Tag Archives: Enablement

Guest Post: Where we Stand with Trade Secret Enforcement in Federal Courts

Guest Post by Prof. David Opderbeck (Seton Hall), originally published on his blog The CyberSecurity Lawyer.

Introduction

Trade secrets are important to cybersecurity because many data breaches involve trade secret theft.  The Defend Trade Secrets Act of 2016 (DTSA) amended the Espionage Act of 1996 to provide a federal private right of action for trade secret misappropriation.   Some commentators opposed the DTSA in part because it seems redundant in light of state trade secret law and could lead to unnecessary litigation and restrictions on innovation.  Now that the DTSA has been in effect for nearly a year, I conducted an empirical study of cases asserting DTSA claims (with the able help of my research assistant, Zach Hansen).  This post summarizes the results of that study.

Methodology

We ran keyword searches in the Bloomberg Law federal docket database to identify cases asserting DTSA claims in federal courts.  It is not possible to search only on the Civil Cover Sheet because there is no discrete code for DTSA claims.  Our search ran from the effective date of the DTSA (May 26, 2016) through April 21, 2017 (just prior to our symposium on the DTSA at Seton Hall Law School).  After de-duping, we identified 280 unique Complaints, which we coded for a variety of descriptive information.  Our raw data is available online.

Findings

This chart shows the number of filings by district:

We were not surprised to see that the Northern and Central Districts of California, Southern District of New York, or District of Massachusetts were among the top five.  We were surprised, however, to see the Northern District of Illinois tied for first.  This could reflect the influence of the financial services industry in Chicago, but further research is required.

The next chart shows the number of filings by month:

It is interesting to note the decline in filings following the initial uptick after the May 26, 2016 effective date.  Perhaps this reflects a slight lull during the summer months.  Filings then remained relatively steady until March, 2017, when they increased significantly.  This could have something to do with the quarterly business cycle or bonus season, since many of the cases (as discussed below) involve employment issues.  Or, it could reflect a random variation given the relatively small sample size.

We next examined other claims filed along with the DTSA counts in these Complaints:

We excluded from this chart related state law trade secret claims.  Not surprisingly, nearly all the cases included claims for breach of contract.  As noted above, trade secret claims often arise in the employment context in connection with allegations of breach of a confidentiality agreement or covenant not to compete.  Another finding of note was that a fair number of cases assert Computer Fraud and Abuse Act claims, although the number is not as high as expected.  Most trade secret cases today involve exfiltration of electronic information, but perhaps many cases do not involve hacking or other access techniques that could run afoul of the CFAA.

We also noted a smaller but not insignificant number of cases asserting other intellectual property claims, including trademark, copyright and patent infringement.  Since many documents taken in alleged trade secret thefts are subject to other forms of intellectual property — particularly copyright — this may show that some lawyers are catching on to the benefit of asserting such claims along with DTSA claims.

Finally, our review of case status revealed the following:

  • 198 cases in various pre-trial stages
  • 61 cases dismissed
  • 5 preliminary injunctions
  • 4 final judgments, including 2 permanent injunctions
  • 3 default judgments
  • 1 case sent to compulsory arbitration
  • 8 undetermined / miscellaneous

At first blush, the number of cases dismissed seems high, given that none of the cases have been pending for more than a year.  We assume the vast majority of these cases settled, though further investigation is required.  In contrast, the number of preliminary injunctions granted seems very low.  Again, further investigation is required, but so far it does not seem that the DTSA is resulting in the kind of preliminary injunction practice we expected to see under a federal trade secret statute.

Uncertainty: Helsinn Foreshadows Trouble with AIA Patents

By Dennis Crouch

The AIA was passed back in 2011 and the changes have gradually been implemented through the patent system.  We are finally at the point where most newly issued U.S. patents are post-AIA patents whose patentability is individually based upon the first-to-file provisions of re-drafted 35 U.S.C. § 102.  We’re talking here about hundreds-of-thousands of patents interpreted under the new rules with millions on their way.  As this huge stone is slowly building momentum, the PTO has faced a startup problem: The Agency must apply the new law even though it has almost no guidance from the courts as to how the new portions of the statute will be interpreted.  Because the PTO interpretation is given no deference and because of the many drafting holes in the AIA, I expect that the PTO interpretation will be repeatedly found incorrect.

The only substantive area that has been thus-far decided by the Federal Circuit involves the recent Helsinn decision.  In that case, the Federal Circuit rejected the PTO approach to on-sale prior art and ruled that a pre-filing sale whose existence was disclosed to the public counts as 102(a)(1) prior art even if the elements of the invention were not publicly disclosed (just the fact of the sale).  In its incorrect interpretation of the statute, the PTO had judged the statute as only counting sales as public if the elements of the invention were also disclosed publicly.[1]

There are many other potential examples of questionable language from the AIA first-to-invent provisions that will eventually come to a head:

  • Effective Filing Date: In a patent claiming priority to a prior application, does the claim’s ‘effective filing date’ depend upon whether the relied-upon filing discloses and enables the claimed invention? Section 100(i) suggests that we look only to whether there is a claimed right for priority or benefit. This could impact many written description cases.
  • On Sale: Does a purely private sale or offer to sell count as prior art? Helsinn reserves this question for a later date.
  • Public Use: Does non-disclosing public use count as prior art? Helsinn suggests yes.
  • Commercialization: Does non-disclosing commercialization of the invention by the patentee count as prior art?
  • Otherwise available to the public: Under what conditions apart from the listed publications and uses will we consider an invention to be “otherwise available to the public?” How much further does this go beyond publication and public use? Is public knowledge of the existence of the invention sufficient, or must the public be made aware of the inventions elements and how to make and use the invention? Does the invention need to be discoverable in some way?
  • Grace Period: What level of proof is required for the patentee to show its prior disclosure?
  • Disclosure: For an inventor’s disclosure to trigger the grace period, must it enable the entire invention?
  • Public Disclosure: What counts as a pre-filing ‘public disclosure’ under 102(b)(1)(B) sufficient to knock-out prior art? Is the publicness the same as 102(a)(1)?
  • Changed Disclosure: For intervening third-party disclosures or patent applications that differ from an inventor’s disclosure, what scope (if any) is knocked-out from the scope of prior art? This may be different depending upon whether focusing on 102(b)(1)(a); 102(b)(1)(b); 102(b)(1)(c); or 102(b)(1)(d).
  • Date of 102(a)(2) prior art: 102(d) modifies the 102(a)(2) prior art date for published applications and patents by looking to whether the application claims priority / benefit to a prior filing. Congress certainly intended that the priority date only counts if the priority filing disclosed the subject matter being relied upon in the rejection.  However, the statute is not so clear and suggests instead that all we need is a proper claim of priority or benefit. .

These are a handful of examples, and more certainly exist.

I have some thoughts on how provisions of the statute should be interpreted – both as a matter of statutory interpretation and a matter of patent policy.  My larger concern, however, is that we are still years away from seeing court decisions interpreting these elements in ways that settle the law.  Up to now, for instance, there are not even any public PTAB decisions interpreting the new elements of 102(b).  With the disposing of more than 500,000 patent applications per year, the office is likely to churn through millions before these issues go before the Federal Circuit.  If the first case on point (Helsinn) is any indication, the Federal Circuit is likely to disagree with at least several of the PTO’s statutory interpretations – potentially creating swaths of improperly issued patents or improperly rejected applications depending upon whether the PTO interpretation is too broad or too narrow.  Although temporary, we have the potential here of creating a real bubble that will give us another 20+ year headache in similar fashion to the PTO’s low-quality examination of software and business methods in the late 1990s and early 2000s.

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[1] MPEP 2152.02(d) (“The phrase ‘on sale’ in AIA 35 U.S.C. 102(a)(1)  is treated as having the same meaning as ‘on sale’ in pre-AIA 35 U.S.C. 102(b), except that the sale must make the invention available to the public.”).

Written Description, Disclosed Embodiments, and BRI

By Dennis Crouch

The vast majority of written description problems arise when the patentee amends or adds claims with limitations not found in the original claim set and using language that does not directly map to specification disclosure.  In Cisco Systems v. Cirrex (Fed. Cir. 2017), the Federal Circuit provides an example of this in practice.

[The Decision: Cisco]

After the PTO initiated an inter partes reexamination, the patentee (Cirrex) dropped the original claims (1-34) and added new claims (35-124) of its ‘082 patent.[1]  In its final decision, the PTAB affirmed the examiner’s decision that most of the added claims were invalid as lacking written description support.  The Board did, however, find five of the claims patentable.  On appeal, the Federal Circuit partially reversed – finding all of the claims invalid as lacking written description support.

35 U.S.C. § 112(a) serves as the statutory source for three patentability doctrines: Written Description, Enablement, and Best Mode.

(a) IN GENERAL.—The specification shall contain a written description of the invention, and of the manner and process of making and using it, in such full, clear, concise, and exact terms as to enable any person skilled in the art to which it pertains, or with which it is most nearly connected, to make and use the same, and shall set forth the best mode contemplated by the inventor or joint inventor of carrying out the invention.

In Ariad, the Federal Circuit wrote that the original written description filed by the patentee must “clearly allow persons of ordinary skill in the art to recognize that [he] invented what is claimed.”[2]  Channeling the old fox-law case of Pierson v. Post, courts have held that the requirement is intended to show “possession” of the claimed invention at the time of filing.  Whether the written description is sufficient is a question of fact – with the level of detail depending upon “the nature and scope of the claims and on the complexity and predictability of the relevant technology.”  Thus less description is necessary to show possession in simple technologies in predictable areas.  More description is likely required to show possession of novel structures and arrangements as compared to elements found in the prior art.

Here, the added claims at issue here are related to either equalization or discrete attenuation of fiber optic signals inside a lightguide (PLC).

The problem for Cirrex, according to the court, is that the original specification “lacks any disclosure or suggestion of how placing attenuation material inside the PLC … would result in equalizing the intensities of different wavelengths traveling in the PLC, or discretely attenuating a particular wavelength in the PLC.”  Rather, the disclosed embodiments teach equalizing to light energy outside the PLC and only collective (rather than discrete) attenuation within the PLC.   As such, the Federal Circuit held the claims lacked sufficient written description.

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Alt: Essential Element Test: An interesting issue that the court avoided stems from an odd line of written description cases that center on what the Federal Circuit repeatedly denies is an “essential element” test.  In Gentry Gallery, Inc. v. Berkline Corp.[3], the patentee amended claims to remove a previously recited limitation (placement of recliner controls between two recliners).  In that case, the court held that the broader claim lacked written description since the specification indicated possession of only a much narrower invention.  The basic conclusion is was that since the specification consistently described the invention as including “A, B, and C all connected together,” the patentee cannot broaden its claims to claim just A and B connected together (even if there would be no enablement problem).  Whenever the court cites Gentry, it almost always restates the seemingly contrary statement that this test should not be seen as an ‘essential element’ test but rather merely an inquiry as to whether the inventor possessed the invention now claimed.

Here, the challenger argued, in the alternative, that if the claims should also be invalid if interpreted to be broad enough to include equalizing activity whether inside or outside the PLC.  The problem is that all disclosed equalizing includes operating on signals outside the PLC, and the challenger argued that the disclosure does not then extend to the full scope of the claims.  This argument roughly follows the LizardTech decision where the court held that a broadened claim lacked written description because there was no showing of possession of the “full breadth of the claim.”[4]

This alternative argument was avoided in the appellate decision because the court more narrowly interpreted the claims as discussed above.

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Broadest Reasonable Interpretation vs. Interpretation Most Likely to Invalidate: The court here did not discuss how BRI applies to its claim construction approach.  The theory behind BRI is that a broader claim interpretation typically makes it more likely to invalidate claims, and that approach helps ensure that patents released by the PTO are more likely to be upheld as valid.  The interpretation issue is typically the opposite for written description issues.  Let me explain – since the standard written description problem involves adding new particular limitations into the claims that are absent from the specification, a more narrow interpretation of the claims is actually more likely to invalidate.  (Here, I set aside the aforementioned LizardTech improper broadening issue.)  The query here is whether the PTO should be applying the reasonable interpretation most likely to invalidate rather than broadest reasonable interpretation.

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[1] U.S. Patent No. U.S. Patent No. 6,415,082.

[2] Ariad Pharm., Inc. v. Eli Lilly & Co., 598 F.3d 1336, 1351 (Fed. Cir. 2010) (en banc) (quoting Vas-Cath Inc. v. Mahurkar, 935 F.2d 1555, 1563 (Fed. Cir. 1991)).

[3] Gentry Gallery, Inc. v. Berkline Corp., 134 F.3d 1473, 1479 (Fed. Cir. 1998).

[4] LizardTech  v.  Earth Resource  Mapping,  Inc., 424  F.3d  1336 (Fed.  Cir.  2005).

Court-Agency Allocations of Power and the Limits of Cuozzo

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

Prof. Vishnubhakat was counsel of record for the amicus brief by patent and administrative law professors in this case.

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Yesterday’s argument in Wi-Fi One, LLC v. Broadcom Corp. suggested that the en banc Federal Circuit are grappling with at least three important issues as they consider the reviewability of PTO decisions to institute inter partes review that arguably violate the one-year bar of 35 U.S.C. § 315(b):

  • How does the IPR statute allocate power between the PTAB and the district courts to reevaluate patent validity?
  • How does the Supreme Court’s opinion last Term in Cuozzo Speed Techs., LLC v. Lee allocate power between the USPTO Director and the Federal Circuit to oversee the PTAB?
  • How might this case resolve (or aggravate) rule-of-law concerns that the Federal Circuit has recently expressed, especially as to separation of powers under the Chenery doctrine?

The Federal Circuit’s panel decision in Achates Reference Publ’g, Inc. v. Apple Inc. held that PTAB decisions to institute IPR are unreviewable even where the § 315(b) time bar may have been violated.  The en banc question here is whether to overrule Achates.

