Tag Archives: Enablement

Court: Claim Term Lacks Definiteness but is not Legally Indefinite

Indefinite, Patent,

Every Penny Counts v. Wells Fargo Bank, 2014 U.S. Dist. LEXIS 28106 (M.D. Fl. 2014).

In a ruling this week, Judge Merryday rejected Wells Fargo’s indefiniteness argument made in a pre-trial summary judgment motion. Like claim construction, indefiniteness is seen as a question of law that can be resolved by a district court judge. In fact, the Federal Circuit has written that “Indefiniteness is a matter of claim construction, and the same principles that generally govern claim construction are applicable to determining whether allegedly indefinite claim language is subject to construction.” Praxair, Inc. v. ATMI, Inc., 543 F.3d 1306, 1319 (Fed. Cir. 2008).

EPC’s invention is software for rounding-up credit and debit transactions to the nearest dollar and then putting the extra money to a special use. See U.S. Patent 8,025,217. Claim 1 of the ‘217 patent is listed as follows:

1. A system for accumulating credits from a customer account belonging to the customer and managed by an institution and placing the credits into a provider account, comprising:

an information processor; said information processor including a data store with data identifying the customer, the rounding determinant, the managed institution, and the account;

said data store including machine readable instructions authorizing the processor to access and read the customer account;

said data store including machine readable instructions to calculate rounders after receiving a plurality of payment transactions from the read customer account and to calculate an excess based on the rounders;

said data store including machine readable instructions to withdraw the excess from the customer account;

said data store including machine readable instructions to transfer the withdrawn excess to the provider account.

The indefiniteness issue with the claim is that the claim introduces two types of accounts – a customer account and a provider account – and then refers to “the account” without identifying which of the two accounts are being referenced. Wells Fargo argues that there are “at least four equally plausible interpretations” of “the account” – it could be the customer account, the provider account, both accounts, or some other account. Adding to the difficulty of interpreting the term, Wells Fargo highlights the fact that the patent itself is riddled with seeming typographical errors that make interpretation difficult. The court writes:

The patent is infested with scrivener’s (and other) errors, and the prospect of a missing “s” fits comfortably within the patterns discernible in the patent. For example, the patent states, “The actual transfer . . . concludes with the [transfer of] funds to each listed PC (provider account) . . . .” “PC” is used nowhere else in the patent, and the patent later clarifies that “PA” is the intended acronym for “provider account(s).” But even the creation of the correct acronym, “PA,” is tardy – by the time the patent defines the acronym, the patent has already deployed either “provider account” or “provider accounts” four times and “PA” twelve times. And after the “PA” acronym is created, the patent no longer uses the acronym but uses “provider accounts.” In other examples of error, the patent bungles nearly every acronym, conflates “i.e.” and “e.g.,” and writes “invention invention,” “FIG. 7A” (not “FIG. 7” – no figure 7A exists), “FIG. 4B” (although Figure 4B exists, “FIG. 4C” is intended), step “8120” (not”120″), “2 $300.14” (not “$300.14”), “pa id” (not “paid”), “saving s,” and “piece s.” These errors – which say nothing of the drafter’s grammatical and syntactical incompetence and bemusing judgment – confirm that “account” lacking an “s” by mistake accords with the level of compositional adroitness and dexterity that pervades the patent.

In sum, as used in claims 1 and 2, the phrase “the account” lacks definiteness. “[T]he account” might mean “the customer account,” “the provider account,” or otherwise; no informed and confident choice is available among the contending definitions.

Now, here’s the trick – after finding that the phrase lacks definiteness, the court next went on to hold that the phrase is not legally indefinite. Rather, there exist a spectrum of definiteness levels, and the forfeiture of patent rights due to indefiniteness (currently) requires extreme indefiniteness. Thus, a claim term that is only somewhat indefinite will not render its respective claim invalid as indefinite. And, because of the conceptual separation of most patentability doctrines, the lack of definiteness shown here will have no other adverse impact on the patent.

In particular, a claim term is only found indefinite if clear and convincing evidence sufficient to overcome the statutory presumption of validity proves that the claim is “insolubly ambiguous” and “not amenable to claim construction.” Taking that standard, the court could only find the claim sufficiently definite:

Although the entire patent is awkwardly drafted, the oppugned claim is simple. The specification is simple. The drawings are simple. The patent as a whole, notwithstanding the deficiencies, seems understandable; the claim seems understandable. In short, the indefiniteness of the term “the account” leaves no unmanageable gap in the information available for determining the scope of the claim. No practical incapacity or disabling uncertainty appears as a consequence of the fact that “the account” might mean one thing or the other. In sum, the extent of the indefiniteness in the term “the account” is inconsequential and falls far short of the “insoluble ambiguity” required to invalidate the claim.

Holding: Claim not invalid as indefinite.

This case tightly linked to the outcome in Nautilus. If the court changes the standard for determining indefiniteness there then we’ll likely see a modified holding here as well.

[Updated on 3/8/14 with updated information that opinion was written by Judge Merryday not Magistrate Judge McCoun. Via W.Pollack]

 

Federal Circuit: Enablement More Difficult When Invention Faces Skepticism

Enablement, Patent, ,

By Dennis Crouch In re Hoffman (Fed. Cir. 2014) (non-precedential decision) Gene Hoffman and David Lund’s patent application is directed to method of weakening the strength of tropical cyclones by delivering super-coolant from an aircraft into the eye of the hurricane. The inventors here have never tested their method, but did provide some preliminary calculations that – they argue – suggest success. The USPTO rejected the application for failing to enable the claimed invention under 35 U.S.C. 112(a). In particular, the examiner identified three failures: (1) the preliminary calculations contained unexplained assumptions and mathematical errors; (2) the specification noted a need for experimentation to determine the proper amount of coolant to add and the optimal strike time; and (3) a number of weather scientists have expressed doubt as to whether similar approaches would work. In reviewing the rejection, the PTAB affirmed and that decision (rejecting the application) has now been affirmed on appeal. Pending claim 36 is identified as representative and claims:

A process for disrupting a formed or forming tropical cyclone eye wall or eye or center of lowest pressure comprising:

Introduction of a super coolant chemical agent sprayed with force (the super coolant is stored in a vessel under pressure) and or released from pre-measured containers from an appropriate number of large aircraft to reduce the temperature within the eye wall (top to bottom at sea level),

thereby circulating the super coolant throughout the eye wall by the centrifugal force of the eye wall, alternatively into the eye or center of lowest pressure to reduce the temperature in the eye or center of lowest pressure and the water beneath,

[t]hereby reducing the wind and storm surge of the eye wall or raising the pressure in the eye or center of lowest pressure and converting it back to a tropical rainstorm.

The claim form here does not really follow the standard ordinarily used by professional patent drafters. Here, it appears that claim drafting and prosecution were handled pro-se by the inventors. For more than 150 years, patent law has been seen as an arcane area of law full of traps for non-experts. In some ways, this decision confirms that tradition. The first sub-section of 35 U.S.C. § 112 requires that the patent document disclose enough about the invention so as to enable an artisan skilled in the particular area of science and technology to make and use the invention. The statute reads:

[The patent must disclose] 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.

35 U.S.C. §112(a). The court has added some gloss to the statute in that precedent allows missing elements from the specification so long as the skilled artisan could fill-in those gaps without undue experimentation. The court also uses the “Wands factors” to help determine whether the disclosure meets the enablement standard. These factors include:

  1. The quantity of experimentation necessary,
  2. The amount of direction or guidance presented,
  3. The presence or absence of working examples,
  4. The nature of the invention,
  5. The state of the prior art,
  6. The relative skill of those in the art,
  7. The predictability or unpredictability of the art, and
  8. The breadth of the claims.

In re Wands, 858 F.2d 731 (Fed. Cir. 1988). In applying these, the Federal Circuit found that there was no doubt that the USPTO’s decision was correct. Although the court did not go into depth in its analysis, one interesting aspect of the decision is that the Federal Circuit identifies skepticism in the scientific community as the most important factor here. The court writes:

And perhaps most significantly, the very efficacy of the method itself is subject to considerable doubt in the scientific community.

In other words, the enablement burden is more difficult to meet when the invention is surprising or when it goes against conventional wisdom. Of course, those same inventions will more easily surpass the central patentability test of non-obviousness. My point here, though, is that patentees with clearly groundbreaking inventions should take extra pause to ensure that the surprising result has been properly enabled.

“Inventive Concept” and the Hot-Blast Cases

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Guest post by Jeffrey A. Lefstin, Professor of Law, University of California, Hastings College of Law

As the Supreme Court prepares to take up Alice Corp. v. CLS Bank, a major question the Court may confront is to what extent an “inventive concept” is necessary for patent eligibility under § 101. In Mayo v. Prometheus, the Court suggested that “conventional and obvious” activity cannot transform a law of nature or abstract idea into a patent-eligible invention. The Court seemingly revived Parker v. Flook, which held that only “inventive applications” of abstract ideas are patent-eligible. But when the Federal Circuit heard CLS Bank, divided as the court was, both Judge Rader and Judge Lourie emphatically rejected the idea that Mayo demands “inventiveness” for patent-eligibility.

In both Flook and Mayo, the Supreme Court anchored the requirement for inventive application in Neilson v. Harford, the famous English case on James Neilson’s hot-blast smelting process. The Court in Flook and Mayo focused on this passage appearing in Baron Parke’s opinion for the Court of Exchequer:

We think the case must be considered as if the principle being well known, the plaintiff had first invented a mode of applying it by a mechanical apparatus to furnaces; and his invention then consists in this—by interposing a receptacle for heated air between the blowing apparatus and the furnace.

Flook took this language to mean that an underlying idea or discovery should be treated as part of the prior art; Mayo took it to mean that a claim is patent-eligible only if the application of a discovery or idea is inventive or unconventional.

However, a reading of the Exchequer’s full opinion tells the opposite story. Neilson’s patent was sustained because his application was entirely conventional and obvious. The defendant’s challenge in Neilson was primarily a scope of enablement argument: Neilson had disclosed that the blast should be heated before introducing it into the furnace, but disclosed next to nothing about the heating means. In refuting the defendant’s challenge, both the patentee and the judges of the Exchequer emphasized that the mode and apparatus for heating air were old and well known in the field, and represented no invention by Neilson.

So why did Baron Parke write that Neilson’s discovery – his ‘principle’ – should be regarded as “well known”? The court was wrestling with the question of whether Neilson had claimed a patentable manufacture, or the abstract principle that hot air was superior to cold. And if a manufacture, was Neilson entitled to reach the accused blast furnace, which employed a different heating apparatus? The Exchequer had faced the same questions seven years earlier in Minter v. Wells, involving a patent to an adjustable chair. The defendant in Minter had argued that the patentee was trying to claim a well-known principle of mechanics: the self-adjusting lever. Alternatively, if the claim was to the chair rather than the principle, the patent should be restricted to the inventor’s particular embodiment. Baron Parke concluded instead that the patentee had claimed the application of the self-adjusting leverage to an adjustable chair. Therefore, the patent was not drawn to an abstract principle, and might extend to other chairs embodying the same application but with a different arrangement.

Minter thereby established that a patent might claim the application of a well-known principle to new ends, and might extend beyond the exact machinery employed by the patentee. In the famous passage from Neilson, Parke was applying the same doctrine to Neilson’s patent – except that Neilson’s ‘principle’ was new rather than well-known. Neilson was a more difficult case because, given Neilson’s minimal disclosure, the scope of enablement was more dubious than in Minter. But a special jury verdict on that point ultimately carried the day for Neilson.

Neilson was only one of some twenty cases asserted by Neilson in England and Scotland. Other decisions following and interpreting Neilson leave no doubt that the case stood not for inventive application, but for the distinction between principles in the abstract and patentable applications. For example, in a case litigated the next year, Househill v. Neilson, the Court of Sessions stated:

The main merit, the most important part of the invention, may consist in the conception of the original idea—in the discovery of the principle in science, or of the law of nature, stated in the patent, and little or no pains may have been taken in working out the best manner and mode of the application of the principle to the purpose set forth in the patent.

Neilson was understood the same way in the Supreme Court’s landmark 19th-century opinions that discussed Neilson extensively, such as Le Roy, Morse, and Tilghman. Further, in late 19th-century and early 20th-century American cases and treatises, it was black-letter law that while abstract principles and discoveries could not be patented, a practical application was patent-eligible without the need for inventive application – subject to certain exclusions such as the ‘mental steps’ rule.

As I wrote about last year, the actual origin of the inventive application test was Justice Douglas’s opinion in Funk Brothers, in 1948. The dubious history of the inventive application test in the wake of Funk suggests we would have been better served by following Justice Frankfurter instead of Justice Douglas. For it was Frankfurter’s concurrence that embraced the spirit of Neilson and the historical tradition: the claims to bacterial compositions in Funk were unpatentable not because they added or changed little relative to a law of nature or natural phenomenon, but because the patentee was claiming the idea of compatible strains instead of his practical application.

I write about the hot-blast cases, and the history of the inventive application test, in an article available here.

