Tag Archives: Enablement

Federal Circuit Affirms Patent Rejection for Lack of Enablement in In re Pen

by Dennis Crouch

The Federal Circuit (CAFC) recently affirmed a USPTO enablement rejection — holding that the patentee did not enable the “full scope” of the claimed invention.  In re Pen, 23-2282 (Fed. Cir. 2024) (non-precedential).  As an aside, the listed inventor’s legal name is “The Pen;” first and last name respectively, with no middle initial.  Based upon Pen’s address, he is related to “The People’s Email Network.”  In the case, Pen represented himself pro se. (more…)

Discerning Signal from Noise: Navigating the Flood of AI-Generated Prior Art

by Dennis Crouch

This article explores the impact of Generative AI on prior art and potential revisions to patent examination standards to address the rising tidal wave of AI-generated, often speculative, disclosures that could undermine the patent system’s integrity.


The core task of patent examination is identifying quality prior art.  References must be sufficiently accessible, clear, and enabling to serve as legitimate evidence of what was previously known.  Although documents are widely available today via our vast network of digital communications, there is also increasing junk in the system — documents making unsubstantiated claims that are effectively science fiction.  Patent offices prefer patent documents as prior art because they are drafted to meet the strict enablement standards and filed with sworn veracity statements. Issued patents take this a step further with their imprimatur of issuance via successful examination.  Many of us learned a mantra that “a prior art reference is only good for what it discloses” — but in our expanding world of deep fakes, intentional and otherwise, is face value still worth much?

In a new request for comments (RFC), the USPTO has asked the public to weigh in on these issues — particularly focusing on the impact of generative artificial intelligence (GenAI) on prior art. (more…)

Without Undue Experimentation vs Without Any Experiments

by Dennis Crouch

I was rereading the Supreme Court’s recent enablement decision of Amgen Inc. v. Sanofi, 598 U.S. 594 (2023) and was struck by the Supreme Court’s statement that its 19th Century decision of Wood v. Underhill, 46 U.S. 1 (1847) “establish[ed] that a specification may call for a reasonable amount of experimentation to make and use a patented invention.”  This statement from Amgen is surprising because Chief Justice Taney’s decision in Wood includes a seemingly contrary statement that bars any experimentation (more…)

What is Next for Enablement and Written Description of Antibody Claims?

by Dennis Crouch

I had been following the case of Teva v. Lilly for a few years.  Teva has traditionally been a generic manufacturer, but in this case sued Eli Lilly for infringing its patents covering methods of treating headache disorders like migraine using humanized antibodies that bind to and antagonize calcitonin gene-related peptide (CGRP), a protein associated with migraine pain. U.S. Patent Nos. 8,586,045, 9,884,907 and 9,884,908.  The patents cover Teva’s drug Ajovy, and allegedly cover Lilly’s Emgality. Both drugs were approved by the FDA in September 2018.  A Massachusetts jury sided with Teva and awarded $177 million in damages, including a controversial future-lost-profit award.

Although the jury sided with Teva, District Judge Allison Burroughs rejected the verdict and instead concluded that Teva’s patent claims were invalid as a matter of law for lacking (more…)

In re Xencor: USPTO’s Inaction Following Federal Circuit Remand

by Dennis Crouch

On January 23, 2024, the Federal Circuit granted the USPTO’s request for a remand in the case of In re Xencor, Inc. The appeal focused on two important issues concerning written description requirements for means-plus-function (MPF) and Jepson claims in the context of antibody patents. The USPTO had indicated that it wanted to reconsider its approach to these issues and convene its newly established Appeals Review Panel (ARP) to clarify its position. (ARP is the new POP). As part of its justification for remand, the Federal Circuit noted its expectation “that proceedings will be conducted expeditiously.”

However, more than two months after the remand order, there has been no visible progress in the case. The USPTO has not docketed the case with the ARP, and no public announcement has been made regarding the composition of the panel that will review the case. Furthermore, the prosecution history of the application in question (USPTO Application Number 16/803,690) does not reflect any updates or changes since the remand.