The USPTO’s interest in the case was clear from the large group of agency employees in attendance, including members of the PTAB and the Solicitor’s Office as well as Director Michelle Lee herself.  The USPTO also formally intervened in the case and designated Mark Freeman from the DOJ Civil Division’s Appellate Staff to argue.

The PTAB-District Court Balance of Power

Historically, of course, the power to invalidate patents in the first instance resided in the district courts.  An opening exchange with Chief Judge Prost laid the groundwork that although the AIA sought efficient patent validity review outside the courts, it also constrained the administrative alternatives in a variety of ways.  The USPTO would later elaborate this point as well, that challenges that would have gone to court would now go to the agency, but this reallocation of power would not be total.  District-court defendants and their privies would have to act within a year, or never at all.  Judicial review can police this balance of power—but not without disruption of its own, and so the dispute over appealability.

The Main Cuozzo Exception: Relatedness to Institution

From early in Wi-Fi’s argument, several members of the court starting with Judge Dyk explored whether the § 315(b) time bar is distinguishable from the § 312(a)(3) particularity requirement that was found nonappealable in Cuozzo.  A well-known passage in Cuozzo orients the holding toward institutions that are made “under this section [§ 314]” or that are “closely tied” to institution-related statutes.  Meanwhile, several types of “shenanigans” may still merit review, such as constitutional defects, interpretations of less closely related provisions, or decisions whose scope and impact reach well beyond institution.  As a result, arguments to limit Cuozzo and afford review have often focused on these exceptions, especially on framing the statute as “less closely related” to institution “under this section [§ 314].”  Judges Chen and Stoll also followed up at several points with Broadcom and the USPTO about the “under this section” limitation.

Reconciling Cuozzo’s Majority and Dissent

Judge Chen also took an interesting further approach to how closely related a statute must be for Cuozzo to apply.  He noted that the dissent in Cuozzo complained specifically that the majority’s approach swept broadly and harmfully.  The Cuozzo dissent argued that the majority’s position would foreclose review even of issues such as the § 315(b) time bar because timeliness is “no less . . . closely tied” to institution.  The majority disclaimed various other horribles but was silent about the alleged relatedness of the one-year bar to institution.  Was this colloquy from Cuozzo a signal of consensus that the time bar is, indeed, the type of PTAB decision that is immune from review?

One sensible answer is that the Cuozzo dissent’s argument about the one-year bar should be seen as hortatory, intended first to build a majority and later, when the case was lost, to cabin the impact of the majority’s reasoning.  In other words, the dissent did not merely read the majority’s logic broadly but read it broadly as a reason to reject that logic.  To accept part of the Cuozzo dissent’s premise now while continuing to reject the dissent’s urged conclusion may itself be problematic cherry-picking, especially if any supposed agreement by the Cuozzo majority were to be inferred from its silence on the matter.  Indeed, Wi-Fi answered Judge Chen along just these lines by discussing what the Cuozzo dissent was trying to accomplish—limiting nonappealability to a prohibition of interlocutory review—not merely what the dissent said.

The Other Cuozzo Exception: Scope and Impact

Apart from “less closely related” statutes, the argument also started at times to explore Cuozzo’s “scope and impact” exception, particularly where the PTAB might act outside its statutory authority and thereby lose immunity from review.  It was the USPTO to whom Judge Chen suggested that the one-year bar of § 315(b) may well have been a Congressional allocation of power between the agency and the district courts to resolve patent validity disputes.  This view of the time bar would make it a statutory limit on the agency’s authority, a violation of which would render the PTAB susceptible to appellate review despite Cuozzo.

The scope and impact of § 315(b) are also stark when seen through the lens of court-agency substitution.  Arti Rai, Jay Kesan, and I have reported in recent research that a substantial share of petitioners (about 30%) seek PTAB review before being sued in district court on the patent in question.  This and related findings indicate that, in addition to ordinary court-agency competition over who resolves the validity of a patent in an ongoing infringement lawsuit, the PTAB also competes with the courts over who should resolve preemptive strikes against patents.  As the law professors’ amicus brief argued in this case, the one-year bar of § 315(b) sets an important boundary line in this competition and—as Judge Chen suggests—preserves an inter-branch allocation of power.  Thus, its scope and impact reach well outside the walls of the agency and into the federal courts, empirically as well as analytically.

The USPTO Director-Federal Circuit Balance of Power

One of the most significant aspects of this case, and why it was an apt choice for en banc review, is that the Federal Circuit is shaping its own ability to shape future cases.  Much like the balance of power between the PTAB and the district courts to evaluate patent validity in the first instance, also at stake is the power to correct errors and bring uniformity to the decision-making of the PTAB.  This latter power, too, was reallocated away from the Federal Circuit by the AIA’s nonappealability provisions.

The Source(s) of Uniformity

One might suppose, as Wi-Fi began to argue, that the absence of judicial oversight would leave individual PTAB panels to generate consensus in a common law fashion, and that consensus is unlikely to emerge because of the PTAB’s sometime disregard for its own prior analogous precedents and for prior court judgments regarding the validity of the same patent.  (Even a Federal Circuit panel endorsed the latter as recently as a month ago in Novartis AG v. Noven Pharms. Inc.)

Judge Wallach, however, strongly rejected Wi-Fi’s view that nonreviewability might leave uniformity and oversight to individual panels of the PTAB.  Instead, he noted, the Director of the USPTO can impose uniformity by assigning additional judges to particular panels to resolve contentious issues in a certain way.  To this, one might add that the Director can also generate uniformity directly through the ordinary chain of administrative command as an ex officio member of the PTAB and through the process for designating PTAB opinions as precedential, representative, or informative.  Judge Wallach raised the issue with Broadcom as well, asking whether “stacking the panel” to reach certain outcomes would qualify as judicially reviewable shenanigans.

This alternate view of uniformity is significant for its implicit but direct potential not only for displacing the Federal Circuit but also for making patent validity decisions more responsive to political constituencies.

The APA Presumption of Reviewability

The counterargument to this potential injection of politics into patent adjudication came in the closing minutes of the hearing.  For all the discussion about Cuozzo and its enumerated exceptions, Wi-Fi argued that the Cuozzo holding did not make nonreviewability the new baseline in administrative reviews of patent validity.  Rather, Cuozzo was one instance where the Administrative Procedure Act’s ever-present presumption favoring judicial review was rebutted clearly and convincingly enough as to institution decisions.  To construe the nonappealability statute as to timeliness under § 315(b) or any other issue would require a fresh analysis of statutory text, purpose, legislative history, etc.

Judge Moore engaged this argument, suggesting that Cuozzo need not be limited entirely to its facts with nonappealability decided from scratch each time.  She suggested, for example, that Cuozzo could be seen as precluding a range of appeals from institution and institution-related decisions, but that the opinion’s limitations apply here and thus dispel the indications that were clear and convincing in the Cuozzo case itself.

Notably, Judge Moore was also one of several, including Judges Newman and Reyna, to ask whether PTAB actions that are plainly invalid or ultra vires would enjoy immunity from review.  This concern, too, is of a piece with the balance of power between the Federal Circuit as judicial overseer and the Director of the USPTO as political overseer because it highlights a necessary choice between correcting agency errors and tolerating them in the name of Congressionally intended agency autonomy.

Making the PTAB Better Explain Itself

Finally, the en banc court referred at various points to the need for greater transparency in the PTAB’s own decision-making.  This is a concern that Federal Circuit panel decisions increasingly voice in PTAB appeals.  An early colloquy with Chief Judge Prost explored whether the PTAB might be shielded from review of certain issues in final written decisions simply by omitting discussion of those issues from its final written decisions, in light of the APA’s general requirement that an agency articulate its “findings and conclusions, and the reasons or basis therefor.”  Similarly, in the discussion over political panel-selection by the USPTO Director, Judge Wallach suggested that rule-of-law values such as predictability, uniformity, and transparency of judgments and the neutrality of decision-making may be threatened.

These concerns are also consistent with recent decisions finding fault with the PTAB’s failure to explain its reasoning with enough detail even to enable meaningful review.  For example, citing the Chenery doctrine, the In re NuVasive, Inc. panel decision last December reversed a finding of obviousness not because it was necessarily wrong, but because the reasoning that the PTAB had articulated could not support the decision, while the separation of powers forbade the Federal Circuit to supply its own rationale.  Similarly, in the Shaw Indus. Group., Inc. v. Automated Creel Sys., Inc. panel decision early last year, Judge Reyna wrote separately to chastise the USPTO for its opaque practice of making partial institutions while denying certain grounds or prior art as “redundant.”

Conclusion

The opportunity to clarify these allocations and reallocations of power is likely to be a welcome aspect of en banc consideration.  The power in question may be to adjudicate (as between the PTAB and the district courts), to oversee (as between the USPTO Director and the Federal Circuit), or simply to force a clearer account of the PTAB’s own reasoning.  All of these powers have seen significant revision under the AIA, reflecting the more general ascendancy of administrative adjudication in patent law.  In seeking the right balance for each of these powers, the Federal Circuit appears to be taking seriously the warning that “no legislation pursues its purposes at all costs” and that if the goals of the AIA are important, so also are the particular means that Congress enacted to achieve those goals.

Case Information

  • Oral Argument Recording
  • En Banc Panel: Prost, Newman, Lourie, Bryson, Dyk, Moore, O’Malley, Reyna, Wallach, Taranto, Chen, Hughes, Stoll
  • Arguing for Appellant Wi-Fi One, LLC: Douglas A. Cawley (McKool Smith)
  • Arguing for Appellee Broadcom Corporation: Dominic E. Massa (WilmerHale)
  • Arguing for Intervenor Michelle K. Lee, Director of the USPTO: Mark R. Freeman (DOJ Civil Division, Appellate Staff)

Step one: Find the Gist (Do not Construe)

In Blue Spike v. Google, the patentee has asked the Supreme Court to further elucidate its test for eligibility under Mayo, Alice, and Myriad with the following three questions presented.

  1. May patentable subject matter under § 101 properly be assessed by over-generalizing patent claims to a “gist”?
  2. May a district court properly assess patentability under § 101 prior to authoritatively construing the patent’s claims?
  3. May a district court adjudicating a motion for judgment on the pleadings on § 101 patentability grounds properly consider questions of patent enablement under 35 U.S.C. § 112?

We have an interesting case here where the district court expressly stated its approach to Mayo/Alice Step 1 is to distill the claimed invention to its “gist” and ask whether that gist is an abstract idea.

In its lawsuit against Google, Blue Spike asserted five related patents: U.S. Patent Nos. 7,346,472 (the “’472 Patent”), 7,660, 700 (the “’700 Patent”), 7,949,494 (the “’494 Patent”), 8,214,175 (the “’175 Patent”), and 8,712,728 (the “’728 Patent”).  Looking at asserted claim 1 of the ‘472 patent as an example: the claim requires comparing a query signal with a reference signal.  The process involves creating an “abstract” (essentially a hash or digital fingerprint) of each signal that uses “perceptual qualities” of each signal, and then comparing those abstracts.

The district court dismissed the case on the pleadings – holding that the asserted claims were all invalid as a matter of law for effectively encompassing an abstract idea.  On appeal, the Federal Circuit affirmed without opinion.

In its decision, the district court expressly “distill[ed] the gist of the claim[s]” and found that the gist of the claims is to “model, on a computer, ‘the highly effective ability of humans to identify and recognize a signal’ [using a method that] mirrors the manner in which the human mind undertakes the same task.” (quoting the patent specification).   Essentially, the court found, all of the claims are directed to the abstract idea – “the idea of comparing one thing to another.”  Moving on from there, the court recognized the computer implementation, but found no inventive concept in that implementation.  The patentee argues here that the court erred in its gist analysis, and compounded that error by failing to construe the claims prior to the gisting process:

[M]any trial courts have adopted the practice of reducing patent claims to a highly general “gist,” then assessing that gist to determine whether it is so abstract as to be unpatentable. Because distillation to a “gist” inherently abstracts from a patent’s specific claims, this approach builds in a bias towards invalidity. . . . Deciding eligibility before claim construction exacerbates the tendency noted above to ignore a patent’s specific claims and over-generalize its “gist.”

The petition also spends substantial time discussing the Federal Circuit’s new status quo of issuing a substantial number of no-opinion judgments under Rule 36:

[T]he Federal Circuit appears unwilling to shoulder the responsibility for clarifying the Alice/Mayo analysis. That court’s use of summary Rule 36 affirmances seems to be both commonplace and increasing. This is particularly true in cases concerning patentable subject matter under § 101. One recent report identified a dozen Federal Circuit appeals raising this issue decided by Rule 36 affirmances in 2016 alone. . . . [P]recedential opinions in § 101 cases are important not just for trial courts reviewing issued patents, but also for the PTO’s examiners who must determine whether to issue patents in the first place. When the Federal Circuit fails to write a written opinion, it fails to provide the USPTO with necessary examples to use in granting patent applications.

In this particular case, the R.36 judgment is not a law violation (since the case arose from the district court rather than the PTO) but should also not be an excuse for failing to properly resolve the case – certainly the issues raised are not resolved and there is need for explanatory precedent.

[Blue Spike Petition (April 6 2017)]

 

Eligibility: Get Technical or Get Denied

Dennis Crouch

The principle that patent prosecutors are following today is in the headline: Get Technical or Get Denied.  The following is a case-in-point.

Nonprecedential decision today in Clarilogic v. FormFree Holdings affirming that the claims of FormFree’s U.S. Patent No. 8,762,243 are ineligible under 35 U.S.C. § 101 as directed to an abstract idea.   [Decision: clarilogic] The patent is directed toward a credit reporting scheme.  The gist – according to the court:

In brief, the … system seeks a potential borrower’s financial information from a third party, applies an “algorithm engine” to the data, and outputs a report. . . . the logic rules applied by the engine are received “from government entities or particular users.”

