Tag Archives: Federal Circuit En Banc

Wild Inaccuracies in CAFC’s Opinion on Reines

Ethics,

This is the only post before I do a full analysis of the Reines opinion, but word needs to get out: it’s wrong.  I’m shocked — baffled is a better word actually — at what the Court did.

I’ll begin with this passage from the Court’s “en banc” opinion (more on that later) since it’s the easiest thing to deconstruct for you so far.  The court wrote:

It [the email in Ex. 38] suggested that his special relationship with the court should be taken into account. Respondent touted his role as chair of this court’s Advisory Council, and stated that his “stature” within the court had helped “flip” a $52 million judgment in favor of his client and that he “would love to help [the recipient of his message] do the same.” Reines Ex. 38.

The court did not quote email exhibit 38. In fact, the Court both misrepresents what the email says, and its “interpretation” makes absolutely no sense.  Here is the material text of Exhibit 38:

Paul, I saw the unfortunate verdict in ND Cal in the Power Integrations case. I call to offer assistance in two ways. I can help in the district court. No one knows this court better or has a better relationship with the bench. I have chaired the ND Cal Patent Rules committee for many years and am viewed as an authority on all-things-patent by this bench. You will have maximum credibility. Second, I am a leading Federal Circuit advocate. Just yesterday Chief Judge Rader sent me an email reporting how impressed the Federal Circuit judges were in appeals I argued Tuesday. In one of those cases I helped flip a $52 million verdict. I would love to help you do the same. Yesterday’s email [from Chief Judge Rader] is below. Please keep it to Fairchild. I have served the Federal Circuit as Chair of its Advisory Council for many years. That obviously speaks to my stature at that court.

Where to begin.  Putting to the side the fact that it obviously doesn’t say what the court said — he did not say his stature helped flip a jury verdict — it also cannot be reasonably read that way:  he refers to an oral argument that had just occurred two days prior, and says he helped flip the verdict.  Wow!  How did he know 2 days after argument that the case had been reversed?

It hadn’t been two days. He had “flipped” the verdict in a JMOL before the district court.  The Federal Circuit’s characterization of the evidence — and this seems to be the key piece — is flatly wrong.  This is outrageous.

And there is more.

Court Publicly Reprimands Ed Reines, Recipient of Email from then-Chief Judge Rader (to be updated)

En Banc, Ethics, Patent

By David Hricik

(Note:  yesterday when writing this, it struck me as odd that this was en banc (I don’t think that’s procedurally proper and it surely deprives Reines of any “appeal,”)  and some of the facts, upon critical thought, don’t make a lot of sense. I’m going to read the source documents.  Click on “ethics” above to keep reading.)

In early June, 2014, the Federal Circuit in an unusual per curiam order ordered Ed Reines to show cause as to why he should not be sanctioned for forwarding an email sent to him by then-Chief Judge Rader.  The Federal Circuit today issued an en banc per curiam decision publicly reprimanding Mr. Reines for his actions.  The opinion, In Re Edward R. Reines, is here.

The email from Chief Judge Rader that began the events reads:

Ed,

On Wednesday, as you know, the judges meet for a strictly social lunch. We usually discuss poli- tics and pay raises. Today, in the midst of the general banter, one of my female colleagues inter- rupted and addressed herself to me. She said that she was vastly impressed with the advocacy of “my friend, Ed.” She said that you had handled two very complex cases, back to back. In one case, you were opposed by Seth Waxman. She said Seth had a whole battery of assistants passing him notes and keeping him on track. You were alone and IMPRESSIVE in every way. In both cases, you knew the record cold and handled every question with confidence and grace. She said that she was really impressed with your performance. Two of my other colleagues immediately echoed her en- thusiasm over your performance.

I, of course, pointed out that I had taught you everything you know in our recent class at Berkeley together . . . NOT! I added the little enhancement that you can do the same thing with almost any topic of policy: mastering the facts and law without the slightest hesitation or pause!

In sum, I was really proud to be your friend today! You bring great credit on yourself and all associated with you!

And actually I not only do not mind, but encourage you to let others see this message.

Your friend for life, rrr

Consistent with his encouragement to let others see the email, Reines forwarded it to clients and potential clients.

The decision analyzed whether Reines’ conduct violated Model Rule of Professional Conduct 8.4(e). That rule states that “[i]t is professional misconduct for a lawyer to . . . state or imply an ability to influence improperly a government agency or official to achieve results by means that violate the Rules of Professional Conduct or other law.” The court noted that the ABA has stated that “a lawyer who suggests that he or another lawyer is able to influence a judge or other public official because of a personal relationship violates Rule 8.4(e).” Id. (quoting Lawyers’ Manual on Prof’l Conduct (ABA/BNA), at 101:703 (Mar. 30, 2011)).

The court held that Reines had violated the rule.  Specifically, it reasoned:

First, the email both explicitly describes and implies a special relationship between respondent and then-Chief Judge Rader. The text of the email describes a close friendship between the two. The email included the language, “[i]n sum, I was really proud to be your friend today,” and closed with “[y]our friend for life.” The very fact that the email was a private communication rather than a public document implies a special relationship, and then-Chief Judge Rader’s sharing of internal court discussions (which would be ordinarily treated as confidential) about the lawyer’s performance in a pending case implies an unusually close relationship between respondent and the then-Chief Judge. Respondent’s comments transmitting the email also convey a special relationship with then-Chief Judge Rader and the Federal Circuit. Respondent described the email as “unusual” or “quite unusual” in some of his accompanying comments, Reines Ex. 4; Ex. 8; Ex. 44; Ex. 45, and referenced his “stature” within the court and his role as chair of the Federal Circuit’s Advisory Council, Reines Ex. 38.

Second, recipients of the email also viewed it as suggesting the existence of a special relationship between respondent and then-Chief Judge Rader and perhaps other judges of the court. Several responses referred to the high opinion then-Chief Judge Rader and judges in general had for Mr. Reines. 5 Other responses specifically referenced the friendship between respondent and then- Chief Judge Rader.

Third, the transmission of the email did more than suggest that respondent should be retained because of his superior advocacy skills. It suggested that his special relationship with the court should be taken into account. Respondent touted his role as chair of this court’s Advisory Council, and stated that his “stature” within the court had helped “flip” a $52 million judgment in favor of his client and that he “would love to help [the recipient of his message] do the same.” Reines Ex. 38. Another lawyer in respondent’s firm in forwarding the email stated that respondent “knows the judges extremely well.” Reines Ex. 49. Albeit respondent noted that he did not approve of the communication, he took no steps to advise the recipient of his disapproval. Decl. of Edward R. Reines ¶ 21.

Fourth, in sending the email to clients and prospec- tive clients, respondent sought to directly influence their decisions about retaining counsel. He typically stated, “[a]s you continue to consider us for your Federal Circuit needs, I thought the below email from Chief Judge Rader might be helpful.” Reines Ex. 11.7 Prospective clients likewise stated that they would consider it in making retention decisions.8

Finally, the email itself and respondent’s comments accompanying the sending of the email suggested that Federal Circuit judges would look favorably on the retention of respondent. Then-Chief Judge Rader invited respondent to distribute the email to others. Respondent suggested that clients should “listen[] to . . . the Federal Circuit judges[.]” Reines Ex. 30.

Id.  Based upon this analysis, the court stated that it would “blink reality” to pretend that forwarding the email did not imply a special relationship with the judge.  Id.

The court then determined that the penalty would be a public reprimand.  Not only had Reines acknowledged he had erred by forwarding the email, the court found mitigation in the fact that he had been encouraged to do so, and, further, because it was not an express but was an implicit statement that he could influence the court.

After rejecting a First Amendment challenge, the court ended with two somewhat curious observations. First it stated there was a separate issue that it was referring to the California bar concerning an exchange of gifts:

On Mr. Reines’s side, he provided a ticket for one concert, at another concert arranged for upgrading to a standing area near the stage, and arranged for backstage access for then-Chief Judge Rader at both. Then-Chief Judge Rader paid for accommodations. This occurred while Mr. Reines had cases pending before this court.

The court did not decide the issue but referred it “and the underlying relevant documents to the California bar authorities for their consideration.”  Id.

Second, the court stated that it was maintaining certain documents relating to the investigation under seal.  It stated that it was doing so “since this does not concern a matter as to which we have imposed discipline.”  Instead, it was leaving “it to the California bar authorities whether and when such materials should be disclosed.”  Id.

My Comments.

I clerked for Chief Judge Rader ending about 18 months ago. I never perceived him to be influenced by anything other than the merits of a case — period.  I also know he has a tendency to be effusive (that is putting it mildly) in emails.  As a result, the context of Chief’s emails to anyone who knows him discounts some of this.

But, in my view the court’s ruling was correct.  (Well, no it wasn’t.  See the ethics page by clicking above.)

US Government Volunteers to Pay for Infringement by Japan Airlines

Patent,

by Dennis Crouch

The US Federal Government does not get a free-pass on patent infringement.  Rather, the Government’s unlicensed use of a privately held patent constitutes infringement and is actionable. However, Congress created a special court to hear the cases (the Court of Federal Claims), and implemented a number of restrictions on both the adjudication process and the substantive rights that all tend to favor the government as defendant.  See 28 U.S.C. § 1498.  Generally, patentees would prefer to litigate in Federal District court.

Further, Congress created a special indemnity that bars lawsuits against government contractors and others doing the work of the Government. Under the statutory indemnity, when a patented invention “is used or manufactured . . . for the United States [Government] . . . the owner’s [only] remedy shall be by action against the United States in the [US] Court of Federal Claims.” 28 U.S.C. § 1498(a).

In Iris Corp. v. Japan Airlines Corp. (Fed. Cir. 2014), the patent at issue basically covers the method of manufacturing an identification document (such as a national Passport) with an in-laminated RFID chip.  US Patent No. 6,111,506.  As required by US Law, Japan Airlines examines passports before allowing its passengers to board international flights leaving the US  The patent holder here is the Malaysian company Iris Corp. who competes in the market for this type of ID technology.

Iris sued in Federal District Court under 271(g) for using the electronic passports that had been made abroad (namely Japan) but in a manner within the scope of the patented claims.  In response, Japan Air and the US Government (as amicus) argue that the indemnity provision of Section 1498 eliminates both (a) the jurisdiction of the District Court and also (b) the liability of Japan Airlines.

Infringement Done for the United States: The legal question on appeal is whether’s Japan Airline’s alleged use of the patented invention was done “for the United States.” The statute spells out a partial definition of “for the United States” as being done “for the Government and with the authorization or consent of the Government.” In its 2009 decision, the Federal Circuit further explained that the infringement must be “for the benefit” of the US and that benefit may not be merely “incidental.”  Advance Software.  The court here finds that, under this framework, Japan Airline’s activities were done for the Government and thus the case falls under Section 1498.

Is Infringement Required?: A critically element of the court’s decision (in my view) was the court’s factual conclusion that “JAL cannot comply with its legal obligations without engaging in the allegedly infringing activities.”

At first this statements appears at odds with the reality that, although the law requires Japan Air to inspect passports, it does not require that the e-chip be used.  Rather, it appears that manual inspection without reliance on the e-chip is also fully acceptable under the law.  The US Government writes: “While there may be some ability for the airline to determine the best way to make the needed comparison, it may not decline to examine the passport.”

One way to reach the court’s conclusion that infringement is required is to recognize that the case is a 271(g) infringement action that would create liability for any use of a product made by the patented process even if the particular-use does not take advantage of the product benefits.  Under that theory, every US-inspection of an e-chipped-passport, regardless of how it is conducted and even if manual, constitutes infringement.

In addition to the fact that infringement was required by federal law in order to participate in the marketplace element, the court here also found it relevant that border security is a core role of the federal government and that Japan Air’s actions here are quasi-governmental. That finding led to the conclusion that the alleged infringement was done for the non-incidental benefit of the US.

Although in this case the US Government agreed that it should be the defendant, and important take-away from this decision is that the company infringing need not have any contractual relationship with the US Government or that the US Government be given any notice of the ongoing infringement.  Rather, under the law, a private company (her Japan Air) is able to decide to conduct its business in a way that infringes a patent but that only creates liability for the Government.

Next stop Court of Federal Claims?: One reason why the patentee sued in district court was that – at the time of the filing – it appeared that 271(g) actions could not be brought against the US under 1498.  The Federal Circuit changed that rule in Zoltek Corp. v. United States, 672 F.3d 1309, 1323 (Fed. Cir. 2012) (en banc).  One question is whether the long delay in filing in the CFC has tripped some statute of limitations for filing suit.

This case would be much more interesting (from my academic perspective) if Japan Air could carry out its required function without infringing, but had made the business decision to inspect the passports in a way that infringed.

Sorting Out Sections 284 and 285

Patent, ,

By Jason Rantanen

Halo Electronics, Inc. v. Pulse Electronics, Inc. (Fed. Cir. 2014) Halo v Pulse
Panel: Lourie (author), O’Malley (concurring opinion), Hughes (joining concurrence)

This opinions contains two important parts: a discussion of 271(a) in the context of multi-national transactions and Judge O’Malley’s concurrence on the issue of willful infringement.  I’ll write more about the 271(a) issue in a separate post, but for now I wanted to focus on the points Judge O’Malley raises.

In this case, Halo accused Pulse of willfully infringing its patent, thus paving the way for enhanced damages under 35 U.S.C. § 284.  That statute reads in relevant part:

When the damages are not found by a jury, the court shall assess them. In either event the court may increase the damages up to three times the amount found or assessed. Increased damages under this paragraph shall not apply to provisional rights under section 154 (d).

The court may receive expert testimony as an aid to the determination of damages or of what royalty would be reasonable under the circumstances.

Under longstanding Supreme Court precedent, enhancement of damages under this provision requires either willful or bad-faith infringement.