This lack of action is particularly concerning given the significance of the issues at stake. The PTAB previously made two controversial rulings that were on appeal: (1) that under 35 U.S.C. 112(f) equivalents require explicit written description support and (2) that non-limiting Jepson claim preambles also require such support, even if they do not limit claim scope.

Meanwhile, the USPTO did recently issue examination guidance on examining means-plus-function claim limitations under 112(f).  The troubling aspect of the memo, however, is that it does not provide any guidance on the Xencor enablement issue.

Citations:
[1] https://patentlyo.com/patent/2023/12/motion-remand-xencor.html
[2] https://patentlyo.com/patent/2024/01/important-antibody-description.html
[3] https://cafc.uscourts.gov/01-23-2024-23-2048-in-re-xencor-inc-order-23-2048-order-1-23-2024_2257719/

Shaping the Future of Patent Law: The Amgen v. Sanofi Decision and Bite-Sized Monopolies

by Dennis Crouch

“The more one claims, the more one must enable.”

In a unanimous opinion delivered by Justice Gorsuch, the Supreme Court has affirmed the Federal Circuit’s decision invalidating Amgen’s functionally claimed genus of monoclonal antibodies. The Court held that Amgen’s patent claims were invalid due to a lack of enablement, as they failed to provide adequate guidance for making and using the claimed antibodies.

The case in question is Amgen Inc. v. Sanofi, 22-157, — U.S. — (2023) (21-757_k5g1).

Amgen’s patents cover monoclonal antibodies created by Amgen researchers which aid in reducing blood levels of low-density lipoprotein (LDL), also known as “bad cholesterol.” These antibodies inhibit the operation of a naturally occurring protein known as PCSK9, which degrades LDL receptors and contributes to high cholesterol levels. Amgen’s original patent covered antibodies having particular amino acid sequences, but later its competitor Sanofi patented another antibody with a different sequence from those disclosed and began competing.   Amgen was then able to obtain the broader patents at issue here that are not tied to any particular antibody structure or amino acid sequence. Rather, the claims cover an “entire genus” of antibodies capable of binding to specific amino acid residues on PCSK9 and consequently inhibit PCSK9 activity. Amgen subsequently sued Sanofi for infringement, prompting a defense from Sanofi challenging whether these broader claims were sufficiently enabled.

The Patent Act requires that patent applicant describes the invention in explicit terms to enable any person skilled in the art to make and use the invention. 35 U.S.C. 112. Sanofi characterized the methods Amgen provided for generating additional antibodies as merely a trial-and-error process, claiming that Amgen’s patents failed the enablement requirement as they sought exclusive use over potentially millions more antibodies than the company had taught how to produce. Although a jury sided with the patentee Amgen, the district court and the Federal Circuit agreed with Sanofi’s contention, ruling that Amgen did not meet the enablement requirement as a matter of law.

The enablement requirement is a crucial aspect of the patent “bargain”: an inventor is granted limited protection from competition in exchange for publicly disclosing their new technology. The Supreme Court, in its decision, referenced previous cases such as Morse, Incandescent Lamp, and Holland Furniture, as establishing the requirement that if a patent claims an entire class or genus of processes, machines, or compositions of matter, the specification must enable a person skilled in the field to make and use the entire class. In simpler terms, it follows the elementary school principle: If you bring cookies to share, bring enough for everyone.

If a patent claims an entire class of processes, machines, manufactures, or compositions of matter, the patent’s specification must enable a person skilled in the art to make and use the entire class. In other words, the specification must enable the full scope of the invention as defined by its claims.

The more one claims, the more one must enable. See §112(a); see also Continental Paper Bag Co. v. Eastern Paper Bag Co., 210 U. S. 405 (1908) (“[T]he claims measure the invention.”).

Amgen v. Sanofi.

In this case, Amgen sought exclusivity for the entire class of functional antibodies, not just the 26 antibodies expressly disclosed.  Although Amgen also provided a “roadmap” for discovering more antibodies, the court found that those approaches were insufficient “research assignments” rather than a clear process for creating the additional antibodies. The Supreme Court ruled that these disclosures did not fulfill the enablement requirement as per the Patent Act, as they simply described Amgen’s trial-and-error method without providing sufficient information for skilled scientists to make the entire class of claimed antibodies.

