Tag Archives: en banc

Attorney Fees on Undecided Inequitable Conduct Issues

Patent, , , , , , , , ,

by Dennis Crouch

United Cannabis Corp (UCANN) vs. Pure Hemp Collective, — F.4th — (Fed. Cir. 2023)

The UCANN vs. Pure Hemp patent case has come to a close with the Federal Circuit affirming the district court’s decision to deny attorney fees to Pure Hemp. The original infringement lawsuit was filed in 2018, with UCANN suing Pure Hemp for infringing US Patent No. 9,730,911, covering various high concentration cannabis and CBD extract formulations. During the litigation, UCANN filed for bankruptcy, causing the case to be stayed, and eventually, the parties stipulated to a dismissal of the infringement claims with prejudice. However, the stipulated dismissal did not include any discussion of attorney fees — leading to the current appeal.

Following the dismissal, Pure Hemp moved for attorney fees and sanctions, arguing that UCANN’s counsel committed inequitable conduct during patent prosecution and that UCANN’s litigation counsel had a conflict of interest. The district court sided with UCANN and denied attorney fees, stating (1) that Pure Hemp was not the prevailing party and (2) that Pure Hemp did not prove that the case was exceptional. The Federal Circuit has now affirmed the decision, finding that the district court did not abuse its discretion in finding the case unexceptional. Although district court the district court erred in not finding Pure Hemp to be the prevailing party, the error was harmless.

(more…)

The Split on Pleading Scienter for Inequitable Conduct

Ethics, , , , , , , ,

by David Hricik, Mercer Law School

Federal Rule of Civil Procedure 9(b) requires that fraud or mistake be pled with particularity.  The Federal Circuit has held that, although inequitable conduct is “broader than fraud” inequitable conduct must be pled with particularity in Exergen Corp. v. Wal-Mart Stores, Inc., 575 F.3d 1312, 1330 (Fed. Cir. 2009).  (A digression:  I think this is wrong because the Supreme Court has held that Rule 9(b) is limited to “fraud” and “mistake” and it is improper to rely on judicial policies to expand the plain meaning of the rule.  See David Hricik, Wrong about Everything: The Application by the District Courts of Rule 9(b) to Inequitable Conduct, 86 Marquette Law Review  895 (2003) (here).)

One issue that has split the district courts is whether the “single most reasonable inference” standard for scienter applies at the pleading stage. The court in Deere & Co v. Kinze Mfg., Inc (No. 4:20-cv-00389-RGE-HC, C.D. Iowa May 1, 2023) collected the cases:

iLife Techs. Inc. v. AliphCom, No. 14-CV-03345-WHO, 2015 WL 890347, at *4 n.1 (N.D. Cal. Feb. 19, 2015) (“I recognize that there is currently a dispute among courts as to the pleading requirements for an inequitable conduct counterclaim.”) (collecting cases); see also Wyeth Holdings Corp. v. Sandoz, Inc., CIV.A. No. 09-955-LPS-CJB, 2012 WL 600715, at *7 (D. Del. Feb. 3, 2012) (“Several district courts have recently confronted this question and have reached different conclusions.”) (collecting cases); Cutsforth, Inc. v. LEMM Liquidating Co., L.L.C., No. 12-cv-1200 (SRN/JSM), 2013 WL 2455979, at *4 (D. Minn. June 6, 2013) (“District courts are currently conflicted on the effect of the Federal Circuit’s holding in Therasense on the pleading requirements for the specific intent to deceive element.”) (collecting cases). More recent decisions, however, have acknowledged that a majority of courts do not view Therasense as requiring pleadings of inequitable conduct to satisfy the “single most reasonable inference” standard. See Jaguar Land Rover Ltd. v. Bentley Motors Ltd., No. 2:18cv320, 2021 WL 8086357, at *2 (E.D. Va. May 6, 2021) (“[T]he majority position among district courts is that even applying the Rule 9(b) standard requiring heightened specificity when pleading fraud, it is not necessary that intent to deceive be the ‘single most reasonable inference,’ at the pleading stage.” (quoting W.L. Gore & Assocs., Inc. v. Medtronic, Inc., 850 F. Supp. 2d 630, 633 (E.D. Va. 2012))); Front Row Techs., L.L.C. v. NBA Media Ventures, L.L.C., 163 F. Supp. 3d 938, 986 (D.N.M. 2016) (A “line of cases . . . hold[s] that the pleader ‘need only allege facts from which the Court could reasonably infer that the patent applicant made a deliberate decision to deceive the [US]PTO.’ . . . Th[is] . . . line of cases is now the majority position.” (quoting Wyeth Holdings, 2012 WL 600715, at *7)).

The John Deere court ultimately held pleadings showing only a reasonable inference of scienter was required, not the single most reasonable inference, reasoning in part:

Moreover, as multiple courts have noted, the Federal Circuit’s opinion in Delano Farms Co. v. California Table Grape Commission––decided after Therasense––affirmed the Exergen pleading standard on a motion to dismiss an inequitable conduct counterclaim alleging the withholding of material references. Delano Farms Co. v. Cal. Table Grape Comm’n, 655 F.3d 1337, 1350 (Fed. Cir. 2011). The Delano Farms court stated the charge of inequitable conduct would survive “only if the plaintiff’s complaint recites facts from which the court may reasonably infer that a specific individual both knew of invalidating information that was withheld from the [US]PTO and withheld that information with a specific intent to deceive the [US]PTO.” Id. (emphasis added); see also Wyeth Holdings, 2012 WL 600715, *8 (citing Delano Farms, 655 F.3d 1337); Human Genome Scis., Inc., 2011 WL 7461786, at *3 (“Delano Farms, a post-Therasense case . . . also seems to indicate that the less rigorous standard applies.” (citing same)); accord Cutsforth, 2013 WL 2455979, at *4; Mentor Graphics Corp. v. EVE-USA, Inc., 13 F. Supp. 3d 1116, 1125–26 (D. Or. 2014); Illumina Inc. v. BGI Genomics Co., Ltd., No. 20-cv-01465-WHO, 2021 WL 428632, at *4 (N.D. Cal. Feb. 8, 2021); Jaguar Land Rover Ltd., 2021 WL 8086357, at *2; Front Row Techs., 163 F. Supp. 3d at 986; TiVo Inc. v. Verizon Commc’ns, Inc., No. 2:09-cv-257, 2011 WL 13134426, at *3 (E.D. Tex. Sept. 7, 2011); Graphic Packaging Int’l, Inc. v. C.W. Zumbiel Co., No. 3:10–cv–891–J–37JBT, 2011 WL 4862498, at *3 (M.D. Fla. Sept. 12, 2011).

It seems to me that it’s much too high a bar to require the single most reasonable inference at the pleading stage in part because the facts to establish scienter largely will be in the patentee’s possession and if pleading is denied, there won’t be any discovery since it is, largely, limited to information relevant to a pled claim or defense.

Hrdy & Seaman: Are NDAs unenforceable when they protect more than trade secrets?

Patent, , , ,

Guest post by Camilla A. Hrdy, Professor of Intellectual Property Law at University of Akron School of Law

Are NDAs unenforceable when they protect more than trade secrets? The standard answer is no. NDAs can prevent disclosure of contractually-defined “confidential” information that is shared in the course of a confidential relationship, even if it is not technically a trade secret. NDAs can, in other words, go beyond trade secrecy.

NDAs have also not traditionally been treated as contracts in restraint of trade, like noncompetes are. An NDA’s purpose is, ostensibly, just to protect secrets. Similar to trade secret law, NDAs only prevent an employee from disclosing (and using outside authorization) specifically-defined information. They don’t prohibit competition per se. NDAs are thus seen as comparatively “narrow restraints” which, all else being equal, should be preferred to noncompetes.

Or at least that is the common wisdom.  Although there is some support for this viewpoint in treatises and judicial dicta, our new article, Beyond Trade Secrecy: Confidentiality Agreements That Act Like Noncompetes, shows that a growing contingent of courts across jurisdictions are finding NDAs in employment agreements to be unenforceable when they reach too far beyond trade secrecy.  Even Google’s NDA was recently found unenforceable by a California court, because it did not make sure employees could use or share skills they learned at Google with prospective employers. (That said, the Google opinion is quite extreme, even compared to others we reviewed. See pp. 8-11 of the opinion,  Doe v. Google, Inc., Case No. CGC-16-556034 (Cal. Super. Ct., Cty. of San Francisco, Jan. 13, 2022)).

The article is available on SSRN and is forthcoming in Yale Law Journal. It is co-authored by me and Chris Seaman.  This blog post is cross- posted on Patently-O

The Federal Trade Commission recently jumped into the deep end of this swimming pool by proposing a rule that would ban noncompete agreements in employment contracts nationwide. More surprising still, the proposed rule bans what the Commission is calling “de facto” noncompetes,” such as a “non-disclosure agreement between an employer and a worker that is written so broadly that it effectively precludes the worker from working in the same field after the conclusion of the worker’s employment with the employer.”

Our article shows that there is a long history in the courts of finding NDAs are unenforceable — and not just in California. The jurisdictional differences abound. It would probably be unwise to write a nondisclosure agreement today without consulting up-to-date statutes, cases, and regulations from the relevant jurisdiction. That said, from reading the case law, a few main problems stand out.

Confidentiality agreements are far more likely to be unenforceable when they:

(1) protect information that does not constitute trade secrets, in particular by protecting public or generally known information, or information that falls within (what a court is likely to perceive as) an employee’s general knowledge skill and experience;

(2) try to cover information that the employee already knew when they started the job or lawfully gained from a third-party source; or

(3) are so excessively broad that they have the effect of a noncompete, even if they are styled as a “nondisclosure” or “confidentiality” provision. For example, this hypothetical language in a NDA would almost certainly be unenforceable: “Anything you learn at the company that is used or usable in the business is confidential and can’t ever be shared or used by you again without our permission, and there are no meaningful exceptions.”

