Tag Archives: First to Invent

Automatic Assignment of Future Inventions: A Serious Error of Federal Law that Requires Supreme Court Review

Guest post by Dr. Shubha Ghosh, Crandall Melvin Professor of Law and Director of the Technology Commercialization Law Program at Syracuse University College of Law

In Stanford v Roche, 563 U.S. 776 (2011), the Supreme Court ruled that the Bayh-Dole Act did not create special rules of patent ownership for universities and other recipients of federal research funding.  Traditional rules of inventor ownership and assignment, developed for for-profit entities applied to research institutes. Nothing in the language of the Bayh-Dole changed the basic rules and created a statutory automatic assignment (one analogous to work made for hire under the Copyright Act).

But what are the traditional rules for patent assignment? One issue the majority ignored in Stanford is the future interest assignment rule created by the Federal Circuit in Filmtec Corp. v. Allied Signal, 939 F.2d 1568 (Fed. Cir. 1991).  By containing the phrase “hereby assigns,” the Federal Circuit stated in Filmtec, an assignment would have priority over another that only contained the word “assigns.” An assignor stating that he “assigns” a future interest is simply conveying a promise to assign in the future. However, the magic phrase “hereby assigns” is a present assignment of a future interest.  Stanford University’s failure to include the word “hereby” in its assignment agreement lost patent rights to Roche, a competing assignee that showed the wisdom to include the word “hereby” in its agreement.

Justices Breyer and Ginsburg in dissent sharply criticized the Filmtec rule of “automatic assignment” through agreement in the Stanford case. This sentiment was echoed in Justice Sotomayor’s concurrence. All three justices, however, recognized that the assignment interpretation issue was not properly before the Court.  Dr. Alexander Shukh, a computer hardware engineer, signed an assignment to his former employer Seagate.  The assignment contained the “hereby” language sanctioned by the Filmtec decision.  Seagate, and the Federal Circuit, reads the hereby language as creating an automatic assignment of Shukh’s rights to his inventions and resulting patents. The Shukh decision does not involve priority of assignments and  goes beyond the Filmtec decision criticized by Justices Breyer, Ginsburg, and Sotomayor.  Under Shukh, the magic words “ hereby assigns” extinguishes all rights of employees in their inventions.

The Court should grant Shukh’s certiori petition. This post demonstrates that there is a serious error of federal law that requires Supreme Court review. It also shows how the Court might correct the misapplication of federal law.

The Federal Circuit created the rule of automatic assignment through agreement without any basis in the Patent Act or in the common law of assignment. Acting from its institutional law as patent law expert, the Federal Circuit seemingly adopted the Filmtec rule as one of patent assignment. But, as Professor Ted Hagelin pointed out in a 2013 article in the AIPLA Law Quarterly, the automatic assignment rule has no foundation in the Patent Act.  Section 261 speaks to writing requirements and priority rules arising from filing.  There is no mention of the magic word “hereby” as a marker between promises to assign in the future and present assignments of future interests.  Professor Hagelin recommended that Congress correct the error by amending Section 261.

But the Federal Circuit’s error is deeper than one of statutory misconstruction. Its decision confuses the relationship between patent law and contract law. The error is in the same category as the controversy over the conditional sale doctrine, a court created rule from Mallinckrodt v. Medipart, 976 F.2d 700 (Fed. Cir. 1992).  In Mallinckrodt, the Federal Circuit examined a patent owner’s power to impose conditions on its grant of rights to a licensee. Through announcing the conditional sale doctrine, the Federal Circuit ruled that a violation of such conditions constituted patent infringement rather than contract breach.  By so ruling, the Federal Circuit expanded its own jurisdiction by transforming questions of state contract law into those of patent law. A similar move occurs in Filmtec.

The usurpation of contract law by patent law is the subject of my 2014 article in the Journal of the Patent and Trademark Office Society.  My argument in that paper is grounded, in part, in Judge Pauline Newman’s criticism of Filmtec in her dissent from denial of en banc review in Abraxis v. Navinta. 672 F.2d 1239 (Fed. Cir. 2011). According to Justice Newman, patent assignments are a matter of contract law, which is in the jurisdiction of the states. Therefore, the Federal Circuit should look more closely at state law in deciding cases about patent assignments.

The judge’s point is particularly salient when one remembers that the Federal Circuit was created as an expert patent court.  It was given jurisdiction to hear some non-patent matters when these matters are related to patent cases.  Patent assignments are one obvious example of when the Federal Circuit has jurisdiction to consider state matters.  But, as Judge Newman points out, jurisdiction to hear a case does not mean authority to create new law, as the Federal Circuit arguably did in Filmtec and in Stanford. Instead, the Federal Circuit should look to other authorities to address non-patent law matters. For contract law matters, what state courts and legislatures have said about assignments generally would be relevant.  Furthermore, state law provides a stable and predictable source of authority for actors engaged in the business practice of negotiating patent assignments and other contracts.

The core problem is that the court has ignored the Erie doctrine. Under the Supreme Court’s 1937 decision in Erie v. Tompkins, a federal court ruling on a matter of state law under its diversity jurisdiction must apply the law of the state from which the dispute arose.  Which state law to apply is a matter of choice of law principles.  What the federal court cannot do is create its own federal common law in lieu of the state statutory or common law. As the Court affirmed in Butner v. United States, 440 U.S. 48 (1979),  the Erie doctrine applies to a court’s supplemental jurisdiction over state law claims attendant to a federal question. By creating its own federal common law of contracts, the Federal Circuit reveals a fundamental error in its understanding of the federal court system.

State law offers a different analysis of patent assignments from what the Federal Circuit adopts. Justice Breyer, in his Stanford dissent, cited a treatise on patent law by George Ticknor Curtis from 1873 that discusses patent assignments.  Curtis addresses how state law treats assignments and cites a Massachusetts case from 1841 dealing with patent assignments.  Relevant to the issues in Stanford, the assignment involved the present assignment of an invention that had not been made yet.  The court analyzed the assignment as it would any contract, identifying the terms of the document as a key to the expectations of the parties. State law precedents perhaps offer an alternative to the questionable Federal Circuit jurisprudence, at least with respect to patent assignments.

One related area in state law is that of security interests, a part of debtor-creditor law.  In entering into credit agreements, creditors ask for security in the form of collateral for a loan. The collateral may be a legal interest that is not in existence at the time of the loan.  An example would be the future sales or proceeds from a debtor’s business. Another example would be inventory remaining at the end of an accounting period.  These future interests are analogous to the future inventions or patents that I have been discussing.  Rights can be claimed in these properties that are nonexistent at the time of the contract formation between creditor and debtor.

Security interests provide the most common situation in which conflicting obligations arise.  Debtors often take multiple mortgages, hypothetic future proceeds to multiple creditors, and take multiple loans out on the same collateral.  As long as the value of the collateral can cover all the debts, then there is no problem in general.  However, if not all creditors can be satisfied, priority rules are necessary.  In the case of future interests, the law does not fall back on simple rules like first in time because there are multiple interests involved.  A creditor does not want to run the risk of not receiving any return on the debt.  The legal rules of priority allow the creditor to investigate the collateral and through such due diligence identify competing claimants on the collateral.  Priority rules, consequently, depend not only on the timing of the contract, but also on recording and notice requirements.

The case of conflicting patent assignments bears some similarity to the law on intangible future interests in creditor-debtor law.  Both entail rights in property that has yet to come into being.  The main lesson from creditor-debtor law, which is largely a matter of state law, is that many interests are implicated and therefore simple rules are not satisfactory.  The Federal Circuit has arguably adopted too simple and misguided a rule in the Filmtec.  The Supreme Court has confounded the error in the Stanford decision by ignoring the issue of automatic assignments. One way to correct course is by granting Shukh’s petition for certiori and restore the proper balance between federal patent law and state commercial law.

Charting Inventorship: Teams Get the Prize

The primary goal of the patent system is to encourage innovation – “promote the Progress of Science and useful Arts.”  For me, the nature of inventorship is a fascinating pursuit: what are the factors that lead to invention and what are the results of invention?

A major shift over the past few decades in terms of inventors listed on U.S. patents is the rise of team-based inventorship. Back in 1975, the vast majority of U.S. patents were issued to a single inventor.  Since that time, there has been a steady trend toward more inventors-per-patent.  Around 1990 we reached a point where, for the first time, more than than half of US patents listed multiple inventors.  That trend toward more inventors per patents continues today.

Drilling down, the increase is seen in patents with three or more inventors.  The chart below shows the percentage of utility patents with either one listed inventor (downward sloping double line) or three+ listed inventors (upward sloping line).  The drop in the first almost exactly correlates with the rise in the second. Throughout this time, the percentage of two-inventor patents has remained steady at around 25%.


The chart does not offer any causation explanation.  Is the change is due to the nature of the inventions (i.e., more complex subject matter); the increase in team projects in corporate environment; or the politics of patenting (team projects more likely to get funded); or perhaps teams are better at identifying the valuable innovations; etc. We do know that multi-inventor patents tend to do better on patent scorecards and are more likely to be filed internationally, suggesting that their owners place more value on those patents.  In the U.S., un-assigned patents still tend to be single inventor. That factor may be explained by the reality that most cooperative inventorship endeavors set up a partnership or corporate to at least hold the patent rights.   Some areas of technology (esp: biotech & chemistry) tend to have more inventors-per-patent than the mechanical and software areas.

The chart below considers utility patents 2012-2016 and groups them according to the assignee country provided to the USPTO.  For each country, I looked at (1) the average number of inventors per patent; (2) the percentage of patents with 5+ inventors; and (3) the percentage of patents with only 1 inventor.   There is likely an interesting story to tell about Korea & India — why do they list so many inventors per patent?




Adding Fuel to the Bonfire of Patents

Genetic Tech. v. Merial (Fed. Cir. 2016)

Lincoln famously explained the role of the patent system of adding “the fuel of interest to the fire of genius.”  In GTG, the court simplified the phrase by finding that genetic testing patents only value may be literally as fuel.

The decision by Judge Dyk and joined by Chief Judge Prost and Judge Taranto affirms a lower court’s dismissal on-the-pleadings of GTG’s patent infringement claim.[1]  The holding is that the claimed method for analyzing DNA for linkage disequilibrium is ineligible for as effectively claiming a law of nature.  The basic idea stems from the inventors discovery that coding regions (exons) typically correlate with “linked” certain non-coding regions (introns).

The parties agreed that claim 1 of the GTG ‘179 patent was representative for purposes of the eligibility issues. The claim encompasses methods of detecting a particularly genetic allele using the two step process of (1) amplifying and then (2) analyzing the linked intron region.

In analyzing the claims here, the court highlighted the similarity of the claims here to those in both Mayo v. Prometheus[2] and Ariosa v. Sequenom.[3]

The similarity of claim 1 to the claims evaluated in Mayo and Ariosa requires the conclusion that claim 1 is directed to a law of nature. . . .  The claim is directed to a natural law—the principle that certain non-coding and coding sequences are in linkage disequilibrium with one another. We hold that claim 1 is directed to unpatentable subject matter at the first step of the Mayo/Alice test. . . .

Claims directed to laws of nature are ineligible for patent protection when, “(apart from the natural laws themselves) [they] involve well-understood, routine, conventional activity previously engaged in by researchers in the field.” Mayo.

We conclude that the additional elements of claim 1 are insufficient to provide the inventive concept necessary to render the claim patent-eligible.

GTG is an Australian company that had previously sued a few dozen companies for infringing the ‘179 patent. The claims have been reexamined (at Merial’s request) and patentability confirmed.

= = = = =

[1] The courts found that claims 1-25 and 33-36 of U.S. Patent No. 5,612,179 are ineligible under Section 101.

[2] Mayo Collaborative Serv. v. Prometheus Lab., Inc., 132 S.Ct. 1289 (2012)

[3] Ariosa Diagnostics, Inc. v. Sequenom, Inc., 726 F.3d 1296 (Fed. Cir. 2013); rehearing en banc denied by Ariosa Diagnostics, Inc. v. Sequenom, Inc., 809 F.3d 1282 (Fed. Cir., Dec. 02, 2015); on petition for writ of certiorari (No. 15-1182, filed March 21, 2016).