In countering the infringement claim, Pulse argued that the asserted patent was obvious.  Ultimately, the jury rejected Pulse’s argument and found that the “it was highly probably that Pulse’s infringement was willful.”  Slip Op. at 7.  However, both the district judge and the Federal Circuit panel concluded that Pulse’s obviousness defense was not objectively unreasonable, thus precluding a finding of willfulness under In re Seagate‘s two-prong approach (which contains both objective and subjective components).

While concurring as to the panel outcome, Judge O’Malley (joined by Judge Hughes) wrote separately to issue a public call to “the full court to reevaluate our willfuness jurisprudence in light of the Supreme Court’s decisions in Highmark and Octane Fitness.

Judge O’Malley’s concurrence first notes the linking of the standards for exceptional case and willful infringement.  Under Federal Circuit precedent, the test for willful infringement under § 284 parallels that for exceptional case determinations under § 285.  The court has stated this explicitly: “The objective baselessness standard for enhanced damages and attorney’s fees against a non-prevailing plaintiff under Brooks Furniture is identical to the objective recklessness standard for enhanced damages and attorneys’ fees against an accused infringer for § 284 willful infringement actions under [Seagate].”  iLOR, LLC v. Google, Inc., 631 F.3d 1372, 1377 (Fed. Cir. 2011).

This linkage leads Judge O’Malley to three observations:

1) Both the test for willful infringement and the test for exceptional case determinations were based on the Federal Circuit’s interpretation of Professional Real Estate Investors, Inc. v. Columbia Pictures Industries, Inc., 508 U.S. 49 (1993).  But, in Octane Fitness, the Supreme Court rejected the Federal Circuit’s interpretation of PRE in the exceptional case determination context.  If the two tests are truly in parallel, then the Federal Circuit should revisit the test for willful infringement.

2) The evidentiary standard for willful infringement should also be revisited. “In Octane Fitness, the Supreme Court also rejected the requirement that patent litigants establish their entitlement to attorneys’ fees under § 285 by ‘clear and convincing evidence’.  Id. at 1758.  As we used to do for attorneys’ fees, we currently require patentees to prove willfulness by clear and convincing evidence. See Seagate, 497 F.3d at 1371. As the Supreme Court explained in Octane Fitness, however, the ordinary rule in civil cases, and specifically patent infringement cases, is proof by a preponderance of the evidence.”  Concurrence at 4.

3) The Supreme Court also rejected a de novo standard of review for exceptional case determinations in Highmark.  This is important because, although Judge O’Malley doesn’t directly state it, the “objective” prong of willful infringement is currently treated as a question of law, meaning that it is reviewed under a de novo standard.  If the two standards are truly parallel, this is inconsistent with Highmark.

Finally, under both §§ 284 and 285, “the court” is the entity that makes the determination.  However, the Federal Circuit’s caselaw currently sends some issues of willful infringement to a jury.  In Judge O’Malley’s view, whether this is actually correct as a statutory matter should also be addressed by the court en banc.

***

I’m largely in agreement with Judge O’Malley.  Like the judge, I see a tremendous tension between the existing willful infringement caselaw and Octane Fitness/Highmark that flows from the treatment of §§ 284 and 285 as being in parallel.

I also think the history here is important – and my sense is that much of the mucky precedent in this area actually comes from the just the last decade.   One important piece of context to keep in mind is the totality of the circumstances analysis that comes after the threshold determination.  Attorney’s fees and enhanced damages are not a binary question, but rather a multi-step inquiry where the initial determination is just the first part.

Proving Non-Obviousness with Ex-Post Experimental Evidence?

Patent, , ,

by Dennis Crouch

The Federal Circuit has rejected BMS’s petition for en banc rehearing in its chemical compound obviousness case. However, four additional opinions either concurring or dissenting show that the court does not speak with one-mind on the issue. Obviousness is the central patentability doctrine and thus, even small modifications to the doctrine can have important systemic impacts. En Banc Denial Opinions.  The patent in question – if valid – is worth hundreds of millions of dollars and so we can expect a petition for writ of certiorari to the Supreme Court.

In Bristol-Myers Squibb Company v. Teva Pharmaceuticals USA, Inc., the Federal Circuit panel affirmed a lower court finding that BMS’s patent covering the Hep-B drug entecavir is invalid as obvious. Patent No. 5,206,244. Judge Chen drafted the original opinion that was signed by Chief Judge Prost and Judge Plager.  Prof Rantanen covered the original decision here.

The obviousness approach for newly invented chemical compounds typically involves identifying the closest analog compound (lead compound) and then determining whether it would have been obvious to create that new compound based upon the lead prior art.  Here, the basic holdings of the Federal Circuit were: (1) affirming that “those of ordinary skill in the art would have selected 2′-CDG, a carbocyclic analog, as a lead compound for further development efforts;” (2) affirming that the same PHOSITA would have been motivated to modify the lead compound; and (3) holding that the secondary indicia of non-obviousness were insufficient to transform the obviousness determination.

In its petition for rehearing, BMS presented two primary arguments:

  • That the court improperly refused to consider post-invention discoveries regarding the invention and prior art that showed significant differences between the two.  In particular, the appellate panel found it irrelevant that the lead-prior art compound is highly toxic to humans since – at the time of the invention – the compound was generally regarded as safe.
  • With regard to objective indicia of non-obviousness – that the court improperly separated the analysis on a property-by-property basis (finding each merely difference-in-degree) rather than looking at the alleged dramatic (difference-in-kind) impact of the drug when considered as a whole.

In his opinion discussed below, Judge Taranto sets the stage:

In short, the Bristol-Myers compound, which is a novel molecule, is dramatically different from the prior-art compound in providing practical human benefits: one provides such benefits, the other does not. But that difference was identified only after Bristol-Myers filed for its patent, because the prior-art compound, not having been tested in animals or humans, was not then known to be toxic.

A number of Amici supported the petition, including BIO, Pfizer, Eli Lilly, PhRMA, IPO, and Merck.

The basic issue here is that pharmaceutical companies regularly perform tests to compare their newly-invented drug treatment to the prior art in order to prove that the two are quite different.  However, as a general matter, those tests are performed after the invention and application is already on file.  The companies then have a major concern that this decision will deny the relevancy of those objective but ex post results.

The trouble for the patentee in this case is the statute — that expressly calls for considering what was known by PHOSITA at the time of the invention (pre-AIA; in future we the time is at the effective filing date of the patent application).  Under the statute it seems that post-filing information should only be relevant to showing what PHOSITA would have been thinking back at the critical date.

Although the entire court did not explain its reasons for denying the rehearing, Judges Dyk (joined by Judge Wallach) and Judge O’Malley wrote separate opinions concurring in the denial.

Judge Dyk:

This case presents a question of obviousness, in particular whether evidence postdating the invention can be used to establish unexpected results. The panel holds that it cannot be considered in the circumstances of this case. That position is correct. It is mandated by the statute, which provides that an invention is not patentable if it “would have been obvious before the effective filing date of the claimed invention to a person having ordinary skill in the art to which the claimed invention pertains.” 35 U.S.C. § 103 (emphasis added).

The patent applicant’s discovery of unexpected results at the time of the invention can help to establish that the invention would not have been obvious to another skilled person. But hindsight bias must be avoided in determining obviousness. And under longstanding Supreme Court authority, the pertinent knowledge is that possessed at
the time of the invention.

You will note that Judge Dyk cites the new-103 rather than pre-AIA 103(a), but that does not significantly change the point he is making here.

Judge O’Malley:

I write to assuage Bristol-Myers Squibb Co.’s (“BMS”) and the amici’s1 fears that this panel decision has rewritten the test for obviousness for pharmaceutical patents. In my view, the concerns expressed are unjustified and mischaracterize the opinion. This case does not forge new ground or set down immutable principles. It simply decides that, on the record before it, the district court did not err in finding the asserted claim of the ’244 Patent invalid as obvious. . . .

Our case law clearly allows the consideration of later discovered differences between the prior art and the invention. . . . These differences inform the obviousness analysis and thus can be considered when assessing what was understood by one of skill in the art at the time of the invention and what expectations may have been reasonable. . . . Like all evidence of objective indicia, the point of considering later-understood evidence regarding the properties
of the invention is to guard against hindsight bias by assessing claims of a motivation to combine as of the time of invention in light of later surprises or developments.

Judge Newman dissented from the denial with an opinion joined by Judges Lourie and Reyna.  Judge Newman, inter alia, walks through the lengthy list of cases that where ex post evidence was relied upon to prove non-obviousness and sees the panel decision here as a major departure.

Judge Taranto’s dissent basically argues that the panel decision was sloppy and, because it can be read in the extreme way suggested by the petitioner, that it should be modified.

The Vast Middle Ground of Hybrid Functional Claim Elements

Patent, ,

FunctionalClaimsby Dennis Crouch

In Robert Bosch v. Snap-On (Fed. Cir. 2014), the Federal Circuit has held that two different claim elements “lack sufficiently definite structure” that must be interpreted under 35 U.S.C. 112(f) as means-plus-function elements and, because corresponding structures were not sufficiently disclosed in the patent document (as required by 112(f)), the associated claims were held invalid as indefinite.  Here the claim elements in question are a ‘program recognition device’ that plugs into a car motor to see if its control software is out of date and also a ‘program loading device’ that updates the control software if necessary.  U.S. Patent No. 6,782,313.

Functional claim limitations are in vogue.  Part of the reason is that the current generation of computer-focused engineers have been trained in an object oriented approach that discusses solutions more in terms of results than in detailed algorithmic steps.  That approach makes it easier to create new tools and devices by relying upon the building blocks created by others.  But, the carryover to patent law remains somewhat tenuous.

Functional claim terms also offer a mechanism for achieving broader claim coverage and claim coverage that is more aligned with the scope of potential competitor activities and follow-on innovation.  The use of functional language for that purpose has a century-long history in U.S. patent law and has been much debated at all levels, including the U.S. Supreme Court.

When the Supreme Court discussed the topic in its landmark 1946 decision of Halliburton v. Walker, the Court described functional claim terms as those that focus on results – “what it will do” – and not on the actual physical implementation.  In Halliburton, the court held:

A claim which describes the most crucial element in a “new” combination in terms of what it will do, rather than in terms of its own physical characteristics or its arrangement in the new combination, is invalid.

Id. The result in Halliburton was that the claim was found invalid under as indefinite because the functional language there (an “echo receiving means”) did not provide sufficient notice of the scope of patent rights.

The Patent Act of 1952 left intact a strong definiteness requirement but overturned Halliburton by enacting what is now known as 35 U.S.C. 112(f).  That provision expressly allows for an element to be claimed as a “means” for performing a “specified function” but without actually specifying the physical characteristics of how it works.  However, 112(f) has an important and significant limitation that cabins-in the scope of any such means limitation to only cover corresponding embodiments described in the patent document, and their equivalents.

(f) Element in Claim for a Combination.— An element in a claim for a combination may be expressed as a means or step for performing a specified function without the recital of structure, material, or acts in support thereof, and such claim shall be construed to cover the corresponding structure, material, or acts described in the specification and equivalents thereof.

A second limitation on 112(f) is the court interpretation that purely functional claim elements that are not physically described in the specification are deemed indefinite and the corresponding claim invalid.

US patent attorneys have taken notice of these legal limits on means-plus-function claiming and have largely abandoned the form. Twenty years ago, most patents included claim terms written in means-plus-function form. Today, that figure is under 5%.  But the strategy for many does not eschew functional claim elements, but rather to integrate functional limitations together with structural limitations with the result being broadly defined claim elements that avoids the limitations of 112(f).

The Big Middle Ground

Partially Functional Elements: The rules are clear for claim elements written in purely functional terms  such as a ‘means for communicating’ without any claimed physicality. However, there exists a vast middle-ground for claim limitations that include some functionality and some physicality.  These might include a ‘circuit for communicating’ or – as in the recent Bosch Case – a ‘program recognition device.’

In Robert Bosch v. Snap-On (Fed. Cir. 2014), the Federal Circuit has affirmed a lower court determination that two different functional claim elements are indefinite and thus that the associated claims are invalid.  The patents relate a motor vehicle software-update tool.  The claims include a ‘program recognition device’ that plugs into the motor control unit to see if the software is out of date and also a ‘program loading device’ that plugs into the motor control unit to upload new software. Easy enough.    But, the specification includes no diagrams and no real structural detail about these ‘devices.’

The Federal Circuit has a fairly straightforward algorithmic approach to functional claims elements. The first step it to determine whether the element qualifies as “functional” and, if so, interpret the limitation under the rubric of Section 112(f).  For the court, a functional claim element is one recites a functional limitation without “reciting sufficient structure for performing that function” or that fails to “recite sufficiently definite structure.” EnOcean GmbH v. Face Int’l Corp., 742 F.3d 955 (Fed. Cir. 2014). The court also uses a linguistic shortcut — claim elements drafted in the form “means for [performing a specified function]” are also presumed to be functional.   Similarly, elements that do not use the word “means” are presumed to be structural.  Importantly, Federal Circuit precedent indicate that these presumptions are “strong.” See Lighting World, Inc. v. Birchwood Lighting, Inc., 382 F.3d 1354 (Fed. Cir. 2004).

Here, although the terms were not claimed in “means” form, the court found that they lacked structure and therefore were functional.  In walking through its analysis, the court first looked at the claim words ‘program recognition device’ and ‘program loading device’ and found no structure other than the ‘nonce’ word device.  Then, looking at the specification, the court found:

[The] ‘313 patent’s specification does not contain a single reference to the structure of the “program recognition device” itself; all of the proffered citations from the specification merely explain its function. For example, the statement that the external diagnostic tester is “equipped” with the “program recognition device” that “querie[s] and recognize[s]” program versions in the control unit is nothing more than a functional description. This passage is devoid of structure. Likewise, the passage that explains how the external diagnostic tester uses the “program recognition device” to automatically check which program version is currently on the control unit only describes the connection of the external diagnostic tester to the control unit in the vehicle. The specification is, therefore, also silent about any interaction between the “program recognition device” and other components of the system, including the external diagnostic tester. Contrary to what Bosch contends, the specification does not teach how the “program recognition device” receives and processes signals, as the words “signal” and “process” are not even in the specification. . . .