Claim 1 is drafted as a seven step method as follows :

1. A computer-implemented method for providing certified financial data indicating financial risk about an individual, comprising:

(a) receiving a request for the certified financial data;
(b) electronically collecting financial account data about the individual from at least one financial source,
(c) transforming the financial account data into a desired format;
(d) validating the financial account data by applying an algorithm engine to the financial account data to identify exceptions, wherein the exceptions indicate incorrect data or financial risk;
(e) confirming the exceptions by collecting additional data and applying the algorithm engine to the additional data,
(f) marking the exceptions as valid exceptions when output of the algorithm engine validates the exceptions; and
(g) generating, using a computer, a report from the financial account data and the valid exceptions,
wherein the financial account data comprises at least one of real-time transaction data, real time balance data, historical transaction data, or historical balance data; and the algorithm engine identifies a pattern of financial risk; the method is computer implemented, and steps (c), (e), and (f) are executed via the computer or a series of computers.

The Supreme Court’s atextual reading of 35 U.S.C. 101 has created a set of subject matter excluded from patentability – including abstract ideas.  The two step eligibility framework under Alice/Mayo first asks whether the claims are “directed to” an abstract idea and then, if so, asks whether the claims include “something more” beyond the abstract idea such as an “inventive concept” that is “sufficient to transform the nature of the claim into a patent eligible application.”  Quoting Alice.  These issues have generally been treated as questions of law amenable to judgment by a court even at the pleading stage of a lawsuit.

Step 1: The claims are directed to an abstract idea because their focus is “on collecting information, analyzing it, and displaying certain results of the collection and analysis.” (quoting Elec. Power Grp., LLC v. Alstom S.A., 830 F.3d 1350 (Fed. Cir. 2016).   Here, the court suggests the claims might have passed the test if the “algorithm engine” had been further identified or explained, but simply “claiming an algorithm does not alone render subject matter patent eligible.”

Step 2: The requisite ‘something more,’ does not include recitation of the use of a generic computer.  Here, FreeForm argues that its invention uses algorithms to transform data in parallel fashion to the way that Diehr used an algorithm to transform rubber.  On appeal, however, the Federal Circuit disagreed:

In contrast to Diehr, claim 1 recites a method that changes the way electronic information is displayed via an unknown and unclaimed process. Absent any limitation to how the data are changed, there is little, if any, transformative effect. Data are still data.

The problem, according to the court, is that the patent simply does not reach any inventive “technical manner” in which the “data is gathered, analyzed, or output.”

 

Limits on Disclaimer in Claim Construction

by Dennis Crouch

Technology Properties Ltd. v. Huawei Tech, et al. (Fed. Cir. 2017)

This decision by Judge Moore recalls the Federal Circuit’s long history of rejecting district court claim constructions and also highlights Judge Moore’s formalistic approach to claim construction.

Here, the claim term on appeal is “entire oscillator disposed upon [an] integrated circuit substrate” as used in Tech Properties’ U.S. Patent No. 5,809,336.  The patent is directed to a microprocessor system that has two independent clocks: A variable frequency CPU ring oscillator clock and a fixed frequency quartz crystal I/O clock.  The improvement here is in linking the variable frequency clock to the CPU so that the performance of both vary according to external stress (such as temperature) while not impacting the I/O clock speed.

cpuclock

Following a Markman hearing, the district construed the oscillator term as being the variable-speed clock and requiring “an oscillator located entirely on the same semiconductor substrate as the central processing unit that does not require a control signal and whose frequency is not fixed by any external crystal.”  Although the claims do not expressly include the negative limitation of no-control-signal and no-external-crystal for the CPU, the district court found that the prosecution history showed that the patentee disclaimed scope of its claims when attempting to overcome prior art rejections.

Claim construction: The general process of claim construction is to interpret the claims according how a person of skill in the art (PHOSITA) would understand the claims in the context of the intrinsic record (patent and prosecution history).  This standard process uses the intrinsic record to help give meaning to the claim terms.  Phillips v. AWH.

Disclaimer: Unlike the soft and seemingly flexible approach of Phillips, any disclaimer of scope must be “clear and unmistakable.” to one of ordinary skill in the art.  Statements by the patentee that are either “ambiguous or amenable to multiple reasonable interpretations” do not create a disclaimer.  Disclaimer is big because it allows the court to permissible add limitations from the specification and prosecution into the claims.

PTO ERROR: Let me note here that – in my view – every time we have a strong prosecution disclaimer argument, we know that the PTO erred.  When the patentee made the argument that the claimed oscillator was variable-speed, the examiner should have replied: “Please amend the claims to actually include that limitation.”

No fixed-crystal-clock: During prosecution, the patentee distinguished the prior art by noting that unlike the “variable speed clock as claimed”, the prior art “is at a fixed, not a variable frequency” and “relies on an external crystal.”  For Judge Moore, these statements were sufficient to find that the patentee had disclaimed fixed-speed clocks from its entire oscillator claim scope.

The patentee noted that the disclaimer was not necessary to overcome the prior art. On appeal, however, the court rejected that factor non-determinative.  Rather, the question for disclaimer is whether the statements were “clear and unmistakable.”

[T]he scope of surrender is not limited to what is absolutely necessary to avoid a prior art reference; patentees may surrender more than necessary. . . [W]e hold patentees to the actual arguments made, not the arguments that could have been made.

Scope of Disclaimer: The district court also found that the patentee had disclaimed any use of a control-signal in its “entire oscillator.” On appeal, the Federal Circuit modified the disclaimer to an oscillator “that does not require a command input to change the clock frequency” since the patentee had disclaimed only a “particular use of a command signal” when it characterized the prior art as different sinc it included “a command input . . . to change the clock speed.”

The principle associated with this second point goes to the scope of disclaimer which follows the general principle that a patentee’s disclaimer only extends to the scope of what is actually disclaimed.

On remand, the district court will need to decide whether this change impacts the prior non-infringement decision.

 

In Defense of the Federal Circuit: TC Heartland and Patent Venue

Guest Post by Professors Megan M. La Belle & Paul R. Gugliuzza

Patent litigation is, as we all know, highly concentrated in a small number of districts.  Most notably—some might say, notoriously—the rural Eastern District of Texas hears about forty percent of all patent cases nationwide.  Many lawyers and scholars consider this case concentration to be a critical flaw in the patent system.

Against this background, TC Heartland doesn’t seem like a case the Supreme Court would hear simply to affirm.  As Dennis reported last week, nearly twenty amicus briefs have been filed urging reversal, including one signed by sixty-one law professors and economists.  Predictions of a unanimous ruling against the Federal Circuit are not hard to find.  Indeed, TC Heartland looks like other recent cases in which the Supreme Court has reversed the Federal Circuit without breaking a sweat:  It involves a procedural-type rule so favorable to patent owners that, one could easily assume, it must conflict with the rules in other areas of federal litigation.

The Federal Circuit, in the caselaw on review in TC Heartland, has interpreted the patent venue statute to allow patentees to sue corporations for patent infringement in any district where personal jurisdiction exists.  For companies that sell products nationwide, venue is proper almost anywhere, and that enables litigation to cluster in places like East Texas.  Surely, the conventional wisdom seems to be, the Supreme Court will not permit the Federal Circuit to make the venue statute a dead letter in most patent cases.

In our forthcoming article, we defend the Federal Circuit’s venue doctrine, and we challenge the notion that Federal Circuit venue law is outside the mainstream.  As we explain in detail, the expansive venue options available in patent cases are consistent with historical trends in venue law more generally.  For over a century, Congress has steadily expanded plaintiffs’ venue choices, particularly in cases against corporations.  In fact, the Wright and Miller treatise has gone so far as to say that Congress has “nearly eliminate[d] venue as a separate restriction in cases against corporations.”  Venue in patent cases, simply put, is just like venue in other federal cases.

In the article, we also explain why the Federal Circuit’s interpretation of the venue statute is doctrinally sound.  Though the relevant statutes are somewhat complicated and have been amended several times, our defense of the Federal Circuit’s venue law is simple.  It is based on the plain language of two sections of the Judicial Code:  28 U.S.C. §§ 1391(c) and 1400(b).  Section 1391(c)(2), a subsection of the general venue statute, says that, “[f]or all venue purposes,” corporate defendants “reside” in any district in which they are subject to personal jurisdiction.  Section 1400(b), a venue statute specifically for patent infringement cases, says that infringement suits may be brought, among other places, “where the defendant resides.”  Reading the two statutes together, a corporation can be sued for patent infringement in any district in which it is subject to personal jurisdiction—just like in all other types of federal cases.  That is precisely what the Federal Circuit held in its seminal 1990 decision, VE Holding Corp. v. Johnson Gas Appliance Co.

Of course, there’s more law on this issue than the statutes alone.  The petitioner in TC Heartland argues that the question presented is “precisely the same” as in Fourco Glass Co. v. Transmirra Products Corp., a 1957 decision in which the Supreme Court held that the general venue statute—as it read at the time—did not supplement the patent venue statute.  The Court in Fourco relied heavily on its 1942 decision, Stonite Products Co. v. Melvin Lloyd Co., in which the Court interpreted an even older version of the venue statute and held that, in patent infringement cases, a defendant “resided” only in the state in which it was incorporated.

The petitioner in TC Heartland, building on the theme of “patent exceptionalism” that has resonated with the Supreme Court in recent years, claims that the Federal Circuit has ignored this authoritative Supreme Court precedent.  As we explain in the article, however, even if the Supreme Court decided Fourco correctly (which is not beyond doubt), the general venue statute today is far different than it was at the time of Fourco.  Recent amendments to the statute make plain that the definition of corporate residence in the general venue statute does in fact apply to the patent venue statute.

To be sure, as a matter of policy, granting plaintiffs unbridled discretion over choice of forum in patent litigation may be problematic.  It has incentivized judges, particularly in East Texas, to adopt rules and practices favorable to patent holders in an effort to attract cases.  It has encouraged litigants to engage in unseemly tactics to influence prospective jurors. Ultimately, discretion in forum choice can threaten innovation by facilitating nuisance litigation.  But, contrary to the prevailing wisdom, these problems are emphatically not the result of a misinterpretation of the venue statute by the Federal Circuit, nor does Federal Circuit venue doctrine reflect any sort of patent exceptionalism.

There are better ways to reform the law of forum selection in patent cases.  Congress could amend the venue statute.  Or it could reduce the incentive for litigants to forum shop—and the ability of district judges to “forum sell”—by mandating increased procedural uniformity in patent cases.  Or the Supreme Court could alter personal jurisdiction doctrine, which, for corporate defendants, is tightly linked to venue.  Later this Term, the Court will decide a personal jurisdiction case that could have major consequences for patent litigation.

For a more detailed explanation of these points, read our draft article, which is forthcoming in a terrific symposium issue of the American University Law Review.

Megan La Belle is Associate Professor of Law at Catholic University of America.
Paul Gugliuzza is Associate Professor of Law at Boston University School of Law. 

Guest Post: Administrative Law Matters Even More following Cuozzo Speed Technologies v. Lee

By David Boundy

David Boundy of Cambridge Technology Law LLC, a patent law firm in Cambridge, Massachusetts, practices at the intersection of patent and administrative law, and consults with other firms on PTAB trials and appeals. In 2007–09, David led the teams that successfully urged the Office of Management and Budget to quash the USPTO’s continuations, claims, information disclosure statements, and appeal regulations under the Paperwork Reduction Act.

This paper is a short version of an article in the current issue of ABA Landslide, vol. 9, no. 3, electronic edition.  It’s a follow up to my earlier paper on the Cuozzo case, which ran in Patently-O in February 2015.

Cuozzo Speed Technologies v. Lee[1] illustrates an important lesson for the patent bar: federal courts are far more familiar with administrative law than with patent law. Almost every federal court hears several times as many administrative law cases as patent cases. Even the Federal Circuit sees at least as many administrative law issues (involving various federal employees and contracts) as patent law issues. We patent lawyers need better administrative law issue spotting skills, and when a case presents them, we must argue on administrative law grounds with administrative law expertise. Basic principles of good advocacy urge us to argue our cases on the courts’ choice of turf.

Cuozzo is a prime illustration.  In Cuozzo, the Supreme Court narrowly decided that the PTO’s decision to institute an inter partes review (IPR) against Cuozzo’s patent was unreviewable.  Notably, the Court’s reasoning clarifies that many decisions to institute are judicially reviewable, so long as the issues are cloaked in administrative law terms rather than patent law terms. Cuozzo’s loss stems from Cuozzo’s briefing that failed to mention a dead-on administrative law statute, and that was all but silent on the Supreme Court’s administrative law precedent. Cuozzo creates many future opportunities for informed administrative law advocacy.

The AIA, Its Preclusion Statutes, and Cuozzo’s Path to the Supreme Court

The 2011 America Invents Act (AIA) created new patent reviews within the United States Patent and Trademark Office (USPTO): inter partes review (IPR), post-grant review (PGR), and covered business method review (CBM). Congress included preclusion statutes that limit judicial review of USPTO decisions to institute such reviews.

The preclusion statutes for IPR and PGR decisions to institute, 35 U.S.C. § 314(d) and § 324(e) respectively, are essentially similar: “The determination by the Director whether to institute [a review] under this section shall be final and nonappealable.” Compared to other preclusion statutes (discussed in the full Landslide paper), this is decidedly on the weak end of the spectrum of preclusion statutes.

In February 2015, the Federal Circuit gave its first deep consideration to these statutes in In re Cuozzo Speed Technologies LLC.[2] The IPR petition against Cuozzo’s patent had applied reference A to claim 10, and references A, B, and C to claim 17 (which depended from claim 10). However, the Patent Trial and Appeal Board (PTAB) instituted on references A, B, and C against claim 10. The PTAB cited no statute or regulation, only its own naked claim of “discretion” to mix and match among the grounds in the petition.

The IPR ended in cancellation of claim 10, on references A, B, and C.

Cuozzo appealed the final decision to the Federal Circuit, and challenged the decision to institute. The Federal Circuit held that § 314(d) precluded all review of all issues embedded in a decision to institute: “On its face, the provision is not directed to precluding review only before a final decision. It is written to exclude all review of the decision whether to institute review.”[3]

In June 2016, the Supreme Court issued its further decision.  Where all decisions leave open issues, Cuozzo introduces several internal contradictions.  Let’s look at the background administrative law case law, and how Cuozzo fits—or misfits.

