Form 18 is to be eliminated.

USPTO Funding:

Fees collected by the USPTO will be made available to the Director until expended including past each fiscal year.

Infringement:

The Punitive Damages Provision would be amended to allow the court “in its discretion” to treble damages “upon determining, by a preponderance of the evidence, that the infringement was willful or in bad faith.”

Inducement of Infringement becomes a cause of action as outlined by the Federal Circuit in Akamai. This would effectively overrule the Supreme Court’s decision in the case.

Universities:

The provision would fix a seeming gap in the current micro-entity status requirements that don’t actually allow universities to claim micro-entity status (for a 75% fee reduction) but instead only those with a duty to assign rights to the university.

Rogue and Opaque Demand Letters:

The new law would specify that certain bad-faith demand letters are unlawful under the FTC Act and the FTC would have power to enforce the law with a maximum penalty of $5 million.

= = = = =

 

CAFC Reverses Award of 285 Fees: Biax Corp. v. Nvidia Corp.

Ethics

In a non-prec opinion in Biax Corp. v. Nvidia Corp., the panel (Dyk-auth; Lourie; Taranto) reversed the district court’s award of section 285 fees and affirmed its denial of sanctions under section 1927.  The case was decided before Octane and so had a fun procedural path to get to this point.

The district court had found that the patentee had asserted objectively baseless infringement claims after the district court had construed the claims.  Thus, under Brooktree, it awarded fees under Section 285.

There are many cases where courts have awarded fees when, after claim construction, a party has no reasonable basis to contest, or assert, infringement, yet continues to do so.  Here, however, the Federal Circuit found there was such a basis, and it reversed the fee award.

What is odd, however, is the panel’s decision not to remand.  In its concluding paragraph the court wrote:

Because neither the expert testimony nor the claim construction orders foreclosed Biax’s position and there was nothing unreasonable about Biax’s infringement position, the basis for the district court’s award of fees no longer exists. Thus, even applying the deferential standard of review under Highmark, the district court’s fee award must be set aside. In some cases decided under the old Brooks Furniture standard, we have remanded for the district court to consider whether the case is “exceptional” in light of the new Octane Fitness standard. See, e.g., Checkpoint Sys., Inc. v. All-Tag Sec. S.A., 572 F. App’x 988 (Fed. Cir. 2014). A remand is not necessary here because neither the defendants nor the district court has suggested any basis for awarding fees other than the lack of objective reasonableness, and the resulting bad faith from continuing to litigate an objectively baseless position. Therefore, we reverse rather than vacate the fee award.

This strikes me as odd, since from the case, it appears that the only basis, pre-Octane to seek fee shifting was objective baseless.  To not give the defendant the right to assert that, regardless of objective reasonableness, the case was not “ordinary” under Octane seems odd.

 

Construing Claims: Independent Claim Preamble is Limiting when Used in the Body of Dependent Claims

Patent

ScreenShot156by Dennis Crouch

In Pacing Tech v. Garmin, the Federal Circuit has affirmed a summary judgment of non-infringement — holding that Garmin’s fitness watches do not infringe U.S. Patent No. 8,101,843.

Although captioned as a decision on infringement, the defendants were able to shift the focus to claim construction.  Here, the Federal Circuit found the claim-preamble limiting in such a way that avoids infringement.

One well-known secret of patent interpretation is that, a claim preamble will not be seen as limiting unless it “breathes life and meaning into the claim” In re Wertheim, 541 F.2d 257 (CCPA 1976).  The rule here is essentially a particular application of the general thought that statements of the invention’s intended purpose are not limiting. Expanding upon Wertheim, however, the Federal Circuit has also ruled that the preamble can be limiting when elements in the preamble serve as an antecedent basis for limitations in the claim body. See Eaton Corp. v. Rockwell Int’l Corp., 323 F.3d 1332 (Fed. Cir. 2003).

The strategy used by some patent applicants is to include preamble terms that make the claim scope seem reasonable and well grounded, but with the hope that those limitations will not be given effect later in enforcement proceedings.

Here, the claim at issue is:

25. A repetitive motion pacing system for pacing a user comprising: . . .

a web site adapted to allowing the user to pre-select [activities]…

a data storage and playback device; and

a communication device adapted to transferring data [between the web site and data storage and playback device].

The ‘preamble’ of claim 25 is the portion coming before the word ‘comprising:’ i.e., ‘A repetitive motion pacing system for pacing a user.’ Although not used in the body of claim 25, the ‘repetitive motion pacing system’ phrase is found in the body of dependent claim 28 with the following clause: ‘wherein the repetitive motion pacing system can determine a geographic location of the data storage and playback device.’ Further, the preamble term ‘user’ was also relied upon in the body of claim 25.

Taking a whole-patent analysis approach, the Federal Circuit found the claim preamble limiting because the core terms served generally served an antecedent basis:

Because the preamble terms “user” and “repetitive motion pacing system” provide antecedent basis for and are necessary to understand positive limitations in the body of claims in the ’843 patent, we hold that the preamble to claim 25 is limiting.  