White House Fact Sheet on Patent Reform

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THE WHITE HOUSE

Office of the Press Secretary

FOR IMMEDIATE RELEASE

February 20, 2014

Executive Actions: Answering the President’s Call to Strengthen Our Patent System and Foster Innovation

 Year of Action: Making Progress Through Executive Action 

In his State of the Union address, President Obama set an ambitious agenda to make 2014 a year of   action. As part of that commitment, and recognizing that innovation is the lifeblood of our economy, the Administration today is announcing major progress on a series of initiatives designed to combat patent trolls and further strengthen our patent system and foster innovation; issuing new executive actions to build on these efforts; and renewing its call on Congress to finish the job by passing common-sense patent reform legislation.

Since last June, when the White House pledged to protect innovators from frivolous litigation, the Administration has been working to implement a series of executive actions to improve the U.S. patent system. Today the White House is announcing delivery on these commitments:

  • Promoting Transparency — The United States Patent and Trademark Office (USPTO) recently published a draft rule to ensure patent owners accurately record and regularly update ownership information when they are involved in proceedings before the USPTO. This effort is aimed at improving the quality of patents issued, enhancing competition, facilitating technology transfer, and making it harder to hide abusive litigation tactics behind shell companies. After receiving input from the public, the USPTO aims to issue a final rule in the coming months.
  • Making Patents Clear — The USPTO has developed and implemented a training program to help its examiners rigorously examine so-called “functional claims” to ensure claims are clear and can be consistently enforced. In the coming weeks, the USPTO will launch a pilot program that uses glossaries in patent specifications to promote patent clarity.
  • Protecting Main Street from Abuse — To help ensure consumers and main-street retailers know their rights before entering into costly litigation or settlements, the USPTO is today launching an online toolkit aimed at empowering consumers with answers to common questions, information about patent suits, and details about specific patents. The toolkit will include information and links to services and websites that can help consumers understand the risks and benefits of litigation or settlement, and pick their best course of action.
  • Expanding Outreach & Focused Study — Today, the USPTO is announcing the expansion of its Edison Scholars Program, which brings distinguished academic experts to the USPTO to develop and make available to the public more robust data and research on issues bearing on abusive litigation. USPTO will also continue to expand its engagement with stakeholders—including patent holders, researchers, advocates, and others—and build on the successful roundtables the agency hosted across the country over the past year on high-tech patent issues.
  • Strengthening Exclusion Order Enforcement — To make the enforcement of exclusion orders issued by the International Trade Commission more transparent, effective, and efficient, the Office of the U.S. Intellectual Property Enforcement Coordinator launched an interagency review and will, in the coming months, deliver its recommendations on refining that process.

         Innovation For Global Development — In addition, today, the Administration is committing to sustain, going forward, the Patents for Humanity Program, which creates business incentives for using patented technology to address global humanitarian needs.

Today, the White House is also announcing three new executive actions to encourage innovation and further strengthen the quality and accessibility of the patent system:

 Crowdsourcing Prior Art — To help ensure that U.S. patents are of the highest quality, the USPTO is announcing a new initiative focused on expanding ways for companies, experts, and the general public to help patent examiners, holders, and applicants find relevant “prior art”—that is, the technical information patent examiners need to make a determination of whether an invention is truly novel.

  • More Robust Technical Training — The USPTO is expanding its Patent Examiner Technical Training Program to help patent examiners keep up with fast-changing technological fields by making it easier for technologists, engineers, and other experts to provide relevant technical training and guidance to patent examiners. To make the most of these changes, the Administration is calling on innovators to volunteer their time and expertise to help ensure that USPTO training is robust and reflects the state of the art.
  • Pro Bono and Pro Se Assistance — To increase the accessibility of the patent system, the USPTO will dedicate educational and practical resources to assist inventors who lack legal representation, appoint a full-time Pro Bono Coordinator, and help expand the existing America Invents Act pro bono program to cover all 50 states. The Administration is calling on members of the patent bar to participate in the program.

Renewing the Call for Meaningful Legislation to Combat Patent Trolls: In his State of the Union address President Obama renewed his call for Congress to pass patent reform legislation, which enjoys strong bipartisan support. The Administration looks forward to continuing to work with Congress to deliver focused and effective patent reform legislation to the American people in the coming months.

   Year of Action: Making Progress Through Executive Action 

 Further Detail on Answering the President’s Call to

Improve our Patent System and Foster Innovation, not Litigation

 A strong intellectual property system supports and enables the innovation that is the lifeblood of our economy. Our patent system is enshrined in our Constitution to encourage invention and to reward Americans for their hard work and risk-taking. But in recent years, that system has also seen the growth  of abusive patent litigation designed not to reward innovation but to threaten inventors and companies based on questionable claims. That’s why President Obama has made it a priority to reform that system to ensure it encourages innovation and invention and provides the right incentives to drive investment, inspire and reward creativity, and spur job creation.

 In 2011, the President signed the Leahy-Smith America Invents Act (AIA), a landmark piece of legislation designed to help make our patent system more efficient and responsive to innovators. The United States Patent and Trademark Office (USPTO) has now successfully implemented that law, enabling many reforms that are leading to higher patent quality, including post-grant patent review proceedings at the USPTO that offer faster and less expensive alternatives to litigation in Federal courts. Yet many innovators have continued to face challenges by patent-assertion entities or patent “trolls”– entities that have, over the past decade, increasingly used patents to extract settlements based on the high cost of defense.

 Building upon the strong foundation of AIA reforms, on February 14, 2013, President Obama stated that “our efforts at patent reform only went about halfway to where we need to go. What we need to do is pull together additional stakeholders and see if we can build some additional consensus on smarter patent laws.”

 On June 4, 2013, the White House set forth a series of executive actions and legislative recommendations designed to protect innovators from frivolous litigation and ensure high-quality patents.

 During his State of the Union address in January 2014, the President renewed his called for passage of a patent reform bill that would allow businesses to stay focused on innovation, not litigation. To complement this legislative effort, today the White House is highlighting progress to date on the previously announced executive actions, and is announcing three new actions to further respond to the President’s call-to-action to level the playing field for all innovators and increase patent quality.

 Progress on the June 2013 Executive Actions

1.                  Transparency in Patent Ownership.  Patent trolls often set up shell companies to hide their activities. This tactic prevents those facing litigation from knowing the full extent of the patents that their adversaries hold when negotiating settlements; keeps innovators from being able to find each other; and undermines companies’ understanding of the competitive landscape.  That’s why the USPTO recently proposed a new rule, informed by extensive stakeholder input, requiring the reporting of people or companies with ownership interests in a patent or application, called the “attributable owners.” Attributable owner information will provide the public with more complete information about the competitive landscape; facilitate more efficient technology transfer by making patent ownership information more readily available; and reduce abusive patent litigation by helping the public better defend itself against meritless assertions. The USPTO is currently soliciting and accepting written comments from the public here, and hosting stakeholder engagement events to solicit additional valuable feedback.

2.      Enhancing Claim Clarity. The AIA reforms made important improvements to the patent examination process and overall patent quality, but stakeholders remained concerned about patents with overly broad claims in certain high-tech fields. In response, the USPTO has developed an extensive, multi-phased training program for all examiners and judges focused on evaluating functional claims and improving examination consistency and the clarity of the examination record.  The agency has also conducted extensive stakeholder outreach and engagement to solicit ideas and collect feedback, experiences, and insights on improving patent quality. In the coming weeks the USPTO will launch a pilot program aimed at encouraging the use of clearer language within patent claims through the use of glossaries in patent specifications.

3. Empowering Consumers and Main Street Retailers. Unsuspecting retailers, consumers, small businesses, and other users of products containing patented technology have increasingly found themselves targeted by letters alleging patent infringement and demanding money—even in instances where a small business is using an off-the-shelf product. To help level the playing field and ensure individuals and businesses know their rights and are aware of available resources before entering into costly litigation or settlements, the USPTO is launching today a robust online toolkit of information, available at www.uspto.gov or www.uspto.gov/patentlitigation. This new portal brings together for the first time in one place a wide-ranging, powerful set of patent-relevant tools and information, including answers to commonly asked questions about patent-demand letters and a catalog of third-party sites that users can access to find out, for example, whether the patent has ever been asserted in litigation.

4. Expanding Outreach and Focused Study. Since last June’s announcement, the USPTO has significantly increased its already extensive public outreach efforts to more actively engage key stakeholders in the high-tech community, trade and bar associations, business and university groups, and advocacy organizations, resulting in a wealth of valuable input on patent clarity, transparency, and high-tech patents. The USPTO has also expanded its Thomas Alva Edison Visiting Scholars Program and has now selected three new scholars who will engage in focused study of various aspects of our patent system, to provide insights on how to further reduce unnecessary litigation and improve the quality of issued patents.  This empirical research will help the Administration better understand our current patent system and better inform the development of new ideas and consensus around improvements to patent policies and laws.

5.      Strengthening Exclusion Order Enforcement. When patent-infringing products are banned from importation to the United States, U.S. Customs and Border Protection and the U.S. International Trade Commission are responsible for the application of exclusion orders and determining whether imported products fall within the scope of an order. Implementing these orders presents unique challenges, particularly when a technologically sophisticated product has been redesigned to avoid the order. To address this growing challenge, the U.S. Intellectual Property Enforcement Coordinator has launched a review of the processes and standards used during exclusion order enforcement activities and, in the coming months, will issue recommendations and guidance to executive agencies to improve the efficacy, transparency, and efficiency of exclusion order enforcement activities.

 
 

In addition, the Administration is today committing to sustain the Patents for Humanity Program, which aims to increase the accessibility of the patent system for innovators who are delivering game-changing technologies to address global humanitarian needs. Past award recipients have used their patent portfolios to decrease the price of HIV and malaria drugs, develop more nutritious food sources, bring solar energy to off-grid villages, combat toxic counterfeit drugs, and purify billions of liters of water using inexpensive chemical packets. 

 
 

New Executive Actions Announced Today

1.      Crowdsourcing Prior Art. To determine whether an invention is novel, examiners in the USPTO must find and apply information about the state-of-the-art in the relevant technology. However, documents reflecting this state of knowledge can sometimes be difficult to find and incorporate into the patent-examination process. Today, the USPTO is announcing that it is exploring a series of measures to make it easier for the public to provide information about relevant prior art in patent applications, including by refining its third-party submission program, exploring other ways for the public to submit prior art to the agency, and updating its guidance and training to empower examiners to more effectively use crowd-sourced prior art. This effort will focus on driving valuable contributions to the patent process and to patent quality, strengthening a process that is vital to innovation and economic growth. The USPTO will seek public input on these efforts, as the Administration calls on the public and expert stakeholders to partner with us to encourage the disclosure and sharing of prior art, particularly hard-to-find references.

2.      More Robust Technical Training and Expertise. Patent examiners must be skilled in determining whether a particular application should be granted based upon the state of the art. Building upon its existing “Patent Examiner Technical Training Program,” the USPTO will take steps to make it easier for technologists and engineers from industry and academia to provide relevant, technical training and expertise to patent examiners regarding the state of the art. The Administration is calling upon volunteers to assist in this training effort and ensure that training is systematic, robust, and covers all disciplines. In addition the USPTO is making permanent each of its four regional satellite offices, which will make it even easier for stakeholders to contribute  in-person or virtually from these locations nationwide.  

3.      Patent Pro Bono and Pro Se Assistance. Due to a lack of resources, independent inventors and small businesses sometimes struggle with how to file and prosecute a patent application to protect their invention. The USPTO will be  providing dedicated educational and practical resources to those who lack legal representation (i.e., pro se applicants) and will work with the AIA Pro Bono Advisory Council—and through a newly appointed full-time Pro Bono Coordinator—to expand the existing pro bono program established under the AIA to cover all 50 states. The Administration is calling on members of the patent bar to participate in the program.

 
 

Renewing the President’s State of the Union Call for Legislation to Combat Patent Trolling


The Administration stands ready to work with Congress on these issues, which are crucial to our economy, American jobs, and the Nation’s engine of innovation. Building upon the President’s State of the Union remarks, the Administration urges Congress to pass a bipartisan law designed to curtail abusive patent litigation and improve transparency in the patent system. We are encouraged by Congress’s strong, bipartisan attention to these issues and look forward to working with the Congress and stakeholders to bring this important bipartisan legislation to the President’s desk this year.

Patent Reform 2014: Via Executive Action

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By Dennis Crouch

The White House is expected to announce today (February 20) a round of new patent reform initiatives. This comes eight months after the President announced a set patent reforms via executive action in June of 2013 along with a set of suggested legislative reforms. Today’s announcements are expected to fit within the guidelines outlined in 2013 but will include more particular action items – with special focus on transparency of ownership and clarity of claim scope. President Obama also called for further reforms in his 2014 State of the Union Address.

The meeting is expected to be led by Secretary of Commerce Penny Pritzker who will be joined by the USPTO’s Michelle Lee (Head of the USPTO) and the leading White House patent reformers: Gene Sperling (Director of the National Economic Council), Todd Park (U.S. Chief Technology Officer), and Colleen Chien (White House Senior Advisor for Intellectual Property and Innovation in the OSTP).

