Tag Archives: Enablement

Self-Replicating Technologies

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Guest Post by Jeremy Sheff. In view of the pending Monsanto case, I asked Professor Sheff to provide some of his thoughts on the patenting of self-replicating technologies –  DC.  This essay is cross-posted on PrawfsBlawg.

Self-replicating technologies, once the subject of theory and fantasy, are now upon us. The original self-replicating machine—the living organism—has already been harnessed by biotechnology engineers and, more to the point, their lawyers.  The next wave of self-replicating technologies, be they nanomedical robots or organic computers, are not far behind. Rather than triggering a “grey goo” apocalypse, these technologies are, at present, raising far more prosaic issues of intellectual property and antitrust law.

Those issues have now apparently caught the attention of the Supreme Court.  A few weeks ago, the Court called for the views of the solicitor general on the certiorari petition in the case of Bowman v. Monsanto.  This is the latest in a series of cases in which the Federal Circuit has addressed the application of the doctrine of patent exhaustion to the genetic engineering technology embodied in Monsanto's "Roundup-Ready" herbicide-resistant seeds.  Seeds are the prototypical self-replicating technology, and a number of similar herbicide-resistant crops are in the pipeline of the largest agribusiness concerns.  In each of the Roundup-Ready cases, a farmer has argued that Monsanto's patent rights do not extend to the second generation of soybeans grown from a patented first-generation seed.  In each case, the Federal Circuit found for Monsanto and against the farmers.

Patent exhaustion (or "first sale") doctrine serves as a limit on patent rights, and provides that once a patentee has made an authorized sale of an embodiment of its patented invention, its patent rights with respect to that embodiment are exhausted, and the purchaser is free to use or re-sell the embodiment as it sees fit.  Like analogous doctrines in copyright and trademark, it is motivated by competition concerns.  Its aim is to enable the creation of downstream or secondary markets in patented articles, and to prevent patentees from using their intellectual property rights to gain market power in markets other than the market for the patented technology.  When the Supreme Court last spoke on the issue, it rebuked the Federal Circuit for giving these pro-competitive policies insufficient weight.  It seems to be considering an encore in the Roundup-Ready cases.  For reasons I'll explain after the jump, I think that would be a mistake.

The Federal Circuit's analysis of patent exhaustion in the Roundup-Ready cases is admittedly not a model of the judicial craft.  Framing the issue as a formal question whether a second-generation soybean is a different "article" than the first generation seed from which it grew, the court's main justification for its result was the bare assertion that any alternative result would "eviscerate" Monsanto's patent.  But this is a question-begging explanation, and there are other, better reasons why a patentee's sale of a single embodiment of its self-replicating technology ought not to exhaust patent rights with respect to the second, third, or nth generation of the technology that is propagated from that first embodiment.  Moreover, these reasons are consistent not only with the reasons for granting patent rights in the first place, but with the pro-competitive principles that justify limiting those rights through exhaustion doctrine.

To get at these reasons, I propose a thought exercise.  Let's imagine that the Roundup-Ready cases came out the other way–that purchasers of Roundup-Ready seed from Monsanto were free, as a matter of patent law, to use all subsequent generations of soybeans grown from those first purchased seeds however they saw fit.  What would we expect the Monsantos of the world to do?  How do we believe their behavior might be influenced by this new legal framework?

One possible answer to this question is: not at all.  It may be that the additional revenues to be derived from selling additional embodiments of a self-replicating technology to the same customer are trivial (perhaps due to the structure of demand), and that the prospect of any one customer re-selling a subsequent generation of the technology to another potential customer of the patentee is remote.  Nanomedicine, particularly personalized nanomedicine, may one day prove that this is a possible result.  But in the agriculture context, it strikes me as unlikely.  

Where the technology at issue is an input for the production of a commodity, and the demand for that technology is broad and essentially undifferentiated, I would expect that the possibility of re-sale of nth generation seeds by the patentee's customers would significantly eat into the patentee's revenue stream, potentially making it impossible for the patentee to recoup the investment in research and development required to develop the technology in the first place.  This is the classic free-rider problem that patent law is supposed to prevent: we preserve the incentive to engage in costly research and development by giving the inventor a limited-time monopoly.  Other scholars have noted that this free-rider rationale is particularly salient for inherently self-disclosing inventions (inventions that are easy to copy once they have been introduced to the public).  I would add that self-replication exacerbates the problem of self-disclosure: the patentee selling an embodiment of its invention would not only be teaching competitors how to practice the invention, it would in essence be building their factories as well.

So there are sound justifications grounded in the innovation policies underlying patent law for the Federal Circuit's rulings in the Roundup-Ready cases.  But of course, patent exhaustion doctrine is concerned not only with innovation policy, but also with competition policy.  This brings me back to my earlier question: how would we expect the Monsantos of the world to react to the free-rider problem if patent law did not protect them against competition from nth generation copies of their own first-generation products?  I can imagine two possible strategies a technologist might pursue to circumvent the free-rider problem: contract and secrecy.  And I think both of these alternatives are inferior to the patent solution crafted by the Federal Circuit on competition grounds.

Take the contract approach, which has been explicitly advocated by Yee Wah Chin, one of the attorneys representing the interests of Monsanto's farmer customers.  To avoid the problem of free-riders Monsanto might, for example, restrict sales of its seeds to customers who sign a license agreement in which the customers undertake to monitor the uses of nth generation embodiments.  So, a farmer might have to agree to sell his soybean crop only to buyers who have their own license agreement with Monsanto, or to Monsanto itself.  Or Monsanto could include field-of-use restrictions in its licenses, as Ms. Chin proposes: "Monsanto could have licensed seedmakers to sell seed embodying Monsanto technology on condition that the second-generation seed be either consumed or sold to buyers who agree to either consume the seed or isolate that seed from other seed and sell the seed only for consumption."  

This does not strike me as a pro-competitive result, for a few reasons.  First, it incentivizes Monsanto to extend its influence into downstream markets–such as the market for commodity soybeans and their derivative products–in ways that it would have little incentive for under the Federal Circuit's approach.  This downstream market creep is precisely the type of expansion of patent rights that exhaustion doctrine is supposed to prevent, out of fear that the patentee's interests are not likely to be consistent with the efficient functioning of those downstream markets.  Second, and perhaps more importantly, forcing Monsanto to look to contract rights to protect its investment in research and development shifts the costs of monitoring and enforcing the Roundup-Ready patents from Monsanto itself onto its customers, who are likely to face higher monitoring costs.  

We must remember, Monsanto's customers are largely farmers, who lack Monsanto's economies of scale, its greater expertise with its own technology, and its understanding of the functioning of the markets for that technology.  Moreover, shifting enforcement responsibility from the patentee to its customers is likely to create agency costs where they would not otherwise exist.  A farmer who is paying Monsanto a premium for Roundup-Ready seeds probably has far weaker incentives to vigorously monitor for violation of Monsanto's license terms than does Monsanto itself, which is reaping the premium.  Finally, in the event that a customer breaches these monitoring obligations, either maliciously or negligently, Monsanto's technology could fall into the hands of a competitor who is not in privity of contract with Monsanto and thus (absent any unfair competition type of claim) would be free to use the nth generation seed (in which Monsanto's patent rights are exhausted) to compete with Monsanto.  An individual farmer is likely to be judgment-proof in the face of the claims Monsanto might make should such a competitive threat emerge outside the reach of its licensing provisions, which once again leads us to the original problem: how would we expect Monsanto to respond to this risk of free-riding?

This brings me to the last alternative to the Federal Circuit's solution in the Roundup-Ready cases: secrecy.  Monsanto might seek to prevent free-riding by refusing to release its technology to public view, and relying on trade secret protection to protect against free-riding.  But in order to preserve its secret (a prerequisite of trade secret protection),  Monsanto would have to ensure that nothing it released into the market disclosed its genetic technology.  As I noted above, self-replication can be seen as a heightened form of self-disclosure, and so this type of secrecy would be fairly hard to maintain.  Indeed, I think the only plausible way of doing so would be to pursue a course of comprehensive vertical integration.  Monsanto would not only have to be in the business of propagating seeds, but also in the business of cultivating and harvesting soybeans, and processing them into useful products (oil, animal feed, industrial adhesives, tofu, you name it) that do not reveal the genetic material at the core of Monsanto's invention.  Even if this were technically possible (a big if), the effect on all sorts of markets, both for inputs and outputs of the soybean market, is likely to be catastrophically anti-competitive.  Where the alternative is such drastic shocks to competition in the market for, e.g.,  miso paste, soy-fed livestock, and arable land, the Federal Circuit's decisions in the Roundup-Ready cases start to look surprisingly pro-competitive.

The big question in my mind, then, is not whether the Federal Circuit's reached the right result in the Roundup-Ready cases.  Given the factual setting of those cases, I think the answer to that question is a relatively uncontroversial yes.  The real question, to me, is whether the same holds true for self-replicating technologies other than seeds for agricultural commodities.  I already noted above one type of self-replicating technology–personalized nanomedicine–that may not present the same incentives for patentees, their customers, and their competitors, as do herbicide-resistant soybeans.  Given how little we can presume to know about the future development of other self-replicating technologies, it is likely unwise to try to set a rule today to govern the rights of downstream users for all such technologies that may arise tomorrow.  And for this reason alone, it may be worth getting some discussion of the issue from the Supreme Court, which seems particularly sensitive (almost to a fault) to the hazards of establishing brittle legal rules to govern the unknown future of technology.  If the analysis that emerges is more substantive and functionally-minded than the under-argued, formalist analysis of the Federal Circuit (admittedly, another big if), I would be happy to see the Court take the case, if only to put the type of issues I've discussed in this post on the table.

Supreme Court: Generic Pharma Manufacturer Has Standing to Pursue FDA Mis-Label Claim against Patentee

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By Dennis Crouch

Caraco Pharmaceutical Laboratories, Ltd. v. Novo Nordisk A/S, (Supreme Court 2012)

This decision only slightly shifts balance of power in the pharmaceutical industry away from patentees toward generic manufacturers. The case may serve as a good example a complex issue that the Supreme Court appears to understand and deal with in a nuanced fashion.

The FDA maintains a listing of approved drug treatments and any patents that cover the treatment. The listing – known as the Orange Book – is essentially managed by the individual patentee-manufacturers who regularly provide the FDA with updated information of new listings and de-listings. Patentees receive a number of benefits from listing patents in the Orange Book, including constructive standing to sue based upon a generic company's filing of an abbreviated new drug agreement (ANDA) as well as an up-to-30-month stay of FDA approval of any generic versions.

Although the diabetes drug repaglinide has three FDA approved uses, Novo's listed patent covers only one of those methods of use. Relying upon that limitation of coverage, Caraco filed an ANDA application requesting permission to sell the drug for the other two uses but carving out the patented use from its application. Novo then changed its Orange Book listing to indicate that its patent actually covered all three approved uses.

In the ensuing litigation, Caraco filed a counterclaim seeking an order to force Novo to amend its use-code listings. The Federal Circuit, however refused to allow the counterclaim.