An Early Review of the Impact of Form 18’s Elimination on Pleading Direct Infringement

Guest Post by Leeron Morad & Andrew J. Bramhall of Quinn Emanuel[i]


On December 1, 2015, as part of a sweeping set of amendments to the Federal Rules of Civil Procedure, Rule 84 and its Appendix of Forms were abrogated.  Patent litigators are no doubt well acquainted with Form 18, which set forth a generic complaint for patent infringement.  Under the guise of notice pleading, the Form 18 complaint recited only the most basic factual allegations: it did not identify any asserted patent claims or any specific accused product models, nor provide an explanation of how those products allegedly infringe.  Nevertheless, a direct infringement claim could survive a motion to dismiss simply by complying with Form 18.[ii]

As the effective date for the new amendments approached, practitioners began to consider how Form 18’s elimination might affect the pleading of direct infringement.  In particular, they questioned whether newly filed claims would be analyzed under the “plausibility” standard established by the Supreme Court in Twombly and Iqbal[iii] and thus would require “enough facts to state a claim to relief that is plausible on its face.”[iv]  The possibility of a heightened pleading standard caused a considerable spike in the filing of complaints in the days leading up to December 2015: more than 250 patent infringement complaints were filed on November 30 alone.[v]

Early indications from the few issued district court decisions interpreting the amended Rules confirm that the pleading standard for direct infringement claims may indeed have changed.  In this article, we look at two decisions applying the amended Rules—one from the District of Delaware and the other from the Central District of California—that provide an interesting glimpse of what may or may not suffice when pleading direct infringement today.

Case 1: RainDance Techs. Inc. v. 10x Genomics, Inc., No. 15-cv-00152, Dkt. 28 (D. Del. Mar. 4, 2016). [RainDance Decision]

In RainDance Techs., Inc. v. 10x Genomics, Inc., Judge Andrews of the District of Delaware granted 10x Genomics’ motion to dismiss RainDance’s and the University of Chicago’s claims for direct infringement of seven patents, finding that “Plaintiffs have not plausibly alleged any infringement.”[vi]  RainDance and the University of Chicago (collectively, the RainDance Plaintiffs) filed their original complaint against 10x Genomics in February 2015, and then filed an amended complaint in April 2015.  10x Genomics filed its motion to dismiss in May 2015, arguing (among other things) that the direct infringement claim fell short of the plausibility standard of Twombly and Iqbal.[vii]

The level of detail in the RainDance Plaintiffs’ complaint, which clocked in at 35 pages, almost certainly would have passed muster under Form 18.  For each of the seven asserted patents, the RainDance Plaintiffs identified a representative claim that they alleged had been directly infringed.[viii]  They also identified 10x Genomics’ accused product—a microfluidic DNA and RNA analysis platform—as well as the specific platform components implicated by the alleged infringement.  As support for their allegations, the RainDance Plaintiffs included figures from 10x Genomics’ conference presentations describing the accused platform’s structure and its chemical workflow, as well as excerpts from 10x Genomics’ website.[ix]

Judge Andrews, however, found the RainDance Plaintiffs’ amended complaint lacking.  He first noted that, despite the complaint’s length, the “essential factual allegations d[id] not take up much space.”[x]  He took issue in particular with the RainDance Plaintiffs’ reliance on 10x Genomics’ promotional materials, adding that it did not appear the plaintiffs had “purchased one of [10x Genomics’] products to see how it actually works.”[xi]  Judge Andrews also noted that the RainDance Plaintiffs filed the complaint “less than a month” after first learning about the 10x Genomics platform, suggesting they might have benefited from spending more time investigating the accused product before filing suit.

In assessing the adequacy of the direct infringement allegations, Judge Andrews also performed his own analysis of the exemplary patent claims identified in the complaint.  He appeared to be searching for express factual allegations tying each asserted claim limitation to the accused products in a way that bridged the gap between technical claim language and the accused features.[xii]  For example, Judge Andrews concluded that the complaint failed to address the “adjusting pressure” limitation of one asserted method claim: “[t]here is nothing in the complaint (at least so far as I can see) that hints at the role of pressure in Defendant’s products.”[xiii]  In reference to a different asserted claim, he likewise noted that “[i]t is not obvious to me that what Plaintiffs described is an ‘autocatalytic reaction.’”[xiv]  He ultimately determined that the RainDance Plaintiffs “ma[d]e no attempt to relate any of their factual assertions with any of the asserted claims” and dismissed the direct infringement claim as not plausibly alleged.[xv]

It is noteworthy that although the RainDance Plaintiffs filed their amended complaint in April 2015—nearly eight months before the new amendments went into effect—Judge Andrews chose “to apply the post-December 1, 2015, direct infringement pleading standard to the amended complaint” because “it would be in the interest of justice” to do so.[xvi]  He did not, however, explain his reasoning for this conclusion or give an indication of whether he would come to the same conclusion in other already pending cases.

Case 2: InCom Corp. v. The Walt Disney Co., No. 15-cv-3011, Dkt. 26 (C.D. Cal. Feb. 4, 2016). [InCom Decision]

In contrast to Judge Andrews’ decision in RainDance, Judge Gutierrez’s decision in Incom Corp. v. The Walt Disney Co. provides an example of what at least one court considers to be sufficient to plead direct infringement under the amended Rules.[xvii]  InCom filed its original complaint on April 22, 2015, and an amended complaint seven months later on Nov. 23, 2015, alleging infringement of three patents related to tracking systems using Radio Frequency Identification.  Like the RainDance plaintiffs, InCom identified specific accused products in the complaint—namely, Disney’s attendance tracking device, “MagicBand,” and the “MyMagic+” attendance monitoring system.  On December 10, 2015, not long after the new amended Rules went into effect, Disney moved to dismiss InCom’s amended complaint, arguing that it did not plausibly allege a claim for direct or indirect infringement.

Judge Gutierrez denied Disney’s motion to dismiss to the extent it sought to dismiss InCom’s direct infringement claims.  As in RainDance, he first rejected InCom’s argument that the amended Rules should not apply because it filed the complaint before their effective date, December 1, 2015.[xviii]  Citing the Supreme Court’s order adopting the amended Rules, which stated that the amendments should apply “insofar as just and practicable [in] all proceedings then pending,” Judge Gutierrez held that it was appropriate to require InCom to meet the “plausibility” standard in its amended complaint.[xix]

Even under the heightened pleading standard, however, Judge Gutierrez held that InCom’s amended complaint sufficiently pleaded a direct infringement claim.  While acknowledging that “merely naming a product and providing a conclusory statement that it infringes a patent is insufficient to meet the ‘plausibility’ standard set forth in Twombly and Iqbal,” he found that InCom had done enough “by specifically identifying Defendants’ products and alleging that they perform the same unique function as Plaintiff’s patented system.”[xx]  In particular, Judge Gutierrez emphasized that InCom “describe[d] how its Attendance Tracking System uses RFID technology and ID badges to track human presence in large volumes,” and “name[d] specific products developed, manufactured and used by Defendants which, like Plaintiff’s system, track human presence in large volumes.”[xxi]

Notably, in contrast with Judge Andrews, Judge Gutierrez did not require InCom to identify any exemplary asserted claims in its complaint, much less conduct any element-by-element analysis.  Despite these missing details, he concluded that “[a]t this stage, it is sufficient that Plaintiff has made plausible allegations that each Defendant is responsible for direct infringement.”[xxii]  In comparison with the RainDance decision, the InCom decision therefore appears to establish a lower threshold for “plausibly” alleging direct infringement under the amended Rules.


These two early decisions, while by no means definitive of the pleading standards under the amended Rules, suggest that patent plaintiffs were right to be concerned about a heightened requirement for pleading direct infringement.  Because the amendments only went into effect fairly recently, however, only time will tell whether other district courts will apply the “plausibility” standard to direct infringement claims as well.  It also remains possible that, despite the abrogation of Rule 84 and the Appendix of Forms, some courts may find that compliance with Form 18 is still enough to survive a motion to dismiss.[xxiii]

Yet even under the heightened “plausibility” standard, we would not be surprised to see meaningful differences emerge in the ways different districts—and even individual judges within districts—apply that standard to direct infringement claims.  The decisions discussed in this article suggest such a trend: one seems to demand allegations that directly tie the claim language to the accused product, whereas the other accepts general discussion of the patented invention without the identification of any asserted claims.

Before filing suit, litigants should be mindful of these differences, lest they be faced with the prospect of having to amend and re-file their complaint—or perhaps worse.  Indeed, it would be prudent for would-be plaintiffs to closely follow this area of law in the year to come, as it appears Form 18’s elimination is already changing how patents are litigated.  Finally, existing plaintiffs should be aware that merely filing a complaint prior to December 1, 2015—even many months before that date—does not guarantee application of the Form 18 pleading standard.

= = = = =

[i] Leeron Morad is an associate and Andrew Bramhall is a partner in Quinn Emanuel’s Silicon Valley office.  The opinions expressed are those of the author(s) and do not necessarily reflect the views of the firm or its clients. This article is for general information purposes and is not intended to be and should not be taken as legal advice.

[ii] In re Bill of Lading Transmission & Processing Sys. Patent Litig., 681 F.3d 1323, 1336 (Fed. Cir. 2012).

[iii] Bell Atl. Corp. v. Twombly, 550 U.S. 544 (2007); Ashcroft v. Iqbal, 556 U.S. 662 (2009).

[iv] Twombly, 550 U.S. at 554-55, 570.

[v] Based on a Docket Navigator search of cases filed on November 30, 2015.  By comparison, in the entirety of 2015, plaintiffs filed approximately 5,500 new patent cases.  The filing of 250 cases represents almost 5% of the total for the year.  http://www.law360.com/articles/755311/how-2015-s-crush-of-patent-lawsuits-kept-ip-attys-busy.

[vi] Case No. 15-cv-00152, Dkt. 28, at 5 (D. Del. Mar. 4, 2016).

[vii] According to 10x Genomics, the “plausibility” pleading standard should apply to the RainDance Plaintiffs’ direct infringement claim because pleading is governed by regional circuit law in the Third Circuit.  Id., Dkt. 16, at 14-17.  10x Genomics also argued that the “plausibility” standard should apply because Form 18 was expected to be abrogated “during the early stages of this case.”  Id. at 17.

[viii] E.g., id., Dkt. 12 ¶ 26.

[ix] Id. ¶¶ 16-20.

[x] Id., Dkt. 28, at 1.

[xi] Id. at 3.

[xii] See id. at 4 (“The requirements of the next to last element might be met, but involves quite a bit of supposition.  I think, but am not sure, that partitioning samples is the same as amplification. . . .”).

[xiii] Id. at 3.

[xiv] Id. at 4.

[xv] Id.  Judge Andrews dismissed the complaint without prejudice, however, because “Plaintiffs might very well be able to [plausibly allege infringement],” and gave the RainDance Plaintiffs three weeks to re-file.  Id. at 5.

[xvi] Id. at 4-5.

[xvii] Case No. 15-cv-3011, Dkt. 39 (C.D. Cal. Feb. 4, 2016).

[xviii] Id. at 3.

[xix] Id. at 3-4 (quoting Supreme Court of the United States, Order Regarding Amendments to the Federal Rules of Civil Procedure (Apr. 29, 2015)).

[xx] Id. at 4.

[xxi] Id.

[xxii] Id. at 5.

[xxiii] According to the Committee Notes to the amended Rules, “[t]he abrogation of Rule 84 does not alter existing pleading standards or otherwise change the requirements of Civil Rule 8.”  It seems possible that a court could interpret this as intending to maintain the notice pleading standard for direct infringement claims.

AIA Challenges Pile On, but the Federal Circuit Deflects

By Dennis Crouch

As I write about this case, I should first note Trading Technologies (TT) is a former client of mine while I was in practice at the MBHB firm (2001-2007).  I was the person who actually signed the complaint against CQG noted below.  TT gave me permission to write on the case, but did not review this post.

TT makes and sells software systems used by stock-market-exchange traders.  TT’s U.S. Patent No. 6,766,304 covers a graphical user interface (GUI) tool that served as the launching point for the company’s software and its design helps traders trade more quickly and more accurately – features demanded by folks in this hyper-industry.  The speed and accuracy improvements come from changes in how the software displays market price changes and how it responds to various user actions (usually ‘clicks’). The patent has been asserted against a number of competitors and has been repeatedly been found valid (or not invalid) on various grounds, including patent eligibility. That seemingly ended with the PTAB decision to grant a petition for Covered Business Method (CBM/PGR) Review of the ‘304 patent. (CBM2015-00161).

