Tag Archives: Claim Construction

Obviousness: Cannot modify Prior Art a way that Disrupts the Reference’s Contribution to the Art

Patent, , ,

by Dennis Crouch

Plas-Pak Indus v Sulzer Mixpac (Fed. Cir. 2015) (non-precedential)

In 2011, Plas-Pak requested an inter partes reexamination of Sulzer’s paint-mixing Patent No. 7,815,384.  After considering the prior art, the examiner refused to issue the proposed obviousness rejection and that determination was affirmed by the PTAB. The proposed obviousness rejection involved two prior patents: Fukuta and Morris (inter alia).  Although the two references taught all of the Sulzer claim limitations the USPTO found that it would be improper to combine the references in an obviousness rejection.  In particular, the PTO found that the central feature of Fukuta involved the prevention of back-flow and the proposed combination with Morris would eliminate that core feature.  That required “substantial reconstruction” that so greatly impacts the “principle of operation” led to the Board’s conclusion that the combination would not have been obvious to one of ordinary skill in the art.

In most cases USPTO does not appeal an adverse PTAB decision. Here, however, the third party requester has appellate standing.

Under the rules of administrative procedure, factual findings made by the PTAB are reviewed by the Federal Circuit for “substantial evidence.” Under that low standard, the Federal Circuit will affirm factual conclusions so long as the evidence is sufficient such that “a reasonable mind might accept” that the conclusion is supported by the evidence.  Legal conclusions, on the other hand, are reviewed de novo by the Federal Circuit.

As with many areas of patent law, obviousness involves mixed questions of law and fact. On point here, questions of fact include (1) what a reference teaches; and (2) whether a proposed combination of references would impact a reference’s “principle of operation” while the ultimate conclusion as to whether an invention is obvious is seen as a question of law.  Of course another fundamental question of law is interpretation of the statute and precedent.

At first cut, the Federal Circuit appeared to follow these rules of review and gave deference to the PTAB’s principle of operation ruling. And, as a consequence affirmed the refusal to reject.

I see some error in the Federal Circuit’s approach.  In particular, the challenger’s argument here was not simply that the PTAB erred in reading the prior art to discover its principle of operation.  Rather, Plas-Pak argued that the PTAB erred by ruling that a prior art’s principle of operation should be limited to its innovative contribution to the art.  That general question of “how do we define a principle of operation” is a question of law and should be reviewed de novo by the court.  In its brief, Plas-Pak argued this particular point – that the appeal is focused on whether the Board applied the correct legal definition of a “principle of operation” — particularly “that a reference’s principle of operation is not equivalent or limited to its alleged contribution to the art.”

The decision here was authored by Judge Lourie and joined by Judges Moore and Reyna. However, because it was non-precedential, the standard operating procedures of the Federal Circuit do not require that it be first distributed to the other appellate judges prior to release.

Next Up: Lighting Ballast

Patent

In Teva v Sandoz, the Supreme Court held that a district court’s factual conclusion supporting a claim construction determination should be reviewed with deference on appeal.  In the expected follow-up, the Supreme Court has now acted on a hadful of cases riding in Teva‘s wake. In particular, the Court has issued “GVR” decisions in the pending cases of Lighting Ballast v. Universal Lighting; Gevo v. Butamax, and Shire v. Watson Pharma.  In a GVR, the Supreme Court Grants certiorari, but, rather than deciding the case in the merits, immediately Vacates the appellate court holding and Remands for further consideration — Grant-Vacate-Remand.  For these cases, the Supreme Court wrote simply:

 The petitions for writs of certiorari are granted. The Judgments are vacated, and the cases are remanded to the United States Court of Appeals for the Federal Circuit for further consideration in light of Teva Pharmaceuticals USA, Inc., v.
Sandoz, Inc., 574 U. S. ___ (2015).

On remand, these cases will each challenge aspects of the new deferential review standards and, once they are decided, district courts will then understand whether the game has truly changed.

Giving Deference to the Supreme Court in Teva v. Sandoz

Patent, ,

by Dennis Crouch

In Teva v. Sandoz, the Supreme Court raised the standard of appellate review of a district court’s factual conclusions regarding extrinsic evidence relied upon during claim construction proceedings.  Although the decision represents a relatively small change in procedural law, it is important, both because claim construction has become such a major element of patent litigation and because the Court of Appeals for the Federal Circuit has a history of reversing a high percentage of claim construction decisions.

I asked a handful of patent law experts for their instant thoughts on the decision (and gave them strict word limits). Douglas Kline, Chair of Goodwin Procter’s IP Litigation Group spells out the basic first-order result of the case:

From now on, when a district court resolves factual disputes concerning extrinsic evidence bearing on patent claim construction, the Federal Circuit will review those subsidiary factual findings for clear error.  This should result in the Federal Circuit affirming some claim construction decisions it might have overturned under the old standard.

Thinking forward about how parties will react, MBHB Partners Joshua Rich and Andrew Williams suggest higher reliance on expert testimony and thus higher litigation costs:

Today’s decision is likely to increase the cost and complexity of claim construction because it encourages parties to introduce extrinsic evidence, especially expert testimony, in an attempt to maximize deference to a favorable decision.  And some trial courts may end up relying on that extrinsic evidence to insulate their decisions.

Joshua Rich & Andrew Williams, partners at McDonnell Boehnen Hulbert & Berghoff.  “At the district court level, the new standard of review will likely mean more reliance on experts in interpreting the claims.” Dominick Conde, partner at Fitzpatrick, Cella, Harper & Scinto LLP.

Providing Guidance: The decision itself does a nice job of detailing the level of review for each different aspect of a claim construction ruling.  Paul Hughes from Mayer Brown LLP comments that “the Court provided unusually robust prospective guidance to aid the Federal Circuit in distinguishing questions of fact from questions of law.”

As usual, Professor Lefstin’s comments are both insightful and linked to historic evidence. Here, Lefstin disagrees slightly with Hughes in that some surprising aspects of claim construction should also be considered extrinsic evidence.

As Justice Traynor pointed out long ago, sources of meaning such as dictionaries and the judge’s personal linguistic experience are ‘extrinsic.’ Under Justice Breyer’s holding, the act of consulting a dictionary – which is how a court might determine “the meaning of a term in the relevant art during the relevant time period” – seems entitled to deference.

Jeffrey A. Lefstin, Professor of Law, UC Hastings College of Law.  However, Lefstin – along with others – believes that the ultimate change in the law is too slight to make much difference. Or, perhaps more pointedly, Lefstin’s argument is that the Teva decision leaves the Federal Circuit with power to continue reviewing claim construction without deference.

Ultimately it will make no difference, since the CAFC can review without deference the district court’s assignment of that meaning “in the context of the specific patent claim under review.”  The opportunities for the CAFC to frame construction as a contextual inquiry are so pervasive that Teva will serve only to generate pointless disputes over the extrinsic/intrinsic and isolated/contextual boundaries.

Lefstin. Recognizing this same point, Professor Liivak explains that a legal analysis is still required for claim construction which will be reviewed de novo.

There is still ample room for de facto de novo review.  The district court “must” conduct a “legal analysis” on whether the factual determination is relevant in the “context of the specific patent claim under review.”  This is where all the maneuvering will be.

Oskar Liivak, Professor of Law, Cornell Law School.  With reference to the disputed “molecular weight” claim term in this case, Liivak foresees that the Federal Circuit could fairly easily modify its opinion to satisfy the Supreme Court without changing its ultimate determination.

On remand as to this claim term, a very few words have to change but the outcome need not:  the factual determination about SEC is quite plausibly irrelevant to interpretation of the intrinsic evidence in Fig. 1.

Liivak.  The question – in Professor David Berry’s mind is whether the CAFC will “flex its muscles” on the issue.  If not, we can “look for more expert testimony, especially on the crucial question of what the claim meant to those in the art. That finding frequently will be dispositive, and may insulate the whole construction from de novo review.”  Professor David C. Berry, Western Michigan University – Cooley Law School.

Fallacy of Predictability: One of the key policy goals of deference is to provide predictability – at least once the district court construes the claims.  Professor Mark Janis sees the potential that this particular outcome will, unfortunately, not aid that goal. Still, Janis has some optimism. He writes:

A long-overdue ruling.  But it’s one that leaves CAFC judges ample room to defer (or not) in any given case.   The CAFC’s challenge is to demonstrate that it can implement Teva in the service of better predictability – which may require some CAFC judges to set aside cherished views about who really gets to call the shots in claim construction.

Mark D. Janis, Robert A. Lucas Chair of Law, Center for Intellectual Property Research, Indiana Univ. Maurer School of Law.  I agree with the fallacy of predictability given by deference, but at an even deeper level.  If I may quote myself:

My problem with the decision is that giving deference on review only masks the major problem that claim scope is not well understood until decided by a court.  Claim scope should be clearly understood at the time of issuance.

Dennis Crouch, Professor at the University of Missouri School of Law.

Who Benefits?: Erich Spangenberg is the CEO of nXn Partners and founder and former CEO of IPNav. He has been on the patent-owner side of a very large number of patent lawsuits and he tends to provide insight that is spot on. In my prior article on Teva, I suggested that patentees will prefer the new rule and Spangenberg agrees, with caveats:

The appellate reversal rate was too high and created far too much uncertainty.  If what Teva means is that we are going to have greater certainty, faster resolution as a result of fewer reversals and the occasional district court decision that gets it wrong—I am in favor.  My enthusiasm is tempered by the likelihood that there are a few years of disputes as the new boundaries are defined—but longer term, this is a positive.

Erich Spangenberg.

Professor Roger Ford recognizes that “who benefits” may well depend upon the case:

How [Teva] will play out is unclear, since litigants don’t always know, before construction, what review standard they’d prefer. Optimistic parties may prefer deferential review, assuming they’ll win; risk-averse ones may prefer having two chances to win.

Roger Ford is Assistant Professor of Law at the University of New Hampshire School of Law.

Evidentiary Hearings: Few courts conduct evidentiary hearings as part of claim construction. Going against the tide, Michael Risch doesn’t foresee any change in that reality:

A key question after Teva will be whether District Courts are more likely to hear extrinsic evidence just because findings get deference. Given likely reversal if the intrinsic evidence is clear, I don’t see why they would waste their time that way.

Michael Risch, Professor of Law, Villanova University School of Law.  Implicit in Professor Risch’s remarks is the conclusion that the Phillips “intrinsic first” approach continues to reign. Dean Holbrook believes that conclusion is correct:

The Federal Circuit will continue to use the Phillips hierarchy, turning to extrinsic evidence only when the intrinsic evidence is ambiguous. I think, in the main, the Federal Circuit will view the intrinsic evidence as determinative, retaining de novo review in the vast majority of cases.

Timothy R. Holbrook, Associate Dean of Faculty and Professor of Law, Emory University School of Law.

Changing Claim Construction: Dean Holbrook’s conclusion is not universally supported.  Professor Jason Rantanen argues instead that Teva may have more generally changed the nature of claim construction:

As I read Teva, the Court endorses a claim construction process where the judge begins with the extrinisic evidence about a claim term, decides what the extrinsic evidence establishes for that term and then determines whether the way the patent uses the term is inconsistent with the established ordinary meaning of the term.  This approach is more consistent with Texas Digital than Phillips.

Jason Rantanen, Associate Professor of Law, University of Iowa College of Law.  Rantanen does fully agree with others that significant power is now in the Federal Circuit’s hands — in particular, he “fully expects the Federal Circuit to disagree with [his] reading” of the case.  Eileen M. Herlihy, a da Vinci Fellow at George Mason CPIP, recognizes a particular evidentiary focus here – the person having ordinary skill in the art. She notes that the court once again “reemphasizes the patent law specific importance of the PHOSITA, thereby adds to recent Supreme Court cases asserting this perspective.”

Although Rantanen in his claim-construction-shift compares precedent, Professor Shubha Ghosh encourages creative lawyering in suggesting alternative “styles of claim construction”

Teva teaches that patent claims consist of law, reviewed de novo, and evidence, reviewed for clear error.  Unanswered is what mix of law and evidence forms the basis for claim construction.  The Federal Circuit’s and rulings favored strict constuction.  The Court’s decision here opens the floodgates for experimentation by advocates and judges  in different styles of claim construction.

Shubha Ghosh, Vilas Research Fellow and George Young Bascom Professor
of Intellectual Property and Business Law, University of Wisconsin,
Madison, Law School.

Exceptionality: One theme of Supreme Court patent cases over the past decade is that patent law need not always be so exceptional – i.e., different from other areas of law.  Rather, when traditional principles apply across doctrines, then they should apply to patent law as well. Referencing eBay, an early case in this trend, Professor Clifford writes:

Patent law is not unique when balancing must be done before granting equitable relief. Now, as is required for other legal documents such as contracts, we must separate interpretation of the words used (a matter of fact) from the meaning and effect they have (a matter of law).

Ralph D. Clifford, Prof., Univ. of Massachusetts School of Law. Similarly, Professor Landers writes that “Teva underscores the Supreme Court’s view that (like eBay and Holmes v. Vorando) the procedural aspects of patent cases are not exceptional.” Prof. Amy Landers, Drexel University Kline School of Law.  “Teva has broad significance because it … conforms patent law to other areas of the law on a matter of proper appellate function.”  Eileen M. Herlihy, da Vinci Fellow at George Mason CPIP.

Indefiniteness and ambiguity have been important topics in recent patent law cases.  Profesor Laakmann reminds us that the setup for the Teva case is not so-much claim construction but instead the lower court determination that the claim was unduly ambiguous and therefore invalid as indefinite.