In a unanimous decision penned by Justice Kagen, the Supreme Court has reversed, holding that a generic drug manufacturer may employ the counterclaim provision of the Hatch-Waxman Act to force correction of a use code that inaccurately describes the brand's patent as covering a particular method of using a drug.

The Federal Circuit had given the statute a highly technical reading – noting that such a counterclaim for correction was only available if "the patent does not claim … an approved method of using the drug." 21 U. S. C. §355(j)(5)(C)(ii)(I). Since the patent did cover one approved method, the appellate panel majority reasoned that there was no standing to correct the two incorrect listings.

The Supreme Court rejected that analysis as counter to the context surrounding the provision in the law.

The statutory counterclaim we have considered enables courts to resolve patent disputes so that the FDA canfulfill its statutory duty to approve generic drugs that do not infringe patent rights. The text and context of the provision demonstrate that a generic company can employthe counterclaim to challenge a brand's overbroad use code. We accordingly hold that Caraco may bring a counterclaim seeking to "correct" Novo's use code "on the ground that" the '358 patent "does not claim . . . an approved method of using the drug"—indeed, does not claim two.

Reversed.

Justice Sotomayor penned a short concurring opinion calling for further reform to the statute and within the FDA to better ensure that generic drugs can become quickly available for uses that are not covered by any valid patent. The concurring opinion calls the agency to task for failing to exercise its authority in regulating listings in the Orange Book.

The Frand Wars: Who’s on First?

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Guest Post by Jorge L. Contreras

Standards are powerful market tools that enable products and services offered by different vendors to interoperate: think WiFi, USB, and the pervasive 3G and 4G telecommunications standards. Yet once standards are widely adopted, markets can become "locked-in" and switching to a different technology can be prohibitively costly. Because patent holders have the potential to block others from deploying technology covered by their patents, the industry associations that develop standards ("standards development organizations" or "SDOs") often demand a trade-off from the companies that participate in standards-development: you can have a say in the technical direction of the standard, but in return you must license your patents that are essential to the standard on "fair, reasonable and non-discriminatory" (FRAND) terms.

Last month, I discussed a series of statements released by Apple, Microsoft and Google seeking to clarify how they interpret FRAND licensing commitments. Both the U.S. Department of Justice and the European Commission looked carefully at these interpretations in evaluating Google's $12 billion acquisition of Motorola Mobility, Apple's purchase of a number of Linux-related patents, and the $4.5 billion acquisition of Nortel's patent portfolio by a group including Microsoft, Apple, and RIM. The agencies concluded that these transactions did not present significant antitrust concerns, basing their reasoning in part on the interpretations of FRAND offered by Apple, Microsoft and Google.

Independently of these agency determinations, there continues to be significant disagreement among market participants over the meaning of FRAND. This disagreement arises both in reference to the level of royalties that should be considered "reasonable", and whether other tactics, such as seeking injunctive relief, are fair game when FRAND commitments have been made. Such disagreements have serious consequences because a commitment to grant a license on FRAND terms is not itself a license. A license to operate under a patent is not granted until the parties can agree on those "fair, reasonable and non-discriminatory" terms. So, if the parties can't agree on the terms of the FRAND license for a particular "standards-essential" patent, the frustrated licensee must either refrain from implementing the standard (and lose a significant market opportunity) or risk infringing the patent. The typical result: litigation.

To help get a handle on the current state of play in the courts, Table 1 offers a summary of some of the principal cases in which FRAND issues are currently being litigated in the U.S. and Europe. These disputes form only a part of the larger patent wars currently being waged across the smart phone industry. That wide-ranging litigation involves even more players and extends to patents that are not necessarily essential to the implementation of industry standards. But the more focused skirmishes over FRAND issues are important too, as some of the most basic technology needed to make mobile devices interoperate is covered by standards, and the terms on which "standards-essential" patents will be licensed will affect all players in the market, both large and small. Thus, while the scale, complexity and rapid pace of this litigation virtually guarantees that any summary will be incomplete and quickly outdated, I hope that it will be useful (at least temporarily) for those who want an overview of the current state of play regarding FRAND.

Table 1 – Current FRAND Litigation

Parties

Court

FRAND Issue(s)

Status

W.D. Wash

Royalty rate, injunctions

Summary judgment hearing scheduled May 2012, trial scheduled Nov. 2012.

 

Moto currently enjoined from enforcing German injunctions

European Comm'n

Injunctions, licensing conditions

EC investigation announced in Apr. 2012

N.D. Ill. & W.D. Wis.

Royalty rate

Ill. trial scheduled June 2012; Wis. trial scheduled Nov. 2012

S.D. Cal.

Defensive suspension, injunctions

Apple complaint filed Feb. 2012

N.D. Cal.

Injunctions, failure to disclose

Summary judgment motion scheduled for hearing May 2012; mediation pending

Netherlands – Hague

Injunctions

 

European Comm'n

Injunctions

EC investigation announced in Jan. 2012

Del. Ch.

ITC exclusion orders

Huawei complaint filed Oct. 2011

Microsoft v. Motorola (W.D.Wash, Case No. C10-1823-JLR): This case relates to Motorola patents covering the IEEE's 802.11 (WiFi) standards and the ISO/IEC's and ITU's H.264 video codec standards. In 2010, Motorola offered to license these patents to Microsoft at a proposed royalty of 2.25% of the end product (i.e., each Xbox 360, PC/laptop or smart phone implementing the standard). Microsoft did not take a license, sought declaratory relief that Motorola breached its FRAND obligations to the SDOs, and Motorola sued Microsoft for patent infringement. The crux of Microsoft's argument is that Motorola's license offer is inherently unreasonable because it is not tied to the value of Motorola's technical contribution and because it seeks to assess royalties on the price of a PC/laptop rather than Microsoft's contribution to that product (i.e., the Windows operating system). Microsoft has also contended that the absolute value of Motorola's royalty demand (about $4 billion, presumably across all product lines) is unreasonable and far exceeds the amounts that Microsoft pays to other holders of larger numbers of standards-essential patents. Motorola counters that its 2.25% royalty rate has been offered for many years and is well within industry norms (citing examples of royalty rates much higher than this). It also contends that Microsoft refused to negotiate in good faith, thereby repudiating its right to receive a FRAND license. In February, the District Court denied Microsoft's first motion for summary judgment, but each party has made additional motions for summary judgment relating to FRAND and breach of contract issues, which will be heard in May.

Last week, the court granted Microsoft a preliminary injunction and temporary restraining order preventing Motorola from enforcing injunctions enjoining the sale of Microsoft products in Germany, a matter on which the Mannheim Regional Court is scheduled to rule shortly. Microsoft has requested that the International Trade Commission (ITC) similarly postpone ruling on Motorola's infringement claims until the Washington court has had the opportunity to rule on the FRAND matter.

European Commission Investigations. On April 3, the European Commission (after receiving complaints from Microsoft and Apple) announced that it initiated an investigation to determine whether Motorola violated European competition law by failing to comply with its FRAND commitments to standard-setting organizations. In particular, the EC has stated that it will investigate whether Motorola's attempts to obtain injunctions on the basis of standards-essential patents, and the licensing terms that it has offered, amount to an abuse of dominant position in violation of Article 102 of the EU Treaty. In January, the EC opened a similar investigation of Samsung to determine whether its attempts to obtain injunctive relief in various European patent actions pending against Apple violated Samsung's FRAND commitments to ETSI and otherwise ran afoul of EC competition law. The EC has actively investigated FRAND compliance in the past, most notably the allegedly excessive royalty rates charged by Qualcomm on the CDMA and WCDMA wireless 3G communications standards. The Qualcomm investigation, which was initiated in October 2007, was closed in November 2009 after Qualcomm reached settlements with the original complainants in the case.

Apple v. Motorola (N.D. Ill, Case No. 1:11-cv-08540, transferred in part from W.D. Wis., Case No. 10-CV-00662-BBC). Apple and Motorola have been embroiled in patent litigation over smart phones and other products since late 2010. Not all of the patents at issue relate to standardized technology, but in a few critical cases standardization and FRAND issues are front and center. Most significant is the dispute playing out in the Northern District of Illinois before Judge Richard Posner, sitting by designation. In that case, Apple argues that Motorola should be equitably estopped from enforcing certain patents relating to the ETSI GSM/WCDMA and UMTS/3GPP standards. The gist of Apple's complaint appears to be that Motorola did not offer to license Apple on terms that were FRAND. Yet Motorola maintains that it did, beginning in 2007, offer to license its patents to Apple at its customary rate of 2.25%. The dispute, then, revolves around the issue whether this licensing offer complies with Motorola's FRAND obligations to ETSI and possibly other SDOs and, if not, what remedies are available to Apple. Trial is scheduled for June. Trial in Illinois is scheduled in June. It appears that some, but not all, of the FRAND-related claims in this case remain in the Wisconsin court, which is scheduled for trial in November.

Apple v. Motorola (S.D. Cal., Case No. 12CV0355 JLS BLM). Last year the Apple-Motorola patent litigation spread to Germany and Motorola obtained an injunction against the sale of certain Apple products (e.g., iPhones) from the Regional Court (Landesgericht) of Mannheim (the injunction was recently suspended by the Higher Regional Court (Oberlandesgericht) in Karlsruhe pending further proceedings). Among the many patents being asserted by Motorola are two that are essential to the GPRS standard developed at the European Telecommunications Standards Institute (ETSI). This February, Apple brought a declaratory judgment action against Motorola in the Southern District of California, alleging that Motorola violated its FRAND obligations to ETSI when it sought an injunction from the Mannheim court. Apple bases its FRAND claim on a license that Motorola previously granted to Qualcomm, the supplier of GPRS-based communication chips used in the iPhone. Based on the pleadings, it appears that under the Motorola-Qualcomm license Motorola covenants not to sue Qualcomm's customers (such as Apple) for using Qualcomm's GPRS-based chips. However, Motorola seems to have revoked Apple's immunity under the Qualcomm license, asserting that Apple's enforcement of different patents against Motorola triggered the "defensive suspension" provisions of that license. In the California suit Apple seems to claim that either Motorola's revocation of Apple's rights under the Qualcomm license, or its enforcement of patents against Apple in Germany, violates Motorola's FRAND obligations to ETSI. The case is still at an early stage, and Apple's FRAND-based arguments, as well as Motorola's defenses, will presumably be clarified in the future.

Apple v. Samsung (N.D. Cal. Civil Action No. 11-CV-01846-LHK). Apple is also involved in wide-ranging patent litigation with Samsung, maker of the Galaxy smart phone than runs Google's Android operating system. In the Northern District of California, Apple and Samsung are each asserting patents against each other. Apple has moved for partial summary judgment arguing that Samsung failed to disclose patents essential to the ETSI UMTS telecommunications standard used in the iPhone and iPad, that Apple is licensed under these patents pursuant to a cross-license between Samsung and Intel (the supplier of chipsets used in these Apple products), and that Samsung's FRAND commitments to ETSI prevent it from now seeking injunctive relief against Apple. Apple's FRAND argument is interesting, in that it relies on French law (which purportedly governs the ETSI IPR policy and declarations). Samsung counters that Apple only sought a FRAND license from Samsung after Apple initiated litigation, then rejected Samsung's FRAND license offer and "steadfastly refused to engage in meaningful FRAND negotiations" (Samsung's Opposition to Apple's Motion for Partial Summary Judgment, Apr. 2, 2012, at 11). The sum of these actions, according to Samsung, is that Samsung's FRAND obligations should no longer prevent it from seeking an injunction against Apple under these circumstances. A hearing on Apple's motion is scheduled for May, 2012. The case is particularly noteworthy, as it involves not only FRAND issues, but also allegations that Samsung violated ETSI's patent disclosure rules (thus rendering Samsung's patents unenforceable), allegations reminiscent of those made in Rambus v. Infineon, 318 F.3d 1081 (Fed. Cir. 2003), cert. denied, 124 S.Ct. 227 (2003), and Qualcomm v. Broadcom, 584 F.3d 1004 (Fed. Cir. 2008). This month, the parties agreed to submit at least part of the dispute to mediation.

