Tag Archives: Federal Circuit En Banc

Appealing a BPAI Rejection: Can the Applicant Present New Arguments and New Evidence to the District Court?

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Hyatt v. Kappos (Fed. Cir. 2010)

The Federal Circuit has ordered an en banc rehearing of its August 14 decision. The appeal focuses on evidentiary and procedural limits of an appeal of a BPAI decisions to a District Court under 35 USC 145. The Court framed the en banc issues as follows:

(a) Are there any limitations on the admissibility of evidence in section 145 proceedings? In particular—

(i) Does the Administrative Procedure Act require review on the agency record in proceedings pursuant to section 145?
(ii) Does section 145 provide for a de novo proceeding in the district court?
(iii) If section 145 does not provide for a de novo proceeding in the district court, what limitations exist on the presentation of new evidence before the district court?

(b) Did the district court properly exclude the Hyatt declaration?

Background: Hyatt's district court action was originally filed in 2003 as Hyatt v. Rogan after the BPAI sustained written description and enablement rejections for seventy-nine of Hyatt's claims. The examiner had issued 45 separate rejections of Hyatt's claims based on the doctrines of inadequate "written description, lack of enablement, double patenting, anticipation, and obviousness." Complicating the case is the fact that the application's claimed priority date is 1975.

The issues in this appeal case arose when Hyatt filed a civil action in DC District Court to challenge the BPAI decision. In the civil action, Hyatt submitted a new declaration offering additional evidence of enablement and written description. However, the district court excluded that inventor-declaration from evidence based on Hyatt's "negligence" in failing to previously submit the information to the PTO.

Writing for the majority in the original panel opinion, Judge Michel affirmed the exclusion of evidence – holding that the district court may properly exclude evidence that Hyatt should have produced to the PTO. Judge Moore penned a compelling dissent in support of the patent applicant's right to a full civil action including the right to submit additional evidence when challenging a PTO decision.

Briefing: Hyatt's en banc brief will be due around March 31 and the USPTO's response due 28-days later. Briefs of amici curiae may be filed without leave of the court, but must otherwise comply with FRAP 29 and Fed Cir R 29.

* * * * *

35 U.S.C. 145 Civil action to obtain patent.

An applicant dissatisfied with the decision of the Board of Patent Appeals and Interferences in an appeal under section 134(a) of this title may, unless appeal has been taken to the United States Court of Appeals for the Federal Circuit, have remedy by civil action against the Director in the United States District Court for the District of Columbia if commenced within such time after such decision, not less than sixty days, as the Director appoints. The court may adjudge that such applicant is entitled to receive a patent for his invention, as specified in any of his claims involved in the decision of the Board of Patent Appeals and Interferences, as the facts in the case may appear, and such adjudication shall authorize the Director to issue such patent on compliance with the requirements of law. All the expenses of the proceedings shall be paid by the applicant.

Top-Ten Pending Patent Cases

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Foley attorney Hal Wegner regularly updates his list of the top-ten most important pending patent cases ranked according to their likely impact on the law. The list follows with my own annotations.

  1. Ariad v. Eli Lilly: This en banc case is fully briefed and pending decision on the question of whether the written description requirement of Section 112 should be considered separate and distinct from the enablement requirement. In many ways, the case is about how the law should define the inventor’s “possession” of the invention.
  2. I4i v. Microsoft: A petition for en banc rehearing has been filed on issues of damages and injunctive relief.
  3. Mayo v. Prometheus: This case is on petition for certiorari to the Supreme Court on the question of patentable subject matter for medical diagnostic methods. It has the potential to be a Bilski follow-on.
  4. Bilski v. Kappos: This patentable subject matter case is pending decision at the Supreme Court.
  5. Pequignot v. Solo Cup: Question of intent necessary for false marking charges.
  6. Microsoft v. Lucent: Microsoft is expected to file a petition for certiorari on the “clear and convincing” standard required for invalidating a patent. Microsoft argues that the standard should be lowered when the most pertinent prior art was not considered during patent prosecution.
  7. Arkansas Carpenters: [UPDATED AND CORRECTED] The Second Circuit is considering whether a “reverse payment” from a patentee to an ANDA generic challenger to settle a patent challenge should be considered an antitrust violation.
  8. Costco v. Omega: This case is pending certiorari with an outstanding request for the views of the Obama administration. The case raises an important question of copyright exhaustion in the context of authorized sales of copyrighted material on foreign soil. If decided by the Supreme Court, the case will likely impact patent doctrine.
  9. Princo v. ITC: En banc argument is scheduled for March 3, 2010 on the contours of antitrust and patent misuse in the standard-setting processes.
  10. Acushnet v. Callaway: Whether the legal determination of obviousness should be made by a judge – rendering a jury’s conclusion on that question “entirely advisory.”

Federal Circuit Jurisprudence: Moving Beyond Federal Circuit Patent Cases

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Download the (5–page) Essay here: Broadening Federal Circuit Jurisprudence: Moving Beyond Federal Circuit Patent Cases, 2010 Patently-O Patent Law Journal 19 (2010).

By Dennis Crouch

After the Federal Circuit’s 2006 en banc decision in DSU Medical, charges of inducing patent infringement were thought to require that the accused infringer have actual knowledge of the asserted patent.  In its recent decision in SEB v. Montgomery Ward, the Federal Circuit rejected that conventional wisdom and instead held that “deliberate indifference” to the existence of a patent would be sufficient to support an inducement finding.  Thus, “a claim for inducement is viable even where the patentee has not produced direct evidence that the accused infringer actually knew of the patent-in-suit.”

An interesting aspect of the recent SEB decision is the court’s use of non-patent and non-Federal Circuit cases to aid its interpretation of the law.  Specifically, the decision relies on three cases that are decidedly non-patent: Farmer v. Brennan, 511 U.S. 825 (1994); United States v. Carani, 492 F.3d 867, 873 (7th Cir. 2007); and Woodman v. WWOR-TV, Inc., 411 F.3d 69 (2d Cir. 2005).