There is also an important empirical component to our article. These agreements are themselves often kept, or even required to be kept, secret. NDA skeptics like Orly Lobel and Sharon Sandeen have noted that a threshold challenge in assessing NDAs is simply finding them.  Thanks to Chris Seaman and his “army of RA’s” we have a dataset of 450 confidentiality agreements that were disclosed in trade secret litigation. These 450 contracts give a unique snapshot of what NDAs look like in practice. Some people may find the data points alarming. For example, most of the confidentiality provisions in our dataset cover far more than trade secrets, and around 40% of the agreements in our dataset had no carve-outs at all, even for public information. For people in practice, perhaps you will not be surprised at the breadth of the agreements, which is itself interesting. Either way, I hope you will check out our findings on SSRN.

Amgen Scores Partial Victory in Efforts to Maintain OTEZLA Exclusivity

Patent, , , , , , , , , , , , , ,

By Chris Holman

Amgen Inc. v. Sandoz Inc., 2023 WL 2994166, — 4th —   (Fed. Cir. Apr. 19, 2023)

In 2019, Amgen acquired worldwide rights to apremilast (OTEZLA) from Celgene $13.4 billion in cash, in connection with Celgene’s merger with Bristol-Myers Squibb. Apremilast was the only oral, non-biologic treatment for psoriasis and psoriatic arthritis, and in 2020 apremilast generated $2.2 billion for Amgen.

At the time Amgen’s acquired apremilast, Celgene was involved in Hatch-Waxman litigation with numerous generic challengers, including Sandoz. Celgene had asserted three of its 11 Orange Book-listed patents against Sandoz, and in 2020 Amgen was substituted as plaintiff.

The primary patent asserted is U. S. Patent 7,427,638, which is directed to pharmaceutical compositions comprising stereochemically pure apremilast. The original expiration date of this patent was in 2024, but the patent received a patent term extension of more than three years, resulting in an effective patent expiration date of February 16, 2028, according to the Orange Book.

Celgene also asserted U. S. Patent 7,893,101, which is directed to enantiomerically pure solid forms (e.g., crystalline polymorphic forms) of apremilast. This patent is due to expire December 9, 2023.

The third patent asserted by Celgene was U. S. Patent 10,092,541, directed to methods for treating a patient using dose titration of apremilast. According to the Orange Book, this patent was set to expire on May 29, 2034.

The district court found the claims of the ‘638 and ‘101 patents to be infringed and not invalid, and enjoined generic apremilast until the expiration of the ‘638 patent in February 2028. On appeal the Federal Circuit affirmed, an outcome that Amgen characterizes as a win.

On the other hand, the district court found the asserted claims of the ‘541 patent to be invalid for obviousness, which reportedly “pleased” Sandoz because the ruling “enables Sandoz to launch [its] generic apremilast product in the U. S. in 2028, six years prior to the expiry date of the latest-expiring Amgen patent asserted in litigation.”  On appeal, the Federal Circuit affirmed with respect to the obviousness of the ‘541 patent.

Here is a brief overview of the court’s decision regarding the asserted obviousness of these patents.

The ‘638 patent claims apremilast, which is the stereochemically pure (+) enantiomer of a compound falls that within a class of molecules referred to as phosphodiesterase-4 (“PDE4”) inhibitors.  Sandoz’s obviousness argument was based primarily upon a prior art Celgene patent, U. S. Patent 6,020,058, which includes an Example 12 that describes a racemic mixture containing apremilast, but that does not disclose the purified (+) enantiomer. The Federal Circuit found that the district court had not erred in holding that Sandoz had not proven that a skilled artisan would have had sufficient motivation to purify the (+) enantiomer from the racemic mixture disclosed in Example 12, nor that a skilled artisan would have had a reasonable expectation of success in resolving that mixture into its enantiomeric components, given the unpredictable nature of resolving racemic mixtures.

The Federal Circuit further found that the district court had not erred in its finding of strong objective indicia of nonobviousness, particularly given the unexpected potency of apremilast relative to the apremilast-containing racemic mixture disclosed in Example 12. The court credited testimony from a Celgene researcher listed as an inventor on the ‘638 patent, who noted a 20-fold difference in potency between apremilast alone and the racemic mixture, and stated that the inventors “didn’t expect a 20-fold difference in potency… Normally, if a racemate is a 50/50 mixture of two enantiomers, you might expect a two-fold difference in potency, all things being equal.” The district court also did not err in determining that apremilast satisfied a long felt need for an improved psoriasis treatment suitable for oral administration, that others in the field had tried and failed to develop other PDE4 inhibitors as drugs, and that there had been a degree of skepticism about the safety of apremilast because of its structural similarity to thalidomide, a drug notorious for its teratogenic effects in fetuses leading to severe and debilitating birth defects.

The issue with respect to the ‘101 patent was whether it could rely upon the filing date of a provisional application to which it claims priority. The ‘101 patent claims crystalline Form B of apremilast, and the provisional application includes an Example 2 which discloses a synthetic procedure for preparing apremilast. Although Example 2 does not explicitly disclose that the resulting apremilast has the Form B crystalline structure, Amgen provided the court with the results of over a dozen experiments following the procedure of Example 2, all of which resulted in crystalline Form B of apremilast, while Sandoz had provided no evidence to establish that Example 2 was capable of producing a crystalline Form other than Form B. Although the district court had based its holding on its conclusion that the provisional application inherently disclose crystalline Form B of apremilast, the Federal Circuit found that it did not need to reach the issue of inherent disclosure because the evidence established that Example 2 actually disclosed crystalline Form B of apremilast, albeit without specifically disclosing the crystal structure of the resulting product.

The ‘541 patent claimed a method of treating a patient with apremilast that basically involves starting with a relatively low dose and, over a course of days, gradually increasing the dosage to arrive at a full dosage which is significantly higher than the initial dosage, i.e., a dose-titration schedule. The court found this to be an obvious method, in view of prior art disclosing a similar dosage schedule. The Federal Circuit observed that, as a general matter, varying doses in response to the occurrence of side effects is well-known and obvious to the skilled artisan.

Overlapping Ranges in Claims and Prior Art Result in Invalidation of Patent on Transdermal Patch for Parkinson’s Disease

Patent, , , , , , ,

By Chris Holman

UCB, Inc. v. Actavis Lab’ys UT, Inc., 2023 WL 2904757, — 4th —   (Fed. Cir. Apr. 12, 2023)

Rotigotine is a drug used to treat Parkinson’s disease. People with Parkinson’s disease experience significant gastrointestinal dysfunction, such as difficulty swallowing, which can frustrate the oral administration of drugs. However, the complications associated with oral treatment can be avoided by means of a transdermal patch that delivers the drug through the patient’s skin.  In order to cross the skin barrier, however, the drug must be in an “amorphous,” i.e., non-crystalline, form.  If the drug crystallizes in the patch, it will generally not be able to cross the skin barrier.

In 2007, UCB invented and marketed “original Neupro,” a transdermal patch for the treatment of Parkinson’s disease containing a dispersion of amorphous rotigotine and polyvinylpyrrolidone (PVP), with the PVP functioning as a stabilizer. Unfortunately, soon after original Neupro entered the market it was found that the rotigotine was crystallizing when stored at room temperature, rendering the drug ineffective.  This caused UCB to recall the product from the U.S. market in April 2008 (although it remained in limited use under a compassionate-use program). In Europe, regulators allowed original Neupro to stay on the market, under the condition that it would only be marketed under “cold-chain conditions,” i.e., it would be stored in a refrigerator.

The patent at issue in this case, U.S. Patent No. 10,130,589, is directed towards UCB’s solution to this problem, which was to essentially double the amount of PVP in the patch, from original Neupro’s weight ratio of rotigotine to PVP of 9:2 to the new, reformulated Neupro’s weight ratio of 9:4. In particular the ‘589 patent claims a method for stabilizing rotigotine by combining a non-crystalline form of rotigotine with PVP to form a solid dispersion, wherein the weight ratio of rotigotine to PVP is in a range from about 9:4 to 9:6. UCB re-entered the U. S. market with its reformulated Neupro in 2012.

In 2019, UCB sued Actavis for infringing the ‘589 patent in a Hatch-Waxman lawsuit.  The district court found the asserted claims to be invalid based on anticipation and obviousness, particularly in view of earlier-issued UCB patents, i.e., the “Muller patents,” which disclosed combinations of rotigotine and PVP present at a range of weight ratios from 9:1.5 to 9.5. Note that the Muller patents cover both original Neupro (9:2) and reformulated Neupro (9:4), while the ‘589 patent (claiming a range of 9:4 to 9:6) only covers reformulated Neupro. Significantly, UCB had successfully asserted a Muller patent in a previous ANDA suit that resulted in an injunction preventing approval of Actavis’s ANDA until the relevant Muller patent’s expiration in March 2021. The ‘589 patent would not have expired until December 2030, and thus could have delayed FDA approval of a generic version of Neupro by nine additional years.

On appeal, the Federal Circuit reversed the district court’s anticipation ruling, but affirmed on the basis of obviousness. The opinion, authored by Judge Stoll, begins by explaining that Federal Circuit precedent sets forth an established framework for analyzing whether a prior art reference anticipates a claimed range. If the prior art discloses a point within the claimed range, the prior art anticipates the claim. On the other hand, if the prior art discloses an overlapping range, the prior art anticipates the claimed range “only if it describes the claimed range with sufficient specificity such that a reasonable factfinder could conclude there is no reasonable difference in how the inventions operate over the ranges.”