Apple v. Samsung (District Court – Hague, Netherlands, Case numbers 400367 / HA ZA 11-2212, 400376 / HA ZA 11-2213 and 400385 / HA ZA 11-2215). In March, a district court in the Hague, Netherlands, denied Samsung's request for an injunction against Apple, basing its reasoning (according to news reports – I do not have access to an English translation of the decision) on Samsung's commitment to grant FRAND licenses. The court apparently found that because Apple was willing to negotiate in good faith, Samsung's request for an injunction against the sale of Apple products in the Netherlands would not be sustained.

Huawei v. InterDigital (Del. Ch., No. 6974). InterDigital Communications has asserted eight patents relating to 3G telecommunications standards against Huawei in the ITC, seeking an exclusion order against the importation of infringing Huawei products into the U.S. Huawei alleges in an action brought in the Delaware Chancery Court that InterDigital has breached its commitments to ETSI and 3GPP by seeking to enforce its patents against Huawei products without first offering to enter into a FRAND license. Because an exclusion order is the only remedy that the ITC is authorized to grant, Huawei seeks to have the ITC action dismissed on this basis, as well as the establishment of a FRAND royalty rate for InterDigital's 3G patents.

Means-Plus-Function: Invalid as Indefinite

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by Dennis Crouch

Ergo Licensing v. CareFusion 303 (Fed. Cir. 2012)

In a split opinion, the Federal Circuit has affirmed a lower court ruling that Ergo's asserted claims are invalid. Judge Moore explains in her opinion, that the claims are indefinite under 35 U.S.C. § 112 (2) because the means-plus-function limitations are not supported by any corresponding structure disclosed in the specification.  Judge Linn joined Judge Moore's opinion.  Judge Newman dissented. 

Describing, Enabling, and Defining: 35 U.S.C. § 112 (1) requires that a claimed invention be fully described and enabled. In addition, the claims must be drafted in a manner that particularly identifies the scope of rights being claimed.  35 U.S.C. § 112 (2).  Although overlapping, these three requirements—written description, enablement, and definiteness—are separate and distinct requirements. Thus, a claim may fail the definiteness requirement even though the invention sought to be patented was fully described in the original specification in "full, clear, concise, and exact terms" and in a way that "enables any person skilled in the art … to make and use the same."

Means-Plus-Function: Patent claims ordinarily recite particular "structure, material, or acts" as elements that both provide for the inventive step and limit the scope of rights. 35 U.S.C. § 112 (6) allows a patentee to alternatively draft limitations as "a means or step for performing a specified function without the recital of structure, material, or acts in support thereof." To a lay reader, these means-plus-function claims appear quite broad. For instance a claimed "means for connecting elements A and B" seemingly covers any method or structure that accomplishes the claimed function. However, the statute itself require that means-plus-function claims be given a much more limited scope. Under § 112 (6), a means-plus-function claim "shall be construed to cover the corresponding structure, material, or acts described in the specification and equivalents thereof." Thus, to know the meaning of a claimed "means for connecting," we must look to the patent specification to see what particular connecting means were disclosed and the scope of the claim would be limited only to those disclosed structures and their equivalents. The result here is that means-plus-function claims typically have a scope that is much narrower than one might expect on the initial reading.

Undefined Means: In recent years, a number of means-plus-function claims have been invalidated as lacking definiteness under § 112 (2). (I.e., invalid as indefinite). Courts follow the following approach: (a) The statute requires that a means-plus-function element be defined according to corresponding structure found in the specification. (b) If no corresponding structure is found then the term cannot be defined and (c) is therefore invalid as indefinite.

This case offers yet another example of claims being held invalid based upon means-plus-function claim elements that lack corresponding structure in the specification. The claims recite a "control means for controlling [an] adjusting means." The patentee argued that its disclosure of a general purpose computer was sufficient structure because a computer would be able to accomplish the task-at-hand. On appeal, the court rejected the patentee's argument and affirmed that such a computer was insufficient structure since a general purpose computer could not accomplish the function required by the claim. The court wrote that the patentee could have satisfied the requirement by additionally including the algorithm that the computer would use to accomplish its task."

If special programming is required for a general purpose computer to perform the corresponding claimed function, then the default rule requiring disclosure of an algorithm applies. It is only in the rare circumstances where any general-purpose computer without any special programming can perform the function that an algorithm need not be disclosed.

Thus, the means-plus-function limitation has no corresponding structure in the specification because "there is no algorithm described in any form for the function of 'controlling the adjusting means.'" As a result, the claim is invalid as indefinite.

In an extended dissent, Judge Newman argued that the ruling amounts to a formalistic technicality that is unfair to patentees – especially when the enablement and written description tests are not offended by the claim.

Disfavored by Patentees: Because of their narrow scope and high-likelihood of invalidity, "means for" claiming has been on a steady decline for the past two decades. The chart below shows a time series of the percent of patents that include at least one "means for" claim limitation. (Note – my search was for "means for" and so some MPF claims are not counted). These days, the only ones being caught in this trap are either (1) being poorly advised or (2) attempting to improperly extend the scope of their patent beyond what was actually invented. In my view, prudent patent applicants today never rely on MPF claims as their broadest or strongest claims. However, many still find some role for those claims and it is important to recognize that means-plus-function claim scope varies dramatically on the international level.

Device for: The majority opinion suggests the next frontier of challenge – patent claims that rely heavily on functional language but that do not use the magic "means" language. Here, the court at least suggests that an equivalent claim drafted as a "device for controlling" would have been invalid under the same analysis. The court wrote "The [hypothetical] recitation of 'control device' provides no more structure than the term 'control means' itself, rather it merely replaces the word 'means' with the generic term 'device.'"

Punishing Prometheus: Part II – What is a Claim?

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Guest Post by Robert R. Sachs of Fenwick & West LLP; Read Part I

Yes, I said that: the Court does not understand the nature of patent law—more precisely, it does not understand what claims do. Reading the Court’s treatment of Prometheus’ claim, one would think that claims are some type of qualitative instruction manual, a recipe that speaks to “audiences” such as doctors, about which things are “relevant to their decision making.” Claims are no such thing: they are definitions that articulate a specific combination of steps or structures. They are objective in form and design, not subjective or advisory. The notion that the claims here “trust” doctors to “use those laws” is at best silly, and at worst badly misguided. Reducing the claim to this “instruction manual” allows the Court to analogize the claim to Einstein “telling linear accelerator operators about his basic law”—a low point in modern legal reasoning.

In this decision, as well as in Bilski, Benson, and Flook, the Court simply does not “get” what claims are about. The entire preemption analysis, born of a conflation of “algorithms” with “scientific truths” in Benson, is based on this misunderstanding. By definition claims preempt, that is what they are designed to do: to preclude one from making, using, selling, etc., the invention. A broadly drafted claim preempts broadly. And it is this further confusion—between “breadth” or “abstraction” and “abstract ideas”—that is the second damaging mistake the Court made (and continues to make).

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USPTO Director Kappos on Increased USPTO Fees

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Oh his blog, USPTO Director Dave Kappos has written an important defense of proposed USPTO fee increases and his rejection of the normal Washington DC approach of including improbable efficiency gains as major budget elements. I have excerpted a portion of the Kappos post that he titles “Increased Fees v. Operational Efficiencies”:< ?xml:namespace prefix ="" o />

[S]ome stakeholders have taken the view—to caricature it slightly—that the USPTO does not need to increase fees; it needs to get more efficient.

We could not agree more on the importance of improving efficiency at the USPTO. . . . But attempting to draw a corollary between fee-setting and speculation about the possible impact of potential future efficiency gains is difficult without the benefit of hindsight. As we have outlined in our fee proposal, our fees must be set in a manner that enables us to continue investing in reducing the backlog and improving all other areas of our agency. Our experience also reminds us that implementing improvements frequently causes short term disruptions, and likely won’t immediately translate into efficiencies. Anyone who runs a business will tell you that productivity investments often take years to pay off.

Moreover, my judgment as the steward of this agency is that I cannot proceed with a funding model that assumes further efficiency gains, especially if we have not yet achieved them. It places our agency at risk, and is just not right for our employees or for our stakeholders.

The responsible approach is to rely on our experience and current cost model, factoring in the efficiency gains we have achieved to date, but not speculating about possible future gains. This approach of using current costs as a basis for setting prices is the common practice among businesses, and follows the sound advice of the accounting, finance, and economics professions.

Then the question becomes the one asked in our fee proposal: does the U.S. innovation community want us to continue investing to quickly reduce the backlog and fully capture the promise of the AIA, or does it want us to back off a bit and accept a longer trajectory to reducing the backlog, and a higher level of risk relative to future funding downturns? The answer will ultimately have consequences for the kinds of efficiencies the agency is able to realize in the future, and what level of services the USPTO can deliver in years to come.

Read the full post here.

 

Guest Post: The February of FRAND

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Guest Post by Professor Jorge L. Contreras. 

For those of us who have been following the telecom patent battles, something remarkable happened a couple of weeks ago.  On February 7, the Wall St. Journal reported that, back in November, Apple sent a letter[1] to the European Telecommunications Standards Institute (ETSI) setting forth Apple’s position regarding its commitment to license patents essential to ETSI standards.  In particular, Apple’s letter clarified its interpretation of the so-called “FRAND” (fair, reasonable and non-discriminatory) licensing terms that ETSI participants are required to use when licensing standards-essential patents.  As one might imagine, the actual scope and contours of FRAND licenses have puzzled lawyers, regulators and courts for years, and past efforts at clarification have never been very successful.  The next day, on February 8, Google released a letter[2] that it sent to the Institute for Electrical and Electronics Engineers (IEEE), ETSI and several other standards organizations.  Like Apple, Google sought to clarify its position on FRAND licensing.  And just hours after Google’s announcement, Microsoft posted a statement of “Support for Industry Standards”[3] on its web site, laying out its own gloss on FRAND licensing.  For those who were left wondering what instigated this flurry of corporate “clarification”, the answer arrived a few days later when, on February 13, the Antitrust Division of the U.S. Department of Justice (DOJ) released its decision[4] to close the investigation of three significant patent-based transactions:  the acquisition of Motorola Mobility by Google, the acquisition of a large patent portfolio formerly held by Nortel Networks by “Rockstar Bidco” (a group including Microsoft, Apple, RIM and others), and the acquisition by Apple of certain Linux-related patents formerly held by Novell.  In its decision, the DOJ noted with approval the public statements by Apple and Microsoft, while expressing some concern with Google’s FRAND approach.  The European Commission approved Google’s acquisition of Motorola Mobility on the same day.