Farmer v. Brennan involved the question of whether an incarcerated pre-operative transsexual who projects female characteristics could be held in a men-only prison. The Supreme Court there held that a prison official could be liable for “deliberate indifference” to inmate safety.  US v. Carani involved an appeal of a child pornography conviction and the Seventh Circuit ruled that the defendant’s knowledge of the child-status of the pornography was satisfied by the defendant’s deliberate avoidance of or indifference to the truth. Woodman v. WWOR-TV involved an age discrimination charge against FOX and noted that knowledge of a fact may be proven through evidence that the party “consciously avoided knowledge of what would otherwise have been obvious him.”

Interestingly, the cases cited above are not found in the appellate briefs. Rather, the SEB court’s concept of “deliberate indifference” was raised sua sponte by the Federal Circuit.

A Broader Jurisprudential Outlook: In the past, I have spoken with appellate attorneys who suggested that briefs to the Federal Circuit should almost exclusively cite to prior Federal Circuit patent cases.  I wonder if this decision is indicative of a shift in the court’s jurisprudence.  In recent cases such as eBay, MedImmune, and Grokster, the Supreme Court pushed the Federal Circuit to consider non-patent jurisprudence when deciding patent cases.  In KSR, the Supreme Court also suggested that the Federal Circuit should not overly bind itself to doctrine.  These bits of Supreme Court guidance suggest a broader jurisprudential outlook.  Additionally, soon-to-be Chief Judge Rader has a penchant for drawing connections across doctrinal lines. It will be interesting see whether this case is a sign of a new era or perhaps simply an aberration.

   

  

Design Patents: Symmetry Requires Elimination of Points-of-Novelty Test for Anticipation

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International Seaway Trading Corp v. Walgreens Corp (Fed. Cir. 2009)

The laws of anticipation and infringement are often considered as a symmetric pair. In its classic statement on point, the Supreme Court proclaimed “[t]hat which infringes, if later, would anticipate, if earlier.” Peters v. Active Mfg. Co., 129 U.S. 530, 537 (1889)

Design Patent Infringement: In the 2008 en banc Egyptian Goddess decision, the Federal Circuit eliminated the ‘points-of-novelty’ test from the infringement analysis. Infringement of a design patent is now proven by showing that an “an ordinary observer, giving such attention as a purchaser usually gives” would find the accused design “substantially the same” as the patented design. Egyptian Goddess, 543 F.3d 665, 670 (Fed. Cir. 2008)(en banc). Egyptian Goddess has been seen as boon for design patent because infringement is now easier to prove.

Design Patent Anticipation: If the Egyptian Goddess decision made it easier to prove infringement of a design patent, the rubric of symmetry indicates that the law of anticipation should also change to make it easier to invalidate a design patent. In particular, in this case Walgreens successfully argued that the points-of-novelty test for novelty should be eliminated.

Prior to the present decision, a design patent would be considered invalid as anticipated if it failed both the points-of-novelty and the ordinary observer tests of novelty. Under the points-of-novelty test, the declared “points-of-novelty” of a patented design are compared with the closest prior art reference to determine whether those same design elements are found in the prior art. Under the ordinary observer test the patented design was compared with the alleged anticipatory reference to determine whether an ordinary observer would find the two “substantially the same.”

Based on the en banc elimination of the points-of-novelty test for infringement analyses, the Federal Circuit here also eliminated the points-of-novelty test from the anticipation analysis.

Writing in Dissent, Judge Clevenger agreed with the elimination of the points-of-novelty test, but disagreed with details of the majority opinion. Namely, Judge Clevenger warned against conducting the ordinary observer test by “dissection of a design as a whole into its component pieces.”

As recognized by the majority, the ordinary observer test requires assessment of the designs as a whole. . . . I agree that the differences in the inner sole designs are to be assessed as part of the anticipation inquiry. But the differences in the inner sole designs must be appreciated in conjunction with all of the design differences. This is so especially with regard to the differing number and arrangement of the circular openings on the upper of the clogs. . . . The effect of the summation of all the design differences is what counts, not the comparison of differences one by one, isolated from each other. Such an approach invites the problems we sought to eliminate by rejecting the “point of novelty” test. . . . Partial judgments of anticipation on segments of a design prohibit assessment of designs as a whole, in violation of long-standing law, starting with Gorham.

PatentlyO027

Enforcing Contracts between Joint Owners: WARF v. Xenon

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Wisconsin Alumni Research Foundation (WARF) v. Xenon Pharma, Appeal No. 08-1351 (7th Cir. 2010).

WARF and Xenon jointly filed for patent protection for a cholesterol lowering enzyme known as Stearoyl CoA Desaturase (SCD). Warf also granted Xenon rights as an exclusive licensee and Xenon agreed to pay royalties for sales or sublicense fees. Xenon then sublicensed its rights to Novartis but did not pay royalties to WARF. Xenon's argument is based on the law of concurrent patent ownership. Generally, a patent co-owner is not required to share licensing revenue with other co-owners. The district court rejected that argument here — finding that the contract between WARF and Xenon is controlling over the patent law default rule. At trial, a jury awarded WARF one-million-dollars in royalties. That award was reduced then by the judge to $300,000.

The Seventh Circuit has now affirmed the lower court ruling that Xenon breached its license agreement by granting a sublicense without paying WARF its share.

35 U.S.C. 262 makes clear that each Joint owner of a patent right may make use of the rights "without the consent of and without accounting to the other owners." However, §262 has a major caveat in that it only applies "in the absence of any agreement to the contrary." Picking up on that caveat, the Seventh Circuit made clear that the "statutory default rule therefore controls unless there is an agreement to the contrary." The appellate panel went on to confirm that the WARF/Xenon agreement is certainly an "agreement to the contrary" despite the fact that it does not include a specific and explicit revocation of § 262 rights.

The bargained-for exchange between the parties provided that the Foundation would forego its right to separately license the patent in exchange for receiving a share of the profits from Xenon's commercialization of the technology—either directly or via a sublicense to a third party. Xenon received a significant benefit from the agreement—the exclusive right to exploit the technology protected by the joint patent application. Xenon cannot avoid paying royalties or sublicense fees to the Foundation simply by labeling the Novartis transaction a "license" rather than a "sublicense."