In the case at hand, the prior art Muller patents disclose a range (9:1.5 to 9.5) that overlaps with the range claimed in the ‘589 patent (9:4 to 9:6). The Federal Circuit found that the district court had erred by failing to analyze this as an overlapping range case, but to instead treat this as a case in which the prior art discloses a point within the claimed range.  The Muller patents did not literally disclose any point within the range claimed in the ‘589 patent, but the district court had nonetheless concluded, based on expert testimony, that the range disclosed in the Muller patents would implicitly teach a person of skill “a few examples” of specific weight ratios, including 9:4 and 9:5 weight ratios of rotigotine to PVP. Nonetheless, the district court’s error with regard to its anticipation analysis was rendered moot when the Federal Circuit proceeded to affirm its obviousness finding.

Judge Stoll cited Federal Circuit precedent for the proposition that there is a presumption of obviousness when a claimed range overlaps with a range disclosed in the prior art. Although this presumption can be overcome if, e.g., the prior art teaches away from the claimed range, or the claimed range produces new and unexpected results, or other evidence demonstrates the nonobviousness of the claimed range, in this case the Federal Circuit agreed with the district court that UCB had failed to present evidence to rebut the presumption of obviousness.

For example, the district court had not erred in its decision to disregard the commercial success of reformulated Neupro, based on a lack of a nexus between the drug’s commercial success and the claimed invention. In particular, the Federal Circuit agreed that the existence of the Muller patents weakened UCB’s evidence of commercial success, because these patents operated as blocking patents, dissuading competitors from developing a rotigotine transdermal patch, at least until the Muller patents expired. While rejecting UCB’s suggestion that the court’s analysis had branded all co-owned patents as “blocking” patents, the court noted that in this case UCB had held exclusive worldwide rights to rotigotine for all therapeutic indications since 1998, and that until the Muller patents expired Actavis had been enjoined from marketing a generic version of reformulated Neupro.

An Opinion on Chief Judge Moore’s Reported Unprecedented Effort to Remove Judge Newman

Ethics, , , ,

by David Hricik, Mercer Law School

As has been reported by Dennis on the main page, by Gene Quinn on IP Watchdog (here), and by various media I am seeing, Chief Judge Moore reportedly threatened Judge Newman with a petition to remove Judge Newman as incompetent to carry out her duties unless Judge Newman agreed to take senior status. Gene points out the incongruity of Chief Judge Moore’s reported position that Judge Newman may continue to serve as a judge, though Chief Judge Moore ostensibly believes she is incompetent to do so.

I’ve now seen several other articles about this, reporting more or less a consistent story. Hopefully, it’s not true.  Beyond what has been reported, I would add the following two facts.

One, I saw Judge Newman (with Judge Lourie and former Judge O’Malley) speak at at the USPTO three weeks ago.  (I was there speaking on patent ethics.) Judge Newman was eloquent, coherent, cogent, and spoke passionately about various topics, including section 101 (which requires a bit of mental agility, I would say).  As others have pointed out, Judge Newman has, for a very long time, often taken more time in getting her opinions out than other judges, but I have seen nothing in those opinions that show incompetency, and if that delay were the basis that was a well known fact decades ago.

Second, this is the second time Chief Judge Moore has engaged in what is unprecedented conduct that has raised concerns about the integrity of the Federal Circuit.  Boiled way down: A few months back, Judge Moore dissented in a case, 2-1, with Judge O’Malley writing the majority opinion. Once Judge O’Malley retired and without notice to the parties, Chief Judge Moore created a “new” panel and her dissent as a result became the 2-1 majority, with the original majority judge dissenting.  That unprecedented flip of the result of a case is the subject of  a petition for cert in which a group of retired circuit judges as amici wrote (here), in part: “Allowing judges to swap out under the pretense of panel rehearing to change already-published decisions undermines public confidence in the judiciary.” (Full disclosure: I’m on an amicus brief with a different group in that case, available here.)

Hopefully, the reports about Chief Judge Moore using the threat of judicial discipline to force Judge Newman to opt for senior status are wrong, and hopefully the Supreme Court will correct the other matter. At stake is public confidence in the judiciary.

Update:  the Federal Circuit unsealed an order by Chief Judge Moore advocating for Judge Newman’s removal, which does indicate the stories discussed above seem basically to have been true. It is here.

The EU’s Response to National Judicial Determinations of FRAND Royalty Rates

Patent, , , ,

Guest Post by Professor Jorge L. Contreras

On March 28, 2023, Reuters reported that a proposed European Parliament and Council Regulation would empower the European Union Intellectual Property Office (EUIPO) to determine “fair, reasonable and non-discriminatory” (FRAND) royalty rates for European patents that are essential to industry standards (standards-essential patents or “SEPs”), and also to assess the essentiality of SEPs to the relevant standards.  In this post, I compare the leaked EU Proposal to last year’s Standards Essential Royalty Act (SERA) to which the EU Proposal bears a notable resemblance, with some important differences. Overall, I believe that the EU Proposal makes a positive contribution toward the efficient and fair resolution of FRAND disputes, though its most valuable role may be to nudge stakeholders toward the preferred solution of global rate-setting arbitration.

The Leaked Draft

Even before the official release of the EU Proposal, a significant amount of material has become publicly available. A leaked text of the draft was posted on Kluwer Patent Blog, a summary and detailed synopsis has been posted on FOSS Patents, and a 248-page Impact Assessment by the European Commission (EC) has been widely circulated among stakeholders. As reported by Reuters, the draft EU Proposal was scheduled to be announced by EC Vice President Margrethe Vestager on April 26, but the leaked draft has already sparked significant commentary and debate (see summaries, with links, posted by Tom Cotter and Florian Mueller). Needless to say, a pre-release draft of proposed legislation does not carry the force of law, and as noted by Intellectual Asset Management and others, a lengthy legislative process lies ahead during which the EU Proposal could substantially change or be scuttled entirely. Nevertheless, it is worth discussing some of its potential impacts today.

The Problem: National Judicial Determination of Global FRAND Royalty Rates

The ambitious EU Proposal addresses numerous lingering issues that are inherent in the underspecified world of FRAND licensing, including whether or not patents declared as “essential” to particular industry standards are actually essential (Title V) (issue discussed here and here) and how FRAND licensing commitments can bind subsequent owners of essential patents (Art. 3) (issue discussed and here and here). On a positive note, the EU Proposal clarifies that “royalty-free licensing policies do not raise concerns” (recital 10) – a welcome acknowledgement in view of recent complaints about royalty-free SEP licensing requirements (see, e.g., here). These important issues, however, are beyond the scope of this post.

The biggest issue that the EU Proposal seeks to tackle is the recent tendency of courts in China and the UK (and potentially other countries) to establish FRAND rates for a SEP holder’s entire global portfolio (the Global Approach), rather than only for SEPs issued in that jurisdiction (the National Approach) (discussed in detail here and here). This phenomenon has led to jurisdictional disputes, escalating anti-suit (ASI) and anti-anti-suit injunctions (AASI) (discussed here, here and here), and an international “race to the bottom” as jurisdictions vie to become preferred destinations for resolving global FRAND disputes. As noted in the cited articles, European courts, following civil law principles, have generally been averse to anti-suit injunctions in global FRAND cases, resulting in royalties for European patents largely being established elsewhere. In addition, the European Union, along with the United States and others, is currently involved in a dispute at the World Trade Organization (WTO) over China’s ASI procedures in these cases (a detailed discussion of China’s ASI landscape can be found here).

Summary of the EU Proposal

Some of the key elements of the EU Proposal concerning FRAND rate determination are the following:

1 – Art. 21 would require SEP owners to register their European SEPs with a new “competence centre” (the “Centre”) established within the EUIPO; SEPs must be registered in order to be enforced in European courts (including the new Unified Patent Court (“UPC”));

2 – Arts. 17-18 would permit participants in standards-development organizations (SDOs) to collectively negotiate the aggregate (“top-down”) royalty burden for a particular standard, which would then be published by the Centre – an approach that would significantly improve the transparency and predictability of FRAND licensing negotiations (see here);

3 – Art. 36 would require SEP holders and implementers of FRAND-encumbered standards to request a FRAND rate determination by the Centre prior to initiating litigation over SEPs in a European court;

4 – Art. 40-41 establishes procedures for selecting the “conciliators” who would make the FRAND determination, including the proposal of five qualified candidates by the Centre, from which the parties would select two (though the means by which that selection would be made is not specified);

5 – Art. 60 provides that the determination of the conciliators will be confidential to the parties (a serious mistake, in my view, given the need for greater transparency in this area, as discussed here and here);

6 – Art. 58(4) provides that no European court or the UPC may rule on a case involving a European SEP unless it is notified of the resolution of this rate setting procedure.  While the Centre’s rate determination is not binding on a court, and there is no stated procedure for introducing the FRAND determination in a judicial proceeding, one would hope that the Centre’s determination will be used as evidence in most European judicial proceedings concerning the affected SEPs.

Comparison to the Proposed U.S. Standards Essential Royalty Act (SERA)

As noted in the introduction, concerns over foreign (particularly Chinese) ASIs and judicial determinations of global FRAND rates have also motivated federal legislators in the U.S. to propose a variety of measures designed to reduce the impact of these foreign proceedings on U.S. patents.  In 2022, two such bills were floated within the Senate Judiciary Committee: the Defending American Courts Act (DACA) (discussed here and here) and the Standard Essential Royalty Act (SERA) (discussed here and here). SERA would establish a U.S. judicial tribunal for the determination of FRAND rates applicable to U.S. FRAND-encumbered patents, notwithstanding the findings of any foreign court.  The recent EU Proposal shares some characteristics with SERA, but also has notable differences.  The Table below summarizes some of the areas of commonality and divergence between the U.S. and EU proposals.