After finding that the preamble requirement of a “repetitive motion pacing system” was limiting, the court then took the next step of giving meaning to the term through the construction process.

Object of Invention Disavows Scope: The patent application describes several ‘objects of the invention’ – all of which include ‘a repetitive motion pacing system for pacing a user that includes a data storage playback device adapted to produce a sensible tempo.’  The asserted claim 25 does not expressly state that the pacing system needs to ‘produce a sensible tempo’, but the Federal Circuit here found that the stated object of the invention represented ‘a clear and unmistakable disavowal’ of scope and requires that the term be interpreted to require the tempo. As the final step of the analysis, the court made the easy conclusion that – since Garmin’s accused devices do not produce a sensible tempo, they do not infringe.

Of interest, the patent does include several embodiment where there was no discussion of whether or not the tempo feature was included.  In its decision, the Federal Circuit found those statements insufficient to overcome the object-of-the-invention statements. “Just because an embodiment does not expressly disclose a feature does not mean that embodiment excludes that feature.”

= = = = =

I. In my mind, the right decision is that the claim preamble should be limiting in this case — and in all cases. Claims need no extraneous elements but instead each claimed phrase should be included for a legally cognizable purpose and interpreted as such.  Additional descriptions, statements of purpose, and the like are helpful, but belong in the specification unless they are intended to be limiting.

II. Here, the court took a statement-of-purpose from the specification and deemed it a clear disavowal of claim scope.  That approach makes logical sense because it truly limits the claim to the subject matter that the inventor believed she had invented.  However, my problem with the approach is that patent attorneys will walk away with the solution of avoiding any discussion of the purpose of the invention or else choose to provide discussion of purpose so full of caveats and exceptions so as to eliminate the potential for clarity in understanding the technological advance being disclosed.

 

Fenner v. Cellco: Judge Newman Speaks on Claim Construction

Patent, , , ,

By Jason Rantanen

Fenner Investments, Ltd. v. Cellco Partnership (Fed. Cir. 2015) Download Fenner v Cellco
Panel: Newman (author), Schall, Hughes

In Fenner v. Cellco Partnership, Judge Newman adds another voice to the chorus of Federal Circuit judges reading Teva v. Sandoz as having little effect on the court’s routine review of district court claim constructions.  Here, the panel affirms the district court’s construction of the term “personal identification number” under what appears to be a de novo standard of review   Frustratingly, the opinion never states which standard of review it is applying either generally or to any given issue, but I read all of the issues it addresses as either consisting of intrinsic evidence or going to the “ultimate question” of claim construction.

Judge Newman’s Articulation of the Post-Teva standard of review.  The appellate analysis begins with the established reading of Teva as reinforcing a largely de novo standard of review for claim construction:

 We review de novo the ultimate question of the proper construction of patent claims and the evidence intrinsic to the patent. Teva Pharm. USA, Inc. v. Sandoz, Inc., 135 S. Ct. 831, 841 (2015); id. (“[W]hen the district court reviews only evidence intrinsic to the patent (the patent claims and specifications, along with the patent’s prosecution history), the judge’s determination will amount solely to a determination of law, and the Court of Appeals will review that construction de novo.”). The district court’s determination of subsidiary facts based on extrinsic evidence is reviewed for clear error. Id. at 835, 841.

After noting that the appellant’s argument rested on a plain meaning versus the specification & prosecution history tension, the opinion summarizes the claim construction process:

The terms used in patent claims are not construed in the abstract, but in the context in which the term was presented and used by the patentee, as it would have been understood by a person of ordinary skill in the field of the invention on reading the patent documents. See Biogen Idec, Inc. v. GlaxoSmithKline LLC, 713 F.3d 1090, 1095 (Fed. Cir. 2013) (“[A] term’s ordinary meaning must be considered in the context of all the intrinsic evidence, including the claims, specification, and prosecution history.”). Thus, a claim receives the meaning it would have to persons in the field of the invention, when read and understood in light of the entire specification and prosecution history. Phillips v. AWH Corp., 415 F.3d 1303, 1312– 1317 (Fed. Cir. 2005) (en banc). Any explanation, elaboration, or qualification presented by the inventor during patent examination is relevant, for the role of claim construction is to “capture the scope of the actual invention” that is disclosed, described, and patented. Retractable Techs., Inc. v. Becton, Dickinson & Co., 653 F.3d 1296, 1305 (Fed. Cir. 2011).

In this articulation of the process, both the specification and the prosecution history play an important role.  But Judge Newman does not stop with this summary; she digs into the meaning of claim construction itself:

Words are symbols, linguistic embodiments of information sought to be communicated, and, as such, can be imperfect at representing their subject. The Supreme Court recently observed this challenge to patent claim interpretation, stating in Nautilus, Inc. v. Biosig Instruments, Inc., 134 S. Ct. 2120, 2128-29 (2014), that “the definiteness requirement must take into account the inherent limitations of language,” and that clarity is required although “recognizing that absolute precision is unattainable.” When the disputed words describe technology, the terse usage of patent claims often requires “construction” in order to define and establish the legal right. Judicial “construction” of patent claims aims to state the boundaries of the patented subject matter, not to change that which was invented.