The proposed executive actions from 2013 include:

  1. Making “Real Party-in-Interest” the New Default. Patent trolls often set up shell companies to hide their activities and enable their abusive litigation and extraction of settlements. This tactic prevents those facing litigation from knowing the full extent of the patents that their adversaries hold when negotiating settlements, or even knowing connections between multiple trolls. The PTO will begin a rulemaking process to require patent applicants and owners to regularly update ownership information when they are involved in proceedings before the PTO, specifically designating the “ultimate parent entity” in control of the patent or application.
  2. Tightening Functional Claiming. The AIA made important improvements to the examination process and overall patent quality, but stakeholders remain concerned about patents with overly broad claims — particularly in the context of software. The PTO will provide new targeted training to its examiners on scrutiny of functional claims and will, over the next six months develop strategies to improve claim clarity, such as by use of glossaries in patent specifications to assist examiners in the software field.
  3. Empowering Downstream Users. Patent trolls are increasingly targeting Main Street retailers, consumers and other end-users of products containing patented technology — for instance, for using point-of-sale software or a particular business method. End-users should not be subject to lawsuits for simply using a product as intended, and need an easier way to know their rights before entering into costly litigation or settlement. The PTO will publish new education and outreach materials, including an accessible, plain-English web site offering answers to common questions by those facing demands from a possible troll.
  4. Expanding Dedicated Outreach and Study. Challenges to U.S. innovation using tools available in the patent space are particularly dynamic, and require both dedicated attention and meaningful data. Engagement with stakeholders — including patent holders, research institutions, consumer advocates, public interest groups, and the general public — is also an important part of our work moving forward. Roundtables and workshops that the PTO, DOJ, and FTC have held in 2012 have offered invaluable input to this process. We are announcing an expansion of our outreach efforts, including six months of high-profile events across the country to develop new ideas and consensus around updates to patent policies and laws. We are also announcing an expansion of the PTO Edison Scholars Program, which will bring distinguished academic experts to the PTO to develop — and make available to the public — more robust data and research on the issues bearing on abusive litigation.
  5. Strengthen Enforcement Process of Exclusion Orders. Once the U.S. International Trade Commission (ITC) finds a violation of Section 337 and issues an exclusion order barring the importation of infringing goods, Customs and Border Protection (CBP) and the ITC are responsible for determining whether imported articles fall within the scope of the exclusion order. Implementing these orders present unique challenges given these shared responsibilities and the complexity of making this determination, particularly in cases in which a technologically sophisticated product such as a smartphone has been successfully redesigned to not fall within the scope of the exclusion order. To address this concern, the U.S. Intellectual Property Enforcement Coordinator will launch an interagency review of existing procedures that CBP and the ITC use to evaluate the scope of exclusion orders and work to ensure the process and standards utilized during exclusion order enforcement activities are transparent, effective, and efficient.

Proposed Rules: Identify the True Owner on Pain of Abandonment

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By Dennis Crouch

In one of her first acts as de facto USPTO Director, Michelle Lee has proposed a new set of rules associated with patent assignment recordation. The proposal is quite complicated (occupying 18,000 words in the Federal Register) but the general idea is (1) that information regarding who owns which patents should be available to the public; (2) some rights-holders have been taking steps to hide their identity; and therefore (3) the USPTO proposes to require greater transparency. Although the proposal is signed by Deputy Director Lee, it was a White House initiative well before she took office.

The Office is proposing … to require that the attributable owner, including the ultimate parent entity, be identified … on filing of an application (or shortly thereafter), when there is a change in the attributable owner during the pendency of an application, at the time of issue fee and maintenance fee payments, and when a patent is involved in supplemental examination, ex parte reexamination, or a trial proceeding before the Patent Trial and Appeal Board (PTAB). The Office is also seeking comments on whether the Office should enable patent applicants and owners to voluntarily report licensing offers and related information to the Office, which the Office will then make available to the public in an accessible online format.

The recordation requirement would be retroactive and apply to all live patents and patent applications. However, the USPTO suggests that “most additional reporting will need to be done by companies that have complicated corporate structures and licenses, which often include the complex structures used by certain patent assertion entities (“PAEs”) to hide their true identities from the public.” The proposed penalty for failure to comply would have some teeth: abandonment.

Comments on the proposed rules are due by March 25, 2014 and can be emailed directly to: AC90.comments@uspto.gov. The review is being spearheaded by James Engel and Erin Harriman who are attorney advisors in the Office of Patent Legal Administration (OPLA).

Why: Before getting into the details of the proposal, we might pause to consider why the USPTO is proposing this new requirement. The USPTO identifies several potential benefits of a more complete ownership record. According to the USPTO, enhanced assignment information will:

  • “[A]llow [competitors] to better understand the competitive environment in which they operate.”
  • “[E]nhance technology transfer and reduce the costs of transactions for patent rights since patent ownership information will be more readily and easily accessible.”
  • “[R]educe risk of abusive patent litigation by helping the public defend itself against such abusive assertions by providing more information about all the parties that have an interest in patents or patent applications.”

In addition to these public benefits, the USPTO argues that the assignment information will help the office in several ways, such as avoiding conflicts of interest and better identifying double-patenting problems.

The key issues regarding the rules are (1) which rights-holders must be named? (2) Under what circumstances must a parent-entity be named? (3) What is the timeline for providing information to the USPTO? And (4) what would be the consequences for failure to fully comply with the regulations.

Who is an Attributable Owner?: In my 1L property law class, we discuss all sorts of way that property rights can be divided amongst present and future interest holders; lienholders; easement holders; those with equitable rather than legal title; etc. The proposed requirement here identifies three particular class of rights-holders who will be required to record their interest: (1) titleholders (someone who has been assigned title); (2) those with rights-of-enforcement (such as exclusive licensees or others that would be a necessary party to an enforcement action); and (3) entities created in order to temporarily divest (or prevent vesting) of title or enforcement rights (such as a trust, proxy, etc.). One difficulty here is that patent ownership interests are defined by a mixture of local law (state and/or foreign) and federal law. It is quite difficult to create a simple rule that fits to each of the hundreds of potential local jurisdictional mechanisms of operation.

Parent Entities: In addition to the attributable owner, the law would also require the recordation of any “ultimate parent entity” of any of the attributable owners. As a term of art, ultimate parent entity is already defined by 16 CFR 801.1(a)(3) and the USPTO is intending to follow that approach. Chapter 16 of the CFR generally relates to commercial practices and is promulgated by the Federal Trade Commission (FTC). The definition is as follows: “The term ultimate parent entity means an entity which is not controlled by any other entity.” The CFR provides the following three examples:

1. If corporation A holds 100 percent of the stock of subsidiary B, and B holds 75 percent of the stock of its subsidiary C, corporation A is the ultimate parent entity, since it controls subsidiary B directly and subsidiary C indirectly, and since it is the entity within the person which is not controlled by any other entity.

2. If corporation A is controlled by natural person D, natural person D is the ultimate parent entity.

3. P and Q are the ultimate parent entities within persons “P” and “Q.” If P and Q each own 50 percent of the voting securities of R, then P and Q are both ultimate parents of R, and R is part of both persons “P” and “Q.”

Although not clear from the definition, there is an idea that a parent entity must exhibit some amount of control over the subsidiary. One purpose here is to identify “hidden beneficial owners.”

Penalty for Failure to Comply: Abandonment.

Read the Rules and Comment: 79 FR 4105 (2014).

Nazomi v. Nokia

Patent, ,

By Jason Rantanen

Nazomi Communications, Inc. v. Nokia Corp. (Fed. Cir. 2014) Download 13-1165.Opinion.1-8-2014.1
Panel: Lourie (concurring), Dyk (author), Wallach

Nazomi is a small software and semiconductor development company that sued a set of large technology companies for patent infringement in a series of lawsuits.  This appeal involved the district court's initial claim construction order in one of these suits and its grant of summary judgment of noninfringement in favor of Western Digital and Sling Media. 

Two of Nazomi's patents were at issue in this appeal: Nos. 7,225,436 and 7,080,362.  During the district court proceeding, the defendants moved for a "preliminary" construction of the asserted claims, arguing that all the claims "require that the processor of the claimed apparatus, when operated, will perform the recited functions related to the processing of stack-based instructions without modification."  The court analyzed the issue in the context of representative claim 48 of the '362 patent

48. A central processing unit (CPU) capable of executing a plurality of instruction sets comprising:

an execution unit and associated register file, the execution unit to execute instructions of a plurality of instruction sets, including a stack based and a register-based instruction set;

a mechanism to maintain at least some data for the plurality of instruction sets in the register file, including maintaining an operand stack for the stack-based instructions in the register file and an indication of a depth of the operand stack;

a stack control mechanism that includes at least one of an overflow and underflow mechanism, wherein at least some of the operands are moved between the register file and memory; and

a mechanism to generate an exception in respect of selected stack-based instructions.

Nazomi contended that the claim required only hardware that was capable of performing the claimed functionalities (here, indicated by italics). The district court concluded, however, that the asserted claims required a combination of hardware and software capable of performing the functional limitations.

To understand why this distinction matters, some background in the defendants' products is useful.  Western Digital and Sling Media use a processor designed by another company, ARM.  In 2000, ARM developed a design involving a hardware component called "Jazelle."  However, recognizing that not every product would use every circuitry feature in its processors, ARM also designed its processors so that unused functionality would remain dormant unless activated (and thus not unnecessarily drain resources).  In order to activate the Jazelle circuitry, it is necessary to first install a software package called "JTEK."  In both the accused Western Digital and Sling Media products, Jazelle is dormant and there was no evidence that any end user had installed JTEK.  Nazomi's argument, however, was that Jazelle's presence in the accused products was sufficient sufficient for a finding of infringement (i.e.: hardware "capable").

On appeal, the Federal Circuit agreed with the district court's construction as requiring both hardware and software.  It reasoned that because hardware cannot meet the functional limitations in the absence of enabling software, "the claims are properly construed as claiming an apparatus comprising a combination of hardware and software capable of practicing the claim limitations."  (my emphasis).  In reaching this conclusion, it distinguished cases involving "programmable" language, such as Intel Corporation v. U.S. International Trade Commission, 946 F.2d 821, 832 (Fed. Cir. 1991).  Here, the claims did not merely cover hardware that could be programmed to perform the claimed functionality; they required that the processor be capable of executing the stated instruction sets.  Since hardware alone cannot do that in the absence of enabling software, the only possibility was that the claims required both hardware and software.  

The panel also affirmed the district court's grant of summary judgment of noninfringement (Judge Lourie agreed with outcome, but did not join as to the bulk of the court's reasoning), drawing on precedent that "“an apparatus claim directed to a computer that is claimed in functional terms is nonetheless infringed so long as the product is designed in such a way as to enable the user of that [product] to utilize the function without having to modify the product.”  Silicon Graphics, Inc. v. ATI Technologies, Inc., 607 F.3d 784, 794 (Fed. Cir. 2010).  The critical issue was thus whether the installation of the JTEK software would constitute a "modification" of the accused product. 

The Federal Circuit concluded that installation of the software would constitute a modification because in the asserted claims the software is part of the claimed structure.  In other words, this is not a case where the software component already resided on the hardware and could be unlocked by using a key, or where the claims recited programable software that also resided on the hardware.  Rather, the software was a necessary structural component of the claimed invention and its addition would constitute the addition of functionality that is not currently present.

Is Software Patentable?: Supreme Court to Decide

Patent, ,

By Dennis Crouch

50-years on, we still don’t have the answer as to whether computer programs are patentable.

The Supreme Court has granted a writ of certiorari in the software patent case of ALICE CORPORATION PTY. LTD. V. CLS BANK INTERNATIONAL, ET AL., Docket No. 13-298 (Supreme Court 2013). The Australian patent holder Alice Corp presented the following question:

Issue: Whether claims to computer-implemented inventions – including claims to systems and machines, processes, and items of manufacture – are directed to patent-eligible subject matter within the meaning of 35 U.S.C. § 101 as interpreted by this Court.

In a highly fractured en banc decision, the Federal Circuit determined that Alice Corp’s claims lacked eligibility. Because none of the opinions in the decision carried a majority, the result was that the Federal Circuit only added confusion to the area.

Alice Corp’s Patent No. 7,725,375 covers software for managing the risk associated with an online transaction essentially by using an electronic escrow service. Claim 26 recites how the system would work:

26. A data processing system to enable the exchange of an obligation between parties, the system comprising:

a communications controller,

a first party device, coupled to said communications controller,

a data storage unit having stored therein (a) information about a first account for a first party, independent from a second account maintained by a first exchange institution, and (b) information about a third account for a second party, independent from a fourth account maintained by a second exchange institution; and

a computer, coupled to said data storage unit and said communications controller, that is configured to (a) receive a transaction from said first party device via said communications controller; (b) electronically adjust said first account and said third account in order to effect an exchange obligation arising from said transaction between said first party and said second party after ensuring that said first party and/or said second party have adequate value in said first account and/or said third account, respectively; and (c) generate an instruction to said first exchange institution and/or said second exchange institution to adjust said second account and/or said fourth account in accordance with the adjustment of said first account and/or said third account, wherein said instruction being an irrevocable, time invariant obligation placed on said first exchange institution and/or said second exchange institution.

The patent also claims “a computer program” for accomplishing the same result.