Table 1

Comparison of Recent U.S. and EU FRAND Tribunal Proposals

Proposed U.S. Standard Essential Royalty Act (SERA) (June 2022) Proposed EU SEP Regulation (Mar. 2023)
Tribunal A new federal court EUIPO, an EU administrative agency
Authorization of collective negotiation of aggregate royalty burden No Yes
Binding effect Binding in U.S. Non-binding
Effect on foreign FRAND determinations Overrides foreign FRAND determinations for U.S. patents None
Confidentiality of decision No Yes
Creation of SEP registry No Yes
Essentiality testing Possibly, though not required Yes

 

Assessing the EU Proposal

The EU Proposal will likely improve some aspects of global FRAND litigation. For example, it could diminish the force of “global” FRAND rate determinations by non-EU courts in countries like China and the UK, create a more authoritative SEP database than that maintained by the notoriously hands-off SDOs, and eliminate some of the current concern over collective negotiation of aggregate royalty burdens for particular standards.

This being said, the EU Proposal also has a few significant drawbacks.  First, the EU Proposal creates a rate determination structure that is non-binding, thus opening the door to further debate and “new” evidence that could be introduced by parties seeking to convince European courts to deviate from Centre-determined rates. More importantly, the confidential nature of the Centre’s findings eliminates much of their potential systemic benefit, as other market participants will not be able to use the information developed by the Centre in their own FRAND negotiations, reinforcing the non-transparent system that exists today.  The U.S. SERA proposal overcomes both of these weaknesses by proposing a binding rate determination that will be open and transparent.

Another Step Along the Road to Non-governmental Global FRAND Rate-Setting?

Despite their advantages, both the U.S. and EU proposals suffer from a focus on individual party disputes rather than the overall royalty burden for a particular standard.  The most efficient, fair and transparent approach to global FRAND rate determinations is to involve all concerned parties (SEP holders and stakeholders) in a multilateral, multinational rate-setting procedure that addresses all SEPs covering a particular standard and then makes that determination publicly available, much like the copyright royalty rates determined by rate-setting boards in the U.S., UK and other countries (see proposal here).

While the international community has not yet embraced such a comprehensive, multilateral approach to FRAND royalties, an important first step in rationalizing the FRAND royalty system is eliminating the ability of individual jurisdictions (e.g., China/UK) pre-emptively to set global FRAND rates for patents outside of their jurisdictions (see here).  Processes such as those set forth in the U.S. SERA and the EU Proposal would significantly limit the bite of such unilateral global rate-setting efforts. As I have previously written, “country-by-country rate adjudication need not be the end game for global FRAND rate setting”.  If stakeholders find that legislatively mandated rate proceedings in individual countries are burdensome, they may be more amenable to a truly global, yet fair, solution to the FRAND royalty conundrum.

[Disclosures: The author declares no conflicts of interest regarding the subject of this article.]

Skilled Searcher Test Allows Estoppel for Unknown References

Patent, , , ,

by Dennis Crouch

Ironburg Inventions Ltd. v. Valve Corp., — F.4th —, 21-2296 (Fed. Cir. Apr. 3, 2023)

The recent decision in Ironburg Inventions Ltd. v. Valve Corp. has significant implications for post-IPR estoppel under 35 U.S.C. § 315(e)(2). In this case, the Federal Circuit adopted a “skilled searcher” standard to determine whether grounds not raised in the original IPR “reasonably” could have been raised at the time. The court also addressed the burden of proof in estoppel cases, with the Federal Circuit holding that it lies with the party seeking the estoppel — a ruling that aligns with traditional practice and the best reading of the statute.  These standards and procedures are important because they provide clarity on the scope of estoppel and help stabilize the law, particularly given diverging district court rulings on these issues. One interesting aspect of Ironburg is the split 2-1 decision on indefiniteness, which I’ll address in a separate post.

Before delving into the case, it is also worth noting that the issue of estoppel and its nuances are currently pending before the U.S. Supreme Court in Apple v. CalTech. In Apple, the Federal Circuit broadly applied the estoppel doctrine, and the Supreme Court is now considering whether to grant certiorari.

Lack of Knowledge and a Skilled Searcher Test: After being sued for infringement, Valve challenged Ironburg’s game controller patent via inter partes review (IPR).  That administrative action ended with a final written decision favoring the patentee — i.e., Valve lost.  Back in district court, Valve attempted to challenge the validity again – this time based upon non-petitioned grounds that it gleaned from a competitor’s IPR petition against the same Ironburg patent. The district court barred Valve’s defenses as estopped under § 315(e)(2)  after concluding Valve “reasonably could have raised” those grounds in its original IPR. Valve argued that it had no knowledge of those references at the time of its IPR petition and therefore could not have included them as challenge grounds. However, both the district court and the Federal Circuit held that lack of knowledge is not a complete excuse.  Rather, in cases where the IPR challenger lacks knowledge of the prior art the appropriate test for estoppel is what “a skilled searcher conducting a diligent search reasonably could have been expected to discover.”

Burden Shifting: One question on appeal is which party has the burden of proving that the ground reasonably could have been raised in the IPR.  The district court (seemingly) placed the burden on the patent challenger to prove that it could not have reasonably raised the issue. In some ways, that burden makes sense because the IPR challenger is in the best position to understand and prove its level of knowledge  (or lack thereof) at the time.  On appeal, however, the Federal Circuit flipped that ruling — holding instead that the burden lies with the party seeking the estoppel to prove estoppel.  In my view, this result better aligns with both tradition and the reading of the statute.

Digging a bit into the weeds: the district court’s holding basically concludes that Valve reasonably should have been able to find the references since the other IPR challenger found them.  On appeal, the appellate court found some faulty logic — an inherent and unproven assumption made by the district court was that the other IPR challenger used only reasonable diligence to find the art. If, on the other hand, it took “extraordinary measures” to find the references and construct the challenge ground, then no estoppel should apply.

The patentee had won a $4 million judgment at the original trial, but on remand, the district court will need to reconsider its estoppel decision. If the result is no-estoppel, Valve will get a third chance at invalidating the patent. This case underscores the importance of conducting a diligent search to identify all potential grounds for invalidity and then putting the best grounds forward in the IPR petition.

The Brandeis Brief in Patent Cases

Patent, , , ,

by Dennis Crouch

Louis D. Brandeis was a famous lawyer long before becoming a Supreme Court Justice. In the 1908 case of Muller v. Oregon, Brandeis represented the State of Oregon defending the state’s rule restricting the number of hours that women could work in certain industries.  In defense of the law, Brandeis filed a brief that presented social science research and empirical evidence to support the argument that long working hours had negative effects on women’s health and family life.  That evidence helped sway the court and also spawned the “Brandeis brief” — an approach that continue to be a popular mechanism for attempting to influence the Supreme Court. Brandeis briefs typically include lots of facts and claims about how the world works and ask the court to use those facts in its interpretation of the law.  One key problem with this approach is that it does not follow the usual rules of evidence required for factual findings.  And, when the Supreme Court adopts the findings, then the facts suddenly become the law and binding precedent.  Thus, Muller v. Oregon, the Supreme Court precedentially concluded that it was uniquely risky for women to work long hours and that their natural caregiver role would be improperly disrupted.  Today, we might recognize that those conclusions included inherent cultural biases rather than stemming from the nature of women.

A major problem with this sort of evidentiary submission directly to the Supreme Court is that it is unchecked and admittedly biased — these are sent to the court in briefs advocating a particular point of view and without the ordinary judicial evidentiary process.  But, proponents of Brandeis briefs argue that the rules don’t apply to these “legislative facts” because the evidence is being used to interpret the law rather than make case-specific factual conclusions.  This is much the same approach as the Court uses to determine historical facts for originalist decisions.  But, many historians would agree that history as defined in Supreme Court cases appears to be cherry-picked in order to achieve a particular results.

In patent cases, we often have Brandeis briefs on the policy impact of certain choices.  In addition, we also regularly see attempts to explain the science to the justices in ways that help lead them to a particular conclusion.  In Amgen, for instance, Nobel Prize winner Gregory Winter submitted a brief explaining that antibody design is extremely unpredictable and, because of that, broad functional claims should not be allowed.   Amgen contended that some of the evidence Winter relied upon had been excluded by the trial court, and thus should not be reintroduced to the Court. But, the practice is likely to persist.

Bye Bye Functional Claims

Patent, , , ,

by Dennis Crouch

Oral arguments from Amgen v. Sanofi suggest the potential of a blockbuster Supreme Court decision further derogating functional claim limitations (all of which are also genus claims).  A key question is whether the court will include limiting language that that directs impact primarily upon the “unpredictable arts.”

At oral arguments, the Supreme Court was quite hostile to the patentee counsel Jeffrey Lamken and his attempt to defend Amgen’s functionally claimed genus of antibodies.  I believe that Lamken took the wrong turn by first repeatedly telling the court that the claim covered only about 400 antibodies, before eventually admitting that a scope covering millions of yet unidentified antibodies.  I could taste the bitterness in the further questions.  Several members of the court struggled with the expressly functional claim limitation that permitted Amgen to claim all antibodies that achieve its stated results.  Lamken suggested that the “PTO regularly issues patents which have that sort of functional piece.”  Of course, the PTO also regularly issues invalid and overbroad patents.  In questioning, the court clearly thought we had a potential eligibility problem because of the functional limit. In his response Paul Clement picked-up on that issue and explained that the functional genus claim is “a work-around of Myriad. Because basically they’re pointing to something that exists in nature [the PCSK9 pathway] and they’re saying, we claim everything that works to bind there en bloc.”

In Amgen v. Sanofi, the Supreme Court  agreed to reevaluate the doctrine of enablement as applied by the Federal Circuit.  Although juries twice sided with the patentee, the district court and the court of appeals both rejected the jury verdict and concluded that lacked an enabling disclosure as a matter of law.  The Federal Circuit particularly noted (1) that functional limitations are much more difficult to enable than are structural limitations and (2) that each embodiment covered by a genus claim must be enabled.  Here, the court noted that Amgen had failed to enable the “far corners of the claimed landscape.”