Quiet Title: Xenon also filed for its own patents on PPA compounds used to suppress SCD levels. WARF claimed ownership rights in the PPA because one of its scientists had contributed to the project and sued here to quiet title and also sued for conversion. On appeal, the court sided with WARF — finding that the WARF scientist's assignment of rights to Xenon was void because the scientist has already assigned all interest in future inventions to WARF.

Seventh Circuit: WARF originally appealed its case to the Federal Circuit. However, the Federal Circuit transferred the case to the Seventh Circuit based on a lack of subject matter jurisdiction. In a non-precedential opinion, the court held that the dispute did not "arise under the patent laws." [Link] An interesting aspect of that decision was that the court's statement that the Bayh-Dole Act (35 U.S.C. §§ 200-212) is not "patent law" when considering the question of appellate jurisdiction. The Federal Circuit refused to take the jurisdiction issue en banc. Judge Rader penned the following dissent from the en banc denial:

In an extremely short per curiam opinion with far too little explanation, the panel left the impression that it was giving away this court's jurisdiction over a broad swath of claims potentially arising from the Bayh-Dole Act, 35 U.S.C. §§ 200-212. While non-precedential, the panel's opinion nonetheless unnecessarily suggests that this court's jurisdiction to review these cases is limited. I respectfully dissent from this court's denial of rehearing en banc.

The panel concluded, albeit without much analysis, that WARF's complaint did not allege that the Bayh-Dole Act creates a cause of action. Thus it was entirely unnecessary for the panel to opine as to whether the Bayh-Dole Act is a "patent law" or not. And indeed, the Bayh-Dole Act, in my view, is most certainly a patent law. While the panel dismissed the notion that the Bayh-Dole Act's "mere inclusion" in Title 35 does not make it a "patent law," it seems to me that this is actually a pretty good indicator. After all, Title 35 is itself entitled "Patents," and Chapter 18, which encompasses only §§ 200-212, is called "Patent Rights in Inventions Made with Federal Assistance." Also, the language within some of the sections of the Bayh-Dole Act suggests its provenance as a patent law. For example, 35 U.S.C. § 201(d) defines "invention" as "any invention or discovery which is or may be patentable…." Section 201(e) explains that a "subject invention" is an invention conceived of or first reduced to practice by a contractor. "Conception" and "reduction to practice" are familiar patent law terms of art. Also, § 200 states that the Act intends "to use the patent system to promote the utilization of inventions arising from federally supported research or development…." The Bayh-Dole Act is, "at its heart," a patent law, albeit a patent law that employs some government contract rules to facilitate its patent-related policy objectives.

Although this court's panel opinion did not mention it, the reason that the "improvements" clause in this case does not require an infringement analysis is that the WARF/Xenon agreement features no issued patents, just patent applications. Thus, no court need perform a true infringement analysis. See GAF Building Materials Corp. v. Elk Corp., 90 F.3d 479, 483 (Fed.Cir.1996) (no declaratory judgment jurisdiction for infringement/invalidity of a design patent that had not issued when suit was filed; without an issued patent, there can be no infringement and thus no Article III controversy). Unlike GAF, however, this case features an undeniable controversy between the parties. To resolve this dispute, some court will have to compare the claims of the pending patent applications of the WARF/Xenon agreement with the alleged "improvements," and the contract's use of patent infringement parlance to define this term will necessitate some sort of patent analysis, starting with construction of the pending claims. Thus, this is a patent dispute for still another reason.

Appellate Court Enforces Permanent Injunction against Microsoft Word

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By Dennis Crouch

i4i Limited Partnership v. Microsoft Corp. (Fed. Cir. 2009) (Judges Schall, Prost, & Moore; opinion by Judge Prost)

The i4i district court decision created some turmoil this past summer when the Eastern District of Texas court ordered Microsoft to stop selling versions of its flagship MS Word product that infringe i4i’s patent covering xml editing technology. The injunction was stayed pending appeal, but now the Court of Appeals for the Federal Circuit (CAFC) has affirmed the lower court’s findings of validity and willful infringement and its award of enhanced damages and permanent injunctive relief. The only modification made by the court was to push-back the effective date of the injunction from sixty-days to five months (from the original order). Thus, “[t]he injunction’s effective date is now January 11, 2010.”

To be clear, the permanent injunction “applies only to users who purchase or license Word after the date the injunction takes effect. Users who purchase or license Word before the injunction’s effective date may continue using Word’s custom XML editor, and receiving technical support.” Beginning January 11, 2010, Microsoft will be prohibited from “(1) selling, offering to sell, and/or importing into the United States any infringing Word products with the capability of opening XML files containing custom XML; (2) using Word to open an XML file containing custom XML; (3) instructing or encouraging anyone to use Word to open an XML containing custom XML; (4) providing support or assistance that describes how to use Word to open an XML file containing custom XML; and (5) testing, demonstrating, or marketing Word’s ability to open an XML file containing custom XML.”

Because the injunction only applies to future purchasers, Microsoft does not need to back-fix its already-distributed software. Rather, it only needs to ensure that software sold on or after January 11, 2010 is non-infringing. Microsoft may request another emergency stay of relief in order to seek en banc review of the decision. However, that process has a low likelihood of success. Because of the large damage award of $240 million, Microsoft will likely push-forward with requests for rehearing en banc and eventually a petition for a writ of certiorari to the U.S. Supreme Court.