To understand the significance of the Apple, Microsoft and Google FRAND statements, some background is in order.  The technical standards that enable our computers, mobile phones and home entertainment gear to communicate and interoperate are developed by corps of “volunteers” who get together in person and virtually under the auspices of standards-development organizations (SDOs).  These SDOs include large, international bodies such as ETSI and IEEE, as well as smaller consortia and interest groups.  The engineers who do the bulk of the work, however, are not employees of the SDOs (which are usually thinly-staffed non-profits), but of the companies who plan to sell products that implement the standards: the Apples, Googles, Motorolas and Microsofts of the world.  Should such a company obtain a patent covering the implementation of a standard, it would be able to exert significant leverage over the market for products that implemented the standard.  In particular, if a patent holder were to obtain, or even threaten to obtain, an injunction against manufacturers of competing standards-compliant products, either the standard would become far less useful, or the market would experience significant unanticipated costs.  This phenomenon is what commentators have come to call “patent hold-up”.  Due to the possibility of hold-up, most SDOs today require that participants in the standards-development process disclose their patents that are necessary to implement the standard and/or commit to license those patents on FRAND terms. 

On its face, it is easy to see why a FRAND commitment might reassure implementers of a standard.  If a patent is essential to the standard, the patent holder must license the patent on terms that are fair, reasonable and non-discriminatory.  Unfortunately, the devil has proven to be in the details of FRAND, and no two companies seem to have the same view of what constitutes fair, reasonable or non-discriminatory licensing terms.  This lack of agreement has troubled regulators for some time and has led to an increasing number of litigation claims alleging that one party or another to a standards effort has failed to comply with its FRAND obligations. 

The February FRAND statements by Apple, Microsoft and Google are thus informative and potentially of great importance.  To understand the statements, and why the DOJ viewed them differently, it is helpful to compare them side-by-side.  The following table summarizes what Apple, Microsoft and Google said FRAND means to them.

 

Apple (relating to cellular telephony standards)

Microsoft

Google (limited to Motorola Mobility patents)

1. Prior Commitments.

Will the patent holder honor FRAND obligations of prior patent owners?

A party acquiring patents from someone who made FRAND commitments must abide by those commitments

n/a

G will honor Motorola’s existing FRAND commitments

2.  Onward Transfer.

Will the patent holder require future owners of the patent to comply with its FRAND obligations?

n/a

M will require transferees to abide by its FRAND commitments

G will use “best efforts” to ensure that transferees abide by its FRAND commitments

3. Reciprocity.

Will the patent holder require that the licensee grant a license back to the licensor?

n/a

M will only require a grant-back of the licensee’s patents that are essential to the same standard

G will only require a grant-back of the licensee’s patents that are essential to the same standard

4.  Royalty Rate.

Will the patent holder commit to a maximum royalty rate?

Standards-essential patents should be licensed at an “appropriate” royalty rate reflective of the licensor’s share of the overall number of patents essential to the standard

n/a

Maximum per-unit royalty of 2.25% of product net selling price

5. Injunctive Relief.

Will the patent holder seek injunctive relief against unlicensed implementers of the standard?

A party making a FRAND commitment must not seek injunctive relief on patents subject to the commitment

M will not seek an injunction … on the basis of [standards-] essential patents

G will not seek an injunction on the basis of standards-essential patents, during a reasonable negotiation period and if the other party makes a similar commitment

 

Despite their differences, the three FRAND statements exhibit some important similarities.  All three, for example, support the notion that FRAND commitments should “travel with the patent”.  This is an important acknowledgement, as such commitments typically lack the necessary elements of a bilateral contractual arrangement, and have been questioned in both corporate acquisitions and bankruptcy proceedings (see In re Nortel Networks Inc., Order – Case No. 09-10138(KG) (Bankruptcy Ct. D.Del., Jul. 11, 2011)).

The three statements also address the question of injunctive relief.  Numerous commentators have questioned whether injunctive relief is an appropriate remedy for holders of standards-essential patents, particularly in view of the Supreme Court’s four-part analysis under eBay v. MercExchange LLC, 547 U.S. 388 (2006). In 2011, the Federal Trade Commission suggested that injunctive relief might not be justified in the standards context, writing that “[a] prior [F]RAND commitment can provide strong evidence that denial of the injunction and ongoing royalties will not irreparably harm the patentee.”  Federal Trade Comm’n, The Evolving IP Marketplace – Aligning Patent Notice and Remedies with Competition 235 (2011).  In their February FRAND statements, Apple and Microsoft each commit not to seek injunctions on the basis of their standards-essential patents.  Google makes a similar commitment, but qualifies it in typically lawyerly fashion (Google’s letter is more than 3 single-spaced pages in length, while Microsoft’s simple statement occupies about a quarter of a page).  In this case, Google’s careful qualifications (injunctive relief might be possible if the potential licensee does not itself agree to refrain from seeking an injunction, if licensing negotiations extended beyond a reasonable period, and the like) worked against it.  While the DOJ applauds Apple’s and Microsoft’s statements “that they will not seek to prevent or exclude rivals’ products form the market”, it views Google’s commitments as “less clear”.  The DOJ thus “continues to have concerns about the potential inappropriate use of [standards-essential patents] to disrupt competition”. 

It is not clear whether the DOJ’s criticism of Google’s stance on injunctive relief, or its endorsement of Apple’s and Microsoft’s positions, is warranted.  After all, none of the February FRAND statements was made directly to the DOJ, formed part of a consent order, or even rose to the level of a contractual commitment.  But whatever their actual legal effect, it is certainly preferable to have such statements than not, and perhaps this recent wave of “clarifications” will help courts to interpret the array of FRAND-based claims that will inevitably be brought over the next several years.

Mr. Contreras is a Visiting Associate Professor at American University – Washington College of Law and will join the faculty as an Associate Professor this summer.  His research focuses on the impact of intellectual property rules on scientific and technological development, including in the area of technical standard-setting.  He is the editor of the ABA's Standards Development Patent Policy Manual and has written numerous articles and book chapters relating to intellectual property and standards.

 

Bar to Courts: Please Define “Unpatentably Abstract”

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By Dennis Crouch

Fort Properties, Inc. v. American Master Lease LLC, __ F.3d __ (Fed.Cir. 2012)(Judge Prost joined by Judges Schall and Moore.

American Master Lease (AML) owns a patent that covers a method of creating a tax-deferred real estate investment instrument. U.S. Patent No. 6,292,788. Claim 1 includes three primary steps: aggregating title to real property to form a real estate portfolio; encumbering the property in the real estate portfolio with a master agreement; and creating a plurality of deedshares by dividing title in the real estate portfolio into a set of tenant-in-common deeds with each of the deedshares subject to a reaggregation provision in the master agreement. This method is designed to take advantage of a federal income tax loophole that allows investment properties to be traded tax free in some circumstances.

This litigation arose after AML threatened Fort Properties with an infringement lawsuit and Fort Properties filed an action in the Central District of California asking for a declaratory judgment of invalidity. In a decision predating Bilski v. Kappos, the district court ruled the patent invalid for failing the machine-or-transformation test (MoT). On appeal, the Federal Circuit affirmed – finding the invention unpatentably abstract.

Unpatentably Abstract: Courts have long recognized patent claims as abstractions that tend to generalize and broaden the scope of a particular invention. That small level of abstraction is acceptable and encouraged. However, if a claim is too abstract then it becomes unpatentably abstract. At a conference this weekend, Chief Judge Rader, USPTO Solicitor Chen, and I held an interesting discussion on drawing that line. In my view, “preemption” is largely unhelpful because it falls into the same line drawing trap: A patent is only useful if it sufficiently preempts (i.e., excludes) others, but at some point too much preemption renders a claim unpatentably preemptive. I believe that all three of us see the current jurisprudence on abstract ideas as problematic. It leaves the courts and patent examiners without any real standards for determining an outcome other than asking whether the particularly claimed invention is “too much like Bilski, Benson, or Flook?”

Here, the appellate panel reviewed the tax strategy patent and decided that it counts as abstract because the invention is too much like Bilski.

We view the present case as similar to Bilski. Specifically, like the invention in Bilski, claims 1-31 of the ‘788 patent disclose an investment tool, particularly a real estate investment tool designed to enable tax-free exchanges of property. This is an abstract concept. Under Bilski, this abstract concept cannot be transformed into patentable subject matter merely because of connections to the physical world through deeds, contracts, and real property. . . . When viewing the claimed invention as a whole, the physical activities involving the deeds, contracts, and real property are insufficient to render these claims patentable.

Some of the claims included a computer limitation. However, the court held that limitation did not impose any meaningful limits on the claim scope for subject matter eligibility purposes. “AML simply added a computer limitation to claims covering an abstract concept—that is, the computer limitation is simply insignificant post-solution activity. Without more, claims 32-41 cannot qualify as patent-eligible.”

The problem with the court’s jurisprudence here is that “unpatentably abstract” is not defined. Rather, the court simply recited the core function of the invention and the conclusion that it is abstract.

Whither Obviousness: Narrow Range Anticipated by Broader Range in Disclosure

Anticipation, Articles and Publications, Obviousness, Patent, , , , ,

By Dennis Crouch

ClearValue v. Pearl River Polymers (Fed. Cir. 2012) (Opinion by Judge Moore, joined by Judges PROST and SCHALL)

This case presents a classic law school hypothetical of an invention that is anticipated but likely not obvious. According to the appellate panel, the prior art fully discloses and enables the invention but also teaches that the proposed invention is impractical and does not work well. As discussed below, however, the anticipation holding itself is somewhat controversial because it is based upon the conclusion that a broad range disclosure found in the prior art ("less than 150 ppm") anticipates the narrower range found in the claims ("less than 50 ppm").

A jury found ClearValue’s patent valid and infringed and the district court denied the defendants motions to set the patent verdict aside. On appeal the Federal Circuit reversed based upon the appellate court's own factual finding that a single prior art reference teaches and enables each element of the asserted patent claim.

Background: The patent at issue is directed to a process for clarifying water using a flocculated suspension of aluminum along with high molecular weight quarternized polymers. The listed inventor, Richard Haase continues to be an owner of the patent and also CEO of ClearValue. Haase has filed more than 50 water purification and energy related patents and is also a graduate of the University of Missouri (ChemE + Mathematics + Economics). The defendant, Pearl River was once ClearValue’s customer but later began making its own version of the patented process.  ClearValue and Haase sued for patent infringement and for trade secret violation (for using the process without authority even before he filed for patent protection).