The case turns on whether there is cognizable distinction between a claim term being factually ambiguous (and thus amenable to extrinsic evidence under a “clearly erroneous” standard of review) and legally indefinite (and thus invalid under 112 under a de novo standard of review).  This is the crux of the disagreement between the majority and the dissent – the majority says “yes” and the dissent says “no.”

Anna Laakmann is an Assistant Professor at Lewis and Clark Law School.  On remand, an important feature of the case is that the lower courts will also now need to work-in the new standard of indefiniteness from Nautilus.

At the PTO: For the most part, we’re talking about patent litigation.  However, Professor Joe Miller thinks that there may be a broader impact on USPTO practice as well:

Justice Breyer, speaking for a split Court’s majority, set aside a Federal Circuit patent validity determination. According to the Court, the Federal Circuit had not reviewed the lower tribunal’s key factual findings with the greater deference the controlling rule requires. Today’s decision in Teva v. Sandoz? Sure. But also 1999’s Dickinson v. Zurko, 527 U.S. 150 (1999). Teva’s main effects may well be felt at the PTO.

Joe Miller, Professor, University of Georgia Law School.

Although there are differing perspectives here, the overarching thought is that we’ll have to wait to see what the Federal Circuit does — which is exactly the result deference is supposed to avoid.

– Dennis

* Thanks to my colleagues for providing their interesting input on this article.

 

Using 35 USC 285 to Impose Fees on Patentee’s Counsel

Ethics, , ,

When Dreams Come True? Using Section 285 to Impose Fees against a Losing Patentee’s Lawyers

By David Hricik

[This article first appeared in Landslide Magazine.]

 

A patentee can use the extraordinary costs of defense to extract settlements that far exceed the value of the technology to the defendant. Further, if the patentee’s business is asserting patents, it likely will have, compared to a manufacturer-defendant, fewer documents, fewer employees, and less to lose in a patent case.[1] These asymmetrical costs can lead to frivolous claims being made solely to extract unreasonable settlements.

Defense counsel has some tools, imperfect as they are, to shift those costs, including Federal Rule of Civil Procedure 11, 28 U.S.C. § 1927, and a court’s inherent power.[2] But only one tool generally allows for all fees to be shifted from a prevailing defendant to a losing patentee: 35 U.S.C. § 285. Section 285 authorizes fee shifting only in an “exceptional case.” Earlier this year, the Supreme Court in Octane Fitness, LLC v. Icon Health & Fitness, Inc., made it easier to recover fees, holding that an “exceptional case” was simply that: unusual, in that it “stands out from others with respect to the substantive strength of a party’s litigating position (considering both the governing law and the facts of the case) or the unreasonable manner in which the case was litigated.”[3] Presumably, Octane will result in awards of fees in a greater number of cases, because the Court rejected interpreting the statute to allow fee shifting only upon clear and convincing evidence of both objective and subjective bad faith.[4]

Yet, particularly where the patentee is an asset-less “troll,” shifting fees is a hollow victory. An uncollectible judgment is literally not worth the paper it is printed on. But often trolls are represented by plaintiffs’ counsel, who may have deep, if not the only, pockets. No court has rigorously analyzed whether fees under § 285 may be imposed on the loser’s attorneys (either singly or jointly with the patentee), though motions to shift fees onto lawyers post-Octane are already being filed.[5]

This article shows that whether § 285 authorizes a prevailing accused infringer to have fees awarded against the patentee’s lawyer, either alone or jointly with the client, is an open question with strong arguments that it does. The article concludes by explaining why, even if lawyers are not directly liable to the opposing party, ultimately much of the increase in § 285 fee awards will be borne by lawyers, not their clients.

 

History, Text, and Purpose of Section 285

Fee shifting became available in patent cases for the first time in 1946 under 35 U.S.C. § 70, which permitted a court “in its discretion” to award fees “to the prevailing party.”[6] Congress made § 70 applicable to both accused infringers and patentees. Fee shifting in favor of a patentee was deemed necessary not only to ensure that a patentee who was forced to file a suit to protect its patent would not merely receive a reasonable royalty—what it would have received had the accused infringer taken a license in the first place—but also to prevent “a gross injustice.”[7]

Of course, the primary “gross injustice” a prevailing accused infringer faces in this statute’s context is paying its defense costs. Thus, with respect to the issue here, the statute’s purpose is to compensate a prevailing accused infringer to achieve justice. Consistent with this, courts soon emphasized that the statute focused on equity, fairness, and justice, stating for example that a fee award should be “bottomed upon a finding of unfairness or bad faith in the conduct of the losing party, or some other equitable consideration of similar force, which makes it grossly unjust that the winner . . . be left to bear the burden of his own counsel fees.”[8]

Congress recodified § 70 into what is now § 285. Rather than effecting substantive change, Congress added the phrase “exceptional case” to § 285 to codify the approach of those cases that had applied § 70 between 1946 and 1952.[9] Thus, § 285 focuses on achieving fairness, justice, and equity. With respect to accused infringers, § 285 is intended to avoid the injustice of a prevailing accused infringer having to bear the cost of defense in an exceptional case.

No one doubts that an award of fees in favor of a prevailing accused infringer can be entered against the patentee. But can an award be entered against the patentee’s lawyers, either alone or jointly with the patentee? In related cases and without rigorously analyzing the statute, the Federal Circuit gave mixed signals. In a nonprecedential opinion, the court reversed a district court’s award of fees under § 285 against the patentee’s counsel, but in a later precedential opinion, over a dissent, it apparently affirmed an award jointly and severally against the patentee and its counsel.[10]

 

Arguments that Section 285 Permits Shifting Fees onto Loser’s Counsel

The text is the starting point: nothing in § 285 indicates who must pay. Instead, the statute only states that fees may be awarded to a prevailing party. Congress could have but did not specify that the losing party must pay the prevailing party its fees, only that a party must prevail to receive a fee award. When Congress has wanted to limit statutes in that way, it has done so. Foremost, the Copyright Act allows the court to award “the recovery of full costs by or against any party.”[11] Congress’s decision not to limit § 285 in this same way confirms § 285’s plain meaning: it only specifies who can win, not who must pay.

Further, rules with similar structures have been interpreted in this way. For example, Federal Rule of Appellate Procedure 38 allows an award of fees for frivolous appeals “to the appellee.” That rule has been interpreted to permit an award against counsel, the appellee, or both.[12] Section 285 is likewise open-ended with respect to who must pay.

Moving beyond the text, the purpose of § 285 and congressional intent each suggests that an award against attorneys might be proper: an uncollectible award of fees does nothing to avoid the injustice of a wrongfully accused infringer paying the cost of defense in an exceptional case. The intent of Congress and the purpose of § 285 would be frustrated by a construction that does not permit awards against attorneys, at least where they are the only real recourse for compensation.

Further, construing § 285 to not permit fee awards against counsel results in some absurdities. Foremost, that interpretation would impose costs on the patentee for decisions that it may be incapable of making and, in fact, did not make. For example, many patentees cannot assess what a claim means; yet, courts have found cases “exceptional” for unreasonable infringement claims.[13] In that circumstance, imposing costs on patentees, not lawyers, punishes the wrong party and does not deter the offensive conduct. It may in fact result in punishing the innocent patentee, and yet awarding nothing in substance to the victim, the accused infringer.

Illustrating that point further, Rule 11 does not permit sanctions to be awarded against a client where the basis for the sanction is a frivolous legal argument.[14] Where the basis of a fee is a frivolous legal argument, interpreting § 285 to not permit awards against lawyers would result in clients being on the hook for fees, which is clearly against public policy. Further, unless a lawyer can be liable under § 285, the lawyer’s interest is to characterize any legal arguments as being solely the basis for an award under that statute, rather than Rule 11. In this regard, some courts have refused to permit a client to indemnify an attorney for sanctions imposed against the lawyer, recognizing that the deterrent effect of sanctions would be diminished.[15]

Finally as a matter of policy, sanctions are generally not insurable, but damages for malpractice are.[16] Thus, by imposing fees only on the patentee, courts may indirectly allow lawyers to insure themselves for damages that otherwise would not be insurable.

 

Arguments against Interpreting Section 285 to Permit Shifting Fees onto Counsel

Some statutes do permit awards expressly against attorneys. Foremost, 28 U.S.C. § 1927 permits sanctions against “[a]ny attorney or other person admitted” to practice. The existence of these statutes suggests that when Congress wants to permit an award of fees against a lawyer, it knows how to do so, and it did not do so in § 285. Where a fee shifting statute does not mention attorneys, some courts infer that awards against counsel are improper.[17]

In addition, at least after Octane, imposing liability directly onto attorneys may chill advocacy. Specifically, an attorney may not make an argument permitted by Rule 11 in light of the potential for liability under the much lower, and amorphous, standard in Octane.

Finally, although the purpose of § 285 was to avoid an injustice to prevailing accused infringers, Congress no doubt understood that normal limitations of liability that benefit corporations would apply. What matters is what Congress intended in 1952, and nothing suggests that it was concerned about asset-less trolls enforcing patents but leaving accused infringers actually uncompensated for their loss.

 

Conclusion

It is an open question whether § 285 allows fee awards against losing counsel. Given the statute’s open-ended language and broad equitable purpose of avoiding the injustice of an accused infringer paying its own fees, the text would seem to permit such awards when justice so requires. Those circumstances may include where counsel has assisted the patentee to structure its operations to avoid having assets to pay any award of fees, or where the lawyer’s conduct causes the exceptional nature of the case. In making any award, however, courts should carefully consider any chilling effect that an award may have on advocacy.

Lawyers should carefully consider several things in the post-Octane world:

The patentee’s counsel faces different issues than the accused infringer’s. First, to some extent it may be unethical to seek indemnity or reimbursement of such claims.[18] Second, suppose the lawyer of a patentee who loses faces the motion of the prevailing accused infringer asserting that the lawyer is liable to the accused infringer for its fees. That lawyer must face the fact that the patentee’s interest is that the lawyer bears those costs, while the lawyer’s interest is the opposite. As a result, it may be necessary for the lawyer, at a minimum, to obtain the client’s informed consent to continue the representation.

Counsel for an accused infringer must determine whether to attempt to shift fees onto the patentee’s counsel, rather than the patentee. Even if the patentee has assets, an order holding the patentee and its counsel jointly liable may best serve the accused infringer.

Finally, fee awards are going to be borne largely by lawyers, not clients. A client ordered to pay the other side’s fees will often contend that the lawyer’s incompetence caused the client to bring, or defend, an exceptional case. A lawyer should consider insurance, indemnification, revisions to engagement letters to permit withdrawal, and other ways to protect the lawyer and to make the risks clear to the client.

All lawyers should analyze § 285 carefully. It may be a dream come true, or a dark nightmare.

 

BIO: David Hricik is a professor at Mercer University School of Law and of counsel at Taylor English Duma LLP in Atlanta, Georgia. He clerked for Chief Judge Rader in 2012, has written on statutory interpretation, and is nationally recognized as an expert in legal ethics in patent practice. The title is from “When Dreams Come True,” by John Wesley Harding on the CD Garden of Eden (2003).

 

[1]. See David Hricik, Legal Ethics and Non-Practicing Entities: Being on the Receiving End Matters Too, 27 Santa Clara Computer & High Tech. L.J. 793 (2010); Randall R. Rader, Colleen V. Chien & David Hricik, Make Patent Trolls Pay in Court, N.Y. Times, June 4, 2013, http://www.nytimes.com/2013/06/05/opinion/make-patent-trolls-pay-in-court.html?_r=1&.

[2]. See David Hricik, Patent Ethics: Litigation § 5.01 (LexisNexis 2014).

[3]. 134 S. Ct. 1749, 1756 (2014).

[4]. Id. at 1756–57.

[5]. See, e.g., Opinion and Order, Rates Tech. Inc. v. Broadvox Holding Co., LLC, No. 13 Civ. 0152 (S.D.N.Y. Oct. 7, 2014) (concluding without rigorous analysis that § 285 did not authorize awards against lawyers).

[6]. See Octane, 134 S. Ct. at 1753.

[7]. See S. Rep. No. 79-1503 (1946).

[8]. Park-in-Theatres, Inc. v. Perkins, 190 F.2d 137, 142 (9th Cir. 1951) (emphasis added). Courts considered all facts, including whether the patentee could have simplified the case, made unreasonable infringement claims, or delayed in suing or in dropping customer-defendants. E.g., Merrill v. Builders Ornamental Iron Co., 197 F.2d 16 (10th Cir. 1952); Aeration Processes, Inc. v. Walter Kidde & Co., 170 F.2d 437 (2d Cir. 1948); Brennan v. Hawley Prods. Co., 98 F. Supp. 369 (N.D. Ill. 1951).

[9]. See Mach. Corp. of Am. v. Gullfiber AB, 774 F.2d 467 (Fed. Cir. 1985) (explaining addition of the “exceptional case” language).

[10]. Compare Phonometrics, Inc. v. ITT Sheraton Corp., 64 F. App’x 219 (Fed. Cir. 2003) (reversing § 285 award against lawyer), with Phonometrics, Inc. v. Westin Hotel Co., 350 F.3d 1242, 1253 (Fed. Cir. 2003) (affirming an apparent award of joint and several liability against client and lawyer over the dissent of Judge Newman, who argued that awards against counsel under § 285 were permissible only for egregious conduct). See also Stillman v. Edmund Scientific Co., 522 F.2d 798, 800 (4th Cir. 1975) (opining that “it is not the purpose of [§ 285] to discipline uncooperative or overzealous counsel”).