Judging Injunctive Relief: A patentee seeking a permanent injunction must show that (1) it has suffered an irreparable injury due to the infringement; (2) remedies available at law (typically monetary damages) are inadequate to compensate for that injury; (3) considering the balance of hardships between the plaintiff and defendant, a remedy in equity is warranted; and (4) the public interest would not be “disserved” by a permanent injunction. eBay, 547 U.S. at 391. Here the irreparable harm was proven by “evidence that Microsoft’s infringement rendered i4i’s product obsolete for much of the custom XML market, causing i4i to lose market share and change its business strategy to survive.” Monetary damages were inadequate because “a loss of market share, brand recognition, and customer goodwill” typically defy valuation “particularly when the infringing acts significantly change the relevant market, as occurred here.” The balance of the hardships favor i4i because the patented technology is “central” to i4i’s business, but only a small factor in Microsoft’s business. Here, the court held that the “cost of redesigning the infringing products” is irrelevant to the hardship consideration. “Microsoft is not entitled to continue infringing simply because it successfully exploited its infringement.” Likewise, the public interest favors upholding patent rights especially here where the injunction is of a “narrow scope.” “By excluding users who purchased or licensed infringing Word products before the injunction’s effective date, the injunction greatly minimizes adverse effects on the public.”

Notes:

Cases where Written Description is Satisfied, but Enablement is Lacking

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In Ariad, an en banc Federal Circuit is set to determine whether (and how) the written description requirement is separate and distinct from enablement. The questions presented read as follows:

1. Whether 35 U.S.C. § 112, paragraph 1, contains a written-description requirement separate from the enablement requirement.

2. If a separate written-description requirement is set forth in the statute, what is the scope and purpose of that requirement?

I’m interested in finding cases where the written description requirement has been critical to the outcome. More particularly, I’m interested in seeing cases where the invention is sufficiently described but is not enabled. The recent major written description cases are seemingly only tied to written description doctrine because the panels chose to focus on that argument rather than enablement. A case-in-point is Ariad v. Eli Lilly. As in most written description cases, Ariad’s patent was also challenged on enablement grounds. However, rather than reaching the enablement question, the panel majority held that question moot in the wake of their finding that the asserted claims were invalid on written description. The same result occurred in University Of Rochester v. G.D. Searle & Co., Inc., 358 F.3d 916 (Fed. Cir. 2004) (holding that “in view of our affirmance of the district court’s decisions [invalidating the claims] on the written description ground, we consider the enablement issue to be moot and will not discuss it further.”). The LizardTech decision held the asserted claim invalid under both enablement and written description doctrines.

Using the language lf LizardTech, what are examples of cases where the specification provides enough disclosure “to convince a person of skill in the art that the inventor possessed the invention” but not enough to “enable such a person to make and use the invention without undue experimentation.”

Disclosing “Related Cases” at the Federal Circuit: Eli Lilly’s Written Description “Secret”

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Guest Post by Ted Sichelman, University of San Diego School of Law

As any diligent reader of Patently-O would know, the Federal Circuit is considering en banc whether to retain the written description requirement—and, if so, in what form—in the pending case, Ariad Pharmaceuticals v. Eli Lilly & Co.

Lilly, which was found liable in the district court, argues in its en banc brief that the Federal Circuit should retain a strong and independent written description requirement. In the event Lilly’s arguments are successful—and Ariad’s patent is invalidated—Lilly stands to save roughly $250 million (in present value) of potential damages and likely settlement payments. (For an explanation of the calculation, click here.)

Yet, in another case pending at the Federal Circuit, Lilly v. Teva, Lilly—as the patentee—is on the other side of the fence on the written description issue. Specifically, Lilly appealed a finding that some of its patents are invalid for lack of written description. If Lilly wins this appeal, assuming infringement holds up, it stands to gain roughly $750 million (in present value) in on-going profits from the sale of its blockbuster osteoporosis drug Evista. (Ironically, Evista is one of the accused infringing drugs in Ariad.)

Thus, in simple dollar terms—focusing on Lilly’s pending patent cases at the Federal Circuit—Lilly has more money to gain by losing the Ariad appeal than winning it. Presumably, Lilly has other financial interests motivating its position in Ariad. For instance, Lilly has been subject to more than several accusations of infringement over the years and its financial wherewithal to engage in intensive R & D may make its patents relatively immune to written description attacks.

But, even so, Lilly might not care as much as the usual appellant if it loses the Ariad case. To be fair to Lilly and its lawyers, I have not seen any evidence showing that they have not vigorously argued their case. Nevertheless, Lilly’s large financial interest in Teva is concerning, especially given that Ariad could be one of the most important Federal Circuit decisions in recent years.

So when I read Lilly’s en banc brief to the Federal Circuit in Ariad, I was surprised that Lilly did not disclose its position in Teva. And it seems very unlikely that Lilly’s lawyers in Ariad were unaware of the issue in Teva, since at least three of them are working on both cases. Moreover, the district court in Teva mentioned the pending Ariad case in its final order, noting that it was bound by existing precedent to apply an independent written description requirement.

The Federal Circuit has a rule that requires litigants to disclose certain information about other pending cases. The applicable rule, Fed. Cir. R. 47.5, reads in relevant part:

Each principal brief must contain a statement of related cases indicating: …. (b) … any case known to counsel to be pending in this or any other court that will directly affect or be directly affected by this court’s decision in the pending appeal. If there are many related cases, they may be described generally, but the title and case number must be given for any case known to be pending in the Supreme Court, this court, or any other circuit court of appeals.

In my view, one could read the rule such that Lilly should have disclosed the Teva case in its Ariad brief. Unfortunately, the scope of this rule is sufficiently ambiguous to be construed otherwise. In particular, it is unclear whether “related cases” in the preamble of Rule 47.5 is, so to speak, a “limitation”—namely, does a case qualifying under Rule 47.5(b) need to be a “related case” in addition to meeting the requirements stated in that sub-section, or does that sub-section fully define the kinds of “related cases” that need to be disclosed? Arguably, the latter is the better reading, but it does not seem compelled by the language of the rule. Moreover, it is unclear exactly what “directly affect or be directly affected by this court’s decision” means. Since the rule contemplates that there may be “many related cases,” arguably this clause should be read broadly, but again, such an interpretation does not seem mandated by the rule.

What does seem clear, though, is that the roughly $750 million Lilly potentially has to gain in Teva from losing the Ariad case is important information that any Federal Circuit judge would want to know when reading Lilly’s briefs and listening to its arguments. As such, the Federal Circuit should clarify the scope of Rule 47.5—like it has done in a few cases (here and here)—or explicitly revise the rule to ensure that parties are clearly required to disclose cases like Lilly v. Teva.