IP Law Professors Rise-Up Against Patent Assertion Entities

Patent, , , ,

By Dennis Crouch

A group of sixty US intellectual property law professors have signed a letter to Congress supporting anti-troll patent reform legislation. This effort was driven by Professor Love of Santa Clara and is also signed by Professors Bessen, Goldman, Ghosh, Lemley, Meurer, Samuelson, Sprigman, and others. [Download ProfessorsLetterOnTrolls].

A key introductory line from the letter:

Despite our differences, we all share concern that an increasing number of patent owners are taking advantage of weaknesses in the system to exploit their rights in ways that on net deter, rather than encourage, the development of new technology.

The basic argument is that patent litigation is expensive and frontloaded in such a way that "creates an opportunity for abuse" because early-state settlement is focused more on the cost of litigation rather than the value of the patent or its underlying technology. And, it is the recent "rise of patent assertion entities" that has "disrupted [the] delicate balance" of the patent system.

The professors propose the following six general reforms:

  1. To discourage weak claims of patent infringement brought at least in part for nuisance value, we recommend an increase in the frequency of attorneys' fee awards to accused patent infringers who choose to fight, rather than settle, and ultimately defeat the infringement allegations levelled against them.
  2. To reduce the size and front-loaded nature of patent litigation costs, we recommend limitations on the scope of discovery in patent cases prior to the issuance of a claim construction order, particularly with respect to the discovery of electronic materials like software source code, emails, and other electronic communications.
  3. To further protect innocent retailers and end-users that are particularly vulnerable to litigation cost hold-up, we recommend that courts begin to stay suits filed against parties that simply sell or use allegedly infringing technology until after the conclusion of parallel litigation between the patentee and the technology's manufacturer.
  4. To facilitate the early adjudication of patent infringement suits, we recommend that patentees be required to plead their infringement allegations with greater specificity.
  5. [To increase transparency and confidence in the market for patent licensing, we recommend that Congress require] patentees … to disclose and keep up-to-date the identity of parties with an ownership stake or other direct financial interest in their patent rights.
  6. [To increase transparency and confidence in the market for patent licensing, we recommend that] Congress consider additional legislation designed to deter fraudulent, misleading, or otherwise abusive patent licensing demands made outside of court.

Without a doubt, there is merit to the professors' case, although I bristle at the letter's broad-brush statements and overt stance that is pro-large-corporate-entity. I have a few thoughts regarding the specific suggestions:

(1): Anti-plaintiff fee shifting will have the obvious impact of altering the availability of contingency-fee counsel which may be the motivation of the suggestion. One problem is that almost every patent in litigation is amenable to a good-faith challenge on either invalidity or non-infringement grounds. Predicting winners and losers is a difficult prospect and this gives me little faith that the fee-shifting proposal will primarily target low-quality claims but instead will target risk-averse plaintiffs. The professors' suggestion here to reward non-settlement does not provide me with any confidence that overall litigation costs will be reduced. On the other hand, this proposal (especially if focused on invalidating patents) could serve as something like a bounty for attorneys to challenge bad patents and, as a consequence, would lessen the free-rider problem associated with a single company challenging a patent that is also being asserted against competitors.

(2) & (4): I agree that there is plenty room for reducing discovery costs and for raising pleading requirements without substantially harming patentee rights. However, one problem for both software and method patents is that some forms of infringement are difficult to truly pin-down absent discovery. Some work must be done on any particular proposals to ensure that the result is not a clear pathway unactionable infringement.

(3) Regarding customer lawsuits, we have a difficulty in line drawing because, for the most part, these are not simply customer lawsuits. Rather, the patents being asserted cover particular methods or systems that take advantage of a particular device on-the-market (such as a wireless router or flat-panel television). In this situation, the differences are such that the manufacturer and retailer typically refuse to honor their implied warrantee that the good is "free of the rightful claim … of infringement or the like." UCC 2-312(3). And so, the question is whether these use cases will fit within the definition. One reason for the downstream lawsuits is that downstreamers typically value the technology more than upstreamers with the result of greater damage award. (We know the downstreamers valued it more because they purchased it from the upstreamers). Since the exhaustion doctrine only allows a patentee to recoup at one point in the stream-of-commerce, it makes sense that they would focus on the highest valued user.

= = = = =

Text of the letter:

To Members of the United States Congress:

We, the undersigned, are 60 professors from 26 states and the District of Columbia who teach and write about intellectual property law and policy. We write to you today to express our support for ongoing efforts to pass patent reform legislation that, we believe, will improve our nation's patent system and accelerate the pace of innovation in our country.

As a group we hold a diversity of views on the ideal structure and scope of our nation's intellectual property laws. Despite our differences, we all share concern that an increasing number of patent owners are taking advantage of weaknesses in the system to exploit their rights in ways that on net deter, rather than encourage, the development of new technology.

Several trends, each unmistakable and well supported by empirical evidence, fuel our concern. First, the cost of defending against patent infringement allegations is high and rising. The American Intellectual Property Law Association estimates that the median cost of litigating a moderately-sized patent suit is now $2.6 million, an amount that has increased over 70% since 2001. These and other surveys suggest that the expense of defending even a low-stakes patent suit will generally exceed $600,000. Moreover, the bulk of these expenses are incurred during the discovery phase of litigation, before the party accused of infringement has an opportunity to test the merits of the claims made against it in front of a judge or jury.

The magnitude and front-loaded nature of patent litigation expenses creates an opportunity for abuse. Patent holders can file suit and quickly impose large discovery costs on their opponents regardless of the validity of their patent rights and the merits of their infringement allegations. Companies accused of infringement, thus, have a strong incentive to fold and settle patent suits early, even when they believe the claims against them are meritless.

Historically, this problem has largely been a self-correcting one. In suits between product-producing technology companies, the party accused of infringement can file a counterclaim and impose a roughly equal amount of discovery costs on the plaintiff. The costs, though high, are symmetrical and, as a result, tend to encourage technology companies to compete in the marketplace with their products and prices, rather than in the courtroom with their patents.

In recent years, however, a second trend – the rise of "patent assertion entities" (PAEs) – has disrupted this delicate balance, making the high cost of patent litigation even more problematic. PAEs are businesses that do not make or sell products, but rather specialize in enforcing patent rights. Because PAEs do not make or sell any products of their own, they cannot be countersued for infringement. As a result, PAEs can use the high cost of patent litigation to their advantage. They can sue, threaten to impose large discovery costs that overwhelmingly fall on the accused infringer, and thereby extract settlements from their targets that primarily reflect a desire to avoid the cost of fighting, rather than the chance and consequences of actually losing the suit.

To be sure, PAEs can in theory play a beneficial role in the market for innovation and some undoubtedly do. However, empirical evidence strongly suggests that many PAEs have a net negative impact on innovation. Technology companies – which, themselves, are innovators – spend tens of billions of dollars every year litigating and settling lawsuits filed by PAEs, funds that these tech companies might otherwise spend on additional research and design. Surveys also reveal that a large percentage of these suits settle for less than the cost of fighting, and multiple empirical studies conclude that PAEs lose about nine out of every ten times when their claims are actually adjudicated on their merits before a judge or jury.

The impact of these suits is made more troubling by the fact that PAE activity appears to be on the rise. Empirical studies suggest that at least 40%, and perhaps as high as 59% or more, of all companies sued for patent infringement in recent years were sued by PAEs. PAE suits were relatively rare more than a decade ago, and they remain relatively rare today elsewhere in the world.

More worrisome than these bare statistics is the fact that PAEs are increasingly targeting not large tech firms, but rather small business well outside the tech sector. Studies suggest that the majority of companies targeted by PAEs in recent years earn less than $10 million in annual revenue.

When PAEs target the numerous small companies downstream in the supply chain, rather than large technology manufacturers upstream, they benefit in two ways. First, for every product manufacturer, there may be dozens or hundreds of retailers who sell the product, and hundreds or thousands of customers who purchase and use the technology. Patent law allows patent owners to sue makers, sellers, or users. Suing sellers or users means more individual targets; some PAEs have sued hundreds of individual companies. And, more targets means more lawyers, more case filings, more discovery, and thus more litigation costs overall to induce a larger total settlement amount.

Second, compared to large manufacturers, small companies like retailers are less familiar with patent law, are less familiar with the accused technology, have smaller litigation budgets, and thus are more likely to settle instead of fight. In fact, many small businesses fear patent litigation to such an extent that they are willing to pay to settle vague infringement allegations made in lawyers' letters sent from unknown companies. Like spammers, some patent owners have indiscriminately sent thousands of demand letters to small businesses, with little or no intent of actually filing suit but instead with hopes that at least a few will pay to avoid the risk.

This egregious practice in particular, but also all abusive patent enforcement to some extent, thrives due to a lack of reliable information about patent rights. Brazen patent owners have been known to assert patents they actually do not own or, conversely, to go to great lengths to hide the fact that they actually do own patents being used in abusive ways. Some patent owners have also sought double recovery by accusing companies selling or using products made by manufacturers that already paid to license the asserted patent. Still others have threatened or initiated litigation without first disclosing any specific information about how, if at all, their targets arguably infringe the asserted patents.

In short, high litigation costs and a widespread lack of transparency in the patent system together make abusive patent enforcement a common occurrence both in and outside the technology sector. As a result, billions of dollars that might otherwise be used to hire and retain employees, to improve existing products, and to launch new products are, instead, diverted to socially wasteful litigation.

Accordingly, we believe that the U.S. patent system would benefit from at least the following six reforms, which together will help reduce the cost of patent litigation and expose abusive practices without degrading inventors' ability to protect genuine, valuable innovations:

  1. To discourage weak claims of patent infringement brought at least in part for nuisance value, we recommend an increase in the frequency of attorneys' fee awards to accused patent infringers who choose to fight, rather than settle, and ultimately defeat the infringement allegations levelled against them.
  2. To reduce the size and front-loaded nature of patent litigation costs, we recommend limitations on the scope of discovery in patent cases prior to the issuance of a claim construction order, particularly with respect to the discovery of electronic materials like software source code, emails, and other electronic communications.
  3. To further protect innocent retailers and end-users that are particularly vulnerable to litigation cost hold-up, we recommend that courts begin to stay suits filed against parties that simply sell or use allegedly infringing technology until after the conclusion of parallel litigation between the patentee and the technology's manufacturer.
  4. To facilitate the early adjudication of patent infringement suits, we recommend that patentees be required to plead their infringement allegations with greater specificity.

And finally, to increase transparency and confidence in the market for patent licensing, we recommend:

  1. that patentees be required to disclose and keep up-to-date the identity of parties with an ownership stake or other direct financial interest in their patent rights, and
  2. that Congress consider additional legislation designed to deter fraudulent, misleading, or otherwise abusive patent licensing demands made outside of court.

In closing, we also wish to stress that as scholars and researchers we have no direct financial stake in the outcome of legislative efforts to reform our patent laws. We do not write on behalf of any specific industry or trade association. Rather, we are motivated solely by our own convictions informed by years of study and research that the above proposals will on net advance the best interests of our country as a whole. We urge you to enact them.

Sincerely,

John R. Allison (Texas); Clark D. Asay (Penn State); Jonathan Askin (Brooklyn); Gaia Bernstein (Seton Hall); James E. Bessen (BU); Jeremy W. Bock (Memphis); Annemarie Bridy (Idaho); Irene Calboli (Marquette); Michael A. Carrier (Rutgers); Bernard Chao (Denver); Andrew Chin (UNC); Ralph D. Clifford (UMass); Jorge L. Contreras (American); Rebecca Curtin (Suffolk); Samuel F. Ernst (Chapman); Robin Feldman (Hastings); William T. Gallagher (Golden Gate); Jon M. Garon (Northern Kentucky); Shubha Ghosh (Wisconsin); Eric Goldman (Santa Clara); Leah Chan Grinvald (Suffolk); Debora J. Halbert (Hawaii); Bronwyn H. Hall (Berkeley); Yaniv Heled (Georgia State); Christian Helmers (Santa Clara School of Business); Sapna Kumar (Houston); Mary LaFrance (UNLV); Peter Lee (Davis); Mark A. Lemley (Stanford); Yvette Joy Liebesman (SLU); Lee Ann W. Lockridge (LSU); Brian J. Love (Santa Clara); Glynn S. Lunney, Jr. (Tulane); Phil Malone (Stanford); Mark P. McKenna (Notre Dame); Michael J. Meurer (BU); Joseph Scott Miller (Georgia); Fiona M. Scott Morton (Yale); Lateef Mtima (Howard); Ira Steven Nathenson (St. Thomas); Laura Lee Norris (Santa Clara); Tyler T. Ochoa (Santa Clara); Sean A. Pager (Michigan State); Cheryl B. Preston (BYU); Jorge R. Roig (Charleston); Jacob H. Rooksby (Duquesne); Brian Rowe (Seattle); Matthew Sag (Loyola Chicago); Pamela Samuelson (Berkeley); Jason Schultz (NYU); Christopher B. Seaman (W&L); Carl Shapiro (Berkeley); Lea Shaver (Indiana); Jessica Silbey (Suffolk); Christopher Jon Sprigman (NYU); Madhavi Sunder (Davis); Toshiko Takenaka (Washington); Sarah Tran (SMU); Jennifer M. Urban (Berkeley); Samson Vermont (Charlotte)

Summary of Oral Argument in Medtronic v. Boston Scientific by Prof. La Belle

Patent,

Guest Post by Megan M. La Belle, Assistant Professor at Catholic University of America, Columbus School of Law

Yesterday, the Supreme Court heard oral argument in Medtronic v. Boston Scientific, the first patent case of the term.  The issue before the Court is whether the burden of proof in a declaratory judgment action should be on the patent owner to prove infringement or on the accused infringer to prove noninfringement.  Ordinarily, the patent owner bears the burden of proving infringement, and the declaratory posture of a suit does not shift that burden.  In Medtronic, however, the Federal Circuit created an exception for “MedImmune-type” cases since the patent owner cannot counterclaim for infringement.  “Because the declaratory judgment plaintiff is the only party seeking the aid of the court,” the Federal Circuit reasoned, it should bear the burden of proving noninfringement.