[11]. 17 U.S.C. § 505 (emphasis added).

[12]. “[M]any cases under rule 38 assess sanctions against offending counsel, alone or jointly with the client . . . .” Coghlan v. Starkey, 852 F.2d 806, 818 (5th Cir. 1988) (citing cases).

[13]. See Hricik, Patent Ethics, supra note 2, § 5.03[5][b] (collecting cases).

[14]. Fed. R. Civ. P. 11(c)(5)(A).

[15]. See Young Apartments, Inc. v. Town of Jupiter, Fla., 503 F. App’x 711 (11th Cir. 2013) (collecting cases and discussing policy issues); N.Y. Cnty. Lawyers’ Ass’n Comm. on Prof’l Ethics, Op. 683 (Nov. 15, 1990) (analyzing propriety of clients reimbursing lawyers for sanctions).

[16]. If a lawyer brings a patent case and fees are shifted under § 285 and imposed on the patentee, the patentee can contend that that lawyer acted incompetently by pursuing the case at all, or continuing after some point. Courts have already entertained these suits. For example, in E-Pass Technologies v. Moses & Singer, LLP, fees had been imposed on a losing patentee who then brought a legal malpractice claim against its lawyers. No. C-09-5967, 2011 WL 5357912 (N.D. Cal. Nov. 4, 2011); see also Deutch & Shur, P.C. v. Roth, 663 A.2d 1373, 1375 (N.J. Super. Ct. 1995) (stating that “the client may seek indemnification against the attorney for sanctions”); In re S. Bay Med. Assocs., 184 B.R. 963 (C.D. Cal. 1995) (analyzing indemnity of sanctions orders). Of course, and particularly under the broader Octane standard, simply because fees are imposed under § 285 does not automatically evidence incompetence.

[17]. E.g., Neft v. Vidmark, Inc., 923 F.2d 746, 747 (9th Cir. 1991).

[18]. For a discussion of indemnification in the context of sanctions, see N.Y. Cnty. Lawyers’ Ass’n Comm. on Prof’l Ethics, Op. 683 (Nov. 15, 1990).

Teva v. Sandoz: Partial Deference in Claim Construction

Patent, , , ,

by Dennis Crouch

As President Clinton taught, the meaning of words is always up for debate.  In the patent realm, actual claim scope often depends upon the particular meaning given to the individual words and terms.  We have seen that claim construction can vary widely – easily flipping the outcome of cases.  Litigators know the construction is only ‘probabilistic’ until decided by the court.  And, district courts know that their decisions are likely to be overturned – at least partially because claim construction is a question of law reviewed de novo and without deference on appeal

In Teva v. Sandoz, the US Supreme Court has changed the litigation game – holding that factual conclusions that underpin claim construction rulings must be reviewed for “clear error” – i.e., given substantial deference on appeal.

Up-to-now, many litigants have not worried much about the fact/law divide because all aspects of a claim construction decision were to be reviewed de novo in the eventual appeal.  More-so, district court litigants have likely shaded toward arguments asking for legal conclusion because those conclusions do not require the same level of evidentiary support as factual conclusions.  I expect for (some) litigants and district courts to shift their behavior and focus much more on evidentiary aspects of the case — such as the understanding of a person having ordinary skill in the art at the time of the patent.  The traditional approach is for plaintiffs to focus more on facts so that the case will end if they win at the district court level and for defendants to focus more on legal issues that – in case of a loss – are more easily appealable. Thus, on balance, the outcome here likely favors patentees as compared to the prior full de novo review system.

Under the new rule, determinations regarding evidence “intrinsic to the patent” will continue to be reviewed de novo on appeal. This intrinsic evidence includes both the patent document and the prosecution history of record.  The change, is that conclusions regarding other evidence considered – so called “extrinsic evidence” – are subject to the ordinary fact-finding rules of court and will be reviewed with deference on appeal.  Finally, the Supreme Court was also clear that application of the extrinsic evidence to the patent-in-question will also be seen as an issue of law reviewed de novo.

A major open question is the extent that the decision here modifies the standard approach to claim construction that has been explained by the Federal Circuit in Phillips v. AWH Corp – namely the rule that extrinsic evidence is of secondary importance and perhaps should not be considered absent ambiguity in the intrinsic evidence.  In my view, that approach is contrary to the rule that the interpretation should be based upon the contemporary understanding of a person having ordinary skill in the art.

At the prosecution level there is a bit of a logical conundrum – parties that present factual evidence during prosecution may get the USPTO to make factual conclusions and agree with that construction. However, if the case later goes into litigation that evidence and those conclusions will be seen as purely intrinsic evidence and thus given no deference in a Federal Circuit appeal.  It will be interesting to see how this works on a contemporary basis for the administrative post-issuance review proceedings where any testimony or extrinsic evidence presented instantly becomes part of the prosecution history record.

The 7-2 majority opinion was penned by Justice Breyer and joined by Chief Justice Roberts and Justices Scalia, Kennedy, Ginsburg, Sotomayor, and Kagen. Justice Thomas wrote in dissent an was joined by Justice Alito.

Statute vs Contract: In his dissenting opinion, Justice Thomas drew an analogy between claim construction and statutory construction and found that neither involve “finding of facts” even when conclusions are drawn from extrinsic evidence.  At least at a rhetoric level, this argument makes tremendous sense – the word “patent” itself references a publicly documented grant by a sovereign – something that seems awfully close to a statute.  Replying to the dissent, Justice Breyer argues for stare decisis — pointing to the fact that the Court already ruled in Markman that claim construction can have “evidentiary underpinnings.”  Rather, the majority links claim construction to that of a deed or contract where factual conclusions are sometimes needed.

Federal Circuit Exceptionalism: A theme running through most recent Supreme Court patent cases is that, when applicable, common-law patent doctrines should follow the common law approach rather than some specialized patent rule. Here, one aspect of the majority opinion is that the process of patent claim construction should look like the process of construing a deed or contract.  As Professor Ouellette wrote this morning: “Today’s opinion joins a long line of Supreme Court decisions rebuking the Federal Circuit for patent law exceptionalism.”  Of course, the link to deeds and contracts only goes so-far because with claim construction we’re not really looking to figure out what the patentee intended by the words but rather what is the proper public understanding of the words (as J. Scalia noted). Nevertheless, it will be interesting to see how district courts fare with that analogy and the extent to which the Federal Circuit is accepting.

Cybor No Longer Subject to Challenge: The Federal Circuit’s decision in Cybor has long been subject to renewed efforts for en-banc review. This happened most recently in Lighting Ballast Control LLC v. Philips Electronics N.A. Corp. (Fed. Cir. 2014) (En banc).  Although the Supreme Court here modified Cybor and Lighting Ballast, it also foreclosed future challenges to increase the level of deference. Rather, the Court is clear in Teva that – apart from factual conclusions regarding extrinsic evidence – that no deference should be given on appeal.

 

Masking the Problem of Claim Ambiguity: My problem with the decision is that giving deference on appellate review only masks the major problem that claim scope is not well understood until decided by a court. Claim scope should be clearly understood at the time of issuance rather than years later following an expensive litigation effort.

Teva v. Sandoz: Deferential Review on Factual Issues; de novo review of final question of construction

Patent

By Jason Rantanen

Teva Pharmaceuticals USA, Inc. v. Sandoz, Inc. (2015) Download Opinion
Breyer (author), joined by Roberts, Scalia, Kennedy, Ginsburg, Sotomayor, and Kagan; Thomas (dissenting) joined by Alito.

One (or both) of us will certainly write more on this very important opinion.  The Court holds that subsidiary factual issues are reviewed for clear error while legal determinations continue to be reviewed de novo.  From the Court’s syllabus:

Held: When reviewing a district court’s resolution of subsidiary factual matters made in the course of its construction of a patent claim, the Federal Circuit must apply a “clear error,” not a de novo, standard of review.  Pp. 4–16.

***

(c) This leaves the question of how the clear error standard should be applied when reviewing subsidiary factfinding in patent claim construction. When the district court reviews only evidence intrinsic to the patent, the judge’s determination is solely a determination of law, and the court of appeals will review that construction de novo. However, where the district court needs to consult extrinsic evidence in order to understand, for example, the background science or the meaning of a term in the relevant art during the relevant time peri­od, and where those subsidiary facts are in dispute, courts will need to make subsidiary factual findings about the extrinsic evidence.  The district judge, after deciding the factual dispute, will then interpret the patent claim in light of the facts as he has found them.  The ulti­mate construction of the claim is a legal conclusion that the appellate court can review de novo. But to overturn the judge’s resolution of an underlying factual dispute, the appellate court must find that the judge, in respect to those factual findings, has made a clear error. Pp. 11–14.

(d) Here, for example, the District Court made a factual finding, crediting Teva’s expert’s account, and thereby rejecting Sandoz’s ex­pert’s contrary explanation, about how a skilled artisan would under­stand the way in which a curve created from chromatogram data re­flects molecular weights.  Based on that factual finding, the District Court reached the legal conclusion that figure 1 did not undermine Teva’s argument that molecular weight referred to the first method of calculating molecular weight. When the Federal Circuit reviewed the District Court’s decision, it did not accept Teva’s expert’s explanation, and it failed to accept that explanation without finding that the Dis­trict Court’s contrary determination was “clearly erroneous.”  The Federal Circuit erred in failing to review this factual finding only for clear error.  Teva asserts that there are two additional instances in which the Federal Circuit rejected the District Court’s factual find­ings without concluding that they were clearly erroneous; those mat­ters are left for the Federal Circuit to consider on remand.  Pp. 14– 16.

The Court provides a few examples of how this new standard is to be applied:

In some cases, however, the district court will need to look beyond the patent’s intrinsic evidence and to consult extrinsic evidence in order to understand, for example, the background science or the meaning of a term in the rele­vant art during the relevant time period.  See, e.g., Seymour v. Osborne, 11 Wall. 516, 546 (1871) (a patent may be “so interspersed with technical terms and terms of art that the testimony of scientific witnesses is indispensable to a correct understanding of its meaning”).  In cases where those subsidiary facts are in dispute, courts will need to make subsidiary factual findings about that ex­trinsic evidence. These are the “evidentiary underpin­nings” of claim construction that we discussed in Mark-man, and this subsidiary factfinding must be reviewed for clear error on appeal.

For example, if a district court resolves a dispute be­tween experts and makes a factual finding that, in gen­eral, a certain term of art had a particular meaning to a person of ordinary skill in the art at the time of the inven­tion, the district court must then conduct a legal analysis: whether a skilled artisan would ascribe that same mean­ing to that term in the context of the specific patent claim under review. That is because “[e]xperts may be examined to explain terms of art, and the state of the art, at any given time,” but they cannot be used to prove “the proper or legal construction of any instrument of writing.” Winans v. New York & Erie R. Co., 21 How. 88, 100–101 (1859); see also Markman, supra, at 388 (“‘Where tech­nical terms are used, or where the qualities of substances . . . or any similar data necessary to the comprehension of the language of the patent are unknown to the judge, the testimony of witnesses may be received upon these sub­jects, and any other means of information be employed. But in the actual interpretation of the patent the court proceeds upon its own responsibility, as an arbiter of the law, giving to the patent its true and final character and force’” (quoting 2 W. Robinson, Law of Patents §732, pp. 482–483 (1890); emphasis in original)).

Accordingly, the question we have answered here con­cerns review of the district court’s resolution of a subsidi­ary factual dispute that helps that court determine the proper interpretation of the written patent claim. The district judge, after deciding the factual dispute, will then interpret the patent claim in light of the facts as he has found them. This ultimate interpretation is a legal con­clusion. The appellate court can still review the district court’s ultimate construction of the claim de novo. But, to overturn the judge’s resolution of an underlying factual dispute, the Court of Appeals must find that the judge, in respect to those factual findings, has made a clear error. Fed. Rule Civ. Proc. 52(a)(6).

The full discussion of the Teva example makes a similar point, finding that the Federal Circuit erred because it should have determined whether the district court’s acceptance of Teva’s expert’s explanation of figure 1 in the patent was “clearly erroneous.”

 

 

USPTO Too Broad in its Broadest Reasonable Interpretation

Patent, , ,

by Dennis Crouch

Stoller holds several patents directed to a winterizing golf course greens.  In particular, Stoller’s approach is to roll-out a rubber blanket over the turf.  His most recent patent application was rejected by the USPTO examiner — with the broadest claim being anticipated and the dependent claims obvious. That decision was then affirmed by the PTAB.  Now, the Federal Circuit has largely affirmed — finding that the anticipation finding was erroneous but that the obviousness findings were correct.  The result then is that on remand the examiner should now also reject the broadest claim as obvious.

The broadest claim requires a layer of polyurethane “laminated” to a fabric layer and the primary dispute on appeal is the broadest reasonable interpretation of laminated clause. The importance of the construction comes up because the prior art uses for the anticipation rejection fastens its layers together by with strings going through a series of grommets at the cover’s perimeter.  The USPTO took the position that be broadest reasonable interpretation of a laminated structure would require only that the structure have multiple layers while Stoller argued that laminated requires a fusing or bonding.

The application itself provides no definition of the term but it does provide an example that requires using a molten polymer to bond the layers and repeatedly explains the durability benefits of the laminate approach. [I should note here that I’m hard-pressed to understand how the Court’s broadest reasonable construction is different or any broader than the seemingly more narrow construction that would be used post-issuance.]

On appeal, the Federal Circuit sided with the patent applicant – finding that even a broad dictionary definition of the laminate terms requires “uniting” layers in a way that goes beyond simply stacking them together.