For example, the Federal Circuit could—similar to DC Circuit Local Rule 28(a)(1)(C)—define a “related case” as including “any pending case involving at least one of the same parties and the same or similar issues.” Such a definition would capture cases like Lilly v. Teva, but would not overly burden litigants. With this sort of rule in place, potentially contrary interests of parties in other cases—particularly those worth large sums—would be appropriately unveiled on appeal.

Ted Sichelman is an Assistant Professor at the University of San Diego School of Law, where he teaches patent law and other intellectual property courses. He has neither represented nor has any financial interest (other than from market index funds) in Ariad Pharmaceuticals, Eli Lilly, or Teva.

Patently-O Bits and Bytes No. 304

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  • Next Monday (December 7, 2009) at 2:00 P.M. in Room 201, the Federal Circuit will hear en banc arguments in the case of Ariad Pharmaceutical v. Eli Lilly. The case questions whether Section 112 of the Patent Act creates a written description requirement that is separate and distinct from the enablement requirement. An audio version of the oral arguments is expected to be available that same day. [Calendar]
  • PATracer reports on the pending Federal Circuit case of Kawasaki v. Bombadier. In that case, Kawasaki had sued to enforce the terms of a settlement agreement. Rather than enforcing the agreement, Judge Folsom of the E.D. Tex. dismissed the lawsuit – holding that his court lacked subject matter jurisdiction over what had become a contract dispute. In the 1994 case of Kokkonen v. Guardian Life, the Supreme Court held that unless incorporated into a court order, disputes over a settlement agreement must stand on its own jurisdictional feet. [LINK]
  • Eriq Gardner asks Can a Science-Fiction Movie Infringe a Tech-patent? His question is prompted by a lawsuit where – you guessed it – a patentee (Carl Burnett & his company Global Findability) has sued Summit Entertainment for making/distributing the Nicholas Cage film entitled “Knowing” in which Cage is portrayed as acting like he is using an allegedly infringing geo-locator. The complaint was filed by the Cahn Samuels firm in Federal Court in Washington DC. In the movie setup, the geo-locating technology is based on information provided in 1958 (and rediscovered in 2008). If pretending to be an infringer is actionable, this reconstructed history may also render the patent obvious… The movie was critically panned, but Cage’s star power still helped bring in almost $80 million in box office revenues.
  • Global Findability’s patent is actually quite interesting. It focuses on a mechanism that converts latitude, longitude, & altitude readings into a “single discrete all-natural number.” I.e., one number to uniquely identify a position anywhere (relative to the earth). [LINK]

 

Patently-O Bits and Bytes No. 301

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Jobs Postings from the Past Week:

Interviewing Director Kappos: Tony Mauro writes a comical story about one reporter’s quest to interview David Kappos:

[W]hen ABA Journal senior writer Terry Carter got nowhere in his recent effort to reach Patent and Trademark Office director David Kappos . . . he decided on a characteristically novel approach: on Tuesday he drafted and posted a humorous patent application for a “method to get an interview with USPTO Director David Kappos.” Edward Adams, editor and publisher of the ABA Journal, wrote in this story at the Journal Web site, “We figured the problem was that Carter was not speaking the agency’s language.” [Link][Read the Application]

Next Federal Circuit Judges and en banc petitions:

  • There is currently one open slot on the Federal Circuit. In the interim, it should be statistically slightly easier to get the court to agree to an en banc rehearing. Instead of convincing seven of twelve (58%), now a successful petitioner need only convince six of eleven (55%).

Patently-O Bits and Bytes No. 301

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Jobs Postings from the Past Week:

Interviewing Director Kappos: Tony Mauro writes a comical story about one reporter’s quest to interview David Kappos:

[W]hen ABA Journal senior writer Terry Carter got nowhere in his recent effort to reach Patent and Trademark Office director David Kappos . . . he decided on a characteristically novel approach: on Tuesday he drafted and posted a humorous patent application for a “method to get an interview with USPTO Director David Kappos.” Edward Adams, editor and publisher of the ABA Journal, wrote in this story at the Journal Web site, “We figured the problem was that Carter was not speaking the agency’s language.” [Link][Read the Application]

Next Federal Circuit Judges and en banc petitions:

  • There is currently one open slot on the Federal Circuit. In the interim, it should be statistically slightly easier to get the court to agree to an en banc rehearing. Instead of convincing seven of twelve (58%), now a successful petitioner need only convince six of eleven (55%).

Patently-O Bits and Bytes No. 301

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Jobs Postings from the Past Week:

Interviewing Director Kappos: Tony Mauro writes a comical story about one reporter’s quest to interview David Kappos:

[W]hen ABA Journal senior writer Terry Carter got nowhere in his recent effort to reach Patent and Trademark Office director David Kappos . . . he decided on a characteristically novel approach: on Tuesday he drafted and posted a humorous patent application for a “method to get an interview with USPTO Director David Kappos.” Edward Adams, editor and publisher of the ABA Journal, wrote in this story at the Journal Web site, “We figured the problem was that Carter was not speaking the agency’s language.” [Link][Read the Application]

Next Federal Circuit Judges and en banc petitions:

  • There is currently one open slot on the Federal Circuit. In the interim, it should be statistically slightly easier to get the court to agree to an en banc rehearing. Instead of convincing seven of twelve (58%), now a successful petitioner need only convince six of eleven (55%).

Tafas v. Kappos: Cleaning Up

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Tafas & GSK v. Kappos (Fed. Cir. 2009) (En banc order)

After a two-year battle and under the new leadership of David Kappos, the PTO recently withdrew its proposed rules package that would limit the number of continuation applications and the number of claims-per-application. The PTO also asked that the Federal Circuit dismiss the now moot appeal and also vacate the district court judgment. All parties supported the dismissal, but Tafas opposed vacatur. The district court decision included strong language limiting the scope of PTO power, and vacatur would essentially eliminate that district court decision from the books.