Because the claim terms lack structure, the court determined that they fall under the rules of 112(f) [112p].

The claim terms, construed in light of the specification, fail to provide sufficiently definite structure to one of skill in the art. The claim terms “program recognition device” and “program loading device” invoke § 112, ¶ 6.

The problem for Bosch in this case is that the same analysis of the specification above also supports the conclusion that the claimed function lacks structural description in the specification. And, as a result, the court found the claims invalid as indefinite.

Since we have concluded that both claim terms invoke § 112, ¶ 6, we now must attempt to construe the terms by identifying the “corresponding structure … described in the specification” to which the claim term will be limited. Welker Bearing Co., 550 F.3d at 1097. “If there is no structure in the specification corresponding to the means-plus-function limitation in the claims, the claim will be found invalid as indefinite.” Biomedino, LLC v. Waters Techs. Corp., 490 F.3d 946, 950 (Fed.Cir.2007). On this point, however, little needs to be said. Bosch did not argue to this court that, even if the claim language at issue is within § 112, ¶ 6, the language is definite because the specification sufficiently discloses corresponding structure. See Appellant’s Br. 51–52. And we also see no such disclosure.

Indeed, as already discussed in Part III.B, in the limited number of instances that the specification even mentions these claim terms, it offers no further guidance about their structures. Therefore, we conclude that “program recognition device” and “program loading device” are indefinite. Since these terms are found in the only independent claim of the ‘313 patent, we conclude that all claims in the ‘313 patent are invalid.

An important element of the court’s analysis here is that it is all seen as a question of law reviewed de novo on appeal. Thus, although the appellate panel largely agreed with the lower court’s original decision in this case, that decision was given no deference in the analysis. Further, the strong presumption of validity requiring clear and convincing evidence was also entirely ignored here because that evidentiary requirement is directed toward questions of fact not questions of law.

A second important and interesting element of the court’s decision here is that it does not cite the Supreme Court’s most recent foray into indefiniteness – Nautilus v. BioSig (2014) (requiring reasonable certainty).  Likewise, the court did not cite Halliburton. In fact, the court has not cited Halliburton for almost 20 years and it has never cited the case other than to criticize the decision or indicate that it has been legislatively overruled by 112(f).

The case here is also in tension with those cited above: EnOcean, Lighting World, and Inventio. however, the court here took steps to distinguish those cases based upon the ‘fact’ that Bosch’s patent application failed to provide structure in the specification to guide one skilled in the art in understanding the ‘device’ limitation.  In the other cited cases, the specification included examples and diagrams sufficient to transform the seeming ‘nonce’ words into ones with structural meaning.

What will be interesting here will be to see whether this case is the beginning of a movement in a new direction.  This case’s path to the Supreme Court is most likely if the Federal Circuit first grants an en banc rehearing request.

STC.UMN v. Intel: Co-owners are necessary parties but may not be involuntarily joined

Patent,

By Jason Rantanen

STC.UMN v. Intel Corp. (Fed. Cir. 2014)

Original panel: Rader (author), Dyk, Newman (dissenting)
Denial of rehearing en banc: Dyk, concurring (joined by Moore and Taranto); Newman, dissenting (joined by Lourie, O’Malley, and Wallach); O’Malley, dissenting (joined by Newman, Lourie and Wallach)

Panel opinion

Denial of rehearing en banc

The issue at the core of this appeal was whether a co-owner of a patent can be forced to join an infringement lawsuit brought by another co-owner or instead effectively block the suit by refusing to participate. The Federal Circuit is deeply split on this issue, as evidenced by both the June 2-1 panel opinion  and the 6-4 refusal to rehear the decision en banc. The panel majority held that a co-owner may not be forced to join the infringement suit and because the full court denied rehearing en banc, that holding stands unless the Court grants cert. Judge Newman and Judge O’Malley both wrote dissenting opinions.

The patent right and co-owners. Co-owners of a patent may separately exercise all the rights of a patent owner: they may make, use, offer for sale, and import the patented invention without needing the permission of the other co-owner. They may also grant a license to the patent. Importantly, they may do all of this without giving the other co-owner a dime; unlike for copyrighted works, there is no right of accounting for patents.

A consequence of this is that if there are co-owners of a patent, a prospective infringer need only obtain a license from one co-owner. This makes unity of patent rights important for any party who wishes to actually enforce those rights as against future conduct.

This rule is clear as to future conduct; the complexity comes about when dealing with past infringing activities. A patent co-owner may only grant a prospective license to the patent and a release as to its own claims for liability for past infringing conduct; it may not release infringers from liability to the other co-owner for past infringement. However, it is also blackletter law that all owners of a patent must be parties to an infringement suit for there to be standing. But not all co-owners may cooperate with the party wanting to bring the suit. Perhaps they have some contractual obligation to the accused infringer; perhaps they are even directly connected to the accused infringer. Or perhaps, as in this case, the co-owner just wants to remain “neutral.” Does the uncooperative co-owner have the right to do so?

This case can be seen as an old fight renewed. The origins of the split go back to the Federal Circuit’s 1998 decision in Ethicon v. United States Surgical, 135 F.3d 1456. The majority opinion, written by Judge Rader, dismissed the suit on the ground that a co-owner could not and did not consent to the infringement. This conclusion followed the following statement of law:

Further, as a matter of substantive patent law, all co-owners must ordinarily consent to join as plaintiffs in an infringement suit.9 Consequently, “one co-owner has the right to impede the other co-owner’s ability to sue infringers by refusing to voluntarily join in such a suit.” Schering, 104 F.3d at 345.

Footnote 9 referred to two exceptions: where the co-owner has waived its right to refuse to join the suit and where there is an exclusive licensee, the exclusive licensee may sue in the owner’s name.

Judge Newman dissented in Ethicon. While much of her dissent focused on the issue of whether an inventor on only some of the claims is a co-owner of the patent as a whole (Judge Newman would have held no), she also pointed out that Rule 19’s involuntary joinder rule should apply here.

Involuntary Joinder Does Not Apply: Drawing heavily upon Ethicon, the panel opinion in this case – also written by Judge Rader -extended the rule that co-owners of a patent may refuse to voluntarily join an infringement suit to preclude operation of Federal Rule of Civil Procedure 19(a). The relevant portion of that rule states:

(1) Required Party. A person who is subject to service of process and whose joinder will not deprive the court of subject-matter jurisdiction must be joined as a party if:

(A) in that person’s absence, the court cannot accord complete relief among existing parties; or

(B) that person claims an interest relating to the subject of the action and is so situated that disposing of the action in the person’s absence may:

(i) as a practical matter impair or impede the person’s ability to protect the interest; or

(ii) leave an existing party subject to a substantial risk of incurring double, multiple, or otherwise inconsistent obligations because of the interest.

(2) Joinder by Court Order. If a person has not been joined as required, the court must order that the person be made a party. A person who refuses to join as a plaintiff may be made either a defendant or, in a proper case, an involuntary plaintiff.

A few things to note: First, no one appears to be disputing that Rule 19 has the force of law or that a co-owner may refuse to voluntarily participate in a patent infringement suit. Rather, the disagreement boils down to (1) whether the co-owner has a “substantive right” not to participate in a patent infringement suit and (2) if there is such a right, whether it preclude the application of Rule 19.

Unfortunately, as Judge O’Malley’s dissent points out with particular rigor, the panel majority opinion is is quite short on the basis for this “substantive right.” The basic legal move the majority makes is to rely on precedent holding that a co-owner may refuse to voluntarily participate in a patent suit as providing the basis for a substantive right not to join an infringement suit, with the policy basis that the anti-involuntary joinder rule ” protects, inter alia, a co-owner’s right not to be thrust into costly litigation where its patent is subject to potential invalidation.”

Concurring in the denial of en banc review, Judge Dyk’s opinion fleshes out the argument in more detail. In Judge Dyk’s articulation, the question is whether there is a “substantive obligation” for the co-owner of a patent to join the suit; in the absence of a “substantive obligation,” the co-owner cannot be forced to join through the operation of procedural rules, such as Rule 19. Judge Dyk thus flips the question: while he points to cases where the co-owner did not consent, and thus the suit was dismissed, he also points out the lack of patent cases imposing a “substantive obligation on a patent co-owner to consent to the assertion of an infringement claim.” This allocation of substantive rights cannot be changed by application of Rule 19.

Writing in dissent to the denial of rehearing en banc, Judge O’Malley challenged both the basis for the substantive right as well as way such a “right” interacts with Rule 19. Walking through Ethicon and the other cases cited by Judges Rader and Dyk, Judge O’Malley challenges the precedential basis for such a “right.” Nor, Judge O’Malley argues, is there any basis in statute for this “right;” indeed, it is directly contradicted by other statutory “rights,” particularly Section 154(a)(1), “the right to exclude others.” And in any event, Rule 19 is *mandatory.* “By its terms, therefore, when a person satisfies the requirements of Rule 19(a), joinder of that person is required.”

So what’s going to happen? As Hal Wegner has noted in his email newsletter, a petition for certiorari is expected in this case. And, given that the core issue is one of civil procedure, albeit intertwined with an issue of the nature of the patent right, it may be particularly appealing for the Court – especially coupled with the deep split and thoughtful opinions of two of the Federal Circuit’s sharpest thinkers.

An odd issue raised by the majority rule here: What happens when one co-owner sends out threatening letters to an accused infringer but the other does not. Can the accused infringer bring a declaratory judgment action against both co-owners? If not, must the declaratory judgment action be dismissed for lack of standing? Or is this sufficiently different from an affirmative suit for infringement as to make the “all parties required” rule not apply?

Court Affirms Inequitable Conduct for Inventor’s Failure to Submit Prior Art

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American Calcar v. American Honda (Fed. Cir. 2014)

Back-Link: Jason Rantanen previously discussed the court’s first decision in the case here: Calcar v. Honda: CAFC’s First Post-Therasense Inequitable Conduct Opinion (2011).

EvidentiaryStandardsIn a split opinion, the Federal Circuit has affirmed the district court’s determination that Calcar’s three asserted patents are unenforceable due to inequitable conduct during prosecution.  The case teaches about “but-for materiality” and holds that the withholding of information can be the but-for cause of a patent issuance even if that information is insufficient to render any of the patent claims invalid in court. See also Therasense. The court winds this tale by noting the evidentiary difference: PTO only requires a preponderance of evidence of nonpatentability while invalidation in court requires clear and convincing evidence.

Duty of Disclosure, Candor, and Good Faith Dealing: Although lawyers always bear certain good faith obligations, those practicing before the before the PTO bear a more significant duty of disclosure, candor, and good faith dealing.  Failure to meet this high standard has a number of potential repercussions — for patent owners, the greatest issue is the potential that resulting patents may be held undenforceable due to inequitable conduct in proceedings before the USPTO.  Importantly, for any particular patent case, the duty of disclosure extends to all “individuals associated with the filing or prosecution.” 37 C.F.R. 1.56. This certainly includes named inventors as well as “every other person who is substantively involved” with the application.  Id.

Therasense En Banc: In Therasense (Fed. Cir. 2011) (en banc), the court made it a bit more difficult to render a patent unenforceable by requiring (a) proof of a ‘bad’ act that is a but-for cause of the patent issuing as well as (2) particular intent that the act was intended to deceive the PTO.  Conventional wisdom is that Therasense (as well as Excergen) has dampened many claims of unenforceability — especially those where the allegation is merely a failure to fully disclose to the USPTO all information related to patentability of the case in question.

large-luxury-carFailure to Disclose Photos Taken of Prior Art: This case involves a family of three patents directed to a multimedia system used to access vehicle information and control vehicle functions.  The district court found that Calcar’s founder and named inventor Michael Obradovich had particular information about a prior Acura 96RL navigation system that he failed to submit to the PTO.  In particular, prior to starting work on his invention, Obradovich had driven the Acura, operated its navigation system, and taken photographs as well written a “QuickTips” guide.  Although the application identified the 96RL system as prior art, Obradovich did not write a summary of his experiences or submit the photographs or the owner’s manual.  The district court found this failure to be material to patentability and also that the “only reasonable inference from the evidence” was that Obradovich withheld the information with “specific intent to deceive the PTO.”  On appeal, the Federal Circuit affirms.

But For Materiality: An interesting aspect of this case comes from the fact that the jury considered the non-submitted prior art but found that it failed to render any of the patent claims invalid. Yet, the courts here hold that the non-submitted prior art can still be considered a but-for cause of the patent issuing in the first place.  The reasoning for this discrepancy is that that the PTO’s evidentiary standard for refusing to issue a patent is only a preponderance of evidence – a much lower standard that the clear and convincing evidence required to invalidate an issued patent.  Here, the finding is that the USPTO would have found at least one of the claims obvious if it had seen the non-submitted prior art.

But Obviousness is a Question of Law: Under Graham and KSR, obviousness is a question of law that relies upon an underpinning of factual determinations. Although the court ignores the Graham inquiry in its analysis here, it appears that the only disputed issue is the ultimate legal question of obviousness and not the factual underpinning.  The fact that we’re talking about a question of law is important because questions of law are not governed by evidentiary standards but rather both the PTO and Courts must approach that ultimate question with the same framework of simply correctly determining the law based upon the evidence presented.

The majority opinion was written by Chief Judge Prost and joined by Judge Wallach. Judge Newman wrote in dissent.