TT filed an emergency mandamus action asking the Federal Circuit to reject the institution decision as overstepping the limits on CBM review proceedings.  In response, the court provided a one paragraph denial:

Trading Technologies now seeks a writ of mandamus directing the Board to vacate its institution decision and terminate proceedings. Having considered the papers, we deny the petition without prejudice to Trading Technologies raising its arguments on appeal after the Board issues its final written decision. See Versata Dev. Group, Inc. v. SAP Am., Inc., 793 F.3d 1306, 1323 (Fed. Cir. 2015) (holding that this court has authority to address whether patent is a covered business method patent on appeal after issuance of final written decision).

Although it is not entirely clear, the point here appears to be that the Federal Circuit claims no authority to address whether a patent is a covered business method patent until a final written decision is issued.  This decision here by Judge Moore should likely be linked to the recently decided Shaw Industries case as well.

Under the statute, “the term ‘covered business method patent’ means a patent that claims a method or corresponding apparatus for “performing data processing or other operations used in the practice, administration, or management of a financial product or service, except that the term does not include patents for technological inventions.”  AIA Section 18. TT has argued that its GUI tool is neither a “data processing method” or “other operation” as designated by the statute – and that a district court had previously held that the patent claims a specific technological GUI tool. See Trading Techs. Int’l v. CQG, Inc., No. 05-cv- 4811, 2015 WL 774655 (N.D. Ill. Feb. 24, 2015).

Battle over Secret Sales and Secret Commercialization under the AIA

by Dennis Crouch

Helsinn v. Dr. Reddy’s and Teva (D.N.J. 2016)

The America Invents Act of 2011 (AIA) amended the definitions of prior art under 35 U.S.C. § 102 – up for grabs in this case is whether the changes included a narrowing of the ‘on-sale bar.’  Prior to the AIA, the ‘on sale’ bar blocked patenting of inventions that had been “on sale in this country.”  Although not specific in the statute, courts interpreted the on-sale bar to include secret sales or offers-to-sell.  These typically include closed-door business-to-business and custom sales rather than retail sales.[1]  The AIA amended the statute in a number of ways – most pertinent here is addition of the ‘otherwise available to the public’ clause to Section 102(a)(1).[2]  The provision now reads:

Novelty; Prior Art.—A person shall be entitled to a patent unless—(1) the claimed invention was patented, described in a printed publication, or in public use, on sale, or otherwise available to the public before the effective filing date of the claimed invention; or

The question in this case is how to interpret the statutory phrase “on sale, or otherwise available to the public.”  The otherwise available to the public language suggests that the ‘on sale’ activity is also available to the public.  That reading, however, conflicts with the history of the on sale bar.  Which construction is correct?

The district court in Helsinn sided with the USPTO’s interpretation of the statute – that the AIA modified the definition of on-sale so that it now only includes publicly available sales activity.  This allowed the patentee in the case to avoid an invalidity finding based upon its own prior sales of the patented drug. On appeal, Teva offers its set of arguments to retain the old-meaning:

  1. In ordinary usage, an item is “on sale” whether sold privately or publicly.
  2. Courts have treated “on sale” as a term of art for almost two centuries for sound policy reasons grounded in the Constitution.
  3. Congress did not change the settled meaning of “on sale” by adding the phrase “otherwise available to the public.”
  4. The district court’s reading of “on sale” would render meaningless the crucial word “public” in [102(b)(1)(B)].
  5. A Committee Report and floor statements of two senators cannot accomplish what they failed to accomplish in the statute itself.
  6. The PTO’s interpretation is not entitled to deference.


Professors Mark Lemley (Stanford) and Robert Merges (Berkeley) along with 39 other law professors have filed a brief in support of Teva’s arguments here – arguing that the new interpretation “would radically rewrite the law of prior art.”

The key legal question in the case is simple: did Congress mean to sweep away scores of established cases under the 1952 Act even though it reenacted language unchanged since 1870, merely because it added the phrase “or otherwise available to the public” to the list of prior art categories in the new AIA section 102? We think not. We have three primary reasons. First, the district court’s reading is inconsistent with the language and structure of the AIA. Second, it is inconsistent with Congressional intent in readopting the “on sale” and “public use” language in section 102. Finally, it would sweep away scores of cases decided over two centuries and radically rewrite a host of patent doctrines.

[TevaProfAmicusBrief] Moving forward, Helsinn’s responsive brief will be due April 21.

Of course, the issues here have been substantially debated already with commentators coming out on both sides of the debate:

= = = = =

AIA expanded the scope of prior art in a number of ways. This is one area, however, where it potentially shrunk the body of potential prior art.  Innovative entities with a robust business involving private-transactions and those who rely upon third-party manufacturers are the most likely to benefit by a changed-law.

An important policy question (that could also influence is the construction) is whether eliminating secret sales as prior art would actually allow an innovator secretly commercialize its patent for years and then subsequently obtaining patent rights.

= = = = = =


[1] The Federal Circuit has also include a manufacture-supply agreement. (E.g., a supplier seeking for to manufacture and supply your custom inventory).  This issue is currently being reconsidered by the Federal Circuit in the en banc case of Medicines Co. v. Hospira.

[2] The statute also eliminating the ‘in this country’ limitation for on-sale prior art and limited the one-year grace period associated with the on sale bar.

Federal Circuit Again Revives Zoltek Case: Who Invented Stealth Technology

By Dennis Crouch

Zoltek Corp. v. US (Fed. Cir. 2016)

The interesting and long-running Zoltek case has received another decision from the Federal Circuit – this time reversing the Court of Federal Claims ruling that Zoltek’s stealthy patent claims are invalid.

Zoltek is the owner of US Reissue Patent No. Re 34,162[1] issued January 19, 1993.  In 1996, Zoltek sued the U.S. government for infringing the patent – in particular, the patentee argued that the B-2 Bomber and F-22 Fighter both used carbon fiber sheets that infringed the patent rights.

As a starting point for most claims against a government is with sovereign immunity. The U.S. Government claims sovereign immunity against suits except where waived.  In the patent context, the U.S. government has waived its immunity, but limits the procedure and form of recovery. In particular, 28 U.S.C. § 1498(a) provides that “the owner’s remedy shall be by action against the United States in the United States Court of Federal Claims for the recovery of his reasonable and entire compensation for such use and manufacture.”  The statute also provides cover for contractors or other non-government-entities who infringe the patent “with the authorization or consent of the Government” so that those actions must also be pursued against the U.S. Government.  The Court of Federal Claims is located in the same Madison Place building as the Court of Appeals for the Federal Circuit.

In its prior en banc decision from the case, the Federal Circuit ruled that Section 1498(a)’s infringement statute should be broadly read to encompass Section 271(g) infringement.

Following that decision, the Court of Federal Claims held a trial on validity and found that the asserted claims were invalid as obvious and/or lacking written description.  The court has reversed that holding and remanded.

Omitted Elements:  During reissue prosecution of the manufacturing process claims, the applicant deleted the initial step of “oxidizing and stabilizing the carbonizable fiber starting material at an elevated temperature.”  That deletion clearly broadened the patent claim – however, a broadening reissue was proper because it had been filed within two years of the grant of the original patent.  The CFC found, however, that the new breadth went beyond the original written description and thus rendered the claim invalid – holding that “the preparation of the known starting material must be included in the claim” even if known in the prior art.  On appeal, the US Government argued for affimance since “the specification does not state that these steps need not be performed by the same entity.”

On appeal, the Federal Circuit completely rejected this analysis: “The question of who performs steps of a fully described invention, including preparation of a known starting material, is not a matter of the written description requirement.”

The original specification plainly, and without dispute, describes that the starting material is an oxidized and stabilized fiber, cites references showing this known material, and describes its preparation. That a previously oxidized and stabilized starting material was known to a person of ordinary skill in the field was recognized [as well] . . . . The question of who performs steps of a fully described invention, including preparation of a known starting material, is not a matter of the written description requirement.

The purpose of the written description requirement is to assure that the public receives sufficient knowledge of the patented technology, and to demonstrate that the patentee is in possession of the invention claimed. . . . The written description need not include information that is already known and available to the experienced public. . . .

The CFC stated its concern that the reissue patent claims could be infringed by an entity that did not itself make the starting material, but purchased the known starting material from a commercial source. . . . A validly obtained reissue does not violate the written description requirement if the patentee can reach an enlarged scope of possible infringement. It is not an improper broadening amendment when a reissue applicant, with the considered agreement of the reissue Examiner, substitutes a preparatory step known to those skilled in the art at the time of the invention with a requirement to start with the product of that known preparatory step. The CFC’s emphasis on who might infringe the broadened reissue claims is an issue of infringement, not written description. We conclude that the CFC erred in holding reissue claims 1–22 and 33–38 invalid for failure to meet the written description requirement of section 112. That ruling is reversed.

The issue here is definitely interesting – in particular, I see the question of whether the starting-material is available as prior art to be a total red-herring since its manufacture was sufficiently described in the specification.  The question is whether the patentee described an invention that began by “obtaining” rather than “making” the starting material.  The Federal Circuit didn’t really answer that question. I will note that none of the parties cited Gentry Gallery, Inc. v. Berkline Corp., 134 F.3d 1473 (Fed. Cir. 1998) ([not announcing] an omitted essential elements test).

On Obviousness, the Federal Circuit took the government to task as well – finding substantial errors in the Government’s expert testimony and noting the admitted novelty of the fiber sheets created by the inventors. “Instead, the government’s argument appears to be that since [its expert] Dr. Sullivan is a renowned scientist in this field, and since Dr. Sullivan was able to reproduce the Figure 4 graph, it was obvious to do so. This was error.”[2]

Section 101 – The government had also argued that the patented “method of manufacturing . . . carbon fiber sheets” lacked subject matter eligibility under Section 101 as effectively claiming a law of nature.  From the CFC Decision rejecting the eligibility argument:

The Government argues that the claims are invalid because they embody nothing more than a law of nature. For example, the Government points to Figure 4 of the patent to support its contention. It argues that Figure 4, which charts a relationship between heat treatment temperature and surface resistance, demonstrates the ineligibility of the ‘162 Patent claims by showing that the claims embody nothing more than a natural law that links temperature to resistance. Relying upon the testimony of its expert, Dr. Brian Sullivan, the Government argues that the independent claims at issue (claims 1 and 33) consist of three parts: (1) the manufacture of carbon fibers using conventional carbonization equipment and techniques; (2) the manufacture of a sheet product using conventional techniques and processes; and (3) “the concept that if you control the fibers’ volume electrical resistivity it gives you the ability to control the sheet or surface resistivity of the final carbon mat productThe Government argues that these three parts render the ‘162 Patent’s claims similar to those found ineligible in Flook and Mayo. . . . The Court agrees with Zoltek [and disagrees with the Government]. The Government’s comparisons to the ineligible claims in Flook and Mayo are much less apt than comparison to Diehr.

The CFC did reject that argument and the Government did not appeal that issue.

= = = =

[1] The ‘162 Reissue Patent originally issued in 1988 as U.S. Patent No. 4,728,395 and then reissued in 1993. Zoltek obtained the patent rights when it bought Stackpole Fibers in 1988.

[2] See Uniroyal, Inc. v. Rudkin-Wiley Corp., 837 F.2d 1044, 1051 (Fed. Cir. 1988) (“[t]hat which may be made clear and thus ‘obvious’ to a court, with the invention fully diagrammed and aided . . . by experts in the field, may have been a break-through of substantial dimension when first unveiled.”); see also KSR (“A factfinder should be aware, of course, of the distortion caused by hindsight bias and must be cautious of arguments reliant upon ex post reasoning”); W.L. Gore, 721 F.2d at 1553 (“It is difficult but necessary that the decisionmaker forget what he or she has been taught at trial about the claimed invention and cast the mind back to the time the invention was made (often as here many years), to occupy the mind of one skilled in the art who is presented only with the references, and who is normally guided by the then-accepted wisdom in the art.”).