Anticipation versus Obviousness: The appeal focused on anticipation. Pearl River argued that all of the elements of CV's asserted claim were previously disclosed in U.S. Patent No. 4,800,039 (Hassick). The jury found otherwise. As a matter of procedure, a jury's verdict must be supported by "substantial evidence." If not, it must be set aside either by the district court or on appeal. At trial, the defendants had presented their case that Hassick taught each element of the claimed invention while the plaintiffs pointed only to "teaching away" found in patent. Unfortunately for the plaintiffs, "teaching away" is legally irrelevant to the question of anticipation. See Celeritas Techs., Ltd. v. Rockwell Int'l Corp., 150 F.3d 1354, 1361 (Fed. Cir. 1998). Rather, under 35 U.S.C. § 102 a claim will be anticipated and therefore invalid if a single prior art reference describes "each and every claim limitation and enable[s] one of skill in the art to practice an embodiment of the claimed invention without undue experimentation." Quoting Am. Calcar, Inc. v. Am. Honda Motor Corp., 651 F.3d 1318, 1341 (Fed. Cir. 2011).

Genus Species Anticipation: The only gap in the prior art disclosure was that Hassick generally disclosed "low-alkalinity systems (i.e., 150 ppm or less)" and "alkalinity of between 60-70 ppm" while the asserted patent claimed "alkalinity less than or equal to 50 ppm." In its 2006 Atofina decision, the Federal Circuit addressed a similar genus-species situation involving a narrow claimed temperature range and a broader temperature range found in the prior art. Atofina v. Great Lakes Chem. Corp., 441 F.3d 991 (Fed. Cir. 2006). In Atofina, the court held that a broad genus range disclosure in the prior art did not anticipate the narrow species range claimed. There, both the hypothetical “person having skill in the art”  (PHOSITA) and the patentee agreed that there was something special or “critical” about the claimed temperature range. The court distinguished this case from Atofina based upon its factual conclusion that “there is no allegation of criticality or any evidence demonstrating any difference across the range.”  Based upon the logical analysis that the narrow range is not critically different from the broad range, the Federal Circuit held that the claimed narrow range was fully disclosed by the broad range and therefore is unpatentable.

Comment – Whither Obviousness: Interesting notion: The mechanism that the court used to distinguish this case from Atofina are very much akin to obviousness principles — looking essentially for synergy or unexpected results that make the narrow range qualitatively different from the broad range.  It seems to me, however, that if these obviousness principles can be used to extend the anticipatory scope of prior art, then other obviousness principles (such as teaching away) should also be relevant.

Trade Secret Negated by Prior Art?: The Texas jury found Pearl River liable for trade secret misappropriations. However, the district court rejected that conclusion based upon an implicit admission by ClearValue that all of the elements of the alleged trade secret were publicly known at the time and found in the Hassick reference.  On appeal, the Federal Circuit affirmed without further analyzing the extent that public availability of knowledge in the form of a third-party prior art document is sufficient to disqualify the knowledge as a trade secret. I am not an expert on Texas trade secret law, but the at least the Restatement of Torts is clear that a trade secret “may be a device or process which is clearly anticipated in the prior art.”

 

 

Streck v. Research Diagnostic Systems: Dismissal of Invalidity Counterclaims, Written Description, and Enablement

Patent, , ,

By Jason Rantanen

Streck, Inc. v. Research & Diagnostic Systems, Inc. (Fed. Cir. 2011) Download 11-1044
Panel: Newman, O'Malley (author), and Reyna

Streck, Inc. sued Research & Diagnostic Systems, Inc. for infringement of three patents relating to hematology control technology using integrated reticulocyte controls.  In response, R&D counterclaimed for declaratory judgment of noninfringement and invalidity.  During the district court litigation, R&D argued that the claims were unsupported by adequate written description, that they were not enabled, and that it was entitled to priority.  The district court granted summary judgment in Streck's favor on written description, JMOL in Streck's favor on enablement, and a jury ruled for Streck on the issue of priority.  Following trial, the district court entered a permanent injunction.

Dismissal of Invalidity Counterclaims:  On appeal, the CAFC concluded that the district court properly dismissed R&D's invalidity counterclaims against unasserted claims.  During the litigation, Streck submitted a series of infringement contentions in which it progressively limited the specific claims asserted, while R&D amended its invalidity contentions to ultimately encompass all but one claim of the patents-in-suit.  When R&D moved for summary judgment of invalidity on two of the unasserted claims, the district court dismissed the invalidity counterclaims for those claims citing a lack of "reasonable apprehension" of suit on R&D's part as to those claims.

On appeal, the Federal Circuit agreed with the District Court's dismissal.  Even in the wake of MedImmune, a declaratory judgment plaintiff must show the existence of a case or controvery, as evaluated on a claim-by-claim basis. Drawing upon the reasoning of a New Jersey district court opinion addressing the same issue, Hoffman-La Roche Inc. v. Mylan Inc., No. 2:09cv1692, 2009 U.S. Dist. LEXIS 114784, at *17-18 (D.N.J. Dec. 9, 2009), the Federal Circuit held that "consistent with MedImmune, a counterclaimant must show a continuing case or controversy with respect to withdrawn or otherwise unasserted claims."  Slip Op. at 20.

The CAFC further concluded that R&D failed to satisfy this requirement.  Although the district court technically erred by relying exclusively on the reasonable apprehension of suit test, "there is no evidence that R&D met its burden of showing a continuing case or controversy with respect to the unasserted claims."  Id. at 23. Nor was the court persuaded by R&D's arguments based on Scanner Technologies Corp. v. ICOS Vision Systems Corp., 528 F.3d 1365 (Fed. Cir. 2008):

"unlike the situation in Scanner Technologies, where all of the claims were at issue and were never withdrawn or altered by either party, here, both parties were on notice from the start of litigation that the scope of claims at issue was only a subset of the full patents-in-suit and, significantly, did not include Claim 3 of any patent."

Id. at 22.

Written Description Satisfied: Streck v. Research Diagnostic is also notable for its reliance on the knowledge of a PHOSITA in the context of written description.  In this instance, the asserted claims covered both the use of a "true" reticulocyte or an analog of a reticulocyte in the claimed control composition.  The two parties' technical lineage differed based on this distinction: the inventor of Streck's patents used only a reticulocyte analog when he reduced the invention to practive, while R&D developed its composition using a true reticulocyte.  Leveraging this distinction into a written description argument, R&D contended that the patents-in-suit failed to provide adequate written description for a true reticulocyte integrated control.

On appeal, the CAFC agreed with Streck and the district court that the patents contained sufficient disclosures to support claims encompassing the use of true reticulocytes when combined with the knowledge of a PHOSITA, namely, that "use of true reticulocytes in stand-alone controls was well-known in the prior art."  Slip Op. at 28.  Based on the disclosures of the patents, "one skilled in the art would have recognized that the claimed integrated controls could be made using either true reticulocytes or reticulocyte analogs." Id.

Enablement: Focus on the "Novel Aspect" of the patents-in-suit: The CAFC also affirmed the district court's grant of JMOL of enablement, agreeing with Streck's claims that the "novel" aspect of the invention was an integrated control using both reticulocytes and white blood cells and that true reticulocytes are "virtually indistinguishable" from analogs.  While "the specification, not the knowledge of those skilled in the art, 'must supply the novel aspects of an invention,'" id. at 32-33 (quoting Automotive Technologies v. BMW, 501 F.3d 1274 (Fed. Cir. 2007), the court apparently did not view the type of retriculocytes as a novel aspect of the invention in this case.  "Here, there was unrebutted evidence that true reticulocytes and Ryan’s reticulocyte analogs 'work in exactly the same way in a hematology control, and are virtually indistinguishable, even to one skilled in the art.'”  Id. at 33.

The CAFC also affirmed on the issue of priority, citing its earlier and controlling decision in Streck, Inc. v. Research & Diagnostic Systems, Inc., 659 F.3d 1186 (Fed. Cir. 2011), and concluded that the wording of the permanent injunction was not overly broad. 

Celsis: Federal Circuit Upholds Preliminary Injunction over Dissent

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by Dennis Crouch

Celsis In Vitro v. CellzDirect and Invitrogen (Fed. Cir. 2012)

This case is important because it provides an important incremental analysis of when a validity challenge is sufficiently substantial to lead a court to reject a motion for preliminary injunctive relief.

Majority opinion by Chief Judge Rader (author) and Judge Prost. Dissent by Senior Judge Gajarsa.

Celsis owns Patent No. 7,604,929 — claiming as its invention a method and system of freezing and preserving human liver cells using multi-cryopreservation.  In a split opinion, the Federal Circuit affirmed the lower court's preliminary injunction order stopping the defendants from practicing the invention. 

When appealed, a preliminary injunction is reviewed for abuse of discretion that requires clear error, either in “judgment in weighing relevant factors” or in the exercise of “discretion based upon an error of law.”  A decision on preliminary relief is immediately appealable. 

Dissent on Substantial Question of Obviousness: Writing in dissent, Judge Gajarsa argued that this case is not amenable to the “extraordinary and drastic remedy of a preliminary injunction” because the defendants “raised a substantial question as to the validity” of the asserted patent.  Focusing on the burden of proof, Judge Gajarsa noted that a preponderance of the evidence is sufficient to prove the “substantial question” and that “it is unnecessary to prove a substantial question of invalidity by clear and convincing evidence.”

The the key dispute between the majority and dissent was on the issue of obviousness.  Judge Gajarsa wrote:

In my judgment, the district court abused its discretion in finding that Celsis had demonstrated a likelihood of success on the merits because the claimed invention is nothing more than a repetition of steps already known in the art.  Moreover, the majority perpetuates this error, and in so doing applies the wrong standard for obviousness and rationalizes the issuance of the preliminary injunction because it would prevent competition with a patented process which may be proven to be invalid. 

In particular, Judge Gajarsa argued that the district court and majority improperly rejected the obviousness argument by seeking some teaching or suggestion (TSM) in the prior art that would lead someone to attempt to combine the known elements of the claimed invention.

In particular, the majority wrote that the key prior art does not disclose “micro-cryopreservation” as claimed nor does it suggest this step as a solution to problems known in the art.  Chief Judge Rader wrote “This court has not seen [the Defendants] identify any teaching, suggestion, or motivation in the [prior art] that multiple rounds of freezing would somehow increase rather than decrease cell viability.”  The majority agreed with the lower court that the obviousness argument lacked credibility because "not a single one of that astonishingly large body of literature was devoted to the subject of multi-cryopreservation of hepatocytes."  Judge Gajarsa felt this fact was inconsequential because multi-cryopreservation simply involved repeating steps that were already known.  

DDC Comment: The TSM test for combining prior art was eliminated by the Supreme Court KSR v Teleflex in much the same way that the MOT test for patentable subject matter was eliminated in Bilski. In both cases, the strict tests remain probative, if inconclusive, tools.  However, in the context of a preliminary injunction a defendant's failure to provide a motivation to combine prior art may well be sufficient find a patent “likely nonobvious.” 

Although identified as a “factor”, the likelihood of success factor turns out to be a necessary element of a successful motion for preliminary relief.  In other words, if the plaintiff is unable to prove that it has a sufficient likelihood of success on the merits of the case then the district court will deny the preliminary injunction motion.  This case provides some assistance in determining when that threshold has been met.

Motivation versus Long Felt Need:  Chief Judge Rader is known for playing logical games with the secondary indicators of nonobviousness. Here, the accused infringers provided evidence of a “market need” for the solution and argued that those market forces would prompt the variation found in the patent.  That argument follows the statement in KSR that “market forces can prompt variations” of known design elements.  Judge Rader flipped the argument and instead noted that such market need is when “properly linked to the claimed invention, is actually probative of long felt need under objective criteria analysis and supportive of non-obviousness.”