Judge Newman focuses on an interesting issue. She argues that, rather than speculating about what the PTO might do, lets look at what it actually did when it saw the references.  Namely, the ‘497 patent (invalidated by the jury and not at issue here) was reexamined by the PTO during the course of the litigation and the examiners reviewed the previously non-submitted prior art and then confirmed all of the claims as patentable.  However, Judge Newman’s arguments appear more appropriately addressed to the earlier court opinion in this case.

Nonetheless, my colleagues rule that the patents are unenforceable based on the initial failure to send the Owner’s Manual and photographs to the PTO. The inequitable conduct with which Mr. Obradovich is charged is that he “did not tell Mr. Yip [his patent attorney] about his experience with the 96RL, nor did he provide Mr. Yip with the Owner’s Manual or the photos of the navigation system display screens.” Dist. Ct. Op. at 11. However, the PTO established, on reexamination of the ’497 patent, that the purportedly withheld information was not material to patentability. In accordance with Therasense this ended the inequitable conduct inquiry, for the PTO sustained patentability in view of this information.

In addition, there was no evidence of intent to deceive the PTO. The panel majority impugns Mr. Obradovich’s credibility, although they do not say what is disbelieved. The jury heard and saw Mr. Obradovich, on examination and cross-examination, and did not find deceptive intent. My colleagues “infer” clear and convincing evidence of deceptive intent from Mr. Obradovich’s initial failure to send his patent attorney the Owner’s Manual and the photographs of the Acura display. They postulate that a savvy inventor and businessman such as Mr. Obradovich
would have known the information was material to patentability and would therefore withhold it in order to deceive the PTO. However, a more likely inference is that a savvy inventor and businessman would know that a patent obtained through concealment of a material reference is not a reliable commercial asset.

 

Federal Circuit Defies Supreme Court in Laches Holding

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by Dennis Crouch

SCA Hygiene v. First Quality (Fed. Cir. 2014)

Rather than focusing on a single event, allegations of patent infringement generally involve a series of actions that each constitute an infringement.  Courts identify each act (making, using, selling, …) as a separate and actionable infringement of the patent.  This notion of repeated acts of infringement (the “separate-accrual rule”) is only occasionally important, but comes up most often in the context of the impact of delays in pursuing court action with the effect of making delays look less egregious.

The Patent Act includes a six-year limitation on collecting back-damages. 35 U.S.C. 286. The old equitable doctrine of laches has also traditionally been available to cut-off damages when the patentee unreasonably and inexcusably delayed in bringing suit.  Under the Federal Circuit’s 1992 en banc Aukerman decision, courts generally apply the same six-year timeline for laches – finding that a six-year delay in filing suit creates a presumption of unreasonable delay that, when coupled with detrimental reliance leads to a laches finding.  Although it only creates a presumption of unreasonableness, in my experience, this six-year delay makes laches much much more likely to be found. Laches then has the ordinary result of cutting-off all pre-suit damages. However, based on the aformentioned theory of individualized acts of infringement, a remedy remains available for infringement that occurs after the lawsuit is filed as well as the potential for further equitable relief to stop future infringement.

Laches is based on a tradition of equity and has no direct tie-in to the patent statute itself. Likewise, Laches is not found in the list of defenses under Section 282 nor identified as an aspect of the statutory limitation on damages. Of course, that is the tradition of equity — existing for times when the law fails.

Putting this entire area somewhat astir is the Supreme Court’s 2014 copyright laches decision in Petrella v. Metro-Goldwyn-Mayer, 134 S.Ct. 1962 (2014).  In similar manner to patent law, the copyright statute has a three-year statute of limitations on filing suit.  In the case, the (alleged) copyright holder had delayed for 18-years in filing suit.  The statute-of-limitations cut-off all but the last three years of recovery and the lower court found that laches blocked recovery for those remaining three years.  However, in Petrella the Supreme Court revived the copyright claim and held instead that laches should not apply because Congress has taken fully spoken on the issue with its statute.

Laches, we hold, cannot be invoked to preclude adjudication of a claim for damages brought within the three-year window. . . .  [L]aches is a defense developed by courts of equity; its principal application was, and remains, to claims of an equitable cast for which the Legislature has provided no fixed time limitation. See 1 D. Dobbs, Law of Remedies 104 (1993) (“laches . . . may have originated in equity because no statute of limitations applied, . . . suggest[ing] that laches should be limited to cases in which no statute of limitations applies”). Both before and after the merger of law and equity in 1938, this Court has cautioned against invoking laches to bar legal relief. See Holmberg v. Armbrecht, 327 U. S. 392 (1946) (in actions at law, “[i]f Congress explicitly puts a limit upon the time for enforcing a right which it created, there is an end of the matter,” but “[t]raditionally . . . , statutes of limitation are not controlling measures of equitable relief “); Merck & Co. v.Reynolds, 559 U. S. 633 (2010) (quoting, for its current relevance, statement in United States v. Mack, 295 U. S. 480 (1935), that “[l]aches within the term of the statute of limitations is no defense [to an action] at law”); County of Oneida v. Oneida Indian Nation of N. Y., 470 U. S. 226, n. 16 (1985) (“[A]pplication of the equitable defense of laches in an action at law would be novel indeed.”).

An important element of the holding is the ongoing separation of legal and equitable remedies — with the notion that laches may still be obtained to block equitable remedies, but not to bar a traditional legal remedy such as past-damages.

In Petrella, the Supreme Court limited its particularly holding to copyright law and noted that “[w]e have not had occasion to review the Federal Circuit’s position” on laches in patent cases. Of course, the parallels between copyright and patent are strong in this situation and so we would expect the Federal Circuit to seriously consider whether Petrella should be applied to overrule Aukerman.

SCA v. First Quality: In 2003, SCA sent a C&D letter to First Quality in 2003 regarding patented adult diapers. However, in 2004, SCA filed for ex parte reexamination that was completed in 2007 with a confirmation of patentability. Finally, in 2010, SCA filed the lawsuit against First Quality.  By that time (beginning in 2006) First Quality had greatly expanded its use of the underlying concepts of the invention (it doesn’t leak).  Rather than deciding the lawsuit, the district court dismissed the case based upon the delay finding both laches and equitable estoppel.

On appeal, the Federal Circuit has affirmed – most notably holding that the Petrella decision has no impact on the adjudication of laches in patent cases.  However, rather than addressing the clear and obvious tension, the court simply wrote:

Petrella notably left Aukerman intact. See id. at
1974 n.15 (“We have not had occasion to review the Federal Circuit’s position.”). Because Aukerman may only be overruled by the Supreme Court or an en banc panel of this court, Aukerman remains controlling precedent.

While clinging to the Aukerman approach, affirmance was easy because the six-year delay creates a strong presumption of unreasonable delay.  However, the court did reverse the summary judgment of equitable estoppel because there was no evidence of the required affirmative act such as a misleading communication leading to detrimental reliance on the notion that the defendant’s infringement would be permissible.

The decision here is notable for its glaring reticence. The panel of Judges Reyna, Wallach, and Hughes are all relatively new and perhaps expect en banc review of this issue.  Many (perhaps most) other judges on the court would have made their mark rather than simply passing.

Although I believe, on balance, that Petrella controls here, the case is not open-and-shut because there are important distinctions as you move from copyright to patent. Notably, the copyright statute of limitations is a more direct and total limit on filing suit while in patent law the statute only limits the collection of too-far-back damages. Thus, in this situation, Congress seems to have spoken more fully in the copyright realm. Additionally, the three versus six year limit appears important because, in the time-scale of lawsuits and three years is a relatively short time while six-years begins to allow for much more unreasonableness and detrimental reliance.  That time differential is further compounded by the fact that three years is quite a small bit of the copyright term (5%) while six-years is often more than 1/3 of the patent term — suggesting that a patentee’s should move more quickly.

If anything, this issue will be interesting to watch.

Design Patents §103 – Obvious to Whom and As Compared to What?

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Guest Post by Paul Morgan

This is an increasing important and not fully resolved legal issue which should logically be addressed in the pending Fed. Cir. appeal of the nearly $1 billion infringement damages award in Apple v. Samsung, re the Apple design patents held infringed.   That award seems to have inspired increased design patent assertions and design application filings.  In that case Judge Koh had even called the application of the Supreme Courts controlling KSR decision on §103 an “open question” as to design patents!  Apple, Inc. v. Samsung Electronics Co., Ltd., Case No.: II-CV-01846-LHK, Slip Op. at 19 (N.D. Cal. Dec. 2, 2011).   These issues could also arise soon in PTO IPR PTAB decision appeals to the Fed. Cir.  The PTAB has already issued a final written decision in the first IPR against a design patent. Munchkin, Inc. and Toys “R” US, Inc. v. Luv N’ Care, Ltd, IPR 2013-00072 (Paper No. 28) (April 21, 2014).

In contrast to utility patent litigation, in design patent litigation summary judgments for non-infringement are relatively rare, while summary judgments for §103 obviousness are more common.  This is so even though they have the very same §103. Yet the Supreme Court’s controlling §103 guidelines in KSR Int’l Co. v. Teleflex Inc, 550 U. S. 398 (2007) have been strangely totally ignored or not applied in many subsequent design cases.  Instead, unique old Fed. Cir. case law is still being applied in making §103 design prior art comparisons and combinations, as discussed below.  Perhaps this reportedly high rate of design patent §103 summary judgments logically correlates with the prior study and report on this blog at: https://patentlyo.com/patent/2010/01/design-patent-rejections.html showing that design patent applications are issued with only rare §103 rejections by PTO design patent application examiners?  That is, prior art is rarely being applied at the examination stage.  Again, this is opposite from PTO utility patent application examination, even though under the very same §103 standard.  A recent example of a Fed. Cir. sustained §103 summary judgment of two design patents in suit isMRC Innovations v. Hunter Mfg. (Fed. Cir. 2014).

Is another reason for relatively less non-infringement than §103 summary judgments in design patent cases due in part to the usual absence of any verbal claim distinctions, plus the Egyptian Goddess “ordinary observer” test?   The “ordinary observer” test for designpatent infringement must also be contrasted with the traditional judicial view of design patent “claims scope” as narrow – see, e.g., cases cited in the article “Functionality and Design Patent Validity and Infringement”, 91 Journal of the Patent and Trademark Office Society (JPTOS) 313, May, 2009, by Perry J. Saidman of the DesignLaw Group.  But is the scope of design patents now being treated consistently with the black-letter case law that claims in litigation must have the same scope for infringement and validity?  Is there a problem with lack of legal guidance of how prior art is to be treated in defining a design patent’s claim scope for, or before, an “ordinary observer” infringement test?  [It has been argued that this was a jury instruction defect in the above Apple decision.]

In what seems like a remarkably begrudging semi-admission [which may be due to its particular panel members], the panel in Titan Tire Corp. v. Case New Holland, Inc. 566 F.3d 1372, (Fed. Cir. 2009) said that “it is not obvious that the Supreme Court necessarily intended to exclude design patents from the reach of KSR.”  However even this Fed. Cir. panel held that: “Our precedents teach that ‘the ultimate inquiry under section 103 is whether the claimed design would have been obvious to a designer of ordinary skill who designs articles of the type involved.’ Durling v. Spectrum Furniture Co., 101 F.3d 100, 103 (Fed. Cir. 1996) (citing In re Rosen, 673 F.2d 388, 390 (CCPA 1982)).”

Yet the patent statute at §171 is perfectly clear that design patents have the very same §103 as other patents.  §103 requires “..that the claimed invention as a whole would have been obvious .. to a person having ordinary skill in the art to which the claimed invention pertains” [emphasis supplied].  For design patents  that has to be a person having ordinary skill in the art of industrial product design, not the non-skill level of any lay person, such as a jury member.    [This §103 requirement should, of course, not be confused with a §102 novelty test.]

The prior en banc Federal Circuit “Egyptian Goddess” decision on design patent infringement, Egyptian Goddess, Inc. v. Swisa, Inc. 543 F.3d 665 (Fed. Cir. 2008), notes, just after referring to “the hypothetical ordinary observer who is conversant with the prior art” test fordesign patent infringement, that: “We emphasize that although the approach we adopt will frequently involve comparisons between the claimed design and the prior art, it is not a test for determining validity, but is designed solely as a test of infringement.”  Unfortunately this en  banc Egyptian Goddess decision did not clarify that statement further.

In High Point Design LLC v. Buyers Direct, Inc., (Fed. Cir. 2013) a Fed. Cir. panel had to face up to the District Court below having been mislead by one of the Court’s own prior design patent decisions, and had to re-clarify its §103 “obvious to whom” case law.  Key text in this High Point Design decision includes:

The use of an “ordinary observer” standard to assess the potential obviousness of a design patent runs contrary to the precedent of this court and our predecessor court, under which the obviousness of a design patent must, instead, be assessed from the viewpoint of an ordinary designer. See Apple, 678 F.3d at 1329 (“In addressing a claim of obviousness in a design patent, ‘the  ultimate inquiry . is whether the claimed design would have been obvious to a designer of ordinary skill who designs articles of the type involved.’”) (quoting Durling, 101 F.3d at 103); Titan Tire Corp. v. Case New Holland, Inc., 566 F.3d 1372, 1380–81 (Fed. Cir. 2009) (same); In re Borden, 90 F.3d 1570, 1574 (Fed. Cir. 1996) (“The central inquiry in analyzing an ornamental design for obviousness is whether the design would have been obvious to ‘a designer of ordinary skill who designs articles of the type involved.’”) ..

Although High Point Design cites prior Fed. Cir. decisions which note §103, its does not base the decision directly on this controlling statute, as it could and should have!   Instead, this High Point Design footnote 2 below unsuccessfully attempts to explain-away a priorconflicting, erroneous “ordinary observer” invalidity test decision, but ends up by noting that it cannot, in any event, overrule even earlier Fed. Cir. decisions:

2 We do not believe our decision in International Seaway Trading Corp. v. Walgreens Corp., 589 F.3d 1233, 1240 (Fed. Cir. 2009), cited by the district court, compelsa contrary conclusion. The International Seaway court may in fact have had the “designer of ordinary skill” standard in mind when it used the term “ordinary observer.” In any event, the court could not rewrite precedent setting forth the designer of ordinary skill standard. See Vas Cath, Inc. v. Mahurkar, 935 F.2d 1555, 1563 (Fed. Cir. 1991); Newell Cos., Inc. v. Kenney Mfg. Co., 864 F.3d 757, 765 (Fed. Cir. 1998).