Anonymous Loan Shopping — An Unpatentable Abstract Idea

By Dennis Crouch

On summary judgment, Judge Guilford (C.D.Cal) found Mortgage Grader’s asserted patents[1] ineligible under 35 U.S.C. § 101.[2]  On appeal, the Federal Circuit has affirmed this substantive holding as well as the district court’s procedural decision to allow the defendant (First Choice) to re-add its Section 101 contention after first dropping it.[3]  The appellate decision here was authored by Chief Judge Stark (D.Del) who was sitting by designation.  Judges O’Malley and Taranto joined the unanimous opinion.

A patent is not permitted to effectively claim an abstract idea.  In Mayo/Alice, the Supreme Court outlined a two-step process for determining whether this exception applies to Section 101’s otherwise broad eligibility principles: (1) is the claim at issue directed to a patent-ineligible concept and (2) if so, does the claim include an “inventive concept … sufficient to ensure that the patent in practice amounts to significantly more than a patent upon the [ineligible concept] itself.”[4]

Here, the district court found that the claims-at-issue were generally directed to “anonymous loan shopping” which is an unpatentable abstract idea.[5]  According to the court and apart from the computerization claim limits, the “series of steps covered by the asserted claims—borrower applies for a loan, a third party calculates the borrower’s credit grading, lenders provide loan pricing information to the third party based on the borrower’s credit grading, and only thereafter (at the election of the borrower) the borrower discloses its identity to a lender—could all be performed by humans without a computer.”  These human-mind-potentials cannot be claimed in the abstract.  In step two of Mayo/Alice, the court considered the computerization elements of the claims, but found only “generic computer components such as an ‘interface,’ ‘network,’ and ‘database.’ These generic computer components do not satisfy the inventive concept requirement.”

In the appeal, the patentee argued a factual dispute regarding the history of loan processing in an attempt to show that the process here was not “old.”  The appellate panel, however, found the testimony essentially irrelevant to the legal question of whether claim is directed to an abstract idea.


On the procedural point, the defendant had dropped its eligibility defense from its contentions. However, following the Supreme Court’s Alice decision added the contention back into place – but well after the court appointed deadline.  On appeal, the appellate panel confirmed that the district court did not abuse its discretion in allowing that procedural anomaly because of the significance of the decision:

In Alice, the Supreme Court held that “merely requiring generic computer implementation fails to transform [an] abstract idea into a patent-eligible invention.” 134 S. Ct. at 2352. We recognized the significance of Alice in buySAFE, Inc. v. Google, Inc., 765 F.3d 1350, 1354–55 (Fed. Cir. 2014), in which we stated that Alice “made clear that a claim directed to an abstract idea does not move into § 101 eligibility territory by merely requiring generic computer implementation” (internal quotation marks omitted). The impact of Alice is also illustrated by our decision in Ultramercial, Inc. v. Hulu, LLC, 772 F.3d 709 (Fed. Cir. 2014) (“Ultramercial III”). Ultramercial had sued WildTangent for infringement of U.S. Patent No. 7,346,545, a patent directed to allowing consumers to view copyrighted media products on the Internet at no cost in exchange for viewing an advertisement. See id. at 712. When the case was first before us, in 2011, we reversed the district court’s grant of WildTangent’s Rule 12(b)(6) motion to dismiss, holding that “as a practical application of the general concept of advertising as currency and an improvement to prior art technology, the claimed invention is not so manifestly abstract as to override the statutory language of § 101.” Ultramercial, LLC v. Hulu, LLC, 657 F.3d 1323, 1330 (Fed. Cir. 2011) (“Ultramercial I”) (internal quotation marks omitted). The Supreme Court granted WildTangent’s petition for certiorari, vacated our order, and remanded for further consideration in light of Mayo. Ultramercial III, 772 F.3d at 713. On remand, we again reversed the district court, holding yet again that the claims were patent-eligible. Ultramercial v. Hulu, 722 F.3d 1335, 1354 (Fed. Cir. 2013) (“Ultramercial II”). Once more, the Supreme Court granted WildTangent’s petition for certiorari, vacated our order, and remanded, this time for further consideration in light of Alice. Id. On this further remand, with the “added benefit of the Supreme Court’s reasoning in Alice,” we affirmed the district court and found the claims to be not patent-eligible. Id. Our conclusion was expressly based on Alice’s holding that “adding a computer to otherwise conventional steps does not make an invention patent-eligible.” Id. at 713, 716–17.

Ultramercial III demonstrates that a § 101 defense previously lacking in merit may be meritorious after Alice. This scenario is most likely to occur with respect to patent claims that involve implementations of economic arrangements using generic computer technology, as the claims do here. For example, the asserted claims of the ’694 patent require use of a “computer system” or “computer network” for facilitating anonymous loan shopping and the asserted claim of the ’728 patent requires “programmatically generating” and uses a “network” for shopping for loans. In this context, it was not an abuse of discretion to allow Appellees to inject a § 101 defense into the case after Alice.

= = = = =

[1] U.S. Patent Nos. 7,366,694 (“’694 patent”) and 7,680,728 (“’728 patent”).

[2] Mortgage Grader, Inc. v. Costco Wholesale Corp., 89 F. Supp. 3d 1055, 1065 (C.D. Cal. 2015) (Costco was later dismissed as a party).

[3] Mortgage Grade, Inc. v. First Choice Loan Services, ___ F.3d ___, App. No. 15-1415 (Fed. Cir. 2016) available at http://www.cafc.uscourts.gov/sites/default/files/opinions-orders/15-1415.Opinion.1-15-2016.1.PDF.

[4] Mayo Collaborative Services v. Prometheus Laboratories, Inc., 132 S. Ct. 1289 (2012) (as clarified by Alice).

[5] Claim 1 of the ‘694 patent, that the court found sufficiently representative is listed as follows:

1. A computer-implemented system for enabling borrowers to anonymously shop for loan packages offered by a plurality of lenders, the system comprising:

a database that stores loan package data specifying loan packages for home loans offered by the lenders, the loan package data specifying, for each of the loan packages, at least a loan type, an interest rate, and a required borrower credit grading; and

a computer system that provides:

a first interface that allows the lenders to securely upload at least some of the loan package data for their respective loan packages to the database over a computer network; and

a second interface that prompts a borrower to enter personal loan evaluation information, and invokes, on a computer, a borrower grading module which uses at least the entered personal loan evaluation information to calculate a credit grading for the borrower, said credit grading being distinct from a credit score of the borrower, and being based on underwriting criteria used by at least some of said lenders;

wherein the second interface provides functionality for the borrower to search the database to identify a set of loan packages for which the borrower qualifies based on the credit grading, and to compare the loan packages within the set, including loan type and interest rate, while remaining anonymous to each of the lenders and without having to post a request to any of the lenders, said second interface configured to display to the borrower an indication of a total cost of each loan package in the set, said total cost including costs of closing services not provided by corresponding lenders;

and wherein the computer-implemented system further enables the borrower to selectively expose at least the personal loan evaluation information to a lender corresponding to a selected loan package.

Due Process and Separating Powers Within an Agency

by Dennis Crouch

In this decision, the Federal Circuit has affirmed that the IPR procedure allowing the same PTAB panel to both institute an IPR and issue the final decision cancelling the claims is proper. In the process, the divided court rejected both a constitutional and statutory challenge. 

In Ethicon Endo-Surgery v. Covidien (Fed. Cir. 2016)[1], a divided Federal Circuit has affirmed the PTAB’s final judgment that all of Ethicon’s challenged patent claims are invalid as obvious.  The court also confirmed that the PTAB’s procedure of having the same panel decide both the IPR initiation petition and the final decision is proper. “Neither the statute nor the Constitution precludes the same panel of the Board that made the decision to institute inter partes review from making the final determination.”

Ethicon’s U.S. Patent No. 8,317,070 is directed to a surgical stapling device used in endoscopic surgery.  The purported novelty of the stapler is that it uses (a) two sets of staples (with different heights) and (b) staples with non-parallel legs.  The prior art included surgical staplers with each of these features, but no prior art teaches the combination of the two. “Thus, the purported inventive aspect of the ’070 patent is the combination of these two features in a surgical stapler.”

From the majority’s perspective, the case involves a straightforward application of KSR’s holding that a “combination of familiar elements according to known methods is likely to be obvious when it does no more than yield predictable results.”  Here, the court noted that the patent itself “discloses no particular synergy resulting from the combination.”  Ethicon did present evidence of commercial success of Covidien’s infringing product. However, that argument failed because, according to the court, Ethicon provided no evidence of nexus between the particular inventive combination of features and the proven commercial success.

Nowhere does Ethicon demonstrate, or even argue, that the commercial success of the Covidien products is attributable to the combination of the two prior art features—varied staple heights and non-parallel staple legs—that is the purportedly inventive aspect of the ’070 patent.

I’ll pause here to note that that the court’s nexus requirement here appears to be doctrinally different than the more traditional requirement that the commercial-success be linked to the claimed invention (as a whole) rather than the clearly more stringent inventive features of the claimed invention.  See Wyers v. Master Lock Co., 616 F.3d 1231, 1246 (Fed. Cir. 2010) (“the patentee must establish a nexus between the evidence of commercial success and the patented invention.”).

= = = = =

Ethicon also argued (unsuccessfully) that the PTAB’s procedure violated Ethicon’s procedural due process rights. In particular, Ethicon argued that the final decision was invalid because it was “made by the same panel that instituted the inter partes review.”   The appellate panel rejected that argument- finding that “[t]he inter partes review procedure is directly analogous to a district court determining whether there is ‘a likelihood of success on the merits’ and then later deciding the merits of a case” and that the initial decision to grant a petition did not create any presumption of prejudice or bias against the patentee.

Ethicon’s best (but still weak) argument was that the AIA does not permit the PTAB to make the institution determination.  In particular, the statute gives the PTAB power and authority to make final determinations regarding an IPR, but assigns the USPTO Director the power to institute IPRs.  The statutory scheme, according to Ethicon, requires separation of these two functions.   On appeal, the Federal Circuit rejected that argument as well – finding that the USPTO director has implicit authority to delegate her authority to officials within the agency.

Ethicon argues that because Congress (1) specifically gave the Director the power to institute, see, e.g., 35 U.S.C. § 314(a), (2) did not explicitly give the Director authority to delegate the institution decision to the Board, and (3) gave the Board the power to make the final determination, Congress intended to keep the functions of institution and final decision separate.

= = = = =

The majority opinion was penned by Judge Dyk and joined by Judge Taranto.  Judge Newman wrote in dissent arguing that the statutory scheme created a clear distinction:

At the first stage, the Director determines whether the review is to be instituted. 35 U.S.C. § 314(a) (“The Director may not authorize an inter partes review to be instituted unless the Director determines that the information presented in the petition . . . and any response . . . shows that there is a reasonable likelihood that the petitioner would prevail with respect to at least one of the claims challenged in the petition.”). (Of course, the Director may designate an examiner or solicitor to conduct this initial review.)

If instituted by the Director, the Board then conducts a trial on the merits. 35 U.S.C. § 316(c). . . .

The bifurcated design of post-grant review is clear not only from the language of §§ 314(a) and 316(c), but pervades the structure of these post-grant proceedings. Congress unambiguously placed these separate determinations in different decision-makers, applying different criteria. The majority’s endorsement of the PTO’s statutory violation departs not only from the statute, but also from the due process guarantee of a “fair and impartial decision-maker.”

= = = = =

Phil Johnson (President of the Intellectual Property Owners Association) argued the case on behalf of Ethicon while Kathleen Daley of Finnegan argued for Covidien and Katherine Twomey Allen of the DOJ represented the USPTO as an intervenor.

The parties relied upon Supreme Court for support and the case has some chance of heading up.

= = = = =

[1] Federal Circuit Appeal No. 14-1771, appeal of PTAB IPR 2013-00209. [EthiconDecision]

Amicus Briefs on Enhanced Damages

by Dennis Crouch

This term the Supreme Court is addressing one patent issue,[1] that of enhanced damages.[2] Two cases have been joined together for a single one hour hearing.  Merits briefing is ongoing. In an earlier post I briefly discussed the merits briefs that were filed in early December 2015. Now a set of friend-of-the-court briefs have also been filed either in support of the patentee-petitioners or in support of neither party. Respondent briefs as well as any briefs in support of respondent will be due in the upcoming weeks.