Preliminary Injunction Standards: A preliminary injunction is decided on a four-factor test that is almost identical to the test outlined for permanent injunctions in eBay v. MercExchange.  Namely, a court must consider (1) likelihood of success on the merits, (2) irreparable harm, (3) balance of hardships, and (4) public interest.  In the context of permanent relief, the likelihood of success on the merits is no longer a factor because permanent relief is only determined after the patentee wins on the merits. In eBay, the Supreme Court included an additional factor –  that monetary damages are insufficient.  However, that factor is likely wholly subsumed by the “irreparable harm” factor.

Here irreparable harm was shown by expert testimony and evidence of "price erosion, damage to ongoing customer relationships, loss of customer goodwill (e.g., when an effort is later made to restore the original price), and loss of business opportunities." And, the public interest factor is normally presumed to be met in patent cases because the public interest favors enforcement of valid patents.

Patented or Described in a Printed Publication

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By Dennis Crouch

The newly revised 35 U.S.C. § 102 states that no patent shall issue if “the claimed invention was patented, described in a printed publication, or in public use, on sale, or otherwise available to the public before the effective filing date of the claimed invention…” 35 U.S.C. §102(a).

My question for the hour is whether (or not) the word “patented” in this fundamental provision is entirely superfluous. In other words, when is a claimed invention “patented” but not described in a printed publication? I should note at this point that the pre AIA Section 102 also includes the statement that an invention is not patentable if it was already “patented or described in a printed publication.”

Patented but not Published: It is largely safe to assume that patents are published and, therefore, any disclosure found in a patent should also be considered to be “described in a printed publication.” A narrow exception to this aforementioned assumption can be derived from regular SNAFUs that occur in patent offices around the world that allow for patents to issue without actually being published. Historically, some countries also granted patentee’s a period of post-grant secrecy. US courts have ruled that these foreign patents still count as patented under the statute so long as the secrecy is only temporary and the patent is eventually and meaningfully “laid open for public inspection.” See In re Kathawala, 9 F.3d 942, 28 USPQ2d 1789 (Fed. Cir. 1993) and In re Carlson, 983 F.2d 1032 (Fed. Cir. 1992). The statute covers patents issued in any country and because the US has no direct control over how any particular country publishes its patents, the “patented” clause has the potential of potentially becoming meaningful if countries decide to again limit publication.

Patented but not Described?: There is also some potential that, even when a patent is published, a particular element in the prior art will covered by the patent claims but not sufficiently described to qualify under the “printed publication” leg of the clause. The enablement and written description requirements of 35 U.S.C. § 112 (as well as their worldwide equivalents) largely eliminate this possibility. However, the truth is that patents regularly issue that are directed to particular inventions but that are not fully enabled by the specification. In those cases it is quite possible that an invention be “patented” without being “described in a printed publication.” (Of course, this may be unlikely because US courts have placed such a low enablement requirement on prior art).

Thoughts?

Patently-O Bits & Bytes by Lawrence Higgins

Bits and Bytes, Design Patent, Patent, ,

Apple v. Samsung

  • Christopher Carani recently wrote an article about the Apple v. Samsung smartphone war. In the article, Carani provides the facts and background necessary to understand the current design patent dispute and offers insight into the merits along with potential outcomes. For example, Carani writes that Judge "Koh may find that Apple has not met its burden on validity at this stage of the case and deny the motion for preliminary injunction with respect to all patents." The article is a great source for information about the exciting smartphone battle between the top two smartphone makers in the world. [Link]

Spangenberg Family Foundation

  • The Spangenberg Family Foundation gave Case Western University School of Law a $2 million gift to endow the Spangenberg Family Foundation Chair in Law and the Arts. Eric Spangenberg is the founder and chairman of Dallas-based IP Navigation Group, a patent monetization company.

IP Hall of Fame

  • The process to find inductees into the IP Hall of Fame for 2012 is currently underway. The IP Hall of Fame enables the IP community to honor individuals from business, politics, the law, finance, academia and anywhere else, who have made a significant contribution to IP. Any member of the IP community can make a nomination, and all nominations will be considered by the IP Hall of Fame Academy. [Link]

Executive Director

  • The Engelberg Center on Innovation Law and Policy at New York University School of Law is seeking applicants for the full-time position of Executive Director. They seek an Executive Director with an entrepreneurial approach who would be an engaged participant in formulating and implementing an ongoing vision for the Center's programs in competition, innovation, and information law. Specific duties will be determined in consultation with the Center's faculty directors, but should be expected to include: developing a policy-oriented research agenda, preferably in a way that could involve students, fundraising for the Center from industry, foundation, or government sources, and planning conferences and other events (with the help of the center's administrator). More information about the Center and its activities is at [Link].

Applications should be emailed by December 10, 2011, to Nicole Arzt, nicole.arzt@nyu.edu, and should include: a cover letter, curriculum vitae, copies of any publications or other relevant writing, and the names and contact information of three references.

Patent Jobs:

  • Roberts Mlotkowski Safran & Cole is searching for an IP attorney with 2-4 years of patent prosecution experience and a degree in EE. [Link]
  • Roberts Mlotkowski Safran & Cole is seeking an IP attorney with 2-4 years of patent prosecution experience and a chemical or chemical engineering degree. [Link]
  • iRobot is looking for a patent agent with 5-8 years of experience. [Link]
  • Greenblum & Bernstein is seeking a patent associate with an EE or CE background and 2-3 years of experience. [Link]
  • Steptoe & Johnson is searching for IP associates with a minimum 4 years of experience in litigation and a technical background. [Link]
  • Fiala & Weaver is looking for a patent attorney/agent with 1 or more years of experience. [Link]
  • Myers Wolin is seeking a partner level attorney (patent or trademark) or small practice group. [Link]
  • Edell, Shapiro & Finnan is searching for associates with backgrounds in EE or mechanical engineering. [Link]
  • The IP group of Sutherland is seeking a patent agent with 1-3 years of experience and a chemical engineering degree. [Link]

Upcoming Events:

  • The ITC Trial Lawyers Association Annual Meeting will be held on November 9th in Washington D.C. Guest speakers includes Deanna Okun and former Chief Administrative Judge Luckern. [Link]
  • World Research Group, an official Patently-O Jobs sponsor, is hosting the 3rd Annual Social TechNet Intellectual Property Forum Nov. 16-17 in New York. This conference provides solutions to the most prevalent in-house software and online IP protection and management issues. (Patently-O readers can save $200 by using promo code ABY668) [Link]
  • IBC will hold a Standards and Patents Conference in London on November 16th & 17th. The conference will analyze the interplay between standards, intellectual property and competition law. There will be 28 speakers representing various organizations, such as, the European Commission, Mr. Justice Floyd, IBM, Qualcomm Europe, Nokia, GE Healthcare and Intel. (Patently-O readers receive a 10% discount) [Link]
  • IBC will hold a US Patent Reform Congress Conference on November 18th in London. The conference will focus in the impact of the Leahy-Smith America Invents for the European practitioner, with expertise from the EPO, AIPLA, USPTO and more. (Patently-O readers receive a 10% discount) [Link]
  • The American Conference Institute's 2nd Annual Forum on: Paragraph IV Disputes will be held in San Francisco on December 7th. Experienced faculty of renowned litigators and judges will guide attendees through every stage of a Paragraph IV challenge to help them formulate offensive moves and defensive plays. (Patently-O readers can receive a discount by registering with code PO 200) [Link]
  • IBC Legal is holding a conference on International Patent Litigation 2011 in London on December 7th-8th. Use VIP Code FKW82249PO to get a 10% discount. [Link]
  • The WSBA IP Section, WSPLA, IEEE IP Professional Initiative, and the University of Washington School of Law's Law, Technology & Arts Group will be presenting an all-day CLE at the University of Washington School of Law on Friday, December 9, 2011 on the impacts of the America Invents Act.

Contact Lawrence.Higgins@patentlyo.com with leads for future Bits and Bytes.

Patently-O Bits & Bytes by Lawrence Higgins

Bits and Bytes, Design Patent, Patent, ,

Apple v. Samsung

  • Christopher Carani recently wrote an article about the Apple v. Samsung smartphone war. In the article, Carani provides the facts and background necessary to understand the current design patent dispute and offers insight into the merits along with potential outcomes. For example, Carani writes that Judge "Koh may find that Apple has not met its burden on validity at this stage of the case and deny the motion for preliminary injunction with respect to all patents." The article is a great source for information about the exciting smartphone battle between the top two smartphone makers in the world. [Link]

Spangenberg Family Foundation

  • The Spangenberg Family Foundation gave Case Western University School of Law a $2 million gift to endow the Spangenberg Family Foundation Chair in Law and the Arts. Eric Spangenberg is the founder and chairman of Dallas-based IP Navigation Group, a patent monetization company.

IP Hall of Fame

  • The process to find inductees into the IP Hall of Fame for 2012 is currently underway. The IP Hall of Fame enables the IP community to honor individuals from business, politics, the law, finance, academia and anywhere else, who have made a significant contribution to IP. Any member of the IP community can make a nomination, and all nominations will be considered by the IP Hall of Fame Academy. [Link]

Executive Director

  • The Engelberg Center on Innovation Law and Policy at New York University School of Law is seeking applicants for the full-time position of Executive Director. They seek an Executive Director with an entrepreneurial approach who would be an engaged participant in formulating and implementing an ongoing vision for the Center's programs in competition, innovation, and information law. Specific duties will be determined in consultation with the Center's faculty directors, but should be expected to include: developing a policy-oriented research agenda, preferably in a way that could involve students, fundraising for the Center from industry, foundation, or government sources, and planning conferences and other events (with the help of the center's administrator). More information about the Center and its activities is at [Link].

Applications should be emailed by December 10, 2011, to Nicole Arzt, nicole.arzt@nyu.edu, and should include: a cover letter, curriculum vitae, copies of any publications or other relevant writing, and the names and contact information of three references.