APA § 706: Government-Wide Grounds of Judicial Review

The Administrative Procedure Act (APA), in 5 U.S.C. § 706(2), confines judicial review of agency action to a specific list of errors—a court may set aside agency actions that are:

(A) arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with law;  …
(C) in excess of statutory jurisdiction, authority, or limitations, or short of statutory right;
(D) without observance of procedure required by law; …

Section 706(2) is famously deferential to agencies, but it doesn’t insulate agencies totally. Courts set aside agency decisions that fail standards of “reasoned decisionmaking” by failing to explain an important point, giving an irrelevant explanation, omitting consideration of important factors or basing a decision on impermissible factors, deciding without evidence, deciding on legal error, acting beyond jurisdictional authority, and the like.

APA § 704: Preliminary Decisions Are Reviewable with Final Agency Action

Procedural lapses usually find review under 5 U.S.C. § 704: “A preliminary, procedural, or intermediate agency action or ruling not directly reviewable is subject to review on the review of the final agency action.” Thus, if an agency’s final decision is infected by error earlier in the process, the final decision can be attacked on the basis of that underlying error.

Supreme Court’s Presumption of Judicial Review

Since the days of Chief Justice John Marshall, the Supreme Court has relied on a strong presumption that judicial review is available for executive branch action.[4] Agency decisions are presumed to be reviewable, and preclusion statutes are construed narrowly. Even within the scope of preclusion, an agency decision that reflects “brazen disregard” of procedure, or “abuse,” or that has sufficiently grave consequences, often can be reviewed.  Likewise, the Court has always held agencies to scrupulous observance of their own procedures. The presumption of review has always been extraordinarily high for procedure, and the “holes” in preclusion statutes for procedure and “abuse” have always been quite large. Cuozzo is an extraordinary outlier. Among the principles established in Supreme Court precedent:

  • Courts accept judicial review of underlying issues in agency decisions, even if the final decisions are unreviewable, especially where procedural fairness is at stake.[5]
  • Preclusion statutes are read narrowly—they preclude only what they say they preclude, and no more. Even where a statute precludes review of an end result decision, underlying issues are not precluded unless the preclusion statute speaks expressly to those underlying issues.  “[R]eview is available to determine whether there has been a substantial departure from important procedural rights, a misconstruction of the governing legislation, or some like error going to the heart of the administrative determination.”[6]
  • Courts read statutes closely to split issues finely, and will review issues (especially underlying issues) that differ by a hair’s breadth from precluded issues. When a statute precludes benefit amounts for individual claimants, “challenges to the validity of the Secretary’s instructions and regulations[] are cognizable in courts of law.”[7]
  • When an agency statute, regulation, or guidance promises the public that an agency or agency employee “must” or “will,” the agency must follow those procedures “scrupulously.” Review of agency decisions under § 706(2)(D), “without observance of procedure required by law,” is “strict” and “without deference.”[8]

Review under § 704/§ 706 is a persistent substrate. To preclude review, especially of underlying issues, Congress must speak expressly.

Cuozzo’s Brief, the Majority Opinion, and the End Result: Cuozzo’s Specific Institution Is Nonreviewable

The Cuozzo majority opinion follows the basic contour of 50 years of precedent: preclusion statutes are to be read narrowly. However, on the facts, Cuozzo lost—the Court characterized Cuozzo’s complaint to be a “mine-run claim,” “an ordinary dispute about the application of certain relevant patent statutes,” and “little more than a challenge to the Patent Office’s conclusion, under § 314(a), that the ‘information presented in the petition’ warranted review.”[9] That is, the Supreme Court understood the case to be a good faith difference of opinion in application of validly promulgated law, not a case of an agency tribunal exercising naked “discretion” against a party, making up new rules on the fly with no grounding in any text, and asserting those new rules in a context with no opportunity for rejoinder. Because the Court was not informed of the procedural basis for the case, the Cuozzo opinion stands in striking contrast with the Court’s precedent that requires agencies’ “scrupulous” observance of procedure, and strict “no deference” judicial review for procedural issues.

The Supreme Court majority opinion embeds a number of internal contradictions that leave a great deal of unclear ground. The majority’s holding, if applied to the facts—at least the procedural facts as we patent lawyers understand them—leads to the opposite result.

Most of these contradictions in the majority opinion, and perhaps the final result itself, are invited error. Cuozzo’s brief treats the case as a patent law case, arguing page after page of Title 35 U.S.C. and Federal Circuit patent law cases.[10] Cuozzo’s opening brief cites Supreme Court “preclusion of review” cases only as a cursory afterthought—a single string cite, with no discussion of analogies to precedential cases. The brief compounds the error by citing a 1946 case that had been overruled by the Supreme Court in 2013.  The table of authorities in Cuozzo’s opening brief has only a single cite to Title 5 U.S.C., and only one more in the reply brief.

But reviewability is an administrative law issue, and that’s where the Court decided it.

Even though Cuozzo’s briefs are all but irrelevant to the administrative law bases on which the Court decided the case, the reasoning comes so close to going Cuozzo’s way. Cuozzo demonstrates the importance of identifying the turf where a court is likely to decide an issue, and arguing it there.  And that may well be administrative law, rather than patent law.

Cuozzo’s “Long Paragraph”

The heart of the majority opinion is a long paragraph toward the end of section II, beginning “Nonetheless.” The majority explains that most issues arising under patent law are precluded, but that issues arising under other bodies of law are not. Review remains available for constitutional questions, and most importantly, for issues slotted into one of the pigeonholes of APA § 706.  The latter half of the “long paragraph” reads as follows:

[W]e do not categorically preclude review of a final decision where a petition fails to give “sufficient notice” such that there is a due process problem with the entire proceeding, nor does our interpretation enable the agency to act outside its statutory limits by, for example, canceling a patent claim for “indefiniteness under § 112” in inter partes review. Such “shenanigans” may be properly reviewable in the context of § 319 and under the Administrative Procedure Act, which enables reviewing courts to “set aside agency action” that is “contrary to constitutional right,” “in excess of statutory jurisdiction,” or “arbitrary [and] capricious.”[11]

The latter half of the long paragraph, especially the last sentence, opens a wide barn door. The Cuozzo majority’s long paragraph indicates that the full reach of § 706 applies to underlying issues in decisions to institute.  Cuozzo tells us that issues that are losers when presented in patent law vocabulary become winners when wrapped in administrative law vocabulary.

Cuozzo Could Have Argued an Administrative Law Jurisdictional Issue

Cuozzo’s brief doesn’t squarely present the issue of the PTAB’s transgression of its own jurisdictional boundaries. Section 312(a) reads, “A petition . . . may be considered only if . . . the petition identifies, in writing and with particularity, each claim challenged, the grounds on which the challenge to each claim is based . . . .” Section 314(a) reads, “The Director may not authorize [institution of an IPR] unless the Director determines that the information presented in the petition . . . shows that there is a reasonable likelihood that the petitioner would prevail . . . .” These are plainly jurisdictional statutes, confining jurisdiction to the grounds in the petition. The APA, in § 706(2)(C), provides that a court shall set aside agency action “in excess of statutory jurisdiction.” Yet, Cuozzo’s brief argues only breaches of the AIA, not the administrative law jurisdictional issues that—the majority tells us—would be reviewable under administrative law principles.

The Supreme Court has been quite strict in enforcing agencies’ jurisdictional boundaries, no matter (in the Cuozzo majority’s words) how compelling “one important congressional objective” might be.[12]

Cuozzo’s brief fleetingly nibbles at the edges of the issue, and even cites one of the important cases in this line (for a different proposition), but never squarely frames the challenge as “in excess of [the agency’s] jurisdiction”—neither brief mentions § 706 at all.  And thus Cuozzo lost the issue.

The latter half of Cuozzo’s “long paragraph” places jurisdictional issues within the scope of judicial review, so long as they are framed in an § 706(2)(C) administrative law context, not a patent law context.  Subject matter jurisdiction is central to a court’s duty to prevent agencies from “act[ing] outside . . . statutory limits,” or in the language of § 706, “in excess of statutory jurisdiction.”

Had the issue been presented squarely as a challenge to PTAB action beyond its jurisdiction, with the patent law issues argued as underlying support for APA § 706(2)(C) “in excess of jurisdiction” grounds, Cuozzo likely would have obtained a favorable result, and the Court majority would not have been left grasping at inconsistent straws to reach its decision.

Several more omissions from Cuozzo’s brief, and internal contradictions in the majority opinion, are discussed in the full Landslide paper.  The full paper shows that Cuozzo lost a very winnable case because the opening brief argued patent law principles to the near exclusion of administrative law principles. The patent bar is left with a resultant set of internal contradictions in the Cuozzo decison, with all the problems and opportunities they create.  And the Federal Circuit is left with a difficult task of reconciling Cuozzo’s reasoning against its end result.

Conclusion

The full paper gives a number of other examples of questions that come out differently depending on whether they’re argued as patent law issues or administrative law issues. There are many differences between the powers of an Article III court and of an agency tribunal, differences between appellate review of an Article III court vs. judicial review of an agency, differences in the arguments that an appellant and appellee can raise, and differences in limits on raising new issues on appeal. Unfortunately, Cuozzo’s brief did not exploit those differences or cite the applicable administrative law.

The key take-away is that almost every PTAB proceeding and appeal presents a “target rich environment” of administrative law issues. Teams that include administrative law expertise will successfully exploit many opportunities that are invisible to teams without that expertise.

Because of internal tensions in the Cuozzo decision, many issues remain to be decided by the Federal Circuit, and will be decided differently depending on how well parties match their argument turf to courts’ choice of decision turf.

Endnotes

[1]. Cuozzo Speed Techs. v. Lee (Cuozzo III), 136 S. Ct. 2131 (2016).

[2]In re Cuozzo Speed Techs. LLC (Cuozzo I), 778 F.3d 1271 (Fed. Cir. 2015), reissued without change to the reviewability discussionCuozzo II, 793 F.3d 1268 (Fed. Cir. 2015).

[3]Cuozzo I, 778 F.3d at 1276.

[4]. 5 U.S.C. § 702 (“A person suffering legal wrong because of agency action, or adversely affected or aggrieved by agency action within the meaning of a relevant statute, is entitled to judicial review thereof.”); Citizens to Preserve Overton Park, Inc. v. Volpe, 401 U.S. 402 (1971).

[5]Service v. Dulles, 354 U.S. 363 (1957); Vitarelli v. Seaton, 359 U.S. 535 (1959).

[6]Lindahl v. Office of Personnel Management,470 U.S. 768, 791 (1985) (internal quotation marks omitted).

[7]Bowen v. Michigan Academy of Family Physicians, 476 U.S. 667, 680 (1986).

[8]Reuters Ltd. v. FCC, 781 F.2d 946, 950–51 (D.C. Cir. 1986); see also Berkovitz v. United States, 486 U.S. 531, 544 (1988) (“The agency has no discretion to deviate from [its procedural regulations].”).

[9]Cuozzo III, 136 S. Ct. 2131, 2136, 2139, 2142 (2016).

[10]See Brief for the Petitioner, Cuozzo III (No. 15-446), 2016 WL 737452 at xiv, 52-53, 54 (Feb. 22, 20142016); Reply Brief for the Petitioner at iii, Cuozzo III, 2016 WL 1554733 (Apr. 15, 2016).

[11]Cuozzo III at 2141–42 (majority opinion).

[12]FDA v. Brown & Williamson Tobacco Corp., 529 U.S. 120, 125 (2000)

Trading Technologies: User Interface for Stock Trading

Before writing more about Trading Technologies v. CQG, I will first note that TT is my former client and I personally filed the original complaint in this very case 12 years ago (2005).  Although TT is no longer my client, I am bound by and respect the rules of professional ethics and the duties owed to former clients.  

The new non-precedential opinion from the Federal Circuit affirms the district court ruling that TT’s asserted claims are patent eligible.

The patent claims here cover a computerized method and system used for trading stocks and similar products.  When buying and selling stocks, speed and accuracy are both critically important and in this invention, TT created a Graphical-User-Interface design (and operational software) that helps traders buy and sell stock more quickly and more accurately. See U.S. Patents No. 6,772,132 and No. 6,766,304.

The court writes:

It is not disputed that the TTI System improves the accuracy of trader transactions, utilizing a software implemented programmatic [method]. For Section 101 purposes, precedent does not consider the substantive criteria of patentability. For Section 101 purposes, the claimed subject matter is “directed to a specific improvement to the way computers operate,” Enfish, for the claimed graphical user interface method imparts a specific functionality to a trading system “directed to a specific implementation of a solution to a problem in the software arts.” Id.

The opinion is authored by Judge Newman and joined by Judges O’Malley and Wallach.  The court’s opinion is a short and interesting read:

Precedent has recognized that specific technologic modifications to solve a problem or improve the functioning of a known system generally produce patent-eligible subject matter. … [I]neligible claims generally lack steps or limitations specific to solution of a problem, or improvement in the functioning of technology.

For some computer-implemented methods, software may be essential to conduct the contemplated improvements. Enfish… Abstraction is avoided or overcome when a proposed new application or computer-implemented function is not simply the generalized use of a computer as a tool to conduct a known or obvious process, but instead is an improvement to the capability of the system as a whole.

We reiterate the Court’s recognition that “at some level, all inventions . . . embody, use, reflect, rest upon, or apply laws of nature, natural phenomena, or abstract ideas.” Alice, quoting Mayo. This threshold level of eligibility is often usefully explored by way of the substantive statutory criteria of patentability, for an invention that is new, useful and unobvious is more readily distinguished from the generalized knowledge that characterizes ineligible subject matter. This analysis is facilitated by the Court’s guidance whereby the claims are viewed in accordance with “the general rule that patent claims ‘must be considered as a whole’.” Alice, quoting Diamond v. Diehr.