This High Point Design decision should, finally, end part of the debate over the proper “obvious to whom” test for design patent obviousness.  [Prior §103 design patent decisions include In re Nalbandian, 661 F.2d 1214, 1215-16 (CCPA 1981) and In re Carter, 673 F.2d 1378 (CCPA 1982), both cited in MPEP Section 1504.03, and the above Walter E. Durling v. Spectrum Furniture Company, Inc., 101 F.3d 100, 103 (Fed. Cir. 1996).]

* * * *

However, High Point Design still leaves another important unresolved §103 issue for design patents, one serious enough that it may end up in another Supreme Court challenge if the Fed. Cir. does not address it.  I have labeled this the “as compared to what”? question.    Because High Point Design does not even mention KSR and instead continues to apply an additional and unique “obviousness” analysis requirement for design patents from old pre-KSR case law.  An additional requirement that is not in §103 and does not seem consistent with KSR or even some other §103 combination of references case law.   Specifically, High Point Design states:

When assessing the potential obviousness of a design patent, a finder of fact employs two distinct steps: first, “one must find a single reference, a something in existence, the design characteristics of which are basically the same as the claimed design”; second, “[o]nce this primary reference is found, other references may be used to modify it to create a design that has the same overall visual appearance as the claimed design.” Durling v. Spectrum Furniture Co., 101 F.3d 100, 103 (Fed. Cir. 1996) (internal quotations omitted); see also Apple, Inc. v. Samsung Elecs. Co., 678 F.3d 1314, 1329 (Fed. Cir. 2012). Under the first step, a court must both “(1) discern the correct visual impression created by the patented design as a whole; and (2) determine whether there is a single reference that creates ‘basically the same’ visual impression.” Durling, 101 F.3d at 103.”

Another way in which this above unique old special §103 test for design patents is sometimes expressed is a requirement to “first find a Rosen reference” (In re Leon Rosen, 673 F.2d 388, 391 (CCPA 1982)).  [That may be quite difficult in some cases.]  Note particularly the above High Point requirements for first finding a single reference that has “basically the same” design characteristics and visual impression, and only modifying it with other references to create “the same overall visual appearance.” Does that seem appropriate for a normal §103 analysis?  Does this old judicially created §103 analysis for design patents not significantly reduce §103-usable or combinable prior art?  How is that consistent with the controlling Sup. Ct. KSR §103 guidance for combining references, completely ignored in High Point Design?  Has anyone suggested any reason why KSR does not apply to design patent §103 analysis?

In this respect, here are some specific §103-KSR issues to consider.  Is not the designing of costly consumer products intended to be sold by the millions [like smart phones] an “art” in which the §103 “ordinary skill” level of product designers would be expected to be especially high?   Furthermore, do not professional product designers normally work on many different products and use product appearance design ideas from many different fields and products, far more than for utililty patents?  To express that another way, should not “non-analogous art” arguments against combining art for a 103 rejection be even less effective for design patents after KSR than for utility patents?

* * * * *

I have no stake in any of these interesting legal issues.  I simply think members and professional organizations of the patent bar as well as legal academics should be doing more pro bono thinking about them.  Hopefully the Federal Circuit will provide clearer guidance in future decisions.

 

Judge Bryson: Computerized Loyalty-Point Conversion System Not Patent Eligible

Patent,

Loyalty Conversion Systems v. American Airlines (E.D. Texas 2014) LoyaltyConversion101Decision

Data processing and business method patents continue to fall like dominoes. In this case, Federal Circuit Judge Bryson – sitting by designation in the Eastern District of Texas – has determined on the pleadings that Loyalty’s reward-program patent is ineligible based upon the recent Supreme Court cases of Alice Corporation Pty. Ltd. v. CLS Bank International, 134 S.Ct. 2347 (2014) and Mayo Collaborative Servs. v. Prometheus Labs., Inc., 132 S.Ct. 1289 (2012).

Loyalty’s two patents are recently issued but claim priority back to a 2006 filing. U.S. Patent Nos. 8,313,023 (“the ′023 patent”) and 8,511,550 (“the ′550 patent”).  The inventors appear to be corporate lawyer Sean McGhie and patent attorney Brian Buchheit. The litigation is apparently being controlled by ITUS Corp (Robert Berman) although no assignments are listed for the patents in the US Patent Office website.

The basic goal behind the invention is to open-up the buying power of customer reward points. This goal is accomplished by allowing customers to transfer reward-points (and their typical limited buying power) for a more negotiable instrument.  The claims include a number of computers sending, displaying and storing messages back and forth in order to accomplish the aforementioned goal.  However, the patent proposes no advance in computer technology per se, other than perhaps being the first to propose the sending and storing of messages in the particular sequence identified.

Judge Bryson writes:

Notwithstanding the prolixity of the claims, they recite a very simple invention: a computer-driven method and computer program for converting one vendor’s loyalty award credits into loyalty award credits of another vendor. In principle, the invention is thus the equivalent of a currency exchange as applied to loyalty award credits such as airline frequent flyer miles or hotel loyalty award points. The Court concludes that the invention claimed in the ′023 and ′550 patents is not fundamentally different from the kinds of commonplace financial transactions that were the subjects of the Supreme Court’s recent decisions in Bilski v. Kappos, 130 S. Ct. 3218 (2010), and Alice Corporation Pty. Ltd. v. CLS Bank International, 134 S.Ct. 2347 (2014), in which the Court held patent claims invalid for failing to recite patentable subject matter. This case falls squarely within the principles announced in those cases. Accordingly, the Court holds that the asserted claims of the ′023 and ′550 patents are invalid. . . .

In light of Bilski and CLS Bank, the resolution of the section 101 issue in this case is straightforward. At their core, the asserted claims of the two patents in suit are directed to the conversion of loyalty award points of one vendor into loyalty award points of another. That core idea plainly would not be patentable without more, as it is indistinguishable in principle from the simple and familiar financial or business operations that were at issue in Bilski and CLS Bank, as well as similar financial operations at issue in various Federal Circuit decisions in which the claims were held to be invalid under section 101. See Accenture Global Servs., GmbH v. Guidewire Software, Inc., 728 F.3d 1336 (Fed. Cir. 2013) (“system for generating tasks to be performed in an insurance organization”); Bancorp Servs., L.L.C. v. Sun Life Assurance Co., 687 F.3d 1266 (Fed. Cir. 2012) (method for managing a life insurance policy, including generating the policy, calculating fees, and determining the surrender value and investment value of the policy); Dealertrack, Inc. v. Huber, 674 F.3d 1315 (Fed. Cir. 2012) (method for processing credit applications); Fort Props., Inc. v. Am. Master Lease LLC, 671 F.3d 1317 (Fed. Cir. 2012) (method for creating a real estate investment instrument adapted for performing tax-deferred exchanges); CyberSource Corp. v. Retail Decisions, Inc., 654 F.3d 1366 (Fed. Cir. 2011) (method for verifying the validity of credit card transactions). If anything, the conversion process at the core of the claims in this case is simpler and more commonplace than some of the methods held unpatentable in the cases cited above.

Regarding the computer technology elements of the claim, Judge Bryson dismissed those as “largely functional in nature” and that the resulting claims “do little more than set forth the general concept of currency exchange, as applied to loyalty awards, and then announce the use of ‘one or more’ computers to obtain various efficiencies in the process of converting one type of loyalty award credits into another.”  In the decision, Judge Bryson stepped through each of the technological limitations of the asserted claims and concluded that none offered the ‘something more’ required by the Supreme Court.

= = = =

Procedurally, this case is important as a dismissal-on-the-pleadings — i.e., quite early in the case.  For defendants – this means a major cost savings.

The standard for this type of dismissal are defined by Rule 12(c) of the Federal Rules of Civil Procedure and  is “designed to dispose of cases where the material facts are not in dispute and a judgment on the merits can be rendered by looking to the substance of the pleadings and any judicially noticed facts.” Great Plains Trust Co v. Morgan Stanley, 313 F.3d 305 (5th Cir. 2002). The approach is akin to summary judgment and considers: “whether, viewed in the light most favorable to the plaintiff, the complaint states a valid claim for relief.”

The dismissal on the pleadings is somewhat workable here because subject matter eligibility is a question of law that is largely based upon an introspective look at the patent document.  Of course some outside reference points are: is it an inventive concept? Further, a case potentially turn on claim construction.  In his opinion, Judge Bryson recognized these complications but noted that the parties “have not pointed to any factual issues that could affect” the eligibility analysis.  Further, Judge Bryson waited to make his decision until after a claim construction hearing to likewise ensure that claim construction would not affect the outcome of the 101 analysis.

= = = =

Claim 1 of the 550 patent is as follows:

  1. A method comprising:

a computer serving a set of one or more Web pages for a loyalty program of an entity to one or more remotely located client machines, wherein the Web pages are able to be rendered within a client-side browser as a graphical user interface on the one or more client machines, wherein upon being rendered within the client-side browser said graphical user interface shows a quantity of nonnegotiable credits, wherein said non-negotiable credits are loyalty points of the loyalty program possessed by a member, wherein upon being rendered within the client-side browser the graphical user interface comprises a conversion option to convert at least a subset of the shown non-negotiable credits into a quantity [of] entity independent funds, wherein said entity independent funds are different loyalty points of a different loyalty program of a commerce partner, wherein said entity independent funds are possessed by the member, wherein an agreement exists between the entity and the commerce partner, wherein the agreement permits members to convert the non-negotiable credits to the entity independent funds in accordance with a fixed credits-to-funds conversion ratio, wherein the agreement specifies that the entity is to compensate the commerce partner in an agreed upon amount of cash or credit for conversions of non-negotiable credits to entity independent funds, wherein said agreed upon amount is a multiple of a quantity of converted non-negotiable credits, wherein the entity independent funds are redeemable per the different loyalty program for commerce partner goods or for commerce partner services, wherein the commerce partner is not said entity, wherein in [the] absence of being converted the non-negotiable credits are not accepted as payment for commerce partner goods or for commerce partner services;

the computer responsive to receiving a message indicating a selection of the conversion option, processing the selection to effectuate changes in the served set of Web pages; and

responsive to the processing, the computer serving one or more Web pages or Web page updates that include the effectuated changes to the one or more remotely located client machines, wherein upon being rendered within the client-side browser the graphical user interface is updated with the effectuated changes, wherein the updated graphical user interface shows a reduced quantity of non-negotiable credits possessed by the member in the loyalty program, said reduced quantity resulting at least in part from the subset of non-negotiable credits being converted into the quantity of entity independent funds in accordance with the fixed credits-to-funds conversion ratio.

Judge Mayer Raises 101 When Not In Issue: Other Panelists Don’t

Invalidity, Obviousness, Patent, Patentable Subject Matter, Software, , , ,

I am sure Dennis will do his usual full and grand treatment, but this one is sort of the counter-punch to Ultramercial. In I/P Engine, Inc. v. AOL Inc. (Fed. Cir. Aug. 15, 2014) (per curiam), the court split on whether the claims were properly found by the jury to have been not obvious, with Judge Chen dissenting on that point and the per curiam opinion reversing the finding of no invalidity. (The other panel members were Judge Wallach and Judge Mayer).

Recall that in Ultramercial the court emphasized that 101 was seemingly a defense, and so evidence was needed and the usual presumption of validity applied, and so on.  Here, Judge Mayer seemed to take precisely the opposite tact, though it’s not quite clear.  In addition to writing at length about what he perceives the “technological arts” test to mean and require, he wrote:

The Supreme Court has dictated that the subject mat- ter eligibility analysis must precede the obviousness inquiry. Flook, 437 U.S. at 593 (“The obligation to determine what type of discovery is sought to be patented” so as to determine whether it falls within the ambit of sec- tion 101 “must precede the determination of whether that discovery is, in fact, new or obvious.”); Bilski, 130 S. Ct. at 3225 (explaining that the issue of whether claims are directed to statutory subject matter is “a threshold test”); see also In re Comiskey, 554 F.3d 967, 973 (Fed. Cir. 2009) (“Only if the requirements of § 101 are satisfied is the inventor allowed to pass through to the other requirements for patentability, such as novelty under § 102 and . . . non-obviousness under § 103.” (citations and internal quotation marks omitted)). To fail to address at the very outset whether claims meet the strictures of section 101 is to put the cart before the horse. Until it is determined that claimed subject matter is even eligible for patent protection, a court has no warrant to consider subordinate validity issues such as non-obviousness under 35 U.S.C. § 103 or adequate written description under 35 U.S.C. § 112.

From a practical perspective, there are clear advantages to addressing section 101’s requirements at the outset of litigation. Patent eligibility issues can often be resolved without lengthy claim construction, and an early determination that the subject matter of asserted claims is patent ineligible can spare both litigants and courts years of needless litigation. To the extent that certain classes of claims—such as claims on methods of doing business—are deemed presumptively patent ineligible, moreover, the United States Patent and Trademark Office will have more resources to devote to expeditiously processing applications which disclose truly important advances in science and technology.

Even more fundamentally, the power to issue patents is not unbounded. To the contrary, the constitutional grant of authority “[t]o promote the Progress of Science and useful Arts, by securing for limited Times to Authors and Inventors the exclusive Right to their respective Writings and Discoveries,” U.S. Const. art. I, § 8, cl. 8, “is both a grant of power and a limitation,” Graham v. John Deere Co., 383 U.S. 1, 5 (1966); see Bonito Boats, Inc. v. Thunder Craft Boats, Inc., 489 U.S. 141, 146 (1989). Section 101’s vital role—a role that sections 103 and 112 “are not equipped” to take on, Mayo, 132 S. Ct. at 1304— is to insure that patent protection promotes, rather than impedes, scientific progress and technological innovation. A robust application of section 101 ensures that the nation’s patent laws remain tethered to their constitutional moorings.