For the most part, the briefest stick to a model of focusing on a particular set of questions:

  • Is willfulness a prerequisite to enhanced damages under section 284?
  • Does the two-step test of Seagate create too high and too rigid of a standard?
  • Is subjective bad faith sufficient for enhanced damages award?
  • Should the District Court apply a totality of the circumstances test when determining enhanced damages?
  • What level of proof is required: preponderance of evidence or clear and convincing evidence?
  • When and enhanced damage award is appealed, what level of review should be applied?

The following is a short review of the amicus briefs that have been filed in the case.[3]

United States Government

When the United States government files and amicus brief, that brief is usually seen as the most important amicus brief in the case. Often, it is seen as the most important brief in the case – even more important than briefs filed by the parties themselves. The brief was filed in a joint effort by both the Department of Justice Solicitor’s office and the USPTO.

The government brief supports the petitioners’ position that the Federal Circuit test is too rule-based and too restrictive. “The Federal Circuit’s recent decisions, including its decisions in these cases, have imposed unwarranted restrictions on awards of enhanced damages.” In particular, the government argues that Seagate should be overruled. At the same time, the government takes pains to clarify that enhanced damages should only be awarded in cases of “unusually egregious acts of patent infringement.”  An interesting question not addressed by the brief is how “unusually egregious” corresponds to the “exceptional” requirement for attorney fees.

The government brief does particularly ask the court to limit enhanced damages only to cases involving willful infringement. In particular, the brief quotes affirmatively from Aro Mfg., that enhanced damages are available for “willful or bad-faith infringement.”[4]  Earlier courts, the brief notes, allow enhanced damages “for the infringer’s unlawful conduct was intentional, willful, flagrant, or undertaken in bad faith.”

Regarding the questions addressed above, the government brief argues that a preponderance of the evidence – the lower standard – is sufficient to prove enhanced damages and that District Court determinations regarding enhanced damages should be reviewed for abuse of discretion on appeal, not de novo.

Prof. Rantanen and Chris Seaman

Professors Rantanen and Seaman take a statutory and historical approach in their argument that willfulness is the appropriate standard for determining whether damages should be enhanced.  The historical case law they argue was bolstered by the AIA language which states that failure to obtain or introduce evidence of counsel “may not be used to prove that the accused infringer willfully infringed the patent”[5] It is clear from context that this new provision was intended to be a defense against enhanced damages under Section 284.

The professors argue that the determination of whether the infringement was willful should be accomplished through a totality of the circumstances test and reviewed on appeal for abuse of discretion as has been the law since 1836.

Mentor Graphics, Microsoft, and SAP

John Vandenberg of Klarquist Sparkman filed this brief arguing that trial courts should be given discretion to increase damages following a judgment of infringement.  Parties on this brief all have valuable patent portfolios. However, they are also subject to infringement allegations – typically from nonpracticing entities. In that framework is not surprising they argue that the behavior of the patent owner, not just the infringer, should be relevant to the willfulness inquiry. In particular the brief suggests that the court should consider whether the patentee “implemented a scientifically or commercially significant advance” and “diligently provided actual and clear notice.”  They also suggest that a patentee who, instead of suing the source of infringement, sues that infringers customers, should be less likely to receive enhanced damages.

Brief also asks the Supreme Court to make clear that enhanced damages are a question for the judge, not for a jury.


John Haynes of Alston & Bird filed Nokia’s brief that argues for broader enhanced damages. Stating that “the Federal Circuit’s grafting of a willfulness requirement onto section 284 is contrary to the legislative history of the statute and ignores the compensatory aspect of enhanced damages.” A weakness of this argument from Nokia is that it fails to consider 19th-century Supreme Court cases on point such as Seymour v. McCormick (1854).

Prof. Mossoff

The purpose of Prof. Mossoff’s brief is to highlight his research that the current “crisis” in the patent system is nothing new rather.  Patent licensing entities have been around for more than 100 years and serve an “important role in the development of innovation”.

Licensing Executives Society

Daniel Stringfield from Steptoe and Johnson filed the LES brief is interesting because it is somewhat equivocal. The brief argues that the Seagate rule is beneficial because it appears to encourage predictable and consistent results at the same time, the brief recognizes that a more flexible approach may do a better job of deterring undesirable infringement and better protecting patented inventions.

Intellectual Property Owners Association

My former boss Paul Berghoff of MBHB filed the IPOs short brief. The brief supports Seagate and argues that enhanced damages should only be allowed based upon sufficient evidence that the infringement was subjectively willful and also objectively reckless. In general, a party that “mounted a good-faith defense against allegations of infringement” should not be punished with punitive damages even if defense was ultimately unsuccessful.

Public Knowledge, the Electronic Frontier Foundation, and Engine Advocacy

Charles Duan filed a brief for these three public interest groups acting together. In general these groups can be termed “anti-patent.”  The brief argues that the threat of enhanced damages are regularly used against small companies with “devastating results” such as practically requiring opinion letters for legitimate threat creating an incentive not to read patents. The brief also argues that lowering the bar would increase the likelihood of abusive patent demands.and C That petitioner’s policy concerns are detached from reality.


Mike McKool of McKool Smith filed Ericcson’s brief arguing that the Federal Circuit’s limits on enhanced damage awards are “practically insurmountable”, “too high”, and have “fostered patent holdout and diminished respect for intellectual property rights”.  Ericcson argues that the extensive body of precedent stretching back to the 1832 patent act provide sufficient standards and guidance for district courts considering enhanced damage awards.[6]  On particulars, the brief argues that there should be no objectively reckless requirement, no clear and convincing evidence requirement and no de novo review of District Court decisions regarding enhanced damages.


Peter Sullivan of Foley Hoag filed the AIPLA brief.  Brief argues that “willful infringement” should be read into the statute as a limit on when damages may be enhanced. For that point, the brief sites Seymour v. McCormick (1854) where the court wrote distinguished between, on the one hand, a “good faith” or ignorant infringer from a “wanton and malicious pirate.”

Of course, is not a clean dividing line between “good faith” acts and willfully bad acts. The brief does not delve into that potential middleground other than stating that proof of willful infringement should be a requirement.  However, the association does argue that the Seagate standard “goes too far, allowing blameworthy conduct to go unpunished.” The brief argues instead that proof of subjective bad faith should be sufficient.  The brief also cautions the Supreme Court to be wary of giving too much discretion to District Court judges. For instance, it argues that a totality of the circumstances test has the potential of leading to both unpredictability and imprecision in punitive damage awards.

Foreman, Morinville, and the “Small Inventors”

IP attorney Andy Baluch filed a brief on behalf of a group of self-identified “small inventors” including Lewis Foreman, Paul Morinville, and James Innes.  The brief lays out the argument that contemporary intellectual property licensing has been undermined by the rise of what is termed “efficient infringement.” In 1L contract law, budding attorneys learn of the economic concept of efficient breach that, in certain circumstances and jurisdictions, permits a contracting party to breach a contract when the harm (penalty) caused by the breach is less than the benefit associated with breach.  Manufacturers and the uses of technology are using the same concept now to continually infringe patent rights with the expectation that their benefit from infringing will be greater than any potential penalty they must pay. That balance has shifted in recent years as today the ordinary penalty is simply payment of a reasonable royalty since both injunctive relief and enhanced damages are so difficult to obtain. Brief argues that this “anti-patent climate is particularly harmful to America’s individual inventors and startups.”


Askeladden’s brief was filed by Kevin Colligan’s team at Goodwin Procter in New York.  Brief makes two primary conclusory arguments. First, despite the open language of section 284, enhanced damages should only be available for acts of willful infringement. That conclusion is supported by what Askeladden sees as “established” law in the patent field and “consistency” with the ordinary rules of punitive damages. Second, adjudged infringer’s should have an absolute defense to enhanced damages if the infringement occurred in good faith and based upon a reasonable belief that the patent was either invalid or not being infringed.


James Otteson’s counsel of record for Innovention Toys. That company won an infringement action against MGA entertainment – makers of “Bratz.”  Although the district court awarded enhanced damages for willful infringement based upon strong evidence of copying, Federal Circuit reversed finding that MGA’s obviousness defense was not objectively reckless. The company has a petition for writ of certiorari pending.[7]  brief here stands with the petitioners, arguing that enhanced damages should not even require finding of willfulness but instead should be based upon the totality of the circumstances as determined by the District Court judge and only reviewed on appeal for substantial evidence/clear error.

= = = = =

[1] Certiorari has been granted on only one patent issue thus far. A number of petitions remain pending.

[2] Halo Electronics, Inc. v. Pulse Electronics, Inc., et al., Supreme Court Docket No. 14-1513 (2015) and Stryker Corporation, et al. v. Zimmer, Inc., et al., Supreme Court Docket No. 14-1520 (2015).  See, Dennis Crouch, Expanding the Framework for Enhanced Patent Damages, Patently-O (December 13, 2015).

[3] Opening  briefs by the petitioners are available on Patently-O at: https://patentlyo.com/patent/2015/12/expanding-framework-enhanced.html.

[4] Aro Mfg. Co. v. Convertible Top Replacement Co., 377 US. 476, 508 (1964).

[5] 35 U.S.C. § 298.

[6] See, for example Bott and Read.

[7] Innovention Toys, LLC v. MGA Entertainment , et al. , No. 15-635 (U.S. Nov. 10, 2015).

Director Michelle Lee: Moving toward Patent Clarity

The following is a post from Under Secretary of Commerce for Intellectual Property and Director of the USPTO Michelle K. Lee and was published on the PTO Director’s blog

Patent quality is central to fulfilling a core mission of the USPTO, which as stated in the Constitution, is to “promote the Progress of Science and useful Arts.” It is critically important that the USPTO issue patents that are both correct and clear. Historically, our primary focus has been on correctness, but the evolving patent landscape has challenged us to increase our focus on clarity.

 Patents of the highest quality can help to stimulate and promote efficient licensing, research and development, and future innovation without resorting to needless high-cost court proceedings. Through correctness and clarity, such patents better enable potential users of patented technologies to make informed decisions on how to avoid infringement, whether to seek a license, and/or when to settle or litigate a patent dispute. Patent owners also benefit from having clear notice on the boundaries of their patent rights. After and after successfully reducing the backlog of unexamined patent applications, our agency is redoubling its focus on quality. 

 We asked for your help on how we can best improve quality—and you responded. Since announcing the Enhanced Patent Quality Initiative earlier this year, we received over 1,200 comments and extensive feedback during our first-ever Patent Quality Summit and roadshows, as well as invaluable direct feedback from our examining corps. This feedback has been tremendously helpful in shaping the direction of our efforts. And with this background, I’m pleased to highlight some of our initial programs under the Enhanced Patent Quality Initiative. 

 First, we are preparing to launch a Clarity of the Record Pilot, under which examiners will include as part of the prosecution record definitions of key terms, important claim constructions, and more detailed reasons for the allowance and rejection of claims. Based on the information we learn from this pilot, we plan to develop best examiner and applicant practices for enhancing the clarity of the record.

 We also will be launching a new wave of Clarity of the Record Training in the coming months emphasizing the benefits and importance of making the record clear and how to achieve greater clarity. Recently, we provided examiners with training on functional claiming and putting statements in the record when the examiner invokes 35 U.S.C. 112(f), which interprets claims under the broadest reasonable interpretation standard and secures a complete and enabled disclosure for a claimed invention. Training for the upcoming year includes an assessment of a fully described invention under 35 U.S.C. 112(a) and best practices for explaining indefiniteness rejections under 35 U.S.C. 112(b).

 Second, we are Transforming Our Review Data Capture Process to ensure that reviews of an examiner’s work product by someone in the USPTO will follow the same process and access the same facets of examination. Historically, we have had many different types of quality reviews including supervisory patent examiner reviews of junior examiners and quality assurance team reviews of randomly selected examiner work product. Sometimes the factors reviewed by each differed, and the degree to which the review results were recorded. With only a portion of these review results recorded and different criteria captured in those recordings, the data gathered was not as complete, useful, or voluminous as it could have been. As a result, the USPTO has been able to identify statistically significant trends only on a corps-wide basis, but not at the technology center, art unit, or examiner levels. We are working to unify the review process for all reviewers and systematically record the same and all review results through an online form, called the “master review form,” which we intend to share with the public. 