As demonstrated in recent jurisprudence directed to eligibility, and as illustrated in the cases cited ante, the claim elements are considered in combination for evaluation under Alice Step 1, and then individually when Alice Step 2 is reached. Applying an overview of this evolving jurisprudence, the public interest in innovative advance is best served when close questions of eligibility are considered along with the understanding flowing from review of the patentability criteria of novelty, unobviousness, and enablement, for when these classical criteria are evaluated, the issue of subject matter eligibility is placed in the context of the patent-based incentive to technologic progress.

 

The patents are also currently being challenged on 101 grounds in CBM proceedings before the USPTO.  Although I feel that it should have a direct impact, it is unclear to me whether this decision will impact the PTO proceedings addressing the identical question.  (For instance, the court here holds that the patent covers a technological invention – and CBM proceedings can only proceed for non-technological inventions.) Patentees may also consider petitioning the court to make this decision precedential.

Wi-Fi One v. Broadcom: Mine-Runs and Shenanigans in Inter Partes Review

by Dennis Crouch

Wi-Fi One v. Broadcom (Fed. Cir. 2017)

First en banc order of the year: the Federal Circuit will review the following question:

Should this court overrule Achates Reference Publishing, Inc. v. Apple Inc., 803 F.3d 652 (Fed. Cir. 2015) and hold that judicial review is available for a patent owner to challenge the PTO’s determination that the petitioner satisfied the timeliness requirement of 35 U.S.C. § 315(b) governing the filing of petitions for inter partes review?

en banc order. Briefs of amicus curiae may be filed without consent.

One Year Filing Deadline: Section 315(b) creates a statute of limitations for inter partes review proceedings – indicating that the petition for IPR must be filed within one-year of “the date on which the petitioner, real party in interest, or privy of the petitioner is served with a complaint alleging infringement of the patent.”  Here, Wi-Fi argues that Broadcom was in privity with entities involved in parallel district court litigation involving challenged patents — creating a time bar under 315(b).

The PTAB rejected Wi-Fi’s argument and call for discovery on the issue — holding that the “privy” requirement could only be met if Broadcom had the right to control the District Court litigation.

No Appeal: On appeal, the Federal Circuit affirmed – holding Section 314(d) prohibits appellate review of the institution issue.  In particular Section 314(d) states that

The determination by the Director whether to institute an inter partes review under this section shall be final and nonappealable.

In Achates, the court ruled that the one-year-deadline determination is an institution decision – “even if such assessment is reconsidered during the merits phase of proceedins and restated as part of the Board’s final written decision.”

In the background stands the 2016 Supreme Court decision in Cuozzo.  In that case, the Supreme Court gave effect to the no-appeal provision of 314(d).  However, the Supreme Court noted that unusual questions – such as constitutional questions – might still be appealable.  The foundation for the en banc review decision will be its interpretation of the following Cuozzo excerpts:

We conclude that [314(d)], though it may not bar consideration of a constitutional question, for example, does bar judicial review of the kind of mine-run claim at issue here, involving the Patent Office’s decision to institute inter partes review. . . .

Nevertheless, in light of §314(d)’s own text and the presumption favoring review, we emphasize that our interpretation applies where the grounds for attacking the decision to institute inter partes review consist of questions that are closely tied to the application and interpretation of statutes related to the Patent Office’s decision to initiate inter partes review. See §314(d) (barring appeals of “determinations . . . to initiate an inter partes review under this section” (emphasis added)). This means that we need not, and do not, decide the precise effect of §314(d) on appeals that implicate constitutional questions, that depend on other less closely related statutes, or that present other questions of interpretation that reach, in terms of scope and impact, well beyond “this section.” . . .  Thus, contrary to the dissent’s suggestion, we do not categorically preclude review of a final decision where a petition fails to give “sufficient notice” such that there is a due process problem with the entire proceeding, nor does our interpretation enable the agency to act outside its statutory limits by, for example, canceling a patent claim for “indefiniteness under §112” in inter partes review. Such “shenanigans” may be properly reviewable in the context of §319 and under the Administrative Procedure Act, which enables reviewing courts to “set aside agency action” that is “contrary to constitutional right,” “in excess of statutory jurisdiction,” or “arbitrary [and] capricious.”

The question then for court is whether we have a shenanigan here.

 

 

Goodbye E.D.Texas as a Major Patent Venue

by Dennis Crouch

In a case with the potential to truly shake-up the current state of patent litigation, the Supreme Court has granted certiorari in the patent venue case TC Heartland v. Kraft Food (SCT Docket No. 16-341).  An 8-0 reversal of the Federal Circuit is quite likely, although my headline is likely premature.

The case centers on the patent litigation venue statute which states rather simply that patent infringement actions “may be brought” either (1) in “the judicial district where the defendant resides”; or (2) “where the defendant has committed acts of infringement and has a regular and established place of business.” 28 U.S.C. § 1400(b).  Under any normal interpretation of the provision, very few cases would be amenable to proper venue in the Eastern District of Texas because almost none of the accused infringers “reside” in that district or even have a place of business in that district.  However, the “normal” interpreation was seemingly thrown under the bus by a congressional provision that expands the definition of a corporation’s residence to all districts where the company has minimum contacts.  See 28 U.S.C. § 1391.  For its part, the Federal Circuit found that Section 1391 applies to expand the scope of 1400(b) to all for, inter alia, the filing of infringement lawsuits in the Eastern District of Texas.

It turns out that the Supreme Court has already decided almost this exact case in Fourco Glass Co. v. Transmirra Products Corp., 353 U.S. 222 (1957). In Fourco, the Court held that “§ 1400(b) is not to be supplemented by § 1391(c), and that as applied to corporate entities, the phrase “where the defendant resides” in § 1400(b) “mean[s] the state of incorporation only.” (quoting from the certiorari petition). Although the provisions have been amended since 1957, non of the amendments appear to warrant such a dramatic change in the Supreme Court’s analysis of the statutes.

In its 1990 VE Holdings decision, the Federal Circuit rejected Fourco based upon some reasoning, but without any good reasons.  There are two reasons to stick with the Federal Circuit’s 26 year old rule: (1) The rule is 26 years old and well settled with almost every patents now in force applied-for after the rule change.  At this point, it is Congress’s turn (not the courts) to amend the statute if its wants a policy change. (2) The actual reasoning of Fourco is quite dodgy – not the most stellar statutory interpretation.  If the Supreme Court actually takes a fresh look at the statute it may well overturn Fourco of its own accord.   Still, I expect that these arguments will not carry the day and instead that the Supreme Court will reverse the Federal Circuit.  The result would then be a major redistribution of patent infringement cases.

More Reading:

Patent Venue at the Supreme Court: Correcting a 26 Year Old Legal Error

Guest Post: What Would Happen to Patent Cases if They Couldn’t all be Filed in Texas?

Guest Post: Recalibrating Patent Venue

TC Heartland Law Professor Amicus Brief

Guest Post: The Problematic Origins of Nationwide Patent Venue.

 

 

 

Microsoft v. Enfish: Turns Out the Claims Are Obvious

This is a discussion of the new Federal Circuit Decision Microsoft v. Enfish appealing a PTAB final decision.

In the prior parallel decision – Enfish v. Microsoft, 822 F.3d 1327 (Fed. Cir. 2016), the Federal Circuit reversed a district court ruling that Enfish’s asserted software claims were ineligible under § 101 and also vacated the lower court’s holding that some of the claims were invalid as anticipated. U.S. Patent Nos. 6,151,604 and 6,163,775 (inventions relating to a “self-referential” database).

Enfish sued Microsoft for infringement in 2012. In addition to its litigation defenses, Microsoft marshaled a collateral attack on the patents with five petitions with the US Patent Office for inter partes review of the ’604 and ’775 patents.

After instituting review, the Patent Trial and Appeal Board found some of the patent claims invalid as anticipated/obvious.  On appeal, PTAB factual findings are generally given deference but legal conclusions are reviewed without deference.  After reviewing the claim construction and rejections, the Federal Circuit affirmed in a non-precedential decision.

Collateral Attacks: These collateral attacks work well to cancel patent claims with obviousness arguments that would have been unlikely to be accepted by a trial court or jury.  This is a pointed example here since the previously rejected district court’s judgment was based upon a more simplistic Section 101 analysis that is easier for the Federal Circuit to overturn.

Not Amenable to Construction:  The most interesting aspect of the decision is hidden in a single sentence statement:  “As to claims 1–26 and 30 of both patents—which are not at issue before us—the Board terminated proceedings after concluding that those claims were not amenable to construction.”

In its final judgment, the Board explained that those claims include a means-plus-function element (“means for configuring said memory according to a logical table“) but that no embodiments of the element were provided in the specification.  And, although a person of skill in the art may know how to construct the element, our 112(f) jurisprudence requires embodiments in the specification and does not allow a patentee to “rely on the knowledge of one skilled in the art to address the deficiencies” See Function Media, LLC v. Google Inc., 708 F.3d 1310 (Fed. Cir. 2013).  The statute states permits means-plus-function claims but also provides a guide for narrowly construing those claims.

35 U.S.C. 112(f) ELEMENT IN CLAIM FOR A COMBINATION.—An element in a claim for a combination may be expressed as a means or step for performing a specified function without the recital of structure, material, or acts in support thereof, and such claim shall be construed to cover the corresponding structure, material, or acts described in the specification and equivalents thereof.

In both patent prosecution and district court litigation, failure to properly disclose structural embodiments for a means-plus-function limitation results in the claim being held invalid as indefinite since the limitation’s scope cannot be properly construed.  In the inter partes review situation, however, the Board’s power is limited to cancelling patents on novelty or obviousness grounds.  As such, the Board simply terminated the IPR trial with respect to these non-construable claims. The Board writes:

In the circumstance when the specification of the challenged patent lacks sufficient disclosure of structure under 35 U.S.C. § 112, sixth paragraph, the scope of the claims cannot be determined without speculation and, consequently, the differences between the claimed invention and the prior art cannot be ascertained. For the reasons given, we determine that independent claims 1, 11, and 15 are not amenable to construction and, thus, we terminate this proceeding with respect to claims 1, 11, and 15 under 37 C.F.R. § 42.72.

[PTAB Final Decision].

No Appeal of Termination: Neither party appealed the termination, although the Federal Circuit previously held that its appellate jurisdiction over these cases is limited to appeals of “final written decision[s] with respect to the patentability of any patent claim challenged by the petitioner …”  A termination decision was seen as essentially an extension of the institution decision that is not itself appealable.

 

Of course, the original Federal Enfish decision mentioned above also addressed this indefiniteness issue and held that the claims were not indefinite because sufficient structure was disclosed — holding that the scant description was adequate because “the sufficiency of the structure is viewed through the lens of a person of skill in the art and without need to ‘disclose structures well known in the art.’  I guess that this means that those claims are OK.

Remarks by Director Michelle K. Lee at the 2016 AIPLA Luncheon

USPTO Director Michelle Lee offered a set of Remarks at the October 28, 2016 AIPLA Luncheon.  As a presidential appointee, Director Lee is likely nearing the end of her term as USPTO Director.  Although the likely election of fellow Democrat Hillary Clinton suggests a smooth transition that could extend her term beyond January 2017, I expect that she will step-down prior to that point and that Deputy Director Russ Slifer will step-up as Acting Director.

The following are a few snippets from her speech:

Thank you, Denise, for the introduction.  And, good afternoon, everyone.  It’s a real pleasure to be here with you today. I always look forward to the AIPLA annual meeting. In fact, it is the third time I’ve had the honor to speak at this conference. I’m reminded of the first time I spoke at AIPLA, the mid-winter conference in Phoenix, AZ in January 2014. It was literally just a few weeks after I had moved from California to Washington and became acting head of the USPTO. At that conference you all welcomed me to my new role and we began our work together to strengthen and protect the intellectual property system that we know is so critical to our country’s continued economic success.

Almost three years have passed since that meeting, and I find myself honored and humbled every single day to serve in this role and to be a part of an amazing team at the USPTO. I feel it every time I’m at an international conference, seated behind a flag of the United States on the table in front of me, reflecting on how I’m a child of immigrant parents representing the United States of America.  And I feel it today, standing before you, reflecting on just how far the USPTO has come during this Administration.

Today, I’d like to share with you my views of the state of the United States Patent and Trademark Office and how this situates us to meet our future challenges. Back in January 2009, when our President was first sworn into office, the USPTO’s patent application backlog and pendency numbers were at all-time highs. Today, both our backlog and pendencies are now lower than they’ve been in more than a decade, and they continue to go down. That is hardly the only success story. But it’s emblematic of how much the USPTO has charged forward the last eight years, and how strongly it is positioned to face future challenges. This has been a team effort, with incredible work done by my predecessors, Congressional cooperation, the incredibly dedicated and talented staff at the USPTO, and all of you.

Together, we have put the Agency in a spot where we are ready to build on our successes. Today, we are financially more secure thanks to the America Invents Act, a milestone of this Administration, which gave us, among other things, fee setting authority. Additionally, we are more customer-service oriented and more responsive to stakeholder input than ever before. We’ve constantly welcomed—in fact solicited—feedback and input, and are willing to refine and improve where needed. We’ve had more RFC’s, Proposed Rules, and roundtables than ever before–and thank you for your input and patience responding to each. Whether you gave feedback on our EPQI, our 101 guidance, our PTAB implementation and refinements, and/or our transparency of patent ownership proposal, your input has been valuable.

We’ve also brought a broader range of services to support American innovators where and when needed, including: Through four regional offices across the country and over a dozen IP attaches across the globe. And, we’ve worked to provide you with more access to examiner interviews by training and promoting their benefits internally at the USPTO and externally, leading to an increase of 232% more interviewing hours in just eight years.

Finally, and importantly, the USPTO’s relationships with all of its partners is healthier and stronger than ever before–that’s with our users, our employees, our unions, Congress, and within the Administration. I want to take a brief moment on this topic, because I really do believe it is key to the Agency’s success – past and future. Thinking back to even just 10 years ago [under Jon Dudas], the relationship with our users was nowhere near as collaborative, transparent, or productive as it is today. The Agency often didn’t seek much public input on examiner guidance or implementation rules, and interviews weren’t encouraged as they are today. Together, we have changed that dynamic.