Because the cited anticipation reference did not disclose laminated layers, the rejection was improper.  On the other hand, a number of additional references taught laminating in its ‘properly’ construed form and those references were included in the obviousness rejections of the more narrow claims. As such, the court found those obviousness rejections proper.

Thus, we’re left with the odd situation that the broader claim is not rejected while the narrower claims are rejected.  Addressing that situation, the Federal Circuit refused to take the logical step of finding the the broader claim obvious as well. Instead, the court simply remanded with – I assume – the expectation that the USPTO will make that determination for itself.

We do not turn a blind eye to the many references in this record that demonstrate that laminating two (or more) layers together was well-known in the art. The only rejection of claim 35 before us, however, is a § 102 rejection based only on Sibbet. That rejection is not supported in the record. Accordingly, we reverse the rejection of claim 35.

Read the decision.

Upcoming Conferences and Workshops

Patent, , , , , , ,
By Jason Rantanen
Three upcoming conferences that may be of interest to readers:
This Friday and Saturday, January 16 and 17, the University of San Diego School of Law’s Center for Intellectual Property Law & Markets is holding its 5th Annual Patent Law Conference.  This year’s topic is “Patent Invalidity after the America Invents Act.”  Speakers include Judges Bencivengo, Bartick & Chen.  I attended last year as part of PatCon and thought it was a great event.  More details here: http://www.sandiego.edu/law/centers/ciplm/detail.php?_focus=49377#overview
Hal Wegner’s 3rd Annual Naples Patent Law Experts Conference will be held February 9 and 10.   This beachfront Conference in Naples, Florida, will involve  an interactive discussion by more than thirty faculty members.  Topics to be covered include recent and pending Supreme Court patent law decisions, potential legislative activity, issues of international law, and more. Further information from the sponsoring organization, the University of Akron, is available here: http://www.uakron.edu/law/ip/naples-midwinter.dot
On March 5-6, Don Chisum and Janice Mueller will conduct a two-day patent roundtable seminar.  The program is limited to a total of ten participants to maximize opportunities for interactive discussion and debate.  All sessions are led by treatise authors and educators Don Chisum and Janice Mueller. Coverage focuses on recent significant patent decisions of the Federal Circuit and U.S. Supreme Court. Topics currently planned for discussion include:
  • The Supreme Court’s Alice Corp. decision on patent-eligible subject matter and subsequent Federal Circuit decisions applying Alice; 
  • The Supreme Court’s grant of certiorari in Commil USA concerning the intent requirement for inducing infringement;
  • The Supreme Court’s grant of certiorari in Kimble v. Marvel concerning the propriety of post-patent expiration royalties;
  • The Supreme Court’s pending decision in Teva v. Sandoz on review of patent claim construction;
  • The Federal Circuit’s grant of en banc review in SCA Hygiene to determine whether the Supreme Court’s Petrella decision changed the law of laches as a defense to patent infringement;
  • Patent Practice Gone Wrong: Lessons from Patent Malpractice, Exceptional Case and Rule 11 Sanctions, and Inequitable Conduct Cases;
  • Patent Claim Construction and Definiteness in the Wake of Nautilus (and Anticipating Teva); and
  • Inter Partes Review: Two-Year Snapshot and Lessons from Case Studies.
No advance preparation is expected or required. The Supreme Court of Ohio Commission on Continuing Legal Education has approved the seminar for 12.0 hours of CLE instruction. For additional details on the venue, topics, and registration form, see http://chisum-patent-academy.com/upcoming-patent-law-seminars/advanced-patent-law-seminars-cincinnati-oh/ or e-mail info@chisum.com.

 

Promega v. Life Tech, pt. 2: Inducing Oneself

Patent, ,

By Jason Rantanen

Promega Corp. v. Life Tech. Corp. (Fed. Cir. 2014) Download Promega v. Life Tech
Panel: Prost (dissenting-in-part), Mayer, Chen (author)

Before the holidays, I wrote about the enablement issue in this case.  Today I’ll talk about the inducement issue, which involves two significant—and probably erroneous—doctrinal developments.  I say “probably erroneous” because in my view at least one, if not both, would likely be reversed by the Supreme Court were it to grant cert.

The short version is that the majority held that in 35 U.S.C. § 271(f)(1), “induce” means “specific intent to cause” and “a substantial portion of the components” includes “a single important or essential component.”  The consequence of the former is that one can induce oneself; the consequence of the latter is that merely supplying a single “main” or “major” component of the claimed invention is sufficient for purposes to 271(f)(1).  Judge Prost dissented as to “induce” and would not have reached the “substantial portion” issue.

The patent claim: The asserted claim, claim 42 of patent No. RE 37,984, is directed to “[a] kit for analyzing polymorphism in at least one locus in a DNA sample.”  The claim limitations involve vessels containing a variety of materials: a mixture of primers, a “polymerizing enzyme suitable for performing a primer-directed polymerase chain reaction,” adenosine, guanine, cytosine and thymidine, a buffer solution, and template DNA.

LifeTech’s activities: LifeTech manufactured Taq polymerase in the United States and shipped it to its facility in the U.K. where it was combined with foreign-manufactured components to produce kits containing all the claimed elements.  While some of the kits were sold in the United States, the main issue on appeal involved kits that never entered the United States.  Taq is indisputably “a polymerizing enzyme suitable for performing a primer-directed polymerase chain reaction.”

Procedural History: At trial, the jury was instructed to consider liability for all “United States sales,” which included “all kits made, used, offered for sale, sold within the United States or imported in the United States as well as kits made outside the United States where a substantial portion of the components are supplied from the United States.” Id. at 11 (emphasis added).  LifeTech preserved its challenge to the italicized language.  The jury returned a verdict finding that “all of LifeTech’s worldwide sales were attributable to infringing acts in the United States.”  Id.  The district court subsequently granted JMOL in LifeTech’s favor.

On appeal, Promega challenged the court’s grant of JMOL as to both sales infringing under 271(a) and under 271(f)(1).  The Federal Circuit focused primarily on the 271(f)(1) issue. 35 U.S.C. § 271(f)(1) states:

Whoever without authority supplies or causes to be supplied in or from the United States all or a substantial portion of the components of a patented invention, where such components are uncombined in whole or in part, in such manner as to actively induce the combination of such components outside of the United States in a manner that would infringe the patent if such combination occurred within the United States, shall be liable as an infringer.

 

(emphasis added).  LifeTech raised two legal grounds for affirming the district court’s grant of JMOL.  First, it argued that 271(f)(1) requires inducement of another; one cannot induce oneself.  Thus, it could not be liable under 271(f)(1) for exporting the Taq polymerase to itself to combine with the other components.  Second, it argued that 271(f)(1) requires that a “substantial portion” of the components be exported; “one” component is not a “substantial portion” of the components.

For 271(f)(1), one can induce oneself: The majority first rejected LifeTech’s argument that 271(f)(1) should be interpreted as requiring another person to be induced.  Rather, it means “merely the specific intent to cause the combination of the components of a patented invention outside the United States.”  Slip Op. at 23.  In reaching this conclusion, it first looked to the dictionary definition of “induce,” observing that it means “to bring about, to cause.”  Id.  From this, it concluded that “[t]he object of the transitive verb ‘induce’ can either be a person or a thing, such as an activity or result.”  Id.  Here, it is the activity that is being “induce[d]”: “The statute is written such that an activity—”the combination”—is the object of “induce,” not a person.”  Id.  Thus, no third party is necessary.  Furthermore, “[h]ad Congress wanted to limit “induce” to actions contemplated by two separate parties, it could easily have done so by assigning liability only where one party actively induced another “to combine the [p]atented components.”  Id.  To bolster its conclusion, the majority drew upon its reading of the legislative history and what it divined as Congress’s intent in passing the statute.  The result is to effectively turn the word “induce” into word “cause.”

The majority’s pseudo-textualist analysis: I’m thoroughly unconvinced by the majority’s analysis.  Setting aside the majority’s reading of the legislative history, which Judge Prost criticizes in her dissent, its textual analysis is deeply flawed.  Proper textualism involves the consideration of the ordinary meaning of words, evaluated in context, and an application of the canons of statutory construction.  But just as in patent law, “ordinary meaning” doesn’t just mean “ordinary meaning.”  Rather, terms with a legal meaning (such as “person”) are given their ordinary legal meaning.   The problem with the majority’s analysis begins with its reliance on a general-purpose dictionary for a term that has a well-established legal meaning and goes downhill from there.

While “induce” might mean “to bring about, to cause” in the general-usage context, in the legal context—and particularly the patent law context—its meaning invariably involves a relationship between two separate persons.  I am not aware of any instances (but would be interested to learn of them) where courts have interpreted “induce”  as encompassing one’s own performance of the proscribed acts.  This is especially true with respect to 271(b), where both the Federal Circuit and the Supreme Court have written extensively about the requirements for the relationship to rise to the level of inducement.  One would not “induce” infringement of a patent by using a machine to carry out a claimed process; one would be liable for direct infringement.  To treat the word as if it were necessary to start from first principles, looking it up in a general purpose dictionary, is to ignore all of this well-established legal meaning.

As part of my background reading for this post, I took a look at Bryan Garner’s Black’s Law Dictionary.  Here’s his entry for “inducement” (there is no separate entry for “induce”), defining it as “The act or process of enticing or persuading another person to take a certain course of action”:

Garner 1999 InducementCongress did not have the benefit of Professor Garner’s text in 1984, when it passed 274(f); this definition comes from the 1999 version of Black’s.*  But my sense is that Garner’s definition is a lot closer to the legal meaning of “actively inducement” than “http://www.merriam-webster.com/dictionary/induce.”  Slip Op. at 23.  And to the extent it is descriptive of the legal meaning, it unquestionably supports the interpretation as involving another person.

Edit to add a legal citation: “It is, however, well established that “[w]here Congress uses terms that have accumulated settled meaning under… the common law, a court must infer, unless the statute otherwise dictates, that Congress means to incorporate the established meaning of these terms.”  CCNV v. Reid, 490 U.S. 730 (1989) (quoting NLRB v. Amax Coal Co., 453 U.S. 322, 329 (1981)).

“Congress knows how to say…”: In addition to its dictionary definition, the majority also observed that Congress could easily have included the word “another” in the statute.  The main problem with this interpretative principle is that it only applies when it’s clear that Congress actually does know how to say something.  Typically, the principle is invoked in the context of a parallel statute in which Congress actually said it.  See, e.g., Limelight Networks, Inc. v. Akamai Technologies, Inc., 134 S. Ct. 2111, 2118 (2014) (“As this provision illustrates, when Congress wishes to impose liability for inducing activity that does not itself constitute direct infringement, it knows precisely how to do so.”) (emphasis added).  Here, however, there is no such contrasting statute that contains that “something;” worse, the closest parallel—Section 271(b)—does not contain the word “another.”  Rather, it says simply “Whoever actively induces infringement of a patent shall be liable as an infringer.”

Edit to add a citation: “Ordinarily, ‘Congress’ silence is just that—silence.”  CCNV v. Reid (quoting Alaska Airlines, Inc. v. Brock, 480 U.C. 678, 686 (1987)).

Judge Prost’s Dissent: Judge Prost’s dissent identifies another problem with the majority’s interpretation: that interpretation is foreclosed by precedent.  “[W]e have never before held—in the context of either § 271(f) or § 271(b)—that a party can induce itself to infringe.  And for good reason: this conclusion runs counter to unambiguous Supreme Court precedent.”  Dissent at 2.

Twice the Supreme Court has held that inducement liability requires a third party. In interpreting the phrase “induces infringement” in § 271(b), the Supreme Court wrote that it requires “that the inducer lead another” or “persuade another.” Global-Tech Appliances, Inc. v. SEB SA, 131 S. Ct. 2060, 2065 (2011) (emphases added). Additionally, in Metro-Goldwyn-Mayer Studios Inc. v. Grokster, Ltd., a case in the analogous copyright context, the Supreme Court stated that inducement is defined as “entic[ing] or persuad[ing] another” to infringe. 545 U.S. 913, 935 (2005) (emphasis added). The majority cannot point to a single case—from the Supreme Court or otherwise—that supports its contrary interpretation of inducement.

Id. at 2-3.

Judge Prost might go too far in arguing that the majority’s interpretation is foreclosed by precedent (As the majority points out, none of these cases directly confronted the question of whether one can “induce” oneself), but her underlying point is sound: these cases demonstrated that the meaning of “induce” is already well-established as requiring another person.

Multinational companies must be careful: As long as the accused party meets the “supplies…a substantial portion of the components” requirement, it will be liable for its own foreign combination of those elements.**   This has particular importance for multinational companies that engage in distributed manufacturing.  As a policy matter, the court’s decision pushes those companies towards one of two alternatives: purchasing their components from another (possibly US) supplier or simply making the components abroad.  Perhaps the lack of liability in this situation was an oversight in the statute, a statutory loophole.  But if so, the appropriate response would be—as was the case following Deepsouth—legislative action.  (I’m not convinced that it’s necessarily a loophole, but need to think further on that point.)