In an en banc order, the Federal Circuit has now granted the dismissal, but denied the motion for vacatur. Following the Supreme Court’s 1994 Bancorp Mortgage decision, the Federal Circuit held that vacatur is not appropriate when the “mootness” of an appeal “is due to a voluntary act by the losing party, such as a settlement.”

“[This] is a case in which the agency itself has voluntarily withdrawn the regulations and thus set the stage for a declaration of mootness. The motion’s statement that an intervening regulatory change is directly analogous to an intervening statutory change is not persuasive. The agency does not control Congress; but it does control the decision to rescind the regulations. Thus, it was the USPTO (the losing party in the district court action) that acted unilaterally to render the case moot, and vacatur is not appropriate

Denial of vacatur also provides Tafas with the opportunity of demanding recoupment of its costs under Fed. R. Civ. Pro. R. 54.

Supreme Court Hears Bilski v. Kappos

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As she has done with past cases, Jill Browning provides the following same-day analysis of the Supreme Court oral arguments in Bilski v. Kappos.

By Jill Browning

The Federal Circuit, sitting en banc, affirmed the Patent Office's decision that the applicant's claims directed to a method of hedging risk in the field of commodities trading did not meet the patent eligibility standard of  35 U.S.C. § 101.  The Federal Circuit found that a "process" must be tied to a particular machine or apparatus, or must transform a particular article into a different state or thing (the "machine-or-transformation" test), to be eligible for patenting under 35 U.S.C. § 101.

The Supreme Court heard oral argument on the appeal from the Federal Circuit today, wherein the central issue is whether the Federal Circuit erred by holding that a "process" must be tied to a particular machine or apparatus, or transform a particular article into a different state or thing ("machine-or-transformation" test), to be eligible for patenting under 35 U.S.C. § 101. 

Justices Sotomayor, Kennedy and Breyer were particularly active, with only slightly lesser participation by Justices Scalia and Ginsburg and Chief Justice Roberts. The Justices appeared to be struggling to come up with the "right" answer and appeared to be mindful of the potential consequences their ruling may have.

Justice Scalia initially indicated that the "useful arts" should mean the manufacturing arts, but not someone who writes a book on "how to win friends and influence people."  Justice Sotomayor followed up with a question regarding the difficulty in where to draw the line if there is no tie to science/technology, reciting the parade of horrors of potentially patentable methods for estate plans or tax avoidance.  Justice Breyer followed up with a question asking whether the framers of the Constitution intended for every  "new" method that helps the business owner to conduct business should be patentable, intimidating that the petitioner's proposed test could be too encompassing and asking for an alternative to limit it to something more reasonable, such as "useful arts."  Justice Sotomayor asked whether a method to cure someone that involves only human activity would fall within the Patent Act.  In response, Petitioner responded that yes, many of these things, if there were new and useful and met the other requirements of the Patent Act, should be patentable, giving the specific example of surgical methods.

Justice Breyer asked for a proposed "back up" principle if the Court "hypothetically" decided to reject the test that "any steps" may potentially be patentable.  Chief Justice Roberts and Justice Kennedy both followed up with comments indicating that certain "ideas" that are abstract should not be patentable, indicating that it would be difficult for him to think that the actuarial tables used in the insurance industry should have been limited to 1 person.  

Justice Ginsburg appeared to be in favor of something similar to the European system, which, she understood to require that the invention be tied to "science or technology".  The petitioner pointed out that the United States is different and that it would be difficult to define "technology based" in the United States.  Petitioner indicated that Europe defines "technology based" to exclude business methods.   Justice Scalia asked why, in a horse-based economy (in the 1800's) there were no patents directed to methods of training horses, as this would certainly have been useful at the time.

Justice Sotomayor indicated that "how" to approach a problem can't be enough to make it patentable, rather, it has to involve some transformation.  She also asked how to discern Congressional intent.  Further to the "intent" issue, Justice Stevens asked whether the original drafter of the Patent Act had any comments on this issue.

Justice Breyer indicated that there were four things to consider when making this ruling, two positive and two negative.  The two positives were the monopoly power the patent provides and the disclosure to the public.  The two negatives were the higher prices that result when a monopoly is in play and having to get a license or permission to practice a patented invention takes time and slows progress.  He indicated that in the past, we respected machines, now, this was asking to respect information, and he was grappling with whether providing patent protection would do more harm than good.

Justice Sotomayor commented that maybe it be sufficient to patent useful knowledge if it were tied to some transformation and the patenting of the Morse Code was discussed.

This concluded the Petitioner's opening argument.

The Respondent began by indicating that the Federal Circuit's test was not "inflexible," but only required some link between the method and the transformation.  At least Justice Sotomayor expressed concern regarding applying a  rigid exclusive test, in that potential patentable subject matter would be excluded from the patenting process.  Justice Ginsberg was curious regarding whether the Federal Circuit sua sponte came up with the test or whether the Government proposed the test during briefing.

The Respondent indicated a couple of different times during the argument that there would be many difficult questions to answer in the future, but that the test could accommodate the difficult questions and allow for exceptions to the machine or transformation test.

The State Street case was discussed and Justices Stevens, Scalia and Breyer wanted to know whether this case would come out the same way if the Federal Circuit's test were utilized.  The Justices appeared to expect a "no" answer, but Respondent indicated that State Street would have ended with the same result because the claims were directed to a machine (a computer).

This led to a discussion regarding the Respondent's apparent position, set forth in its last footnote on its brief, which Chief Justice Roberts was troubled about, that if the method is simply tied to a calculator or a computer, then it would be patentable, and this seemed to place form over substance.  Both Justices Kennedy and Stevens were curious with respect to what was "transformed" by the State Street computer program, indicating that it appeared to be merely a new process on an old machine.  The Respondent did not have a ready answer, deflecting the question by indicating that hardware could be present which would transform the machine.

In rebuttal, the Petitioner stressed its position against a rigid test, which could be avoided by simply looking at whether the "invention" is attempting to patent an abstract idea.