I am guessing we’ll see another en banc case soon…

Federal Circuit affirms Rule 12 dismissal of a design patent case

Patent,

Guest Post By Sarah Burstein, Associate Professor of Law at the University of Oklahoma College of Law

Anderson v. Kimberly-Clark Corp. (Fed. Cir. 2014) (nonprecedential)

Panel: Prost, Clevenger, Chen (per curiam)

In this case, pro se plaintiff Anderson alleged that nine different disposable undergarments infringed U.S. Patent No. D401,328 (the “D’328 patent”). Kimberly-Clark moved for judgment on the pleadings, asserting that it only manufactured five of the nine accused products—and none of those five infringed the D’328 patent. In a per curiam opinion released only two days after the case was submitted to the panel, the Federal Circuit agreed.

Under Egyptian Goddess, a design patent is infringed if “an ordinary observer, familiar with the prior art designs, would be deceived into believing that the accused product is the same as the patented design.” As these illustrations from Kimberly-Clark’s motion for judgment on the pleadings show, the accused products manufactured by Kimberly-Clark do not even arguably look “the same” as the patented design:

Indeed, in opposing Kimberly-Clark’s motion, Anderson did not even argue that the designs looked alike. And on appeal, her main argument was that the district court erred in considering the images shown above because they were not attached to her complaint. The Federal Circuit rejected this argument, concluding that the district court did not err in considering the images because: (1) Anderson did not dispute their accuracy or authenticity; and (2) the appearances of the patent illustrations and accused products were integral to her claims. And ultimately, the Federal Circuit found no error in the District Court’s conclusion that Anderson had failed to state a plausible claim for infringement.

So this was a pretty easy case on the merits. And it is, of course, nonprecedential. But it’s still noteworthy because of its procedural posture. Since Egyptian Goddess, a number of courts have granted summary judgment of noninfringement where, as here, the accused designs were “plainly dissimilar” from the claimed design. But Rule 12 dismissals are still rare. And dismissals pursuant to Rule 12(c) are even rarer. It will be interesting to see if cases like this inspire more defendants to seek dismissal of weak design patent claims at the pleading stage.

Federal Circuit: To Satisfy the Written Description Requirement, a patent “must at least describe some species representative” of the accused product.

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By Dennis Crouch

AbbVie v. Janssen Biotech and Centocor Biologics (Fed. Cir. 2014)

This decision is important in the way that it confirms a strong Post-Ariad Written Description requirement – especially with regard to genus-species claim situations. The decision also includes a key (but preliminary) discussion on the preclusive effect of PTAB decisions and also attempts to justify Federal Circuit decisions that extend beyond questions necessary for the judgment. Hal Wegner has already classified this opinion – written by Judge Lourie – as “unnecessary judicial activism.”

In 2013, Abbot Labs spun-off AbbVie as a separate company with a focus on biopharmaceutical research and a current Market Cap of $90 Billion US (ABBV). In the split, AbbVie obtained ownership of a number of valuable patents. In this case, AbbVie asserted various claims of U.S. Patent Nos. 6,914,128 and 7,504,485. These patents broadly cover antibodies that can bind to and neutralize activity of human interleukin 12 (IL-12). These antibodies have been found useful in the treatment of autoimmune disorders, including psoriasis and rheumatoid arthritis.

A key asserted claim is listed as follows:

29. A neutralizing isolated human antibody, or antigen-binding portion thereof that binds to human IL-12 and disassociates from human IL-12 with a Koff rate constant of 1×10−2s−1 or less, as determined by surface plasmon resonance.

A jury found the claim invalid for lacking a sufficient written description, lacking enablement, and also for obviousness. AbbVie appealed the §112(a) claims (WD & enablement) and, as for obviousness, AbbVie argued that that issue should never have been decided by the district court since it had already been fully litigated during the prior interference contest. On appeal, the court affirmed – agreeing that the patent was properly held invalid for lack of written description and that the collateral estoppel did not apply to the obviousness question because the interference proceeding was not sufficiently “final” at the time of the complaint filing.

Written Description: In Ariad, the Federal Circuit confirmed that the written description requirement is separate and distinct from that of enablement and that it serves an important role of ensuring that the patent is based upon an actual describable invention and that the patent scope does not overreach beyond the scope of the inventor’s contribution.

Written Description
– Genus-Species: By design, patent claims generally cover a set of a variety of potential embodiments. Likely, most claims cover an infinite variety of potential embodiments each involving a minor tweak in one way or another. The courts have never required that all potential embodiments be disclosed – however, the written description doctrine has been applied to invalidate patent claims that do not disclose a sufficient representative sample of embodiments. This is generally known as part of a genus-species problem – with the operative question here being how many different species (embodiments) of an invention must be described in a patent document before the applicant can properly claim rights to the genus of all related species. A key case on point is Regents of the University of California v. Eli Lilly & Co., 119 F.3d 1559 (Fed. Cir. 1997) (Lourie, J.) that was also affirmed in Ariad Pharm., Inc. v. Eli Lilly & Co., 598 F.3d 1336, 1355 (Fed. Cir. 2010) (en banc; Lourie, J.) (“[No] bright-line rules govern[] the number of species that must be disclosed to describe a genus claim, as this number necessarily changes with each invention, and it changes with progress in a field.”). Rather than simply listing various embodiments, the usual approach is to also describe common structural features of the species.

Here, AbbVie’s generic claim can be classified as a set of human antibodies defined functionally by their high affinity and neutralizing activity to the human IL-12 antigen. However, AbbVie did not disclose any structural features common to the members of the genus. Rather, AbbVie’s patent described only one type of structurally similar antibodies rather than antibies representative of the full scope of the genus.

In the decision, Judge Lourie focuses particularly on the alleged infringing antibodies and notes that:

[While] AbbVie’s patents need not describe the allegedly infringing [compound] in exact terms . . . [t]he patents must at least describe some species representative of antibodies that are structurally similar to [the accused compound].

Because the patent document lacked any such structural description, the court confirmed that the corresponding claims were invalid under 112(a).

Functional Patent Claims Are Inherently Vulnerable: In discussing the case, Judge Lourie was clear that one problem here is that the invention was described in terms of its function rather than its structure. Lourie writes:

Functionally defined genus claims can be inherently vulnerable to invalidity challenge for lack of written description support, especially in technology fields that are highly unpredictable, where it is difficult to establish a correlation between structure and function for the whole genus or to predict what would be covered by the functionally claimed genus.

With functional claims, the patentee must establish “a reasonable structure-function correlation” either within the specification or by reference to the knowledge of one skilled in the art. Of importance, the court is clear that functional claim limitations are patentable, but, in order to be patentable, they must be linkable to structure by PHOSITA. An interesting distinction though is that, unlike many written description issues, the linkage between the function and structure need not necessarily be found in the patent document itself.

Patent attorneys will also note that Judge Lourie’s reference to “highly unpredictable” arts is designed to refer primarily to bio-related sciences. We shall see whether the subsequent case law is so limited.

= = = =

Collateral Estoppel applies to preclude a court from re-deciding issues. Generally collateral estoppel only applies when the same issue was actually litigated and decided by a final and binding judgment in a way that was essential to the judgment. It is also generally true that collateral estoppel applies even when the first case is still pending on appeal – so long as the original court’s judgment was a final judgment being appealed.

Here, a prior interference proceeding between the parties had resulted in a determination that the AbbVie claims were not-obvious. Following the PTAB interference decision, Centocor filed a civil action under 35 U.S.C. § 146 that was pending at the time the present infringement litigation began. In the present appeal, the Federal Circuit held that the PTO decision should not be considered a “final judgment for the purposed of collateral estoppel” since the district court decision was still pending and during that case the parties have the opportunity to expand the factual record. The court left open the possibility that collateral estoppel would apply once the decision is final and that collateral estoppel may have applied if Centocor had appealed directly under § 141 instead of filing a civil action.

= = = =

Because AbbVie did not appeal the substance of the obviousness question, the collateral estoppel question fully decided the case. However, in its decision, the court offered an explanation for its reasons for going ahead and deciding the written description question.

AbbVie did not substantively challenge the district court’s holding of obviousness of the asserted claims. It might therefore be concluded that we could affirm that court’s obviousness holding and proceed no further. However, as an “inferior” court, we are well-advised to review more than one issue raised before us on appeal, lest higher authority find error in any basis for a more limited review. Cardinal Chem. Co. v. Morton Int’l, Inc., 508 U.S. 83, 97–98 (1993) (“[T]he Federal Circuit is not a court of last resort. . . . [Its] decision to rely on one of two possible alternative grounds (noninfringement rather than invalidity) did not strip it of power to decide the second question, particularly when its decree was subject to review by this Court.” (emphasis in original)); see also Wm. Wrigley Jr. Co. v. Cadbury Adams USA LLC, 683 F.3d 1356 (Fed. Cir. 2012) (affirming invalidity based on anticipation and obviousness); Verizon Servs. Corp. v. Cox Fibernet Va., Inc., 602 F.3d 1325 (Fed. Cir. 2010) (same); Union Pac. Res. Co. v. Chesapeake Energy Corp., 236 F.3d 684 (Fed. Cir. 2001) (affirming invalidity based on indefiniteness and lack of enablement). Because the written description issue constituted the principal basis of AbbVie’s appeal to this court, we proceed to consider the written description issue rather than affirm merely on any procedural defect or omission relating to the obviousness issue.

In her concurring opinion, Judge O’Malley did not sign-on to the “thoughtful written description analysis” of the majority – finding it not “necessary or dispositive ot the outcome of the case.”

Taming the Mongrel: Aligning Appellate Review of Claim Construction with its Evidentiary Character in Teva v. Sandoz

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Guest Post by Peter. S. Menell, J. Jonas Anderson, and Arti K. Rai.  Below, they summarize their recently filed amicus brief in Teva v. Sandoz.

In its seminal Markman decision, the Supreme Court sought to usher in a more effective, transparent patent litigation regime through its ruling that “the construction of a patent, including terms of art within its claim, is exclusively within the province of the court.” Markman v. Westview Instruments, Inc. (Markman II), 517 U.S. 370, 372 (1996). Notwithstanding the constitutional right to patent jury trials, the Court ruled that claim construction would no longer be conducted by lay jurors in shrouded deliberations. Rather, based on historical analysis of the role of juries in patent cases, characterization of the nature of claim construction, and a comparative assessment of judicial institutional capabilities, the Court concluded that the Seventh Amendment right of trial by jury did not extend to claim construction and that trial judges were better equipped than juries to resolve the mixed fact/law controversies inherent in construing disputed patent claim terms.

In the aftermath of Markman II, the Federal Circuit adhered to its Markman decision, Markman v. Westview Instruments, Inc. (Markman I), 52 F.3d 967 (1995) (en banc) – that claim construction is a “purely legal issue” subject to plenary de novo review, see Cybor Corp. v. FAS Technologies, Inc., 138 F.3d 1448, 1451 (Fed. Cir. 1998) (en banc) – downplaying the Supreme Court’s more nuanced description of claim construction as a “mongrel practice” merely “within the province of the court.” Markman II, 517 U.S. at 372, 378. Over nearly two decades of experience in the post-Markman era, it has become apparent that the Federal Circuit’s adherence to its Markman I plenary de novo appellate review standard has frustrated district courts’ distinctive capabilities to apprehend and resolve the factual disputes inherent in claim construction determinations, undermined the transparency of the claim construction process, discouraged detailed and transparent explanations of claim construction reasoning, and produced unusual and at times alarming levels of appellate reversals. These effects have cast doubt on the predictability of patent litigation, discouraged settlements, delayed resolution of patent disputes, and run up the overall costs of patent litigation.

The Supreme Court’s Markman II decision points toward a balanced, structurally sound, legally appropriate, hybrid standard of appellate review that would promote more accurate and efficient patent dispute resolution. Factual determinations underlying claim construction rulings should be subject to the “clearly erroneous” standard of review, while the Federal Circuit should retain de novo review over the ultimate claim construction decision. In this manner, district court judges, in their capacity as fact-finders, could better surmount the distinctive challenges posed by the technical, mixed fact/law controversies inherent in patent claim construction. A hybrid standard would encourage district judges to identify the “person of ordinary skill in the art” and, where appropriate, build fuller, more transparent records to support their claim construction decisions. These effects would promote clearer substantive analysis, more settlements following claim construction and trial, more effective appellate review, and fewer reversals and remands.

A hybrid appellate standard is unlikely to undermine the national uniformity of the patent system. In any event, concerns about national uniformity and clarity of patent claims are more appropriately addressed through improvements to the patent prosecution process, meaningful implementation of the 35 U.S.C. §112(b) claim indefiniteness standard, post-grant review and reexamination procedures, consolidation of claim construction through multi-district litigation, and adjustments to substantive claim construction jurisprudence.

Our brief filed in Teva v. Sandoz can be accessed at: http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2457958

Peter S. Menell is the Koret Professor of Law and Director of the Berkeley Center for Law & Technology at the University of California at Berkeley School of Law (Boalt Hall), J. Jonas Anderson is an Assistant Professor of Law at American University Washington College of Law, and Arti K. Rai is the Elvin R. Latty  Professor of Law and Co-Director of the Duke Center for Innovation Policy at Duke Law School.

The Three Faces of Prometheus: Alice and Generic Application

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Today continues our mini-symposium on Alice v. CLS Bank with a guest post by Jeffrey A. Lefstin, Professor at the University of California, Hastings College of the Law.  