Every “essential” component is a “substantial portion of the components.”  The majority also interpreted the requirement that “all or a substantial portion of the components of a patented invention” be supplied, concluding that “substantial portion of the components” includes “a single important or essential component.”  Slip Op. at 27.  Here, that component was the Taq polymerase, a widely-used enzyme for polymerase chain reaction.  The court concluded that supplying Taq was enough based on the following evidence: “Without Taq polymerase, the genetic testing kit recited in the Tautz patent would be inoperable because no PCR could occur.  LifeTech’s own witness admitted that the Taq polymerase is one of the “main” and “major components of the accused kits.”  Id. at 32.  As the Taq example demonstrates, under the court’s interpretation any component of a patented invention is an essential component.  If one removes Taq, the kit won’t work; if one removes the primers, the kit won’t work; if one removes the nucelotide bases, the kit won’t work.  This has the potential to greatly expand liability under 271(f)(1).

Rendering 271(f)(2) superfluous: In my view, the majority’s textual analysis of  “substantial portion” suffers from similar flaws as its analysis of “induce.”   The deepest, however, is that by reading “substantial portion” as it does, the majority renders 271(f)(2) superfluous.  That section states:

(2) Whoever without authority supplies or causes to be supplied in or from the United States any component of a patented invention that is especially made or especially adapted for use in the invention and not a staple article or commodity of commerce suitable for substantial noninfringing use, where such component is uncombined in whole or in part, knowing that such component is so made or adapted and intending that such component will be combined outside of the United States in a manner that would infringe the patent if such combination occurred within the United States, shall be liable as an infringer.
 .
Under the majority’s interpretation of “substantial portion,” 271(f)(1) reads:
 .
 “Whoever without authority supplies or causes to be supplied in or from the United States an important or essential component of a patented invention, where such components are uncombined in whole or in part, in such manner as to actively induce the combination of such components outside of the United States in a manner that would infringe the patent if such combination occurred within the United States, shall be liable as an infringer.”
 .

The only differences between the two are that (f)(2) is limited to components that are “especially made or especially adapted for use in the invention and not a staple article or commodity of commerce suitable for substantial noninfringing use;” a knowledge of infringement requirement in (f)(2); and the “intending that such component will be combined” language of (f)(2) versus the “in such manner as to actively induce the combination” language of (f)(1).  The first two differences make (f)(2)’s scope narrower than that of (f)(1), and the third does not constitute a meaningful difference under the majority’s interpretation of “actively induces.”***  The result is that, under the majority’s interpretation, I can’t envision any conduct that would fall within (f)(2) that would not also fall within (f)(1).

—

*The older definition of “induce” from Black’s doesn’t provide much interpretative help in my view.  See Black’s Law Dictionary, Fourth Edition (West 1951) (defining “induce” as “to bring on or about, to affect, cause, to influence to an act or course of conduct, lead by persuasion or reasoning, incite by motives, prevail on”) (this definition was carried forward through at least the 1990 version). Part of my ambivalence is that without looking at the source of the definition, it’s not clear that another party isn’t required.  And once you look at the source of the definition, it’s apparent that the case wasn’t talking about the legal meaning of “induce” but it’s general purpose meaning.  See State v. Stratford, 55 Idaho 65 (Idaho 1934).

**Nor does the argument that the majority’s interpretation still imposes an “intent” requirement change the analysis.  The majority concludes that “actively induce the combination” means “merely the specific intent to cause the combination of the components of a patented invention outside the United States.”  Slip Op. at 23.  This is nothing more than a volitional conduct requirement: a person that combines the elements will necessarily have the “specific intent to cause the combination” except in very rare, very unusual circumstances.  And the jury instruction discussed above did not mention any requirement of intent.

***If “actively induce” were interpreted as requiring the participation of a third party, then there might be a difference between the two in that a reasonable reading of 271(f)(2) is that it covers one’s own combination of the components.

Side note: This appeal is one of the two that were at the heart of In re Reines; Ed Reines represents LifeTech.  In the other appeal, the district court’s judgment in favor of Promega was summarily affirmed in March.

Comments are welcome.  My comment moderation policy is in effect. 

Federal Circuit: A hole is not “water-permeable”

Patent,

by Dennis Crouch

In Teashot v. Green Mountain Coffee, the Federal Circuit has affirmed the lower court determination that tea-filled K-Cups do not infringe T-Shot’s Patent No. 5,895,672.

teapodK-Cups originally included only disposable coffee pods for use in Keurig machines, but now also include tea-pods for quickly brewing tea.  T-shot’s patent covers a disposable tea-pod, but the asserted claims require that the pod be a “sealed body . . . constructed of a water-permeable material which allows flow of a fluid through said sealed body to produce a tea extract from said tea composition.”  The figures from the patent look like the disposable coffee-pods that you might find in a hotel room – essentially tea wrapped and sealed within a coffee filter.  One feature of the patent is that the pod include both tea leaves as well as some instant tea powder that allows for very quick brewing.

At first glance, K-Cups do not appear to be made of a water-permeable membrane but rather are constructed of a impermeable combination of plastic and metal foil.  The Keurig machines operate by first puncturing a hole in both the top and bottom of the K-Cup and then sending water through the holes as shown in the schematic below.

Kcuppod

 

T-shot’s infringement argument was that – once punctured – the K-cup also becomes water permeable. (Of course, the patentee couched this as a claim-construction issue in order to receive de novo review).  On appeal, the Federal Circuit rejected the argument, finding that the claim requires the pod to simultaneously be a “sealed body” and “water permeable” and that the hole-puncturing scheme does not fit within that requirement.

Doctrine of Equivalents: In a move that is seemingly increasingly common, the Colorado district court refused to allow the patentee to amend its infringement contentions following the claim construction decision in order to include allegations of infringement under the doctrine of equivalents.

The proposed doctrine of equivalents claim was not disclosed in the patentee’s original or supplemental infringement contentions nor in response to any interrogatory.   As a discovery sanction under Fed. R. Civ. Pro. 37, the district court refused to allow the new infringement theory to be presented — writing “Plaintiff
waived its right to raise the doctrine of equivalents by failing to timely disclose it as an infringement theory.”  On appeal, the Federal Circuit affirmed that holding.

[As a side-note, the doctrine of equivalents theory here might have been viable given that the patent was issued without amendment.]

 

Guest Post by Prof. Chiang: A Response to Hrdy and Picozzi

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Professor Tun-Jen Chiang is an Associate Professor of Law at the George Mason University School of Law.  Below, he responds to Camilla Hrdy and Ben Picozzi’s commentary on The Interpretation-Construction Distinction in Patent Law.  As with the previous two posts in this series, the real name policy applies to comments on this post. 

Thanks to Jason and Dennis for inviting me to post, and to Jason for the extremely flattering introduction. I should make clear at the outset that I am only speaking for myself, not my coauthor, on this blog, though of course the article represents our joint views.

A brief recap for those who have not read (or only skimmed) the article. The article’s primary claim is conceptual. The claim is that in making decisions pursuant to text, courts necessarily engage in a two-step process: (1) they read the text and try to discern its linguistic meaning, i.e. the meaning of the language, qua language, to members of the intended audience, and (2) they determine the legal effect of the text by rendering a decision. We call the former “interpretation” and the latter “construction.” The key point is that linguistic meaning and legal effect are not always the same, and therefore uncertainty over the legal scope of patent claims does not necessarily arise because of linguistic ambiguity.

A couple of clarifications at the outset. The first is that our definition of “construction” is simply giving text a legal effect—it does not care whether that legal effect is consistent with statute, precedent, and text or not. Camilla’s articulation (where judges “‘construe’ the claims according to their normative beliefs about what the claims’ legal effect should be”) potentially gives the impression that we define construction as only when judges act as super-regulators who engage in free-floating first-order policy analysis. This is not correct. Even the most restrained judge who makes decisions strictly in accordance with statute, precedent, and/or claim text engages in construction, because his decisions necessarily give the claim text a legal effect.

Second, our claim is conceptual, not normative. Our claim is not that interpretation is good or that construction is bad; our claim is that both are intrinsic to the activity of claim analysis, so there is really no “good” or “bad” about the matter. And because our claim is conceptual, our doctrinal prescriptions are very limited. We do not opine, for example, whether courts should give more or less weight to dictionaries, or specifications, or anything else.

The sum is that we are not trying to push a textualist or plain meaning agenda, and we are not trying to suggest that judges who engage in construction are judicial activists who ought to be impeached. Our goal is to simply provide more clarity in analysis and a better diagnosis for what ails patent claims. Specifically, we argue that the uncertainty in patent claims is not caused by linguistic ambiguity, but by methodological disagreement among judges about whether to construe claims according to the patentee’s actual inventive contribution, or instead according to the linguistic meaning of claim text written by the patentee (which is likely to be broader than the real invention).

It is at this point that Hrdy and Picozzi’s response comes in. Hrdy and Picozzi agree with us that methodological disagreement, rather than linguistic ambiguity, underlies disagreements over claim construction. But, they argue, the root source of methodological disagreement in patent law is more narrow than in other areas of law. That is, according to Hrdy and Picozzi, in areas such as constitutional law, “judges are relatively free to interpret and construct the text based on their prior beliefs about which policy outcomes or which form of interpretive methodology (e.g., textualism or anti-textualism) is superior.” But in patent law, they argue, judges are constrained by the Patent Act, and so disagreements over claim construction do not stem from free-floating beliefs about desirable policy outcomes, but instead are tethered to more mundane and legalistic disagreements about the proper statutory construction of the disclosure requirements of 35 U.S.C. § 112. In particular, they argue that “judges’ approaches to claim construction closely followed—and were likely influenced by—their constructions of section 112(a)’s written description requirement and section 112(b)’s definiteness requirement.”

It might perhaps surprise Hrdy and Picozzi to discover that I agree that judges’ approaches to claim construction largely parallel, and are likely influenced by, their positions on § 112. Yet I do not think this defeats my argument. As an initial matter, I would note that, even if Hrdy and Picozzi are correct that disagreements over claim construction stem from narrow legalistic disagreements about the proper understanding of § 112, that would not contradict the core claims of the article—the basic point that disputes about claim analysis are mostly disputes about legal methodology rather than linguistic meaning would still stand. In that sense Hrdy and Picozzi’s argument is less a refutation and more in the nature of a follow-on contribution. But I also think there is a deeper disagreement: Implicit in Hrdy and Picozzi’s con-law-is-different argument seems to be the contention that disagreements about § 112 are not based on beliefs about desirable policy but instead are narrow, mundane, and legalistic debates unencumbered by ideological priors. I think this contention is flawed and that their evidence is more consistent with an alternative hypothesis, namely that judges show a consistent pattern across several doctrinally-distinct issues—claim construction, § 112(a), § 112(b)—because they are influenced by their underlying beliefs about desirable policy (specifically, beliefs about desirable patent scope) in all of them. Judges who favor broad patents tend to construe claims broadly and read § 112 narrowly; judges who favor narrow patents tend to do the opposite. Rather than proving that patent law is not like con law, I submit that the Hrdy and Picozzi’s evidence tends to show that it is.

 

Guest Post by Camilla Hrdy on The Interpretation-Construction Distinction in Patent Law

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Camilla Hrdy is the Center for Technology, Innovation & Competition Fellow at the University of Pennsylvania Law School and a Visiting Fellow at the Yale Law School Information Society Project.  Below, she comments on The Interpretation-Construction Distinction in Patent Law by Professors Chiang and Solum. The “real name” rule applies to comments on this post.

Uncertainty and unpredictability in claim construction outcomes is one of the most important problems in patent litigation today. But patent law isn’t the only context in which judges struggle to determine the meaning of legal texts. In a recent article in the Yale Law Journal, The Interpretation-Construction Distinction in Patent Law, T.J. Chiang and Lawrence Solum argue that construing a patent is no different from any other form of legal analysis performed by judges, whether in constitutional law, statutory law, or contract law. As in these contexts, judges proceed in two distinct stages when determining the legal meaning of a patent’s claims. First, they “interpret” the claims’ linguistic meaning. Second, they “construe” the claims according to their normative beliefs about what the claims’ legal effect should be. According to Chiang and Solum, uncertainty in claim construction outcomes is caused mainly by judges’ disagreements in the “construction” phase, not the “interpretation” phase. In other words, judges disagree over policy, not language.

In a response in the Yale Law Journal Forum, Ben Picozzi and I argue that the “interpretation-construction distinction” does not fully capture how judges construe patent claims because it does not take into account the difference between the statutory context in which claim construction occurs and the constitutional context in which the interpretation-construction distinction evolved. In constitutional analysis, judges are relatively free to interpret and construct the text based on their prior beliefs about which policy outcomes or which form of interpretive methodology (e.g., textualism or anti-textualism) is superior. In contrast, when judges construe the terms of a patent, they must do so in light of the requirements of the Patent Act – in particular, 35 U.S.C. § 112. Section 112 imposes several requirements for minimum disclosure and definiteness. If a patent does not meet these requirements, judges are obligated to find it invalid under one of several doctrines.

We agree with Chiang and Solum, as well as other commentators such as Thomas Krause and Heather Auyang, that significant policy disagreements underlie judges’ divergent views on the legal meaning of patent claims, and that one of the major debates is whether claims should be interpreted broadly, according to how a patentee wrote them, or narrowly, according to what the judge finds to be the “real invention.” But in our view, these debates are based on judges’ disagreements over the precise levels of disclosure and definiteness that section 112 requires. Simply put, what Chiang and Solum call “claim construction” versus “claim interpretation” is actually statutory construction. In our response, we analyze the major claim construction cases that Chiang and Solum use as examples of their theory and show that in each of these examples, the judges’ disagreement over the meaning of the claims at issue was motivated by their disagreement over the meaning of the statute. Specifically, judges’ approaches to claim construction closely followed—and were likely influenced by—their constructions of section 112(a)’s written description requirement and section 112(b)’s definiteness requirement.