Amgen has requested the court to incorporate a meaningful limitation into the enablement test.  In that framework, a patent challenger would need to show both (1) that some embodiments requires undue experimentation in order to recreate and (2) that those failures would be meaningful to skilled artisans.  And, Amgen suggests that functional genus should not face heightened scrutiny.  Lastly, Amgen suggested that the Wands Factors should be given less weight – that today they are being used as the test, rather than for functional support.  The particular Wands problem for the patentee here is the notion that antibodies are “unpredictable” and therefore require more disclosure.

The case is a very big deal, and not just for antibodies.  Every claim covers myriad undisclosed embodiments; Everyone is using lots of functional limitations; and Every patent suffers from unenabled far corners.

The claim here:

1. An isolated monoclonal antibody, wherein, when bound to PCSK9, the monoclonal antibody binds to at least one of the following residues: S153 … or S381 of SEQ ID NO:3, and wherein the monoclonal antibody blocks binding of PCSK9 to LDLR.

The Amgen invention centers around a pathway that others discovered regarding LDL, AKA “bad cholesterol,” the liver’s role in destroying bad cholesterol, and a new protein PCSK9.  The liver has LDL receptors (LDLRs) that bind and break-down LDL.  But, the body also makes a protein known as PCSK9 that competitively binds to those receptors and blocks the liver LDL-breakdown action.  In creating its invention, Amgen set out to find monoclonal antibodies that bind to PCSK9 and block its operation — and thus allow the liver to do its LDL-breakdown work.  The process for doing this was somewhat straightforward. They first injected a humanized-mouse with PCSK9 in order to cause an immune reaction to attack the foreign body.  The mouse created a bunch of antibodies (about 3,000) that bind to PCSK9.  These were then all tested (using standard rapid testing tools) to determine which ones bind the “sweet spot” of PCSK9 — and thus would have the impact of “block[ing] binding of PCSK9 to LDLR.”  This process brought it down to about 400 antibodies.  However, Amgen did not actually take the time to figure out the amino-acid sequence for of each of these. Rather, it did so for 16 of them and called it good.  Sanofi’s product is – most likely – one of the 400 discovered by Amgen, but was not literally described in the Amgen patent. Rather, Amgen described the process, and also described the use of a codon-replacement process to check similar antibodies (that is where the millions come-into play).

A key quote from Clement was be the following: “I think functional genus
claims are terrible.”  The essence of his argument is that they have the potential of giving the patentee a broad scope covering numerous radically different solutions.  The result though is that nobody has incentives to look for the others because of the covering patent.  “They retard the science.”  In his view, a more limited monopoly is much better — “We’re better off with two competing independently developed therapies.”

Colleen Sinzdak argued on behalf of the US Gov’t as amicus and in support of Sanofi.  Sinzdak was in complete agreement with Clement, arguing that broad genus claims are “a danger to innovation and especially in the medical field.”

The Government argued that a genus claim is only proper if each and every embodiment within the genus has been enabled. “It really is that simple. … you really do need to enable each of the different embodiments that you’re claiming.”  Sinzdak argued that in an unpredictable, fast-moving field, the law should be more stringent in order to allow an early patent to unduly grab land and shut-down further research.   Sinzdak suggested that the court force narrow claims and then let folks rely upon the doctrine of equivalents if necessary.

Lamkin’s important rebuttal point: Although Amgen did not literally disclose every embodiment, and some covered embodiments are quite structurally different from those disclosed, “the key fact in this case is that Sanofi has not identified one antibody that would require undue experimentation to make.”

$469 Million: There and Gone

Patent, , , ,

ClearPlay v. Dish Network (D.Utah 2023)

Earlier in March 2023, a Utah jury sided with the patentee ClearPlay – find that Dish Network infringed two “clean movie” patents used to to skip the naughty bits of a video program. US7577970 (Claims 28 and 33); and US6898799 (Claim 12).  The jury went on to award a “reasonable royalty” of $469 million.

Hold that pause button.  This week, Judge Nutter rejected the jury verdict and instead granted the defendant’s motion for Judgment as a Matter of Law.  Nutter concluded that the patentee had not shown either literal infringement or infringement by equivalents.  The court ordered DISH to prepare a draft order for his signature that adopts the rational from its briefing.

The draft order will contain support, citations, and consistent rationale from its briefing; transcript references from DISHs appendix (which should be used extensively in the draft order); and references to contrary positions taken by ClearPlay to illustrate the conflicts that this ruling resolves.

Minute Entry of March 21.   The case has been pending since 2014.

Only Some of the Claims are Invalid

Patent, , , ,

by Dennis Crouch

Hantz Software v. Sage Intacct (Fed. Cir. 2023) (non-precedential) 

The district court sided with the defendant Sage, dismissing the complaint for lack of eligibility.  In a short opinion, the Federal Circuit has largely affirmed, but made an important caveat — that the district court held only that claims 1 and 31-33 are invalid.

[W]e agree that the operative complaint asserted infringement of only claims 1 and 31–33 of each asserted patent, and because Sage did not file any counterclaim of its own (instead, it simply moved to dismiss Hantz’s complaint), we conclude that the ineligibility judgment should apply to only claims 1 and 31–33 of the asserted patents. We therefore vacate the district court’s judgment insofar as it held any claim other than claims 1 and 31–33 of each asserted patent ineligible and affirm in all other respects.

Slip Op.  Despite the limit here, claim preclusion will prevent Hantz from reasserting any of the remaining claims against Sage. Non-mutual collateral estoppel should also apply here to to prevent Hantz from asserting any of the claims against a third party — unless the claims are meaningfully distinct on eligibility grounds from those already adjudged to be invalid.  Normally, collateral estoppel only applies to issues actually litigated, but in the patent context, the Federal Circuit has ruled that it may also apply to non-litigated claims when the differences do not “materially alter the question of invalidity.” Ohio Willow Wood Co. v. Alps South, LLC, 735 F.3d 1333, 1342 (Fed. Cir. 2013); MaxLinear, Inc. v. CF CRESPE LLC, 880 F.3d 1373, 1377-78 (Fed. Cir. 2018) (Asking “whether the remaining claims present materially different issues that alter the question of patentability”).

 

(more…)

IPRs and the APA: Review of Director’s Discretion to Initiate IPRs

Patent, , , ,

By Jordan Duenckel.  Jordan is a second-year law student at the University of Missouri School of Law and a registered patent agent. 

Apple brought an action against the USPTO Director Vidal in district court under the Administrative Procedure Act (APA), 5 U.S.C. §§ 701– 706, challenging the Director’s instructions to the Board regarding exercise of discretion in IPR institution decisions. In Apple v. Vidal, 2022-1249, — F.4th — (Fed. Cir. Mar. 13, 2023), Judge Taranto (joined by Judges Lourie and Stoll) largely affirmed the district court’s dismissal, confirming that the Director’s instructions are unreviewable.  The court did separately reverse a tertiary challenge to allow Apple to proceed on a claim related to the note-and-comments procedure of the APA. 

Apple and other repeat players in patent infringement litigation often use the inter partes review process under 35 U.S.C. §§ 311–319 to challenge the validity of asserted patents. The statute provides a two-step IPR process: Step 1 is the institution decision by the Director under § 314(b); Step 2 is the trial and final written decision by the PTAB.   

At least two prerequisites assist the Director in deciding to grant review: [1] a reasonable likelihood that the petitioner would prevail in 35 U.S.C. § 314(a) and [2] a petition must be filed within one year after service of the infringement complaint. § 315(b). Even if these conditions are met, the Director has unreviewable discretion over whether to initiate an IPR. The statutory text is seemingly as clear as a statute can be: “The determination by the Director whether to institute an inter partes review under [§ 314] shall be final and non-appealable.” 35 U.S.C. § 314(d); see also United States v. Arthrex, Inc., 141 S. Ct. 1970, 1977 (2021).   

From the outset of the IPR program, the Director delegated institution authority to the Board. 37 C.F.R. § 42.4(a). Practically, without this delegation, Director Vidal would spend a disproportional amount of time reviewing IPR petitions at the expense of other duties of the office, although she could have delegated responsibility to other agency departments such as the petitions division.  The right of delegation of the institution is settled law. See Ethicon Endo-Surgery, Inc. v. Covidien LP, 812 F.3d 1023, 1031–32 (Fed. Cir. 2016).  

At issue in Apple v. Vidal are the so-called Fintiv instructions issued by the Director based on Apple Inc. v. Fintiv, Inc., IPR2020-00019, 2020 WL 2126495 (P.T.A.B. Mar. 20, 2020) which provides six factors for analysis of whether to institute an IPR parallel to pending litigation.   

Proposing an analysis under the arbitrary and capricious standard, Apple and the other petitioners are directly focused now not on the denial of a specific petition for IPR review but as a general challenge to the Director’s instructions to the PTAB about how to exercise the delegated discretion.   

Slip Op. The district court ruled that 35 U.S.C. § 314(d) “precludes judicial review” of the challenged agency actions, bringing the case within the APA exclusion stated in 5 U.S.C. § 701(a)(1). According to this court, the IPR statute’s preclusion was settled by the Supreme Court in Arthrex and encompasses review of content-focused challenges to the Fintiv instructions. § 314(d) provides the clearest congressional delegation of nonreviewable discretion possible and the panel rightfully relied on plain-meaning and clear Supreme Court precedent.    