Business Method Patents: Technological Change, Not Judicial Activism

Patent

By Professor John Duffy

The last two decades have seen an extraordinary growth in the number of patent applications for business technologies and methods. Critics of business method patents tend to assign responsibility for this development to judicial activism by the judges of the Federal Circuit especially those responsible for the decision in State Street Bank & Trust Co. v. Signature Financial Group, Inc. For example, Professor Peter Menell points to the State Street decision as one of the “more notable” examples of the Federal Circuit’s “strong pro‑patent bias in the interpretation of patent law.” Professor Leo Raskind describes the State Street decision as “so sweeping a departure from precedent as to invite a search for its justification.” So too, Judge Mayer of the Federal Circuit, in his opinion dissenting from the en banc ruling in In re Bilski, argues not only that the State Street “decision to jettison the prohibition against patenting methods of doing business contravenes congressional intent,” but also that it “launched a legal tsunami, inundating the patent office with applications seeking protection for common business practices;” led to the patenting of “the somewhat ridiculous to the truly absurd;” and “generated a thundering chorus of criticism.” The activism thesis has even entered the political arena, as shown by a 2006 report issued by the Computer and Communications Industry Association (CCIA), which accuses the Federal Circuit of being an “activist court” that “summarily eliminated the judicial rule against business method patents” as a means of expanding the domain of the patent system by “judicial fiat.”

The judicial activism thesis may have a superficial appeal. State Street was a highly visible and prominent pronouncement by the federal court having nationwide jurisdiction over patent cases. It may seem reasonable to attribute tremendous implications to such a famous judicial opinion. Yet the judicial activism thesis suffers from multiple glaring problems and plainly cannot account for the timing of the rise in business method patenting, which plainly began well before State Street.  

[Read the full article: Business Method Patents_Blog.pdf]

Notes:

  • Bilski v. Kappos oral arguments are set for this afternoon at the Supreme Court in Washington DC.
  • In college, I earned a certificate in “engineering management systems.” That program was part of the civil engineering department at Princeton and essentially focused on applying engineering techniques to solve business related problems. There was nothing “abstract” about these courses. The problems were real, and the solutions sure seemed like engineering – especially since they worked to solve the problems.

Misuse of a Patent Pool: En Banc Federal Circuit To Decide Whether CD-R/RW Patentees Improperly Sequestered Alternative Technologies

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Princo Corp. v. International Trade Commission (ITC) (Fed. Cir. 2009)

The long-running Princo cases involve questions of when bundled licensing of patent rights may be seen as patent misuse (and thus rendering the patents unenforceable). The underlying pools of patents cover compact discs that are recordable (CD-R) and re-writeable (CD-RW).

In its most recent panel decision, the Federal Circuit (Judges BRYSON, GAJARSA, and DYK) rejected several theories of patent misuse, but remanded to consider whether the patentees has improperly sequestered alternative technologies. Judge Bryson did not agree with the novel misuse theory and dissented-in-part. Princo, US Philips, and the ITC each requested rehearing en banc.

The Federal Circuit has now granted the requests from US Philips and the ITC to hear the case en banc. (The court rejected Princo’s request for rehearing its questions en banc).

US Philips presented two questions:

  1. Whether a supposed agreement, between developers of new technology and a new product standard, to license one of the resulting patents only for use under that standard, thus foreclosing the possibility that it might be used to create a competing standard, could be held anticompetitive without (i) defining a relevant market in which the standards compete and (ii) proving that the agreement injured or was likely to injure competition in that market.
  2. Whether such an agreement, even if deemed anticompetitive, would be a proper basis for invoking the doctrine of patent misuse to refuse enforcement of different patents used to practice the joint standard.

The ITC did not explicitly list its en banc question, but basically argues that the remand is improper because (1) neither party raised the misuse theory that the court relied upon in its decision and (2) the ITC needs the Federal Circuit to define the “relevant market” before it can properly determine the market harm.

Briefs: US Philips en banc brief will be due at the end of November, and briefs from the ITC and Princo will be due thirty days from the date of service of US Philips. “Briefs of amici curiae will be entertained, and any such amicus briefs may be filed without leave of court but must otherwise comply with Federal Rule of Appellate Procedure 29 and Federal Circuit Rule 29.”

US Philips is represented by Douglas Melamed at WilmerHale; Princo is represented by Eric Wesenberg at Orrick; the ITC’s lead attorney is Clara Kuehn. Portions of the Melamed and Calebresi 1972 article on property rights is found in almost every property law casebook.

Microsoft Questions Strong Presumption of Patent Validity over Newly Found Prior Art

Patent,

Lucent v. Gateway, Dell, and Microsoft (Fed. Cir. 2009)

PatentLawPic798In its original opinion, the Federal Circuit vacated a $350+ million verdict against Microsoft based on improper damages calculations. On remand, the court must conduct a new damages assessment, but in that scenario Microsoft will certainly be on-the-hook for millions of dollars.

As an end-run, Microsoft has petitioned the Federal Circuit for a rehearing of the Lucent case en banc with a special focus on a particular issue that was ignored by the original opinion: the standard of proof for proving invalidity when the defendant presents prior art evidence that was not considered during patent prosecution. In particular, the software giant asks the court to “overrule its precedents requiring clear and convincing evidence of invalidity when the PTO did not consider the asserted prior art.”

Microsoft argues that the justification for a clear-and-convincing disappears when the patent challenge is based on newly uncovered prior art:

As the Supreme Court noted in KSR, however, “the rationale underlying the presumption [of validity]-that the PTO, in its expertise, has approved the claim-seems much diminished” where the claim of obviousness is based on prior art that was never before the PTO. 550 U.S. at 426. See also Penn Int ‘1 Indus., Inc. v. New World Mjg. Inc., 69 1 F.2d 1297, 1300-01 (9th Cir. 1982) (“‘The basis for the presumption-that the Patent Office has compared the claim of the patent with the prior art and used its expertise to determine validity-can no longer exist when substantial evidence of prior art not considered by the Patent Office is placed in evidence at trial.”). As the Supreme Court cogently observed, the force of the statutory presumption-which stems from the conclusion that the PTO has done “its job properly,” see Superior Fireplace Co. v. Majestic Products Co., 270 F.3d 1358, 1367 & n.l (Fed. Cir. 2001)-dissipates when the PTO lacked essential evidence.