Our disagreement with Chiang and Solum is not just theoretical. It is highly relevant for the Supreme Court’s upcoming decision in Teva v. Sandoz, where the Court will decide what standard the Federal Circuit must apply in reviewing district courts’ claim construction decisions. Is claim construction a purely legal question that must be reviewed de novo? Or should at least some aspects of claim construction be reviewed under the more deferential “clear error” standard ordinarily applied to district courts’ factual findings? Most commentators—and the Solicitor General—argue that many issues that arise in claim construction, such as expert testimony on the level of ordinary skill in the art, are factual issues that should be reviewed deferentially. Chiang and Solum disagree, arguing that claim construction should be treated as a question of law and reviewed without deference. The reason they give for their somewhat unusual stance is their view that many important disputes over claim meaning involve construction, not interpretation of claims. If district courts were free to engage in construction without significant oversight from courts of appeal, this would increase, not reduce, uncertainty in outcomes, with “hundreds of district court judges across the nation each following their own individually preferred methodologies in the individual cases that come before them.”

We agree with Chiang and Solum’s conclusion that some purely legal questions underlie judicial disagreements over the meaning of patent claims and that many of these questions are in need of appellate review. But this is because they are questions of statutory construction. Judges disagree over issues like the contours of section 112’s disclosure and claim definiteness requirements, and consequently disagree over the proper construction of claims.

On this view, granting deference to district courts with respect to questions that do not involve statutory construction would not necessarily increase uncertainty and disuniformity in claim construction outcomes. Moreover, even if the Federal Circuit must review many facets of district courts’ claim construction decisions under the more deferential clear error standard, the Federal Circuit could still do much to increase certainty by resolving a number of outstanding statutory debates. For instance, does section 112(a), which the Federal Circuit has held contains a separate written description requirement, also require claims to be construed according to what the inventor “actually invented,” as Judge Lourie and other members of the court have suggested in several claim construction decisions? Does section 112(b), as construed by the Supreme Court in Nautilus v. Biosig, require courts to review more expert evidence in order to determine whether a patent’s claims would inform those skilled in the art “with reasonable certainty” about the scope of the invention?

If the Federal Circuit or the Supreme Court cannot resolve such issues, then Congress should amend the statute to provide greater clarity. This is how patent law has historically progressed and, we believe, is how lawmaking should work within a well-functioning statutory framework. Chiang and Solum’s analysis is a good start, but it doesn’t take this framework into account. Doing so would lead to conclusions that are less pessimistic and more complete.

The Interpretation-Construction Distinction in Patent Law

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By Jason Rantanen

Last week, I wrote about my view that patent rights are malleable; that is, their scope and strength can be altered by the parties who interact with them after their issuance.  Malleability is different from ideas that patent rights are simply uncertain; that the scope and strength of patents that revolve around chance or indeterminacy, as it involves changes to the patent right rather than resolution of an unknown variable.

In connection with that work, I’ve recently had several valuable exchanges with Professor Tun-Jen Chiang, whose ability to articulate theoretical concepts in patent law is possibly without equal.  This is not to say that I agree with Chiang’s perspectives; I frequently do not.  But his work bears strong traces of both Richard Epstein and Timothy Dyk in the rigor of its analysis and lucidity of its explanations.

One of Professor Chiang’s most recent works, The Interpretation-Construction Distinction in Patent Law, 123 Yale L. J. 530 (2013), co-authored with Professor Lawrence Solum, takes head-on the issue of indeterminacy in claim scope.  Chiang and Solum argue that this indeterminacy is not so much due to linguistic ambiguity as it is to “a conflict about the underlying goal of claim construction: is it to give effect to the linguistic meaning of text, or is it to tailor patent scope to the real invention?”  Id. at 536.  This conflict, they argue, involves two fundamentally different goals, and determining claim meaning is an incoherent inquiry when judges move between them.  The result is indeterminacy not due to linguistic ambiguity but due to an inability to resolve whether to apply linguistic analysis in the first place.

I’ve provided the abstract below; the full article is here: http://www.yalelawjournal.org/article/the-interpretation-construction-distinction-in-patent-law

The ambiguity of claim language is generally considered to be the most important problem in patent law today. Linguistic ambiguity is believed to cause tremendous uncertainty about patent rights. Scholars and judges have accordingly devoted enormous attention to developing better linguistic tools to help courts understand patent claims.

In this Article, we explain why this diagnosis is fundamentally wrong. Claims are not often ambiguous, and linguistic ambiguity is not a major cause of the uncertainty in patent law today. We shall explain what really causes the uncertainty in patent rights, how the erroneous diagnosis of linguistic ambiguity has led the literature off track, and what will get us back on track to solving the uncertainty problem.

Tomorrow, Camilla Hrdy will guest-blog about her response to The Interpretation-Construction Distinction in Patent Law.  For this series of posts, we’ll be doing something a bit different for comments.  Only comments with the author’s real name will be permitted; all others will be removed.

The Malleability of Patent Rights

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By Jason Rantanen

Folks who write about patents commonly explain the concept by drawing an analogy to real property rights, with the metes and bounds of a patent set out in the claims rather than a deed description.  Drawing upon this analogy, a common critique of by scholars such as Jim Bessan and Mike Meurer is that patent boundaries are much less clear than those of deeds.  Related to this uncertainty in scope is the fact that the very existence of the rights themselves is hardly certain.  While issued patents come with a presumption of validity, it is only that: a presumption.  Patent claims can be and are invalidated by courts.  Commentators have used various terms to describe these attributes, terms that when unpacked mean somewhat different things.  Indeterminacy and probabilistic rights are two of the most common.  Regardless of the terminology, the core idea is that that patent rights are characterized by a degree of uncertainty.

In my most recent long-form work, I describe another important characteristic of patent rights: their malleability.  By malleable, I mean that the scope and strength of the right can be changed after the patent is issued through an array of mechanisms, thus allowing actors operating within the patent system the ability to change the very contours of the right.  In other words, not only can patent rights involve something akin to a roll of the dice or an inability to definitively pin down their scope, but the outcome of that roll or the contours of the uncertainty can be changed by the actions of the parties involved.  An obvious example is the role that skilled counsel play in litigation, but that’s not the only way that patent rights can be altered after issuance.

Over the past few months, we’ve seen quite a few manifestations of this malleable nature of rights; most recently in the Federal Circuit’s decision this morning in Content Extraction v. Wells Fargo Bank invalidating an issued patent on section 101 grounds.  The rise in importance of Section 101 is in large part the result of individual actions pushing and pulling on patent rights using those tools at their disposal, as attorneys develop creative new ways to deploy the legal precedent and policy arguments.  The consequence in this case is that the patent rights are eliminated well after the patent issued.  There are, of course, better examples of malleability than invalidation: claim construction is the one that most quickly comes to mind.

Ultimately, it’s not clear to me that malleability is a desirable characteristic.  Although there are individual doctrines where malleability may be necessary, I have yet to come up with a good theoretical justification for it on a broad scale.

Read The Malleability of Patent Rights here: http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2540356.  The article is still a draft, so well thought out comments and responses are particularly welcome.

Obviousness: Analogous Art and Hindsight

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by Dennis Crouch

In an interesting September 2014 decision, the Federal Circuit upheld a USPTO determination of obviousness.  The majority decision (authored by Judge Newman) touches on both (1) analogous-art and (2) motivation to combine references. The problem-focused approach taken by the majority in determining analogous art is fascinatingly similar to parts of the abstract-idea analysis in Alice Corp. — looking generally to the problem-to-be-solved as the overarching focus of the invention.  Writing in dissent, Judge Moore characterized the obviousness determination as “[h]indsight, hindsight, hindsight.”  [Decision]

Scientific Plastic Products (SPP) holds a number of patents relating to cartridges for low pressure liquid chromatography (LPLC) with a resealable screw-on cap. See U.S. Patent Nos. 7,138,061, 7,381,327 and 7,410,571. When SPP sued Biotage for infringement, the defendant responded by filing an inter partes reexamination.  Reexam Nos. 95/000,495, ‘496, and ‘497 (filed in 2009, pre-AIA).  Based upon his consideration of the prior art, the patent examiner rejected all of the claims of each patent — finding them obvious under 35 U.S.C. 103. That decision was affirmed by the PTAB and is the subject of the appeal here.  Meanwhile, the district court case has been stayed pending outcome of the reexamination.  On appeal here, a split panel of the Federal Circuit has affirmed the USPTO rejection – with Judge Newman joined by Judge Wallach writing the majority and Judge Moore in dissent.

The primary obviousness reference in the case apparently discloses all of the elements of the patented LPLC cartridge except for one – a tapered lip of the cartridge that corresponds to a taper in the screw-on cap.  The tapering helps create a better seal and avoid leakage when the cap is on.  It turns out that the tapered lip feature is not new, and the USPTO identified two different patents from the soda-pop bottle industry that disclosed the approach.  See for example, Strassheimer (Patent No. 5,100,013).

Obviousness: Section 103 of the Patent Act provides the basic test for obviousness — whether “differences between the claimed invention and the prior art are such that the claimed invention as a whole would have been obvious . . . to a person having ordinary skill in the art to which the claimed invention pertains.”   The two primary interpretations of this decision are Graham v. John Deere Co., 383 U.S. 1 (1966)(outlining test) and KSR Int’l Co. v. Teleflex, Inc, 550 U.S. 398 (2007) (explaining that test should not be rigid but instead apply common sense).

Deere explained that there are four factual prerequisites to consider when determining the legal question of obviousness.

  1. The level of ordinary skill in the art;
  2. The scope and content of the prior art;
  3. The differences between the claimed invention and the prior art;
  4. Any objective indicia of nonobviousness.

Those who know Deere well will notice that I have re-arranged the order of the test by placing the level of ordinary skill in the art as the first step in the analysis. I do that because – as explained below – the scope-and-content of the prior art is impacted by the level of skill in the art.

In many obviousness cases, all of the elements of the invention are found within a limited set of prior art references. The argument then is that it would have been obvious for one skilled in the art to think of combining the elements from those references to create the claimed invention.  In KSR, the Court held that the justification for such a combination can be based upon common sense or other evidence and does not require a particular teaching-suggestion-or-motivation found within the prior art itself.

Scope of the Prior Art: The scope and content of prior art is determined by several factors. First, evidence must fall within the prior art definitions for anticipatory references under 35 U.S. 102.  Second, the prior art must also be seen as “analogous art.”  The analogous art requirement is based upon the idea that someone working in a particular field would be unlikely to search through or know all possible prior art but rather would focus attention on what is known (1) in the same field of endeavor or (2) to be addressing the same problem.  The general question is whether it would have been “reasonable” for a person of ordinary skill in the art to consider the given prior art in order to solve the problem confronting the inventor. In re Clay, 966 F.2d 656 (Fed. Cir. 1992).

Here, the problem identified by the inventor was to prevent leakage on a plastic screw-cap and everyone knows that the soda-pop bottles have solved that problem. From that framework this is an easy case.  However, the patentee here argued that this analysis involves improper hindsight because the leakage problem was one identified by the inventor as part of the invention process and was not previously identified in the prior art.

The Federal Circuit implicitly agreed that it would be improper hindsight to rely upon the problem first identified by the inventor for determining analogous art. However, the court rejected that argument as applied to the facts here.  In particular, the PTAB noted that the primary LPLC reference includes a particular o-ring seal that serves as an implicit recognition leakage could be a problem. On appeal, the Federal Circuit confirmed that the implicit concern was sufficient to avoid  hindsight concerns.  Affirmed.

= = = =

Writing in dissent, Judge Moore argues that majority opinion is hindsight of the worst kind, ‘wherein that which only the invention taught is used against its teacher.’ quoting W.L. Gore & Assocs., Inc. v. Garlock, Inc., 721 F.2d 1540(Fed. Cir. 1983).

The patents do not indicate that leakage was a problem identified in the prior art or a problem known to those of skill in the art. Rather they indicate that the claimed design will avoid leakage. These inventors identified a design problem, articulated it, and solved it. There is absolutely no evidence of the existence of a known leakage problem that would have motivated skilled artisans to modify Yamada. The Board is taking the ingenuity of these inventors and, without any record basis, attributing that knowledge to all skilled artisans as the motivation to make the inventions at issue. Hindsight, hindsight, hindsight. . . .

I would reverse because I conclude that the Board’s cancellation of the claims at issue was based entirely on hindsight reconstruction—there is no record evidence that one of skill in the art would have been motivated to modify Yamada with soda pop bottle sealing closures.

An implicit suggestion from Judge Moore is that in hotly contested post-issuance cases invalidating evidence should be high quality:

These were inter partes reexamination proceedings between sophisticated parties. Both parties put on expert testimony regarding obviousness. Yet there is no evidence that the chromatography cartridges in Yamada had
a leakage problem that skilled artisans would have been motivated to address.

Judge Moore also challenged the PTAB’s failure to determine the level of ordinary skill in the art.  “An ordinarily skilled chemist would have likely looked to a different body of prior art than an ordinarily skilled mechanical engineer with industrial design experience. . . We cannot answer the analogous art question without knowing who the person of ordinary skill is.”