Seth Waxman, on behalf of Medtronic, started his argument with the non-controversial proposition that patent law places the burden of proving infringement on the patent owner.  Mr. Waxman went on to argue that the burden should not shift when the infringement question is raised in a declaratory judgment action –  including MedImmune-type suits – because the Declaratory Judgment Act is merely a procedural device that does not alter substantive rights.  For the most part, the justices appeared to agree with Mr. Waxman.  However, a few questions were raised by Chief Justice Roberts, Justice Kagan, and Justice Kennedy about the fairness of allowing an accused infringer to enter into a license and then turn around and sue the patent owner for declaratory relief.  In the Chief Justice’s words: “The idea is you’re moving along with the license, everybody’s happy.  All of a sudden you jump into court.  Why shouldn’t you have the burden as the party who seeks to disturb the status quo?”

Both Mr. Waxman and Curtis Gannon, arguing on behalf of the government as amicus curiae, addressed these questions of potential unfairness to the patent owner.  They asserted that shifting the burden of proof was not the appropriate way to address the problem.  Mr. Waxman suggested, instead, that patent owners could take certain steps to protect themselves, for instance by including specific contractual provisions in the license that contemplate a declaratory judgment action by the licensee.  Mr. Waxman proposed a number of possible license provisions, including one that would increase the royalty rate if the accused infringer brings a declaratory judgment action, or a provision that makes the filing of a declaratory judgment action a breach of the license agreement.  Mr. Gannon agreed with Mr. Waxman, and made one additional point.  He said this problem of potential unfairness to the patent owner – assuming it is a problem – should be addressed by estoppel, not by shifting the burden of proof:

But even if there were some concern about the licensee turning around and challenging the agreement that it had previously made, it seems like the problem there is either that they should be estopped by what they already said in the agreement or Lear [v. Adkins] needs to be extended to keep them from being estopped in that way.  But shifting the burden of proof seems like an odd way to get at solving whatever the quandary there might be.       

The looming question since MedImmune is whether Lear allows patent owners to “license around” this problem as suggested, or whether such provisions undermine Lear’s policy of encouraging patent challenges.  Unfortunately, Medtronic is unlikely to answer that question, so licensing parties will to continue to wonder if these types of provisions are in fact valid and enforceable.

            Arguing on behalf of the patent owner, Mirowski Family Ventures, Arthur Neustadt defended the Federal Circuit’s decision in Medtronic.  Mr. Neustadt contended that the Federal Circuit correctly applied the “default rule,” which allocates the burden of proof to the party seeking relief.  Because Medtronic was the only party seeking relief in this case, Mr. Neustadt reasoned, it should bear the burden of proving noninfringement.  Justice Scalia began the questioning by stating that this default rule generally doesn’t apply to declaratory judgment actions.  So, Justice Scalia asked, “[w]hat’s different here?”  Mr. Neustadt responded that this case is different because the patent owner could not assert a counterclaim for infringement due to the license.  Justice Scalia was not persuaded by that argument because, as he explained, defendants in declaratory judgment actions often cannot counterclaim:

The whole purpose of the declaratory judgment statute is to enable you to sue before the other side has a cause of action against you.  That’s the whole purpose of it.  So – so why should the fact that the other side doesn’t have a counterclaim change anything?  That’s usually the situation.

Following up on this line of questioning, Justice Ginsburg asked whether Mr. Neustadt was saying that the burden of proof should shift in every declaratory judgment action where only one party is seeking relief.  Mr. Neustadt confirmed that that was his position; in his view, the burden shifting rule established in Medtronic should not be limited to patent cases.  This question of how far the Medtronic rule might extend is also explored in an essay I recently published.

            Throughout his argument, Mr. Neustadt made the point that this isn’t a dispute about infringement, it’s a dispute about claim coverage under the license agreement.  In other words, because there’s a license in place, Medtronic cannot be infringing the patent.  The justices seemed to think this was a distinction without a difference, however.  At one point Justice Breyer said: “[Y]ou want to call that a claim coverage.  I would call it no infringement.  Call it what you wish.”  Later in the argument, Justice Kagan disagreed with Mr. Neustadt’s characterization more directly: “You keep on saying it’s a question of claim coverage, but the question of claim coverage, all that is, is part of an infringement analysis.”  

            One issue the Court did not ask many questions about at oral argument was subject matter jurisdiction.  While subject matter jurisdiction was not raised by the parties, an amicus brief filed by Tessera Technologies argued that the case does not arise under the patent laws because it’s really a contractual royalty dispute, not a dispute about patent infringement.  Tessera relied heavily on the Supreme Court’s recent decision in Gunn v. Minton, which concerned the question of jurisdiction over patent malpractice actions.  Yet, at yesterday’s argument, the only question raised on the topic was by Justice Ginsburg who asked the government for its views on subject matter jurisdiction.    Mr. Gannon stated that the government believes this case arises under the patent laws.  He explained that, in declaratory judgment actions, subject matter jurisdiction is determined by considering what claims would be asserted in the hypothetical coercive action brought against Medtronic.  In other words, if Medtronic were to stop paying royalties and breach its license agreement, the patent owner would sue not only for breach of contract, but for patent infringement as well.   Although the Court did not devote much time to subject matter jurisdiction, the issue was discussed at some length at a post-argument discussion hosted yesterday afternoon by the American University Washington College of Law.  It will be interesting to see to what extent the Court addresses this jurisdictional question in its final decision.

A copy of the full transcript is available here.

The Court is expected to issue its decision before the end of June 2014. 

 

A short observation about Ultramercial v. Hulu

Ethics

An off-topic early morning rant.

I teach civil procedure (and ethics, and patent law), and I'm just boggled by some of the amici briefs (I haven't read the petition for cert itself) in Ultramercial v. Hulu.  The case involved the appeal of a 12(b)(6) dismissal.  That requires that, on the face of the patent itself there is clear and convincing evidence the patent was invalid.  (Why?  If 101 matters at all, then it is a basis for invalidity, and so an affirmative defense, and so under long-standing case law, the patentee has to "plead into" the affirmative defense.  Here, that means the patent alone must show clear and convincing evidence of "invalidity" under 101.)

The burden is actually even higher than that.  At the start of Ultramercial, the court wrote:  

Further, if Rule 12(b)(6) is used to assert an affirmative defense, dismissal is appropriate only if the well-pleaded factual allegations in the complaint, construed in the light most favorable to the plaintiff, suffice to establish the defense.See Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 555 (2007); Jones v. Bock, 549 U.S. 199, 215 (2007). Thus, the only plausible reading of the patent must be that there is clear and convincing evidence of ineligibility. For those reasons, Rule 12(b)(6) dismissal for lack of eligible subject matter will be the exception, not the rule.

So… how can you ever grant a 12(b)(6) motion granted with that standard?  Imagine a court saying "as a matter of law there is clear and convincing evidence that there is no plausible way this patent is enabled" without considering anything but the patent. 

So, with that background , what is really, um, peculiar to me is lawyers putting in amicus briefs with "evidence" in the appendix about how the claim could be done in 16 lines of code.  One is here.  If one of my civ pro students in their first semester said this was proper, they'd get a zero on that answer.

So, whatever the merits of this patent, I'll bet a metaphorical dollar that the Supreme Court will take one look and say, "12(b)(6)?  cert denied."

But then again, it's early and I've only had one cup of coffee.  So tell me what I'm missing.

What is an Exceptional Case such that Court Should Award Attorney Fees?

Attorney Fees, Fee Shifting, Patent, , ,

By Dennis Crouch

Earlier this week, I commented on the two attorney-fees cases pending before the US Supreme Court:

  • Octane Fitness, LLC v. ICON Health & Fitness, Inc., Docket No. 12-1184; and
  • Highmark Inc. v. Allcare Health Management Sys., Docket No. 121163.

Both cases stem from the same perspective that the “exceptional case” requirement for attorney fees is too narrowly construed by the courts and especially by the Federal Circuit. See 35 U.S.C. § 285.

I noted in the prior post that the predecessor of Section 285 was first enacted in a 1946 Patent bill. The 1946 law was substantially similar to the current law (enacted in 1952) with the major difference that the 1946 act expressly gave the court “discretion” to award attorney fees to the prevailing party while the 1952 act removed that “discretion” term and instead indicated that the fee may be awarded “in exceptional cases.”

The Senate Report associated with the 1946 statute indicates that the statute is not intended to make fee awards an “ordinary thing in patent suits” but instead to reserve such awards for “gross injustice.”

It is not contemplated that the recovery of attorney’s fees will become an ordinary thing in patent suits, but the discretion given the court in this respect, in addition to the present discretion to award triple damages, will discourage infringement of a patent by anyone thinking that all he would be required to pay if he loses the suit would be a royalty. The provision is also made general so as to enable the court to prevent a gross injustice to an alleged infringer.

S. Rep. No. 1503, 79th Cong., 2d Sess. (1946), reprinted in 1946 U.S. Code Cong. Serv. 1386, 1387.

When the 1952 act was passed, the House Committee Report briefly mentioned the “exceptional case” amendment to the statute – indicating that the phrase “‘in exceptional cases’ has been added as expressing the intention of the present statute as shown by its legislative history and as interpreted by the courts.”

In several cases, the Federal Circuit has considered the standard and, after some debate, decided in Eltech Systems Corp. v. PPG Industries, Inc., 903 F.2d 805 (Fed. Cir. 1990), that the exceptional case standard should be the same for both prevailing plaintiffs and for prevailing defendants – writing: “we now reach the question and determine that there is and should be no difference in the standards applicable to patentees and infringers who engage in bad faith litigation.” The Eltech Systems case was then cited positively by the Supreme Court in Fogerty v. Fantasy, 510 U.S. 517 (1994) as justification for a party-neutral approach to fee shifting in copyright cases.

We note that the federal fee-shifting statutes in the patent and trademark fields, which are more closely related to that of copyright, support a party-neutral approach. Those statutes contain language similar to that of [17 U.S.C.] § 505, with the added proviso that fees are only to be awarded in “exceptional cases.” 35 U.S.C. § 285 (patent) (“The court in exceptional cases may award reasonable attorney fees to the prevailing party”); 15 U.S.C. § 1117 (trademark) (same). Consistent with the party-neutral language, courts have generally awarded attorney’s fees in an evenhanded manner based on the same criteria. For patent, see, e.g., Eltech Systems Corp. v. PPG Industries, Inc., 903 F.2d 805, 811 (Fed. Cir. 1990) (“[T]here is and should be no difference in the standards applicable to patentees and infringers who engage in bad faith litigation”). For trademark, see, e.g., Motown Productions, Inc. v. Cacomm, Inc., 849 F.2d 781, 786 (2nd Cir. 1988) (exceptional circumstances include cases in which losing party prosecuted or defended action in bad faith); but see Scotch Whisky Assn. v. Majestic Distilling Co., 958 F.2d 594 (4th Cir.) (finding in the legislative history that prevailing defendants are to be treated more favorably than prevailing plaintiffs), cert. denied, 506 U.S. 862 (1992).

Fogerty at note 12.

Of course, the problem with a party-neutral approach is that it can only be applied at a certain high level of granularity or abstractness. Since patentees and accused infringers make systematically different argument and have systematically different strategies, the particular causes of exceptional case findings tends to be different. Thus, losing infringers most often pay fees based upon ongoing willful and reckless infringement while losing patentees most often pay fees for suing on patent obtained through inequitable conduct or for bringing baseless lawsuits. At that low level of granularity, the differences are such that it is difficult to compare whether a party-neutral approach is being applied.

Notes:

Thanks to John Pinkerton at Thompson & Knight for providing me with this legislative history from the 1946 Act.

Is “Insolubly Ambiguous” the Correct Standard for Indefiniteness?

Indefinite, Patent, , , ,

By Dennis Crouch

Nautilus v. Biosig Inst. (on petition for writ of certiorari 2013)

A major focus of attention in the current arena of patent reform is on the notice function of patent claims and, in particularly, the standard for definiteness. Most of the time, the scope of a patent's coverage is only known once a district court construes those claims. And, in many cases, that knowledge is really delayed until Federal Circuit review. A substantial portion of the blame in this area can be placed on patentees who intentionally draft claims of ambiguous scope. Of course, the Supreme Court has long recognized the policy benefits of allowing ambiguity in patent coverage. (See, Doctrine of Equivalents). Most technology users would prefer to understand the scope of claims before litigation and use that information to decide whether to obtain a license. However, the ambiguity (in combination with other factors) lead to the common practice of holding-out until a court construes the claims.