Second, we’ve strengthened our working relationship with our employees. All told, we have enjoyed some of the highest rankings in the Partnership for Public Service’s list of Best Places to Work in the Federal Government. And we all know, an engaged workforce produces better work product and services for all of you. Over the last eight years, our attrition rate has reduced significantly to the point where we compete favorably with some top companies in the private sector. Also, we’ve developed a productive relationship with our unions, allowing us to make better and faster improvements in important areas such as our production count system, patent quality, and our telework program.

We have also maintained a healthy working relationship with Congress on both policy proposals and operational issues. From the passage of AIA, to the Defend Trade Secrets Act, to technical assistance on various legislative proposals, we have engaged with our colleagues on the Hill in impactful ways and the USPTO’s voice is a respected one.

Finally, the USPTO is effectively fulfilling its role as principal advisor to the President and Administration on IP policy. I’ve been pleased with the confidence the President and the Secretary of Commerce have shown my team and I, allowing us to pursue policies and programs in the best interest of our innovators. All of this: the greater financial security, the increased customer service orientation and responsiveness, and  the better relationships with all of our stakeholders, has enabled us to make real progress on our priorities, and positions us for even greater success going forward.

There is strong evidence of this in a number of important areas, including patent backlog and pendencies, quality and policy. During this Administration, we have: Reduced the backlog of unexamined patent applications by ~30%, despite an average ~4% year-over-year increase in filings. Reduced our first action pendency by ~38% to 16.2 months, and reduced total pendency by ~25% to 25.3 months. This is due to numerous actions taken by the USPTO leadership team and my predecessors, and the hard work of our examining corps, and we will continue to do more.

Armed with greater finances and a shrinking backlog, we embarked on an unprecedented effort to enhance the quality of patents – a core goal of the Agency. There is a cost to society when the USPTO issues a patent that we should not issue, just as there is a cost to society when we don’t issue a patent that should issue. And just as there is a cost to society when there is a patent in the system that properly issued, but that may no longer be valid due to changes in the case law. Recognizing this, we have enhanced the quality of patents in our system, both before they leave our office through our Enhanced Patent Quality Initiative (led by a new Deputy Commissioner and a newly created department within the Patents organization solely focused on this effort); and after the patents return to the office through our PTAB and other post grant review proceedings (which double check the Office’s work and allow reconsideration in light of evolving case law or newly discovered prior art).

Addressing the second prong first, the new PTAB proceedings have significantly changed the patent landscape. With over 5,000 PTAB petitions now filed, we have one of the busiest dockets in the country. These proceedings are meeting our Congressional mandate of providing a faster, more cost efficient quality check on the patents in the system. With extensive input from all of you, we have worked hard to implement and conduct these proceedings as fairly and efficiently as possible. That’s why I asked my team to engage the public in a series of listening tours that led to a set of “quick fixes” in 2015 and then more substantive revised rules last April. That’s also why we took it upon ourselves to assess the frequency of motions to amend and the reasons for their grants or denial.  We’re applying your input to identify where we can do better. These PTAB proceedings have proven themselves a valuable check on patent quality, particularly in the later part of a patent’s lifecycle.

At this point, it makes sense to bring greater resources to bear if there are questions about a patent’s validity. The economics are different at the beginning of a patent’s lifecycle. The value of a patent is often not fully known at time of filing (perhaps due to the nascency of the technology, industry and/or market), and the time and resources afforded during examination are typically limited. Innovation isn’t served if the USPTO strives to issue very expensive, “bullet-proof” patents after many years of examination. Extensive time and expense would mean that innovators would file too few patent applications, given finite budgets. The purpose of the patent system—to incentivize disclosures to advance the progress of science and the useful arts—would be defeated because too few disclosures would be made. If over time the industry and the market determine that a piece of patented technology is valuable and the public believes it is not valid under current law or newly discovered art, then there is an economic incentive to expend greater resources to test the validity of the patent. And a panel of technically trained judges steeped in patent law is well-suited to perform this double-check quickly and efficiently.  In short, to best incentivize innovation. The USPTO needs to issue IP rights that are as certain, reliable and affordable as they can reasonably be, and offer post-grant proceedings that quickly, accurately and cost-effectively test the validity of certain patents proven to be of economic importance if questions of validity arise.

With all of that said, it is essential that these post-grant proceedings are properly calibrated so that they provide a quality check but do not bar deserving patentees from enforcing their patent rights. It’s why some protections in the AIA are so important, such as restrictions on timing of challenges, thresholds petitioners must meet for institution, and strict estoppel provisions. It’s also why the Agency is committed to revising our rules as many times as needed so these proceedings are as fair and effective as possible within our Congressional mandate. It’s why it is critical, within this framework, the USPTO issue the very best quality patents possible. Patents that are issued correctly in accordance with the law, that are clear providing notice to the public of the patent’s boundaries, and that are issued consistently across the Patent Examination Corps. And, it’s why I launched the Enhanced Patent Quality Initiative in 2015, so patent owners can have greater confidence and certainty of their rights in this new environment. Today, we’ve got about a dozen initiatives underway that, we believe, will meaningfully move the needle on enhancing patent quality. This includes making sure we’re getting the most relevant prior art before our examiners as early as possible by: leveraging technology, making prior art cited in our PTAB proceedings available to the examiner handling a related pending child application, and transitioning our entire patent examination corps from the decades old, antiquated U.S. Patent Classification System to the updated, increasingly global Cooperative Patent Classification System. It also includes drilling down on best practices (such as clarity of the record) during examination coupled with targeted training. Developing new and better ways to measure our progress, like our Master Review Form and new Quality Metrics. And, providing a new after-final procedure that offers applicants the opportunity to make a presentation before a panel and receive a detailed write-up of the panel’s decision that  might resolve an issue without going to appeal, or even result in the application being allowed.

So, this is what we’re doing at a high level. But I’d like to share more specifics about one of our flagship programs—our “Clarity of the Record Initiative”–and some of the great progress we have been making on our Clarity of the Record pilot program. The goal of this program is to develop best practices on how much detail to include in certain key parts of the prosecution record, for example: Interview summaries, or reasons for allowance, or construction of 112(f) limitations. Regarding interview summaries: How many times have you reviewed a file history, noted the patent rejected and then seen the patent allowed after an examiner interview with minimal or no changes to the claims and little or no explanation for the allowance? In this pilot, we worked to provide more detailed summaries including the substance of the examiner’s position, details of any agreement reached, and a description of next steps following the interview. After the pilot concluded, we measured 22 data points focused on clarity, and found an average of 15% improvement in clarity between the pilot examiners and a control group.

On reasons for allowance: How many times have you reviewed a prosecution history, and there is nothing in the record to indicate why the claims were allowed by the examiner? Because it is at the discretion of the individual examiner to set forth reasons for allowance, those reasons have not always been included in every Notice of Allowance. As part of this pilot, participants were trained on setting forth reasons for allowance in every Notice of Allowance. At the conclusion of the pilot, we found a 25% improvement in the clarity of reasons for allowance between the pilot examiners and a control group. Through the pilot, we also found the following practices significantly improved overall clarity addressing each independent claim separately, particularly identifying the applicant’s persuasive arguments (wherever they may be in the record), and identifying the specific allowable subject matter of the claim rather than merely reciting the entire claim as the basis for allowance. This pilot also helped us review the best practices around claim interpretation.

On claim interpretation:  How many times have you seen a prosecution record where there was clearly an issue about how a claim was interpreted, but the record was devoid of any explanation of the claim’s interpretation? In the pilot, the examiners were given training on explicitly setting forth key claim interpretations to minimize ambiguities. For example: Explaining all Section 112(f) presumptions and whether the presumptions were overcome, identifying on the record the structure in the specification that performs the function, and when a prior art reference is used to reject multiple claims, clearly addressing specific limitations in each claim that provide the basis for the rejection.

With our trainings on interview summaries, reasons for allowance and claim interpretations, we saw a statistically significant improvement in clarity when examiners used these best practices. Perhaps the most telling indicator of progress from this pilot is that when these pilot examiners were examining applications not included in the pilot program, they continued to apply the pilot’s best practices. This is a strong indication of the success of our training. Also, the clarity of the record initiative furthers the goal of compact prosecution by encouraging the applicant to rebut the examiner’s on-the-record position promptly and directly if there is disagreement. In short, we are already taking steps to clarify the record and you will see our examiners doing so increasingly over time.

Of course, patent quality also means applying the law accurately and clearly even in areas of the law that are evolving. Including, for example, the 101 jurisprudence on what is patent eligible subject matter. As many of you know, we’ve spent a fair amount of effort on this in recent years. Following major court rulings, we’ve revised our examination guidance, with input from all of you, multiple times and trained our examiners on the new guidance. Based upon input from our stakeholders, we also introduced training focused on clear drafting of 101 rejections and subsequent responses. And, we just announced in a Federal Register Notice two roundtables focused exclusively on the topic of patent eligible subject matter. At the first roundtable, we will discuss potential updates to our examination guidance, and at the second roundtable, we will discuss the impact of the current 101 jurisprudence on innovation, what changes might be considered to further support innovation, and whether such changes are best achieved legislatively, judicially or administratively. We thought it would be helpful to begin the public discussion, to create a record of where there is agreement or disagreement and what, if any, need for improvement. We welcome your participation on this important and complex issue.

As I hope you can see from this quick run-down of our initiatives, we are very excited about EPQI! It is an ambitious effort that is yielding results now and will yield many more in the long run. To learn more about our EPQI progress to date, please join us— mark your calendars—on December 13, at the USPTO, where we will spend a good part of the day sharing details of the results of each of the dozen or so EPQI.  We think you will like what you hear.

Turning now to some of our policy and other accomplishments over the course of this Administration, thanks to the AIA, we can now engage more directly with innovators—through our regional patent offices in Detroit, Denver, Silicon Valley, and Dallas. As you know, I started my tenure in public service as the Director of the Silicon Valley Regional Office. Having had the opportunity to help define the vision of these Offices, and stand up three of the four regional offices, I am very proud of this legacy to our IP system that will endure for generations to come. I’ve always said that, one day when my daughter is old enough, I can point to the Silicon Valley Regional Office in our hometown and say, “Your mom had a hand in opening that office.” And I’d feel very proud about my contribution to our community and society for that. Through these offices, we powerfully expand our ability to educate regional innovators about intellectual property and help small and large businesses and inventors directly access a wider range of services offered by the USPTO.

Additionally, one of the great privileges serving as head of the America’s Innovation Agency is that it is my job to increase opportunities and awareness about STEM, invention and intellectual property and, to me, this means across all geographic regions of this great country of ours and across all demographics. For example, when fewer than 15% of U.S. based inventors listed on a patent are women, it’s clear that we are leaving valuable inventive talent behind. This is something we cannot afford, especially as our companies cannot hire the technical talent they need, and  they are asking Congress to change our immigration laws to provide more flexibility in our visa and immigration system to ensure we can hire the best talent here in the U.S. We have the power to change this. We’ve called this our “All in STEM” campaign—and, true to the complex nature of the problem—it’s a multifaceted approach, including increasing awareness of the issue;

Getting girls interested in science, invention and IP early through efforts like our Girl Scout IP Patch and retaining and supporting women in STEM fields by mentoring, training and simply highlighting the female success stories through social media and inventors baseball trading cards for distribution to our school-aged children, so all our kids can see themselves as inventors! It’s not just a social imperative, it’s an economic imperative as we look compete in an increasingly global and competitive environment. 

And, it is no less an economic imperative to ensure that intellectual property beyond patents is properly calibrated to support creativity and entrepreneurship. We’ve advocated for significant modernizations of copyright law, beginning with our Green and White Papers on Copyright Policy, Creativity, and Innovation in the Digital Economy, where we made in the White Paper legislative recommendations on reforms to statutory damages for copyrights. We completed two historic copyright treaties and sent ratification packages to Congress—One on facilitating access to published works by the visually impaired, and another to expand copyrights for actors in audiovisual works.

On Trademarks, we’ve taken steps to improve the efficiency of our operations by adopting policies to encourage electronic filings of trademark applications which permitted fee reductions; and introducing the first major overhaul of rules at the Trademark Trial and Appeal Board since 2007, and I was pleased to recently join the President in the Oval Office when he signed the Defend Trade Secrets Act, which created a new federal civil cause of action for trade secrets This provided much needed, additional protections to innovators of today, in an environment where confidential business information can be quickly transported or emailed over state—or international—lines. While modern trade secret protection is essential, we are mindful that inventors need to be able to have the choice to instead disclose their invention in exchange for the exclusivity guaranteed by a patent—through reliable patent protection here and abroad.

As many of you know, there’s an entire department at the USPTO devoted to this very mission, complemented by IP attachés stationed in about a dozen countries across the globe. With this team, I have frequently represented the USPTO abroad, helping to ensure that a strong and equitable IP system does not stop at our nation’s borders.  One such trip—to China in 2015—stands out in my mind, both because of the importance of promoting strong IP rights in the second largest economy in the world, and because I experienced, on a personal level, the depth of opportunity offered by our country. As I articulated our positions on these critical IP policy issues with the Vice Premier in Zhongnanhai, Beijing, the central headquarters for the Chinese government, I thought for a moment of my parents back home in the Bay Area. When they bravely left their homeland in China to move to the United States to build a new life, did they ever imagine their daughter would one day be in such a meeting, in such a role? They understood America is the land for those willing to work hard and embrace its values.

I’ve had the honor and privilege of having many great opportunities over the last three years while leading the USPTO, and, I’ve capitalized on those opportunities for the benefit of innovators because, each and every day, I’ve been able to count on an amazing team of public servants at the USPTO working hard to best serve all of you. I firmly believe that the United States Patent and Trademark Office is healthy, well-functioning and poised to successfully handle whatever challenges and opportunities lie ahead.

Our issues are important, complex and nuanced. And while not everyone will always agree with all that the Agency does, we are well prepared to work together and with all of you to accomplish our top priorities and successfully address the challenges ahead. So, thank you for all your help. And thank you for all I know you will continue to do to ensure that our greatest inventions are yet to come.