While affirming the dismissal of the content-based claims, the court separates the procedural requirements set forth in the APA. Reversing the district court in part, Judge Taranto’s panel opinion reopened Apple’s claim that the Director was required, by 35 U.S.C. § 116 together with 5 U.S.C. § 553, to promulgate institution instructions through notice-and-comment rulemaking procedures.  Slicing the procedure from the underlying substance of the rule, Taranto relies on Lincoln v. Vigil, 508 U.S. 182, 195 (1993) to clarify that the 5 U.S.C. § 553 provides the basis for rulemaking through the notice-and-comment procedure for the Director’s instructions and is a separate analysis of reviewability from the substance of the instructions. 

Standing was also preemptively addressed for the remand proceedings. Lujan provides the three-step test: injury-in-fact, causation, and redressability. In search of a particularized, concrete injury, the court takes notice that Apple is a repeat player with a history of IPR claims being denied. This past injury was used to show the eminency of future injury resulting from the denial of the benefits of IPRs linked to the concrete interest possessed by an infringement defendant. Redressability and causation were met because there is a genuine possibility that the instructions would be changed in a way favorable to Apple in notice-and-comment rulemaking.  

The Federal Circuit may have reached a bit to find standing in an effort to effectively resolve concerns about a heavily used procedure: the IPR process. On remand, the district court might rightly decide that a traditional notice-comment rulemaking procedure is required to redress harms or prophylactically provide clarifications for the patent system that can accomplish the goals of using agency resources effectively. Allowing the frequent fliers of the IPR system to at least have an appearance of input in the procedure would create a process with more certainty and produce more long-term economic efficiency.  

Publicly Traded International Patent Firms

Patent, , , ,

by Dennis Crouch

In October 2022, Canada’s largest intellectual property firm became a publicly traded entity.  Smart & Biggar, a firm that includes 100+ Canadian patent attorneys and agents (most of whom are also registered with the USPTO) was purchased by the Australian company IPH Limited.  The holding company trades on the Australian stock exchange with a market valuation of $1.8 billion Australian dollars ($1.2 billion USD).

IPH already owns five Australian IP-focused law firms (consolidated from 10), including offices in New Zealand, Singapore, China, Malaysia, Indonesia, and Thailand.   With one firm having 32% of the Australian national phase market, you might think that conflicts would get a bit tricky. A bit more on that below.

What is the benefit of selling for Smart & Biggar? Presumably money today.  The purchase price was $350 million Canadian dollars ($250 million USD).  That includes $241m cash to the old owners (i.e., the partners) along with $45m in IPH shares and another $66m in deferred IPH shares (presumably for partners who stay for two years).  The old partners continue to have some management rolls at the firm but will be employees of IPH rather than owners.  “Canada’s Intellectual Property Firm” is now owned by the Australians.

Like the U.S., Canadian law generally requires that law firms be owned by lawyers.  To avoid this hiccup, Smart & Biggar divided its firm into two parts – an “IP Agency Practice” involving patent preparation and prosecution; and a “Law Practice” handling litigation and other legal issues.  The IP Agency Practice apparently “does not practice law” and therefore is not controlled by the lawyer-ownership rule.  As the deal was structured, IPH owns the IP Agency Practice without any problem because they are “not practicing law.”  The Law Practice is partially owned by the IP Agency Practice which is somehow sufficiently owned by lawyers, even though IPH owns the IP Agency Practice.  This clever approach apparently satisfies Canadian restrictions except for Alberta where Smart & Biggar’s law practice remains “wholly owned by individual lawyers.”  Still, at least according to the website, the Smart & Biggar Alberta branch is operating as part of IPH.

Back in Australia we have had some interesting events that began a decade ago when the country began to permit patent attorneys to incorporate in public firms. Shelston IP was the first IP firm to list itself on the Australian Stock Exchange back in 2015.  In 2019, IPH bought Shelston in a hostile takeover. Shelston has now been merged into Spruson & Ferguson as have Fisher Adams, and Cullens. Other IPH brands include Pizzeys; AJPark, & Griffith Hack.  Collectively, this is about 1/3 of the Australian national-phase market. What this means to me is that there is a good chance that competitors are are hiring co-owned firms to do their Australian work.

Throughout this time, there has been lots of turmoil for attorneys themselves, with a substantial percentage moving firms.  IPH has repeatedly sued its former employees who left to start their own firms — seemingly for “stealing” clients.

Australian patent attorney Mark Summerfield has been writing about these issues for the past several years on his excellent Patentology blog.

Could this happen in the US: The ABA model rules as well as USPTO rules prohibit law firms being owned by non-lawyers.  But, some states are moving forward with experiments.  So far, the USPTO has not suggested any changes.

Issue its “Mandate and Opinion”

Patent, , , , ,

by Dennis Crouch

The Federal Circuit regularly affirms PTAB judgments without issuing any explanatory opinion to justify the result.  Although not found in the Rules of Appellate procedure, the court has created its own local rule allowing itself to “enter a judgment of affirmance without opinion.”  In a 2017 paper, I argued that these no-opinion affirmances violated both the spirit and letter of 35 U.S.C. 144, which requires the court to issue a “mandate and opinion” in cases appealed from the USPTO.  Since that time, the Federal Circuit has continued its practice, issuing hundreds of no-opinion judgments.  Throughout this time, dozens of losing parties have petitioned for en banc rehearing with the Federal Circuit or certiorari to the Supreme Court.  Up to now, both courts have remained silent and have refused to address the issue.

A new pending petition raises the issue once again. Virentem Ventures v. Google (Supreme Court 2023).  Virentem sued Google for patent infringement, and Google responded with a set of Inter Partes Review (IPR) petitions.  The PTAB eventually sided with Google and invalidated the claims of all seven challenged patents.  Virentem appealed; but the Federal Circuit affirmed the PTAB’s judgement without opinion under its local Rule 36.

The new petition to the Supreme Court asks four related questions:

  1. Does the Federal Circuit’s use of Rule 36 to affirm without opinion PTAB invalidity determinations that are challenged based on pure questions of law violate a patentee’s due process rights through arbitrary or disparately applied results?
  2. Did the Federal Circuit’s use of Rule 36 to affirm without opinion PTAB invalidity determinations of Virentem’s patents violate its due process rights?
  3. Did the PTAB’s adoption, and Federal Circuit’s summary affirmance, of broad constructions of Time Scale Modification and other claim terms over Virentem’s explicit narrowing definitions, violate the Federal Circuit’s own law and precedents on claim construction in such circumstances?
  4. Does the Federal Circuit’s use of Rule 36 to affirm without opinion decisions from the PTAB violate the requirement of 35 U.S.C. § 144 that the Federal Circuit “shall issue to the Director its mandate and opinion”?

The Virentem patents relate to time-scale modification — the speeding-up or slowing-down of media.  You may remember Alvin, Simon, and Theodore — the Chipmunks.  That unintelligible high pitch arguably is not really time-scale modification because it is such a failure.  Rather, TSM modern impliedly requires maintaining pitch and intelligibility.  In this case though, the PTAB broadly interpreted the term to include any system that speeds-up or slows-down media.  With that broad interpretation, the tribunal then was able to find prior art rendering the claims obvious.   Virentem argued that its patents would be seen as valid under the narrower construction.  The PTAB’s response: If you wanted that limitation in the claim, you should have added it to the claim.

(more…)

Laundry Lists of Components are Insufficient Written Description for a Particular Combination

Patent, , , , , ,

by Dennis Crouch

The pending Supreme Court case of Amgen v. Sanofi focuses on a broadly claimed genus and asks whether the disclosure is sufficiently detailed.  The Federal Circuit’s recent UMN v. Gilead is the flip-side.  Regents of the U. of Minnesota v. Gilead Scis., Inc., 2021-2168, — F.4th — (Fed. Cir. Mar. 6, 2023).  UNM’s original disclosure is extremely broad with “laundry lists” of components that might be included in various combinations;  while the later-added claim is directed to a more particular sub-genus combination.  The court looked in vain for some indication in the specification as to why the claimed combination is important or particularly suggested.  Here, they disclosed a large forest, but failed to disclose the tree that turned out to be valuable.

Going forward, a patentee might avoid this particular problem with some patent attorney tricks.  Rather than listing all potential components for each functional group and generally suggesting their combination, an early-stage patentee might have its AI assistant provide a hypothetical example of each possible combination, one at a time.  That situation would provide clear ipsis verbis disclosure and thus more likely survive a written description challenge.

= = =

Most U.S. patents assert priority to at least one prior patent application filing.  The early filing date helps avoid would-be intervening and invalidating prior art.  But, the right to priority is not automatic. In addition to the formal paperwork, the original application must sufficiently disclose the invention as claimed in the later patent.  Sufficiency of disclosure is generally judged under 35 U.S.C. §112(a) with the doctrines of enablement and written description.

A patent that improperly claims priority is not automatically invalid.  Rather, the priority filing date is rendered void and then we consider whether the  invention was still novel and nonobvious as-of the later filing date.  This setup also allows these disclosure issues to be considered during Inter Partes Review  (IPR) proceedings that are statutorily limited to anticipation and obviousness grounds.

 

In Regents of the U. of Minnesota v. Gilead Scis., Inc., 2021-2168, — F.4th — (Fed. Cir. Mar. 6, 2023), the Federal Circuit faced the issue of whether the  written description found in UMN’s priority applications supported the claims in the resulting US8815830 patent.  Here, the ‘830 patent covers the drug sofosbuvir that has FDA approval for Hep-C treatment.  Claim 1 does not simply cover sofosbuvir, but instead an entire genus of molecules that fit the general structure shown above and where functional groups R1 – R7 are further defined within the claim.  For instance, “R3 is hydroxy … R5 is an amino acid …”

UMN’s initial patent application was a provisional filed back in 2004, followed by a PCT application in 2005, followed by a non-provisional application in 2007 and finally by another non-provisional application in 2013 that led to the ‘830 patent. In 2010, a Gilead patent application published (“Sofia”) that discloses the claimed invention.  In this setup, UMN’s can disregard Sofia so long as it properly claimed priority to at least one of those earlier applications.  But, if priority fails then the ‘830 patent is anticipated.