The Supreme Court did agree with Amgen that functional/genus claims should not be held to a stricter standard of enablement. In other words, there is “one statutory enablement standard.” Nonetheless, the general principle remains that broader claims necessitate more enablement, and all claims must be enabled to their “full scope.”

The outcome of the Amgen v. Sanofi case, while significant, may not come as a surprise to those familiar with the evolution of patent law. In recent years, there has been a growing emphasis on promoting innovation and competition by limiting the scope of patent monopolies. This approach recognizes that patents should strike a balance between incentivizing inventors to disclose their inventions and ensuring that the public can freely build upon existing knowledge. Rather than granting broad and far-reaching patent rights, the trend has been towards encouraging more focused and narrowly tailored claims. This shift reflects a recognition that patents are more palatable when they offer bite-sized protection rather than providing a singular and overpowering monopoly. The ruling in the Amgen v. Sanofi case aligns with this approach, reinforcing the notion that patents should enable the creation and use of the claimed inventions while still allowing for competition and further advancements in the field.

Bringing Home the Bacon with Joint Inventorship

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

HIP, Inc., v. Hormel Foods Corp., 2022-1696, — F.4th — (Fed. Cir. May 2, 2023)

Joint inventorship requires a substantial contribution to the invention. In the decision HIP, Inc. vs. Hormel, Judge Lourie writes for a unanimous panel to reverse a district court’s determination of joint inventorship involving a new process for precooking bacon. US Patent 9,980,498 has four inventors that are employees of and assigned their interest to Hormel.  HIP sued Hormel, alleging that David Howard was either the sole inventor or a joint inventor of the ’498 patent. The district court determined that Howard was a joint inventor based solely on his alleged contribution to the infrared preheating concept in independent claim 5.  

Bacon is an interesting food with unique preservation and cooking properties. Being a cured product, for food safety reasons, no additional cooking of the bacon is needed when bought off the shelf in a refrigerated section. Of course, most people are not consuming the bacon without additional cooking and some companies will precook the product for consumer convenience. When precooking, Hormel is trying to avoid the loss of salt, and therefore flavor, through condensation and prevent the creation charred off flavors (as opposed to the desirable char on a steak).  

 In the process of viability testing the new method, prior to filing the application, the inventors consulted with David Howard of Unitherm, HIP’s predecessor, to discuss methods related to Unitherm’s cooking equipment to create a two-step process of preheating then a higher temperature step. After some difficulties, Hormel leased the equipment and returned to their own R&D lab. The method created, the subject matter of the ‘498 patent, involves a first step that allows the fat of the bacon to seal the surface of the bacon and prevent condensation. The charring was remedied by adjusting the heating method of the oven in the second step of high-temperature cooking. In Hormel’s product development, Hormel tried an infrared oven and a conventional spiral oven.

HIP argued that Howard contributed to the ‘498 patent in the preheating by hot air in claim 5 and/or preheating with an infrared oven in claim 5.  Claim Five reads in the relevant part:  

  1. A method of making precooked meat pieces using a hybrid cooking system, comprising: preheating meat pieces in a first cooking compartment using a preheating method selected from the group consisting of a microwave oven, an infrared oven, and hot air to a temperature of at least 140º F. to create preheated meat pieces…

On appeal, Hormel argues that Howard’s contribution is well-known in the art and insignificant when measured against the full invention. With inventorship being a question of law, and the issuance of a patent creating a presumption of inventorship, an alleged joint inventor must provide clear and convincing evidence to substantiate their claim. In evaluating whether a significant contribution was made by Howards, the parties apply the test from Pannu v. Iolab Corp., 155 F.3d 1344, 1351 (Fed. Cir. 1998). The test requires that the alleged joint inventor: 

(1) contributed in some significant manner to the conception of the invention; (2) made a contribution to the claimed invention that is not insignificant in quality, when that contribution is measured against the dimension of the full invention; and (3) did more than merely explain to the real inventors well-known concepts and/or the current state of the art. 