For indefinite claims, the statutory guidelines come from 35 U.S.C. § 112(b) that requires claims that "particularly point[] out and distinctly claim[] the subject matter which the inventor … regards as the invention." The doctrine of indefiniteness finds its statutory support from §112(b). And, when a claim is indefinite it is both unpatentable and invalid.

Once a patent issues, it tends to be quite difficult to invalidate that patent on indefiniteness grounds. The difficulty begins with the statutory presumption of validity under § 282 that requires clear and convincing evidence of invalidity. That difficulty continues with the standard for indefiniteness itself. In particular, the Federal Circuit has required that invalidity by indefiniteness requires proof that the challenged claim is ambiguous in a way that is "insoluble." In Biosig, the Federal Circuit similarly held that indefiniteness of an issued claim can only be found "if reasonable efforts at claim construction result in a definition that does not provide sufficient particularity and clarity to inform skilled artisans of the bounds of the claim."

In a new petition, John Vandenberg's team at Klarquist Sparkman has asked the Supreme Court to reconsider the Federal Circuit's standard on this point. Nautilus presents the following questions:

1. Does the Federal Circuit's acceptance of ambiguous patent claims with multiple reasonable interpretations—so long as the ambiguity is not "insoluble" by a court—defeat the statutory requirement of particular and distinct patent claiming?

2. Does the presumption of validity dilute the requirement of particular and distinct patent claiming?

Many of these same issues have been previously addressed by the Supreme Court in pre-1952 decisions. See, for example, United Carbon Co. v. Binney & Smith Co., 317 U.S. 228 (1942). In Union Carbide, the court wrote that:

The statutory requirement of particularity and distinctness in claims is met only when they clearly distinguish what is claimed from what went before in the art and clearly circumscribe what is foreclosed from future enterprise. A zone of uncertainty which enterprise and experimentation may enter only at the risk of infringement claims would discourage invention only a little less than unequivocal foreclosure of the field. Moreover, the claims must be reasonably clear-cut to enable courts to determine whether novelty and invention are genuine. . . . Whether the vagueness of the claim has its source in the language employed or in the somewhat indeterminate character of the advance claimed to have been made in the art is not material. An invention must be capable of accurate definition, and it must be accurately defined, to be patentable.

Interpreting the precursor to Section 112(b), 35 U.S.C. § 33 (1932). The old § 33 included the parallel requirement of claims that "particularly point out and distinctly claim the part, improvement, or combination which he claims as his invention or discovery."

In the Union Carbide, the court's problem with the claims was what it called functionality, writing: [T]he claims are but inaccurate suggestions of the functions of the product, and fall afoul of the rule that a patentee may not broaden his claims by describing the product in terms of function. Holland Furniture Co. v. Perkins Glue Co., 277 U.S. 245; General Electric Co. v. Wabash Corp., 304 U.S. 371. The particular claims at issue in Union Carbide are as follows:

1. Substantially pure carbon black in the form of commercially uniform, comparatively small, rounded, smooth aggregates having a spongy porous interior.

2. As an article of manufacture, a pellet of approximately one sixteenth of any inch in diameter and, formed-of a porous mass of substantially pure carbon black.

See U.S. Patent No. 1,889,429. Read the claims again and look for the functional limitations, then read the Supreme Court's decision.

In General Electric Co. v. Wabash Corp., 304 U.S. 364 (1938), the Supreme Court similarly took issue with the indefiniteness of issued patent claims.

The limits of a patent must be known for the protection of the patentee, the encouragement of the inventive genius of others, and the assurance that the subject of the patent will be dedicated ultimately to the public. The statute seeks to guard against unreasonable advantages to the patentee and disadvantages to others arising from uncertainty as to their rights. The inventor must inform the public during the life of the patent of the limits of the monopoly asserted, so that it may be known which features may be safely used or manufactured without a license and which may not.

. . . . Patentees may reasonably anticipate that claimed inventions, improvements, and discoveries, turning on points so refined as the granular structure of products, require precise descriptions of the new characteristic for which protection is sought. In a limited field, the variant must be clearly defined.

GE v. Wabash.

Reaching further back to the 19th century, the court wrote in Merrill v. Yeomans, 94 U.S. 568 (1876) that a patentee has no excuse for ambiguous or vague descriptions.

The growth of the patent system in the last quarter of a century in this country has reached a stage in its progress where the variety and magnitude of the interests involved require accuracy, precision, and care in the preparation of all the papers on which the patent is founded. It is no longer a scarcely recognized principle, struggling for a foothold, but it is an organized system, with well-settled rules, supporting itself at once by its utility, and by the wealth which it creates and commands. The developed and improved condition of the patent law, and of the principles which govern the exclusive rights conferred by it, leave no excuse for ambiguous language or vague descriptions. The public should not be deprived of rights supposed to belong to it, without being clearly told what it is that limits these rights. The genius of the inventor, constantly making improvements in existing patents,—a process which gives to the patent system its greatest value,—should not be restrained by vague and indefinite descriptions of claims in existing patents from the salutary and necessary right of improving on that which has already been invented. It seems to us that nothing can be more just and fair, both to the patentee and to the public, than that the former should understand, and correctly describe, just what he has invented, and for what he claims a patent.

Merrill (1876). These cases are in obvious tension with the Federal Circuit's current standard. However, there remains only a small chance that the Supreme Court will hear the case.

One key to the petition here is the argument that the Federal Circuit made it triply difficult to invalidate a claim on indefiniteness ground by (1) using the presumption of validity of § 282 to create stringent elements for the invalidity defense and then (2) also requiring clear-and-convincing evidence to prove those elements; all while (3) regularly ignoring the reality that indefiniteness is a question of law (as are patentable subject matter and obviousness).

Judge Rader’s Obviousness Tutorial: Including the Conclusion that Older Prior Art is Less Credible and a Restatement that Objective Indicia of Nonobviousness Play a Critical Role

Obviousness, Patent, , , , , , ,

By Dennis Crouch

Leo Pharmaceutical Products, Ltd. v. Rea, 2013 WL 4054937 (Fed. Cir. 2013)

In a pre-AIA filing, Galderma challenged Leo’s U.S. Patent No. 6,753,013 in an inter partes reexamination before the USPTO’s now renamed Board of Patent Appeals. The patent claims a “storage stable and non-aqueous” pharmaceutical composition used to treat skin conditions such as psoriasis. Prior to the invention, it was well known that a combination of Vitamin-D along with a corticosteroid could form the basis of an effective treatment. However, no one had been able to manufacture a storage stable form of the combination. This was especially challenging because the stable forms of the active ingredients prefer different pH levels. To achieve the storage stable results, Leo added a solvent to the mixture. The claim identifies the solvent in a markush group that likely includes thousands of potential compounds. During the reexamination, Leo also added the particular limitation that “said pharmaceutical composition is storage stable and non-aqueous.”

In reviewing the case, the Board first construed these new terms “storage stable” and “non-aqueous” and then found the patent invalid as obvious over the prior art. On appeal, the Federal Circuit has reversed.

Claim Construction: The Federal Circuit continues, for the time being, to give no deference to PTO claim construction decisions. Here, the term “storage stable” was difficult to construe because it was never used during prosecution of the original patent application and only added during reexamination. However, the patent does discuss the composition’s “ability to resist degradation” according to test results presented in the specification and the PTO accepted that definition as proper. Noting that one of ordinary skill “would have reasonably looked to the described stability test as defining what was meant by ‘storage stable.'” On appeal, the Federal Circuit rejected that definition as impermissibly narrow and that instead allowed a broader definition. Although not elucidated by the opinion, the patentee is walking a fine line with this amendment between (1) having a sufficiently broad patent and (2) improperly adding new matter to the claims in violation of the written description requirement.

Obviousness: This decision may become a somewhat important obviousness case for patentees. The Board found the patent claims obvious in light of a combination of three prior art references. The Board basically found that it would have been obvious for someone of skill in the art to take the prior art combination of Vitamin-D and corticosteroids and add in the claimed solvent in order to achieve storage stability.

On appeal, the Federal Circuit faulted the Board for failing to give credence to the patentee’s identification of the problem (that a stable form should be designed). The prior art did not particularly recognize the problem but rather “either discouraged combining vitamin D analogs and corticosteroids … or attempted the combination without recognizing or solving the storage stability problems.” Leo also presented evidence that, at the time of the invention, researchers were being “warned that vitamin D should not be combined with other drugs requiring a low pH ( e.g., corticosteroids).”

[T]he record shows no reason for one of ordinary skill in the art to attempt to improve upon either Dikstein or Serup using Turi. The ordinary artisan would first have needed to recognize the problem, i.e., that the formulations disclosed in Dikstein and Serup were not storage stable. To discover this problem, the ordinary artisan would have needed to spend several months running storage stability tests Only after recognizing the existence of the problem would an artisan then turn to the prior art and attempt to develop a new formulation for storage stability. If these discoveries and advances were routine and relatively easy, the record would undoubtedly have shown that some ordinary artisan would have achieved this invention within months of Dikstein or Serup. Instead this invention does not appear for more than a decade.

Now, the Federal Circuit’s language here obviously includes some amount of doublespeak or could perhaps be described as slicing the bologna awfully thin since according to the court, researchers (1) recognized that vitamin D could not be stably combined with low pH drugs such as corticosteroids but (2) did not recognize that vitamin-D could not be stably combined with corticosteroids.

Old Prior Art: In the discussion, Judge Rader uses an interesting between-the-lines or perhaps behind-the-scenes analysis of the prior art:

First, the Board found motivation to combine Dikstein or Serup with Turi because one of ordinary skill would have used vitamin D to solve the well-known side effects of steroid treatment. However, combining Turi and vitamin D to address the side effects of a steroid treatment is only straightforward in hindsight. Turi was publicly available in the prior art for twenty-two years before the ′013 patent was filed, yet there is no evidence that anyone sought to improve Turi with vitamin D. According to the record, even when Serup published the well-known side effects of steroid-induced atrophy in 1994, no one—including Serup—sought to improve Turi by adding vitamin D to Turi’s corticosteroid composition. Serup even targeted the precise side effects that the Board believed would have motivated the addition of a vitamin D analog to Turi’s corticosteroid composition, yet Serup did not seek to improve Turi by adding vitamin D. . . .

The elapsed time between the prior art and the ′013 patent’s filing date evinces that the ′013 patent’s claimed invention was not obvious to try. Indeed this considerable time lapse suggests instead that the Board only traverses the obstacles to this inventive enterprise with a resort to hindsight. It took over a decade—after Dikstein’s disclosure of the benefits of combining vitamin D and corticosteroid treatments into one formulation—for Dikstein’s formulations to be tested for storage stability. And, until the advancement made by the inventors of the ′013 patent, no one had proposed a new formulation that would be storage stable. The problem was not known, the possible approaches to solving the problem were not known or finite, and the solution was not predictable. Therefore, the claimed invention would not have been obvious to try to one of ordinary skill in the art. Indeed ordinary artisans would not have thought to try at all because they would not have recognized the problem.

Under Judge Rader’s point of view here, older prior art should be seen as less credible in the obviousness analysis. The logic obvious improvements would have happened quickly and the long time span between improvements suggest that the improvement was not an obvious one. This logic is bolstered in cases such as this where research is ongoing in the area and a market has already developed.

Although the patentee claimed a wide variety of solvents, the Federal Circuit also found that there were many more potential solvents available to try and the PTO did not offer specific reasons why the ones selected would have been particularly obvious to try.

In addition, the Board found that a person of ordinary skill in the art would have been capable of selecting the correct formulation from available alternatives. Specifically, the Board found more than eight different classes of additives ( e.g., diluents, buffers, thickeners, lubricants). The Board also found more than ten different categories of composition forms ( e.g., liniments, lotions, applicants, oil-in-water or water-in-oil emulsions such as creams, ointments, pastes, or gels). “Based on these broad and general disclosures,” the Board reasoned that an artisan would have been able to “mak[e] choices about what ingredients to include, and which to exclude” in formulating a composition with a vitamin D analog and steroid. To the contrary, the breadth of these choices and the numerous combinations indicate that these disclosures would not have rendered the claimed invention obvious to try. See Rolls–Royce PLC v. United Techs. Corp., 603 F.3d 1325, 1339 (Fed.Cir.2010) (claimed invention was not obvious to try because the prior art disclosed a “broad selection of choices for further investigation”). . . . .

This court and obviousness law in general recognizes an important distinction between combining known options into “a finite number of identified, predictable solutions,” KSR, and ” ‘merely throwing metaphorical darts at a board’ in hopes of arriving at a successful result,” Cyclobenzaprine, quoting Kubin. While the record shows that, as early as 1995, the prior art indicated that both vitamin D analogs and corticosteroids were effective treatments for psoriasis, that same prior art gave no direction as to which of the many possible combination choices were likely to be successful. Instead, the prior art consistently taught away from combining vitamin D analogs and corticosteroids.