 What are the implications of this new process and new form? This new process will give us the ability to collect and analyze a much greater volume of data from reviews that we were already doing, but that were not previously captured in a centralized, unified way. As we roll out this new review process the amount of data we collect will significantly increase anywhere from three to five times. This will allow us to use big data analytic techniques to identify more detailed trends across the agency based upon statistically significant data including at the technology center, art unit, and even examiner levels. Also, this new process will give us better insight into not just whether the law was applied correctly, but whether the reasons for an examiner’s actions were spelled out in the record clearly and whether there is an omission of a certain type of rejection. For example, for an obvious rejection we are considering not only whether a proper obvious rejection was made, but whether the elements identified in the prior art were mapped onto the claims, whether there are statements in the record explaining the rejection, and whether those statements are clear.

 The end result will be the (1) ability to provide more targeted and relevant training to our examiners with much greater precision, (2) increased consistency in work product across the entire examination corps, and (3) greater transparency in how the USPTO evaluates examiners’ work product. You can read more about these and our many other initiatives, such as our Automated Pre-examination Search pilot and Post Grant Outcomes, which incorporates insight from our Patent Trial and Appeal Board and other proceedings back into the examination process on our new Enhanced Patent Quality Initiative page on our website.

 Finally, let me close by emphasizing that our Enhanced Patent Quality Initiative is not a “one-and-done” effort. Coming from the private sector, I know that any company that produces a truly top quality product has focused on quality for years, if not decades. The USPTO is committed to no less. The programs presented here are just a start. My goal in establishing a brand new department within the USPTO was to focus exclusively on patent quality and the newly created executive level position of Deputy Commissioner for Patent Quality will ensure enhanced quality now, and into the future. With your input we intend to identify additional ways we can enhance patent quality as defined by our patent quality pillars of excellence in work products, excellence in measuring patent quality, and excellence in customer service.

 To that end, we will continue our stakeholder outreach and feedback collection efforts in various ways, such as our monthly Patent Quality Chat webinars. The next Patent Quality Chat webinar on November 10 will focus on the programs presented in this blog and our other quality initiatives. I encourage you to join in regularly to our Patent Quality Chats and visit the Enhanced Patent Quality Initiative page on our website for more information.  The website provides recordings of previous Quality Chats as well as upcoming topics for discussion. We are eager to hear from you about our Enhanced Patent Quality Initiative, so please continue to provide your feedback to WorldClassPatentQuality@uspto.gov(link sends e-mail).  Thank you for collaborating with us on this exciting and important initiative!


Federal Circuit Looks for Briefing on Automatic Assignment En Banc Challenge

Following up on the Shukh v. Seagate petition for en banc rehearing, the Federal Circuit has now taken an important first step of asking Seagate for its response to the petition, due by November 13, 2015.

The issue here is the construction of an employment agreement where the patentee “hereby assigns” all future inventions (created within the scope of the employment).  The Federal Circuit rule is that the agreement serves as an effective property right transfer such that, at the moment* of invention, rights to the invention automatically transfer to the employer.

One reason why the issues in the case are interesting to me is because the current Federal Circuit rule is contrary to the traditional property law notion expounded in the UCC that  “a purported present sale of future goods or of any interest therein operates as a contract to sell.”  Although relatively new, these same limits on property transfer stretch back hundreds of years in our common law history. In the background of the case is the notion that the Federal Circuit has created a federal law of assignment agreements that seemingly operates worldwide — again going against the norm that in the patents are to be treated as personal property in the exchange context, and personal property exchanges are normally governed by local state or foreign law.

In the patent context the question the Federal Circuit’s rule serves as an important and additional thumb on the side of employers rather than their employee inventors. In addition questions of legal tradition noted above, the the case raises important innovation policy questions and questions of inventor/employee rights.  The issues here can be thought of as in parallel to other areas where the law places limits on how far employment contracts can go to strip an employee of her rights. Consider, for example, covenants-not-to-compete, inventions outside of the scope of employment, and post-employment secrecy requirements limiting what someone can do with learned skills and knowledge.  In those contexts, the courts (and legislatures) have found that it doesn’t make sense to enforce overreaching employment contracts except when very particularly bargained for.

Employers obviously prefer the current rule because it so strongly favors them.  Thus, I expect that any IPO/AIPLA (and probably PTO) commentary on this front will support the current automatic-assignment rule.


* I included the asterisk next to “moment” of invention because of the reality that invention is typically a process distributed over time.  As the courts have repeatedly written, invention begins with a full and complete conception of the invention remains inchoate until the invention is reduced to practice (either actually or constructively). Updated for spelling.


Federal Circuit Sends Bad-Faith-Patent-Assertion Case back to State Court

Vermont v. MPHJ Tech (Fed. Cir. 2015)

In an interesting opinion, the Federal Circuit has rejected MPHJ’s plea to get into Federal Court. The State of Vermont sued the patent holder for violations of Vermont Consumer Protection Act (VCPA) stemming from MPHJ’s patent enforcement campaign. The letter campaign had three stages:

  1. Letter from the shell company stating that “we have identified your company as one that appears to be using the patented [scanner-to-email] technology” suggesting that “you should enter into a license agreement with us at this time.”
  2. Follow-up letter a few weeks later from the Farney Daniels firm stating that a prior-non response is considered “an admission of infringement” and implying that litigation would commence if the recipient did not enter into a license agreement.
  3. A third follow up following the pattern of the second.

These actions prompted the Vermont Attorney General to sue under the VCPA – alleging unfair and deceptive trade practices based upon MPHJ’s “threating litigation even though litigation was unlikely, targeting small businesses, placing the burden on the recipient to do the investigation, using shell corporations to minimize liability; and stating in its letters that it would bring suit immediately absent a license, the licensing program was successful with many businesses taking part, and the average license was $1000/employee.” The state demanded a permanent injunction requiring that MPHJ comply with state law.

After VT filed its original complaint (but before it filed its amended complaint), the state enacted the “Vermont Bad Faith Assertions of Patent Infringement Act” (BFAPIA) that creates a new Vermont cause of action for “bad faith assertion of patent infringement” based upon factors such as “the contents of the demand letter, the extent of any pre-assertion investigation, demands for payment of a license fee in an unreasonably short time, and deceptive assertions of infringement.”

MPHJ alleges that the proposed injunction would force it to comply with BFAPIA, but that law is preempted by the US patent laws and – as such – that the case should be removed to Federal Court.

The Federal District Court denied MPHJ’s first removal request (based upon the first complaint) and second removal request (based upon the VT amended complaint).  It is that second denial that was appealed and the Federal Circuit here has affirmed the denial – limiting the appeal question to the BFAPIA issue and finding that the VT injunction does not raise the BFAPIA enforcement issue – especially since Vermont stipulated during oral arguments that they were not seeking an injunction that would require compliance with that statute.

Federal Circuit Jurisdiction: The most interesting aspect of the decision is Judge O’Malley’s discussion of Federal Circuit jurisdiction post-AIA and post-Gunn.

The America Invents Act amended Title 28 to now grant Federal Circuit appellate jurisdiction “in any civil action arising under, or in any civil action in which a party has asserted a compulsory counterclaim arising under, any Act of Congress relating to patents.” 28 U.S.C. § 1295(a)(1). This change extends the Federal Circuit’s jurisdiction to include cases where the patent issues arise only in a compulsory counterclaim (formerly, the focus was only on the complaint). The new statute also added additional language that “no state court shall have jurisdiction over any claim for relief arising under any Act of Congress relating to patents,” 28 U.S.C. § 1338(a), and a new removal statute indicating that “a civil action in which any party asserts a claim for relief arising under any Act of Congress relating to patents . . . may be removed to [federal] district court . . . .” 28 U.S.C. § 1454.

At the same time, in Gunn (2013) the Supreme Court contracted Federal Circuit jurisdiction to cases where (1) federal patent law creates the cause of action or (2) where, although the claim arises under state law, that a federal patent law issue is: (a) necessarily raised, (b) actually disputed, (c) substantial, and (d) capable of resolution in federal court without disrupting the federal-state balance approved by Congress. Gunn (interpreting pre-AIA law).

Here, MPHJ asserts that the Federal Circuit has jurisdiction over the appeal because its Counterclaim (No. 5) raises a patent law issue. In particular, MPHJ asked for “a declaratory judgment that the VCPA is invalid or preempted by the First, Fifth, and Fourteenth Amendments, the Supremacy and Patent Clauses, and Title 35 of the U.S. Code.”

Walking through this morass, the Federal Circuit first ruled that the counterclaim is a compulsory counterclaim because of its close factual and logical relationship with the main claim found in the complaint. The next question under Section 1295(a)(1) then, also answered affirmatively here, is whether the counterclaim “arises under” federal patent law. Although not a cause of action, the federal circuit found that the preemption defense is an important and necessary federal patent question whose resolution will have a broad impact on the federal patent system as a whole.

Whether federal patent laws preempt or invalidate the VCPA as applied has considerable significance beyond the current case. A hypothetical finding that the VCPA is not invalid or preempted in state court would affect the development of a uniform body of patent law, as such a decision would be binding in Vermont, but would not be in other states with similar laws or in federal court. The facts of this case are fundamentally unlike Gunn, in which the Court recognized that the federal issue was a “backward-looking . . . legal malpractice claim” that would be unlikely to have any “preclusive effect” on future patent litigation and was, therefore, not substantial. As an “as applied” challenge, counterclaim 5 depends to a certain extent on the specific facts of this case, but the resolution of this case would assist in delineating the metes and bounds of patent law and clarifying the rights and privileges afforded to patentees in pursuing patent infringement claims.

With that, the Federal Circuit found that it does indeed have appellate jurisdiction to hear the appeal.

At this point, you may be seeing a disconnect between the ultimate holding that I first described (effectively denying removal) and the new statute permitting removal of cases “in which any party asserts a claim for relief arising under any Act of Congress relating to patents” (§ 1454) – especially since the court just decided that the court here decided that MPHJ had indeed asserted a claim for relief arising under federal patent law. The resolution of that seeming conflict is procedural – “MPHJ has not appealed the district court’s ruling pursuant to 28 U.S.C. § 1454 [and thus] we have no occasion to address … how that newly enacted provision should be interpreted.”

The complicating factor is that it looks like the State court will now need to dismiss MPHJ’s preemption counterclaim because it arises under the patent law. 1338(a) and, at that point, MPHJ would seemingly have standing to file a federal declaratory judgment action raising preemption.

Federal Circuit: Damages Expert Credibility is a Question for the Jury

Summit 6 v. Samsung (Fed. Cir. 2015)

A jury sided with the patentee – finding that Summit 6 had proven infringement and that Samsung had failed to prove invalidity of U.S. Patent No. 7,765,482 (claims 38, 40, 44-46, and 49).  The award – $15 million in damages.  On appeal, the Federal Circuit affirms that judgment.  Here, I’ll focus on the damages issues.


Experts: In a Daubert appeal, Samsung asked the Federal Circuit to rule that Summit 6’s damages expert’s testimony was inadmissible.  The general rules for expert testimony are found in Fed. R. Evid. 702 and allows testimony from a qualified expert relating to:

(a) the expert’s scientific, technical, or other specialized knowledge will help the trier of fact to understand the evidence or to determine a fact in issue;

(b) the testimony is based on sufficient facts or data;

(c) the testimony is the product of reliable principles and methods; and

(d) the expert has reliably applied the principles and methods to the facts of the case.

Although a court may exclude testimony based upon unreliable principles or methods, once that threshold has been passed the question of expert credibility goes to the fact finder and may be uncovered by “[v]igorous cross-examination, presentation of contrary evidence, and careful instruction on the burden of proof are the traditional and appropriate means of attacking shaky but admissible evidence.” Daubert.

Here, the damages expert (Paul Benoit) relied upon an unpublished methodology based upon the premise “that a feature’s use is proportional to its value.”   On appeal, the Federal Circuit indicated that this type of “analytical method” for calculating damages was sufficient to pass as expert testimony and be relied upon by a jury.

[W]here the methodology is reasonable and its data or evidence are sufficiently tied to the facts of the case, the gatekeeping role of the court is satisfied, and the inquiry on the correctness of the methodology and of the results produced thereunder belongs to the factfinder.