Beginning with the written description issue, the opinion concludes that the district court used that portion of the patent properly:

The foundation of judicial claim construction is the “written description” in the specification. The patent statute requires that the claims “particularly point[] out
and distinctly claim[] the subject matter” that the applicant regards as the invention. 35 U.S.C. §112(b). The district court appropriately consulted the description in the ’706 specification “for the purpose of better understanding the meaning of the claim.” White v. Dunbar, 119 U.S. 47, 51 (1886).

The prosecution history further bolstered the district court’s construction even though the examiner did not appear to have relied upon the relevant statements by the applicant in granting the patent:

Fenner argues that these purportedly limiting statements he made during prosecution do not limit the claims, arguing that the statements and the limitations discussed were not the basis for grant of the patent. However, the interested public has the right to rely on the inventor’s statements made during prosecution, without attempting to decipher whether the examiner relied on them, or how much weight they were given. See Microsoft Corp. v. Multi-Tech Sys., Inc., 357 F.3d 1340, 1350 (Fed. Cir. 2004) (“[A] patentee’s statements during prosecution, whether relied on by the examiner or not, are relevant to claim interpretation.”); Laitram Corp. v. Morehouse Indus., Inc., 143 F.3d 1456, 1462 (Fed. Cir. 1998) (“The fact that an examiner placed no reliance on an applicant’s statement distinguishing prior art does not mean that the statement is inconsequential for purposes of claim construction.”)

The court also rejected the appellant’s arguments based on interoperability (concluding that the district court’s construction did not render the claim inoperable) and claim differentiation:

Although claim differentiation is a useful analytic tool, it cannot enlarge the meaning of a claim beyond that which is supported by the patent documents, or relieve any claim of limitations imposed by the prosecution history. See, e.g., Retractable Techs., 653 F.3d at 1305 (“[A]ny presumption created by the doctrine of claim differentiation ‘will be overcome by a contrary construction dictated by the written description or prosecution history.’” (quoting Seachange Int’l, Inc. v. C-COR, Inc.,413 F.3d 1361, 1369 (Fed. Cir. 2005))); Toro Co. v. White Consol. Indus., Inc., 199 F.3d 1295, 1302 (Fed. Cir. 1999) (“[T]he doctrine of claim differentiation does not serve to broaden claims beyond their meaning in light of the specification, and does not override clear statements of scope in the specification and the prosecution history.” (citation omitted)).

 

 

 

Patently-O Bits and Bytes

Patent, ,

by Dennis Crouch

New Jobs posted in Patently-O Jobs. Target your hiring with Patently-O.

Guest Post: Why Administrative Law Matters to Patent Attorneys—In re Cuozzo Speed Technologies LLC

Patent, , , ,

by David Boundy

Many patent attorneys—including me—went through law school thinking “Administrative law?  What do I care?”  Administrative law matters; it is as important to intra-PTO litigation and to Federal Circuit appeals as the Federal Rules of Civil Procedure are during district court proceedings.

Administrative law provides a rich set of tools to for a party to guide rational agency decision making while a proceeding is in progress, and to challenge adverse decisions on judicial review.  Administrative law tools can:

  • require the agency to follow its own regulations as written, without ad hoc “interpretation” or creation of on-the-fly rules,
  • require the agency to consider all relevant evidence and arguments,
  • establish jurisdiction for judicial review,
  • on judicial review, obtain favorable standards of review by slotting issues into exceptions to the high deference normally accorded agency action,
  • turn weak policy-based arguments into strong arguments based on statute and Supreme Court authority,
  • challenge the agency’s evidentiary and factual rulings on standards that are often far more favorable than the standard of review applied to Article III courts—indeed, the standard of review in some instances can be less deferential than the standard applicable to jury findings,
  • adduce new evidence on appeal,
  • limit the agency’s ability to wiggle out of a case by requesting remand, and instead force the issue to a binding judgment against the agency, and
  • confine the arguments that the agency can make to defend its action, and
  • require the agency to meet the requirements of the Administrative Procedure Act and other relevant laws when promulgating its regulations or guidelines.

Competence in administrative law is essential in complex patent prosecution, ex parte appeals, PTAB trials, and appeals to the Federal Circuit from PTO and ITC actions.

The Administrative Law Requires Courts to Accept Jurisdiction to Review Agency Non-Compliance with Their Own Regulations

For example, last Wednesday, the Federal Circuit in In re Cuozzo Speed Technologies, LLC ruled that the court has no jurisdiction to review decisions by the Patent Trial and Appeal Board (PTAB) whether to institute an Inter Partes Review (IPR). An argument based on administrative law would have established the Federal Circuit’s jurisdiction, but that argument was not raised.