Patent Jobs:

  • Roberts Mlotkowski Safran & Cole is searching for an IP attorney with 2-4 years of patent prosecution experience and a degree in EE. [Link]
  • Roberts Mlotkowski Safran & Cole is seeking an IP attorney with 2-4 years of patent prosecution experience and a chemical or chemical engineering degree. [Link]
  • iRobot is looking for a patent agent with 5-8 years of experience. [Link]
  • Greenblum & Bernstein is seeking a patent associate with an EE or CE background and 2-3 years of experience. [Link]
  • Steptoe & Johnson is searching for IP associates with a minimum 4 years of experience in litigation and a technical background. [Link]
  • Fiala & Weaver is looking for a patent attorney/agent with 1 or more years of experience. [Link]
  • Myers Wolin is seeking a partner level attorney (patent or trademark) or small practice group. [Link]
  • Edell, Shapiro & Finnan is searching for associates with backgrounds in EE or mechanical engineering. [Link]
  • The IP group of Sutherland is seeking a patent agent with 1-3 years of experience and a chemical engineering degree. [Link]

Upcoming Events:

  • The ITC Trial Lawyers Association Annual Meeting will be held on November 9th in Washington D.C. Guest speakers includes Deanna Okun and former Chief Administrative Judge Luckern. [Link]
  • World Research Group, an official Patently-O Jobs sponsor, is hosting the 3rd Annual Social TechNet Intellectual Property Forum Nov. 16-17 in New York. This conference provides solutions to the most prevalent in-house software and online IP protection and management issues. (Patently-O readers can save $200 by using promo code ABY668) [Link]
  • IBC will hold a Standards and Patents Conference in London on November 16th & 17th. The conference will analyze the interplay between standards, intellectual property and competition law. There will be 28 speakers representing various organizations, such as, the European Commission, Mr. Justice Floyd, IBM, Qualcomm Europe, Nokia, GE Healthcare and Intel. (Patently-O readers receive a 10% discount) [Link]
  • IBC will hold a US Patent Reform Congress Conference on November 18th in London. The conference will focus in the impact of the Leahy-Smith America Invents for the European practitioner, with expertise from the EPO, AIPLA, USPTO and more. (Patently-O readers receive a 10% discount) [Link]
  • The American Conference Institute's 2nd Annual Forum on: Paragraph IV Disputes will be held in San Francisco on December 7th. Experienced faculty of renowned litigators and judges will guide attendees through every stage of a Paragraph IV challenge to help them formulate offensive moves and defensive plays. (Patently-O readers can receive a discount by registering with code PO 200) [Link]
  • IBC Legal is holding a conference on International Patent Litigation 2011 in London on December 7th-8th. Use VIP Code FKW82249PO to get a 10% discount. [Link]
  • The WSBA IP Section, WSPLA, IEEE IP Professional Initiative, and the University of Washington School of Law's Law, Technology & Arts Group will be presenting an all-day CLE at the University of Washington School of Law on Friday, December 9, 2011 on the impacts of the America Invents Act.

Contact Lawrence.Higgins@patentlyo.com with leads for future Bits and Bytes.

Patently-O Bits & Bytes by Lawrence Higgins

Bits and Bytes, Design Patent, ,

Apple v. Samsung

  • Christopher Carani recently wrote an article about the Apple v. Samsung smartphone war. In the article, Carani provides the facts and background necessary to understand the current design patent dispute and offers insight into the merits along with potential outcomes. For example, Carani writes that Judge "Koh may find that Apple has not met its burden on validity at this stage of the case and deny the motion for preliminary injunction with respect to all patents." The article is a great source for information about the exciting smartphone battle between the top two smartphone makers in the world. [Link]

Spangenberg Family Foundation

  • The Spangenberg Family Foundation gave Case Western University School of Law a $2 million gift to endow the Spangenberg Family Foundation Chair in Law and the Arts. Eric Spangenberg is the founder and chairman of Dallas-based IP Navigation Group, a patent monetization company.

IP Hall of Fame

  • The process to find inductees into the IP Hall of Fame for 2012 is currently underway. The IP Hall of Fame enables the IP community to honor individuals from business, politics, the law, finance, academia and anywhere else, who have made a significant contribution to IP. Any member of the IP community can make a nomination, and all nominations will be considered by the IP Hall of Fame Academy. [Link]

Executive Director

  • The Engelberg Center on Innovation Law and Policy at New York University School of Law is seeking applicants for the full-time position of Executive Director. They seek an Executive Director with an entrepreneurial approach who would be an engaged participant in formulating and implementing an ongoing vision for the Center's programs in competition, innovation, and information law. Specific duties will be determined in consultation with the Center's faculty directors, but should be expected to include: developing a policy-oriented research agenda, preferably in a way that could involve students, fundraising for the Center from industry, foundation, or government sources, and planning conferences and other events (with the help of the center's administrator). More information about the Center and its activities is at [Link].

Applications should be emailed by December 10, 2011, to Nicole Arzt, nicole.arzt@nyu.edu, and should include: a cover letter, curriculum vitae, copies of any publications or other relevant writing, and the names and contact information of three references.

Patent Jobs:

  • Roberts Mlotkowski Safran & Cole is searching for an IP attorney with 2-4 years of patent prosecution experience and a degree in EE. [Link]
  • Roberts Mlotkowski Safran & Cole is seeking an IP attorney with 2-4 years of patent prosecution experience and a chemical or chemical engineering degree. [Link]
  • iRobot is looking for a patent agent with 5-8 years of experience. [Link]
  • Greenblum & Bernstein is seeking a patent associate with an EE or CE background and 2-3 years of experience. [Link]
  • Steptoe & Johnson is searching for IP associates with a minimum 4 years of experience in litigation and a technical background. [Link]
  • Fiala & Weaver is looking for a patent attorney/agent with 1 or more years of experience. [Link]
  • Myers Wolin is seeking a partner level attorney (patent or trademark) or small practice group. [Link]
  • Edell, Shapiro & Finnan is searching for associates with backgrounds in EE or mechanical engineering. [Link]
  • The IP group of Sutherland is seeking a patent agent with 1-3 years of experience and a chemical engineering degree. [Link]

Upcoming Events:

  • The ITC Trial Lawyers Association Annual Meeting will be held on November 9th in Washington D.C. Guest speakers includes Deanna Okun and former Chief Administrative Judge Luckern. [Link]
  • World Research Group, an official Patently-O Jobs sponsor, is hosting the 3rd Annual Social TechNet Intellectual Property Forum Nov. 16-17 in New York. This conference provides solutions to the most prevalent in-house software and online IP protection and management issues. (Patently-O readers can save $200 by using promo code ABY668) [Link]
  • IBC will hold a Standards and Patents Conference in London on November 16th & 17th. The conference will analyze the interplay between standards, intellectual property and competition law. There will be 28 speakers representing various organizations, such as, the European Commission, Mr. Justice Floyd, IBM, Qualcomm Europe, Nokia, GE Healthcare and Intel. (Patently-O readers receive a 10% discount) [Link]
  • IBC will hold a US Patent Reform Congress Conference on November 18th in London. The conference will focus in the impact of the Leahy-Smith America Invents for the European practitioner, with expertise from the EPO, AIPLA, USPTO and more. (Patently-O readers receive a 10% discount) [Link]
  • The American Conference Institute's 2nd Annual Forum on: Paragraph IV Disputes will be held in San Francisco on December 7th. Experienced faculty of renowned litigators and judges will guide attendees through every stage of a Paragraph IV challenge to help them formulate offensive moves and defensive plays. (Patently-O readers can receive a discount by registering with code PO 200) [Link]
  • IBC Legal is holding a conference on International Patent Litigation 2011 in London on December 7th-8th. Use VIP Code FKW82249PO to get a 10% discount. [Link]
  • The WSBA IP Section, WSPLA, IEEE IP Professional Initiative, and the University of Washington School of Law's Law, Technology & Arts Group will be presenting an all-day CLE at the University of Washington School of Law on Friday, December 9, 2011 on the impacts of the America Invents Act.

Contact Lawrence.Higgins@patentlyo.com with leads for future Bits and Bytes.

Operating Efficiently Post-Bilski by Ordering Patent Doctrine Decision-Making

Academic Studies, Articles and Publications, Patent, Patent Cases 2011, Patentable Subject Matter, , ,

Last year, Professor Merges and I co-authored this short article on the administration of Bilski. In light of the pending Section 101 cases and Judge Rader's opinion in Classen Immunotherapies v. Biogen, I thought I would post it here again. Download the twenty-page essay from SSRN.

Here is the introduction:

Now that the Supreme Court has decided Bilski v. Kappos, there is an enormous amount of speculation about the case's impact on patent applicants, litigants, and other participants in the patent system. Most of the commentary is concerned with the holding in Bilski, how this holding will be applied by courts and the Patent Office, and ultimately, the effect of the holding on inventors, and those who hold and seek patents.

We take a different approach; rather than try to cut through the complexity of Bilski, or predict how it will be applied, we talk about how to avoid it. We are interested in how to minimize the cost and confusion that accompany a review of patents for § 101 subject-matter eligibility. To be specific, we propose that the § 101 issue of Bilski be considered only when doing so is absolutely necessary to determine the validity of a claim or claims in a patent. We believe any claim that can be invalidated under one of the less controversial and less complex requirements for patentability—§§ 102, 103, and 112, for instance—ought to be disposed of without considering subject matter patentability. In other words, the Bilski issue should be avoided wherever it is not strictly necessary. To support this conclusion, we present a set of empirical data that indicates that the vast majority of patent claims challenged on subject matter eligibility grounds were also challenged on other patentability issues.

We set the stage for our proposal in Part II, which briefly reviews the history behind Bilski and explains its open-ended holding and individualized approach. The difficulty of applying the Bilski ruling to different types of patent claims leads us to Part III, in which we call into question an accepted (if largely implicit) principle of patent law—that the lexical priority of statutory provisions in the 1952 Patent Act dictates a necessary logical sequence of invalidity tests. We reject this widespread assumption. There is nothing in the statute that requires this.

Indeed, in Part III we argue that in many ways the very idea of a sequence of discrete patentability requirements is conceptually misleading. Claims can be and often are rejected by the Patent Office for multiple reasons, suggesting that at least certain claims suffer from defects that transcend specific statutory validity requirements. We argue further that the policy underpinnings of various requirements overlap in complex ways, so that in reality patentability doctrine does not test for a series of discrete and independent qualities that are distinct from and mutually exclusive of each other. In the same way, transcendent qualities of an invention can influence multiple doctrines simultaneously, with pioneering inventions (due to both a liberal treatment under enablement, and a broad reach under infringement doctrines) being a prime example. This demonstrates again that there is not and should not be a strong separation between various patent law doctrines. Another argument along these lines recognizes that while patentability doctrines are not discrete entities, neither is "the invention" whose validity is being considered. Patent applicants routinely present multiple, overlapping claims, all of which cover fine-grained variations on a central inventive insight or advance. So it is inaccurate to visualize patentability as a stepwise series of tests applied to a single "invention." It is not true for example that "invention X" passes § 101 and should thus proceed in logical sequence to be tested under § 102. One claim growing out of inventive insight X might present no § 101 problems at all, yet another claim in the same patent application might raise a difficult issue under this provision. Each claim, being a unique slice of the overall inventive insight, ought to be considered on its own terms, and in whatever order makes the most sense. Put another way, the mental model of a stepwise sequence of patentability determinations overlooks the highly granular nature in which different slices of the inventive concept are presented for validity testing.

This analysis is further developed in Section III.A. When a claim fails to pass muster under any single test of validity, that claim should be invalidated. No further tests should be applied. We describe this as "chain" theory of validity: once one link in the chain is broken, the claim fails, and there is no reason to proceed further. Beyond that point, any expenditure of resources on validity questions is inefficient. Pragmatic considerations enter at this point. Issues of cost, justiciability, and spillover effects are perfectly appropriate in determining the actual sequence in which validity tests are applied with respect to any particular patent claim. The non-linearity of patent validity tests, together with the principle of efficient administration, yields a simple rule: start with chain links that are, in general, easiest and cheapest to test, and when the chain fails, stop the process. That way, the costliest and most complex doctrines—the trickiest "links in the chain"— are often avoided, and in any event are put off until later. Therefore, § 101 should often be avoided, both at the Patent Office and in the courts. We justify this not only on efficiency grounds, but also by analogy to the Supreme Court rules of avoidance.