TC Heartland Law Professor Amicus Brief

In TC Heartland, the accused infringer has asked the Supreme Court to reset the law of venue and give effect to the statutory statement that infringement actions be brought either (1) “in the judicial district where the defendant resides” or (2)” where the defendant has committed acts of infringement and has a regular and established place of business.”  28 U.S.C. § 1400(b).   In its 1957 Fourco decision, the Supreme Court affirmatively answered this question.  However, Fourco has been undermined by subsequent Federal Circuit decisions.  Thus, the question presented again is the same as what was originally asked in Fourco: “Whether 28 U.S.C. § 1400(b) is the sole and exclusive provision governing venue in patent infringement actions and is not to be supplemented by 28 U.S.C. § 1391(c).”

From a policy perspective, the case is seen as a vehicle for defendants who do not like being sued in the Eastern District of Texas and into more venues perceived as more defendant friendly.

A group of 50+ law and economics professors led by Mark Lemley, Colleen Chien, Brian Love, and Arti Rai have filed an important brief in support of the TC Heartland petition that I have copied below.  Their position is (1) the Federal Circuit has erred on interpreting the law; and (2) the permissive venue result has fueled many of the problems of our patent system.

= = = = =

INTEREST OF AMICI[1]

Amici are 53 professors and researchers of law and economics at universities throughout the United States. We have no personal interest in the outcome of this case, but a professional interest in seeing patent law develop in a way that encourages innovation and creativity as efficiently as possible.

SUMMARY OF ARGUMENT

28 U.S.C. § 1400(b) provides that a defendant in a patent case may be sued where the defendant is incorporated or has a regular and established place of business and has infringed the patent. This Court made clear in Fourco Glass Co. v. Transmirra Prods. Corp., 353 U.S. 222, 223 (1957), that those were the only permissible venues for a patent case.  But the Federal Circuit has rejected Fourco and the plain meaning of § 1400(b), instead permitting a patent plaintiff to file suit against a defendant anywhere there is personal jurisdiction over that defendant.  The result has been rampant forum shopping, particularly by patent trolls. 44% of 2015 patent lawsuits were filed in a single district: the Eastern District of Texas, a forum with plaintiff-friendly rules and practices, and where few of the defendants are incorporated or have established places of business.  And an estimated 86% of 2015 patent cases were filed somewhere other than the jurisdictions specified in the statute. Colleen V. Chien & Michael Risch, Recalibrating Patent Venue, Santa Clara Univ. Legal Studies Research Paper No. 10-1 (Sept. 1, 2016), Table 3. This Court should grant certiorari to review the meaning of 28 U.S.C. § 1400(b) because the Federal Circuit’s dubious interpretation of the statute plays an outsized and detrimental role, both legally and economically, in the patent system.

ARGUMENT

1. The Federal Circuit’s Expansive and Incorrect Interpretation of 28 U.S.C. § 1400(b) Allows Patentholders to Sue Anywhere in the Nation

Section 48 of the Judiciary Act of 1897 limited jurisdiction in patent cases to districts that the defendant inhabited or had a place of business and committed infringing acts. Act of March 3, 1897, c. 395, 29 Stat. 695. In 1942, this Court confirmed that “Congress did not intend the Act of 1897 to dovetail with the general provisions relating to the venue of civil suits, but rather that it alone should control venue in patent infringement proceedings.” Stonite Prods. Co. v. Melvin Lloyd Co., 315 U.S. 561, 563 (1942).

In 1948, Congress enacted 28 U.S.C. § 1400(b), specifying that “patent venue is proper in the judicial district where the defendant resides, or where the defendant has committed acts of infringement and has a regular and established place of business.” In 1957, this Court confirmed that patent venue should not be interpreted with reference to the general jurisdiction statute, holding that “28 U.S.C. 1400(b) . . . is the sole and exclusive provision controlling venue in patent infringement actions, and that it is not to be supplemented by the provisions of 28 U.S.C. 1391(c).” Fourco Glass Co. v. Transmirra Prods. Corp., 353 U.S. 222, 223 (1957).

In 1990, the Federal Circuit declined to apply this Court’s longstanding precedent and decided that the general venue statute should define interpretation of the patent venue statute.  It made this decision on the basis of a ministerial change Congress made in 1988 to 28 U.S.C. § 1391. VE Holding Corp. v. Johnson Gas Appliance Co., 917 F.2d 1574, 1583 (Fed. Cir. 1990). That statutory language changed the wording in 28 U.S.C. § 1391, from defining residence “for venue purposes” to defining residence “for purposes of venue under this chapter.” There was no indication that Congress intended this change to impact the patent venue statute.

The Federal Circuit’s conclusion that Congress’s ministerial change overruled this Court’s longstanding precedent is incorrect for at least two reasons.  First, it violates fundamental rules of statutory construction.  It is well-established that Congress “does not alter the fundamental details of a regulatory scheme in vague terms or ancillary provisions—it does not, one might say, hide elephants in mouseholes.” Whitman v. American Trucking Assns., Inc., 531 U.S. 457, 468 (2001) (citing MCI Telecomm. Corp. v. American Tel. & Tel. Co., 512 U.S. 218, 231 (1994); FDA v. Brown & Williamson Tobacco Corp., 529 U.S. 120, 159-60 (2000)).

Second, the Federal Circuit’s interpretation renders the second half of § 1400(b) largely superfluous.  That section provides:

Any civil action for patent infringement may be brought in the judicial district where the defendant resides, or where the defendant has committed acts of infringement and has a regular and established place of business.

The term “resides” in § 1400(b) must mean something different than having “a regular and established place of business.” Otherwise, there would have been no reason to include both provisions in the venue statute, or to link them through the disjunctive term “or.”  In Brunette, this Court, interpreting 28 U.S.C. § 1400(b) as well as 28 U.S.C. § 1391(d), confirmed that where a corporation “resides” is where it is incorporated. Brunette Mach. Works v. Kockum Indus., 406 U.S. 706, n.2 (1972).

Instead of parsing § 1400(b) carefully, the Federal Circuit has chosen to read the § 1391(c)(2) definition of corporate residence for general venue purposes into the specific patent venue provision.  In relevant part, § 1391(c)(2) provides that corporate defendants:

shall be deemed to reside . . . in any judicial district in which such defendant is subject to the court’s personal jurisdiction with respect to the civil action in question . . . .

For patent infringement cases, the relevant aspect of personal jurisdiction is typically specific jurisdiction, which focuses on whether the defendant’s suit-related conduct establishes a “substantial connection” with the judicial forum in question.  Walden v. Fiore, 134 S.Ct. 1115, 1121 (2014).  But a corporation will have established a suit-related “substantial connection” with, and thus be subject to jurisdiction in, any district in which it “has committed acts of infringement and has a regular and established place of business.” So the Federal Circuit’s decision to read the § 1391(c) definition of “resid[ing]” into § 1400(b) renders the second half of the latter section superfluous as to corporations, a category which includes virtually all patent defendants.  A judicial reading that renders half of a statutory provision superfluous is strongly disfavored.  United States v. Jicarilla Apache Nation, 131 S.Ct. 2313, 2330 (2011) (“‘As our cases have noted in the past, we are hesitant to adopt an interpretation of a congressional enactment which renders superfluous another portion of that same law.’” (quoting Mackey v. Lanier Collection Agency & Serv., Inc., 486 U.S. 825, 837 (1988))); Babbitt v. Sweet Home Chapter of Communities for a Great Oregon, 515 U.S. 687, 698 (1995) (noting “[a] reluctance to treat statutory terms as surplusage”).

The Federal Circuit’s expansive, and we believe incorrect, interpretation of 28 U.S.C. § 1400(b) effectively allows patent owners to file suit in any federal district where an allegedly infringing product is sold.  In re TC Heartland, LLC, No. 2016-105, at 10 (Fed. Cir. Apr. 29, 2016) (holding that jurisdiction is proper in a patent suit “where a nonresident defendant purposefully shipped accused products into the forum through an established distribution channel and the cause of action for patent infringement was alleged to arise out of those activities”).  The widespread availability of products over the internet means, in effect, that patentholders can bring their suits in any district in any state in the country.

2. Permissive Venue has Fueled and Enabled Forum Shopping and Selling, Patent Trolls, and Case Concentration

The Federal Circuit’s expansive interpretation of 28 U.S.C. §1400(b) has harmed the patent system in three distinct ways. It has led to forum selling and forum shopping, it has contributed to the growth of opportunistic patent litigation by patent trolls, and it has led to undue case concentration.

Patent lawyers today spend a great deal of time figuring out the best districts in which to file patent cases, and for good reason. The district in which you file your patent case has consequences for how much your case will cost, how long it will last, and whether you will prevail in court. Mark A. Lemley, Where to File Your Patent Case, 38 AIPLA Q.J. 401 (2010); Brian J. Love & James C. Yoon, Predictably Expensive: A Critical Look at Patent Litigation in the Eastern District of Texas, Stan. Tech. L. Rev. ___ (forthcoming, 2016).

The choice of venue enabled by the Federal Circuit’s liberal interpretation of the statute has created an incentive for courts to differentiate themselves in order to compete for litigants and “sell” their forum to prospective plaintiffs. See J. Jonas Anderson, Court Competition for Patent Cases, 163 U. Pa. L. Rev. 631 (2015); Daniel M. Klerman & Greg Reilly, Forum Selling, 89 S. Cal. L. Rev. 241 (2016).

Among district courts, the Eastern District of Texas is the clear forum of choice for patent plaintiffs. It has been the most popular venue for patent cases in eight of the last ten years. Chien & Risch, supra at 3.  Whether intentionally or not, judges in the Eastern District of Texas have adopted rules and practices relating to case assignment, joinder, discovery, transfer, and summary judgment that attract patent plaintiffs to their district. Klerman & Reilly, supra; Matthew Sag, IP Litigation in U.S. District Courts: 1994-2014, 101 Iowa L. Rev. 1065 (2016) (detailing evidence of “forum selling” and five advantages to plaintiffs of filing suit in the Eastern District of Texas).

A study of all patent cases filed from 2014 to June 2016 quantifies some of the advantages. Love & Yoon, supra.  Compared to their colleagues across the nation, judges in the Eastern District of Texas take 150 additional days on average to rule on motions to transfer, id. at 15, and are 10 percentage points less likely to stay the case in favor of an expert adjudication on the validity of the patent by Patent and Trademark Office (PTO) in inter partes review, id. at 26., despite the fact that patents asserted in the Eastern District of Texas are challenged in inter partes review more often than patents asserted in any other district. Saurabh Vishnubhakat, Arti Rai, & Jay Kesan, Strategic Decision Making in Dual PTAB and District Court Proceedings, 31 Berkeley Tech. Law J. 45, 109 (2016).  At the same time, judges in the Eastern District of Texas have adopted discovery rules that begin earlier, end sooner, and require broader disclosure than just about anywhere else in the country. Love and Yoon, supra at 19-22 (comparing discovery and other pretrial deadlines applicable in the Eastern District of Texas and District of Delaware).  In combination, relatively early and broad discovery requirements and relatively late rulings on motions to transfer ensure that defendants sued in the Eastern District of Texas will be forced to incur large discovery costs, regardless of the case’s connection to the venue.

However, not all types of plaintiffs choose to take advantage of the leverage that these rules and procedures make possible.  Patent assertion entities (PAEs), or patent “trolls” use patents primarily to gain licensing fees rather than to commercialize or transfer technology. Colleen V. Chien, From Arms Race to Marketplace: The Complex Patent Ecosystem and Its Implications for the Patent System, 62 Hastings L.J. 297 (2010) Trolls make particular use of the advantages provided by the Federal Circuit’s permissive approach to forum shopping. Since 2014, over 90 percent of patent suits brought in the Eastern District of Texas were filed by trolls established for the purpose of litigating patent suits.  Love & Yoon, supra at 9. By contrast, operating companies, individuals, and universities are more likely to sue in other districts.  Chien & Risch, supra at 3-4, 40.

The troll business model explains this difference in behavior. As the FTC’s recent report describes, “litigation PAEs” sign licenses that are “less than the lower bounds of early stage litigation costs,” a finding “consistent with nuisance litigation, in which defendant companies decide to settle based on the cost of litigation rather than the likelihood of their infringement.” Federal Trade Commission, Patent Assertion Entity Activity: An FTC Study, https://www.ftc.gov/reports/patent-assertion-entity-activity-ftc-study.   Rather than a decision on the merits and damages commensurate with the value of patented technology, litigation PAEs instead seek to leverage the high cost of litigation to coerce nuisance-value settlements keyed not to the merits of the lawsuit, but the cost of litigation.  Mark A. Lemley & A. Douglas Melamed, Missing the Forest for the Trolls, 113 Colum. L. Rev. 2117 (2013). Further, unlike operating companies that sell products, litigation PAEs generally lack customers and regular operations and therefore have the flexibility to incorporate and file suit based solely on litigation considerations, through shell companies or otherwise.

While forum shopping in general impairs the operation of law, disadvantages those who lack the resources to engage in forum shopping, and creates economic waste, Jeanne C. Fromer, Patentography, 85 N.Y.U. L. Rev. 1444, 1464-1465 (2010), the rise of the troll business model exacerbates these problems in patent litigation, creating a particularly urgent need for the Court to hear this case. This Court has previously warned against the problems of abusive patent litigation.  More than a century ago, it worried about the rise of “a class of speculative schemers who make it their business to watch the advancing wave of improvement, and gather its foam in the form of patented monopolies, which enable them to lay a heavy tax upon the industry of the country, without contributing anything to the real advancement of the arts.”  Atlantic Works v. Brady, 107 U.S. 192, 200 (1883).  And in Commil v. Cisco, this Court said:

The Court is well aware that an “industry has developed in which firms use patents not as a basis for producing and selling goods but, instead, primarily for obtaining licensing fees.” eBay Inc. v. MercExchange, L. L. C., 547 U. S. 388, 396 (2006) (KENNEDY, J., concurring). Some companies may use patents as a sword to go after defendants for money, even when their claims are frivolous.