During the IPR, the Board sided with Gilead — concluding that the priority filings lacked sufficient written description and thus that the claims were invalid as anticipated. On appeal, the Federal Circuit has affirmed in an opinion by Judge Lourie and joined by Judges Dyk and Stoll.

The patent act requires a “written description of the invention” be submitted in the form of a patent specification.  “Judicial gloss” explains this requirement has proving that the inventor “possessed the invention as claimed” at the time of filing.  Written description issues most often arise in situations like this one where the patented claims were not found in the original filing documents; but rather were added later during prosecution.

The courts have been particularly hard on patentees seeking to claim coverage for a large genus of compounds.  In that situation, it is typically a difficult endeavor for the patentee to literally enumerate all operable compounds covered by the claims.  That level of disclosure is not required, but the patentee must describe “the outer limits of the genus” as well as “either a representative number of members of the genus or structural features common to the members of the genus, in either case with enough precision that a relevant artisan can visualize or recognize the members of the genus.”  The court will also consider “blaze marks within the disclosure that guide attention to the claimed species or subgenus.” Slip Op., citing In re Ruschig, 379 F.2d 990 (CCPA 1967).

Ipsis verbis: I mentioned above that written description challenges are most often successful in situations where the claim scope has changed during prosecution.  Claims that are found word-for-word in the original application (ipsis verbis) can still fail the written description requirement, but that result is much less likely.  Here, UMN argued that the original provisional filing disclosed the eventual claim in ipsis verbis form — pointing to a combination of elements of provisional claims 1, 2, 13, 21, 22, 45, and 47 that collectively forming a substantial word-for-word recitation of claim 1 in the ‘830 patent.  On appeal though the Federal Circuit found that combination of this disparate set of claims required a bit too much cleverness.

Following this maze-like path, each step providing multiple alternative paths, is not a written description of what might have been described if each of the optional steps had been set forth as the only option. This argument calls to mind what Yogi Berra, the Yankee catcher, was reported to have said: “when one comes to a fork in the road, take it.” That comment was notable because of its indeterminacy, its lack of direction. Similarly, here, all those optional choices do not define the intended result that is claim 1 of the ’830 patent.

Moreover, Minnesota’s argument is akin to that rejected in Fujikawa, where the applicant “persist[ed] in arguing that its proposed count [wa]s disclosed ipsis verbis in Wattanasin’s application.” Fujikawa v. Wattanasin, 93 F.3d 1559 (Fed. Cir. 1996). As the court explained in Fujikawa: “just because a moiety is listed as one possible choice for one position does not mean there is ipsis verbis support for every species or sub-genus that chooses that moiety. Were this the case, a ‘laundry list’ disclosure of every possible moiety for every possible position would constitute a written description of every species in the genus. This cannot be because such a disclosure would not ‘reasonably lead’ those skilled in the art to any particular species.”

Slip Op.  I would argue that the Federal Circuit erred on this point. The UMN provisional application’s Claim 1 is directed to the same general molecule, but with much broader definitions for each of the functional group. Then, the subsequent provisional dependent claims (2, 13, 21, 22, 45, and 47) refine the scope of those functional groups in a manner that is identical to that eventually claimed in the ‘380 patent.  Here, each of these dependent claims are defined as being dependent upon any of the prior claims.  Thus, provisional dependent claim 47  seemingly includes the identical limitations found in the ‘830 patent claim 1. Yes, it is a little bit complicated, but so is chemistry.

It is not clear that my quibble would change the outcome of the case since ipsis verbis support does not necessarily result in sufficient written description.

= = =

The absence of ipsis verbis support is not fatal, so long as the original filings sufficiently show possession of the full scope of the claimed invention.  In cases involving very broad disclosure (a forest), the courts look carefully for indications that for disclosure of the particular trees actually claimed.  But, long lists of components are not sufficient. Rather, the suggestions – the “blaze marks” — must be clear.  Here, the PTAB found the patentee had failed to provide that roadmap and, on appeal, the Federal Circuit affirmed on substantial evidence.

[T]he structures [disclosed in the provisional] are so extensive and varied that [they] encompasses a significantly larger genus than that claimed in the ’830 patent, are not sufficiently common to that of claim 1 of the ’830 patent to provide written description support.

Slip Op.

UMN made other arguments that were all rejected:

  1. The PTAB should have made a credibility determination or other fact finding regarding expert testimony.  On appeal though the Federal Circuit concluded that the PTAB is not required to address each and every  side contention within its decision.
  2. The PTAB previously issued a decision that is facially inconsistent with this case, and thus is acting in an arbitrary and capricious manner.  On appeal, the court found no problem since the Board is not bound by prior panels.
  3. As a state institution, UMN is immune from IPR challenges.  UMN recognized that this argument was previously decided by the Federal Circuit.  Further, UMN has already lost a case on this argument and so is not just bound by precedent but also collateral estoppel.

Cancellation affirmed.

CHIPS and Science Act

Patent, , , , , ,

The $280 billion CHIPS and Science Act is designed to use federal grants and investments to encourage domestic production of advanced semiconductors and will also fund research into further advanced technologies, including further improved microchips; quantum computing; and artificial intelligence (AI).  Although many advanced chips are still primarily designed in the US, almost all of them are currently manufactured abroad (primarily in Taiwan and Korea). And, China is rapidly developing its own capabilities for advanced chip manufacture.  Legislators and the Biden Administration see this situation as a potential national security concern deserving of major market intervention.  These most advanced semiconductors serve as core features of US military and other governmental systems, and the current situation has substantial security risks.  Although the Department of Commerce is in charge of distributing the funds, the Department of Defense is also directly involved with the considerations.  At this point, it appears that there are three primary companies set to vie for the bulk of the $50 billion in direct investment: Intel, Samsung, and Taiwan Semiconductor Manufacturing Company (TSMC).

On the patent side, the basic setup will follow the usual US rule that inventions created using federal fund will belong to the creators (i.e., the chip companies), but the Government will seemingly have march-in rights.  In high-security situations, some developments will also be classified and the patents kept secret, although that situation most often arises in the context of a DoD contract.

Federal Circuit: System is Not a Method (and therefore patent must be delisted from Orange Book).

Patent, , , ,

by Dennis Crouch

Jazz Pharms, Inc. v. Avadel CNS Pharms, LLC (Fed. Cir. 2023)

In the pharmaceutical industry, there is a lot of interplay between the patents and FDA regulation.  A party with an approved drug product will often list related patents in the Orange Book.  Jazz’s approved drug is sodium gamma-hydroxybutyrate (“GHB”).  GHB is an infamous date-rape drug and the FDA conditioned its approval on Jazz developing “Risk Evaluation and Mitigation Strategies” (REMS).  Jazz created a set of strategies, and also obtained a patent covering the strategy. US8731963.  The patent basically overs a computer system that keeps track of prescriptions and inventory using a “single-pharmacy system” as well as a focus on whether the drug was purchased by a cash-payer.  Jazz listed this REMS patent in the Orange Book as covering its drug product.   And, although the patents covering the drug use itself expired in 2022, the REMS patent is still in force.  But, the FDA is actually no longer requiring Jazz to use the system.

In my view, this is a pretty weak patent, and a court will probably eventually hold that it is ineligible.  But, the “beauty” of the orange book listing is that patent quality often does not really matter.   As the Federal Circuit explained Orange Book listing “arm[s] the patent owner with the ability to trigger a presumptive, thirty-month suspension of the FDA’s approval of a competitive product.”  In other words, if a competitor wants to enter the market, the mere existence of a listed Orange Book patent creates a 2.5 years delay in approval of their product.  The law also makes it an act of infringement for a third party to submit a NDA alleging that it is either not infringing or that the patent is invalid/unenforceable.

In this case, Avadel is wanting to market its own GHB drug and has its own proposed REMS using multiple pharmacies.  After Avadel filed its NDA, Jazz sued.  Avadel responded with a counterclaim seeking a court order to delist the patent.

Orange Book listing is proper when the patent either (1) covers the approved drug; or (2) covers an approved method of using the drug.  The Federal Circuit appeared ready to allow this type of REMS patent as an Orange Book Listing.  But, here is the rub for Jazz — its patent doesn’t claim a method, but rather claims a computer system.

Each of the ’963 patent’s three independent claims describes a ‘computer-implemented system’ that comprises ‘one or more computer memories’ and a ‘data processor.’ . . . That the claimed systems can be used in the course of treating patients suffering from narcolepsy does not alter the fact that these are system claims.

Slip Op.  Jazz  unsuccessfully argued that the FDA required submission of a “system,” and that should alter the method requirement.  In fact, the FDA does not directly review the submitted patents and has never definitively stated that REMS patents can be listed.

Thus, the Federal Circuit affirmed the lower court order to delist the patent.

= = =

My key struggle with this case is the background law that a “system” claim automatically covers both the system itself and using the system.   This stems from the definition of patent infringement that covers making, using, selling, etc. 35 USC 271(a).

Federal Circuit Gives Stare Decisis Effect to a Judgment of Claim Validity

Patent, , , ,

by Chris Holman

C.R. Bard, Inc. v. Med. Components, Inc., 2023 WL 2064163 (Fed. Cir. Feb. 17, 2023)

In Blonder-Tongue Laboratories, Inc. v. University of Illinois Foundation (1971), the Supreme Court held that a judgment of invalidity in a suit against one infringer accrues to the benefit of any other accused infringer unless the patent owner shows that he did not have a fair opportunity procedurally, substantively and evidentially to pursue his patent claim the first time.  Collateral estoppel (i.e., issue preclusion) under Blonder-Tongue is non-mutual.  While a judgment of invalidity binds the patent owner and its successors in interest because it is a party to the suit with adequate opportunity to contest the matter, a judgment of validity cannot operate in the patent owner’s favor to bind persons who are neither parties nor in privity with parties to the suit.