Analyzing the second Pannu factor, the Court found that the alleged contribution of preheating meat pieces using an infrared oven to be insignificant in quality because it was mentioned only once in the patent specification as an alternative heating method to a microwave oven and was recited only once in one Markush grouping in a single claim. In contrast, preheating with microwave ovens and microwave ovens themselves were prominently featured throughout the specification, claims, and figures. The examples and corresponding figures also employed procedures using preheating with a microwave oven, but not preheating with an infrared oven.  

Infrared heating seems to have been an afterthought in the creation of the two-step precooking method. Whatever discussions Howard might have had about the importance of the infrared, Hormel seems to have focused on microwave heating to solve the condensation problem. From one step further back, it seems absurd to permit joint ownership by a cooking equipment manufacturer when the significant discoveries and refinements of the methods were made in Hormel’s R&D facility without Howard present. The prevention of condensation and avoiding the char flavor were both made independent of Howard’s contributions. Considering the second Pannu factor, the reversal of inventorship seems appropriate.  

Bye Bye Functional Claims

by Dennis Crouch

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

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

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

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

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

The claim here:

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

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

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

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

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

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

Guest Post by Profs. Masur & Ouellette: Public Use Without the Public Using

Guest post by Professors Jonathan S. Masur (Chicago Law) and Lisa Larrimore Ouellette (Stanford Law).

What is it that makes a use “public” for purposes of the public use bar? Does it matter whether the person doing the using is a member of the public, as opposed to the inventor? Or does it matter whether the use is itself in public, as opposed to taking place in secret behind closed doors? As it turns out, the answer to both questions is “yes,” but the questions are not as distinct from one another as that formulation might make it seem. Instead, the issue of who is doing the using turns out to affect where and how that use must occur if it is to be public use.

Begin with the question of who is doing the using. Most cases of “public use” have involved use by at least one member of the public—“a person other than the inventor who is under no limitation, restriction or obligation of secrecy to the inventor.” And when an invention is in use by a member of the public (rather than the inventor), it is blackletter law that the use can be “public use” even if it takes place entirely in secret, behind closed doors. In addition, it is also blackletter law that the use need not enable the invention to constitute prior art. No member of the public needs to see all the details of the invention or be able to reproduce it—it is enough that at least one person has come to rely on the availability of the invention free from any patent-based restriction.

But as we explain in a forthcoming article, a small line of cases suggests there is a second route to public use: even if no member of the public uses the invention, an invention can be placed in public use if it is used by the inventor, but only if it is displayed to the public in such a way that the relevant public could have understood the invention. That is, there can be public use without the public using, but only if that use is out in the open and with something like an enablement requirement. See Real-World Prior Art, 76 Stan. L. Rev. (forthcoming 2024). These cases appear to rely on an idea of constructive public knowledge: just as a conference poster can be invalidating printed publication prior art if a researcher could have learned about the invention by reading it, an inventor’s demonstration of an invention can be an invalidating public use if someone could have learned about the invention from observing the demonstration. Likewise, the Federal Circuit has held that display of an invention is not public use “if members of the public are not informed of, and cannot readily discern, the claimed features of the invention.” The only exception to these rules has come when the inventor is engaged in secret commercial use of the invention. Some courts have held that this puts the invention into public use. But more recently, the Federal Circuit has instead begun to hold that this places the invention on sale, because the whole point of the use is to exploit the invention commercially. We agree with the Federal Circuit panels that have held that the on sale bar is a better fit in these situations.

The upshot from these two lines of precedent is that the question of whether an invention is in public use depends intimately on who is doing the using. If the user is someone other than the inventor, then there is public use (a) even if the use is taking place in secret, and (b) irrespective of whether the user can figure out how the invention works (enablement). But if the inventor herself is the one doing the using, then (a) the use must be taking place in public, and (b) the use must be enabling.