576  U.S. __, 135 S.Ct. 1920 (2015).

Because troll suits now dominate patent litigation nationwide, their filing patterns have led to an overall concentration of 44% of all patent cases in the Eastern District of Texas in 2015. Among cases initiated 2014 through 2016, one U.S. District Judge on the Eastern District of Texas—Judge Rodney Gilstrap of Marshall, Texas—was assigned almost one quarter of all patent case filings nationwide, more than the total number of patent cases assigned to all federal judges in California, New York, and Florida combined.[2]

This level of concentration is a problem for the legal system whatever one thinks of the decisions of the Eastern District of Texas and regardless of how fair and capable the judges there are. Simply from a logistical standpoint, the current caseload in the Eastern District of Texas is problematic.  If even 10 percent of the 1,686 patent cases assigned to Judge Gilstrap in 2015 go to trial, he will need to preside over three to four patent trials per week every week for an entire year to avoid creating a backlog.

Further, when Congress decided to consolidate patent appeals in the newly-created United States Court of Appeals for the Federal Circuit, it deliberately chose to include both appeals from the United States Patent and Trademark Office and the district courts, so the new court would not hear only appeals from patent owners.  And it considered and rejected proposals to create a specialized district court to hear patent cases.  But the Federal Circuit’s interpretation of § 1400(b) has in practice created just such a court.

The current distribution of patent litigation filings is the result of strategic behavior by a specific type of patent enforcer, not an artifact of proximity to the original locus of invention or alleged infringement. Forum-shopping plaintiffs will naturally gravitate towards whatever district seems to have the most favorable rules. The effect of the Federal Circuit’s decision to expand patent venue beyond the scope of the statute and this Court’s decisions has been to create a de-facto specialized patent trial court, one chosen by litigants on one side rather than by Congress.

CONCLUSION

The Federal Circuit’s permissive venue rule has fundamentally shaped the landscape of patent litigation in ways that harm the patent system, by enabling extensive forum shopping and forum selling, supporting opportunistic patent litigation by patent trolls, and creating undue case concentration.  This Court should grant certiorari in order to curb abuse of venue based on its misinterpretation of § 1400(b).

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[1] No person other than the amici and their counsel participated in the writing of this brief or made a financial contribution to the brief. Letters signifying the parties’ consent to the filing of this brief are on file with the Court.

[2] According to Lex Machina, between January 1, 2014 and June 30, 2016 Judge Gilstrap was assigned 3,166 new patent suits, more than the combined total of all district courts in California, Florida, and New York: 2,656. Love & Yoon, supra, at 5 (collecting these statistics).

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Signed, Professor John R. Allison (Texas); Professor Margo Bagley (Emory); Professor James Bessen (BU); Professor Jeremy Bock (Memphis); Professor Daniel H. Brean (Akron); Professor Michael A. Carrier (Rutgers); Professor Michael W. Carroll (American); Professor Bernard Chao (Denver); Professor Tun-Jen Chiang (George Mason); Professor Colleen V. Chien (Santa Clara); Professor Andrew Chin (UNC); Professor Robert Cook-Deegan (ASU); Professor Rochelle Dreyfuss (NYU); Dr. Dieter Ernst (Honolulu); Professor Robin C. Feldman (Hastings); Professor Lee Fleming (Berkeley); Professor Brian Frye (Kentucky); Professor William Gallagher (Golden Gate); Professor Shubha Ghosh (Wisconsin); Professor Eric Goldman (Santa Clara); Professor Bronwyn H. Hall (Berkeley); Professor Yaniv Heled (Georgia State); Professor Christian Helmers (Santa Clara); Professor Joachim Henkel (Technische Universität München); Professor Susan Helper (CWRU); Professor Tim Holbrook (Emory); Professor Herbert Hovenkamp (Iowa); Professor William Hubbard (Baltimore); Dr. Xavier Jaravel (Stanford); Professor Dennis S. Karjala (ASU); Professor Peter Lee (UC Davis); Professor Mark A. Lemley (Stanford); Professor David K. Levine (WashU); Professor David S. Levine (Elon); Professor Doug Lichtman (UCLA); Professor Yvette Joy Liebesman (SLU); Professor Orly Lobel (USD); Professor Brian Love (Santa Clara); Professor Phil Malone (Stanford); Professor Michael J. Meurer (BU); Dr. Shawn Miller (Stanford); Professor Matthew Mitchell (Toronto); Professor Susan Barbieri Montgomery (Northeastern); Professor Sean Pager (Michigan State); Professor Arti K. Rai (Duke); Professor Jacob H. Rooksby (Duquesne); Professor Jorge R. Roig (Charleston); Professor Matthew Sag (Loyola Chicago); Professor Pamela Samuelson (Berkeley); Ana Santos Rutschman (DePaul); Professor Lea Bishop Shaver (Indiana); Professor John L. Turner (Georgia); Professor Jennifer Urban (Berkeley); Professor Eric von Hippel (MIT).

One Last Try: Is the Inter Partes Review system Unconstitutional?

Cooper v. Square is the final pending constitutional challenge to the inter partes and post grant review proceedings created by Congress in the America Invents Act of 2011 and briefing in the case is now complete.

In the final reply brief in the petition process, Cooper explains how this case is a good vehicle for the challenge:

This case is the only one left of three that raised a facial constitutional challenge to inter partes review (IPR). This Court relisted in Cooper v. Lee, No. 15-955, and MCM Portfolio v. HP, No. 15-1330, before denying cert on October 11, 2016. This case is distinct from both of those, and far more amenable to adjudication by this Court. This case does not have the vehicle problem identified by the federal respondent in Cooper v. Lee (since this case arises directly from an agency final decision, whereas Cooper v. Lee arose from a collateral proceeding). And this case does not seek the extreme constitutional remedies of the petitioner in MCM Portfolio (since this case seeks relief in the form of making IPR outcomes advisory, not in the form of annihilating an entire section of a federal agency).

In its responsive brief Square argued that Cooper waived his constitutional argument by not repeatedly raising the issue.  The Cooper brief does a nice job of explaining the errors in that conclusion.

Patent Academic Ray Mercado also took advantage of the request for a responsive brief to file an amicus brief. Mercado argues that patents should be seen as “private rights” and therefore cannot be administratively cancelled.  He writes: “Once the historical uniqueness of patent law is taken into account, it is clear that patents are ‘private rights’ for purposes of this Court’s separation of powers jurisprudence, and their validity must be decided by Article III courts.”

First Amendment Finally Reaches Patent Law

The big news from Intellectual Ventures v. Symantec (Fed. Cir. 2016) is not that the court found IV’s content identification system patents invalid as claiming ineligible subject matter.  (Although that did happen). Rather, the big event is Judge Mayer’s concurring opinion that makes “make two points: (1) patents constricting the essential channels of online communication run afoul of the First Amendment; and (2) claims directed to software implemented on a generic computer are categorically not eligible for patent.”

Read Judge Mayer’s opinion in full:

MAYER, Circuit Judge, concurring.

I agree that all claims on appeal fall outside of 35 U.S.C. § 101. I write separately, however, to make two points: (1) patents constricting the essential channels of online communication run afoul of the First Amendment; and (2) claims directed to software implemented on a generic computer are categorically not eligible for patent.

(more…)

Patentlyo Bits and Bytes by Anthony McCain

Get a Job doing Patent Law                  

Affinity Content Distribution Scheme – Abstract Idea

Affinity Labs v. DirecTV (Fed. Cir. 2016)

The Federal Circuit here affirms that Affinity’s challenged claims invalid as directed to an abstract idea.  when “stripped of excess claim verbiage”, Claim 1 of U.S. Patent No. 7,970,379 “is directed to a broadcast system in which a cellular telephone located outside the range of a regional broadcaster (1) requests and receives network-based content from the broadcaster via a streaming signal, (2) is configured to wirelessly download an application for performing those functions, and (3) contains a display that allows the user to select particular content.” Slip opinion.

Alice Step 1: Considering these limitations and the claim’s “character as a whole” the court identified the concept of “providing out-of-region access to regional broadcast content” as an unpatentable abstract idea.  The court explained its conclusion by noting that the practice (1) has been long employed in media distribution; (2) is not tied to any particular technology; and (3) could be implemented by very low-tech technology such as via mail.  The court went on to explain that (4) nothing in the claim “is directed to how to implement out-of-region broadcasting on a cellular telephone. Rather, the claim is drawn to the idea itself.” And, (5) unlike in Enfish, the claims are not directed to “an improvement in cellular telephones but simply to the use of cellular telephones as tools.” Taking all these together, the court found the claim was in fact directed to an abstract idea.

Alice Step 2: Step two of Alice indicates that a patent directed to an abstract idea is patent eligible if it claims “additional features” that constitute an “inventive concept” that go beyond “well-understood, routine, conventional activity.” Mayo. Here, the court found no such additional features. “The claim simply recites the use of generic features of cellular telephones, such as a storage medium and a graphical user interface, as well as routine functions, such as transmitting and receiving signals, to implement the underlying idea. That is not enough.” Slip Opinion at 15-16.

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Claim 1 below – seen was used as representative for the analysis:

1. A broadcast system, comprising:

a network based resource maintaining information associated with a network available representation of a regional broadcasting channel that can be selected by a user of a wireless cellular telephone device; and

a non-transitory storage medium including an application configured for execution by the wireless cellular telephone device that when executed, enables the wireless cellular telephone device:

to present a graphical user interface comprising at least a partial listing of available media sources on a display associated with the wireless cellular telephone device, wherein the listing includes a selectable item that enables user selection of the regional broadcasting channel;

to transmit a request for the regional broadcasting channel from the wireless cellular telephone device; and

to receive a streaming media signal in the wireless cellular telephone device corresponding to the regional broadcasting channel, wherein the wireless cellular telephone device is outside of a broadcast region of the regional broadcasting channel, wherein the wireless cellular telephone device is configured to receive the application via an over the air download.

 

Prof. Radin’s Patent Notice and the Trouble with Plain Meaning

By Jason Rantanen

Professor Margaret Radin, who recently retired from the University of Michigan Law School, is a leading scholar known for her work in property theory, contracts law, intellectual property, and internet commerce.  She’s best known to my students  for her articulation of a modern personhood theory of property in Property and Personhood, 34 Stan. L. Rev. 957 (1982).

In her essay Patent Notice and the Trouble with Plain Meaning forthcoming in the Boston University Law Review, Professor Radin offers her thoughts on a topic at the heart of contemporary debates in patent law: the extent to which the words of claims can operate as boundaries that provide the same degree of notice that we expect in the real property context. The abstract reads:

In their book, Patent Failure, James Bessen and Michael Meurer took the position that notice of the scope of a patentee’s property right is usefully analogous to notice conveyed by real property boundaries. In this essay I argue to the contrary that the idea that patent claim language could be rendered determinate enough to justify an analogy with physical fences or metes and bounds is illusory. Patent claims raise the question, in a way that fences do not, of how words “read on” objects in, or states of, or events in the world. I take a small detour through the language theory of Quine as backdrop to my argument that there is no such thing as plain meaning, at least not in situations involving innovative products and processes where there is money at stake. I draw on three landmark patent cases — Markman, Phillips, and Festo — to illustrate this basic point. In my concluding Postscript I bring the big picture into play. The costs of providing better notice, even if that were possible, might outweigh the gains. Plus, even if the analogy with physical boundaries and the commitment to plain meaning were not illusory, such rigidity in interpreting claims would undermine a significant feature of the patent system: the flexibility to reward breakthrough inventions proportionately to their importance.

Professor Radin’s discussion is worth a read for the eloquent way that she captures and synthesizes the raw strands floating around in current discussions about patent claims.

Viewed through the lens of my current projects, though, her essay raises deeper questions about the meaning of claim construction itself.  Over the last two decades, patent law has experienced the emergence of the perception that claim construction is simply the process of interpreting the meaning of the words in the claims.  From Markman to Cybor to Phillips, claim construction grew into a search for linguistic meaning.  Even Teva reinforces this perception, with its focus on the role of evidence in determining the meaning of key claim terms.

But patent law’s dirty secret is that claim construction isn’t just about divining the linguistic sense of words and phrases in the claims.  That’s a seemingly fine inquiry when analyzing questions such as infringement, or anticipation or even, perhaps, nonobviousness.  Yet when it comes to other issues in patent law–enablement, written description and especially § 101–defining the meaning of words is less central to the analysis.   To be sure, sometimes the formalized procedure of Phillips does matter in enablement.  Liebel-Flarsheim and Automotive Technologies offer two examples.  But for the most part, the formalized claim construction that we’re used to is absent from the Federal Circuit’s enablement, written description and § 101 determinations.

Nevertheless, claim construction of a sort is present.  The court articulates something that it uses in its analysis.  In the enablement and written description contexts, I’ve come to call this something a target that must be enabled or adequately described.  What it really is, though, is claim construction–just not in the sense that we’ve become comfortable with.

The Federal Circuit’s opinion on Monday in Bascom v. AT&T Mobility [Download Opinion] illustrates this point.  That case involved a motion to dismiss granted by the district court on the ground that the claims were invalid on § 101 grounds.  (I’ll summarize the facts and holding in more detail in a subsequent post.)  After assuming that the claims were directed to an abstract idea under Enfish‘s statement about “close calls” at step one of the Alice/Mayo framework, the court turned to step two: the search for an “inventive concept.”  Here, the court concluded that the “inventive concept described and claimed in the []patent is the installation of a filtering tool at a specific location, remote from the end-users, with customizable filtering features specific to each end user,” a concept that the court concluded was not (on the record before it) conventional or generic.  Slip Op. at 15-16.  This determination–of identifying an “inventive concept”–is as much claim construction as the linguistic machinations of Phillips.  Indeed, the court even refered to what it is doing as construing the claims: “Thus, construed in favor of the nonmovant–BASCOM–the claims are “more than a drafting effort designed to monopolize the [abstract idea].”  Slip Op. at 17.