Alice Corp. marks the Supreme Court’s eighth subject-matter eligibility case since the 1952 Act. Without question, the most problematic aspect of the Supreme Court’s § 101 jurisprudence has been discerning the actual test for patent-eligibility. In Mayo v. Prometheus, the Court purported to establish a general framework for subject-matter eligibility: that to be patent-eligible, a claim must include an “inventive concept” beyond an underlying fundamental principle, such as a law of nature, natural phenomenon, or abstract idea. The Court’s omission of significant reference to Mayo in Association for Molecular Pathology raised some doubt as to whether Mayo defined a universal test for eligibility under § 101.  Yet Alice Corp. appears to confirm that Mayo is a universal framework for discriminating between ineligible principles and patent-eligible applications.

Mayo’s ambiguity led to the Federal Circuit’s fracture when it heard CLS Bank en banc.  Mayo suggested three possible tests for patent-eligibility, without committing definitively to any one of them:  inventive application, pre-emption, and “more than just apply it.” Justice Thomas’s opinion in Alice does not expressly commit to a single interpretation of Mayo. Yet Thomas’s presentation of Mayo, his framing of the Court’s prior precedent, and his application of Mayo to Alice’s claims all indicate that Alice endorses the last aspect of Mayo: that a claim must do more than set forth a fundamental principle and add a generic instruction to “apply it.”  If this interpretation is correct, then Alice may in the long run be more significant for fields such as biotechnology, where Mayo’s “inventive application” aspect has cast doubt on the patent-eligibility of many discovery-based inventions.

Mayo’s first test of patent-eligibility is a test for inventive, or non-obvious, application of a fundamental principle.  Drawing from Flook, where Justice Stevens wrote that “conventional and obvious” post-solution activity cannot transform an unpatentable principle into a patentable process, and Funk Brothers, where Justice Douglas held that a composition of matter was not patentable because the patentee’s application was “a simple step” once his discovery was assumed away, Justice Breyer invalidated Prometheus’s claims because the steps of the claimed method beyond the underlying natural law were merely “well-understood, routine, conventional activity already engaged in by the scientific community.” Breyer contrasted those steps with the additional steps claimed in Diamond v. Diehr, which in context were not “obvious, already in use, or purely conventional.”  The Mayo Court drew support for this test from the Court of Exchequer’s 1843 opinion in Neilson v. Harford, where the patent was said to have been sustained because the patentee implemented his newly discovered principle “in an inventive way.”*  This view of Mayo – that obvious applications of fundamental principles are not patent-eligible – was the one taken by the Northern District of California in the Ariosa v. Sequenom litigation, where Judge Ilston invalidated Sequenom’s claims largely because once Sequenom’s discovery of cell-free fetal DNA in the maternal bloodstream was assumed to be known, the application in the form of a test for fetal abnormalities required only routine and well-known methods of DNA amplification.

The second test of eligibility suggested by Mayo is a test of pre-emption. The Court explained that subject-matter exclusions were grounded in pre-emption, echoing Benson’s concern that patents should not monopolize “the basic tools of scientific and technological work.”  Mayo seemed to state that pre-emption was analytically secondary to categorical exclusion:  the concern that Prometheus’s claims would tie up too much future use of the underlying natural laws “simply reinforces our conclusion” that the claimed processes were not patent-eligible.   Yet Breyer’s opinion intertwined pre-emption with inventive application as a criterion for patent-eligibility:  Diehr was described as a case where the patentee had not sought to pre-empt the use of the Arrhenius equation. While the patentee in Flook had failed to “limit the claim to a particular application,” the supposedly unconventional steps in Neilson had “confined the claims to a particular, useful application of the principle.” This interpretation of Mayo was followed by the majority of the Federal Circuit when it heard CLS Bank en banc. Both Judge Rader and Judge Lourie rejected the notion that Mayo’s “inventive concept” demanded “inventiveness” in the sense of a non-obvious application. And while they disagreed on the proper framework, both Judge Lourie and Judge Rader founded their analyses on the question of whether Alice’s claims would pre-empt every practical application of the underlying abstract idea.

But Mayo suggests a third test beyond inventive application or pre-emption: that a claim must represent more than a mere direction to apply a fundamental principle. According to Justice Breyer, one could not transform a law of nature into a patent-eligible application by simply disclosing the law of  nature, and adding the words “apply it;” Einstein or Archimedes, for example, could not have patented their famous discoveries by merely appending an instruction to apply them. This aspect of Mayo has received the least attention in subsequent cases and commentary. And yet in Justice Thomas’s opinion in Alice, it is this aspect of Mayo that becomes the core of the doctrine.

In Alice’s framework, once it has been determined that a claim is drawn to an abstract idea, ‘step two’ of the Mayo test is to determine whether it contains an “inventive concept” sufficient to transform the claim into a patent-eligible application. But in contrast to Flook and Mayo, “inventive concept” in Alice bears little trace of “inventiveness.” Justice Thomas does describe the computer implementation in Alice as “conventional.” But nowhere does he label it non-inventive, and the word obvious is conspicuously lacking from the opinion. And while Alice hardly addresses the Federal Circuit’s opinions at all, it may be significant that Thomas never contradicts Judge Lourie’s and Judge Rader’s rejection of “inventiveness” as an aspect of “inventive concept” in their CLS Bank opinions.
The contrast between Alice and Mayo is most apparent in their treatment of Diehr.  In Mayo, the claims in Diehr represented an inventive application of the Arrhenius equation, and were not “obvious, already in use, or purely conventional.” But in Alice, the claims in Diehr were sustained not because they were non-obvious, but because “they improved an existing technological process,” and achieved a result the industry had not been able to obtain. Likewise, in Mayo, the failing of the Flook claims was that the steps of the claim were well-known, conventional or obvious; in Alice, while Thomas notes that the Flook implementation was purely conventional, Flook primarily stands for the proposition that limitation to a particular technological environment does not render an abstract idea patent eligible.

As for pre-emption, which intertwined so closely with inventive application in Mayo, is hardly present for ‘Mayo step two’ in Alice. Again the characterization of precedent is telling: in Mayo, the claim in Benson was vulnerable because it was “overly broad.”  In Alice, Benson requires a “new and useful” –  but not inventive – application of an idea for patent eligibility, but the lesson of Benson is that simply implementing a principle on a computer is not a patentable application.

For Justice Thomas, the ‘step two’ inquiry involves neither inventiveness nor pre-emption, but revolves around Mayo’s proscription against “more than just apply it.” Alice follows Flook and Mayo in holding that “conventional” activity cannot transform a principle into a patent-eligible application, but in Alice “conventional” seems to connote generic more than it connotes obvious.  Thus Thomas introduces ‘step two,’ the search for an inventive concept, by invoking the third aspect of Mayo: patent-eligible application requires more than a statement of the abstract ideas plus the words ‘apply it.’  And while Thomas notes that the measuring steps in Mayo were “well known in the art,” he again quotes the ‘more than apply it’ language from Mayo to establish that those steps adding nothing of significance to the underlying natural law.

Most significantly for the Alice analysis, Thomas ends his summary of Mayo by quoting language that played little role in Mayo itself: it was not that conventional steps cannot supply an ‘inventive concept,’ but “conventional steps, specified at a high level of generality” (emphasis added) could not supply an inventive concept. For it is genericness, not lack of invention or pre-emption, that dominates the remainder of Thomas’s opinion.  His summary of the Court’s § 101 jurisprudence touches upon the notion of pre-emption, but emphasizes above all else the requirement of “more than generic” application:

These cases demonstrate that the mere recitation of a generic computer cannot transform a patent-ineligible abstract idea into a patent-eligible invention. Stating an abstract idea “while adding the words ‘apply it’” is not enough for patent eligibility. Nor is limiting the use of an abstract idea “‘to a particular technological environment.’ ” Stating an abstract idea while adding the words “apply it with a computer” simply combines those two steps, with the same deficient result. Thus, if a patent’s recitation of a computer amounts to a mere instruction to “implemen[t]” an abstract idea “on . . . a computer,” that addition cannot impart patent eligibility. This conclusion accords with the pre- emption concern that undergirds our §101 jurisprudence. Given the ubiquity of computers, wholly generic computer implementation is not generally the sort of “additional featur[e]” that provides any “practical assurance that the process is more than a drafting effort designed to monopolize the [abstract idea] itself.”

(citations omitted).

Similarly, Alice’s application of the test to the claims in suit emphasizes “more than apply it” and generic application;  the question for Justice Thomas “is whether the claims here do more than simply instruct the practitioner to implement the abstract idea of intermediated settlement on a generic computer.” Thomas does describe the functions performed by the computer as “routine, conventional, and well-known in the field,” but his characterization serves to support the conclusion that the claimed steps do nothing more than define generic computer implementation. And taken as a whole, the claims at issue fail not because they lack inventiveness, nor because they reach too broadly, but because they amount to “’nothing significantly more’ than an instruction to apply the abstract idea of intermediated settlement using some unspecified, generic computer.

So Alice may fail to provide clear boundaries for the eligibility of computer-implemented inventions. But it could clarify something more important.  As I have described in a recent paper, the actual test for patent-eligibility in cases like Neilson v. Harford, and in American jurisprudence for the next century, was a requirement that the patentee claim a specific mode of application of a fundamental principle, rather than a generic claim to the principle as applied. If Alice does indeed endorse the third aspect of Mayo, then the test for patent-eligibility is not a question of non-obvious application, nor a question of pre-emption, but a question of whether the claim does significantly more than state a fundamental principle coupled with an instruction to “apply it.” Embracing that aspect of Mayo could signal a return to the historical standard of patent-eligibility.

*As I discussed in a previous post, the Court’s reliance on Neilson in Mayo and Flook was entirely misplaced.  The patent in Neilson was sustained not because the patentee’s implementation was inventive, but precisely because it was entirely conventional and well-known in the art.

Akamai: Is the Answer in the Common Law?

Patent,

Guest Post by Professor Lynda J. Oswald. Editor’s Note – I asked Professor Oswald to write a guest post that links together her prior writing on divided infringement with the Supreme Court’s most recent decision on the subject-matter.

In its recent decision in Limelight Networks Inc. v. Akamai Techs., Inc., the Supreme Court decided the easy question—whether inducement must be supported by direct infringement—on precedent grounds, yet avoided the much more difficult question of how the courts should deal with multi-actor infringement of a method or process patent.

Precedent is indeed clear that direct infringement is a predicate to indirect infringement, and the Court’s decision on this question was exactly right. The interesting questions remaining, however, are why did the Federal Circuit attempt to rewrite precedent in this manner and what should the Federal Circuit do with multi-actor infringement doctrine on remand?

The answer to the why question is driven by the courts’ fundamental discomfort with strict liability. The Federal Circuit’s inartful attempt in its en banc decision in Akamai to move multi-actor infringement from direct infringement to inducement was an effort to relocate such infringement from the harsh rules of strict liability to the more forgiving rules of intent-based indirect liability. Justice Kagan highlighted this at oral argument:

But the reason [the Federal Circuit] put this under 271(b) rather than 271(a) is because of what Justice Scalia said, that 271(b) is not a strict liability offense . . . . [T[hey thought they were being very clever by putting it into a 271(b) box and avoiding the strict liability consequences of what they were doing, but also avoiding the possibility of an end run of the patent law.

As I explore in a work-in-progress, the courts similarly attempt to avoid the strictures of strict liability in other IP contexts such as imposition of officer liability in patent and copyright cases. Although strict liability is antithetical to the notions of fault-based liability that permeate most of American law, the courts are bound by the statutory language and the Supreme Court’s rejection of the Federal Circuit’s attempt to circumvent direct infringement’s strict liability requirement was spot-on.

The what question is harder to answer. The Supreme Court expressed significant skepticism about the Muniauction Inc. v. Thomson Corp. test, appearing, in fact, to characterize any current doctrinal difficulties as self-inflicted by the Federal Circuit:

[R]espondents, like the Federal Circuit, criticize our interpretation of §271(b) as permitting a would-be infringer to evade liability by dividing performance of a method patent’s steps with another whom the defendant neither directs nor controls. We acknowledge this concern. Any such anomaly, however, would result from the Federal Circuit’s interpretation of §271(a) in Muniauction. A desire to avoid Muniauction’s natural consequences does not justify fundamentally altering the rules of inducement liability that the text and structure of the Patent Act clearly require—an alteration that would result in its own serious and problematic consequences . . . .

The Court viewed the Federal Circuit’s multi-actor infringement precedent too narrowly, however. To adequately address the multi-actor infringement issue on remand, the Federal Circuit needs to reexamine not just Muniauction, but two additional decisions as well: BMC Resources, Inc. v. Paymentech and the panel decision in Akamai.

BMC Resources provided the foundation of the Federal Circuit’s current multi-actor infringement doctrine by stating that: (1) for inducement to exist, some other single entity must be liable for direct infringement but (2) a mastermind who controls or directs the activities of another party incurs vicarious liability for the actions of that other party such that the combination of acts would be deemed the act of a single actor for purposes of establishing liability. Muniauction‘s contribution was to refine the BMC Resources test by identifying a “spectrum” of relationships: at one pole is “mere arms-length cooperation,” which does not lead to liability; at the other is “control or direction over the entire process such that every step is attributable to the controlling party, i.e., the mastermind.” The panel decision in Akamai attempted to further clarify the standard by setting up two-pronged test of the type that the Federal Circuit seems to prefer these days: multi-actor infringement occurs only when the parties involved are in either (1) in an agency relationship or (2) contractually obligated to each other.