The Federal Circuit’s holding was so broad as to oust the court of jurisdiction to review whether the PTAB’s decision was made on criteria contrary to statute or the regulations that the PTAB promulgated for itself.  The court read 35 U.S.C. § 314(b) so broadly as to insulate from judicial review all decisions to institute or not institute an IPR, in all circumstances.

But the administrative law requires a court to exercise jurisdiction to review agency compliance with the agency’s own regulations and guidance, and to set aside agency action issued “without observance of procedure required by law.”[1]  The Supreme Court has addressed the following fact pattern on about a dozen occasions.  An agency acts outside its procedures.  The aggrieved party sues.  The agency points to a statute that precludes review, and asks the court to deny jurisdiction on that basis.  In every such case, the Supreme Court holds that even if a statute purports to preclude review, jurisdiction remains to review the agency’s procedures, to assess whether the agency action was “without observance of procedure required by law.”  “Only in the rare—some say non-existent—case  … may review for ‘abuse’ be precluded.”[2]  The Court holds that preclusion statutes must be read narrowly, to preclude review only of the ultimate decision on the merits, leaving intact jurisdiction to review whether the agency departed from procedural requirements.  The Supreme Court has applied this principle to statutes even broader and clearer than § 314(b), and to government interests far more fundamental.  It is a very strong principle.

Had that administrative law argument been raised, the Federal Circuit would unquestionably have accepted jurisdiction in Cuozzo.

The Administrative Law Confines the Board’s Discretion to Deny Motions to Amend During IPR’s

Cuozzo’s brief argues that the Board erred in denying a motion to amend claims.   The argument cites no authority.  This argument could have been converted from a weak argument to a very strong one, by grounding it in the administrative law.

When an agency promulgates a regulation, it is required to explain the regulation in a Final Rule notice in the Federal Register.  Any gloss put on the regulation in that notice binds the public under Chevron[3] deference (though the many exceptions to Chevron are far less known).  This gloss is binding on the agency as well—an agency can’t twist its regulations like a nose of wax.  Nor can an agency move regulatory burden from one regulation to another, like a confidence man moving a pea from under one shell to another, by giving inconsistent rationales and interpretations for regulations.

In promulgating the IPR regulations, the PTO justified its choice of a “broadest reasonable interpretation” standard for claim construction by pointing to “a party’s ability to amend claims to avoid prior art—which exists in these proceedings (§ 42.221).”[4]  But the PTAB almost never grants these motions to amend.[5]  Thus, as a practical matter, the agency’s basis for adopting “broadest reasonable interpretation” is illusory.  The administrative law does not allow agencies to have things both ways—the PTO can’t both uniformly deny motions to amend and point to that “right” as justification for broadest reasonable interpretation.

The strong argument is based in administrative law.  While most “arbitrary and capricious” cases are hard, a few subcategories are easy.  PTAB decisions frequently raise issues that can be slotted into these easy subcategories for appeal.

The PTAB’s Trial Regulations Were Issued with Insufficient Attention to Rulemaking Procedure

Cuozzo also affirms the PTO’s choice of “broadest reasonable interpretation” as the standard for claim construction. However, the PTO’s “broadest reasonable interpretation” rule—like many of the PTO’s other regulations—is subject to challenge because the PTO was less than rigorous in following rulemaking procedure.

Agency rulemaking is governed by a number of statutes, including the Administrative Procedure Act, Regulatory Flexibility Act, Paperwork Reduction Act, Information Quality Act, E-Government Act of 2002, Independent Offices Appropriations Act, regulations on Information Collections, guidelines on Information Quality, and Executive Order 12,866.  These laws require specific procedures, disclosures, and analyses.  For example, they require an agency to disclose its assumptions, factual and statistical information and models and their underlying support on the agency’s web site.  The agency must ask specific questions to seek comment.  The agency must show cost-benefit analyses to asses effect on small entities and overall economic effect, and must show that the agency has sought to minimize (not just reduce, but minimize) paperwork burdens.  The agency must show its work, and provide supporting evidence, similar to that required for a peer-reviewed journal article.

The Paperwork Reduction Act is especially interesting, because it is little known and exceptionally powerful.  As you may recall, the PTO had to stand down on its Appeal regulation on the morning it was to go into effect because the Office of Management and Budget withheld the PTO’s power to enforce those regulations, after a number of letters pointed out PTO violations of the PRA.  (I had a little influence in that outcome.)  Likewise, OMB directed PTO to stand down on the Continuations, 5/25 Claims, and IDS regulations (I also had something to do with that).

During the rulemaking process for the PTO’s AIA regulations, several of the comment letters noted procedural deficiencies in the PTO’s Notices of Proposed Rulemaking and its supporting materials.  The letters warned that these deficiencies would expose the PTAB’s decisions to challenge because the PTAB’s regulations were not validly promulgated.  The oversights were not corrected before the final regulations were published.