Supreme Court Sanctions for Faulty Brief

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Anyone who read Sigram Schindler’s petition for writ of certiorari would have walked away confused.  To say that the petition makes little sense is perhaps over stating its value.  The question presented by Schindler was as follows:

Does the US Constitution, in legal decisions based on 35 USC §§ 101/102/103/112, require instantly avoiding the inevitable legal errors in construing incomplete and vague classical claim constructions – especially for “emerging technology claim(ed invention)s, ET CIs” – by construing for them the complete/concise refined claim constructions of the Supreme Court’s KSR/Bilski/Mayo/Myriad/Biosig/Alice line of unanimous precedents framework, or does the US Constitution for such decisions entitle any public institution to refrain, for ET CIs, for a time it feels feasible, from proceeding as these Supreme Court precedents require – or meeting its requirements just by some lip-service – and in the meantime to construe incomplete classical claim constructions, notwithstanding their implied legal errors?”

The Supreme Court has now – as expected – denied the petition.  However, the court took a major step further — ordering Schindler’s Supreme Court attorney to “show cause … why he should not be sanctioned”:

D-2827 IN THE MATTER OF DISCIPLINE OF HOWARD NEIL SHIPLEY

Howard Neil Shipley, of Washington, D.C., is ordered to show cause, within 40 days, why he should not be sanctioned for his conduct as a member of the Bar of this Court in connection with the petition for a writ of certiorari in No. 14-424, Sigram Schindler Beteiligungsgesellschaft MBH v. Lee.

The brief was filed by Howard Shipley of the Foley firm along with his partner George Quillen.  Although I do not know, I suspect that the Foley firm agreed to file the brief as drafted by Dr. Schindler and without providing any substantive input or editing.

Tony Mauro has more.

This case is unlikely to help shift the Supreme Court’s perspective on the Federal Circuit and the current state of patent law doctrine.

 

Not so fast: Phase III Biosimilar Clinical Trial & Infringement Threat does not Create Justiciable Case or Controversy

Patent

by Dennis Crouch

Sandoz v. Amgen is one of the first decisions by the Federal Circuit relating to the biosimilars and the Biologics Price Competition and Innovation Act of 2009 (BPCIA) (codified principally at 42 U.S.C. § 262).  By rejecting jurisdiction here, the court adds incremental value to biologic patents at the cost of some chilling of the development of follow-on biosimilars.

In this case, the Sandoz sued Amgen — asking the court for a declaratory judgment that two of Amgen’s patents covering its Enbrel formulation are invalid.  Patent Nos. 8,063,182 and 8,163,522.  The district court rejected the lawsuit altogether — finding no case-or-controversy sufficient to create jurisdiction.  On appeal, the Federal Circuit has affirmed, although on narrower grounds than did the district court.

Unlike generic drugs, follow-on (“generic”) biologics will typically require additional research because biosimilars are typically – and as their name suggests – only similar to the original treatment product.  This means that a follow-on company will likely make substantial research investments prior to seeking FDA approval.

The BPCIA creates a biosimilars scheme akin to what Hatch-Waxman does with generics.  In particular – like Hatch-Waxman – BPCIA creates a paper-cause-of-action labeling the filing an FDA biosimilarity application as a form of patent infringement.  The particulars of BPCIA is substantially different from Hatch-Waxman, but they run in parallel at least from a 30,000-foot framework.

Here, Sandoz is working on a biosimilar of Enbrel and Amgen has notified Sandoz that its proposed biosimilar would infringe the patent.  In 2013 Sandoz took two simultaneous actions: (1) it began a major (and expensive) Phase III trial of its version of the treatment product and (2) it filed this declaratory judgment action — asking the federal court for a holding that the Amgen patents are both invalid and would not be infringed by Sandoz’ product.  Although Sanoz has already invested in the research, an adverse decision in the DJ case could help the company avoid wasteful spending.  Because pharmaceutical patent litigation takes years to complete, the early-stage lawsuit may well only be complete at around the product launch date.   Importantly, however, courts often make early claim-construction decisions that could be helpful for Sandoz in developing a non-infringing alternative.  Notably, Sandoz research is not alleged to be infringing since (1) it is being done abroad and (2) it likely qualifies for the research exception of 35 U.S.C. 271(e).

Rather than hearing the case, the district court dismissed based upon lack of jurisdiction.  Applying two alternate theories, the district court held (1) that the controversy was not sufficiently immediate and real as required by Supreme Court doctrine on cases-and-controversies; and (2) that the BPCIA preempts declaratory judgment lawsuits prior to the DJ-plaintiff’s FDA biosimilar application filing.

The U.S. Constitution (as interpreted by the Supreme Court) requires an actual and immediate case-or-controversy between the parties.  The approach is to ask “whether the facts alleged … show that there is a substantial controversy, between parties having adverse legal interests, of sufficient immediacy and reality to warrant the issuance of a declaratory judgment.”  MedImmune, Inc. v. Genentech, Inc., 549 U.S. 118, 127 (2007).

On appeal, the Federal Circuit affirmed – finding no immediate case or controversy between the parties. In addition to the fact that no infringement occurs until at least the FDA filing, the Federal Circuit found that the Sandoz ongoing research could still potentially result in a product that is clearly non-infringing.  Importantly, because the court found no case-or-controversy under MedImmune, the Federal Circuit chose not to address the alternative judgment that BPCIA preempts the lawsuit.

Biopharmaceuticals are on the rise as an important and useful facet of medical technology. However the impact of BPCIA is still yet to be solidified.

Williamson v. Citrix: Means-plus-function, presumptions, and “nonce” words

Patent

By Jason Rantanen

This opinion is notable because it involves an emerging split in the Federal Circuit’s  jurisprudence on “X plus function” claim language.  At the heart of the split is the presumption that arises from the non-use of the word “means” in a claim.  Under the majority’s ruling in this case, that burden is extremely difficult to overcome; a holding that furthers the tension with the Federal Circuit’s recent decision in Bosch v. Snap-On.

Williamson v. Citrix Online, LLC (Fed. Cir. 2014) Download Opinion
Panel: Moore,* Linn (author), Reyna (dissenting)

6155840The patent in this case is part of the bankruptcy estate of the @Home Corporation, a late 1990’s venture to provide cable internet and later, a content portal.  (Those of you who were online in the late 1990’s may remember the company or the multi-billion dollar merger of @Home and Excite in 1999).    Shortly after the dot-com bubble burst, @Home collapsed and entered bankruptcy proceedings.  The plaintiff in this case, Richard Williamson, acts as trustee for the At Home Bondholders’ Liquidating Trust and has brought a series of patent infringement suits against major technology companies in an effort to recover assets for the debt holders.

Patent No. 6,155,840 describes and claims “[a] system for conducting distributed learning among a plurality of computer systems coupled to a network.”  Williamson brought an infringement suit against an array of defendants, including Citrix, Microsoft, Adobe, Cisco, and IBM.  At the district court, the defendants obtained a favorable claim construction at the district court on three key terms, two in independent claims 1 and 17 and one in independent claim 8, leading to a stipulation of noninfringement of claims 1-7 and 17-24 and of invalidity due to indefiniteness of claims 8-12.

On appeal, the Federal Circuit reversed the district court’s claim constructions for both groups of claims.  The reversal as to the first group (1-7 and 17-24) is not particularly noteworthy.  There, the majority concluded that the district court erroneously imported an extraneous limitation into the claims: the claim element called for “a graphical display representative of the classroom” and the district court construed this as requiring a “pictorial map illustrating an  at least partially virtual space in which participants can interact, and that identifies the presenter(s) and audience member(s) by their locations on the map.”  “While the specification discloses examples and embodiments where the virtual classroom is depicted as a “map” or “seating chart,” nowhere does the specification limit the graphical
display to those examples and embodiments.”  Slip Op. at 10.  The proper construction  is “a graphical representation of an at least partially virtual space in which participants can interact.”

Judge Reyna disagreed in part.  In his view, “the specification and prosecution history make clear that the ‘graphical display representative of a classroom’ terms are properly construed as requiring a visually depicted virtual classroom.”  Dissent at 2 (emphasis added).  Judge Reyna reached this conclusion based on the specification and prosecution history’s distinguishing of the invention from the prior art based on the presence of this additional element.  [Given Judge Reyna’s views, it sounds like these claims may be invalid under the majority’s claim construction].

The Section 112 Issue: The more significant portion of the opinion involves the second group of claims, which implicate issues of claim construction, functional language, and indefiniteness.  The district court construed the element “distributed learning control module for…” as being a § 112, ¶ 6 [now § 112(f)] means-plus-function element.  Because there was no corresponding structure for the claimed function disclosed in the specification, the claim was indefinite.  (I’ve highlighted the relevant section of the claim in the image above).

On appeal, the majority concluded that it was error to treat “distributed control module” as a means-plus-function claim term.  Under the court’s precedent, the failure to use the word ‘means’ in a claim limitation creates a strong presumption that 35 U.S.C. § 112, ¶ 6 does not apply.  And rebutting this presumption requires meeting a very high standard: “it must be demonstrated that ‘skilled artisans, after reading the patent, would concluded that [the] claim limitation is so devoid of structure that the drafter constructively engaged in means-plus-function claiming.’ Inventio AG v. ThyssenKrupp Elevator Ams. Corp., 649 F.3d 1350, 1357 (Fed. Cir. 2011).’ ” Slip Op. at 13 (my emphasis added). “A claimed expression cannot be said to be devoid of structure if it is used “in common parlance or by persons of skill in the pertinent art to designate structure, even if the term covers a broad class of structures and even if the term identifies the structures by their function.” Lighting World, 382 F.3d at 1359–60.

Applying this “devoid of structure” standard, the majority concluded that the presumption was not rebutted.  There are at least some meanings of “module” that connote structure.  “The district court, in characterizing the word “module”
as a mere nonce word, failed to appreciate that the word ‘module’ has understood dictionary meanings as connoting either hardware or software structure to those skilled in the computer arts.”  Slip Op. at 14.  In addition, the full term, “distributed learning control module,” is part of a structure, “distributed learning server,” and interconnects and intercommunicates with that server.  “These claimed interconnections and intercommunications support the conclusion that one of ordinary skill in the art would understand the expression “distributed learning control module” to connote structure.”  Id. at 16.  The specification, too, suggests that “distributed control module” is not “devoid of structure.”

“Module” is a ‘nonce” word: Dissenting Judge Reyna would have agreed with the district court that the language triggered Section 112, para. 6.  “Module” is simply a substitution for “means”; the effect is the same, as the claim limitation follows the term with “for” and three functions performed by the “distributed learning control module”:

This claim limitation is in the traditional means-plus-function format, with the minor substitution of the term “module” for “means.” The claim language explains what the functions are, but does not disclose how the functions are performed.[] In this case, the term “module” is a “nonce” word, a generic word inherently devoid of structure.

Dissent at 5.  In support of this conclusion that “module” is tantamount to “means,” Judge Reyna cites sources recognizing that terms such as  “module for” may invoke Section 112, para 6, including the Manual of Patent Examining Procedure.  Furthermore, the majority’s citation of sources indicating that “module” can connote hardware, software, or both does not provide structure: “It refers only to a “general category of whatever may perform specified functions.”  Id. at 6, quoting Bosch v. Snap-On.  None of the addition material relied on by the majority provides any structural significance.

The Intra-Circuit Split: Setting aside the issue of whether the Federal Circuit’s current algorithmic approach to indefiniteness of functional language conflicts with  Supreme Court precedent, an issue that Dennis and I have written about, this opinion reflects one of two different approaches to interpreting “X plus function” language in claims. (When “X” is something other than “means” or “step.”).

The majority’s holding in this case is an extension of a line of cases applying a very high threshold for “X plus function” language to trigger application of § 112, ¶ 6.  To rebut the presumption in these cases, the “X” must simply “connote” structure to a person of ordinary skill in the art (and arguably under the way the standard is applied in Williamson, merely be capable of connoting structure).  Put another way, the presumption is only rebutted if the claim term is “devoid” of structure.

The Federal Circuit’s recent opinion in Bosch v. Snap-On, which Dennis wrote about in October, reflects the second approach, which applies a less-strict threshold for   rebutting the presumption.  In Bosch, the court described the analysis as asking “if the claim language, read in light of the specification, recites sufficiently definite
structure to avoid § 112, ¶ 6…The question is whether the claim language names
particular structures or, instead, refers only to a general category of whatever may perform specified functions.”  Bosch at 7 (emphasis added).  There, the court concluded that “program recognition device” and “program loading device” did lack sufficient structure; the term “device” was a “nonce” word.  The result was the opposite of Williamson: § 112, ¶ 6 was triggered and, because there was no corresponding structure the specification, the claims were indefinite.

For purposes of direct comparison, I’ve pasted the statements of the law from these two cases below.

From Williamson v. Citrix:

In Personalized Media Commc’ns, LLC v. International Trade Commission, 161 F.3d 696 (Fed. Cir. 1998), and again in DePuy Spine, Inc. v. Medtronic Sofamor Danek, Inc., 469 F.3d 1005 (Fed. Cir. 2006), we stated that the failure to use the word “means” in a claim limitation created a rebuttable presumption that 35 U.S.C. § 112, para. 6 did not apply. See Personalized Media, 161 F.3d at 703–04; DePuy Spine, 469 F.3d at 1023. This presumption is “a strong one that is not readily overcome.” Lighting World, Inc. v. Birchwood Lighting, Inc., 382 F.3d 1354, 1358 (Fed. Cir. 2004). To rebut this strong presumption, it must be demonstrated that “skilled artisans, after reading the patent, would conclude that [the] claim limitation is so devoid of structure that the drafter constructively engaged in meansplus-function claiming.” Inventio AG v. ThyssenKrupp Elevator Ams. Corp., 649 F.3d 1350, 1357 (Fed. Cir. 2011). A claimed expression cannot be said to be devoid of structure if it is used “in common parlance or by persons of skill in the pertinent art to designate structure, even if the term covers a broad class of structures and even if the term identifies the structures by their function.” Lighting World, 382 F.3d at 1359–60.