Perhaps it is a function of its narrow jurisdiction, but the Federal Circuit often misses the opportunity to apply traditional common law doctrines in a manner that would reconcile statutory language with the policies underlying the statute. As I discuss in a recent article, the Federal Circuit could resolve much (but not all—some aspects of this issue are amenable only to legislative resolution) of the confusion surrounding multi-actor infringement by explicitly invoking common law doctrines of tort and agency. The panel decision in Akamai got much of this right by looking at agency and contractual relationships. However, the Akamai panel decision ignored the possibility that there could be co-equals involved in the infringement, not bound by contract or agent-principal relationships but acting in concert in a joint tortfeasorship relationship. Early (pre-Federal Circuit) cases did recognize the role that joint torts can play in establishing multi-actor liability but that relationship was lost in the BMC Resources single-entity rule.

The Akamai Court issued a clear call to the Federal Circuit to revisit (and revamp) its troublesome multi-actor infringement standard. Judge Newman provided an elegant statement of how the court should approach this issue in her dissent in the Akamai en banc decision:

The court should simply acknowledge that a broad, all-purpose single-entity requirement is flawed, and restore infringement to its status as occurring when all of the claimed steps are performed, whether by a single entity or more than one entity, whether by direction or control, or jointly, or in collaboration or interaction.

On remand, the Federal Circuit will have the opportunity to articulate liability rules that are more principled, more grounded in traditional legal doctrine, and more consistent with the general patent law scheme; Judge Newman’s characterization provides an excellent starting point for that analysis.

Judicial Error and Justice Alito’s Hypothetical in Limelight

Patent

By Jason Rantanen

As I read yesterday’s two Supreme Court opinions, I was struck by the sense that even as it grants certiorari on an extraordinary number of patent cases, the Court’s actual substantive engagement with patent law seems to be flagging.   None of its patent law opinions this term were more than 14 pages long; the shortest was 5, although Alice could be a beast.  These are well off from its opinions in KSR v. Teleflex, which came it at a more significant 24 pages.  And a quick scatterplot of majority opinion page length in patent cases since MedImmune shows a steep downward slope.

Even if opinion length really is meaningless in terms of opinion value (may be behind a paywall), however, the substantive content of these opinions is disappointing.  In Nautilus, for example, the Court held that the requirement for definiteness is something greater than what the Federal Circuit’s “insolubly ambiguous” standard, but offered no meaningful explanation of its “reasonable certainty” standard.

But the worst (best?) example of the Court’s present cursory approach to patent law issues is Justice Alito’s assertion in Limelight that the “Federal Circuit’s analysis fundamentally misunderstands what it means to infringe a method patent.”  But as Dennis observed yesterday, the full quotation shows that there is also either a substantial misunderstanding or sheer carelessness by the Court:

The Federal Circuit’s analysis fundamentally misunderstands what it means to infringe a method patent.  A method patent claims a number of steps; under this Court’s case law, the patent is not infringed unless all the steps are carried out. This principle follows ineluctably from what a patent is: the conferral of rights in a particular claimed set of elements. “Each element contained in a patent claim is deemed material to defining the scope of the patented invention,” Warner-Jenkinson Co. v. Hilton Davis Chemical Co., 520 U. S. 17, 29 (1997), and a patentee’s rights extend only to the claimed combination of elements, and no further.

…

The Federal Circuit’s contrary view would deprive §271(b) of ascertainable standards. If a defendant can be held liable under §271(b) for inducing conduct that does not constitute infringement, then how can a court assess when a patent holder’s rights have been invaded? What if a defendant pays another to perform just one step of a 12 step process, and no one performs the other steps, but that one step can be viewed as the most important step in the process? In that case the defendant has not encouraged infringement, but no principled reason prevents him from being held liable for inducement under the Federal Circuit’s reasoning, which permits inducement liability when fewer than all of a method’s steps have been performed within the meaning of the patent.

With such a profound buildup, one would expect the majority judges in Limelight to have erred greatly by allowing inducement as long as “the most important step in the process” was performed by someone.  Yet they said no such thing.  From the en banc majority opinion in Akamai v. Limelight:

 To be clear, we hold that all the steps of a claimed method must be performed in order to find induced infringement, but that it is not necessary to prove that all the steps were committed by a single entity.

692 F.3d 1301, 1306 (Fed. Cir. 2012) (en banc).  Variations on this theme are repeated throughout the majority’s opinion, and the issue of whether or not all the steps must be actually performed was never in dispute.

Justice Alito’s sharp criticism is particularly inapposite here, given the difficulty of this particular issue and the meagre analysis that is provided in the opinion.  To be clear, I agree that inducement under 271(b) should require that there be a direct infringer under 271(a).  My point is simply that execution of this opinion could have been much better, and in treating the issue so clumsily the Court reinforced the appearance of just going through the motions.

So “What if a defendant pays another to perform just one step of a 12 step process, and no one performs the other steps, but that one step can be viewed as the most important step in the process?”  Easy answer under all Federal Circuit precedent: no infringement under 271(a), (b), or (c).

What happens next?  Perhaps this will be an instance where the Court engages in post-issuance revision of its opinion, as discussed in Richard Lazarus’s recent study of The (Non)Finality of Supreme Court Opinions and highlighted in Adam Liptak’s NYT article (may be behind a paywall).  If it does so, I would hope that the Court follows Professor Lazarus’s recommendation that it amend its practices to provide meaningful public notice.  But regardless of whether such post-issuance editing takes place here, the Supreme Court’s fumble suggests that for all its apparent interest in patent cases, maybe it isn’t really paying all that much attention to what the Federal Circuit is actually saying.

Is the Federal Circuit Really Worse Than the Cubs?

Patent,

By Jason Rantanen

Yesterday, following the Supreme Court’s unanimous reversal of the Federal Circuit in Nautilus and Limelight, Vera Ranieri of the Electronic Frontier Foundation observed that:

These rulings mean that the Federal Circuit has been unanimously overruled in every single patent case heard by the Supreme Court this term. Since there have been five decisions, the Federal Circuit is now an extraordinary 0-45 in supporting votes by Supreme Court justices this year. Even the Chicago Cubs have a better record than that.

Vera Ranieri, Supreme Court Overrules Federal Circuit Again. And Again. (June 2, 2014).

Ranieri has a point: the Supreme Court has not been kind to the Federal Circuit this term.  Worse than the record on these five decisions (Highmark, Octane Fitness, Medtronic, Nautilus, and Limelight), some of the Court’s comments are harshly critical of the appellate court.  As Dennis noted yesterday, in Limelight the Court wrote that “The Federal Circuit’s analysis fundamentally misunderstands what it means to infringe a method patent.”  By such measures it appears that the Federal Circuit does not currently have much credibility with the Court.

These are bleak numbers indeed, but some context is important.  First, consider that even as the Supreme Court has reversed on these five cases, it also has denied certiorari in other petitions arising from the Federal Circuit (If anyone has solid figures on these, I’d love to see them).  These petitions were vigorously pursued, often with the support of amicus.  So it’s not as if the Federal Circuit is always “losing.”

In addition, it’s important to keep in mind the broader picture: so far this term, the Supreme Court has reversed in 77% of all merits decisions except those arising from the Federal Circuit.  Last year, the Court’s final reversal rate was 72%. (source: SCOSTUSBLOG).  So that the Federal Circuit went 0 for 5 (two of which, Octane Fitness and Highmark, were a linked pair) doesn’t mean that the sky is falling.  And since 2010, the Federal Circuit has actually done fairly well: out of the 13 patent cases arising from the Federal Circuit since Bilski v. Kappos, the Supreme Court has affirmed the outcome in whole or part 7 times.

Even if these figures told the entire story on reversals, however, it’s not as if the Federal Circuit presently speaks with one voice, if it ever did.  It is full of disuniformity, with multiple viewpoints that are at odds with one another.  Given this disuniformity, it should not be surprising that two of the five cases in which the Court reversed the Federal Circuit involved a highly fractured court (Highmark and Limelight).  In these cases, the Court did not reverse a unanimous Federal Circuit, but rather settled a deep intra-circuit divide.  (Nautilus involved a concurrence by Judge Schall, but he agreed with the legal standard for indefiniteness applied by the majority).

Both Highmark and Limelight illustrate this point well: in Highmark, 5 of the 12 judges on the Federal Circuit favored a deferential standard for exceptional case determinations, an approach ultimately adopted by the Court.  Likewise, in Limelight the Supreme Court essentially agreed with the five dissenting Federal Circuit judges that indirect infringement under 271(b) requires an act of direct infringement under 271(a) (although as Tim Holbrook pointed out to me, Justice Alito left open the door for active inducement of any type of direct infringement, such as 271(f) or (g)).  And, when the Court issues its opinion in Alice, it will inevitably rule in the same direction as one or another group of judges in that highly fractured decision.  So too in Teva v. Sandoz, which will address the issue of de novo review of claim construction that split the en banc Federal Circuit 6-4.  What we are observing with the Court is, in substantial part, less outright reversals and more the resolution of intra-circuit splits, divisions that are arguably – at least in the case of subject matter eligibility – of its own making.

Thanks to former Iowa Law student and semester EFF intern Dan Garon for pointing me to Ms. Ranieri’s article.  Full disclosure: I’m not a Cubs fan.  Also, I made one substantive edit, revising the number of cases since Bilski to 13 (I had originally counted Caraco v. Novo, but on reflection it’s not really a patent case).

SmartGene v. Advanced Biological Laboratories

Patent, , ,

By Jason Rantanen

Earlier this month, I posed a question relating to the patent eligibility of the following claim:

  1. A method for guiding the selection of a therapeutic treatment regimen for a patient with a known disease or medical condition, said method comprising:

 (a) providing patient information to a computing device comprising:

 a first knowledge base comprising a plurality of different therapeutic treatment regimens for said disease or medical condition;

a second knowledge base comprising a plurality of expert rules for evaluating and selecting a therapeutic treatment regimen for said disease or medical condition;

 a third knowledge base comprising advisory information useful for the treatment of a patient with different constituents of said different therapeutic treatment regimens; and

 (b) generating in said computing device a ranked listing of available therapeutic treatment regimens for said patient; and

 (c) generating in said computing device advisory information for one or more therapeutic treatment regimens in said ranked listing based on said patient information and said expert rules.

This claim was a real one, from a real case.  It’s Claim 1 from U.S. Patent No. 6,081,786, and in a January 2014 nonprecedential opinion the Federal Circuit affirmed a district court’s ruling that it and claims from related patent No. 6,188,988 were ineligible for patent protection under 35 U.S.C. § 101.  Here’s the core of the court’s reasoning:

The district court correctly held that the claim 1 method falls outside the eligibility standards of section 101 as that provision has been construed. This conclusion follows from CyberSource Corp. v. Retail Decisions, Inc., where, based on earlier precedents, this court held that section 101 did not embrace a process defined simply as using a computer to perform a series of mental steps that people, aware of each step, can and regularly do perform in their heads. 654 F.3d 1366, 1373 (Fed. Cir. 2011); see also In re Grams, 888 F.2d 835, 840-41 (Fed. Cir. 1989); In re Meyer, 688 F.2d 789, 794-95 (C.C.P.A. 1982). As CyberSource explains, those precedents rest on Supreme Court decisions indicating that section 101 covers neither “mental processes”—associated with or as part of a category of “abstract ideas”—nor processes that merely invoke a computer and its basic functionality for implementing such mental processes, without specifying even arguably new physical components or specifying processes defined other than by the mentally performable steps. See Gottschalk v. Benson, 409 U.S. 63, 67-68 (1972); Parker v. Flook, 437 U.S. 584, 589 (1978).

***

The Supreme Court’s post-CyberSource decision in Mayo Collaborative Servs. v. Prometheus Labs., Inc., 132 S. Ct. 1289 (2012), reinforces the application of Cyber-Source to decide the present case. The Supreme Court in Mayo, though addressing a case involving the “law of nature” exclusion from section 101, recognized that “mental processes” and “abstract ideas” (whatever may be the precise definition and relation of those concepts) are excluded from section 101. See 132 S. Ct. at 1289, 1293, 1297-98 (quotation marks omitted). Whatever the boundaries of the “abstract ideas” category, the claim at issue here involves a mental process excluded from section 101: the mental steps of comparing new and stored information and using rules to identify medical options. Mayo demanded that, when a claim involves an abstract idea (or, in Mayo itself, a law of nature), eligibility under section 101 requires that the claim involve “enough” else—applying the idea in the realm of tangible physical objects (for product claims) or physical actions (for process claims)—that is beyond “well-understood, routine, conventional activity.” 132 S. Ct. at 1294, 1298, 1299. The claim here does not do so. It calls on a computer to do nothing that is even arguably an advance in physical implementations of routine mental information comparison and rule-application processes. In this context, the concern about preempting public use of certain kinds of knowledge, emphasized in Mayo, is a grave one. See id. at 1301-02.

Our decisions since Mayo do not undermine Cyber-Source or its application here…..

You can read the entire opinion here: SmartGene v ABL.

ABL has since filed a petition for certiorari, as well as an amicus brief in Alice v. CLS.  Its position is that SmartGene should be GVR’d regardless of the outcome in Alice v. CLS (which might issue as soon as tomorrow).  From the introduction:

Judge Pauline Newman recently characterized the Federal Circuit as being in a state of jurisprudential “deadlock,” making patent eligibility under 35 U.S.C. § 101 a question “whose result will depend on the random selection of the panel.” CLS Bank Int’l v. Alice Corp. Pty. Ltd., 717 F.3d 1269, 1280 (Fed. Cir. 2013) (hereinafter CLS Bank) (en banc) (Newman, J., dissenting), cert granted, Alice Corp. Pty. Ltd. v. CLS Bank Int’l, 134 S.Ct. 734 (2013) (hereinafter Alice). No better case illustrates the panel-dependent crapshoot that Section 101 jurisprudence has become than this one. Although it is impossible to predict the Court’s forthcoming opinion in Alice, there is little doubt that it will significantly impact the law in this area and break the deadlock in the Federal Circuit.

The decision below is a prime example of the
current dysfunctional state of the law in the Federal Circuit.

You can read the petition here: ABL v. SmartGene petition for writ of certiorari.