As one might predict, the grouping of these two approaches under the single heading of “public use” has led to confusion among litigants and, in some cases, courts. Two new Federal Circuit decisions this month add to this “public use without the public using” line of cases and demonstrate the pitfalls of failing to keep the interlocking public use rules straight. In Minerva v. Hologic, the court held that display and demonstration of a medical device at a gynecological trade show constituted public use. The patentee, perhaps misunderstanding this line of doctrine, argued that it could not be public use because no member of the public used the invention. But the court held that “public use may also occur where, as here, the inventor used the device such that at least one member of the public without any secrecy obligations understood the invention.” Similarly, In re Wingen held that display of an inventive “Cherry Star” flowering plant at a private Home Depot event placed the plant into public use. The patentee argued that the display did not disclose the claimed genetics of the plant—which could have been a successful argument given the enablement-like inquiry imposed on other similar cases—but the court held that this argument was forfeited because it was not raised in proceedings below. It seems likely that the lawyers who argued the case before the PTAB had not thought to make this argument because they did not realize that use by the inventor requires enablement. Our article includes numerous examples of district courts that were similarly confused by the rules that vary depending on who’s doing the using.

As we explain in our article, treating enabling demonstrations by the inventor as prior art makes sense as a matter of patent policy. But lumping these cases under the “public use” umbrella has created confusion and mistakes among the lower courts. Going forward, we think the Federal Circuit should be explicit that there are two distinct routes to public use: (1) use by a member of the public—someone under no obligation of confidentiality to the inventor—which can take place in secret and need not be enabling, and (2) use by the inventor, which must take place in public and enable the invention.

Alternatively, and perhaps even better, the Federal Circuit could decide that the inventor-use category of activities instead implicates the “otherwise available to the public” prong of § 102. An enabling demonstration, where the public learns about the invention but cannot use it, could be the paradigmatic example of an activity that makes an invention available to the public without creating any other type of prior art. This is not a full solution given all the pre-AIA patents still in force, and in light of the strong policy reasons for barring pre-AIA patents that were displayed publicly we can see why courts have tried to fit these cases within the “public use” category. Regardless, for patentees and their attorneys, Minerva v. Hologic and In re Wingen serve as a reminder to avoid disclosing the details of an invention before they are ready to file a patent application—and if a disclosure does occur, they should remember to preserve the argument that it wasn’t actually enabling!

Upcoming Supreme Court Oral Arguments in IP & Tech Cases

by Dennis Crouch

The Supreme Court will be handling some significant cases over the next few months that may have a major impact for folks working in IP & Tech fields. The following is brief list sorted by the date of oral arguments.

  • Feb 21 – Gonzales v. Google (Does the safe harbor of CDA Section 230 shield Google from liability for encouraging users to view offending videos).
  • Feb 22 – Twitter v. Taamneh (Can Twitter be held liable for providing a service that aids and abets terrorism, despite its substantial non-violative uses).
  • March 21 – Abitron v. Hetronic (Extraterritorial application of US Trademark Law — damages from foreign sales).
  • March 22 – Jack Daniels v. VIP (Commercial humor leading to fair use or no-infringement/dilution in the TM context)
  • March 27 – Amgen v. Sanofi (Full Scope Enablement: How much description is enough to satisfy the enablement requirement).
  • April 17 – Slack v. Pirani (For securities liability, what causal link is required between misleading statement and the purchase of shares).
  • April 18 – Groff v. DeJoy (Should Title VII of the Civil Rights Act be given more teeth to protect religious liberty in the employment context).
  • April 19 – Counterman v. Colorado (When does speech rise to a “true threat”, unprotected by the First Amendment.  Here, it was a series of unsolicited Facebook direct messages.  The question is whether his intent (mens rea) matters, or can he be convicted based only upon the reasonably perceived threat of the recipient.).
  • April 24 – Dupree v. Younter (If SJ is denied on a question of law, must the party reassert the issue in JMOL in order to preserve the issue for appeal. Although not a patent case, this issue comes up all the time in patent litigation).
  • April 25 – Yegiazaryan v. Smagin (When can an injury to a foreign plaintiff’s “intangible property” serve as the basis for a RICO claim).

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.

= = = = =

[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.

= = = =

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.