From Bosch v. Snap-On:

Although both “program recognition device” and “program loading device” are presumed not to invoke § 112, ¶ 6, we must next turn to the issue of whether this “strong” presumption against means-plus-function claiming is overcome. See Lighting World, Inc. v. Birchwood Lighting, Inc., 382 F.3d 1354, 1358 (Fed. Cir. 2004). In undertaking this analysis, we ask if the claim language, read in light of the specification, recites sufficiently definite structure to avoid § 112, ¶ 6. Inventio, 649 F.3d at 1357. The question is whether the claim language names particular structures or, instead, refers only to a general category of whatever may perform specified functions. See Laitram Corp. v. Rexnord, Inc., 939 F.2d 1533, 1536 (Fed. Cir. 1991) (“[t]he recited structure tells only what the means-for-joining does, not what it is structurally”). In the latter case, § 112, ¶ 6 then commands a construction of the limitation as referring to specification identified corresponding structures and their equivalents.

***

The real problem in my mind, however, is less the split over the strength of the presumption against triggering Section 112(f) when the words “means” (or “step”) are not used, and more the conflict with Nautilus.  Even if Section 112(f) is not triggered, the claim could still be indefinite under the “reasonable certainty” standard for indefiniteness.  In other words, the presumption simply goes to whether or not Section 112(f) is triggered; it does not address the deeper question of what happens when Section 112(f) is not triggered.

*The panel originally included former Chief Judge Rader.  Upon his retirement, Judge Moore was appointed to join the panel.

Guest Commentary by Prof. Peter Menell: Appellate Review of Patent Claim Construction and Institutional Competence

Patent, , , ,

Guest commentary by Peter S. Menell.  Professor Menell is Koret Professor of Law and at UC Berkeley School of Law and Director of the Berkeley Center for Law & Technology. Professor Menell filed an amicus brief along with Professors Jonas Anderson and Arti Rai in Teva Pharmaceuticals USA Inc. v. Sandoz Inc., 13-854. That brief can be accessed at: http://papers.ssrn.com/sol3/papers.cfm?abstract_id= 2457958.

The U.S. Supreme Court heard argument six weeks ago in Teva Pharmaceuticals USA v. Sandoz, a case addressing the scope of appellate review of claim construction rulings. While less headline-grabbing than recent cases addressing the patentability of business methods, computer software, and DNA, Teva nonetheless confronts a critical issue that has long plagued the patent adjudication system.

Nearly two decades ago, the Supreme Court sought to promote more effective, transparent patent litigation through its ruling in Markman v. Westview Instruments that “the construction of a patent, including terms of art within its claim, is exclusively within the province of the court.” While carefully avoiding characterizing claim construction as a pure question of law, the court nonetheless removed interpretation of patent claims from the black box of jury deliberations by holding that the Seventh Amendment right of trial by jury did not extend to patent claim construction and that trial judges were better equipped than juries to resolve the mixed fact/law controversies inherent in construing disputed patent claim terms. The decision ushered in a new patent adjudication era in which judges construe patent claims before trial through a process that has come to be known as a “Markman” hearing.

Notwithstanding this shift, the transparency that the Supreme Court sought has only been partially achieved and the quality of claim constructions falls short on evidentiary and analytical rigor. The U.S. Court of Appeals for the Federal Circuit’s sharply divided 1998 en banc decision in Cybor Corp. v. FAS Technologies held that claim construction is purely a legal issue subject to de novo appellate review, downplaying the Supreme Court’s more nuanced description of claim construction as a “mongrel practice.”

The Cybor decision dissuaded district judges from holding evidentiary hearings regarding the meaning of disputed claims and discouraged judges from explaining their reasoning. As several district judges have candidly acknowledged, why go through all of that trouble if the Federal Circuit is going to construe the terms de novo on appeal? Claim construction reversal rates and consternation among district (and some Federal Circuit) judges rose precipitously following Cybor. And although the Federal Circuit has twice revisited this issue en banc since Cybor and reversal rates have subsided (but not as a result of more transparent records), the controversy has festered, leading to the Supreme Court’s review.

Why the Fuss?

Patent law requires that claim terms be construed from the standpoint of persons of ordinary skill in the technical art using the patent specification and prosecution history (intrinsic evidence) as well as pertinent scientific and technical sources (extrinsic evidence) where necessary as of the time of the patent filing.

Federal district judges are thus thrust into challenging, but not unfamiliar, territory. As in other areas of their docket — such as products liability, toxic torts or even criminal cases turning on forensics — in which they are called upon to resolve factual disputes about scientific and technological matters, judges have at their disposal a familiar toolbox — presentation of evidence and expert testimony. And when district courts assemble a record and explain their reasoning, Federal Rule of Civil Procedure 52(a)(6) provides that their determinations “must not be set aside unless clearly erroneous, and the reviewing court must give due regard to the trial court’s opportunity to judge the witnesses’ credibility.”

Patent claim constructions add a few additional twists to this well-established general judicial framework. Even if a district judge found that a patent claim term meant “X” to skilled artisans as of the effective patent filing date, the court would still have to construe the term to mean “Y” if the intrinsic evidence established that the patentee intended such a specialized meaning. Furthermore, many disputes about patent claim meaning turn not on meaning within the technical art but rather on claim drafting conventions. Thus, courts must pay special attention to the intrinsic evidence. But the understandings of skilled artisans will be pertinent in many claim constructions, and such subsidiary factual determinations should be subject to deference under general judicial rules as well as trial judges’ proximity to the extrinsic evidence.

For these reasons, the Supreme Court should adopt a hybrid appellate standard for claim construction: Factual determinations underlying claim construction rulings should be subject to the “clearly erroneous” standard of review, while the Federal Circuit should retain de novo review over the ultimate claim construction decision. In this manner, district court judges, in their capacity as fact-finders, could better surmount the distinctive challenges posed by the technical, mixed fact/law controversies inherent in patent claim construction. The Federal Circuit would ensure that trial judges’ constructions comport with the intrinsic evidence supporting the patents.

Parsing the Supreme Court Argument

The Teva argument began with a colloquy regarding what constitutes a “subsidiary fact” and how it relates to the ultimate claim construction determination. Midway through Teva’s opening argument, Justice Samuel Alito expressed doubt that departing from the de novo standard was worth the candle. He noted that a recent empirical study could not find any case in which a shift from the de novo standard to clear error review of factual determinations would have affected the appellate review outcome.

In an unintended manner, Justice Alito’s query highlights the reason de novo review of factual determinations raises serious concerns for a justice system. The study to which he refers does not and cannot establish the “fact” that it is purported to prove. Its analysis — which is not revealed or scrutinized in the Supreme Court colloquy — boils down to the following logic: (1) three-judge panels of the Federal Circuit will be better than a single generalist district court judge at applying the appellate court’s rules of claim construction; and (2) because most claim construction reversals (77.1 percent) are unanimous, a shift to a clear error standard would not change the outcome of any cases. The first point ignores the distinctive role of judges in fact-finding, a pillar on which our court system is based. The second point does not prove that no cases would come out differently. It also overlooks the norm that appellate judges rarely dissent unless they disagree on legal questions.

More fundamentally, according greater deference to trial courts through clear error review would encourage district judges to use focused evidentiary hearings (in conjunction with the technical tutorials that are common) to substantiate the basis for their claim constructions, thereby promoting more systematic, well-founded claim construction analysis. Contrary to the study to which Alito referred, we have reason to expect clearer substantive analysis, more settlements following claim construction and trial, more effective appellate review, and fewer reversals and remands in a parallel universe in which Rule 52(a)(6) applies to claim constructions — not business as usual in the Cybor regime.

The Court also probed how deference on subsidiary facts would affect uniformity in patent interpretation. At a basic structural level, it is difficult to see how to achieve such uniformity to the extent that claim construction has a factual component. Under Blonder-Tongue Labs., Inc. v. Univ. of Ill. Found., 402 U.S. 313 (1971), the Federal Circuit’s interpretation of a patent in one case cannot be asserted offensively by the patentee in a later infringement action against other defendants to the extent that there are disputed factual underpinnings. At most, that prior adjudication can bar the patentee from seeking an alternative interpretation under judicial estoppel principles. Because the patent system has no mechanism for conclusively establishing patent scope with regard to all potential infringers where subsidiary factual disputes exist, the certainty that flows from appellate interpretations is not ironclad, as subsequent defendants can potentially bring new evidence or more effective advocacy to bear on claim meaning. Nonetheless, district courts routinely consider prior interpretations of patent claim terms in conducting claim construction. Moreover, concerns about the clarity of patent claims are more appropriately addressed through improvements to the patent prosecution process, post-grant review and reexamination, consolidation of claim construction through multi-district litigation, and adjustments to substantive claim construction jurisprudence.

Back to Basics

The Teva case poses a fundamental question going to the heart of the American justice system. Should factual determinations underlying patent claim construction be subject to substantially less deference (or more distrust) than the factual determinations made in every other area of federal adjudication? In view of the Supreme Court’s efforts over the past decade to bring patent adjudication more in line with general civil litigation principles, it is difficult to see why the Court would make an exception here. Combining deferential review of factual findings with de novo review of the overarching claim construction determination — focused on ensuring that claim construction comports with the intrinsic evidence and that the trial court followed generally applicable rules of claim construction — would enhance the quality of claim constructions, produce a more capacious and transparent appellate record, and provide the appropriate appellate safeguard.

Issue Preclusion in Relation to a Larger Patent Portfolio

Patent,

By Dennis Crouch

One risk of claim construction is potential for inconsistent judgments between different district court judges who each are required to construe disputed claim terms.  In e.Digital v. Futurwei (Huawei), the district court cut this knot by applying the doctrine of collateral estoppel (issue preclusion) to preclude the patentee from seeking a construction that varied from that of a prior court.  On appeal, the Federal Circuit has largely affirmed — however, the appellate panel rejected the notion that collateral estoppel applies to the construction of identical terms found in a second asserted patent since that second-patent was not at issue in the prior case and had material differences. [Read the Court Decision]

Due process generally requires Courts to allow parties a chance to make their case. However, the doctrine of collateral estoppel blocks parties from re-litigating issues that had already been finally decided.  Generally, the issue being precluded must have been actually litigated by the party being precluded and necessarily decided as part of a valid final judgment.  Because claim construction is an interlocutory decision and subject to modification, preclusion does not kick-in until a final judgment is awarded.

Here, a prior Colorado Court construed the terms of e.Digital’s U.S. Patent Nos. 5,491,774. The ‘774 patent covers a handheld audio recorder/player. All of the asserted claims require  “a flash memory module which operates as the sole memory of the received processed sound electrical signals” (sole memory limitation).  The patentee argued that this sole-memory-limitation should not rule-out the use of microprocessors that also require RAM to operate.  The Colorado district court disagreed and held that the claims excluded any device with RAM. Under the arguably narrow construction it was clear that the accused infringers did not actually infringe and the parties stipulated to a dismissal of the case.

In the present action against Huawei, e.Digital asserted both the ‘774 patent and Patent No. 5,839,108.  Although the ‘108 patent is not an official ‘family member’ (e.g., not a continuation, CIP, or divisional), it does cover the same basic device and includes the identical sole memory limitation.

On appeal, the Federal Circuit found that, despite the identical limitation, it was improper for the district court to rely on issue preclusion to bar the patentee from litigating construction of the sole memory limitation term with respect to the ‘108 patent.

The ’108 patent . . . presents a separate claim construction issue. The ’108 patent is not related to the ’774 patent, but does disclose a purported improvement to the ’774 patent. While the ’108 patent may incorporate by reference the ’774 patent as prior art, it does not change the fact that the patents are not related. The ’108 patent discloses a separate invention, includes a distinct prosecution history, and is supported by a different written description—including Figures 3 and 4 which clearly depict RAM. These distinctions reinforce the well understood notion that claims of unrelated patents must be construed separately. Texas Digital Sys., Inc. v. Telegenix, Inc., 308 F.3d 1193, 1211 (Fed. Cir. 2002) (citing Abbott Labs. v. Dey, L.P., 287 F.3d 1097, 1104 (Fed. Cir. 2002)) (explaining that a claim of an unrelated patent “sheds no light on” the claims of the patent in suit). Because the asserted patents are not related, the ’108 patent requires a new claim construction inquiry and the court therefore erred in applying collateral estoppel to the ‘108 patent.

The holding here is partially based upon the fact that the two patents are not formally related according to the rules of priority.  However, the court added – in dicta – that issue preclusion might not apply even if they had been related.

To be clear, our decision that collateral estoppel cannot apply to the construction of a claim in one patent based on a previous claim construction of an unrelated patent is not an invitation to assume the opposite is always justified. That is, a court cannot impose collateral estoppel to bar a claim construction dispute solely because the patents are related. Each case requires a determination that each of the requirements for collateral estoppel are met, including that the issue previously decided is
identical to the one sought to be litigated. A continuation-in-part, for instance, may disclose new matter that could materially impact the interpretation of a claim, and therefore require a new claim construction inquiry.

The point here is that issues involving a related but previously un-asserted patent ‘might’ be subject to issue preclusion based upon whether the new patent requires consideration of arguments and facts that are distinct from the already issued patent.

Going forward, this case offers some considerations for patent portfolio management both at the filing/prosecution stages as well as the assertion stage.  This case, coupled with other prior Federal Circuit decisions provide value in splitting-up larger patents into smaller component patents and in potentially holding-back some patents from initial rounds of litigation.