One important feature of PTO decision making is that Board conclusions of fact only require substantial evidence to be affirmed on appeal. Here, the Federal Circuit avoided that issue by indicating that all of its decisions were based upon the Board failure to properly apply the law to those facts. “In this case, however, with no material factual disputes, this court cannot share the Board’s analysis and application of the law to those facts.”

Objective Indicia of Non-Obviousness: Judge Rader writes:

The court now turns to the Board’s analysis of the objective indicia of nonobviousness. The Board reasoned that “the strong case of obviousness outweighs the experimental evidence and testimony about the advantages of the claimed composition.” Contrary to the Board’s conclusion, this court finds the objective indicia, in concert with the entire obviousness analysis, present a compelling case of nonobviousness. In fact, the objective indicia of nonobviousness highlight that the Board’s analysis regarding the combination of Serup or Dikstein with Turi was colored by hindsight.

Whether before the Board or a court, this court has emphasized that consideration of the objective indicia is part of the whole obviousness analysis, not just an afterthought. … When an applicant appeals an examiner’s objection to the patentability of an application’s claims for obviousness, the PTO necessarily has the burden to establish a prima facie case of obviousness which the applicant then rebuts. However, during inter partes reexamination, the Board is reviewing evidence of obviousness—including objective indicia—submitted by two adversarial parties for the claims of an issued patent. Thus, the Board should give the objective indicia its proper weight and place in the obviousness analysis, and not treat objective indicia of nonobviousness as an afterthought.

Objective indicia of nonobviousness play a critical role in the obviousness analysis. They are “not just a cumulative or confirmatory part of the obviousness calculus but constitute[ ] independent evidence of nonobviousness.” Ortho–McNeil Pharm., Inc. v. Mylan Labs., Inc., 520 F.3d 1358, 1365 (Fed.Cir.2008). This case illustrates a good reason for considering objective indicia as a critical piece of the obviousness analysis: Objective indicia “can be the most probative evidence of nonobviousness in the record, and enables the court to avert the trap of hindsight.” Crocs, Inc. v. Int’l Trade Comm’n, 598 F.3d 1294, 1310 (Fed.Cir.2010) (internal quotation marks omitted). Here, the objective indicia of nonobviousness are crucial in avoiding the trap of hindsight when reviewing, what otherwise seems like, a combination of known elements.

Unexpected results are useful to show the “improved properties provided by the claimed compositions are much greater than would have been predicted.” See In re Soni, 54 F.3d 746, 751 (Fed.Cir.1995) (internal quotation marks omitted). This record shows “extensive experimental evidence” of unexpected results that contradict the Board’s obviousness finding. J.A. 14. The Board concluded that the “unexpected results” claimed by Leo Pharmaceuticals were not surprising or unexpected. J.A. 19. However, substantial evidence does not support the Board’s conclusion.

During reexamination, the inventors of the ′013 patent submitted test results that analyzed the Dikstein and Serup formulations. The inventors found that the formulations disclosed by Dikstein and Serup result in significant degradation of the vitamin D analog and corticosteroid. See J.A. 1041–46 (testing formulations in Serup); J.A. 1625–27, 2152–2154 (testing formulations in Dikstein). The inventors also tested an improvement of Serup using Turi, by replacing Serup’s solvent with POP–15–SE, and still found significant degradation of the corticosteroid component. See J.A. 1045–46. These test results are a strong indication that the ′013 patent’s combination of known elements yields more than just predictable results.

In addition to evidence of unexpected results, Leo Pharmaceuticals provided other objective indicia of non-obviousness. For example, the commercial success of Leo Pharmaceutical’s Taclonex® ointment is a testament to the improved properties of the ′013 patent’s claimed invention. Taclonex® is the first FDA-approved drug to combine vitamin D and corticosteroids into a single formulation for topical application. While FDA approval is not determinative of nonobviousness, it can be relevant in evaluating the objective indicia of nonobviousness. See Knoll Pharm. Co., Inc. v. Teva. Pharm. USA, Inc., 367 F.3d 1381, 1385 (Fed.Cir.2004). Here, FDA approval highlights that Leo Pharmaceutical’s formulation is truly storage stable, something that the prior art formulations did not achieve.

The record also shows evidence of long felt but unsolved need, i.e., the need for a single formulation to treat psoriasis. The length of the intervening time between the publication dates of the prior art and the claimed invention can also qualify as an objective indicator of nonobviousness. See Ecolochem, Inc. v. S. Cal. Edison Co., 227 F.3d 1361, 1376–77 (Fed.Cir.2000). Here, the researchers were aware of the benefits of using both vitamin D and corticosteroids in the treatment of psoriasis as early as 1986. See, e.g., Dikstein col. 1, ll. 9–16. And Turi, upon which the Board relied to make its case, issued in 1978. Yet, it was not until the ′013 patent’s filing in 2000— twenty-two years after Turi and fourteen years after Dikstein-that the solution to the long felt but unsolved need for a combined treatment of vitamin D and corticosteroid was created. The intervening time between the prior art’s teaching of the components and the eventual preparation of a successful composition speaks volumes to the nonobviousness of the ′013 patent.

Here, the objective indicia—taken in sum—are the most “probative evidence of nonobviousness … enabl[ing] the court to avert the trap of hindsight.” Crocs, Inc., 598 F.3d at 1310. Viewed through the lens of the objective indicia, as opposed to the hindsight lens used by the Board, the ′013 patent would not have been not obvious over Turi in combination with Dikstein or Serup. Therefore, this court reverses the Board’s obviousness determination.

Whether Prior Art Should be Presumed Enabled

Patent, ,

Finjan v. Rea (Supreme Court 2013)

In its recently filed petition for certiorari, Finjan asks the court to determine whether "prior art should be presumed enabled" when being applied during prosecution before the United States Patent and Trademark Office. The Government's response in opposition alters the question somewhat by asking "Whether, in proceedings to determine whether a patent application should be granted, the [USPTO] bears the burden of demonstrating that a prior art printed publication that anticipates the invention for which the patent is sought enables a person of skill in the art to practice the invention."

The PTO Argues:

The presumption of enablement is consistent with the general rule that the examiner need not raise and explain every possible issue surrounding each ground of rejection. Because the primary purpose of the prima facie showing is to provide notice, an examiner "is not required to anticipate every possible response to a rejection, including showing that a cited reference is enabling." Antor. When an examiner identifies anticipation as a ground of rejection, that notification informs the applicant that he may raise lack of enablement in his response.

The presumption of enablement also reflects the Federal Circuit's recognition that requiring the examiner preemptively to make the detailed findings necessary to verify enablement would be "manifestly inefficient," "burdensome," and "entirely unnecessary." Jung. Because the enablement inquiry requires an analysis of the degree of experimentation necessary to implement an invention, "an examiner, who has no access to experts or laboratories, is not in a position to test each piece of prior art for enablement in citing it, and requiring him to do so would be onerous, if not impossible." Antor. … The applicant is better positioned than the PTO to gather evidence supporting his contention that the prior art is not enabling.

Federal Circuit Begins its Campaign for Patent Clarity

Patent, , ,

By Dennis Crouch

Wyeth v. Abbot Labs (Fed. Cir. 2013)

In a unanimous opinion, the Federal Circuit has affirmed a summary judgment holding that Wyeth’s patents are invalid as lacking enablement under 35 U.S.C. 112. Wyeth’s patents cover the use of rapamycin antibiotic to treat and prevent restenosis following arterial balloon catheterization. See U.S. Patent Nos. 5,516,781 and 5,563,146. The claimed invention is simple and basically says, administer an “antirestenosis effective amount of rapamycin.” Claim 1 of the ‘781 patent reads as follows:

1. A method of treating restenosis in a mammal resulting from said mammal undergoing a percutaneous transluminal coronary angioplasty procedure which comprises administering an antirestenosis effective amount of rapamycin to said mammal orally, parenterally, intravascularly, intranasally, intrabronchially, transdermally, rectally, or via a vascular stent impregnated with rapamycin.

One requirement of patent law is that the patent application (at the time of its filing) must sufficiently enable a person skilled in the relevant art to make and use the full scope of the claimed invention without undue experimentation. This “enablement requirement” is codified in Section 112(a) of the Patent Act (Formerly known as Section 112¶1).

Here, it is the “full scope” requirement that kills the patent. In particular, Wyeth requested and received a broad construction of the claim term rapamycin to in a way that includes a large number of molecules that are structurally analogous to one another. However, the specification only discloses a single species along with a number of assays that could be useful to ascertain whether potential compounds exhibit the requisite effect.

In the appeal, the Federal Circuit aligned itself to the rule that broad claim scope requires broad disclosure. Here, the court noted that the rapamycin definition includes “tens of thousands” of candidate molecules and the specification “is silent about how to structurally modify sirolimus.

Undue experimentation: For its part, Wyeth argued that a lab tech with the usual skill and little creativity could systematically work through the various potential candidates to find which ones actually work. Citing to Johns Hopkins Univ. v. CellPro, Inc., 152 F.3d 1342, 1360–61 (Fed. Cir. 1998), Wyeth argued that a large pile of merely routine experimentation does rise to the level of impermissible undue experimentation.

The Federal Circuit disagreed – finding that the trial-and-error process of tens-of-thousands of candidates moves the project well into the range of undue experimentation.

[T]here is no genuine dispute that it would be necessary to first synthesize and then screen each candidate compound using the assays disclosed in the specification to determine whether it has immunosuppressive and antirestenotic effects. There is no evidence in the record that any particular substitutions outside of the macrocyclic ring are preferable. Indeed, a Wyeth scientist confirmed the unpredictability of the art and the ensuing need to assay each candidate by testifying that, “until you test [compounds], you really can’t tell whether they work or not [i.e., have antirestenotic effects].” J.A. 6929. In sum, there is no genuine dispute that practicing the full scope of the claims would require synthesizing and screening each of at least tens of thousands of compounds. . . .

Even putting the challenges of synthesis aside, one of ordinary skill would need to assay each of at least tens of thousands of candidates. Wyeth’s expert conceded that it would take technicians weeks to complete each of these assays. The specification offers no guidance or predictions about particular substitutions that might preserve the immunosuppressive and antirestenotic effects observed in sirolimus. The resulting need to engage in a systematic screening process for each of the many rapamycin candidate compounds is excessive experimentation. We thus hold that there is no genuine dispute that practicing the full scope of the claims, measured at the filing date, required undue experimentation.

The take-away legal points here are (1) broad claims must do more to satisfy the enablement requirement than narrow claims; and (2) when excessive, routine non-creative efforts to recreate the invention can constitute undue experimentation.

The case is also interesting because it comes at a time where policymakers are looking to tighten the requirements of Section 112. As it did during the debate over the AIA, the Federal Circuit appears poised to make its mark on the current debate over patent scope and clarity.

Patent Reform 2013: Adding Clarity and Transparency to the System

Patent

By Dennis Crouch

President Obama today released information on planed executive orders and push for new legislation that will attempt to block companies from asserting their patents unless they are also manufacturing a product based upon the patented design. And at the same time, the President’s National Economic Council and Council of Economic Advisers released a report a report titled “Patent Assertion and U.S. Innovation.” The report generally takes the viewpoint that Patent Assertion Entities are bad for the US Economy and makes the bold claim that, in the past year PAE’s have threatened “over 100,000 companies with patent infringement.” The bulk of the report that identifies the “problem” is based upon the work of professor Colleen Chien (Santa Clara); Jim Bessen & Mike Meurer (BU); Mark Lemley (Stanford) and Michele Boldrin (WUSTL) & David K. Levine (WUSTL).

Despite the unknowing hyperbole of the report, the suggested actions are, for the most, welcome and will benefit the patent system as a whole. In fact, this move to finally address the problem of predictability of patent scope and patent validity hits the sweet spot of where problems emerge in the system. Of course, the devil will be in the details of these approaches.

Executive Actions:

1. Knowing Who Owns the Patents: Through the PTO a new rule will require patent applicants and owners to regularly update ownership information with the “real party of interest” so that the assignment records are accurate complete.

2. Tightening Functional Claiming. The PTO will provide new targeted training to its examiners on scrutiny of functional claims and will, over the next six months develop strategies to improve claim clarity, such as by use of glossaries in patent specifications to assist examiners in the software field.

In my view, these two elements are sorely needed and will generally improve the patent system without actually limiting the ability of patent assertion entities to derive value from their innovations through patent assertion. In addition, the PTO will begin a number of outreach mechanisms intended to provide assistance to non-patent-insiders who receive patent demand letter.

Legislative Actions:

1. Require patentees and applicants to disclose the “Real Party-in-Interest,” by requiring that any party sending demand letters, filing an infringement suit or seeking PTO review of a patent to file updated ownership information, and enabling the PTO or district courts to impose sanctions for non-compliance. [DC: This would add statutory back-up for the PTO rulemaking]

2. Permit more discretion in awarding fees to prevailing parties in patent cases, providing district courts with more discretion to award attorney’s fees under 35 USC 285 as a sanction for abusive court filings (similar to the legal standard that applies in copyright infringement cases). [DC: This can be helpful if allowed to go both-ways, although courts generally find that patent litigators are the most well-prepared and honorable of any that they see in court.]