Many PTAB decisions present winnable issues for appeal based on faulty procedure during rulemaking.  Cuozzo likely could have been such a case, but administrative law opportunities were missed.

Conclusion

Some administrative law statutes permit issues to be raised at any time, and such issues have been successfully raised for the first time in courts of appeals.  Unfortunately, in Cuozzo, these administrative law arguments weren’t squarely raised.  The lesson of Cuozzo is that patent attorneys—especially those that practice in contested cases before the PTAB and in appeals to the Federal Circuit—need to know the administrative law as well as they know the patent law.

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David Boundy is a patent attorney in Cambridge Massachusetts, specializing at the intersection of administrative law and patent law.  While Vice President for Intellectual Property at Cantor Fitzgerald, in 2006-10 Mr. Boundy led teams that advocated with the Office of Management and Budget in the Executive Office of the President for the withdrawal by the PTO of the Continuations, 5/25 Claims, IDS, and Appeal rules.  Mr. Boundy consults and provides legal services on administrative law issues for intra-PTO trials and judicial review cases.

= = = = =

[1] 5 U.S.C. § 706(2)(D).

[2] Bowen v. Michigan Academy of Family Physicians, 476 U.S. 667, 672 n.3 (1986)

[3] Chevron U.S.A. Inc. v. Natural Resources Defense Council, Inc., 467 U.S. 837 (1984).

[4]  Patent and Trademark Office, Changes to Implement Inter Partes Review Proceedings, Post-Grant Review Proceedings, and Transitional Program for Covered Business Method Patents; Final Rule, 77 Fed. Reg. 48680, 48693 (Aug. 14, 2012).

[5] Richard Neifeld, “Kill Rate of the Patent Death Squad, and the Elusory Right to Amend in Post-Grant Reviews,” Intellectual Property Today, (April 2014), at http://www.neifeld.com/pubs/Kill%20Rate%20of%20the%20Patent%20Death%20Squad%20-%20Part%20I.pdf

Patent Reform: Innovation Act of 2015

Patent, ,

by Dennis Crouch

On February 5, 2015, Rep. Goodlatte reintroduced his patent reform bill: the Innovation Act.  Co-sponsors already include the bipartisan group of Reps. Defazio, Issa, Nadler, Smith, Lofgren, Chabot, Eschoo, Forbees, Pierlusi, Chaffetz, Jeffries, Marino, Farenthold, Holding, Johnson, Huffman, Honda, and Larsen.

Read the Bill: Innovation Act 2015

The bill as introduced includes the following provisions:

  • Heightened Pleading Requirements: Significant raising of the pleading requirement for patent cases.  A patent holder filing an infringement lawsuit – at the time of filing – would need to include a set of infringement charts showing how each limitation of each asserted claim in each asserted patent is found within each accused product or instrumentality.  However, the plaintiff would not be required to complete the entire chart if the infringement is not readily available after a reasonable amount of pre-filing due diligence.  Form 18 would also be eliminated.  Pharmaceutical companies filing infringement actions under 271(e)(2) wouldn’t need to comply.  The approach here raises some separation of powers concerns (ordering the Judicial Conference to act). The Judicial Conference has also already moved to eliminate Form 18 in a way that would implicitly increase pleading requirements. Those changes are expected to take-effect December 2015.  However, the Judicial Conference changes do not go nearly as far as the legislative proposal here.
  • Presumption of Attorney Fees:  Under the new law, a court would be required to award attorney fees and “other expenses” to the prevailing party unless a judge “finds that the position and conduct of the nonprevailing [was] reasonably justified in law and fact or that special circumstances (such as severe economic hardship to a named inventor) make an award unjust.  This flips the current rule where attorney fees are only available in “exceptional cases” and instead replaces it with a roughshod version of the “English Rule.”  In cases where the patentee is undercapitalized, the law would allow the court to pierce the corporate veil and make investors and other ‘interested parties’ pay the attorney fee award.  Unlike the English system, the proposal here does not place any limits on the potential fee award other than it be “reasonable.”  In my view, an improvement upon this would be to set reasonableness early-on based upon an estimation of the case value.
  • IPR Claim Construction: Rejecting the Federal Circuit’s recent Cuozzo decision, the Bill would require the USPTO to construe claims in post-issuance reviews (IPR/PGR/CBM) in the same manner as would be done by a district court and “in accordance with the ordinary and customary meaning of such claim as understood by one of ordinary skill in the art and the prosecution history pertaining to the patent.”  And, if a court has already construed the claim then the PTO must “consider such claim construction.”  This particular change is one that favors patentees.
  • Discovery Limits:  The bill would limit discovery in litigation until after a claim construction ruling (if one is necessary for the case).  For cases where claim construction is dispositive, this ruling has the potential of reducing costs. It also will create further pressure on courts to conduct early claim construction decisions.   At the same time, the approach seems to increase the likelihood that a court will separate the claim construction decision from its summary judgment decision (which would likely require further discovery) except, perhaps in cases involving definiteness under Section 112(b).  Additionally, discovery of non “core” documents would also be severely limited, and anyone asking for discovery would need to first either (a) post a bond sufficient to cover the expected costs of additional discovery or (b) be a large enough company.
  • Willful Infringement:  Willful infringement can lead to treble damages, but the Bill would limit the applicability of pre-suit demand letters for proving willfulness unless  the demand letter identifies: (1) the patent in question; (2) the ultimate parent entity that owns the patent; (3) the accused products; and (4) how the product infringes at least one claim of the patent.
  • Transparency of Ownership: In any lawsuit, the patent owner must disclose “the ultimate parent entity” of any assignee of the patent. Further, the patentee will be under an ongoing duty to update the USPTO of any change in ownership, including ultimate parent entity within 90-days of any change. Failure to keep-up the information results in no enhanced damages or attorney fees for the patentee in litigation and an award of attorney fees to the defendant who spent money researching the actual ownership information.
  • Stay of Customer Suits: In limited cases, the courts will stay customer lawsuits when the manufacturer of the accused product steps up to challenge the patent.
  • Foreign Bankruptcy: The bill would stop the practice of a bankruptcy executor canceling US IP licenses in foreign bankruptcies.  This is already barred for U.S. bankruptcies under 365(n) of the Bankruptcy code.
  • Codifying Double Patenting: The bill would codify a double patenting regime that would seemingly replace the obvousness-type double patenting system developed by the courts. The proposal would particularly allow prior filings by overlapping inventors to count as prior art unless a terminal disclaimer is filed.