In Part IV, we apply this simple principle. It leads to several recommendations. First, though the PTO has good reasons for its longstanding practice of rejecting claims for multiple reasons, we recommend that §101 be used only as an exception or last resort even at the PTO. Next, we contend that the courts should proceed in a stepwise fashion, beginning with §§ 102, and 103, and 112, changing the order of doctrines as dictated by pragmatic considerations, and stopping as soon as a claim is conclusively invalidated. In all cases, the complex and costly process of deciding whether a claim presents patentable subject matter under § 101 should be deferred until very late in the process. Therefore, we recommend, courts should in effect hold off on the difficult task of evaluating claims under § 101—ideally deploying the full § 101 analysis only when that is essential, i.e., when a claim passes muster under the other validity doctrines.

http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1953512. Thanks!

We the People: Petitioning President Obama to End Software Patents

Patent, ,

The White House's “we the people project” implements a system for petitioning the Administration.  Any petition that receives 25,000 or more signatures within 30–days of being posted will be reviewed and given an “official response.” (Prior to October, the threshold was 5,000 signatures).

One recent petition asks the Administration to “direct the Patent Office to cease issuing software patents.” 

Under the patent office's current activity, patents have been come a way to stifle innovation and prevent competition rather than supporting innovation and competitive markets. They've become a tool of antitrust employed by large companies against small ones.

To return sanity to the software industry – one of the few industries still going strong in America – direct the patent office to cease issuing software patents and to void all previously issued software patents.

The petition has received over 14,000 signatures and Quentin Palfrey, from the White House office of the CTO provided an official response that that primarily focuses on the benefits of the newly enacted America Invents Act and the leadership of Director Kappos. Palfrey did, however, take one sentence to specifically address software patents:

We understand that the concern about software patents stems, in part, from concerns that overly broad patents on software-based inventions may stifle the very innovative and creative open source software development community. As an Administration, we recognize the tremendous value of open source innovation and rely on it to accomplish key missions. For example, the U.S. Open Government National Action Plan recently announced that the source code for We the People and Data.gov would be open sourced for the entire world. Federal agencies are likewise spurring innovation through open source energy. For example, the Department of Defense issued clarifying guidance on the use of open software at the Department. And, the Department of Health and Human Services has become a leader in standards-based, open sourced policy to power innovations in health care quality and enable research into efficient care delivery. The tremendous growth of the open source and open data communities over the years, for delivery of both commercial and non-commercial services, shows that innovation can flourish in both the proprietary and open source software environments.

Folks opposed to software patents saw this response as inadequate and have now created a new petition asking the administration to “pursue software patent abolition.”  The petition states:

The Obama Administration's response to a previous petition shamefully attempted to absolve the President of responsibility and placate us with the toothless America Invents Act. We summarily reject his response and demand immediate action.

Rapid growth in the software industry during economic malaise demonstrates the importance and power of this market. The President must use his full power and influence to fight harmful forces from entrenched incumbents and non-producing entities.

There are no possible reforms to be made to the USPTO that will enable it to keep pace with innovation in the software industry. Those who truly understand software are creating it.

This new petition was created on November 1 and on that same day had already collected 400 signatures. Another new petition is the “petition to take petitions seriously.”

The Narrows: Winning by Arguing Both Trade Secret Misappropriations and Patent Infringement

Patent, Patent Cases 2011, Trade Secret, , ,

Atlantic Research Marketing Systems (ARMS) v. Troy Industries (Fed. Cir. 2011)

By Dennis Crouch

This appeal stems from a 2007 patent infringement and business tort lawsuit filed by ARMS against its former employee and current competitor (Mr. Troy). ARMS' reissue patent claims a firearm hand-guard with an attachment point at the firearm's barrel nut. The original patent application included both the barrel nut attachment and a sleeve support as claim limitations. However, the reissue patent does not require the sleeve support. That change is important for the case because TROY's competing hand-guard uses the barrel nut as the single attachment point.

On summary judgment the district court ruled the patent invalid for failing the written description requirement of 35 U.S.C. § 112 p1.

Written Description Requirement: Section 112 p1 of the Patent Act requires that a patent specification include "a written description of the invention, and of the manner and process of making and using it, in such full, clear, concise, and exact terms as to enable any person skilled in the art to which it pertains, or with which it is most nearly connected, to make and use the same." In Ariad, the Federal Circuit reaffirmed that this provision creates the separate and distinct requirements of written description and enablement. The test for written description considers whether, after reading the original specification, one of skill in the art would understand that the inventor was in possession of the claimed invention. Most written description cases arise in situations like this where the patentee has amended its claims well after the application filing date.

Although not cited here, this case is similar to the Federal Circuit's Gentry Gallery decision where an element in the original claims was omitted in a broader-amended claim. In Gentry Gallery, the original application was directed to a pair of recliners with controls located on a console. The amended claims removed any restriction on the console location. The Federal Circuit held those broader claims invalid because "the patent disclosure did not support claims in which location of recliner controls was other than on the console."

On appeal here, the Federal Circuit agreed that the broader claims are invalid under the written description requirement because it the specification does not provide any evidence that the inventor invented a hand-guard that uses the barrel nut as the one and only attachment point.

[I]t is undisputed that the written description for the '465 patent does not disclose to a person of ordinary skill in the art an invention where the yoke/barrel nut attachment point provides complete support for the handguard accessory. Claims 31-36, however, clearly cover such a design. Put differently, claims 31-36 [as amended] exceed in scope the subject matter that [the inventor] chose to disclose to the public in the written description. Therefore, we hold that the district court properly granted summary judgment invalidating claims 31-36 for failing to satisfy the written description requirement of 35 U.S.C. § 112. Mr. Swan used the reissue process to impermissibly obtain claims unsupported by the written description.

ARMS had also sued TROY for trade secret violation and argued in court that ARMS version of the barrel-nut-only attachment was a trade secret stolen by TROY. That testimony bolstered the court's conclusion that the asserted claims lacked the written description support to cover a barrel-nut-only attachment.

[ARMS] cannot now "have it both ways" by reaching back and relying on the disclosures in the '245 patent to claim an invention he was purposely shielding from the public.

Trade Secret Violation: Although TROY won the patent dispute, the jury found troy liable for trade secret misappropriation and breach of a fiduciary duty to his former employee. The award was $1.8 million in damages under Massachusetts Trade Secret Law. (Massachusetts has not adopted the UTSA). As noted above, the alleged trade secret is the method of attaching the hand-guard to a firearm using only the barrel nut. The jury was instructed that any protectable trade secret must go beyond what was disclosed in the '245 patent. Based upon that instruction, the Federal Circuit affirmed – finding no clear error.

This strategy worked perfectly for ARMS who would likely be satisfied winning either patent infringement or trade secret misappropriations. Although the court clearly sympathized with TROY's position, it noted that the legal positions taken by the two parties meant that ARMS was likely to win one of its claims.

Troy's argument illustrates the inherent tension Atlantic Research created by contending that Troy misappropriated trade secrets, while simultaneously asserting that the products Troy developed with the misappropriated trade secrets infringed its patent. In response, Troy contended that Atlantic Research's patent disclosed the trade secret, but also contended that the patent asserted against it was invalid for failing to disclose a written description of a handguard that attaches solely at the barrel nut. These conflicting positions left little room for either party to prevail on both claims.

The problem: In the end, the Federal Circuit vacated the jury verdict on a "jury taint" issue. One juror brought a plumbing clamp from home during deliberations to show other jurors and the appellate panel held that the judge should have taken more dramatic steps to ensure that the clamp did not have any "prejudicial effect on the jury as a whole."

No Patent for Claimed Method of Patenting

Patent, ,

In 2000, patent attorney Jeff Grainger filed his provisional application for a "computer implemented method for securing intellectual property rights." The claimed method consisted of a system that used an electronic information disclosure form that actively prompted users to provide invention-related information and then automatically converting the information to patent application format. The dependent claims focused on specific prompts – such as "best mode" and "enablement" information.

The first rejection came in 2005, followed by a final rejection in 2006 and the BPAI appeal finally decided in 2011.

The key prior art cited by the examiner was the old ePave filing system.

In the BPAI appeal, Grainger's attorneys at the Kilpatrick Townsend firm had argued that the claimed active prompting for best mode or enablement information was a non-obvious advance over the prior art. The board rejected that argument – explaining that one of skill in the art knows the statutory requirements for a patent application and therefore "ePave's data fields for submitting the Specification, with their textual cues that the Specification is asked for" renders the claimed invention obvious.

At that point the applicant gave-in and has allowed the application to go abandoned – apparently without further continuation.

Grainger is now a partner at the early-stage start-up and investment group known as The Foundry. Back in 2000, he was a founder of First to File, Inc., which he then sold and which now holds the intellectual property rights.

Flowchart Insuficient Structure to Define Sofware Means-Plus-Function Limitation

Patent, , ,

In re Aoyama (Fed. Cir. 2011)

Aoyama’s pending application claims a supply chain management system with two elements: “an order controller system” and “a warehouse system.” According to the claim, the order controller generates “transfer data” using “reverse logistic means” and the warehouse receives the transfer data.  The Examiner identified U.S. Patent Application Pub. 2001/0034673 (“Yang”) as fully anticipating and that rejection was affirmed by the Board of Patent Appeals and Interferences (“Board”).

On appeal to the Court of Appeals for the Federal Circuit, a split panel agreed that the claims lacked merit but found them impermissibly indefinite rather than anticipated.

The key to the decision focuses on the means-plus-function “reverse logistic means” limitation. 

Means-plus-function (MPF) claims are deceptive. MPF claims appear to be broadly drafted and without any structural limitations. However, the patent act requires that the actual scope of MPF claims be limited to structures disclosed within their specifications. 35 U.S.C. 112 p6. The court has also repeatedly held that an MPF limitation is considered impermissibly indefinite if the specification does not contain any structure that performs the claimed function.

Here, the claimed “reverse logistic means” generate “transfer data.”  Aoyama pointed to a flow-chart (Figure 8) as providing the necessary structure.  (Shown below).   In reviewing the flow-chart, however, the Federal Circuit could not identify sufficient structure.  In particular, the court noted that the flow-chart identified a number of results, but did not identify any way that “a computer could be programmed to produce the results described in the boxes.”  Quoting both the Examiner and the Board, the Court wrote  that Figure 8 only “presents several results to be obtained, without describing how to achieve those results, and certainly not how to generate transfer data.”

Patent2011017

Importantly, the question of means-plus-function structure is much like that of written description. It does not matter whether one skilled in the art would be able to create a structure to perform the claimed function. Rather, the focus is on whether such structures were disclosed in the specification.

Because the means-plus-function limitation lacked sufficient disclosure of an accompanying structure and are therefore unpatenable.

In dissent, Judge Newman argued (1) that the federal circuit improperly raised the issue of indefiniteness and (2) that the figure and accompanying text should be considered sufficient structural disclosure.