The particular invention at issue involves pre-processing of an image on a mobile device before uploading it to a server. In estimating a reasonably royalty, Benoit estimated that 65% of phone users regularly use the cameras to take photos; 77% of those share the photos; and 41% of those share by MMS in a way that infringes the patent. Taking the product of these percentages, Benoit found that 20% of the relevant users regularly infringe.  Taking a step back, Benoit estimated Samsung’s camera-related revenue as $14.15 per phone (calculated based upon proportional production costs) and then took the leap of concluding then that 20% of the $14.15 per phone ($2.93) is attributable to the infringement.  Thinking proportionally again, Benoit then estimated that $0.56 of every $2.93 in revenue was profit for Samsung and that – based upon a Nash Bargaining Solution, that a reasonable royalty would split that profit – or $.28 per phone in license fees. Since Samsung has distributed about 100,000,000 phones, that would add up to $29 million.

Reviewing that methodology, the Federal Circuit found:

Mr. Benoit’s damages methodology was based on reliable principles and was sufficiently tied to the facts of the case. Mr. Benoit first estimated Samsung’s economic benefit from infringement by specifically focusing on the infringing features and by valuing those infringing features based on Samsung’s own data regarding use and on its own financial reports outlining production costs and profits. Mr. Benoit then envisioned a hypothetical negotiation in which the parties would have bargained for respective shares of the economic benefit, given their respective bargaining positions and alternatives to a negotiated agreement. Mr. Benoit’s methodology was structurally sound and tied to the facts of the case.

That Mr. Benoit’s methodology was not peer-reviewed or published does not necessitate its exclusion. We recognize that the fact-based nature of Mr. Benoit’s damages testimony made it impractical, if not impossible, to subject the methods to peer review and publication. . . .  Here, the district court did not abuse its discretion in determining that Mr. Benoit’s methodology, involving the correlation of use with value, was not unreliable.

Verdict affirmed.


Federal Circuit Backtracks (A bit) on Prior Art Status of Provisional Applications and Gives us a Disturbing Result

by Dennis Crouch

Dynamic Drinkware v. National Graphics (Fed. Cir. 2015)

The underlying issue in this IPR-appeal is the effective date of prior art: How do we treat prior art patents and published applications that claim priority to provisional applications?

The patent being reviewed – National’s Patent No. 6,635,196 – was applied for on November 22, 2000 but claims priority to a provisional application filed in June of 2000.  National was also able to show that by March 2000 the inventor had completed the invention and reduced-to-practice (RTP) the claimed lenticular lens insert.

The alleged prior art is U.S. Patent 7,153,555 (“Raymond”) was filed in May 2000 and but claims priority back to a February 2000 provisional application filing.  The Raymond provisional is somewhat different from the later-filed non-provisional and so the question is whether the effective prior-art date stretches back to the provisional filing.

On its own, a provisional patent application does not qualify as “prior art” under 25 USC 102 (old or new) and the tens-of-thousands of provisional applications abandoned each year without any further patenting-action are not prior art. However, the Federal Circuit has indicated that (under pre-AIA 35 USC 102(e)) a later-filed non-provisional application will be given the prior-art date of the provisional filing (once the non-provisional is published or patented).  Giacomini.

The somewhat convoluted 102(e) indicates that a US patent application becomes prior art once it is either published or issues as a patent. And, at that point, the reference is back-dated to the application’s filing date.  Section 119(e) describes how an application having a priority claim back to a provisional patent application “shall have the same effect, as to such invention, as though filed on the date of the provisional application” so long as the provisional application sufficiently discloses the claimed invention under Section 112(a).   Weaving these together in Giacomini, the court ruled that an issued patent will be considered prior art as of its provisional filing date – so long as the provisional provides written description support for the invention claimed in that issued patent. In considering the prior art status of Raymond, the PTAB examined the patent claims and compared them to the provisional disclosure — finding that the provisional did not provide adequate support for the claims.

Anyone who works with prior art knows that this setup is an oddball way to addres the situation.  A patent’s disclosure for prior art purposes should not depend upon what was claimed or not but instead should focus on what was disclosed.  My belief is that, once publicly available, all provisional applications should be considered prior art as of their filing dates.

The Federal Circuit merits discussion began by stepping through the process of challenging the prior art’s provenance:

  • First the patent challenger raises the prior art and explains its priority claim (here, done in the IPR petition).  Without further challenge, the patent would be deemed prior art as of its provisional filing date.
  • Then the patentee can raise the argument that the provisional priority claim does not satisfy the Written Description. By satisfying this burden of presentation, the burden shifts back to the challenger.
  • Finally, the patent challenger must prove that the provisional provides proper support.

Thus, once the issue is raised the court will (rebuttably) presume that the provisional does not provide adequate support. “[B]ecause the PTO does not examine priority claims unless necessary, the Board has no basis to presume that a reference patent is necessarily entitled to the filing date of its provisional application.”  In Giacomini, Federal Circuit seemed to have implicitly come out the other way – counting the provisional as prior art without proof of WD satisfaction.  Here, the court distinguished that situation by noting that Giacomini had waived that argument by failing to challenge the written description support.

As noted above, the rule here is that the prior art date of a patent (or patent application) stretches back to the provisional filing date if the provisional provides written description (and enabling?) support of the claims of that patent (or application).  Confusing that rule, the patent challenger here focused on the particular disclosure-of-concern for its invalidity argument and showed that the disclosure was found in the provisional.  Unfortunately, according to this odd rule, the challenger’s explanation is insufficient.

Nowhere, however, does Dynamic demonstrate support in the Raymond provisional application for the claims of the Raymond patent. That was Dynamic’s burden. A provisional application’s effectiveness as prior art depends on its written description support for the claims of the issued patent of which it was a provisional. Dynamic did not make that showing.


With the provisional filing date knocked-out for the Raymond prior art, the unpatentability case crumbled and thus, the Federal Circuit here confirmed patentability of the challenged claims.

= = = = =

  • The result here is silly – and somewhat disturbing – that under the first-to-invent rule the second inventor gets a patent.  Raymond came up with idea at issue first and disclosed it in a provisional patent application that eventually resulted in an issued patent.  But, since Raymond’s non-provisional application included additional subject matter, the provisional disclosure no longer counts as effective prior art.
  • The AIA rewrote Section 102 and re-codified the old 102(e) into 102(a)(2) and 102(d).  The new rule is also a bit unclear — indicating that the disclosure found in a patent or published application will be given a prior art date of a priority filing document if the patent or application is entitled to so claim priority and the priority filing “describes the subject matter” being relied upon as prior art.
  • One element that is unclear from this is whether being “entitled” to claim priority/benefit requires 112(a) support of the claims. The court explains in a footnote: “Because we refer to the pre-AIA version of § 102, we do not interpret here the AIA’s impact on Wertheim in newly designated § 102(d).”
  • Post-AIA: Of course, regardless of the Wertheim issue above,  the outcome of this case flips post-AIA because the prior art cannot be avoided simply by showing an earlier date of invention or reduction to practice. Thus, the patentee would lose here because its priority filing date is subsequent to the prior art’s effective date.
  • My take is that, once the provisional becomes public that the law should regard a provisional application’s prior-art status as of its filing date.  The PTO should also be creating a public database of provisional application filings that can be searched and relied upon as a prior art tool.  For American companies, the failure to make this change means that many of their provisional application disclosures often will not prevent third-parties (half of which are non-US companies) from obtaining patents on identical innovations.


Dow v. Nova: “Nautilus changed the law of indefiniteness”

By Jason Rantanen

The Dow Chemical Company v. Nova Chemicals Corporation (Fed. Cir. 2015) Download Opinion
Panel: Prost, Dyk (author), Wallach

Earlier this year in the opinion on remand in Biosig v. Nautilus, Judge Wallach rejected the argument that the Supreme Court’s opinion on the indefiniteness doctrine  “articulated a new, stricter standard.”  783 F.3d 1374, 1379 (Fed. Cir. 2015).  Instead, the Court  “modified the standard by which lower courts examine allegedly ambiguous claims; we may now steer by the bright star of ‘reasonable certainty,’ rather than the unreliable compass of ‘insoluble ambiguity.’”  Id. The thrust of Judge Wallach’s opinion was that the problem the Supreme Court saw with the Federal Circuit’s previous indefiniteness doctrine was not with the standard that the Federal Circuit was actually applying; it was that the words the Federal Circuit had been using could lead district courts astray.

Dow v. Nova presents a dramatic contrast, one that (in my view) goes a long way towards righting the boat.   Here, Judge Dyk reiterates in the strongest words since Nautilus that the Court’s opinion clearly changed the standard for indefiniteness.  There is no hint of mere Supreme clarification in this opinion, as the outcome turns entirely on whether the pre- or post-Nautilus standard applies.  Under the old standard, the result at the Federal Circuit was that the claims were definite; under the new standard, the result was that they are indefinite.  And given the purely nondeferential review applied in both cases, this pair of cases provides possibly one of the neatest examples of how a legal standard can be outcome determinative.

Background: In 2010, Dow obtained an infringement judgment against NOVA, with a jury rejecting NOVA’s indefiniteness argument.  The Federal Circuit affirmed in 2012, holding that the patents were not indefinite under its pre-Nautilus precedent.  On remand, the district court held a bench trial on supplemental damages for the period after the judgment through expiration of the patents (October 2011). While NOVA’s appeal was pending, the Supreme Court issued Nautilus.  NOVA argued that this intervening decision required the supplemental damages award to be vacated because the patents are invalid for indefiniteness.

Bars to re-litigation of indefiniteness: Nova’s challenge faced a substantial procedural hurdle, however.  Because it had litigated, and lost, its indefiniteness challenge, it would ordinarily be barred from re-litigating that issue under the doctrine of issue preclusion or law of the case.  (Claim preclusion does not apply under Federal Circuit precedent because a claim based on continuing conduct constitutes a separate claim.)     “[T]he doctrine [of law of the case] posits that when a court decides upon a rule of law, that decision should continue to govern the same issues in subsequent stages in the same case.”….Issue preclusion “bars ‘successive litigation of an issue of fact or law already litigated and resolved in a valid court determination essential to the prior judgment.’” Slip Op. at 11 (citations omitted).  However, “when governing law is changed by a later authoritative decision,” these two doctrines do not apply.  Id. at 12.

Nautilus and change in law: There are three requirements for the change in law exception to apply: (1) “the governing law must have been altered;” (2) “the decision sought to be reopened must have applied the old law;” and (3) “the change in law must compel a different result under the facts of the particular case.”  Slip Op. at 14-15.  Here, the court held, those requirements were met by the Nautilus opinion.  “First, there can be no serious question that Nautilus changed the law of indefiniteness. This was indeed the very purpose of the Nautilus decision.”  Slip Op. at 16.  Second, the earlier decision in Dow applied the old law:

Dow argues that our opinion in the previous appeal was not inconsistent with
Nautilus and that we did not apply the “amenable to construction” or “insolubly ambiguous standard.” But the fact that we did not include that particular language does not mean that we were not applying the prevailing legal standard. We cited Exxon, see Dow, 458 F. App’x at 917, which Nautilus specifically cited as exemplary of the rejected Federal Circuit standard…..We also explained that “the test for indefiniteness is not whether the scope of the patent claims is easy to
determine, but whether ‘the meaning of the claim is discernible, even though the task may be formidable and the conclusion may be one over which reasonable persons will disagree.’” Id. at 920 (quoting Exxon, 265 F.3d at 1375). This language corresponds exactly to the “amenable to construction” or “insolubly ambiguous” standard rejected in Nautilus.

Slip Op. at 17-18.

Third, the outcome was different under the Nautilus standard than under the pre-Nautilus caselaw.  Here, the issue was a measurement problem: which methodology should be applied to determine the “slope of strain hardening.”  “Three methods existed to determine the maximum slope, each providing, as Dow admits, “simply a different way of determining the maximum slope.”  Slip Op. at 21 (emphasis added).   None of these methods were taught in the patent, nor did it provide “any guidance as to which method should be used or even whether the possible universe of methods is limited to these four methods.”  Id. at 23.  And Dow’s expert used a fourth method, which he used after applying “only his judgment of what a person of ordinary skill would believe.”  He did not testify that one of ordinary skill in the art would choose his method over the three known methods.