3. Expand the PTO’s transitional program for covered business method patents to include a broader category of computer-enabled patents and permit a wider range of challengers to petition for review of issued patents before the Patent Trial and Appeals Board (PTAB). [DC: This has the potential of capturing a substantial percentage of issued patents, but that may be fine.]

4. Protect off-the-shelf use by consumers and businesses by providing them with better legal protection against liability for a product being used off-the-shelf and solely for its intended use. Also, stay judicial proceedings against such consumers when an infringement suit has also been brought against a vendor, retailer, or manufacturer. [DC: We are on our way here toward a fair use of patents.]

5. Change the ITC standard for obtaining an injunction to better align it with the traditional four-factor test in eBay Inc. v. MercExchange, to enhance consistency in the standards applied at the ITC and district courts. [DC: The focus here is to get patent assertion entities out of the ITC]

6. Use demand letter transparency to help curb abusive suits, incentivizing public filing of demand letters in a way that makes them accessible and searchable to the public. [DC: This sounds good, I wonder how those writing demand letters would respond.]

7. Ensure the ITC has adequate flexibility in hiring qualified Administrative Law Judges. [DC: However, must ensure that the flexibility is not used to hire because of particular political bent.]

Patent Reform 2013: Adding Clarity and Transparency to the System

Patent

By Dennis Crouch

President Obama today released information on planed executive orders and push for new legislation that will attempt to block companies from asserting their patents unless they are also manufacturing a product based upon the patented design. And at the same time, the President’s National Economic Council and Council of Economic Advisers released a report a report titled “Patent Assertion and U.S. Innovation.” The report generally takes the viewpoint that Patent Assertion Entities are bad for the US Economy and makes the bold claim that, in the past year PAE’s have threatened “over 100,000 companies with patent infringement.” The bulk of the report that identifies the “problem” is based upon the work of professor Colleen Chien (Santa Clara); Jim Bessen & Mike Meurer (BU); Mark Lemley (Stanford) and Michele Boldrin (WUSTL) & David K. Levine (WUSTL).

Despite the unknowing hyperbole of the report, the suggested actions are, for the most, welcome and will benefit the patent system as a whole. In fact, this move to finally address the problem of predictability of patent scope and patent validity hits the sweet spot of where problems emerge in the system. Of course, the devil will be in the details of these approaches.

Executive Actions:

1. Knowing Who Owns the Patents: Through the PTO a new rule will require patent applicants and owners to regularly update ownership information with the “real party of interest” so that the assignment records are accurate complete.

2. Tightening Functional Claiming. The PTO will provide new targeted training to its examiners on scrutiny of functional claims and will, over the next six months develop strategies to improve claim clarity, such as by use of glossaries in patent specifications to assist examiners in the software field.

In my view, these two elements are sorely needed and will generally improve the patent system without actually limiting the ability of patent assertion entities to derive value from their innovations through patent assertion. In addition, the PTO will begin a number of outreach mechanisms intended to provide assistance to non-patent-insiders who receive patent demand letter.

Legislative Actions:

1. Require patentees and applicants to disclose the “Real Party-in-Interest,” by requiring that any party sending demand letters, filing an infringement suit or seeking PTO review of a patent to file updated ownership information, and enabling the PTO or district courts to impose sanctions for non-compliance. [DC: This would add statutory back-up for the PTO rulemaking]

2. Permit more discretion in awarding fees to prevailing parties in patent cases, providing district courts with more discretion to award attorney’s fees under 35 USC 285 as a sanction for abusive court filings (similar to the legal standard that applies in copyright infringement cases). [DC: This can be helpful if allowed to go both-ways, although courts generally find that patent litigators are the most well-prepared and honorable of any that they see in court.]

3. Expand the PTO’s transitional program for covered business method patents to include a broader category of computer-enabled patents and permit a wider range of challengers to petition for review of issued patents before the Patent Trial and Appeals Board (PTAB). [DC: This has the potential of capturing a substantial percentage of issued patents, but that may be fine.]

4. Protect off-the-shelf use by consumers and businesses by providing them with better legal protection against liability for a product being used off-the-shelf and solely for its intended use. Also, stay judicial proceedings against such consumers when an infringement suit has also been brought against a vendor, retailer, or manufacturer. [DC: We are on our way here toward a fair use of patents.]

5. Change the ITC standard for obtaining an injunction to better align it with the traditional four-factor test in eBay Inc. v. MercExchange, to enhance consistency in the standards applied at the ITC and district courts. [DC: The focus here is to get patent assertion entities out of the ITC]

6. Use demand letter transparency to help curb abusive suits, incentivizing public filing of demand letters in a way that makes them accessible and searchable to the public. [DC: This sounds good, I wonder how those writing demand letters would respond.]

7. Ensure the ITC has adequate flexibility in hiring qualified Administrative Law Judges. [DC: However, must ensure that the flexibility is not used to hire because of particular political bent.]

Patent Reform 2013: Adding Clarity and Transparency to the System

Patent

By Dennis Crouch

President Obama today released information on planed executive orders and push for new legislation that will attempt to block companies from asserting their patents unless they are also manufacturing a product based upon the patented design. And at the same time, the President’s National Economic Council and Council of Economic Advisers released a report a report titled “Patent Assertion and U.S. Innovation.” The report generally takes the viewpoint that Patent Assertion Entities are bad for the US Economy and makes the bold claim that, in the past year PAE’s have threatened “over 100,000 companies with patent infringement.” The bulk of the report that identifies the “problem” is based upon the work of professor Colleen Chien (Santa Clara); Jim Bessen & Mike Meurer (BU); Mark Lemley (Stanford) and Michele Boldrin (WUSTL) & David K. Levine (WUSTL).

Despite the unknowing hyperbole of the report, the suggested actions are, for the most, welcome and will benefit the patent system as a whole. In fact, this move to finally address the problem of predictability of patent scope and patent validity hits the sweet spot of where problems emerge in the system. Of course, the devil will be in the details of these approaches.

Executive Actions:

1. Knowing Who Owns the Patents: Through the PTO a new rule will require patent applicants and owners to regularly update ownership information with the “real party of interest” so that the assignment records are accurate complete.

2. Tightening Functional Claiming. The PTO will provide new targeted training to its examiners on scrutiny of functional claims and will, over the next six months develop strategies to improve claim clarity, such as by use of glossaries in patent specifications to assist examiners in the software field.

In my view, these two elements are sorely needed and will generally improve the patent system without actually limiting the ability of patent assertion entities to derive value from their innovations through patent assertion. In addition, the PTO will begin a number of outreach mechanisms intended to provide assistance to non-patent-insiders who receive patent demand letter.

Legislative Actions:

1. Require patentees and applicants to disclose the “Real Party-in-Interest,” by requiring that any party sending demand letters, filing an infringement suit or seeking PTO review of a patent to file updated ownership information, and enabling the PTO or district courts to impose sanctions for non-compliance. [DC: This would add statutory back-up for the PTO rulemaking]

2. Permit more discretion in awarding fees to prevailing parties in patent cases, providing district courts with more discretion to award attorney’s fees under 35 USC 285 as a sanction for abusive court filings (similar to the legal standard that applies in copyright infringement cases). [DC: This can be helpful if allowed to go both-ways, although courts generally find that patent litigators are the most well-prepared and honorable of any that they see in court.]

3. Expand the PTO’s transitional program for covered business method patents to include a broader category of computer-enabled patents and permit a wider range of challengers to petition for review of issued patents before the Patent Trial and Appeals Board (PTAB). [DC: This has the potential of capturing a substantial percentage of issued patents, but that may be fine.]

4. Protect off-the-shelf use by consumers and businesses by providing them with better legal protection against liability for a product being used off-the-shelf and solely for its intended use. Also, stay judicial proceedings against such consumers when an infringement suit has also been brought against a vendor, retailer, or manufacturer. [DC: We are on our way here toward a fair use of patents.]

5. Change the ITC standard for obtaining an injunction to better align it with the traditional four-factor test in eBay Inc. v. MercExchange, to enhance consistency in the standards applied at the ITC and district courts. [DC: The focus here is to get patent assertion entities out of the ITC]

6. Use demand letter transparency to help curb abusive suits, incentivizing public filing of demand letters in a way that makes them accessible and searchable to the public. [DC: This sounds good, I wonder how those writing demand letters would respond.]

7. Ensure the ITC has adequate flexibility in hiring qualified Administrative Law Judges. [DC: However, must ensure that the flexibility is not used to hire because of particular political bent.]

Best Mode: Only Mostly Dead

Patent

By Jason Rantanen

Ateliers de la Haute-Garonne v. Broetje Automation USA Inc. (Fed. Cir. 2013) Download 12-1038.Opinion.5-17-2013.1
Panel: Newman (author), Prost (dissenting), Reyna

While the America Invents Act eliminated the failure to disclose best mode as a defense in patent infringement suits commenced on or after September 16, 2011, it remained available as a defense for litigation that had already commenced.  In AHG v. Broetje, the Federal Circuit divides over the issue of whether intentional concealment is required for a best mode violation in a split that will likely remain forever unresolved.

AHG is the owner of two patents relating "to the dispensing of objects such as rivets through a pressurized tube with grooves along its inner surface, to provide a rapid and smooth supply of properly positioned rivets for such uses as the assembly of metal parts of aircraft."  Slip Op. at 2. Prior to the enactment of the AIA, AHG filed an infringement suit against Brotje. 

The crux of Brotje's best mode argument turned on whether the inventors' best mode involved three-grooves or an odd number of grooves. At the time of the application, the inventors were mostly using three-groove embodiments.  The patents disclosed a three-groove embodiment (among other examples including a fifty-five groove and two two-groove embodiments).  Brotje argued, however, that at the time of the application the inventors considered an odd number of grooves to be the best mode of carrying out the invention.  Based on Broje's theory, the district court granted summary judgment of invaliditydue to a failure to disclose the best mode of carrying out the invention.  AHG appealed.

Best mode and the issue of intent: In granting summary judgment, the district court stated that "the clear weight of Federal Circuit authority holds that intentional concealment is not required for best mode violations . . . ." and that the "patents-in-suit are 'so objectively inadequate as to effectively conceal the best mode from the public,' such that a reasonable jury could not find in AHG’s favor with respect to Broetje’s ‘odd number’ theory."  Slip Op. at 9, quoting district court (emphasis in original). 

On appeal, the majority disagreed with the district court that this was the correct correct legal standard.  "Violation requires intentional concealment; innocent or inadvertent failure of disclosure does not of itself invalidate the patent."  Slip Op. at 10.  Thus, under the majority's view, a best mode violation requires both that the inventor knew of a better mode and intentionally concealed it.

Judge Prost disagreed that this is the law of best mode.  "The majority holds that a '[v]iolation [of the best mode requirement] requires intentional concealment.'…"  Dissent at 2 (emphasis in quotation).  This decision "is itself based on an error of law.  It is not in accord with our precedent regarding intent in a best mode analysis."  Id. at 1. Rather, "this court has repeatedly acknowledged the error in the Brooktree dicta and recognized that we are bound to follow our earlier precedent that intent is not an element of a best mode violation."  Id. at 3.

In support of their positions, both the majority and dissent cite an array of recent precedents and engage in a series of dueling footnotes.  This disagreement might seem somewhat minor; after all, best mode is being phased out as a defense in patent litigation.  What is interesting here is the way in which the judges express their disagreement: both opinions suggest that not only is the other side wrong, but that its opinion is invalid.  This is particularly apparent in the treatment of recent precedent by the majority and dissent.  Both cite substantial amounts of recent and older opinions that arguably support their positions and conclude that the opposing sets of precedents are invalid; they then cite back to older precedent in a complex dance in which older precedent is better, unless it is too old, unless it is cited in a more recent old opinion (compare majority footnote 3 with dissent footnote 1).

This opinion itself seems likely to fall into that morass when it is cited in the future: some judges may take the view that it is binding for what it says while others take the opposite view.  I'm curious as to whether this reflects an emerging trend in Federal Circuit jurisprudence or whether it no different than other doctrinal disagreements within the court.  My observational sense is that dissents and disagreement within Federal Circuit opinions are have been on a substantial rise but haven't yet put together the data to test that intuition.

Articulating the best mode:  Majority and dissent also disagreed over what needed to be disclosed.  The majority interpreted the best mode requirement as requiring that the best embodiment must be disclosed.  "The general statement that an odd number is better than an even number is not a statement of a better mode than the preferred embodiment shown in the specification. There was no evidence of intentional concealment of a better mode than was disclosed. The preferred embodiment's disclosure of a three-groove tube is adequate to enable a person skilled in this art to practice the best mode." Slip Op. at 14.

The dissent disagreed.  In addition to concluding that it was a disputed question of fact as to whether the three-groove embodiment or the odd-number of grooves was the preferred embodiment, the dissent would have found even the three-groove embodiment to not be adequately disclosed.  "[T]he inventors did not simply reveal their best mode and disclose others; they buried the best mode among other embodiments, also falling under the preferred embodiment heading, that did not include the
'essential' feature that the inventors discovered and knew was necessary to successfully implement their invention. Such disclosure is not the “quid pro quo” demanded by the best mode requirement."  Dissent at 6.