The case relies on the writings of several academics including the Lichtman & Lemley work on Gold Plated Patents.  In April 2009, I suggested that this type of frontal challenge on the strong presumption of validity would be coming soon.

Notes:

Patently-O Bits and Bytes No. 132

Enablement, , ,
  • Ariad v. Eli Lilly (Written Description): Ariad has filed its opening brief in the en banc Federal Circuit challenge to the statutory basis for a written description requirement that is separate and distinct from enablement requirement. The patentee’s strongest arguments are textual and historic. Although done with tact and persuasive skill, the brief asks the court to read the statute: “The specification shall contain a written description of the invention, and of the manner and process of making and using it, in such full, clear, concise, and exact terms as to enable any person skilled in the art to which it pertains, or with which it is most nearly connected, to make and use the same.” [File Attachment: Ariad v. Lilly Plaintiffs-Appellees Principal Brief.pdf (509 KB)]
  • Forest Group v. Bon Tool False Marking Case: The question on appeal is whether mass production of a falsely marked product constitutes a single instance of false marking. If the Federal Circuit agrees, the false marking statute will continue to have no impact because damages are limited by statute to $500 or less per offense. Judges Rader, Plager, and Moore will likely issue a decision in January. In oral arguments, the court struggled with the potential problem of “marking trolls” — suggesting that an amicus in this case is “pretty close to that.”
  • USPTO Website: Out of Beta
  • Patent Reform: Senator Leahy has suggested a Senate debate on patent reform “before the end of the year.”
  • Board of Patent Appeals: Numbers are in for FY2009 (ending September 30, 2009). 15,349 appeals docketed; 6,757 appeals completed; 12,489 appeals pending at the end of the FY. The Board took heroic efforts to increase its throughput by over 35% in FY2009. However, the Board was already operating in a deficit and the number of cases received in FY2009 is more than double that of FY2008.
  • Board of Patent Appeals II: Despite the backlog, the Board reports an average pendency of only 7.7 months (calculated from assignment of appeal number to decision date).
  • Patent Law Jobs:

Patently-O Bits and Bytes No. 132

Enablement, Patent, , ,
  • Ariad v. Eli Lilly (Written Description): Ariad has filed its opening brief in the en banc Federal Circuit challenge to the statutory basis for a written description requirement that is separate and distinct from enablement requirement. The patentee’s strongest arguments are textual and historic. Although done with tact and persuasive skill, the brief asks the court to read the statute: “The specification shall contain a written description of the invention, and of the manner and process of making and using it, in such full, clear, concise, and exact terms as to enable any person skilled in the art to which it pertains, or with which it is most nearly connected, to make and use the same.” [File Attachment: Ariad v. Lilly Plaintiffs-Appellees Principal Brief.pdf (509 KB)]
  • Forest Group v. Bon Tool False Marking Case: The question on appeal is whether mass production of a falsely marked product constitutes a single instance of false marking. If the Federal Circuit agrees, the false marking statute will continue to have no impact because damages are limited by statute to $500 or less per offense. Judges Rader, Plager, and Moore will likely issue a decision in January. In oral arguments, the court struggled with the potential problem of “marking trolls” — suggesting that an amicus in this case is “pretty close to that.”
  • USPTO Website: Out of Beta
  • Patent Reform: Senator Leahy has suggested a Senate debate on patent reform “before the end of the year.”
  • Board of Patent Appeals: Numbers are in for FY2009 (ending September 30, 2009). 15,349 appeals docketed; 6,757 appeals completed; 12,489 appeals pending at the end of the FY. The Board took heroic efforts to increase its throughput by over 35% in FY2009. However, the Board was already operating in a deficit and the number of cases received in FY2009 is more than double that of FY2008.
  • Board of Patent Appeals II: Despite the backlog, the Board reports an average pendency of only 7.7 months (calculated from assignment of appeal number to decision date).
  • Patent Law Jobs:

Patently-O Bits and Bytes No. 132

Enablement, Patent, , ,
  • Ariad v. Eli Lilly (Written Description): Ariad has filed its opening brief in the en banc Federal Circuit challenge to the statutory basis for a written description requirement that is separate and distinct from enablement requirement. The patentee’s strongest arguments are textual and historic. Although done with tact and persuasive skill, the brief asks the court to read the statute: “The specification shall contain a written description of the invention, and of the manner and process of making and using it, in such full, clear, concise, and exact terms as to enable any person skilled in the art to which it pertains, or with which it is most nearly connected, to make and use the same.” [File Attachment: Ariad v. Lilly Plaintiffs-Appellees Principal Brief.pdf (509 KB)]
  • Forest Group v. Bon Tool False Marking Case: The question on appeal is whether mass production of a falsely marked product constitutes a single instance of false marking. If the Federal Circuit agrees, the false marking statute will continue to have no impact because damages are limited by statute to $500 or less per offense. Judges Rader, Plager, and Moore will likely issue a decision in January. In oral arguments, the court struggled with the potential problem of “marking trolls” — suggesting that an amicus in this case is “pretty close to that.”
  • USPTO Website: Out of Beta
  • Patent Reform: Senator Leahy has suggested a Senate debate on patent reform “before the end of the year.”
  • Board of Patent Appeals: Numbers are in for FY2009 (ending September 30, 2009). 15,349 appeals docketed; 6,757 appeals completed; 12,489 appeals pending at the end of the FY. The Board took heroic efforts to increase its throughput by over 35% in FY2009. However, the Board was already operating in a deficit and the number of cases received in FY2009 is more than double that of FY2008.
  • Board of Patent Appeals II: Despite the backlog, the Board reports an average pendency of only 7.7 months (calculated from assignment of appeal number to decision date).
  • Patent Law Jobs: