Tag Archives: Federal Circuit En Banc

Does the Law Permit a Seller to Assign Title Before Acquiring Title?

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Alexander Shukh v. Seagate Tech. (Fed. Cir. 2015) (en banc petition)

In an en banc petition, Shukh has challenged the Federal Circuit’s “automatic assignment” rule announced in its 1991 FilmTec decision.  The basic rule from the Federal Circuit is that a pre-invention contract that states “I hereby assign” potential future inventions is deemed an effective transfer of title even though the future inventions have not yet been conceived.   The more standard interpretation of a purported transfer of a not-yet-owned property is, at most, as a conveyance of equitable rights but not legal title. See Stanford v Roche (2011) (Breyer, J., dissenting) (citing G. Curtis, A Treatise on the Law of Patents for Useful Inventions §170 (1867)).  Legal title then requires a new affirmative act by the seller once title is acquired. See Pomeroy on Equity Jurisprudence §1287 (1918); Joseph Story, Equity Jurisprudence, §1040 (1853); Murray, Corbin on Contracts §50.2 (2007); UCC Section 2-105(2) (“A purported present sale of future goods or of any interest therein operates as a contract to sell.).

This is an issue that has been boiling under the surface for some time and the court should grant en banc rehearing.

The petition raises a second issue involving attorney-client privilege that could have an important impact on patent prosecution.

Whether, in a Section 256 Correction of Inventor action, does the common interest doctrine of attorney-client privilege entitle an inventor to access and use his own invention records and communications?

A potential outcome of this decision could be further clarification as to the relationship of the attorney to inventors who are the employees of the client at a time when the inventors continue to have title to the invention at name-listing rights.

Read the petition: AMS En Banc Petition

Guest Post: Restoring “Causal Nexus”

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Guest post by Bernard Chao

On September 17, 2015, the Federal Circuit issued another decision in the Apple v. Samsung smartphone war (summarized previously here). In the fourth court decision dealing with injunctions, Apple IV gave new guidance on the level of proof necessary to satisfy the “causal nexus” requirement. Although this requirement demands that patentees prove that the specific infringing feature cause irreparable harm, the majority opinion (by Judge Moore) observed that proving causation was “nearly impossible” in cases involving products with thousands of components. So the court watered down the causal nexus requirement by saying that it was enough for Apple to show the infringing features to be “important to product sales and that customers sought these features in the phones they purchase.” On October 19, 2015, Samsung filed a Petition for Rehearing en banc on this issue. Although I don’t agree with everything Samsung has to say about Apple’s injunction request, I do believe that the full Federal Circuit should revisit the decision and reinvigorate the “causal nexus” requirement.

As I argue in greater depth in my upcoming essay, Causation and Harm in a Multicomponent World
(forthcoming University of Pennsylvania Law Review Online), Apple IV is troubling on both doctrinal and theoretical grounds. On the doctrinal level, the decision fails to appreciate that most multicomponent technology products are made up of countless small advances, not a few far-reaching ones that change consumer preferences. Presumably, Apple chose its most valuable patents to assert against Samsung; but a review of the three Apple patents at issue show how minor the infringing features are — a conclusion that Chief Judge Prost’s dissent also made. If a powerhouse like Apple doesn’t have a pioneering patent to assert, there probably aren’t very many such patents out there. My point is that a single feature rarely, if ever, drives consumers from one technology-based product to another. Holding that causation is present for every important feature is therefore inconsistent with how consumers actually decide to buy multicomponent devices.

On a theoretical level, Apple IV reveals a deeper debate within patent law. Some view patents as a kind of traditional property that allows owners to do with it what they will. Others understand patent law to be focused on the public good. Reviewing Judge Moore’s majority opinion and Judge Reyna’s concurrence reveals that their willingness to accept less evidence of harm has been clouded by their view of patents as a form of traditional property. But this view of patents is wrong. The fundamental purpose underlying patent law is to promote innovation. To the extent that inventors receive financial rewards, it is simply a byproduct of encouraging innovation. This concept is rooted in the Constitution, which authorizes laws “to promote the Progress of Science and the useful Arts . . .” Moreover, the Supreme Court has repeatedly sought to maximize innovation on behalf of the public when shaping various different patent doctrines. Most importantly, that is the view the Court took in eBay Inc. v. MercExchange, L.L.C., 547 U.S. 388 (2006) when it held that patent owners no longer possess the automatic right to exclude others from infringing their patents. They must first satisfy eBay’s equitable four factor test. Of course, the first factor involves showing that the infringing feature actually caused irreparable harm.

In sum, there are both doctrinal and theoretical reasons for the full Federal Circuit to reconsider Apple IV and restore the “causal nexus” requirement so that patentees have to show real causation and harm. The failure to do so will allow patentees to use a permanent injunction (or the threat of one) to force an infringer to take a license at a rate that reflects the value of the injunction, which is often greater than the value of the patented feature. This is the kind of patent holdup that a prudent application of eBay helps avoid.

Where does a Defendant “Reside” for Jurisdictional Purposes in Patent Infringement Cases?

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By Dennis Crouch

In re TC Heartland LLC (on mandamus to the Fed Cir. 2015) (read-it: Heartland Mand)

An interesting mandamus action was recently filed by the Prof John Duffy and Jim Dabney (both now with Hughes Hubbard) raising the following: Whether 28 U.S.C. § 1400(b) precludes the district court from hearing this action.

Section 1400(b) is the jurisdiction statute for patent cases indicates two mechanisms for jurisdiction: (1) the district where the defendant resides or (2) the district where the defendant infringed and has a regular place of business.

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

28 U.S.C. § 1400(b). Section 1391(c) further provides for a broad definition of residency, broadly including both (1) the district of domicile and (2) any district where the defendant is subject to the court’s personal jurisdiction on the issue of the case.

The question ultimately raised by the case is whether the broad residency definition of §1391(c) applies to modify and expand the “resides” language of 1400(b).

The history goes back-and-forth: In Fourco Glass Co. v. Transmirra Products Corp., 353 U.S. 222 (1957), the Supreme Court ruled that “28 U.S.C. § 1400(b) is the sole and exclusive provision controlling venue in patent infringement actions, and that it is not to be supplemented by the provisions of 28 U.S.C. § 1391(c).” Then in 1988, §1391(c) was amended to expand the definition of residency and also to include a statement that its residency definition was “for purposes of venue under this chapter.” Subsequently, the Federal Circuit in VE Holdings held that the 1988 amendment overruled Fourco and that the expanded residency definition §1391(c) now applies in patent cases since §1400 (the patent jurisdiction provision) is in the same chapter as §1391. In 2011, Congress again changed its statute – this time repealing the “for purposes of venue under this chapter” and instead added in that the statute applies in all civil cases “except as otherwise provided by law.”

The petition argues that VM Holdings was wrongly decided in the first place and basically led to the reality known as the Eastern District of Texas. In the alternative, the petition also argues that the 2011 amendment overruled VM Holdings.

VE Holding has produced enormous venue shopping opportunities in patent infringement actions to the point where, in the most recent year, one district (E.D. Tex.) has 50% more patent filings than the next most popular district (D. Del.) and more than four times as many filings as the district with the third most patent case filings. . . . “The abuses engendered by this extensive venue,” Stonite Products Co. v. Melvin Lloyd Co., 315 US 561 (1942), are precisely the sort of abuses that were prevented by the Supreme Court’s decisions on § 1400(b) and that would be prevented once again with a return to those controlling precedents.

What isn’t clear to me is whether a mandamus panel has authority to overrule the prior precedent. Of course, an en banc panel will have that authority and in their petition Duffy & Dabney particularly request en banc consideration.

Personal Jurisdiction: The petitioner here also argues an additional personal jurisdiction question that begins with the standard notion that each act of infringement is a separate act of infringement. Their argument then is that the court only has specific personal jurisdiction with reference to allegedly infringing Delaware sales and not the sales in other jurisdictions. The usual practice in patent cases is that once the court has specific personal jurisdiction based upon one alleged act of infringement directed to the state that the court can then adjudge infringement allegations arising nationwide. Of course, that result contravenes the usual rule that “specific personal jurisdiction is limited to claims that arise from “an ‘activity or an occurrence that takes place in the forum state.'” Walden (2014). In its brief, the petitioner does a fine job of distinguishing Keeton v. Hustler (1984) that allowed for nationwide damages for defamation. The difference from patent law is that the substantive single publication rule for defamation means that the nationwide damages all stemmed from the same tortious act that led to the specific personal jurisdiction in NH; in the patent context sales in one state that might create personal jurisdiction in that state are separate acts of infringement than sales in another state. Thus, the petitioner explains: “The district court here plainly lacks personal jurisdiction to adjudicate the merits of claims arising from non-Delaware transactions or events.”

At first glance, you might think that petitioner’s rule would lead to a patentee having to sue a defendant separately in each state across the nation. That would only be true if there was no location with general jurisdiction over the defendant – nationwide claims would still be available in any state with general jurisdiction over a defendant. In addition, the availability of multi-district litigation would streamline cases where multiple parallel lawsuits are filed.

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about_energy_black_cherry_bottle[1]The case below is Kraft Foods v. TC Heartland (D.Del.) and alleges infringement of three patents covering the packaging and contents of a flavored liquid beverage concentrate such as Kraft’s MiO water enhancer. U.S. Patent Nos. 8,293,299; 8,511,472; and 8,603,557.  TC Heartland makes its competing “Splash” water enhancers from its Carmel, Indiana HQ.

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Additional Docs:

 

AIPLA Patent Year-in-Review

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By Jason Rantanen

I’m very much looking forward to giving the Patent Year-in-Review talk at the AIPLA annual meeting tomorrow.  If you’re at the AIPLA conference, I’d love to chat with you tonight at dinner or Saturday morning.  Look for the somewhat geeky guy with glasses.  😉

In connection with that talk, AIPLA asked me to put together an essay as well.  I posted a copy of that original essay a month ago; surprisingly, there have been developments in patent law since then! So if you’re looking for the updated version, which includes the Federal Circuit’s en banc opinion in SCA Hygiene and the Supreme Court’s grant of certiorari in Halo and Stryker earlier this week, it’s here: http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2658737

Patentlyo Bits and Bytes by Anthony McCain

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Get a Job doing Patent Law 

Federal Circuit Denies En Banc Request in BPCIA case

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by Dennis Crouch

Following the Federal Circuit’s first interpretation of the Biologics Price Competition and Innovation Act (“BPCIA”), neither the patentee (Amgen) nor the biosimilar applicant (Sandoz) were satisfied. Each petitioned separately for en banc rehearing and both petitions have now been denied in a per curium opinion.  (Background from Andrew Williams at PatentDocs). Both parties will likely petition the Supreme Court for further interpretation of the “biologics patent dance”

[AmgenSandozDenial]

Federal Circuit Summarily Affirms Apple v. Samsung judgment without Merits Briefing

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Apple v. Samsung (Fed. Cir. 2015) (SamsungSummaryAffirm)

Most recently in the patent battle between Apple and Samsung, district court Judge Koh awarded $550 million to Apple for based largely upon design patent infringement findings.  That awarded followed immediately after the Federal Circuit’s 2015 remand to Judge Koh “for immediate entry of final judgment.”  Samsung is again appealing the damages ruling, but meanwhile there remains the question of whether Samsung needs to go ahead and pay the money or can stay execution of the judgment.

The Federal Rules of Civil Procedure allow a party to stay payment of money damages (but not injunctive relief) pending appeal of a final judgment and upon payment of a “supersedeas bond.”

Fed. R. Civ. Pro. 62(d): Stay with Bond on Appeal. If an appeal is taken, the appellant may obtain a stay by supersedeas bond…. The bond may be given upon or after filing the notice of appeal or after obtaining the order allowing the appeal. The stay takes effect when the court approves the bond.

Here, Samsung requested that Judge Koh accept $600 million as the bond, but Apple objected – arguing that Samsung’s substantive appeal is frivolous.  Because Judge Koh had not ruled on the bond request, Samsung filed an emergency appeal to have the Bond accepted.  As part of its briefing, Apple also requested “Summary Affirmance” of the district court’s final judgment regarding the half-billion-dollar judgment.

In the appeal, the Federal Circuit has sided with Apple – not only refusing to grant the bond but also summarily affirming Judge Koh’s damages award (that was already subject to a prior appeal).

Summary affirmance is appropriate when “the position of one party is so clearly correct as a matter of law that no substantial question regarding the outcome of the appeal exists.” Joshua v. United States, 17 F.3d 378, 380 (Fed. Cir. 1994). We have reviewed the parties’ arguments and conclude that summary affirmance is appropriate.

The Federal Circuit had granted a temporary stay of execution of the award and indicated that the stay would continue for seven days and by that time Samsung must have paid the money or be in contempt of court (absent action from the en banc Federal Circuit court or the Supreme Court).

In all likelihood, Samsung will immediately (today or tomorrow) file a request for rehearing and the en banc court may agree with the adjudged infringer that the summary affirmance shortcut was too quick.  In its briefing, Samsung wrote:

A motion for approval of a supersedeas bond is not … the proper vehicle to decide or even address the merits of an appeal. Indeed, Apple cites no decision permitting such an inquiry in this context, let alone one disapproving a supersedeas bond based on such an inquiry.

If it ever reached the merits, Samsung has indicated its planned appeal strategy on the following questions:

  1. Whether the PTO’s final decision* invalidating a patent-in-suit is entitled to collateral estoppel effect in a pending federal court case.
  2. Whether a district court my enter a partial final judgment that does not satisfy Fed. R. Civ. Pro. 54(b).

Absent en banc rehearing, those issues will not be addressed in this case.

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* The “PTO Final Decision” raised by Samsung refers to one of Apple’s infringed patents – No 7,844,915.  That patent has been working its way through the third-party-requested ex parte reexamination process since 2012.  Most recently, the examiner issued a final rejection of the asserted claims and that judgment was affirmed by the PTAB and Apple’s request for rehearing denied.  The patent covers the “pinch-to-zoom” feature of Apple’s iPhone.

Cuozzo Takes IPR Challenge to the Supreme Court

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Cuozzo Speed Tech v. Lee (Supreme Court 2015)

Cuozzo lost its petition for en banc rehearing in a 6-5 split of Federal Circuit judges.  Now, the patentee has raised is challenge to the IPR process to the Supreme Court – asking two questions:

  1. Whether the [Federal Circuit] erred in holding that, in IPR proceedings, the Board may construe claims in an issued patent according to their broadest reasonable interpretation rather than their plain and ordinary meaning.
  2. Whether the [Federal Circuit] erred in holding that, even if the Board exceeds its statutory authority in instituting an IPR proceeding, the Board’s decision whether to institute an IPR proceeding is judicially unreviewable.

Answers to these questions will fundamentally alter the inter partes review system. The petition does a good job of walking through the importance of the case and then separately explaining their legal argument.

I’m sure that we’ll cover this case more as the briefing moves forward – amici have 30 days to file.  Meanwhile, read the petition here: Cuozzo Speed Technologies LLC v Michelle K Lee Petition for a Writ of Certiorari

The Cuozzo petition was filed by a rising star in Supreme Court practice – Jeffrey Wall, who is partner at Sullivan & Cromwell.  Wall was a clerk for Justice Thomas and was an Assistant to the Solicitor General for five years. He also has the distinguishing mark of being my law school classmate (as well as Prof. Rantanen).

 

Guest Post: The Blurring Of §§ 101 and 103—A Double-Edged Sword that Cuts the Other Way

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Guest post by Ben Roxborough.  Mr. Roxborough is one of a few dual citizens who have completed federal court clerkships in both the United States and Australia. He has clerked in the U.S. for three years and practiced in Australia for five years, writing articles on how Australian courts developed a workable doctrine for patentable subject matter. He earned an LL.M. degree at Stanford Law School, specializing in intellectual property. This is not legal advice, and he welcomes any comments or criticisms: ben.roxborough@gmail.com

To say that the sands have been shifting with respect to Section 101 jurisprudence would severely understate the seismic change that it has experienced in recent years; ever more so in recent months. The consequence is that the lines between sections 101, 102 and 103 have been blurred. This consequence appears to stem from statements in Mayo Collaborative Services v. Prometheus Laboratories, Inc., 132 S. Ct. 1289, 1304 (2012), where Justice Breyer suggested that the inquiries “overlap.” Indeed, three years later, the Federal Circuit panel in Internet Patents Corp. v. Active Network, Inc., 790 F.3d 1343, 1347 (2015), went as far as saying that a “pragmatic analysis of § 101 is facilitated by considerations analogous to those of §§ 102 and 103.”

Because the lines have blurred, defendants have been able to rely on 102/103 arguments to invalidate patents on 101 grounds. These arguments, which defendants tend to advance at the second step of the Mayo/Alice framework, generally state that the additional steps—beyond the putative ineligible subject matter—are conventional because they can be found in the specification or are so ubiquitous that the court can treat them as routine and well understood by those in the scientific community. In Mayo, 132 S. Ct. at 1298, for example, Justice Breyer cited admissions in the specification that the processes for determining the level of metabolites in a patient’s blood were “well known in the art.” The patent lacked inventive concept because of this. Relying on Mayo, among other cases, defendants now make a simple argument. The argument may be summed up as: “Your Honor, if you combine what’s described in the specification and prior art with the ineligible subject matter, you’ll find that the patent claims are routine and conventional and do not meet the 101 threshold.”

In effect, the 101 ineligibility defense has become a de facto 103 defense, targeting primarily combination patents. But putting aside the fact that this de facto argument reflects a conclusion (rather than any real analysis), the argument is extraordinary because prior art in the specification is used against the patentee. No evidence other than the specification is being proffered to support the defendant’s position (which may mean that the prior art in the specification is an admission, but no patentee would say that the combination of the prior art elements were well known in the art at the time of the invention). And although some district courts have acknowledged this paradox, the argument tends to be successful as it was in McRO, Inc. v. Namco Bandai Games Am., Inc., No. CV 12-10327-GW, 2014 WL 4749601, at *11 (C.D. Cal. Sept. 22, 2014).

But it doesn’t end there: the patentee’s perilous position is only compounded further when the defendant seeks dismissal of the claim pursuant to Federal Rule of Civil Procedure 12(b)(6) because the patentee generally cannot proffer evidence outside the four corners of the complaint (and patent) that could undercut the defendant’s position. This seems unfair from not only a procedural perspective, but also a substantive one. When looking at a combination patent, what courts most want to know (or should want to know) is: “Who would have thought to combine the elements of the invention in the first place, and why?”

These basic concerns are central in the 103 context. But they should be equally relevant in the 101 context. Defendants have had a field day eviscerating patent after patent since Alice using ‘obviousness-like’ arguments to show that the patent lacks inventive concept. What is required in response to these developments is judicial recognition of ‘obviousness-like’ arguments that cut the other way. The article I am writing seeks to develop these themes, so to place plaintiffs and defendants on equal footing under Section 101. They are summarized here (and, admittedly, are far from fully developed):

  1. THE SKILLED ARTISAN: To provide the 101 analysis with an objective baseline, courts need to define who the skilled artisan is—and what she knew at the time of the invention. Sometimes a plaintiff is precluded from presenting such evidence because courts now decide a significant number of 101 cases at the Rule 12(b)(6) stage. To guard against early Rule 12(b)(6) motions, the skilled artisan’s background should be described in the complaint (or even the patent itself). Or, the Defendant should be required to show ineligibility within the confines of Rule 12(b)(6). This is less of a problem at the Rule 56(a) stage because the patentee has a chance to present skilled artisan’s common general knowledge. Critically, however, in those cases now on appeal—where the district court has not properly articulated the skilled artisan’s background—the Federal Circuit should be remanding such decisions for further factual development of the record. Placing greater emphasis on the skilled artisan can only make the 101 analysis a more balanced one.
  1. SOLVE THE PROBLEM: Defendants are using the specification against the patentee. But what is referenced in the specification can actually help the patentee demonstrate that the additional steps beyond the ineligible subject matter constitute inventive concept. Specifically, plaintiffs should turn the tables and point to the specification to demonstrate the problems faced by those in the field—and why the invention provides a “new and useful” solution. 35 U.S.C. § 101. Taking a problem-solution approach to define what is “new and useful” is precisely the type of analysis that Judge Chen applied in DDR Holdings, LLC v. Hotels.com, L.P., 773 F.3d 1245 (Fed. Cir. 2014), though it has its roots in Diamond v. Diehr, 450 U.S. 175, 188 (1981) and the Supreme Court’s more recent holding in Alice also reflects this approach.
  1. TEACHING AWAY: This analysis typically applies in the 103 context. But what stops it from being relevant in the 101 context? To this point, the recent BRCA1 decision has opened the door for its application. In re BRCA1- & BRCA2-Based Hereditary Cancer Test Patent Litig., 774 F.3d 755, 764 (Fed. Cir. 2014). Just as Justice Breyer tethered the notion of what was “well known in the art” by referring to the specification for 101 purposes, the Federal Circuit in BRCA1 has tethered that same notion to “techniques that a scientist would have thought” to use when deciding to engage in experiments that were directed to the invention. But if inventors engage in activities that run counter to scientific thought, those activities can hardly be considered routine and conventional in a 101 sense, correct? While some may say that teaching away analysis should be reserved for § 103 (and to do so would otherwise conflate § 101 with §103), several reasons militate against this position. First, as stated above, the Supreme Court and Federal Circuit have said that § 101 is facilitated by considerations analogous to those of § 103. Second, teaching away analysis should not be monopolized by § 103. In fact, evidence that teaches away is already relevant to enablement (§ 112) to show that “a significant amount of experimentation would have been necessary to practice the claimed invention.” Liebel-Flarsheim Co. v. Medrad, Inc., 481 F.3d 1371, 1379-79 (Fed. Cir. 2007). Because teaching away analysis is transferable between different sections in the statute, there would seem no reason why it could not be extended to § 101 to determine whether a combination of steps is routine and conventional.
  1. HINDSIGHT: Given that Alice requires that courts look at patented elements as a whole, the concern of hindsight bias should have as much relevance to a § 101 challenge as it does a § 103 challenge. For when each of the elements of a claimed invention do not exist in the prior art, or even the ordered combination, how can a defendant rationally argue that the combination is routine and conventional without some degree of hindsight bias kicking in? Princeton Biochemicals, Inc. v. Beckman Coulter, Inc., 411 F.3d 1332, 1337 (2005). Indeed, in Mayo, 132 S. Ct. at 1298-99, Justice Breyer explained that the invention in Diehr was patentable because the “ordered combination” of the steps of the claimed invention as a whole were “nowhere suggested” to be “in context obvious, already in use, or purely conventional.” And while the Supreme Court made no express mention of hindsight in its 101 holdings, it was, at the very least, an underlying rationale in Diehr. Footnote 12 of that opinion is exemplary. Alice, too, reinforces this point when it spoke of looking at combination patents as “whole.”
  1. PREEMPTION & PIONEER PATENTS: Plaintiffs do appear to be pressing preemption arguments more heavily in recent months. The Sequenom case illustrates this: Ariosa Diagnostics, Inc. v. Sequenom, Inc., 788 F.3d 1371 (2015) But, sadly, the Federal Circuit panel got it wrong when it was not prepared to consider evidence that demonstrated that the invention did not foreclose the use of the discovery. The saying what’s good for the goose is good for the gander seems apt. Because of this, it will be left to the Federal Circuit en banc, or other panels to address how preemption should factor into the 101 calculus. In any case, those decisions should take a liberal approach to Mayo’s dicta and allow preemption to play a tie-breaking fact role in close cases—e., a role similar to that of secondary indicia in the 103 calculus as evidence providing a tipping point in favor of a non-obviousness determination. To this end, and in the preemption context, the patentee should be entitled to show that there are different ways of achieving the goal to which the patent is directed—not just one (preemptive) way.

In addition, the Mayo decision also spoke of “how much future innovation is foreclosed relative to the contribution of the inventor.” Mayo, 132 S. Ct. at 1303. Does this mean that a pioneer patent should be given more latitude in a 101 context than a patent that provides a mere incremental improvement? I think it does. But a workable doctrine must emerge—much like one emerged with respect to the doctrine of equivalents in the infringement context. The article will address this.

  1. DRAFT JURY 101 INSTRUCTION: Given that some 101 cases are predicated on underlying factual findings, much like 103, the article will conclude with an appendix that includes a draft jury instruction. That will be addressed in more detail later.

Shukh v. Seagate: Fired Inventors and their Former Employers

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Alexander Shukh v. Seagate (Fed. Cir. 2015)

Mr. Shukh sued his former employer Seagate asking for a correction of inventorship under 35 U.S.C. § 256 as well as breach of contract and discrimination associated with his firing.

Because Shukh had already assigned-away his ownership rights to the patents, the District Court ruled that the Shukh’s standing for the inventorship claim hung on his alleged reputational harm due Seagate’s failure to list him as a co-inventor on six different patents. The district court also dismissed the state law allegations for failure to state a claim. At the close of discovery, the district court then dismissed the case on summary judgment – finding that Shukh had not produced evidence to prove the reputational harm.

On appeal, the Federal Circuit has vacated the lower court’s summary judgment –

Today, we hold that concrete and particularized reputational injury can give rise to Article III standing. As we noted in Chou, “being considered an inventor of important subject matter is a mark of success in one’s field, comparable to being an author of an important scientific paper.” 254 F.3d at 1359. We reasoned that “[p]ecuniary consequences may well flow from being designated as an inventor.” Id. This is particularly true when the claimed inventor is employed or seeks to be employed in the field of his or her claimed invention. For example, if the claimed inventor can show that being named as an inventor on a patent would affect his employment, the alleged reputational injury likely has an economic component sufficient to demonstrate Article III standing.

We find that there is a question of material fact as to whether Dr. Shukh’s omission as a named inventor on the disputed patents caused him reputational injury. Dr. Shukh presented evidence such that a trier of fact could conclude that this omission injured his reputation in at least two ways: first, it harmed his reputation as an inventor in the field of semiconductor physics, and second, it contributed to his reputation for poor teamwork due in part to his accusations that others were stealing his work. Moreover, Dr. Shukh presented evidence from which a trier of fact could conclude that these reputational harms had economic consequences—namely, that Dr. Shukh was unable to find employment after he was terminated from Seagate.

This case highlights a troubling issue for inventors. The difficulty for inventors is that an inventor does not automatically have standing to sue for being improperly excluded from being listed as an inventor. Rather, the inventor must be able to allege additional cognizable harm before the court will hear the case.

Hereby Assign: Shukh’s employment contract with Seagate included a statement that he “hereby assign[s]” his future invention rights to Seagate. Although these contracts are generally interpreted by state-law, the Federal Circuit issued a 1991 patent-specific ruling that this clause results in an automatic assignment of rights. Filmtec Corp. v. Allied-Signal, Inc., 939 F.2d 1568 (Fed. Cir. 1991). The Filmtec outcome should be contrasted with agreements where employees “agree to assign.” In the agreement-to-assign case, legal title does not shift until the inventor actually does assign after inventing. In his appeal, Shukh asked the Federal Circuit to overrule Filmtec – which it refused to do here on stare decisis grounds. “[W]e cannot overrule that holding without en banc action.”

The suggestion for en banc action has some strong backers. In his dissenting opinion in Stanford v. Roche, Justice Breyer challenged the Federal Circuit rule. Relying upon history and tradition, Justice Breyer wrote that the initial “hereby-assign” employment contract as creating equitable title in the invention whose legal title does not automatically transfer.

Given what seem only slight linguistic differences in the contractual language, this reasoning seems to make too much of too little. Dr. Holodniy executed his agreement with Stanford in 1988. At that time, patent law appears to have long specified that a present assignment of future inventions (as in both contracts here) conveyed equitable, but not legal, title. See, e.g., G. Curtis, A Treatise on the Law of Patents for Useful Inventions §170, p. 155 (3d ed. 1867) (“A contract to convey a future invention . . . cannot alone authorize a patent to be taken by the party in whose favor such a contract was intended to operate”); Comment, Contract Rights as Commercial Security: Present and Future Intangibles, 67 Yale L. J. 847, 854, n. 27 (1958) (“The rule generally applicable grants equitable enforcement to an assignment of an expectancy but demands a further act, either reduction to possession or further assignment of the right when it comes into existence”).

Under this rule, both the initial Stanford and later Cetus agreements could have given rise only to equitable interests in Dr. Holodniy’s invention. And as between these two claims in equity, the facts that Stanford’s contract came first and that Stanford subsequently obtained a postinvention assignment as well should have meant that Stanford, not Cetus, would receive the rights its contract conveyed.

In 1991, however, the Federal Circuit, in FilmTec, adopted the new rule quoted above—a rule that distinguishes between these equitable claims and, in effect, says that Cetus must win. The Federal Circuit provided no explanation for what seems a significant change in the law. Nor did it give any explanation for that change in its opinion in this case. The Federal Circuit’s FilmTec rule undercuts the objectives of the Bayh-Dole Act. While the cognoscenti may be able to meet the FilmTec rule in future contracts simply by copying the precise words blessed by the Federal Circuit, the rule nonetheless remains a technical drafting trap for the unwary. It is unclear to me why, where the Bayh-Dole Act is at issue, we should prefer the Federal Circuit’s FilmTec rule to the rule, of apparently much longer vintage, that would treat both agreements in this case as creating merely equitable rights.

The majority in Stanford v. Roche did not particularly address the issue.

Will the Federal Circuit Recognize the U.S.–Foreign Tradeoff in Friday’s Lexmark Argument?

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Guest post by Daniel Hemel, Assistant Professor at the University of Chicago Law School, and Lisa Larrimore Ouellette, Assistant Professor at Stanford Law School.

On Friday, the en banc Federal Circuit will hear argument in Lexmark v. Impression Products, the printer cartridge resale case that will determine the fate of two key patent exhaustion precedents, including the current Jazz Photo rule that foreign sales do not exhaust U.S. patent rights. Despite extensive briefing (including over thirty amicus briefs), we argue in a new Essay that the key distributive tradeoffs between U.S. and foreign interests remain ignored (or misunderstood).

Both sides in Lexmark argue that their proposed rule would be more efficient. Those advocating broader exhaustion rules (including Google, Costco, EFF, and a group of IP professors) argue that the current regime is complex and uncertain. Those favoring the status quo (including PhRMA, BIO, and IPO) point to the aggregate welfare gains from geographic price discrimination. While it is possible to construct models to support both views, we argue that the efficiency question cannot be answered without first making a choice about whose welfare is aggregated.

As explained in more detail in our Essay, Trade and Tradeoffs: The Case of International Patent Exhaustion, the U.S. rule on international patent exhaustion implicates at least two tradeoffs between U.S. and foreign interests:

First, there is a tradeoff between U.S. and foreign consumers. A U.S. rule of international exhaustion would cause prices of patented products in low-income countries to increase and prices of those same products in the United States to fall. It is thus surprising to see groups focused on global access to medicines such as Public Citizen advocating for this change; we are not aware of any study suggesting that a U.S. rule of international exhaustion would decrease prices in the developing world. As counterintuitive as it may be for developing countries and global access-to-medicines proponents to take the side of pharmaceutical companies, we think that their interests are in fact aligned on this issue. Developing-world consumers and pharmaceutical companies would both be better off if the Federal Circuit sticks with its Jazz Photo rule.

Second, a U.S. rule of international patent exhaustion would make it more difficult for foreign countries to allocate access to patented goods using non-market mechanisms. Some national governments subsidize their citizens’ consumption of patented products; examples range from the UK National Health Service’s provision of pharmaceuticals to Uruguay’s one-laptop-per-child program. As we explain in our Essay, such subsidies could end up being transferred to U.S. consumers via arbitrage if the Federal Circuit overrules Jazz Photo. At the very least, the decision to overrule Jazz Photo would make it more difficult for foreign governments to subsidize access to patented goods.

We argue that one cannot answer the policy question at the heart of Lexmark without taking a position on these distributive questions. If one assigns zero value to the interests of foreigners, then the United States might well be better off if it adopted a rule of international patent exhaustion. (While international patent exhaustion would also reduce profits for U.S. patent holders, a majority of U.S. patents are issued to foreigners; if one adopts a purely nationalistic approach, the interests of most patent holders wouldn’t count in the welfare analysis.) If one assigns a high value to the interests outside the United States, particularly those in developing countries, then one should almost certainly come down against a U.S. rule of international exhaustion. (If one assigns equal weight to the interests of all individuals regardless of nationality, then the question is somewhat closer.) How much the Federal Circuit should care about foreign consumers is a question that defies easy answer, but we hope that our Essay at least brings these tradeoffs into clearer focus. We also offer some tentative suggestions as to how U.S. courts might approach questions of global distributive justice.

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Court Maintains Laches Defense for Back Damages in Patent Cases

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by Dennis Crouch

SCA Hygiene Products v. First Baby Products (Fed. Cir. 2015) (en banc)

On en banc rehearing, the Federal Circuit has ruled that the Supreme Court’s Petrella decision (eliminating the doctrine of laches for back-damages for copyright infringement) does not directly apply in the patent context.

All eleven members of the court agreed that, in the patent context, laches continues to be available in the context blocking equitable relief such as an injunction or ongoing royalties – when warranted by the equities.  However, the court indicated (dicta here) that laches should only apply to ongoing royalties in “extraordinary circumstances.”

The 6-5 split was on whether laches can be used to eliminate back-damages for infringement that occurred within the six-year statutory limit.  Here, the majority found that laches continues to apply.

Although laches is considered a judge-made equitable doctrine, the court smartly looked to the statute in reaching its conclusion. In particular, Section 282(b)(1) of the Patent Act states that “unenforceability” is a defense to allegations of patent infringement and back when the law was passed (1952) was understood to encompass defenses such as “laches, estoppel and unclean hands.”  Taking this together, the court found that Congress meant for the laches defense to continue to work alongside the six-year limit on back-damages.

Congress remained silent on the content of the laches defense. Section 282 therefore retains the substance of the common law as it existed at the time Congress enacted the Patent Act. . . . Upon review, the case law demonstrates that, by 1952, courts consistently applied laches to preclude recovery of legal damages. Nearly every circuit recognized that laches could be a defense to legal relief prior to 1952. . . . Following a review of the relevant common law, that meaning is clear: in 1952, laches operated as a defense to legal relief. Therefore, in § 282, Congress codified a laches defense that barred recovery of legal remedies.

Challenging this point, the Dissent argued that the relevant “common law” for consideration should have come from the Supreme Court which, according to the dissent, indicated that laches was only a defense to equitable actions.

The legal history point of debate seems to be whether we should look at the general common law of laches or instead the common law of laches as applied to patent lawsuits?

Majority: If Congress looked to the common law, it likely looked to the common law of patents rather than to more general principles.”

Dissent: Patent law is governed by the same common-law principles, methods of statutory interpretation, and procedural rules as other areas of civil litigation.

With a one-judge majority, the law remains that laches is “a defense to legal relief in a patent infringement suit.”

= = = = =

The majority here argues correctly that we should look to the statute and see what it tells us. That approach makes sense in all patent cases, regardless of the issue.

What the majority finds is that the statute implicitly binds the court to implement the equitable defenses available in patent cases back in 1952 (when the relevant amendment was passed). At the same time, the majority appears perfectly comfortable with the notion that the scope of the equitable actions will continue to adjust over time and were in no way fixed by their incorporation into the 1952 Act.  Thus, when the court asks – what are the contours of the laches defense – it does not feel constrained to limit itself to 1952 precedent but instead looks directly to the recent Supreme Court decision in Petrella.

In Suprema v. ITC remand, Panel Expands on Inducement

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Suprema v. ITC (Suprema III) (On remand from the en banc decision) (non-precedential)

In August, 2015, the Federal Circuit released an en banc decision in Suprema v. International Trade Commission holding that the USITC has power to stop infringing imports if those imports are being used to induce infringement of a patent method of use.  That holding is a shift from the traditional notion that the USITC only has power over goods that are infringing at the point of importation.  The holding is also interesting in that it was at least partially based upon deference given to the ITC’s interpretation of the scope of its statute – that type of deference is typically not given to the USPTO or district courts when making similar judgments.

The en banc opinion flipped Judge O’Malley’s original panel holding that the statutory “articles that infringe” limitation on ITC power did not extend to post-importation acts of infringement.

Following the en banc decision, original panel took-up the case again and has now affirmed the ITC’s findings of violation.  This time, the panel walked through the challenged findings of infringement and held that the Commission’s findings were supported by ‘substantial evidence.’

Although the decision is non-precedential, it does include a few gems. Notably, the patentee had evidence that the accused-infringer had studied two of the patents-in-suit but not the third.  In the appeal, the panel supported the notion that knowledge of the first two could be used to prove knowledge of the third:

Suprema also admitted to researching and identifying Cross Match’s patents, including the ’993 and ’562 patents. . . .  Following its extensive research, Suprema successfully developed its scanners into the autocapture, image quality checking, and automatic segmentation processes that are covered by claim 19 of the ’344 patent. The Commission noted that, because the ’562 and ’344 patents have overlapping inventors and share the same assignee, Cross Match, “a word search likely would have identified both patents.” . . .

Suprema asserts that during its extensive market research it failed to check to see if the related patent application referenced in the ’562 patent proceeded to mature into an issued patent. The Commission discounted this testimony. The Commission found it notable that the ’344 patent issued in April 2007, six months prior to the October 2007 issue date of the ’562 patent. Thus, had Suprema checked for the issuance of the ’344 patent at the time it was reviewing the ’562 patent, Suprema would have undoubtedly discovered that the ’344 patent had issued.

Suprema and amicus Google, Inc. (“Google”) argue that a requirement to seek out every reference referred to in a competitor’s patent would place too high a burden on manufacturers to avoid a finding of willful blindness. We do not hold that such an exhaustive patent search is required in every instance. Nor do we find that the Commission predicated its willful blindness finding only upon such an obligation. Rather, given the similarities in content, inventorship, and ownership between the ’344 and ’562 patents, and the facts that Suprema studied the ’562 patent during its extensive market analysis, was aware of Cross Match’s activities in the scanner field, and specifically targeted the market Cross Match serviced when developing its own products, we find, based on the totality of the circumstances, that the Commission had adequate evidence upon which to conclude that Suprema’s actions constituted willful blindness.

The Federal Circuit also allowed evidence that the accused did not seek opinion-of-counsel to be used to prove willfulness. In the process, the court noted that the AIA altered the law so that “[t]he failure of an infringer to obtain the advice of counsel with respect to any allegedly infringed patent, or the failure of the infringer to present such advice to the court or jury, may not be used to prove that the accused infringer willfully infringed the patent or that the infringer intended to induce infringement of the patent.” 35 U.S.C. § 298.  The AIA has a host of different effective dates. Because the advice-of-counsel section (AIA Sec. 17) did not include a particular effective date, it falls under the general effective date which states that the “Act shall take effect upon the expiration of the 1-year period beginning on the date of the enactment of this Act and shall apply to any patent issued on or after that effective date.”  Here, because the patents-at-issue were issued prior to the 1-year date (Sept 2012), the court did not apply this new statute to the case at hand. [UPDATE] See comments for additional info on the statute of limitations.  

The court also added the following bone to Google who had filed an amicus brief:

In its amicus brief, Google argues that the Commission’s willful blindness ruling imposes too onerous a duty on innovators to ensure that its customers will not potentially infringe a patent. Google asserts that the Commission’s ruling upsets the balance struck in Global-Tech. It is nearly impossible, Google argues, for a technology company to identify “all patents that are potentially implicated” by customers’ potential infringement of patents. While we are not unmindful of these concerns, we do not find them sufficiently implicated in this present controversy to warrant a different outcome. We note, moreover, our deferential standard of review, which requires us to defer to the Commission’s factual findings if supported by substantial evidence. Our holding is limited to the facts in the case before us. None of the facts upon which the Commission relied, in isolation, would support a finding of willful blindness. Yet, while no single factor is dispositive here, we are satisfied that there is substantial evidence on this record to support the Commission’s findings.

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Media Rights Technologies v. Capital One: Williamson v. Citrix applied

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By Jason Rantanen

Media Rights Technologies, Inc. v. Capital One Financial Corporation (Fed. Cir. 2015) Download opinion
Panel: O’Malley (author), Plager and Taranto

Earlier this summer, the Federal Circuit issued a revised opinion in Williamson v. Citrix Online.  The centerpiece of the new opinion was Part II.C.1, joined by a majority of the entire court.  That section overruled past precedent holding that non-use of the words “means” or “step” in a claim created a “strong” presumption that § 112, para. 6 does not apply, one that is only overcome by “a showing that the limitation essentially is devoid of anything that can be construed as structure.”   Instead, the en banc court held, the presumption can be overcome “if the challenger demonstrates that the claim term fails to ‘recite sufficiently definite structure’ or else recites ‘function without reciting sufficient structure for performing that function'”  Williamson, 792 F.3d 1339, 1349 (Fed. Cir. 2015) (en banc in relevant part) (quoting Watts v. XL Sys., Inc., 232 F.3d 877, 880 (Fed. Cir. 2000).

On the surface, Media Rights Technologies v. Capital One involves a relatively straightforward application of Williamson.  But there are several aspects of the decision that make it stand out: the statement of the law of indefiniteness (Judge O’Malley’s first since Nautilus), the sharpness and depth of its analysis of the § 112, para. 6 issue, the holding that the specification must disclose structure for all claimed functions, and the use of factual evidence in the indefiniteness determination.

Claim 1 of Patent No. 7,316,033 is the illustrative claim.  At issue was the term “compliance mechanism.”

A method of preventing unauthorized recording of electronic media comprising:

Activating a compliance mechanism in response to receiving media content by a client system, said compliance mechanism coupled to said client system, said client system having a media content presentation application operable thereon and coupled to said compliance mechanism;

Controlling a data output pathway of said client system with said compliance mechanism by diverting a commonly used data pathway of said media player application to a controlled data pathway monitored by said compliance mechanism; and

Directing said media content to a custom media device coupled to said compliance mechanism via said data output path, for selectively restricting output of said media content.

Multiple claim meanings: The Federal Circuit’s discussion begins with what  appears to be a routine summary of the law of indefiniteness:

A claim fails to satisfy this statutory requirement [§ 112, para. 2] and is thus invalid for indefiniteness if its language, when read in light of the specification and the prosecution history, “fail[s] to inform, with reasonable certainty, those skilled in the art about the scope of the invention.” Nautilus, Inc. v. Biosig Instruments, Inc., 134 S. Ct. 2120, 2124 (2014). Notably, a claim is indefinite if its language “might mean several different things and no informed and confident choice is available among the contending definitions.” Id. at 2130 n.8 (quotation omitted).

Slip Op. at 7. While the first part of this passage is well known, but the second part is interesting because it does not merely embrace the Court’s opinion in Nautilus, but goes beyond.  Footnote 8 is actually a quotation from a district court opinion, dropped in the context of pointing out that the Federal Circuit’s “insolubly ambiguous” standard “can breed lower court confusion.”  It reads:

8. See, e.g., Every Penny Counts, Inc. v. Wells Fargo Bank, N. A., ––– F.Supp.2d ––––, ––––, 2014 WL 869092, *4 (M.D.Fla., Mar. 5, 2014) (finding that “the account,” as used in claim, “lacks definiteness,” because it might mean several different things and “no informed and confident choice is available among the contending definitions,” but that “the extent of the indefiniteness … falls far short of the ‘insoluble ambiguity’ required to invalidate the claim”).

Put another way, Judge O’Malley is not merely quoting Nautilus; she is adopting a standard that is not directly mandated by the opinion.  (To be clear, I think the language adopted here is in line with Nautilus, and perhaps even indirectly mandated by the decision.  Also, it is not the first time this language has appeared in a post-Nautilus decision.  Judge Chen quoted it in Interval Licensing LLC v. AOL, Inc., 766 F.3d 1364, 1371 (Fed. Cir. 2014), but not as a firm statement of the law.)

The §112, para. 6 analysis: The appeal presented two issues related to “compliance mechanism”: whether it is a means-plus-function term and, if so, whether the specification discloses corresponding structure.  Under Williamson, the lack of the word “means” creates a rebuttable presumption that “compliance mechanism” is not a means-plus-function term.  Here, the patent holder neither contended that “compliance mechanism” had a commonly understood meaning nor that it is generally understood in the art to connote a particular structure.  Instead, Media Rights Technologies argued that “compliance mechanism” was like the term “modernizing device” found to be definite in Inventio AG v. Thyssenkrupp Elevator Ams. Corp., 649 F.3d 1350, 1357 (Fed. Cir. 2011).  Not so, said the court.

Here, unlike Inventio, the claims do not use the term “compliance mechanism” as a substitute for an electrical circuit, or anything else that might connote a definite structure. Rather, the claims simply state that the “compliance mechanism” can perform various functions. A review of the intrinsic record does not change this conclusion. The written description only depicts and describes how what is referred to as the “copyright compliance mechanism” is connected to various parts of the system, how the “copyright compliance mechanism” functions, and the potential—though not mandatory—functional components of the “copyright compliance mechanism.” See ’033 Patent col. 18:57–col. 19:5; col. 20:32–49; Fig. 3; Fig. 5B. None of these passages, however, define “compliance mechanism” in specific structural terms. And, the addition of the term “copyright compliance mechanism” in the specification only confuses the issue further. Media Rights does not contend that “copyright compliance mechanism” is the equivalent of the electrical circuit detailed in the written description at issue in Inventio. Indeed, Media Rights asserts that the “copyright compliance mechanism”—the only “compliance mechanism” referenced outside the claims and the summary of the invention, and the only one depicted in the figures to which it points—is narrower than the structure it claims as the “compliance mechanism.” Without more, we cannot find that the claims, when read in light of the specification, provide sufficient structure for the “compliance  mechanism” term.

Slip Op. at 10.  Furthermore, Inventio was a pre-Williamson decision, and was decided under now-superceded case law that imposed a “heavy presumption” against finding a claim term to be in means-plus-function format.  “Because we apply no such heavy presumption here, and the description of the structure to which Media Rights points is far less detailed than in Inventio, we do not believe Inventio carries the weight Media Rights attaches to it.”  Slip Op. at 11.

All functions must be disclosed  Since the claim was a means-plus-function term, the court turned to the question of whether the specification disclosed corresponding structure.  “Where there are multiple claimed functions, as there are in this case, the patentee must disclose adequate corresponding structure to perform all of the claimed functions.”  Slip Op. at 12 (emphasis in original).  Here, there were four claimed functions, so the specification needed to disclose adequate structure to achieve all four of the claimed functions.  And because these were computer-implemented functions, “the specification must disclose an algorithm for performing the claimed function.”  Id. at 13.  Claims that fail to disclose sufficient corresponding structure are invalid for indefiniteness.

Factual evidence in the indefiniteness determination:
Examining the question of whether such an algorithm was disclosed, the court considered the specification’s recitation of source code that Media Rights contended was sufficient.  Since the court could not read the code outright, it needed to look to “expert witness testimony to determine what that source code discloses at an algorithmic level.”  Slip Op. at 14. (Media Rights apparently conceded to this at oral argument.)  The unrebutted expert testimony was that the code returned only various error messages.  From this, the court concluded that “[t]he cited algorithm does not, accordingly, explain how to perform the diverting function, making the disclosure inadequate.”  Id.  In addition, the court held that there was no corresponding structure for another function because “the cited portion of the specification provides no detail about the rules themselves or how the ‘copyright compliance mechanism’ determines whether the rules are being enforced.”  Id.  The consequence was that all of the patent’s claims (all containing the term “compliance mechanism”) were invalid due to indefiniteness

Bits and Bytes on IP Law

Patent,
  • Video Contest: IPO is again hosting its IP Video Contest – for entertainment value I like the LOTR and Cavemen skits. [http://www.ipvideocontest.com/?page_id=410]
  • Lighting Ballast: The Federal Circuit has denied a motion for another en banc rehearing in the longstanding lighting ballast case. Thus, the latest panel decision should stand that affirms the district court holding that the claimed “voltage source means” is not a means-plus-function case.  That outcome is largely based upon the appellate court giving deference to the lower court’s factual findings that were derived from expert testimony discussing the level of skill in the art.
  • Patent Reform: Senator Grassley’s PATENT ACT of 2015 (S.1137) has been placed on the Senate Calendar queue after having been reported out of committee in June.  The bill also includes a number of substantive amendments.
  • ShowerThoughts: Our objective system of judging obviousness almost always gathers more prior art than was actually known to the inventor at the time of the invention.  This means that (for valid patents) the inventor’s actual inventive-step (based upon what the inventor knows) is typically greater than what is required by law – perhaps significantly so.

Sequenom’s Patent

Patent

Sequenom’s patent claim in question:

1. A method for detecting a paternally inherited nucleic acid of fetal origin performed on a maternal serum or plasma sample from a pregnant female, which method comprises:

amplifying a paternally inherited nucleic acid from the serum or plasma sample and

detecting the presence of a paternally inherited nucleic acid of fetal origin in the sample.

The big idea here was to recognize that fetal DNA might be floating around in the mother’s blood and that the fetal DNA could be selectively amplified by focusing on the paternally inherited portion of its DNA (rather than the maternally inherited).

The claim itself has two simple steps: (1) amplifying paternally inherited DNA from a plasma sample from a pregnant female and then (2) detecting the presence of the DNA. The technology for amplifying and detecting was already well known at the time of the invention here.  Further, these two steps are the ones always almost used to detect particular DNA.

The invention here solves a very practical problem accessing fetal DNA without creating a major health risk for the unborn child.  Of course, the problems solved in Mayo and Alice were also very practical and that fact did not change the result.

I am hard-pressed to see how this claim overcomes Mayo/Alice.  The “big ideas” expressed in the invention are seeming laws of nature and the idea of amplifying paternal DNA just relies upon a natural correlation in the same way that the inventors relied upon the drug metabolite in Mayo.  The actual implementation of these ideas appear preemptive of the ideas and rely only upon well known and expected implementation steps.

To me, the push for en banc review is – at its heart – either a showpiece for the Supreme Court or a request to undermine the Supreme Court’s precedent.

Guest Post by Profs. Lefstin & Menell on Sequenom v. Ariosa

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In a parallel post, Dennis summarized the numerous amicus briefs filed in support of Sequenom’s petition for rehearing en banc.  Below, professors Jeffrey Lefstin (Hastings) and Peter Menell (Berkeley) discuss the core issues raised in their amicus brief.

Don’t Throw Out Fetal-Diagnostic Innovation with the Bathwater:
Why Ariosa v. Sequenom Is an Ideal Vehicle for Constructing a Sound Patent-Eligibility Framework

By Jeffrey A. Lefstin and Peter S. Menell
Over the past five years, the U.S. Supreme Court has reinvigorated patentable subject-matter limitations, issuing four significant decisions after nearly three decades of dormancy.  These decisions reflect justifiable concerns about the patenting of abstract business methods and laws of nature. Just as importantly, they reveal internal inconsistencies and confusion about the scope of patentable subject matter and tension with the centuries-old fabric of patent-eligibility jurisprudence. As Justice Breyer remarked at the oral argument in Alice Corp. v. CLS Bank Int’l (2014), the Mayo (2012) decision did no more than “sketch an outer shell of the content” of the patent-eligibility test, leaving much of the substance to be developed by the patent bar in conjunction with the Federal Circuit.

Two of the Supreme Court’s recent patent-eligibility decisions (Bilski and Alice) involve non-technological business methods.  Mayo glosses over several key issues, including how to reconcile prior discordant decisions (Flook and Diehr), and whether the requirement of “inventive concept” demands an unconventional application, or merely more than the generic instruction to “apply the law.” And Myriad departs from Mayo in a critical respect in that it authorizes patentability for a conventional transformation of a natural compound.

Unfortunately, the Federal Circuit’s panel decision in Ariosa v. Sequenom elides the critical questions.  In view of Congress’s reluctance to weigh in on the scope of patentable subject matter and the Supreme Court’s signals to the patent bar and the Federal Circuit to bring coherence to these rough outlines, Ariosa v. Sequenom marks a critical juncture in the development of a modern patent-eligibility framework.  Failure to vet these issues risks undermining the patent system’s role in promoting biomedical research.  Beyond Supreme Court review, which is never guaranteed (consider the havoc wreaked by the Court’s passing on State Street Bank), or corrective legislation (which is even more speculative), en banc review by the Federal Circuit presents the last clear chance to avert potentially dire consequences.

Our amicus brief urges the Federal Circuit to grant en banc review in Ariosa v. Sequenom to ventilate the critical issues left unanswered by the Supreme Court’s patent-eligibility decisions.  Although some language in Mayo could be interpreted to set forth unconventional or inventive application as a possible test for patent-eligibility, Mayo suggests two other possibilities for an “inventive concept”: non-preemptive application; and non-generic application – that is, more than a statement of a natural law coupled with an instruction to apply it.  While the panel was correct to perceive that Mayo describes preemption as the underlying justification for the patent-eligibility doctrine, not the operative test, we believe that the panel was incorrect to conclude that Mayo dictates unconventional or inventive application.

Our brief further shows that the Ariosa panel decision conflicts with several strands of prior Supreme Court decisions.  The panel decision jeopardizes valuable innovation in diagnostic research and other biomedical fields as unintended fallout of the Supreme Court’s justifiable desire to discard vague and non-technological business method patents.  The primary responsibility for developing patent-eligibility doctrine now rests with the Federal Circuit and this case presents an ideal vehicle for explicating sensible jurisprudential boundaries.

Jeffrey A. Lefstin is Professor of Law at the University of California Hastings College of Law.  Peter S. Menell is Koret Professor of Law and a Director of the Berkeley Center for Law & Technology at the University of California at Berkeley School of Law.  Their amicus brief in support of en banc review in Ariosa v. Sequenom is available at: http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2652452

In Brief: Amici Provide Reasons to Reconsider Ariosa v. Sequenom

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[This post includes links to the 12 amicus briefs supporting Sequenom’s petition for en banc rehearing in this Subject Matter Eligibility Case.]

by Dennis Crouch

Ariosa Diagnostics, Inc v. Sequenom, Inc. (Fed. Cir. 2015) (en banc petition 2015)

This subject matter eligibility case revolves around an important scientific discovery that a pregnant woman’s blood plasma/serum contains fetal DNA and that the fetal DNA can teased-out by amplifying paternally-inherited sequences from the cell-free fractions of the mother’s blood. Sequenom’s patents focus on methods of prenatal genetic diagnoses that rely upon these discovery by the inventors. U.S. Patent No. 6,258,540.

Invalid: Applying Mayo v. Prometheous, the Federal Circuit held all the claims in-suit to be ineligible. In step one of the Mayo inquiry, the court found that the claims were all directed to a natural phenomenon: the existence of paternally-inherited cell-free fetal DNA (cffDNA) in the maternal bloodstream. In step two, the search for an ‘inventive concept,’ the court found that the practical implementation of the natural phenomenon was insufficient because it merely involved well known methods of amplifying DNA.  (CitingFlook).  Without an inventive concept beyond the excluded subject matter – the claims were left ineligible for patent protection.

In his usual understated approach, Professor Chris Holman identified the Federal Circuit decision “not good news for innovation in the life sciences.”  The USPTO has also seemingly delayed providing examiner’s with guidance on how to implement Ariosa during examination.

En Banc Rehearing Petition: The patentee has now put forward a strong move for rehearing en banc  with a well drafted petition and support from a host of amici. Aptly describing the core issue, Sequenom’s counsel Tom Goldstein explains:

[Under the Federal Circuit’s rule] the person who first discovers a natural phenomenon can never obtain a patent on any practical application of that new knowledge, however surprising or revolutionary the results, unless the steps she teaches to use it are independently novel. . . . that cannot be correct.

Read the Ariosa.Petition.  The petitioner’s main argument here is with the Supreme Court’s broad language used in Mayo that also revitalized Flook.  Of course, those cases conflict with other Supreme historic precedent. In the coming months, the Federal Circuit will decide this en banc request, but the case is very much being set-up for Supreme Court review.

The 12 amicus briefs filed in support of the petition are strong and well written.

My former boss Kevin Noonan is counsel of record for a group of 23 law professors, including Adam Mossoff, Dan Burk, Tim Holbrook, and Richard Epstein. The brief makes two main arguments: (1) the genetic diagnostic tests developed and commercialized here are the type “historically unforeseen invention” that the patent system is designed to promote; and (2) the panel’s approach here of requiring novelty beyond straightforward application of excluded natural phenomenon “would call into question nineteenth century patented innovation the Supreme Court deemed valid.”Read Ariosa.lawprof.  The sentiment of the Law Professor Brief is consistent with the brief filed by Matthew Dowd on behalf of JYANT Tech, explaining that “in Diamond v. Diehr … the [Supreme] Court explained that “a new combination of steps in a process may be patentable even though all the constituents of the combination were well known and in common use before the combination was made.” Read Ariosa.JYANT

As we will discuss in a parallel post, the brief of Professors Lefstin and Menell provide their reading of recent Supreme Court cases of Mayo and Alice — arguing that (1) a close reading shows that inventive application of a law of nature is not required but instead a non-preemptive or non-generic application; and (2) the Flook-type claim dissection is prohibited. Read Ariosa.Leftsin. This analyze-it-as-a-whole sentiment was repeated by the IPO Brief field by Tiege Sheehan as well as the brief from Amarantus filed by Gideon Schor. Read  Ariosa.IPO and Ariosa.Amarantus.

My Fellow Missouri Professor Chris Holman filed a brief on behalf of the major industry organizations BIO and PhRMA making the credible argument that all this is a very big deal in the diagnostic space and that the resulting uncertainty is having a negative impact on research. Read Ariosa.BIO.

Preemption: When the Supreme Court explained its two two-step approach in Mayo andAlice, it noted the purpose was to avoid preemption of any excluded subject matter — that is, to ensure that no single entity could claim exclusive sovereignty over an abstract idea, law of nature, or natural phenomenon.  Rather, those basic fundamentals of society should not be subject to private claims of right.  Although the purpose behind the test is preventing this preemption, the test itself seemingly does not ask whether preemption has occurred. In its brief, the NYIPLA argues that this fundamental question of preemption must be asked and the Mayo/Alice framework does not authorize a court to ignore that inquiry.READ Ariosa.IPLA.  This focus on preemption is repeated by WARF’s brief filed by Dan Bagatell — writing that “the critical question is whether a patent impermissibly claims and prevents others from using a natural phenomenon, law of nature, or abstract idea itself, or instead permissibly claims a practical application of one of those things.”Read Ariosa.WARF.

Myriad‘s counsel Benjamin Jackson filed a brief on behalf of the industry organization21st Century Medicine that challenges the “gist” method of determining whether a claim encompasses excluded subject matter and suggests that the claim here is simply a technological improvement over the prior art.

Sequenom’s patent teaches it was known in the art that fetal cells can pass into the mother’s blood. Diagnostic techniques had been devised to isolate these cells and analyze fetal DNA extracted from them, but these techniques were expensive and time consuming. The phrase “cell-free fetal DNA” was therefore not an attempt to claim a natural phenomenon but instead a key claim limitation to distinguish over the art. Fifteen years ago, back when patent claiming and examination focused on prior art rather than ill-defined “natural phenomena,” Sequenom appropriately emphasized that its methods used cell-free fetal DNA rather than the cell-derived fetal DNA known in the art.

Thus, the claimed invention is a significant technical improvement in the laboratory process for prenatal diagnosis, allowing laboratories to eliminate the costly and labor-intensive step of isolating fetal cells and then fetal DNA. Such an inventive improvement to the technical performance of an existing technological process is precisely what patents are for.

Read Ariosa.21st. The Novartis brief, filed by its in house counsel Corey Salsberg, makes the important point eligibility has become a tougher test that patentability (nonobviousness). Read Ariosa.Novartis.

Taking a more international approach,Paul Cole and Donald Zuhn teamed-up to file a brief indicating, inter alia, that the panel’s approach in Ariosa creates a potential TRIPs Violation. “This case is an example of an internationally discordant, not harmonious, result, contrary to the eligibility requirements of TRIPS Article 27.”  Read Ariosa.COLE. Similarly, the Bioindustry Association (BIA) also argues that the panel’s approach here means that U.S. eligibility is substantially narrower than that of our global trading partners. Read Ariosa.BIA.

The Federal Circuit may take several weeks to decide this en banc petition. This case is a hot potato and the court’s likely reason for ducking the case would be to avoid being scalded.