Stare decisis,  Latin for “to stand by things decided,” is a legal principle that directs courts to adhere to previous judgments, i.e., precedent, when resolving a case with comparable facts.  According to Chisum on Patents, “Federal Circuit decisions decline to give great weight or stare decisis effect to prior validity rulings.”  For example, in Gillette Co. v. S.C. Johnson & Son, Inc., (1990), the court held that the fact that the validity of a patent claim has previously been upheld in an earlier litigation is not to be given  stare decisis effect, citing Stevenson v. Sears, Roebuck & Co. (Fed. Cir. 1983).

In a recent non-precedential opinion, C.R. Bard, Inc. v. Med. Components, Inc., the Federal Circuit applied stare decisis to a prior validity ruling involving a different patent and a different accused infringer.  The Bard patents at issue are directed to radiopaque markings and structural features that can be used to identify whether a venous access port is power injectable, specifically a venous access port with an alphanumeric message that can be seen on an X-ray and that identifies the port as power injectable.

Representative claim 5 of U.S. Patent No. 7,785,302 claims:

A venous access port assembly for implantation into a patient, comprising:

a housing having an outlet, and a needle-penetrable septum, the needle penetrable septum and the housing together defining a reservoir, wherein:

the assembly includes a radiopaque alphanumeric message observable through interaction with X-rays subsequent to subcutaneous implantation of the assembly, and

the alphanumeric message indicating that the assembly is power injectable.

On motion for summary judgment, the district court found the asserted claims ineligible under § 101 because the claims were solely directed to non-functional printed matter and because the claims were directed to the abstract idea of “[using] an identifier to communicate information about the power injectability of the underlying port” with no inventive concept.

On appeal, the Federal Circuit reversed, explaining:

We are bound by our precedent in C R Bard Inc. v. AngioDynamics, Inc., 979 F.3d 1372 (Fed. Cir. 2020). There, we considered a case that is virtually identical to the one before us now. AngioDynamics also involved patents directed to radiopaque markers that could be used to identify venous access ports as power injectable, and the claims at issue were substantially similar to the asserted claims here. Furthermore, that case asked to consider the exact same question that is before us now: whether claims that include non-functional printed matter could be eligible under § 101. The court in AngioDynamics concluded that, although the asserted claims contained some non-functional printed matter, they were nonetheless eligible under § 101 because the claims were not solely directed to non-functional printed matter—they were also directed to “the means by which that information is conveyed.” Given these similarities, we must reach the same conclusion here as in AngioDynamics.

Because we are bound by our precedent, we conclude that the asserted claims in Bard’s three patents are directed to eligible subject matter under § 101.

As noted above, Chisum’s authoritative treatise on U. S. patent law states that the Federal Circuit does not give “great weight or stare decisis effect to prior validity rulings,” and does not identify any cases which this has occurred.  The C.R. Bard court does not cite to any precedent, case law, or statute to justify its application of stare decisis in the present case.

Perhaps patent eligibility is uniquely amenable to stare decisis, given the amorphous nature of the Alice two part inquiry.  In its opening brief, Bard argued that:

Despite acknowledging the obvious similarities between AngioDynamics and the instant case, the district court . . .  declined to follow it because “the facts and procedural posture are different.” But in AngioDynamics, this Court held that Bard’s patents were valid at Alice step one. Because Alice step one presents a legal question that can be answered based on the intrinsic evidence, CardioNet, LLC v. InfoBionic, Inc., 955 F.3d 1358, 1372 (Fed. Cir. 2020), any supposed differences in the record are irrelevant and thus provide no basis to depart from this Court’s holding that claims directed to features on ports for the purposes of post-implantation identification traverse Alice step one.

AngioDynamics (the company that lost on the issue of patent eligibility in the AngioDynamics decision) filed an amicus brief in C.R. Bard in support of the accused infringer, urging affirmance of the district court’s decision finding the claims patent ineligible. The company argued that the AngioDynamics decision addressed a different factual record and different legal issues, and that:

Unlike the district court in AngioDynamics, the district court here performed a full two-step Alice analysis. The district court also considered a significantly more developed record than the one in AngioDynamics, including multiple prior art references, Bard’s admissions that it did not invent radiopaque identifiers, and Bard’s admissions that adding radiopaque identifiers to ports would be trivial. . . . Bard’s reliance on AngioDynamics is misplaced.

AngioDynamics states in its amicus brief that its interest in the case stems from its involvement in litigation related to the patents asserted in C.R. Bard, as well as other Bard patents directed to “nearly identical subject matter,” which it believes would be impacted by Bard’s appeal. Presumably, the company was hoping to benefit from the collateral estoppel effect of the district court’s patent ineligibility ruling.

Got Milk? Forget about Patent Eligibility

Patent, , , ,

Guest Post by Jordan Duenckel.  Jordan is a second-year law student at the University of Missouri, head of our IP student association, and a registered patent agent.  He has an extensive background in chemistry and food science.

The Federal Circuit weighed in on the amorphous topic of subject matter eligibility in the recent opinion ChromaDex, Inc., V. Elysium Health, Inc., — F.4th —, Docket No. 2022-1116. Writing for a unanimous panel, Judge Prost affirmed a grant of summary judgment that U.S. Patent No. 8,197,807 (“the ’807 patent”) was directed to unpatentable subject matter and therefore ineligible based on 35 U.S.C. § 101.

ChromaDex’s ‘807 patent concerns nicotinamide riboside (“NR”), a form of vitamin B3 found naturally in cow’s milk. When ingested, a human body converts NR into the coenzyme nicotinamide adenine dinucleotide, or NAD+. Claim one of ‘807 states:

1. A composition comprising isolated nicotinamide riboside in combination with one or more of tryptophan, nicotinic acid, or nicotinamide,

wherein said combination is in admixture with a carrier comprising a sugar, starch, cellulose, … or polyanhydride,

wherein said composition is formulated for oral administration and increased NAD+ biosynthesis upon oral administration.

ChromaDex isolates and concentrates naturally occurring NR — selling dietary supplements that contain elevated levels of NR. The levels found in these supplements is significantly above natural levels present in milk or any other food.  Although the claims require isolated NR, they do not require a specific high-concentration, only enough to “increase[] NAD+ biosynthesis upon oral administration.” In its decision, the Federal Circuit focuses on the breadth of the claim and its ability to include natural milk (a product of nature) as the key ingredient providing the NR.

The Supreme Court has two key product of nature cases from the past 45 years: Diamond v. Chakrabarty, 447 U.S. 303 (1980) and Ass’n for Molecular Pathology v. Myriad Genetics, Inc., 569 U.S. 576 (2013).

Under these cases, a determination that milk is within the scope of the claims is not, by itself fatal to eligibility.  Chakrabarty requires that to be patentable the claimed composition must “ha[ve] markedly different characteristics [from the natural phenomenon] and have the potential for significant utility.” 447 U.S. at 310. The chemical composition of isolated NR is not structurally or functionally different from NR found in milk. ChromaDex’s argument at the district court that the characteristics of isolated NR are purportedly different from naturally occurring NR— stability, bioavailability, sufficient purity, and therapeutic efficacy was rejected because these improvements were not required by the claim language. On appeal, ChromaDex insists in their brief that the claims have “markedly different characteristics” that render them patent eligible, specifically that (1) NR is found in milk in only trace amounts, i.e., one part per million, and (2) what little NR is found in milk is not bioavailable because it is bound to the lactalbumin whey protein. Again though, ChromaDex’s argument is thwarted by the overly broad claim language. The claims do not require either a minimum level of NR or even that the isolated NR is more bioavailable by separation from the lactalbumin.

The corollary to Chakrabarty is Ass’n for Molecular Pathology v. Myriad Genetics, Inc., 569 U.S. 576 (2013) and is more similar to the subject matter of ChromaDex. In Myriad, the isolation of specific DNA fragments was found to be patent ineligible. ChromaDex faces the same problem. The act of isolating the NR compared to how NR naturally exists in milk is not sufficient, on its own, to confer patent eligibility.

Federal Circuit held that this Chakrabarty analysis was dispositive on the question of § 101 eligibility and affirmed the grant of summary judgment. One open question is whether the same two-step analysis of Alice/Mayo applies in the product-of-nature eligibility arena.  Without fully deciding that question, the Federal Circuit conducted a subsequent analysis under the Alice/Mayo two-step test and reached the same conclusion — that the claims are ineligible. As noted by this court, the Alice/Mayo test is functionally the same as the Chakrabarty analysis, especially when a composition of matter is at issue.

It appears to me that the primary issue is a patent drafting problem. The ‘807 patent was filed on April 20th, 2006, long before the clarifying guidance from Myriad (2013), Alice (2014), and Mayo (2012). At the time of filing, the isolation and reformulation was not subject to the explicit subject matter restriction in Myriad. However, the patent drafter should have been aware of Chakrabarty (1980). Claim one was written so broadly that potential embodiments include far more than dietary supplement pills.

The Federal Circuit distinguished the current case from Nat. Alts. Int’l, Inc. v. Creative Compounds, LLC, 918 F.3d 1338 (Fed. Cir. 2019). In Natural Alternatives, “natural products ha[d] been isolated and then incorporated into a dosage form”—“between about 0.4 grams to 16 grams”—“with particular characteristics to effectively increase athletic performance.” Id. at 1348–49.  The patentee may have also avoided an eligibility problem by providing evidence in the specification that the NR concentration in milk was insufficient to increase NAD+ biosynthesis as claimed, but that higher levels of concentration did provide that benefit.  To be most clear, the claims could have also added a limitation that the NR is provided in an “effective amount” to achieve the claimed NAD+ synthesis.