Patent Reform 2015

Patent

Representative Goodlatte has re-introduced the Innovation Act that easily passed the House in the last congressional term.  Senate leaders have offered bipartisan support for a reform bill as has President Obama. The push for reform is primarily focusing on bad actors asserting bad patents.  Primary elements of the bill would create a presumption of awarding attorney fees to the prevailing party and ensuring that those financing litigation can be held liable if the assertion entity is undercapitalized; requiring higher pleading standards for patent cases; and limiting discovery until after claim construction. Of course, the actual impact will very much depend upon the details of what passes.

Goodlatte is the chairman of the House Judiciary Committee.  Rep. Issa is also in supporting the legislation in his role as chair of the IP Subcommittee.

 

Patentee Loses First IPR Appeal on all Grounds

Patent, , , ,

by Dennis Crouch

The America Invents Act (AIA) was a major rewriting of U.S. patent law, but the statute includes a number of new provisions that need some amount of court interpretation.  Although the law is now 3 1/2 years old, cases involving the new provisions are only now reaching the courts.

The Federal Circuit’s decision of In re Cuozzo Speed Tech (Fed. Cir. 2015), is important as the first appeal of a written decision stemming from the new inter partes review proceedings.  Over 2000 IPR/CBM/PGR petitions have been filed during this time and so we can expect this to be the first appeal of many.  Garmin filed the IPR challenging Cuozzo’s navigation patent claims as obvious. See IPR 2012-00001; U.S. Patent No. 6,778,074.  The basic idea behind the invention is to link GPS navigators with a database of legal speed limits and provide driver colored speedometer warnings.

In its review, the Patent Trial and Appeal Board (PTAB) held trial and ruled that the challenged claims (10, 14, and 17) were unpatentable as obvious as compared to a set of prior art references.

On appeal, the Federal Circuit has affirmed with the following primary holdings:

  1. Under 35 U.S.C. 314(d), the Federal Circuit has no jurisdiction to consider whether the IPR was properly instituted. However, the court suggested that a mandamus action could potentially be available if the PTAB “clearly and indisputably exceeded its authority” in instituting an IPR.
  2. When conducting an IPR, the USPTO properly determined that claims-at-issue should be construed according to their broadest-reasonable-interpretation.  The appellate panel found that BRI is likely the correct standard and that regardless, the USPTO had been given substantial rulemaking authority in this area.
  3. Teva v. Sandoz altered the court’s approach to reviewing a PTO claim construction. In particular, under the new rule, factual conclusions concerning extrinsic evidence considered by the USPTO are reviewed for substantial evidence. However, because was no extrinsic evidence considered, this statement could be seen as mere dicta.
  4. The obviousness determination was appropriate and, in particular, the combination of references made sense because  “[a]pplying modern electronics to older mechanical devices has been commonplace in recent years.” quoting Leapfrog Enters., Inc. v. Fisher-Price, Inc., 485 F.3d 1157, 1161 (Fed. Cir. 2007). Further, it was fine for the PTO to rely upon prior art not identified in teh petition.
  5. Finally, the PTAB did not err in denying Cuozzo leave to amend its claims in a way that enlarged the scope of the patent – since the statute bars broadening amendments in IPRs. 35 U.S.C. 316(d)(3).

Writing in dissent, Judge Newman argued (1) that the claim construction in IPRs should be the same as that in district court; and (2) that the patent owner should be allowed to appeal PTAB decisions, including the decision to institute an IPR.

In re Papst Licensing: Federal Circuit Speaks on Claim Construction

Patent, , , ,

By Jason Rantanen

In re Papst Licensing Digital Camera Patent Litigation (Fed. Cir. 2015) (Download In re Papst)
Panel: Taranto (author), Schall, Chen

In its first precedential opinion addressing claim construction after Teva v. Sandoz, a panel of Judges Taranto, Schall and Chen take the approach that it is business at usual for the court—at least, as long as only intrinsic evidence is involved.

The most significant aspect of this opinion is the relationship between this appeal and Teva.  Here, the district court heard from the parties’ experts on the technical background, but “declined to admit expert testimony or to rely on an expert declaration from Papst, stating that ‘the intrinsic evidence—the claims, the specification, and the prosecution history—provide the full record necessary for claims construction.”  Slip Op. at 7.  Given this posture, the Federal Circuit comfortably applied a de novo standard of review.  From the opinion:

We review the grant of summary judgment of noninfringement de novo, applying the same standard used by the district court. See Bender v. Dudas, 490 F.3d 1361, 1366 (Fed. Cir. 2007). The infringement inquiry, which asks if an accused device contains every claim limitation or its equivalent, Warner-Jenkinson Co. v. Hilton Davis Chem. Co., 520 U.S. 17, 29 (1997), depends on the proper construction of the claims. See Cybor Corp. v. FAS Techs., Inc., 138 F.3d 1448, 1454 (Fed. Cir. 1998) (en banc). In this case, we review the district court’s claim constructions de novo, because intrinsic evidence fully determines the proper constructions. See Teva Pharm. U.S.A. Inc. v. Sandoz, Inc., 135 S. Ct. 831, 840–42 (2015). As we have noted, the district court relied only on the intrinsic record, not on any testimony about skilled artisans’ understandings of claim terms in the relevant field, and neither party challenges that approach.

Slip Op. at 8.  Operating within this framework, the court drew upon its “familiar approach to claim construction”:

“We generally give words of a claim their ordinary meaning in the context of the claim and the whole patent document; the specification particularly, but also the prosecution history, informs the determination of claim meaning in context, including by resolving ambiguities; and even if the meaning is plain on the face of the claim language, the patentee can, by acting with sufficient clarity, disclaim such a plain meaning or prescribe a special definition.”…We apply, in particular, the principle that “[t]he construction that stays true to the claim language and most naturally aligns with the patent’s description of the invention will be, in the end, the correct construction.”

Slip Op. at 9-10 (internal citations omitted).  Using that approach, the Federal Circuit reversed all of the district court’s claim constructions at issue.

While this appeal appears to involve Teva‘s paradigmatic scenario in which de novo review is appropriate, future appeals are less likely to offer such a relatively simple posture.   Rather, the expectation is that district judges will seek to insulate themselves from review by relying upon evidence that the Supreme Court said is due deferential review.  This increasing reliance on extrinsic evidence by district courts will result in appeals that intertwine the intrinsic with the extrinic.  That said, the above sections of the opinion suggest to me that the court is probably going to focus its review on the intrinsic evidence first and, if that is clear, will decide the appeal on that ground alone.

There’s another layer of complexity going on here that relates to the starting meaning* of words.  In Teva, the Court observed that:

Construction of written instruments often presents a “question solely of law,” at least when the words in those instruments are “used in their ordinary meaning.”…But sometimes, say when a written instrument uses “technical words or phrases not commonly understood,” id., at 292, those words may give rise to a factual dispute. If so, extrinsic evidence may help to “establish a usage of trade or locality.” []. And in that circumstance, the “determination of the matter of fact” will “preced[e]” the “function of construction.”…This factual determination, like all other factual determinations, must be reviewed for clear error.

Teva v. Sandoz at 5-6 (internal citations omitted).  A tension that emerges from this passage is the tension between “ordinary meaning” and “technical words or phrases not commonly understood.”  The latter, the Court’s opinion states, may be due deference; but when “ordinary meaning” is involved, it is a “question solely of law.”

Here, the claim construction did require some discussion of the ordinary meaning of words.  At issue was the meaning of the claim term “virtual files,” which the district court construed as meaning “files that appear to be but are not physically stored; rather, they are constructed or derived from existing data when their contents are requested by an application program so that they appear to exist as files from the point of view of the host device.”  Slip Op. at 21.  This construction, in the district court’s eyes, limited “the “virtual files” of the “virtual file system” to files “not physically stored on the interface device,” whose content is data “originating from the data transmit/receive device.”  Id.