Under the previous indefiniteness standard, the court observed, that Dr. Hsaio had developed a method for measuring maximum slope was sufficient.  But under the Nautilus standard, “this is no longer sufficient:

The question is whether the existence of multiple methods leading to different results without guidance in the patent or the prosecution history as to which method should be used renders the claims indefinite. Before Nautilus, a claim was not indefinite if someone skilled in the art could arrive at a method and practice that method. Exxon, 265 F.3d at 1379. In our previous opinion, relying on this standard, we held that the claims were not indefinite, holding that “the mere fact that the slope may be measured in more than one way does not make the claims of the patent invalid.” Dow, 458 F. App’x at 920. This was so because Dow’s expert Dr. Hsiao, a person skilled in the art, had developed a method for measuring maximum slope. See id. at 919–20.

Under Nautilus this is no longer sufficient.  “[A] patent is invalid for indefiniteness if its claims, read in light of the specification delineating the patent, and the prosecution history, fail to inform, with reasonable certainty, those skilled in the art about the scope of the invention.” 134 S. Ct. at 2124; see also id. at 2129 (“[W]e read § 112, ¶ 2 to require that a patent’s claims, viewed in light of the specification and prosecution history, inform those skilled in the art about the scope of the invention with reasonable certainty.”). Here the required guidance is not provided by the claims, specification, and prosecution history.

Slip Op. at 23-24. That an expert chooses to use a particular measurement technique is insufficient for meeting the requirements of indefiniteness.  “As we held in Interval Licensing, a claim term is indefinite if it “leave[s] the skilled artisan to consult the ‘unpredictable vagaries of any one person’s opinion.’”  Slip Op. at 25.  Perhaps this could have been satisfied by expert testimony as to which methodology a person of ordinary skill in the art would have used, but that will be a question for another day.

Some more thoughts on the opinion:

  • The opinion takes pains to distinguish Biosig v. Nautilus.  In Biosig, the question was how one of ordinary skill in the art would determine what “spaced relationship” meant.  There, “we held that the prosecution history, the language of the claims, and the knowledge of one skilled in the art demonstrated that “a skilled artisan would understand the inherent parameters of the invention as provided in the intrinsic evidence” and that the claim term at issue “informs a skilled artisan with reasonable certainty of the scope of the claim.”  Dow at 25, n. 10.   One way to think about Nautilus is that it’s really about figuring out the meaning of words in the claim, whereas this case and Teva are really about how to determine whether those words, with their meaning understood, are met.
  • The weird tension about indefiniteness being a question of law but involving factual determinations remains.  Here, the issue was originally tried to a jury (probably erroneously as the Federal Circuit implied in the original Dow opinion), and the Federal Circuit’s analysis here focuses less on interpreting the text of the claims and more on identifying which measurement methodology a PHOSITA would have picked (which sounds like a factual question to me).  Regardless of this tension, I’d expect that in future cases knowledgeable counsel will make sure that there’s good support for the particular measurement methodology used by their experts, with the experts also providing support for the proposition that their methodology is the one that a PHOSITA would have used.
  • Another way to think about this case is in tandem with Wiliamson v. Citrix, in which the Federal Circuit relaxed the difficulty of invoking § 112, para. 6 when the words “means” or “step” aren’t used in the claim.  The effect of that decision was to make it riskier to use functional language in a claim when no corresponding structure is disclosed in the specification.  Dow moves in a similar direction: when no measurement methodology is described or suggested in the specification, functional limitations such as the one here may render the claim indefinite, at least when a PHOSITA would not know which of several possible methods to use.
  • Lisa Larrimore Ouellette discusses the decision on the Written Description blog as well.

Drawing Severable Lines in Claim Construction

Inline Platics v. EasyPak (Fed. Cir. 2015)

In this claim construction case, the Federal Circuit has reversed in favor of the patentee – finding that the district court improperly limited the claims to a specific embodiment. Here, the patents at issue are directed toward tamper-resistant food packaging. The idea behind the invention is easy to see from the drawings. A plastic lid connected to the plastic base by a perforated strip. The claims identify this perforated portion as a “frangible section” and the district court interpreted that language to mean “a removable tear strip, delimited by at least two severable score lines.” The result of that construction was that the accused EasyPak containers didn’t infringe.

On appeal, the Federal Circuit held that the lower court improperly narrowed the construction. The district court had offered the prosecution history as a reason for limiting the definition to the particular embodiment. However, the appellate court (reviewing this intrinsic evidence de novo) found the district court’s conclusions of the file wrapper “inaccurate” and noted that the specification included an embodiment with a single score line.

Judge Newman offered the Federal Circuit’s opinion that leads me to the conclusion that nothing-much has changed in the area of claim construction following Teva v. Sandoz, 135 S.Ct. 831 (2015).

In its pending petition for writ of certiorari in MobileMedia Ideas v. Apple, MobleMedia asks a number of follow-on questions:

1. Did the … Federal Circuit violate due process by summarily reversing a patent infringement judgment based upon a new and unprompted claim construction without remand to the district court in denial of Petitioner’s right to present evidence at trial and fully and fairly litigate the matter of infringement for the first time based on the new construction?

2. What standard should apply to denying remand for trial on a new claim construction used by the Federal Circuit to summarily reverse a patent infringement judgment?

3. Has the Federal Circuit effectively rendered Markman hearings and rulings meaningless by creating an unworkable, burdensome and judicially inefficient precedent that will require plaintiffs to present evidence at trial of every imaginable claim construction?

(Pending Petition Case No. 15-206, mobilemediapetition).

Constitutional Challenges to IPR Continue

by Dennis Crouch

Respect for property rights has always been a core American principle.  That respect generally means that a government grant of a property rights cannot be cancelled or annulled outside of judicial action.  In a set of 19th Century cases, that principle was repeatedly upheld, including in the patent law context (both patents for land and patents for inventions).

See, e.g.:

  • McCormick Harvesting Mach. v. Aultman, 169 U.S. 606 (1898) (“[W]hen a patent [issues], it has passed beyond the control and jurisdiction of [the patent] office, and is not subject to be revoked or cancelled by the President, or any other officer of the Government. It has become the property of the patentee, and as such is entitled to the same legal protection as other property.)
  • Iron Silver Mining v. Campbell, 135 U.S. 286 (1890) (“[Patent validity] is always and ultimately a question of judicial cognizance.”)
  • US v. Stone, 69 U.S. 525 (1864).

In his 4th Circuit appeal, Carl Cooper now argues that inter partes review proceedings under the AIA violate these principles and are therefore unconstitutional. (Cooper v. Lee) In addition, Cooper argues that IPRs violate patentees Seventh Amendment right to a jury trial on questions of patent invalidity.

Cooper v. Lee began as a lawsuit after Cooper’s patents were challenged in a set of inter partes review proceedings.  Rather than awaiting the outcome of the IPR, Cooper quickly filed a civil action in district court arguing that the regime is unconstitutional. However, the district court dismissed the case – finding that it lacked jurisdiction. In particular, the district court held that the AIA provides for particular appellate review and that Cooper must first exhaust the administrative process before raising an external constitutional challenge.

As it did at the lower court, the USPTO largely avoids the merits but instead argues that the appellate court has no jurisdiction over the case – both for the reasons given by the district court and because the case should have been heard by the Federal Circuit rather than the 4th Circuit.  [PTO Brief in Cooper v. Lee]. Meanwhile, in May 2015, the USPTO PTAB issued a final order cancelling the challenged patent claims and setting-up a direct Federal Circuit appeal to be filed this month. See IPR2014-00156 (May 14, 2015); IPR2014-00157 (May 14, 2015); IPR2014-00158 (May 8, 2015).

= = = = =

Incredibly important and difficult Constitutional issues here.

= = = = =

Briefing appears now complete in the parallel case of MCM v. HP that I previously discussed:




Eligibility 101: Motion to Dismiss Ends Another Patent

OIP v. Amazon (Fed. Cir. 2015)

In a short-but-important opinion, the Federal Circuit has affirmed a district court’s finding (on motion-to-dismiss) that OIP’s patent claims are invalid as lacking patent eligible subject matter.

The claims are directed to a multi-step process of using an offer-based inquiry method for setting product price.  (U.S. Patent No. 7,970,713).  The basic problem is that it is difficult to figure-out the profit-maximizing price for any given product. The inventor’s insight here is that, unlike a land-based grocery store where prices are publicly labeled, an internet-based store can offer a different price to each consumer.  The invention spells out a method of testing various price-points by actually offering the product for sale to consumers different consumers being given different prices.  The results of those offers (whether or not consumers purchased at the given price) can then be used to automatically calculate the price-point.

In reviewing the claimed invention, the Federal Circuit found it to be “no more than an abstract idea coupled with routine data-gathering steps and conventional computer activity.” As such, the claims are ineligible for patent protection.


Following the two-step approach of Alice Corp v. CLS Bank, the Federal Circuit first found that the claims did encompass an abstract idea — namely the abstract idea of “offer-based price optimization.”  We know that the price optimization is an abstract idea because it is similar to the “fundamental economic practices” that the Supreme Court has previously found to be abstract ideas.  (Note – here the appellate panel misquotes the Supreme Court as saying “fundamental economic concepts” rather than practices.)  The court also states: the fact that “the claims do not preempt all price optimization or may be limited to price optimization in the e-commerce setting do not make them any less abstract.”

The second step of Alice Corp considers whether the claims include an additional inventive concept sufficient to transform the abstract idea into a patent eligible invention.  Here, the court finds that additional limitations and concepts are all well understood, routine, and conventional activities that merely require conventional computer technology.  “[R]elying on a computer to perform routine tasks more quickly or more accurately is insufficient to render a claim patent eligible.”

The opinion of the court was penned by Judge Hughes and joined by Judge Taranto. Judge Mayer published an additional concurring opinion indicating that eligibility is properly addressed at the motion-to-dismiss stage.

Failure to recite statutory subject matter is the sort of “basic deficiency,” that can, and should, “be exposed at the point of minimum expenditure of time and money by the parties and the court,” Twombly, 550 U.S. 544 (2007). Addressing 35 U.S.C. § 101 at the outset not only conserves scarce judicial resources and spares litigants the staggering costs associated with discovery and protracted claim construction litigation, it also works to stem the tide of vexatious suits brought by the owners of vague and overbroad business method patents. Accordingly, where, as here, asserted claims are plainly directed to a patent ineligible abstract idea, we have repeatedly sanctioned a district court’s decision to dispose of them on the pleadings. . . . I commend the district court’s adherence to the Supreme Court’s instruction that patent eligibility is a “threshold” issue, Bilski v. Kappos, 561 U.S. 593 (2010), by resolving it at the first opportunity.

Still fighting against this tide, Judge Gilstrap (E.D. Tex.) requires an accused infringer to must obtain leave of the court after showing good cause before filing a motion to dismiss on patent eligiblity. (Joe Mullin Article).

Despite the suggested cost of patent litigation, I expect that winning on motion-to-dismiss is considerably less expensive than the IPR/PGR/CBM process.


AIA Applications Working Through the System

The AIA makes important changes to the law of prior-art that will impact which inventions are patentable, although it remains unclear whether the new law makes it more difficult to obtain patent protection because it increases the scope of prior art in some areas but decreases the scope in other areas.

What is an AIA-Application.  An AIA application is a patent application that – at some point – included at least one claim whose effective filing date is on or after March 16, 2013.   For most applications, the answer to this is easy: if the US application is filed before the 2013 deadline then it is not an AIA-application; and if the US application is filed after the 2013 deadline and has no priority claims then it is an AIA-application.  The difficult questions come-up with post-AIA applications that claim priority to pre-AIA filings.  The question that the applicant must answer for those is whether the newly filed application includes any claims (including cancelled claims) that were not fully supported by the priority filing.

In their filing papers, patent applicants are asked to self-identify whether the application should be considered pre- or post-AIA with the following check-box statement:

To get a sense of how the transition is going, I pulled-up the files of about 6,000 recently published patent applications to see whether they are listed as pre- or post- AIA applications. The chart below shows the results. Prior to October 2014, very few of the published applications were considered post-AIA.  Unless early publication was requested, those applications were either filed prior to the March 2013 date or claimed priority prior to that date (which thus led to early publication).  Applications published since October 2014 are generally ones filed after March 2013.


We now have a growing number of post-AIA applications filed more than 24-months ago. Many of these have now received a first office action and at least some have issued as patents. (See, for example, Patent Nos. 9,032,902; 9,033,062; 9,035,301; 9,035,446; and 9,037,353).  Coming soon – battles over the meaning of the revised 35 U.S.C. 102.