In reversing the district court’s construction, the Federal Circuit began with its —not the district court’s—ordinary meaning.   “‘Virtual’ conveys some kind of as if action, one thing emulating another; the term was prominently used that way in the computer field at the time of the inventions here.  See CardSoft v. Verifone, Inc., 769 F.3d 1114, 1117–18 (Fed. Cir. 2014) (discussing Java Virtual Machine in patent dating to 1998).”  Slip Op. at 22.  With this meaning as the starting point, the CAFC concluded that the patent identifies this emulation as not turning “on whether data in a ‘virtual file’ is physically located in the interface device or a data device when the host seeks it.”  Id.

The district court, however, relied on a different source for its starting meaning:

The 1993 New IEEE Dictionary defined the term similarly to the construction proposed by the Camera Manufacturers. In the context of a “virtual record,” “virtual” was defined as: “a record that appears to be but is not physically stored; rather, it is constructed or derived from existing data when its contents are requested by an application program….The Court adopts the definition from the New IEEE Dictionary as the most clear and pertinent….”

In re Papst Licensing GmbH & Co. KG Litig., 670 F. Supp. 2d 16, 60 (D.D.C. 2009).  It’s unclear why the Federal Circuit didn’t address the district judge’s choice of starting meaning, substituting its own with no explanation of why.  It’s also not clear to me that the different starting point really matters for the ultimate issue of whether the claim term excludes files stored on the interface device.  But this kind of dispute, where a district judge relied on an extrinsic source for its starting point when construing a claim term, seems to be one that parties will try to make hay with in future appeals on claim construction.

*I’m using “starting meaning” to refer to the meaning that the party construing the claim term begins with; it may or may not be the “ordinary meaning.”  For some words, that may be our individual “mental lexicons,” as Kristen Osenga has described ; for other words, those meanings may come about when we look up the word in a dictionary.  For court opinions on claim constructions, the court will sometimes, but not always, state what it’s using as the starting meaning for a term.  Here, the Federal Circuit started with its meaning from the cited case, while the district court began from the point of the IEEE dictionary and the OED.

Even under BRI, A Wired-Connection is not “Wireless”

Patent,

by Dennis Crouch

In re Imes (Fed. Cir. 2015)

The Federal Circuit has again rejected USPTO’s broadest reasonable claim construction as unduly broad.  The Federal Circuit here maintains the BRI standard, but suggests that more emphasis should be placed on the ‘reasonable’ prong and less on ‘broadest.’

More formal claim construction is becoming a common aspect of ordinary patent prosecution. However, rather than applying the “correct” claim construction that would be applied to an issued patent, the USPTO examiners are tasked with construing pending patent claims according to their Broadest Reasonable Interpretation (BRI).  By design, BRI is intended to be broader than the interpretation given by a court. The purpose of this approach is to offer an additional buffer zone between the prior art and the issued patent and to give the USPTO stronger tools to ensure that claims are not ambiguously written.

In the present case, Imes is attempting to patent a device for certain types of wireless communication and the applied-for claim includes a “wireless communication module.”  Imes argues that that term should be construed as a module that communicates without wires using electromagnetic waves.  The claim construction debate over that term stems from the USPTO’s position that the broadest reasonable construction of “wireless communication” includes communication with wires. In particular, the PTO argued that “wireless communication” between two devices could be accomplished with a removable flash-drive — i.e., by saving information from a first computer on a flash drive then physically moving the flash drive to the second computer. Boom!

Siding with Imes, the Federal Circuit writes:

The Patent Office’s construction of “wireless” to include communications along metal contacts of the removable memory card and the computer system is inconsistent with the broadest reasonable interpretation in view of the specification. The construction of “wireless” is straightforward. The ’423 application expressly and unambiguously defines wireless: “[w]ireless refers to a communications, monitoring, or control system[] in which electromagnetic or acoustic waves carry a signal through atmospheric space rather than along a wire.” ’423 application. The ’423 application consistently uses the term “wireless” to refer to methods and devices that carry waves through atmospheric space, such as Bluetooth and various cellular protocols. The metal contacts of a removable memory card do not carry a signal through atmospheric space using electromagnetic or acoustic waves, and thus removable memory card 35 is not a wireless communication module under the broadest reasonable interpretation of that term in view of the specification.

USPTO Solicitor had identified the error in the PTAB ruling and attempted to shift the argument on appeal.  However, the Federal Circuit refused to hear the new theory as not properly on appeal.

= = = = = =

Imes’ pending application also requires streaming video. In its rejection of the claims, the USPTO concluded that one of the references taught streaming video by teaching the ability to send a series of emails that each include an image attachment.  The USPTO determination here looks like a factual conclusion regarding the scope-and-content-of-the-prior-art — the type of determination that is generally given substantial deference on appeal.  On appeal, the Federal Circuit gave that deference, but found the conclusion still unreasonable:

Sending a series of e-mails with attached still images is not the same as streaming video. Such a construction is unreasonable as it comports with neither the plain meaning of the term nor the specification. Streaming video is the continuous transmission of video. A series of e-mails with attachments does not meet the definition of “streaming” and still images do not meet the definition of “video.”

On remand, the USPTO’s solution will likely be to search for better prior art.